Strategic management

The concept of strategy

 Strategy is the great work of organization. In situations of life or death it is the Tao of survival or
extinction. Its study cannot be neglected. ----SUN TZU, The Art of War.2500 B.C
 Strategy is about winning.
 Strategy is not a detailed plan or program of instructions, it is a unifying theme that gives coherence
and direction to the actions and decisions of an individual or an organization.

Characteristic of a winning strategy

Goals that are simple, consistent, and long term.
Profound understanding of the competitive environment.
Objective appraisal of resources.
Effective implementation.
 Examples
 Kochouseph & V Guard
 Viswanathan Anand
 General Giap
 Dheerubhai Ambani

Origin of the word

 Strategic means generalship in Greek. Stratos means “ army “. Ag means, “ to lead”.
 The concept of strategy was first given in the ART OF WAR by SUN TZU in China 500 BC
 There are 13 chapters in the book.
 Laying plans
 On waging war
 The-sheathed sword
 Tactics
 Energy
 Weak points and strong points
 Maneuvering
 Variations of tactics
 The army on the march
 Terrain
 The nine situations
 Attack by fire
 The use of spies.
 What is there in these chapters that can be adapted to Business?

Sun Tzu says

If you know the enemy and yourself, you need not fear the result of a hundred battles.
If you know yourself but not the enemy, for every victory gained you will also suffer a defeat.
If you know neither the enemy nor yourself, you will succumb in every battle.
SUN TZU says,
Know the other and know yourself
Triumph without peril
Know nature and know the situation
Triumph completely.
Some definitions of strategy
The art of war, especially the planning of movements of troops and ships etc, into favourable positions;
plan of action or policy in business or politics etc. (oxford dic.)
The determination of the long-run goals and objectives of an enterprise, and the adoption of courses of
action and the allocation of resources necessary for carrying out these goals. (Alfred Chandler)
A strategy is the pattern or plan that integrates organisations major goals, policies, and action sequences
into a cohesive whole. A well formulated strategy helps marshal and allocate an organisations
resources into a unique and viable posture based upon its relative internal competencies and
shortcomings, anticipated changes in the environment, and contingent moves by intelligent
opponents
Strategy is the pattern of objectives, purposes, or goals, stated in such a way as to define what business
the company is in or is to be in and the kind of company it is or is to be.( Kenneth Andrews.)
What business strategy is all about is, in a word, competitive advantage. The sole purpose of strategic
planning is to enable a company to gain, as efficiently, a sustainable edge over its competitors.
Corporate strategy thus implies an attempt to alter a company’s strength relative to that of its
competitors in the most efficient way. (KENICHI OHMAE.)
The functions and responsibilities of choice of objectives, mobilisation of resources, allocation of such
resources, continuous monitoring of performance. It is the highest function of management.
The supervision of the continuous process of deciding the nature of the enterprise and setting, revising
and attempting to achieve its goals. (KENNETH ANDREWS)
Fundamental issues in SM.
Purpose and missions
Corporate objectives
Choice of businesses
Courses of action for achieving the objectives.
Nature & scope of SM
Route map for the organisation
Decision guide
Lays down growth objectives
What to do how to do where to reach
Look forward and far ahead
Monitor environment anticipate change and prepare for the unexpected
Build competitive advantage and build core competencies
Not only anticipate future but shape future.
Influence the environment.
Concerns of SM
Future.
Growth.
Environment.
Portfolios of business
Strategy.
Integration.
Creating competitive advantage and core competency
Corporate strategy.
Evolution of strategic mgt.
1950s. Budgetary planning & control. Financial control through operational and capital budgeting.
Investment planning through project appraisal, ROI, DCF. Financial planning was the key.
1960s. Corporate planning. Preparation of short medium and long-term plans. Business forecasting and
investment planning models. Rise of corporate planning departments.
1970s. Corporate strategy, diversification, and portfolio planning matrices. Multidivisional structure.
Quest for global market share.
Late 70s & early 80s.Analysis of industry and competition. Choice of industries, markets, and segments
and positioning with in them. Competitor analysis and PIMS (profit impact of market strategy).
Market selectivity, industry restructuring. Active asset management.
Late 80s & early 90s. The quest for competitive advantage. Sources of competitive advantage with in
the firm. Resource analysis of core competencies. Corporate restructuring and business process
reengineering. Re focusing and outsourcing
Late 90s & early 2000. Strategic innovation and the new economy. Competitive advantage through
strategic innovation. Competing on knowledge adapting to the new digital networked economy.
Organisational flexibility and speed of response. Knowledge management and organisational
learning. Competing for standards. Early mover advantage. The virtual organisation. The
knowledge based firm. Alliances and networks. The quest for critical mass.
Corporate & business strategy
Focus of strategic management shifted from planning process to quest for profit.
The fundamental goal of business is to earn a return on its capital that exceeds the cost of capital. There
are two ways to attain this.
The firm may locate in an industry where favourable conditions result in the industry earning a rate of
return above the competitive level.
Second, the firm may attain a position of advantage vis-a-vis its competitors with in an industry,
allowing it to earn a return in excess of the industry average.
Corporate strategy defines the scope of the firm in terms of the industries and markets in which it
competes. Corporate strategy decisions include,
Investment in diversification
Vertical integration
Acquisition
New ventures
Allocation of resources between the different businesses of the firm.
Divestment.
Business strategy.
Business strategy is concerned with how the firm competes within a particular industry or market. This
is also referred as competitive strategy.
The questions? How can the firm make money?
This leads to
What business or businesses should we be in?
How should we compete?
Answer to the first question describes “ corporate strategy “ and the second describes
business (competitive strategy)
Strategic management
Strategic management is the study of such set of managerial decisions and actions that determines the
long run performance of a firm. The major steps in the strategic management process are:
Environmental analysis
Strategy formulation
Strategy implementation
Strategy evaluation and control
Why strategic planning?
It gives a clear vision of internal and external environment of a business firm
Focus on what is most important and how it is to be managed for success of business.
Understanding of problem, its nature, its threats, its controls and implications.
Appropriate decisions to implement the strategies evolved to achieve the desirable objectives.
A continuous monitoring and evaluation of the progress through the path to the goals
The strategic planning process
The tasks in strategic planning,
Clarifying the mission of the corporation
Defining the business
Surveying the environment
Internal appraisal of the firm
Setting the corporate objectives
Formulating the corporate strategy
Monitoring the strategy.
STRATEGIC PLANNING PROCESS

1.Clarifying the mission of corporation

2.Defining the business
3.Surveying the environment
 Macro environmental factors
Demographic Socio-cultural Economic Political
Natural Technological Legal Govt. Policies
 Environmental factors specific to business concerned.

Industry & Competition Market/Customer Technology

Supplier Factors Govt. Policies

 Spotting the opportunities & threats
 Checking the attractiveness and probability position of these opportunities
 Highlighting those opportunities the pursuit of which will help the firm bridge its strategic planning
gap
 Developing the opportunities-threats profiles (OTP)
4.Internal appraisal of the firm
 Assessing the firm’s capabilities/strengths & weakness in the various areas:

Finance Marketing Human Resources

Operations R&D General Management

 Developing the strength-weakness profile

 Appraising the individual business/strategic business units (SBUs) of the firm
 Identifying the competitive advantages and core competencies and developing the competitive
advantage profile (CAP)
 Examining the capability gap (gap between existing capabilities and the ones needed for pursuing the
spotted opportunities)
5.Setting the corporate objectives
 Framing the broad aims of the corporation, using the corporate mission as the guide
Examining the strategic planning gap and checking the growth-scope
 Fixing the growth objective
 Setting specific objectives in all major areas:

Profitability Competitive Position Technology

Productivity R&D and Innovation Human Resources

Corporate Image Social Responsibilities
 Prescribing the hierarchy/rank/priorities of the objectives
6.Formulating the corporate strategy: exploring generic alternatives
 Examining which generic strategy the firm should opt for:
•Stability?
•Expansion?
•Divestment?
•Combination?
 Understanding the effect of the alternatives in terms of changes/additions/deletions to the firm’s
existing product-market posture
 Clarifying the competitive advantage and synergy which each alternative would require/use
7.Formulating the corporate strategy: strategy choice
 Evaluating the strategy alternatives
 Keeping the O-T profile, the growth objective and CAP as the reference frame, examining what
strategy would be the best
 Reviewing the existing businesses
Assessing the prospects of each SBU
Examining what to do with each SBU
Build? Maintain? Harvest? Divest? To what extent? At what pace?
 Examining, which businesses are to be taken up
 Examining the resource requirement of the different strategy options and checking the resource
availability
 Making the final choice of the strategy/strategy spectrum
 Translating the strategy in terms of what is to be done with each SBU
Assigning the priorities to the SBUs, existing as well as new ones
Clarifying what is expected of each SBU
Allocating resources to the SBUs
8. Monitoring the strategy

Generic Value Chain

FIRM INFRASTRUCTURE

HUMAN RESOURCE MANAGEMENT

SUPPORT
ACTIVITIES TECHNOLOGY DEVELOPMENT

PROCUREMENT

MARKETIN
INBOUND G & SALES
OUTBOUND
LOGISTICS OPERATIONS SERVICE
LOGISITCS

PRIMARY
ACTIVITIES
 Strategy
Alternatives

Stability Expansion Divestment Combination

Intensification Diversification

Market Market Product Vertically Concentric Conglomerate

Penetration Development Development Integrated Diversification Diversification

Forward Backward

Vision & mission

 Vision is what the firm wants to be in future. Such a view is often made explicit in a VISION
statement of the company. A vision statement gives aspiration and motivation besides guiding the
formulation of strategy.
 Hamel and Prahalad, term it as strategic intent. Examples:
 To put a man on the moon by the end of the decade– Apollo program.
 Our vision is to dominate the global food service industry– McDonald.
 Encircle Caterpillar – Kamatsu.
 Project infinity – Coca Cola
Mission

 Mission statement contains the ultimate purpose of the firm. It also is the vision of the founders.
 The corporate mission is an expression of the growth ambition of the firm.
 It is the firm’s future visualized.
How does mission helps the firm

I. Lends direction
II. Gives focus
III Objectives, targets and programs are formulated based on mission.
IV. Helps people at various levels in the corporation understand in what direction they should move.
V. Guiding the action at all levels.
VI. Helps prevent people falling into an activity trap.
A few mission statements

 The mission of our company, is to make cleanliness commonplace, to lesson work for women, to
foster health, and to contribute to personal attractiveness that life may be more enjoyable for the
people who use our products. --- Unilever
 To preserve and improve human life---Merck
 To help business corporations and governments to more successful. —McKinsey & Co.
 To become a major player in the global chemical business and simultaneously grow in other growth
industries like infrastructure ---RIL
 To become a $ 1 billion research based global pharmaceutical company --- Ranbaxy
Values & beliefs
 Organizational values are a major constituent of mission. It is values that hold the mission in tact. It is
the shared values that hold a firm together. Values proclaim the qualities it will cherish and what it
will give to and expect from its people and society.
 The firm’s beliefs can also be found in the mission statement.
Environmental analysis
Macro environment. A) Socio cultural, politico- legal, socio- economic, technological and economic
factors acting on the firm. B) Task environment comprising shareholders, suppliers, employees,
competitors, creditors, debtors, customers, government etc.
Micro –environment. A) Organisational structure b) organisational culture and work .c) organisational
resources.
Task environment.
Task environment consists of all the work and people directly connected to firms activities.
Major task environments are,
Buyer and seller groups.
Competitor groups.
Employees (manpower groups).
Stock / owner groups
Credit group
Debt group
Regulatory group.
Analytical model
SWOT – model. Strength, weaknesses, opportunities and threats. O & T are external or macro
environment and S & W are internal or microenvironment factors.
Swot is used to identify core competency as well as lack of appropriate resources.
O is no O unless backed by resources.
SA = O / S- W or O / S – T where SA – strategic alternative. O – is opportunity, S is
strength, T –threat.
Swot is used to generate external factor analysis summery (EFAS) and internal factor
analysis summery (IFAS)
SWOT -- HM
Strength,
First motor car company in India,
Good product acceptability,
Monopoly and protected market,
Built extensive dealer, repair and service networkThe
GP-CK Birla group,
First collaboration with GM.
Acceptance in government and taxi market,
Most suited for the then Indian roads.
One out of the only two car companies in the country
Weakness -- HM
No mission, vision or goals.
No shared values or beliefs.
Conflict between labour and management.
No corporate strategy.
Failed to see the environmental changes
Did not anticipate competition,
Did nothing to counter the threat from Maruthi till it was too late
Cling on the same product for 50 years without any major change,
Can failed to see customer needs and what competitors offered
High labour cost and low productivity
Failed to follow up the initial success of Lancer,
Truker was a flop.
Deviated from core areas and core competencies.

Opportunity
GDP growth and boom in the car market,
Opening of the economy,
Globalisation and upsurge in peoples aspiration level
Good road network
Export possibility
Low labour cost
JV and collaboration with world class motorcar companies.
In Threat
Competition?
Any other?
BCG growth-share matrix
BCG (Boston Consulting Group) is a simple way to analyse a firm’s portfolio of investments, products,
or business units.
The classification is most attractive, potentially attractive, moderately attractive, and least attractive
based on growth rates and market share.
They are also called CASH COWS, STARS, QUESTION MARKS, and DOGS to describe the above
position.
Stars and question marks are businesses that operate in high growth industries.
Cash cows and dogs are businesses that operate in low growth industries.
Stars are net users of resources but hold potential for future. Question marks are also net users of
resources but are in high-risk categories.
A cash cow brings lot of cash to the company. Dogs are weak in market share and also in low growth
market. They are drags on company resources.

Market Share
High Low
 High Star ?
Market II I
Growth
Cash cow Dog
Low III IV

GE multifactor portfolio planning matrix

Different businesses or products are rated based on the following two parameters,
Industry attractiveness &
Companies business strength.
How attractive is the industry and how strong is the firm in the industry.
If both are very strong such businesses needs more investment and allowed to grow.
Invest and develop such SUBs.
If they are medium the strategy should be selective.
If they are low the policy should be harvest / divest

Business Strength/competitive Positions

High

Industry
Medium

Attractiveness

Low
 Strong Average Weak

SBUs.
It is a single business or collection of related businesses that can be planned separately from the rest of
the company,
It a scientific method of grouping the businesses of a multi business corporation to help planning.
Products/ businesses that are related in the standpoint of “ function “ are formed as a distinct SBU.
A SBU can be a separate corporation or a division in a corporation.
Each SBU will be under a separate CEO, and will be a profit centre
SBU is for facilitating strategic planning and implementation and will be having their vision mission,
goals, targets, programs, budgets and SOPs.

Competitive advantage & core competence

A competitive advantage is a position of superiority on the part of the firm in some function /factor/
activity/ in relation to its competition. It is this superiority that enables the firm to survive, grow
and excel in a competitive market.
The superiority can be in any function such as manufacturing, marketing, finance, HRM, or a
combination. Intellectual property, knowledge, or any factor of production can give a
competitive advantage.
Thus competitive advantage is a superior position relative to competition.
CA is linked to strategy. Both go hand in hand. CA is a vital component of strategy.
For the strategy to work the firm should have competitive advantage.
CA is the back up of strategy. Without relevant CA strategy will not succeed.
Strategy can be used to create and excel CA.

Sources of CA:
MARKETING
FINANCE
PRODUCTION
R& D
HR
THE CEO & LEADERSHIP
LOCATION & many more.
CA & Strength
Strength is different from CA.
All strengths are not CA.
All CA are strength.
Strength is a CA only if it can affect the competition in an advantageous manner or bring in superiority
in the market vis- a- vis the competitor. Otherwise it will remain as strength.
Building CA
By strategy
By SWOT
By bench marking
By value chain approach,
By analysing value chain of self and competitor
Core competence
A firm may loose the CA as competitors will catch up after some time. There for to keep up the position
the firm should develop some unique strength. This is known as CORE COMPETENCE.
An enduring competency that cannot be easily imitated.
A competency that lies at the root of products.
(VSR, Ch. 10)
Mission, vision, goal, objective, policy, SOP.
Mission- is the purpose or reason for the firms’ existence.
Vision is a statement of what a firm can do and what it wants to be.
Goal is a statement of what a firm wants to achieve. Goals should be SMART.
Objective is a statement of what firm wants to achieve with definitive commitment on quantity and time
frame.
Policy is a broad guideline for decision making to link strategy formulation and strategy implementation
Standard operating procedures is developed to control activities. Sops can be in the form of simple
conventions or in detailed written manuals.

Strategic management process

Environmental analysis-
Strategy formulation
Strategy implementation
Evaluation and control
Environmental analysis
Understanding, analysing the external and internal environment of a firm. Models like SWOT; GE
spotlight can be used for this. Forecasting methods can also be used for finding the future trends
and possible developments.
This includes external (society and task) & internal (structure, culture, & resources)
Strategy formulation (strategic planning)
This is the planning stage. The firm will decide the vision, mission, objectives, goals, strategies, and
policies. The major decisions will be,
What business should we are in?
Where should we locate?
What product /service?
How much capital & from where?
What is the organisation structure?
Who should be the key personnel?
Basically these are the entrepreneurial decisions and these are taken buy the investors/
promoters.
Strategy for stability
Strategy for growth
Strategy for retrenchment
Competitive strategy
Cooperative strategy.
Generic competitive strategy (Michael Porter)
1) Overall cost leadership. A firm can achieve competitive advantage if it can supply its products /
service at a lower cost than the competitors. How can one achieve this overall cost leadership?
2) Differentiation strategy. Offer something unique or different. Through brand creation and positioning.

3) Focused strategy. Concentrate on specific products, customers, segments where it is good or superior.
The concept of core competency came out of this.
Strategy implementation
Strategy is translated into action so that the objective of the strategy is achieved. In doing so,
Programs are drawn,
Budgets are made,
Policies, procedures, rules, are formulated.
Evaluation & control
Evaluation and control is the most important part of strategic mgt. process. It involves feedback,
monitoring, assessment, corrective decisions (sometimes involving total reversal or even
abandonment) and implementation.
Strategic mgt. process (summary)
Environmental analysis: task environment factors & internal factors.
Strategy planning: objectives, strategies, tactics, and policies.
Strategy implementation: programmes, budgets, and procedures.
Evaluation & control: evaluation, assessment and control.
Types of strategies
Competitive strategy. Aimed at improving competitive position. This is achieved through cost leadership
or differentiation strategy.
Cooperative strategy. They are,
Collusion,
Strategic alliances,
Mutual service consortia
Joint venture
Licensing agreement
Value-chain partnership (inbound logistic, operations, outbound logistics, marketing and
sales, services. Supporting activities, procurement, technology development, HRM,
& firm infrastructure.) Firm infrastructure includes, planning, finance, accounting,
legal, govt & PR.
Common features of competitive and cooperative strategies
They are made by board of directors or managers
Both are based on common principle of competitive position of a firm against competitors.
They may be formed for entire company, or a business unit or a particular product/ service or a
particular market segment.
Major corporate strategies
Directional: the firms overall orientation towards growth, stability, or retrenchment.
Portfolio: the industry or markets in which firm competes through its products and services
Pareting: the manner in which the top management coordinates activities, transfers resources and
cultivates capabilities among its product lines and business units

Distinction between cooperative and competitive strategy

Cooperative strategy may modify organisational structure. But competitive Strategy will not alter the
organisation structure.
Both have opposite direction to face competition. in coop. they nullify competition but in competitive
they face each other.
Cooperative strategy involve sharing, synergetic, friendly but competitive is unfriendly non-sharing and
hostile.

Directional strategy
Growth strategies:
Mergers,
Acquisitions, or takeovers,
Strategic alliances
Two types of growth strategies can be seen.
Concentration strategies. (Vertical growth, forward integration, backward integration, a
firm builds on its value chain.)
Vertical integration can be full ownership of value chain to no ownership at all. Example
Indian Oil and RIL. As against this some companies out sources the entire value
chain and have minimum vertical integration.
Horizontal growth results in horizontal integration. It refers expansion of forms products
to larger geographical areas or by increasing range of products or services.
Diversification strategies: continuous growth may not be possible with vertical, horizontal strategies
alone. Then the firm goes for diversification. Diversification can be concentric or conglomerate.
Concentric diversification refers to growth into a related industry. The search in concentric
diversification is SYNERGY. The concept is that two will generate more profits together than they
could separately.
Conglomerate strategy. It refers to growth by diversification into an industry not related to its current
line of business.

Stability strategy.
Pause / proceed strategy.
No change strategy.
Profit strategy.
Retrenchment strategies
Turnaround strategy. It is an important retrenchment strategy in corporate world. Its focus is on
operational efficiency. Turnaround strategy involve,
Cuts in profit, sales, and production.
Cut in cost
Identify and stabilise at new level of profit / sales / production.
Improvement of operational efficiency.
Adopt growth strategies from new stabilised level.
 Turnaround strategies are adopted in two steps
1 contraction
2 consolidation and growth at opportune time.
Entrepreneurial turnaround strategy.
Efficiency turnaround strategy.
Captive company strategy.
Disinvestments strategy.
Generation of strategic alternatives
Generation of strategic alternatives
Short listing the feasible strategies
Comparative evaluation of feasible strategies
Selection of best strategy.
Steps involved in generating strategic alternatives.
Among various models, TOWS matrix model is used most widely.
SO – strategy. Use of strength to take advantage of opportunities.
ST –strategy. Use strength to face threats.
WO –strategy. Overcome weakness to take advantage of opportunities.
WT – strategy. Minimise weakness and avoid threats (defensive strategies)
Forecasting techniques.
Forecasting is very crucial for all planning as all planning are for future. Some of the more important
techniques are
Brain storming
Consultancy
Delphi technique.

Organisational strategies
Organisational strategies are such strategies that are made at board level. This is the top most level and
is headed by CMD. They are corporate strategies and hence decide the direction of the firm.
They decide:
The objective
The overall goals and targets
The product and service mix
The capital and financial requirements
Total sequence of how a firm has to perform.
They also govern all functional strategies such as for marketing, production, transportation
etc.
They are regarded as MASTER STRATEGIES.
Important org. strategies
Organisation modification strategy: they modify the organisation structure including the hierarchy,
staffing, objective and capital of the company.
Functional modification strategy: they may or may not alter the organisational structure. They bring
functional modifications with or without capital restructuring.
Organisation modification strategies.
Organisation life cycle.
Stage i simple.
Stage ii functional,
Stage iii divisional.
Stage iv declining.
Stage v mortality. Organisation modification can be brought in one of the following ways.
They push the organisation from stage I to stage ii or stage ii to stage iii
They may require the restructuring of the objective
 They may alter the method and persons making strategic decisions they may bring about
capital restructuring
They change the staffing patterns
They may alter the ownership pattern
Mergers.
Merger is a process-involving establishment of a single corporate body by merging resources and
technologies of two different bodies performing competitive or cooperative business in the same
industry. It requires situations like,
Equal size
Competitive firms, merger nullify competition
Two firms cooperative and merger will consolidate their cooperation
Two companies are from the same industries
Same or partially same board of directors
Synergic or complementary. (HP- Compaq).

Functional & organisational modifications on mergers

Instead of two boards only one board.
A new company is formed with new name. Shares of old companies are collected and cancelled and new
shares of the new company is issued
Restructuring of the organisation is carried out including shifting of personal
Work duplication is avoided.
The new company will adopt town policies
Staff relocation is carried out as needed
Physical shifting of fixed assets or manpower is normally not done.
Merger involves MOU statement and declaration that earlier entities are no more in existence and the
shares, assets liabilities, technologies, and all other resources of two companies stand merged into a
new legal entity.
Advantages & disadvantages.
Advantages are; consolidation, increased market, more resources, good will, synergy, nullification of
competition.
Disadvantages are: liabilities and bad debts are transferred to new company. Staffing can create
problems.
Usually there is a droppage of share prices in the stock market
Frequent mergers lead to inconsistencies in strategy formulation and implementation
Joint ventures
Joint venture is a cooperative business activity formed by two or more separate organisations for
strategic purposes crating an independent entity. The ownership, the operational responsibility,
the risk and rewards are shared in agreed manner through a promotional agreement.
In a JV the respective strengths are shared to overcome a weakness or exploit a new opportunity
In international business JV is one of the most popular forms of organisations because it has the least
financial, political and legal constraints as a mode of entry.
Advantages are flexibility, less legal and statutory constraints, synergy and bring growth for both
parties.
Disadvantages are conflicts, loss of control operations from the respective JV parties, and in technology
transfer fewer advantages to stronger party.
Acquisition
This is a method of growth in which a strong company acquires all the assets and liabilities of another
company.
Acquisitions are made for specific objectives like capital investment, corporate growth, market
coverage, new products or technology transfer.
Advantages are easy entry, synergy, fast growth, less risky especially in international contest, least
gestation period.
Disadvantages are cultural conflicts, adjustment problems, erosion in market image if ownership change
is frequent.
Take over
Take over is a form of acquisition, and can be done by buying shares from market and taking
over the control with or with out the consent of the owners. In a takeover the owners lose
their ownership/ control of the company against their wishes.
Against an attempt by a hostile takeover the owners may try to get a friendly takeover or bring a
“ white knight “ and handover control.
Networking
In recent years a new and radical type of organisations have emerged with network structure. It is also
called VIRTUAL ORGANISATION because it is composed of a series of functional, project,
supply groups or collaborations or partnerships linked and constantly changing .the cobweb like
networking is non-hierarchical in nature but each one doing its specified function in the value
chain.
The organisation is only a shell electronically connected to some completely owned division, partially
owned subsidiaries, and other independent companies.
Such organisations will outsource most of the functions.
For ex. Amason. Com. Most functions of DEL COMPUTERS is carried out through a network
organisation.
Virtual organisation is most dynamic, flexible, and easy to add, delete, disband and relatively less costly.

Consortia
It is a loose partnership between companies in similar or allied industries who pool their resources to
undertake specific tasks.
Typical consortia working can be seen in R & D activity, loans, insurance, developmental work of
various types.
Franchising
It is an agreement under which a company grants right to other company to open an establishment using
the name, brand, products, services and operating systems of the parent company. The first
company is called the franchiser company and the company that uses the name of the franchiser
is called the franchisee
Fast growth, least capital, and mutual benefit..
Subcontracting
Sub contracting is a form of outsourcing the work to outside organisation or individuals.
Most companies do it in different degrees.
International subcontracting is a huge area in which business is developing very fast. The BPO is
mostly based on subcontracting. Various functions on the value chain is subcontracted to
take advantage of the cost difference in factors of production in different locations in the
world.
Licensing
Licensing is an arrangement, wherein a company licences other companies to produce and or sell a
product developed by it
Licensing is based on copy right, patents, trademarks, which are known as IPRs.
Major reasons for failures.
Managers are inadequately prepared for strategic planning.
The information for preparing the plans is insufficient for planning for action.
The goals of the organisation are too vague to be of value.
The business units (SBUs) are not clearly identified.
The reviews of the strategic plans of the business units are not done effectively.
The link between strategic planning and control is insufficient.
Successful implementation of strategies.
It is not enough to have strategic planning. It should be successfully implemented. The following
are eight recommendations for successful implementation.
Communication of strategies to all key decision making managers.
Developing and communicating planning premises.
Action plans contributing to and reflecting major objectives and strategies.
Regular reviews of strategies.
Development of contingency strategies and programs.
Making organisation structure fit planning needs.
Continuing emphasis on planning and implementing strategy.
Creating a company climate that forces planning.
Strategic management, new leadership model.
The old leadership style was more macro or masculine (strong decision making, leading the troops,
driving strategies, waging competitive battle) is shifted to more feminine qualities, (listening,
relationship building, and nurturing). The model today is not so much “ take it on your shoulders
“ but “ create the environment that will enable others to carry part of the burden.
The leadership needs of the organisations are, the ability to :
Build confidence,
Build enthusiasm,
Cooperate,
Deliver results,
Form networks,
Influence others,
Use information.
And the required competencies of business leaders are:
Business literacy
Creativity
Cross cultural effectiveness
Empathy
Flexibility
Pro-activity
Problem solving
Relation building
Team work
Vision
Need is EQ for leaders.
Self awareness, in terms of the ability to read and understand ones emotions and asses ones strengths
and weaknesses, and have positive self worth.
Self-management in terms of control, integrity, conscientiousness, initiative, and achievement
orientation.
Social awareness in relation to sensing others emotions (empathy) reading the organisation
(organisational awareness) and recognising customers needs. (Service orientation)
Social skills in relation to influencing and inspiring others, communicating, collaborating, and building
relationships with others, and managing change and conflict
GAME THEORY
A game is a competitive activity in which players contend with each other according to a set of rules.
Can use game theory to illuminate economic, political, and biological phenomena.
The theory of rational choice – a decision maker chooses the best action according to her preferences
among all the actions available to her.
The players in the game move according to their perception of their best advantages. Based on this they
can be,
Competitive, or cooperative.
Win – lose,
Lose – win,
Lose – lose,
Win -- win
The theory of rational choice:
In any given situation the decision- maker chooses the best according to her preferences. If there
are several equally attractive best actions, the theory is,
The action chosen by a decision maker is at least as good, according to her preferences, as every
other available action.

Strategic games.
A strategic game is a model of interacting decision– makers. Because of the interaction we call them
players. Each player has a set of possible actions. Each player has preferences about the action
profile i.e., the list of all the players’ actions.
A strategic game consists of,
A set of players,
For each player a set of actions,
For each player, preferences over the set of action profiles
The prisoner’s dilemma.
Two suspects Molly and Mottu are caught in a major crime and put in separate cells. If both keep quite
they will get only one year each as evidence is only for a minor crime.
If molly confesses, she will be set free, but Mottu gets four years and vice versa.
If both confess, both will get three years.
What will MOLLY and MOTTU do?