STRATEGIC MANAGEMENT

1
 WHY STRATEGIC THINKING?
Companies are operating in age of discontinuing change - an age of creative & constructive
destruction.
Business, technology and product life is shrinking.
Demographic shift in terms of consumer preference and requirements.
A direct promotion from Agricultural economy to service or Hi-tech economy in the new growth
economy.
A concept from liberalization, privatization & Globalization (LPG) to regionalization.
Shift from controlled economy to market driven economy.
Rich countries adopt deindustrialization.
Emergence of new Global Socio economic system and world orders.
Knowledge is replacing Infrastructure
Self-leadership is in, command and control out
Networks are replacing hierarchies
Wanted - employees with Emotional Intelligence.
Current Trends
Increasing environmental awareness
Growing health consciousness
Expanding seniors market
Impact of the Generation Y boom let
Declining mass market
Changing pace and location of life
Changing household composition
Increasing diversity of workforce & market

2
Challenge of Strategic Management

Only 16 of the 100 largest U.S. companies at

the start of the 20th century are still
identifiable today!

In a recent year, 44,367 businesses filed for

bankruptcy and many more U.S. businesses failed

Competitive success is transient...unless care is

taken to preserve competitive position 3
Challenge of Strategic Management
The goals of achieving
strategic competitiveness
and earning above-
average returns are
challenging

The performance of
some companies more
than meets strategic
management's
challenge

4
 21st Century Competitive Landscape
Fundamental nature of
competition is changing
Rapid technological changes
Rapid technology diffusions
Dramatic changes in
information and
communication technologies
Increasing importance of
knowledge
The pace of change
is relentless....
and increasing
Traditional industry
boundaries are
blurring, such as...
Computers
Telecommunications
5
 21st Century Competitive Landscape

The global economy is Traditional sources of

changing competitive advantage
no longer guarantee
People, goods, services and
success
ideas move freely across
geographic boundaries New keys to success
New opportunities emerge include:
in multiple global markets Flexibility
Markets and industries Innovation
become more Speed
internationalized Integration

6
21st Century Competitive Landscape
Country Competitiveness Rankings
A countrys 1999 1998 Country Competitiveness Competitiveness
competitiveness is 1 1 Singapore
Index 1999
2.12
Index 1998
2.16
achieved through the 2 3 United States 1.58 1.41
accumulation of 3
4
2
6
Hong Kong
Taiwan
1.41
1.38
1.91
1.19
individual firms 5 5 Canada 1.33 1.27
6 8 Switzerland 1.27 1.10
strategic 7 10 Luxembourg 1.25 1.05
competitiveness in 8 4 United Kingdom 1.17 1.29
9 7 Netherlands 1.13 1.13
the global economy 10 11 Ireland 1.11 1.05
11 15 Finland 1.11 0.70
12 14 Australia 1.04 0.79
13 13 New Zealand 10.1 0.84
Achieving improved 14
15
12
9
Japan
Norway
1.00
0.92
0.97
1.09
competitiveness 16 17 Malaysia 0.86 0.59
allows a country's 17
18
16
30
Denmark
Iceland
0.85
0.59
0.61
-0.18
citizens to have a 19 23 Sweden 0.58 0.25
20 20 Austria 0.37 0.37
higher standard of 21 18 Chile 0.57 0.57
living 22
23
19
22
Korea
France
0.46
0.44
0.39
0.25
24 27 Belgium 0.39 -0.03
25 24 Germany 0.37 0.15 7
26 25 Spain 0.16 0.02
 Changing Corporations

Old Organizational Format New Organizational Format

One large corporation Mini-business units & cooperative relationships

Vertical communication Horizontal communication

Centralized top-down decision making Decentralized participative decision making

Vertical integration Outsourcing & Virtual Organizations

Work/quality teams Autonomous work teams

Functional work teams Cross-functional work teams

Minimal training Extensive training

Specialized job design focused on individual Value-chain team-focused job design

Stability & Structured & Gradual Change & Flexibility & Speedy, Fast

Mass Production Mass Customization

* Business Week, 28 August, 2000

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 FOUR MAJOR THRUST AREAS OF
BUSINESS
Managing Competition
- Aggressive Marketing Market Share Go Global

- Superior Quality of Products / Services

- Cost Reduction / Lowering Prices

- Faster Deliveries / Response Time

- Innovations / Productivity Improvements

Developing Leadership Skills for Vision and Change.

To focus on People besides Products, Process, Profits.
Today, every person is a Profit Center.
Using IT based tsunami of information, ideas and tools
for managing the business E Business
Making ours a Learning Organization
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 WHAT IS BUSINESS?

PRODUCT

MARKET FUNCTION

What Business the Firm is in?

Why the Firm is in the Business?
What should be Firms Business?

10
Strategic Management

Creating &
Why?
To ensure Growth Sustaining
with Profits in
the long-run!
Competitive
Advantages,
Globally
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The Strategic Management System
Involves the full set of:

Commitments Decisions Actions

which are required for firms to achieve:

Strategic Competitiveness
Sustained Competitive Advantage
Above-Average Returns
12
Strategic Competitiveness
Achieved when a firm successfully formulates
and implements a value-creating strategy

Sustained Competitive Advantage

Occurs when a firm develops a strategy that
competitors are not simultaneously implementing
Provides benefits which current and potential
competitors are unable to duplicate

Above-Average Returns
Returns in excess of what an investor expects to
earn from other investments with similar risk
13
 BASIC CONCEPTS
STRATEGY: It is Unified, Comprehensive, and Integrated
long term plan that relates to the strategic advantages of the
firm to the challenges of the environment.
STRATEGIC MANAGEMENT: It is a stream of decisions and
actions which leads to the development of an effective
strategy to help achieve the corporate objective. It is a
continuous, iterative, & Cross functional process of matching
firm with its environment.
COMPETITIVE ADVANTAGE: is delivering superior value
advantage to your target customers relative to your
competitors. Or delivering equivalent customer value to your
target customers relative to your competitors , but at a lower
cost.

14
 GAP OUT PUT

VISION VALUE SYSTEM

FIRM/BUSINESS
MISSION
OBJECTIVES

PURPOSE

BASIC INFRASTRUCTURE AND FRAME WORK OF A FIRM

15
 MISSION & GOALS OF A COMPANY
VISION: It is a vividly descriptive image of what you
what to be or what you want to be known for. Vision
is an art for seeing invisibles.
MISSION : It a statement of intent of what a firm wants
to create and through which line of Business. It is a
process of legitimization of corporate existence of
business. It defines the culture, philosophy and grand
design of the firm. To pursue the Creation of Value to all
Stakeholders in the Business. It is an answer to question
What business are we in?
GOALS / OBJECTIVES : End to be achieved. It is
To make Profit for today and forever
To satisfy Customers today and forever
To satisfy Employees today and forever 16
Strategic Planning

17
 Three Big Strategic Questions
Where Are We Now?

Where Do we Want to
Go?

How Will We Get

There?

18
The Five Task of Strategic Planning
Developing a Vision and a Mission
Setting Objectives
Crafting a Strategy
Implementing and Executing Strategy
Evaluating Performance, Reviewing the
Situation and Initiating Corrective Action

19
 An organizations MISSION
reflects managements vision of what the
organization seeks to do and to become
sets forth a meaningful direction for the
organization
indicates an intent to stake out a particular
business position
outline Who we are, What we do, and Where
we are headed.

20
 Setting Objectives
The purpose is to convert
the mission into Specific
Performance Targets

Serve as yardsticks for

tacking company
progress and
performance.

Should be set at levels

that require stretch and
disciplined effort.

21
Two Types of Objectives are
Needed
FINANCIAL
OBJECTIVES

STRATEGIC
OBJECTIVES

Short-Run
Long-Run

22
 Crafting a Strategy
HOW to out compete rivals and win a
competitive advantage.
HOW to respond to changing industry and
competitive conditions
HOW to defend against threats to the
companys well-being
HOW to pursue attractive opportunities

23
 Crafting Strategy is an
Exercise in Entrepreneurship
Risk-taking and venture
someone's
Innovation and
business creativity
A keen eye for spotting
emerging market
opportunities
Choosing among
alternatives

24
 Why Good Management of Strategy Matters

Powerful execution of a powerful strategy is a

proven recipe for success.
Crafting and implementing a strategy are CORE
management functions.
To qualify as WELL-MANAGED, a company should
Have an attractive strategy
A good strategy builds a position that is strong
enough to overpower rivals and flexible enough to
overcome unexpected obstacles.

25
 Why is a Companys Strategy
Constantly Evolving?
Changing market conditions
Moves of competitors
New technologies and production capabilities
Evolving buyer needs and preferences
Political and regulatory factors
New windows of opportunity
Fresh ideas to improve the current strategy
A crisis situation

26
What is a Strategic Plan?
A strategic plan
specifies where a
company is
headed and HOW
management
intends to achieve
the targeted levels
of performance.

27
 Strategic Management Basic model
Options on
Learning
Competitive
points from
Positioning
deviations
Four Basic Elements

Strategic management is the process of moving where you are

to where you want to be in future through
sustainable competitive advantages
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 VISION GAP
VALUE
STRATEGIC
IMPLEMEMTATION
BASIC
MISSION FIRM STRATEGIES
GOAL ORGANISATION
DESIGN
MACRO ENVIRO STRATEGIC
APPRAISAL ALTERNATIVES
FUNCTIONALLEVEL
STRATEGIES &
RESOURCES
MICRO ENVIRO ALLOCATION
APPRAISAL OF BUSINESS LEVEL
INDUSTRIES STRATEGIES
DEVELOPMENT
OF
MICRO ENVIRO CONTROL
APPRAISAL OF STRATEGIC
FIRM SELECTION
Is
Strategy
Working?

STRATEGIC PLANNING DESIGN AND IMPLEMENTATION PROCESS 29

 Characteristic of the Strategic
Management Process
An ongoing exercise
Boundaries among the tasks are blurry rather than clear-
cut
Doing the 5 task is not isolated from other managerial
responsibilities and activities.
The time required to do the tasks of strategic
management comes in lumps and spurts rather than
being constant and regular.
Involves pushing to get the best strategy supportive
performance from each employee, perfecting the current
strategy.

30
 ENVIRONMENTAL APPRAISAL

ENVIRONMENTAL ENVIRONMENTAL
ANALYSIS DIAGNOSIS
O S

T W
ETOP
SAP
OFPP

EVALUATION PROCESS OF SWOT ANALYSIS

31
 Impact Of Environment Business

ENVIRONMENTAL FACTORS
GOVERNMENTAL INTERNATIONAL
ECONOMICAL

POLITICAL
TECHNOLOGICAL

FIRM/BUSINESS
LEGAL
SOCIETAL

CULTURAL

32
Variables in Societal Environment

33
International Societal Environments

34
Industry Analysis

35
 Porters Approach to Industry Analysis

Threat of Substitute Products or Services

Bargaining Power of Buyers

Bargaining Power of Suppliers

Relative Power of Other Stakeholders

36
 Porters Approach to Industry Analysis

Threat of New Entrants

Economies of scale

Product differentiation

Capital requirements

Switching costs

Access to distribution channels

Cost disadvantages

Government policy

37
 Porters Approach to Industry Analysis

Rivalry Among Existing Firms

Number of competitors
Rate of industry growth

Product or service characteristics

Amount of fixed costs

Capacity

Height of exit barriers

Diversity of rivals

38
SWOT analysis of strengths, weaknesses,
opportunities,and threats.

39
TOWS Matrix

40
CREATING STRATEGIC
MIND SET

41
 Corporate Strategy

Three Key Issues:

Firms directional (CORPORATE) strategy
Firms portfolio (BUSINESS LEVEL)
strategy
Firms parenting (FUNCTIONAL LEVEL)
strategy

42
 Initiation of Strategy

New CEO

External intervention Stimulus

for change
Triggering Threat of change in
ownership
in
event
strategy
Performance gap

Strategic inflection point

43
Corporate Directional Strategies

COMBINATION STRATEGIES

DERIVED STRATEGIES
44
 STRATEGIC VARIATIONS - EXPANSION
INTERNAL: Add new product, product line, market,
functions, redefine/ reposition of product market.
EXTERNAL : Take over, acquisition, merger.
RELATED : Synergic diversification.
UNRELATED: Non synergic diversification.
HORIZONTAL: Supplementary/ Complementary
Expansion.
VERTICAL: Integration.
ACTIVE: R & D, Entrepreneurial development.
PASSIVE: Imitation, adoption & adaptation.

45
 IGOR ANSOFFS BUSINESS GROWTH MODEL
New products /New Markets
CO Unrelated
NEW CUSTOMERS BU RP
FOR EXISTING LINES SIN ORA Businesses
ES T
OF PRODUCTS S D E PL
NEW

E A
Related VELO NNIN
MARKETS / CUSTOMERS

MARKET DEVELOPMENT Businesses PME G

NT

EXISTING PRODUCTS NEW PRODUCTS FOR

IN EXISTING MARKETS EXISTING CUSTOMERS
EXISTING

Increase
Market Share NEW PRODUCT
Existing
SALES DEVELOPMENT, UPGRADES
Share of Business
MGMT.
EXISTING NEW
Products
PRODUCTS
* Corporate Strategy, I. Ansoff, Jan 1965, McGraw Hill, USA
46
 SPIN OUT MANAGING
Creating New Business PROJECT
As an external Ventures

INTERNAL VENTURE
STRATEGY
Managing new products/ services,
development projects as
in company
Ventures

ALLIANCE EXTERNAL INVESTMENTS

In
Joint Ventures Acquisition of Product, Market,
Venture Acquisition, Partnering Technology,
or Management control

EXTERNAL VENTURES STRATEGY 47

EXTERNAL GROWTH STRATEGIES

TAKE OVER, AQUISION & MERGER

BUYING FIRM SELLING FIRM

Acquire Controlling interest} TAKE OVER

Acquire Assets and liabilities}
of selling Firm} ACQUISION
Acquire & merge of Assets }
liabilities of both the firms.} MERGER

48
 WHY THE FIRM PURSURE EXTERNAL EXPANSION

To increase the firms stock..

To increase the growth rate of the firm.
To make good investments.
To improve the firms earnings & stability.
To balance or fill out the product line.
To diversified the product line in mature state.
To reduce the competition.
To acquire the needed resources.
For Tax purpose.
To increase the efficiency and profitability.
To diversify the owners holding.
To deal with top management problems.

49
 CRITICAL ISSUES RELATED TO M & A
STRATEGIC ISSUES:
It relates to the commonality of strategic interest. Strength of one firm may be
weakness of the other firm and vice versa. The firms can create Synergy and
complementing business situation.
FINANCIAL ISSUES:
These are related to (a) Valuation of selling firms based on assets, market
standing, share prices, earning potential etc. (b) Sources of financing for merger.
MANAGERIAL ISSUES:
It relates to professional compatibility and acceptance of managerial system of
selling company.
LEGAL ISSUES:
It is related to various issues of legal provisions such as Chapter V of the
Companies Act, the MRTP Act, and section 72A (I) of the Income Tax Act OR Anti
Trust Act, Shermans Act.
CULTURAL ISSUES:
It relates to the cultural compatibility of the organization, society, market etc.
LABOUR ISSUES: It relates to continuation of old staff and subsequent relations.
SOCIETAL ISSUES: It relates to the benefits of society and Social compatibility.
OTHER ISSUES: It relates to Political, Economic, Environmental factors.

50
REASONS FOR FAILUR OF EXTERNAL
GROWTH
Paying too much for the acquired firm.
Assuming that a growing market or product will be out
standing in market.
Leaping into merger without carefully studying the
consequences.
Diversifying in to areas in which the firm had too little
knowledge.
Buying too large a firm and thus incurring an
excessively large debt.
Trying to merge disparate corporate cultures.
Counting on key personnel staying after the merger.
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 DERIVED BUSINESS STRATEGIES

OFFENSIVE DEFFENSIVE CO-OPERATIVE

RAISE STRUCTURAL SYNDICATING (COLLUSION)

FRONTAL ASSAULT
BARRIER STRATEGIC ALLIANCES
FLANKING MANEUVER
INCREASE EXPECTED MUTUAL CONSORTIA
BYPASS ATTACK
RETALIATION JOINT VENTURE
ENCIRCLEMENT
LOWER INDUCEMENT FOR LICENSING ARRANGEMENT
GUERRILLA WARFARE
ATTACK VALUE CHAIN PARTNERSHIP

52
 CO-OPERATIVE STRATEGIES
COLLUSION (SYNDICATING):
It is an active cooperation of firm for their individual and collective
advantages within an industry to reduce out-put and raise price in order to the
normal economic law of supply & Demand. Collusion may be
Explicit, in which firms co operate through direct communication and
negotiation, or
Tacit in which firms cooperate indirectly through an informal system of
signals.
Explicit is illegal under MRTP/ Anti trust Acts.
It can be successful if:
(1) There are small number of identifiable competitors.
(2) Cost are similar among firms.
(3) One firm tends to act as price leader or market leader.
(4) There is common industrial culture that accepts the cooperation.
(5) Sales are characterized by high frequency of small orders.
(6) There are high entry barriers to new competitors.
(Exp: Economic Scale of operation, Switching cost, Capital, Capacity, Regulations, market
accessibility, stage in learning curve, Brand loyalties etc )

53
 MUTUAL CONSORTIA Complemented Grouping:

It is a partnership of similar companies in similar industries who

pool their competency & resources to gain benefits that are too
expensive to develop/ deploy alone, such as access to advance
technology or capturing the market.
It is fairly weak and fragile alliances. There is very little interaction or
communication among the partners.

LICENSING ARRANGEMENT:
It is an agreement in which the licensing firm (licensor) grants rights to
another firm( licensee) in another country or market to produce and/or
sell a product or services. The licensee pays compensation (Royalties,
profit sharing, or lump sum payment) to the licensing firm in return for
technical expertise.
It is useful strategy if the trademark or brand name is well known. It is
also useful when there is Entry barrier for a MNC.
54
STRATEGIC ALLIANCE (Partnering):
It is a partnership of two or more corporations or business units to achieve
strategically significant objectives which can be mutually beneficial. Some alliance
are short term till the product is established, while the others are longer lasting,
resulting in merger.
The reasons for alliance are:

(a) To obtain technological, management and/or manufacturing capabilities.

(b) To enter into specific markets.
(c) To reduce financial risk.
(d) To reduce political and economic risk.
(e) To achieve or ensure competitive advantages in new businesses or markets
(f) It plays vital role in todays market condition and environment to solve some complicated
issues.
(g) It provides vital role in providing the firms synergic strength.
(h) It helps to develop product, process, market & share the investment outlay jointly.
(i) It facilitates the development of unique technological capabilities to meet the challenges of
technological revolution.
(j) It create a compulsion for alliance to enter in the local market through JV.
(k) Building brand image in local market is mostly possible through alliance.

55
SPECIFIC ALLIANCE
Production Alliance: Two or more companies share the
common manufacturing facilities, existing or new facilities.
Marketing Alliance: Two or more companies share
marketing services expertise and facilities.
Financial Alliance: Companies joint together in order to
reduce financial risks associated with the activities & share the
profit in proportion to financial contribution.
Research & Development Alliances: Fast changing
technology, high cost of R & D and need of being ahead of
changes, force companies to form alliance in R & D area.
Human Resources Alliance: Alliance for outsourcing

56
BREAK UP OF ALLIANCE:
Incompatibility between/among partners in
management style, financial position,
culture, business interest.
Access to information.
Distribution of Income.
Change in business environment.
Acquiring the strength of partner: The
companies over a period of alliance,
acquire the strengths of the partner and
starts new operations in competitions.
57
STRATEGIC JOINT VENTURE
Joint ventures (JV) are partnership in which two or more firms carry
out a specific project or business in a selected area of industry in a
form of new venture. Ownership of the original firms remains
unchanged. Actually, corporate partnership are formed with specific
and time bound objectives which, once achieved, leaves little
reasons for the alliance to continue. Joint venture can be
temporary or it can be long term. JV that last longer do so because
their objectives have been redesigned.
Every JV:
1. Has a scheduled life cycle, which will end sooner or later
(5 to 10 years)
2. Has to be dissolved when it has outlived its life cycle.
3. Change in environment forces joint venture to be redesigned
regularly
4. Translations seek to absorb their partners competencies.
5. It is a contractual obligation on fragile platform.
58
Strategic reasons for Formation of JV
1. Foreign firms are allowed to operate only if they enter into a JV with local
partner.
2. Size of the project may be very large and one company accomplish it.
3. Some projects require multidimensional technology that no one firm
possesses. Firm with different, but compatible technology may join
together.
4. One firm with technology competence and another with managerial
competence join together.
5. A foreign firm with technology competence joins with a domestic firm with
marketing competence.
6. While setting up of an organization requires surmounting hurdles such as
import quota, tariffs, nationalistic political interest and cultural road block,
Governments support for the JV.
7. JV are undertaken for a variety of reasons like political, economic or
technological

TYPES OF JV:
(A) SPIDER WEB
(B) GO-TOGATHER & SPLIT
(C) SUCCESSIVE INTEGRATION
59
 Building Competitive
Advantage Through Business
Level Strategy

60
Corporate Value Chain

61
Porters Generic Competitive Strategies

62
 What is a Business level strategy

Business level strategies are firm-specific business model

that will allow a company to gain a competitive
advantage over its rivals in a market or industry.
It aims at improving the effectiveness of a companys
operations and thus its ability to attend superior
efficiency, quality, innovation and customer
responsiveness .
Its ability to improve companys operations helps in
achieving cost leadership or helps the company in
differentiating its product from the rival company.
63
 Distinctive Competencies

They are firm specific strengths that allow a

company to differentiate its products and/or
achieve substantially lower costs than its rivals
and thus gain a competitive advantage.
E.g. Toyota
They arise from two sources:
1) Resources
2) Capabilities

64
 Build
RESOURCES
Differentiatio
n
BUSINESS
STRATEGIES
Superior:
Efficiency
Quality Value profitabili
DISTINCTIVE
Innovation creatio ty
COMPETENCIES
Customer n
responsiven
ess
Low cost

Build
CAPABILITIES

65
 Product/Market/Distinctive-Competency
Choices and Generic Competitive
Strategies
Cost
Differentiation Focus
Leadership
Low Low to High
Product High (Principally
(Principally by (Price or
Differentiation by Uniqueness)
Price) Uniqueness)
High (Many
Market Low (Mass Low (One or a
Market
Segmentation Market) few Segments)
Segments)
Research &
Manufacturing Any kind of
Distinctive Development,
and Materials Distinctive
Competency Sales &
Management Competency
Marketing
66
 Cost Leadership

It is based on the intent to outperform competitors by

doing every thing to establish a cost structure that allows it
to produce or provide goods or services at a lower unit
cost.
Cost leader chooses a low to moderate level of product
differentiation relative to its competitors.
Aims for a differentiation not markedly inferior to that of
the differentiator but a level obtainable at a low cost.
Frequently ignores the many different market segments in
industry to appeal the average customers.
67
 Advantages and Disadvantages
Advantages
Protected from industry
competitors
Less affected by
competitors price change
Requires a big market share
so they purchases in
relatively large quantities
Barrier to entry.
Disadvantages
Cost leadership approach
lurk in competitors ability
to find ways to lower their
cost structure
Ability to imitate cost
leaders methods easily
The single minded desire
to reduce costs might
drastically affect the
demand
68
 Implications
To pursue a full blown cost-leadership, strategic
managers need to devote enormous efforts to incorporate
all the latest information, materials, management, and
manufacturing technology into their operations to find
new ways to reduce costs.
A differentiator cannot let a cost leader get too great a
cost advantage because the leader might then be able to
use its high profits to invest more in product
differentiation and beat leaders.
Must respond to the strategic moves of its differential
competitors and increase the quality and features of its
products if it is to prosper in the long run
69
 Differentiation Strategy
The objective of the differentiation strategy is to achieve a
competitive advantage by creating a product that consumers
perceive as different or distinct in some important way.
Product differentiation can be achieved in three ways
Quality
Innovation
Responsiveness to customers
Generally, a differentiator chooses to segment its market into
many segments and niches
A differentiated company concentrates on the organizational
functions that provide the source of its differentiation
advantage.
70
 Advantages and Disadvantages
Advantages Disadvantages
Differentiation safeguards a Strategic managers long
company against competitors to term ability to maintain a
the degree that customers develop
brand loyalty for its product
products perceived
Suppliers are rarely a problem as distinctness in customers
companys strategy is geared eyes.
more toward the price it can The ease with which
charge than toward costs competitors imitate the
Distinct product solves the differentiators product
problem of strong buyers
The threat of substitutes depends
on the ability of the competitors
product.

71
 Focus Strategies
Focus Strategies position a company to
compete for customers in a particular market
segment, which can be defined
geographically, by type of customers, or by
region or even by locality.

72
 Focus Strategies
Focused Cost Leadership Strategy :
If a company uses a focused low cost approach, it
competes against the cost leader in the market
segment in which it has no cost disadvantage.
Focused Differentiation Strategy :
If a company uses a focused differentiation
approach, then all the means of differentiation that
are open to the differentiator are available to the
focused company.

73
 Advantages
A focused companys competitive advantage stem
from the source of its distinctive competency:
efficiency, quality, innovation, or responsiveness to
customers.
The company is protected from rivals to the extent
that it can provide a product or service they cannot.
This ability also gives the focuser power over its
buyers because they cannot get the same things
from anyone else.

74
 Disadvantages

Powerful suppliers
The focusers niche can suddenly disappear
because of technological change or change in
customers tastes.
The focuser is vulnerable and has to defend its
niche constantly.

75
 Competitive positioning and
business level strategy
Strategic group Analysis

Investment Analysis

Game Theory

76
 Strategic group Analysis
Strategic group analysis helps a company identify the
strategies that its industry rivals are pursuing.
It allows managers to uncover the most important basis
of competition in an industry and identify products and
market segments where they can compete most
successfully for customers.
Such analysis also helps to reveal what competencies are
likely to be most valuable in the future so that companies
can make the right investment decision.

77
 Investment Analysis
An Investment Strategy sets the amount and type of
resources human, financial and functional that
must be invested to maximize a companys
profitability over time.
Two factors are crucial in choosing an investment
strategy:
The strength of a companys position in an industry relative
to its competitors.
The stage of the industrys life cycle in which the company
is competing.

78
 Game Theory

Game such as chess, player move in turn, and

one player can select a strategy to pursue after
considering its rivals choice of strategies or
the players act at the same time, in ignorance
of their rivals current action.

79
Business Level Strategies Help To
Improve
1.Efficiency
2.Quality
3.Innovation
4.Customer responsiveness

80
Industry
Force
Cost Leadership
ntry Ability to cut price in retaliation deters
potential entrants.
arriers
Barriers
uyer
Buyer Ability to offer lower price to powerful
buyers. Large buyers have less power to
ower negotiate because of few close alternatives.
Large buyers have less power to negotiate
because of few alternatives.
upplier Better insulated from powerful suppliers.
Better able to pass on supplier price
ower increases to customers. Suppliers have
power because of low volumes, but a
differentiation-focused firm is better able to
pass on supplier price increases.
hreat of Can use low price to defend against
substitutes. Customer's become attached to
ubstitut differentiating attributes, reducing threat of
substitutes. Specialized products & core
s competency protect against substitutes.
ivalry
Rivalry Better able to compete on price.Brand
loyalty to keep customers from rivals.Rivals
cannot meet differentiation-focused
customer needs.
Generic Strategies
Differentiation
Customer loyalty can discourage
potential entrants.
Ability to offer lower price to
powerful buyers. Large buyers have
less power to negotiate because of
few close alternatives. Large buyers
have less power to negotiate because
of few alternatives.
Better insulated from powerful
suppliers. Better able to pass on
supplier price increases to
customers. Suppliers have power
because of low volumes, but a
differentiation-focused firm is better
able to pass on supplier price
increases.
Can use low price to defend against
substitutes. Customer's become
attached to differentiating attributes,
reducing threat of substitutes.
Specialized products & core
competency protect against
substitutes.
Better able to compete on
price.Brand loyalty to keep
customers from rivals.Rivals cannot
meet differentiation-focused
Focus
Focusing develops core
competencies that can act as an
entry barrier.
Ability to offer lower price to
powerful buyers. Large buyers
have less power to negotiate
because of few close alternatives.
Large buyers have less power to
negotiate because of few
alternatives.
Better insulated from powerful
suppliers. Better able to pass on
supplier price increases to
customers. Suppliers have power
because of low volumes, but a
differentiation-focused firm is
better able to pass on supplier
price increases.
Can use low price to defend
against substitutes. Customer's
become attached to differentiating
attributes, reducing threat of
substitutes. Specialized products &
core competency protect against
substitutes.
Better able to compete on
price.Brand loyalty to keep
customers from rivals.Rivals
81
cannot meet differentiation-
RETRENCHMENT STRATEGY
Common Retrenchment Strategies: Turnaround, restructuring,
Divesting, Bankruptcy, Liquidation

WHY FIRM GO FOR RETRENCHMENT:

Prevalence of poor economic conditions.
Competitive pressure may also cause firms to curtail their
operations.
The comp. is not doing well or perceive itself as doing poorly.
The comp. has not met its objectives and there is pressure
from shareholders, customers, or others to improve
performance.
The external environment poses threats and internal strengths
are insufficient to face the threats.
Better opportunities in the environments are perceived else
where were firms strength can be utilized.
Inability to implement latest technology cause by tech.
revolution.
82
International Strategy

83
International Strategy Opportunities and Outcomes
Identify Explore Use Core Strategic
Internatiodgd Resources and Competence Competitiveness
gnal Capabilities Management Outcomes
Opportunities Problems
International Modes of and Risk
Strategies Entry
Increased International Exporting
Market Size Business-Level Higher
Strategy Exporting Performance
Return on
Investment Multidomestic Returns
Strategic
Strategy
Economies of Alliances
Scale and Global
Acquisition
Learning Strategy
Innovation
Location Transnational Establishment of
Advantage Strategy New Subsidiary

Management
Problems
and Risk 84
 International Strategy Lifecycle
Selling Products or Services Outside a Firms Domestic Market

2 Product Demand
Develops and
Firm Exports
Products
1 Firm Introduces 3 Foreign
Innovation in
Domestic Market Competition
Begins Production

5 Production Becomes
Standardized and is
Relocated to Low Cost
4 Firm Begins
Countries Production Abroad
85
Motivations for International Expansion
Increase Market Share
Domestic market may lack the size to support efficient
scale manufacturing facilities
Example: Japanese electronics or
automobile manufacturers

Return on Investment
Large investment projects may require global markets to justify
the capital outlays
Example: Aircraft manufacturers Boeing or Airbus

Weak patent protection in some countries implies that firms

should expand overseas rapidly in order to preempt imitators
86
Motivations for International Expansion
Economies of Scale or Learning
Expanding size or scope of markets helps to achieve
economies of scale in manufacturing as well as marketing,
R & D or distribution
- Can spread costs over a larger sales base
- Increase profit per unit

Location Advantages
Low cost markets may aid in developing
competitive advantage
May achieve better access to:
- Raw materials - Key customers
- Lower cost labor - Energy
- Key suppliers - Natural resources 87
Porters Determinants of National Advantage
Home Country of Origin Is Crucial to International Success

Related & Supporting

Industries
- Japanese cameras & copiers
Factor Conditions - Italian shoes & leather
Basic Factors
- Land, labor Demand
Advanced Factors Conditions
- Highly educated workers Home country may
- Digital communications support scale efficient
Generalized Factors operations by itself
- Capital, infrastructure
Specialized Factors Firm Strategy, Structure &
- Skilled personnel Rivalry
Intense rivalry fosters
industry competition 88
Business-Level International Strategies

International Low Cost

Usually located in home country
Export to international markets
Low value added operations in foreign countries
High value added operations in home country

International Differentiation
Countries with advanced or specialized factor
conditions most likely to use this strategy
Example: Japan, Germany, U.S.

89
Business-Level International Strategies

International Focus Strategies

Technologically advanced firms follow focused
low cost strategy
Focused differentiation firms compete on the
basis of image & design
Third group competes on low price by imitating

International Integrated Low Cost/Differentiation

Can be most effective in dealing with diverse markets
Often relies upon flexible manufacturing, total quality
management or rapid communication networks
90
Corporate-Level International Strategies
Type of Corporate Strategy selected will have an
impact on the selection and implementation of the
business-level strategies
Some Corporate strategies provide individual country
units with flexibility to choose their own strategies
Others dictate business-level strategies from the home
office and coordinate resource sharing across units

Multi-Domestic Strategy
Three
Corporate Global Strategy
Strategies
Transnational Strategy 91
Corporate-Level International Strategies
Multi-Domestic Strategy

Strategy and operating decisions are decentralized

to strategic business units (SBU) in each country
Products and services are tailored to local markets
Business units in each country are independent
of each other
Assumes markets differ by country or regions
Focus on competition in each market
Prominent strategy among European firms due to
broad variety of cultures and markets in Europe 92
Corporate-Level International Strategies
Global Strategy

Products are standardized across national markets

Decisions regarding business-level strategies are
centralized in the home office
Strategic business units (SBU) are assumed to be
interdependent
Emphasizes economies of scale
Often lacks responsiveness to local markets
Requires resource sharing and coordination across
borders (which also makes it difficult to manage) 93
Corporate-Level International Strategies
Transnational Strategy

Seeks to achieve both global efficiency and local

responsiveness

Difficult to achieve because of simultaneous

requirements for strong central control and
coordination to achieve efficiency and local
flexibility and decentralization to achieve local
market responsiveness

Must pursue organizational learning to achieve

competitive advantage
94
 International Corporate Strategy
When is each strategy appropriate?

High

Need for
Global
Integration

Multi-
Domestic
Low
Low High
Need for Local Market Responsiveness 95
International Corporate Strategy
When is each strategy appropriate?
High

Global Trans-
Strategy national

Need for
Global
Integration

Multi-
Domestic
Low
Low High
Need for Local Market Responsiveness 96
Choice of International Entry Mode
Exporting
Exporting

Common way to enter new international markets

No need to establish operations in other countries
Establish distribution channels through contractual
relationships
May have high transportation costs
May encounter high import tariffs
May have less control on marketing and distribution
Difficult to customize products
97
Choice of International Entry Mode
Licensing
Licensing
Firm authorizes another firm to manufacture and
sell its products
Licensing firm is paid a royalty on each unit
produced and sold
Licensee takes risks in manufacturing investments
Least risky way to enter a foreign market
Licensing firm loses control over product quality
and distribution
Relatively low profit potential
A significant risk is that licensor learns technology
and competes when license expires 98
Choice of International Entry Mode
Strategic
Strategic Alliances
Alliances
Enable firms to shares risks and resources to expand into
international ventures
Most joint ventures (JVs) involve a foreign company
with a new product or technology and a host company
with access to distribution or knowledge of local
customs, norms or politics

May experience difficulties in merging disparate

cultures
May not understand the strategic intent of partners or
experience divergent goals 99
Choice of International Entry Mode
Acquisitions
Acquisitions

Enable firms to make most rapid international

expansion
Can be very costly

Legal and regulatory requirements may present

barriers to foreign ownership

Usually require complex and costly negotiations

Potentially disparate corporate cultures

100
Choice of International Entry Mode
New Wholly-Owned Subsidiary

Most costly and complex of entry alternatives

Achieves greatest degree of control
Potentially most profitable, if successful
Maintain control over technology, marketing
and distribution
May need to acquire expertise and knowledge
that is relevant to host country
Could require hiring host country
nationals or consultants at high cost
101
Strategic Competitiveness Outcomes
International diversification facilitates innovation in
the firm
Provides larger market to gain more and faster returns
form investments in innovation
May generate resources necessary to sustain a large-
scale R&D program
Generally related to above-average returns, assuming
effective implementation and management of
international operations
International diversification provides greater
economies of scope and learning 102
Major Risks of International Diversification
Political Risk

Rebel fighting in Chechnya (Russia) and

Liberia (Africa)

Continual warfare among Middle Eastern nations

Potential renationalization of privatized enterprises

in Russia

Failure of European Community in quest for

economic superpower status because of intercountry
disagreements 103
Major Risks of International Diversification
Economic Risk

Mexicos effect on world trade with low wages and high

quality but strong currency risks

Chinas difficulty in enforcing intellectual property rights

on CDs, software, etc.

Germanys struggle with high unemployment, high

interest rates, sagging competitiveness, and cuts in social
programs

Chinas trade policies. $44 billion trade surplus with

United States in 1977. Chinas overall trade surplus
104
increased twentyfold in first half of 1997.
Limits To International Expansion
Management Problems

Cost of Coordination across diverse geographical

business units

Institutional and cultural barriers

Understanding strategic intent of competitors

The overall complexity of competition

105
PORTFOLIO ANALYSIS

106
Stages of the Industry Life Cycle

107
 PRODUCT LIFE CYCLE
Most product sales observed over long periods can be
portrayed as bell shaped curves Product life cycle curves
which can be typically divided into four stages: Introduction,
Growth, Maturity and Decline.
Product Life Cycle asserts four things.
1. Products have limited life.
2. Product Sales pass through distinct stages, each posing
different challenges, opportunities and problems to the seller.
3. Profits rise and fall through different stages of the life cycle.
4. Products require different marketing, financial,
manufacturing, purchasing and H.R. strategies in each life cycle
stage.
Growth-Slump-Maturity pattern (small kitchen appliances)
Cycle Recycle Pattern
Scalloped Pattern (succession of PLCs; eg: Nylon)
108
 INTRODUCTION - STRATEGIES
Sales growth tends to be slow - Delays in production capacity
expansion /technical problems; Distribution/retail chains being put up;
sales expensive as conversion rates are lower (innovators).
Promotion at the highest ratio to sales inform customers, induce
trial and secure distribution in retail outlets.
Prices tend to be high as costs are higher.

Hi
SLOW RAPID
SKIMMING SKIMMING
PRICE

SLOW RAPID
PENETRATION PENETRATION
Lo Hi
PROMOTION 109
 PLC - GROWTH STAGE
Introduction is followed by a stage marked by rapid climb in
sales. Companies starts to eye for market share.
Growth is a period of rapid market acceptance & substantial
profit improvement.
Innovators, early adaptors like the product and continue to
buy the product while middle majority starts trying.
New competition as sales and profits are growing. The stage
where we see entry of competition in large numbers.
Prices remain where they are or fall slightly to allow better
penetration or for entry into other segments.
Time noted for the introduction of variants/ brand extensions.
Companies maintain promotion at same or higher level.
Profits increase even with higher promotion costs as it gets
spread over higher sales volume. 110
 PLC - GROWTH STAGE
MARKETING STRATEGIES
Firm improves product quality and adds new features and
models.
Enters new market segments.
Enters new distribution channel.
Advertising focus shifts from awareness / knowledge to
Interest/desire/conviction.
Prices should be reduced (or low priced variants launched)
at the right time to attract the next level of price sensitive
customers.
Faces tradeoff between high market share to high current
profit.
Firm that pursues market expansion strategy will improve its
competitive position. 111
 PLC - MATURITY STAGE
Many products which we see around us are in the maturity
stage of PLC.
A stage characterized by the slow down in the growth rate.
Most of practical Marketing management deals with a
mature product. Hence the most important phase in PLC.
Three Phases
1. Growth Maturity: Sales growth starts to fall due to
distribution saturation. Growth predominantly due to trial by
laggards.
2. Stable Maturity: Most potential customers have tried the
product. Future sales governed by population growth and
replacement demand.
3. Decaying Maturity: Absolute level of sales decline.
Slow down in sales growth causes over-capacity -----
Intensified competition ----- price wars ---- profit Erosion----
weak exit. 112
 MATURITY STAGE STRATEGIES
R&D spends are increased to find better versions.
Increased advertising spends.
More Consumer / Dealer cuts.
Three types of interventions are taken up by Marketers.
1. Market Modification:
Company should not try to conserve but should try &
expand market for its Brand.
Sales vol. = No. of users X usage rate.
Try expand the no. of Brand Users by:
Convert non users: Attempts to convert non coffee drinkers
to try coffee.
Enter new market segments: Johnson & Johnson baby
shampoo for adults, Cerelac adapted for the senile.
Win competitors customers: Pepsi/Coke, NIIT/Apple.
113
 MATURITY STAGE STRATEGIES
Volume can also be increased by focusing on the Current
Users convincing them to use more.
More frequent use: Biscuits an all time snack, Coke instead
of coffee/tea, clinic shampoo, variety of SKU, vending
machines.
More usage per Occasion: Shampoo giving better results in
two rinsing, more SKUs.
New more varied uses: Recipe route tried out by microwave
oven manufacturers, Sachets by shampoo manufacturers
for travelers, Arm & Hammer Baking soda as a refrigerator
deodorant.
2. PRODUCT MODIFICATION
Stimulate sales by modifying the products characteristics
by improvements in quality, feature and style.
114
 STRATEGIES FOR MATURE STAGE

2. PRODUCT MODIFICATION
Quality Improvement:
Functional performance improved- for cars, TV, white
goods - New Improved eg: Santro Xing, Indica V2.
Plus launch - from FMCG manufacturers --------- stronger,
bigger, better, Lifebuoy Plus.
Aimed at triggering Brand switching
Style Improvement:
Aimed at increasing aesthetic appeal.
Periodic intro of color variants by auto manufacturers.
Consumer/packaged food bringing packaging /color
variants.
Advantages: Unique identity / can secure loyal customers.
Major disadvantage arises from the fact that it is difficult to
judge customer preferences --- risk of losing those who
liked earlier version 115
 STRATEGIES FOR MATURE STAGE (contd.)
Advantages of feature improvements
Build progressive and leadership image for co. (Maruti)
New features can be made optional (adapted or dropped
easily).
Helps to win loyalty of some segments.
Cost effective publicity.
Can generate enthusiasm for sales force and dealers.
Main disadvantage is that many of these can be easily
imitated.
3. Marketing Mix Modifications:
Product Manager should also try to stimulate sales by
modifying Mktg. Mix.
Price: Decision whether a price cut will attract new
customers.
Trying price specials, early bird discounts, easier credit
terms to retain loyal customers.. 116
 MATURITY STAGE STRATEGIES
3. Marketing Mix Modifications:
Advertising: Change message- copy, media- vehicle mix,
timing/frequency, to target new audience.
Build new brand identity / image.
Direct comparison Ads about competition.
Sales Promotion: Step up trade discount
Price offs, Rebates, warranties, festival offers, gifts etc.
Personal selling: should the quality of sales people or their
area of specialization need to be changed.
Questions on territory revisions; incentive plans; planning of
sales call etc.
Services: can the company speed up delivery. Extending
technical services.
Disadvantages: can be easily copied. Mass distribution and
penetration efforts may not help can lead to profit erosion.
117
 STRATEGIES FOR DECLINE STAGE
Sales of most products/brands eventually decline .
1. Technological advancements in the product category.
2. Consumer shifts in taste & perception.
3. Increased domestic & foreign competition------
price cutting/ over capacity/ profit erosion.

Sales may plunge to zero or gradually fall for a long period.

As sales decline, profits fall. Some of the weaker firms
withdraw.
Those remaining drop smaller market segments & marginal
trade channels to conserve profits.
They may cut their promotion budgets and may reduce prices
further.
Unless strong reasons for retention exist, carrying a weak
product is very costly to the firm.
It can delay aggressive search for alternatives/replacement.
118
 STRATEGIES FOR DECLINE STAGE
MARKETING STRATEGIES:
1. Increase firms investment (Dominate the market or to
strengthen its competitive position)
2. Hold investment level until uncertainties about the
industry are resolved.
3. Decreasing investment selectively. (Unprofitable target
groups/ markets/ products will have to be identified and
instead look for strong niches.)
4. Harvesting: milking to recover cash quickly (Brands with
high loyalty can continue longer without any investments).
5. Divest the business quickly by disposing off its assets as
advantageously as possible.

Drop Decision:
Sell/transfer to someone
Should drop slowly or fast.
Inventory/service level to be maintained.
119
 P.L.C WEAKNESSES
No Uniform Shape:
An S shaped curve describes only shape of PLC while most
of them vary or are unique.
Unpredictable Turning Points:
While most products do peak and then fall there is no
specific turning point.
Difficult to Decide the Stages:
A dormant sales (flat) pattern may denote the product has
reached maturity while it may be just that the product has
touched a plateau before another growth period.
Tendency to drop a product due to such readings can turn
out to be fatal due to the risks involved in new product
development.
120
 P.L.C WEAKNESSES
Unclear Implications:
Growth phase may or may not be associated with
high profit margin.
Rapid growth can be associated with low profits and
decline can be very profitable.

Product Oriented:
Fails to understand the changes in the requirement
of customers / strategies of competitors,
attractiveness of new market to competitors/
Emergence of technologies etc.
Technologies, needs/ demands, product categories
have different driving forces.
121
 P.L.C WEAKNESSES
No Uniform Shape: An s shaped curve describes only
shape of PLC while most of them vary or are unique.
Unpredictable Turning Points: While most products do
peak and then fall there is no specific turning point.
Difficult to Decide the Stages : A dormant sales (flat)
pattern may denote the product has reached maturity
while it may be just that the product has touched a
plateau before another growth period. Tendency to drop
a product due to such readings can turn out to be fatal
due to the risks involved in new product development
Unclear Implications: Growth phase may or may not be
associated with high profit margin. Say rapid growth can
be associated with low profits and decline can be very
profitable.
Product Oriented: Fails to understand the changing
requirement of customers / strategies of competitors,
attractiveness of new market to competitor-ors /
Emergence of technologies etc.
Technologies, needs/ demands, product categories have
different driving forces.
122
 BCG Portfolio Matrix
MARKET SHARE DOMINANCE
HIGH LOW
MARKET GROWTH RATE

High growth High growth

HIGH

Market leaders Low market share

Require cash Need cash
Large profits Poor profit margins

$
LOW

Low growth Low growth

High market share Low market share
High cash flow Minimal cash flow

123
 BCG Matrix
Relative Market Share Position
High Medium Low
1.0
High
Industry Sales Growth Rate

Stars Question Marks

IV III

Med

Cash Cows Dogs

I II
Low

124
BCG Matrix

125
BCG Portfolio Matrix Example
MARKET SHARE DOMINANCE

HIGH LOW

Sub-Notebooks Integrated
MARKET GROWTH RATE

and Hand-Held phone/Palm

Computer devices
HIGH

PROBLEM
STAR CHILD

Laptop and Mainframe

Personal Computer
Computers
LOW

CASH
COW DOG

126
Boston Consulting Group (BCG)
Matrix
When a firms divisions compete in
different industries, a separate strategy
often must be developed for each
business.
To enhance and formulate strategies.
To manage its portfolio of businesses
Focuses on relative market share
position and the industry growth rate.

127
 BCG Matrix
Pie Chart corresponds to corporate revenue
generated by that business unit.
The pie slice indicates the proportion of
divisions profit.
Divisions located
Quadrant I is called Cash Cows,
Quadrant II is called Dogs.
Quadrant III is called Question Marks,
Quadrant IV is called Stars,

128
 Cash Cows
High relative market share but compete in a
low-growth industry
Generate cash in excess of their needs
Milked i.e. cash for other purposes
Manages to maintain strong position as long as
possible
Product development
Concentric diversification
Retrenchment or divestiture if the division becomes
weak

129
 Dogs
Low relative market share and compete in
a slow- or no-growth industry
Weak internal and external position
Liquidation
Divestiture
Retrenchment

130
 Question Marks
Low relative market sharecompete in a
high growth industry
Cash needs are high
Cash generation is low
Decision: strengthen by pursuing an
intensive strategy, e.g. to sell them.

131
 Stars
High relative market share and a high
industry growth rate
Represent the organizations best long-
run opportunities for growth and
profitability.
Substantial investment to maintain or
strengthen their dominant position.
Integration strategies
Intensive strategies
Joint ventures
132
 BCG Matrix & Benefit
Setting the path for growth
Knowing dead investments
Draws attention to the cash flow,
Investment characteristics
Needs of an organizations various
divisions.
To achieve a portfolio of divisions that are
Stars.

133
 BCG Matrix Limitations
Viewing every business as a star, cash cow,
dog, or question mark is overly simplistic.
Middle of the BCG matrix is not easily classified.
The BCG matrix does not reflect whether or not
various divisions or their industries are growing
over time.
Other variables besides relative market share
position and industry growth rate in sales are
important in making strategic decisions about
various divisions.

134
G.E Strategic Planning Model
Business Strength
Strong Average Weak

Industry Attractiveness
High

Medium

Low

Business Strength Index Industry Attractiveness Index

* Market Share * Market size
* Price Competitiveness * Market Growth
* Product Quality * Industry Profit Margin
* Customer Knowledge * Amount of Competition
* Sales Force and Effectiveness * Seasonality
* Geographic Advantage * Cost Structure
135
* Others * Etc.
Strategies for Resource Allocation
Provide financial resources if SBU (Problem
Build Child) has potential to be a Star.
Build

Preserve market share if SBU is a successful

Hold Cash Cow. Use cash flow for other SBUs.
Hold

Increase short-term cash return. Appropriate

Harvest for all SBUs except Stars.
Harvest

Get rid of SBUs with low shares in

Divest
Divest low-growth markets.

136
 Parenting-Fit Matrix

Low

Heartland
and parenting characteristics
MISFIT between critical success

Ballast

Edge of
Heartland

Alien
Territory
factors

Value Trap
High
Low High
FIT between parenting opportunities
and parenting characteristics

137
 McKinseys 7 S Model

Strategy

Structure Systems
Super
Ordinate
Goals-
Shared
Values
Style Skills

Staff 138
Implementation of a strategy

139
 Strategy Implementation
Sum total of the activities
and choices required for
the execution of a
strategic plan.
Process by which strategies
and policies are put into
action through programs,
budgets, and procedures.
The toughest phase in
Strategy Management
140
 Strategy Implementation

More time than planned

Unanticipated problems
Activities ineffectively coordinated
Crises deferred attention away
Problems in
Employees w/o capabilities
Implementing
Inadequate employee training
Strategic plans
Uncontrollable external factors
Inadequate leadership
Poorly defined tasks
Inadequate information systems

141
 DESIGN OF OBJECTIVES
IS STRATEGY & COMMUNICATE TO
CONCERNED
FUNCTIONAL?

TASK BREAK DOWN

EVALUATION OF
OUT COME STRATEGIC ORGANISATION DESIGN
IMPLEMENTATION & DEVELOPMENT
TRAINING & &
DEVELOPMENT OF CONTROL
MANAGERS PROCESS DELEGATION OF TASK &
AUTHORITIES &
RESPOSIBILITIES
DESIGN OF SIS /MIS
RESOURCES
MOBILISATION &
DESIGN OF ALLOCATION
PERFORMANCE
STANDARD
142
 The Nature of Strategy Implementation

The greatest strategy will be failed if its implemented badly.

Successful strategy formulation does not guarantee

successful strategy implementation.

Less than 10% of strategies formulated are successfully

implemented!

143
The Nature of Strategy Implementation
Strategy Implementation can have a low success rate

Implementation may fail due to:

Failing to segment markets appropriately

Paying too much for a new acquisition
Falling behind competition in R&D
Not recognizing benefit of computers in
managing information

144
The Nature of Strategy
Implementation
Successful Strategy Implementation

Market goods & services well

Raise needed working capital
Produce technologically sound goods
Sound information systems

145
Formulation vs. Implementation
Formulation focuses on effectiveness
Implementation focuses on efficiency
Formulation is primarily an intellectual process
Implementation is primarily an operational process
Formulation requires good intuitive & analytical skills
Implementation requires special motivational &
leadership skills
Formulation requires coordination among a few
individuals
Implementation requires coordination among many
individuals

146
Nature of Strategy
Implementation
Strategy Implementation

Varies among different types & sizes of

organizations

147
Nature of Strategy
Implementation
Implementation Activities

Altering sales territories

Adding new departments
Hiring new employees
Cost-control procedures
Modifying advertising strategies
Building new facilities

148
Nature of Strategy
Implementation
Management Perspectives

Shift in responsibility

Division or
Strategists Functional
Managers

149
 Management Issues

Annual Objectives

Resources
Management
Issues Organizational structure

Restructuring

150
 Management Issues (contd)

Resistance to Change

Management
Issues Production/Operations

151
Management Issues
Purpose of Annual Objectives --

Basis for resource allocation

Mechanism for management (e.g. IT
management) evaluation
Metric for gauging progress on long-term
objectives
Establish priorities (organizational, division,
& departmental)

152
Management Issues

-- Central management activity that

allows for the execution of strategy

Resource Allocation
enables resources to be allocated
according to priorities established by
annual objectives.

153
Management Issues

4 Types of Resources

1. Financial resources
2. Physical resources
3. Human resources
4. Technological resources

154
Management Issues

Matching Structure w/ Strategy

-- Changes in strategy = Changes in

structure
Structure dictates how objectives &
policies will be established and how
resources will be allocated; e.g. is
structure based on location or based
on the product

155
Structure should be designed to
facilitate the strategic pursuit of a firm

Organizational
New strategy New administrative
performance
Is formulated problems emerge
declines

Organizational
New organizational
performance
structure is established
improves

156
Management Issues

Restructuring

-- Reducing the size of the firm # of

employees, divisions and/or units, # of
hierarchical levels; e.g. The Internet is
ushering in a new wave of business
transformations

157
Management Issues
Reengineering
In reengineering, a firm uses
information technology to break down
functional barriers and create a work
system based on business
processes Reconfiguring or
redesigning work, jobs, & processes to
improve cost, quality (alteration of
Scott Mortons value chain) Think of
an example.
158
Management Issues
Resistance to Change -- Single
greatest threat to successful strategy
implementation
Raises anxiety; fear concerning:
economic loss, Inconvenience or Uncertainty

Force Change Strategy

Educative Change Strategy
Rational or Self-Interest Change Strategy
159
Management Issues
Production/Operations Concerns
Production processes typically
constitute more than 70% of firms total
assets
Decisions concern e.g. :
Plant size
Quality control
Technological innovation

160
Marketing Issues

Marketing variables affect success/failure

of strategy implementation

1. Market segmentation

2. Product positioning

161
Marketing Issues
Market Segmentation: Subdividing of a
market into distinct subsets of customers
according to needs and buying habits

Market segmentation variables:

Product
Place
Promotion
Price

162
 Marketing Mix Component Factors
Product Place Promotion Price

Distribution
Quality Advertising Level
channels
Distribution Discounts &
Features Personal selling
coverage allowances

Style Outlet location Sales promotion Payment terms

Brand name Sales territories Publicity

Inventory
Packaging
levels/locations
Transportation
Product line
carriers

Warranty

Service level

163
163
Marketing Issues

Product Positioning

Schematic representations that reflect how

products/services compare to competitors on
dimensions most important to success in the
industry; I.e. according to customer wants and
customer needs

164
Finance/Accounting Issues

Essential for implementation

Acquiring needed capital

Developing projected financial statements
Preparing financial budgets
Evaluating worth of a business

165
Research & Development
Issues

New products and improvement of

existing products that allow for effective
strategy implementation
Use an R&D strategy that ties external
opportunities to internal strengths and is
linked with objectives.

166
Research & Development
Issues

3 Major R&D approaches to implementing

strategies

1. 1st firm to market new technological

products
2. Innovative imitator of successful products
3. Low-cost producer of similar but less
expensive products

167
 Management Information
Systems (MIS) Issues

Information is the basis for

understanding the firm. One of the most
important factors differentiating
successful from unsuccessful firms

MIS used to :
Information collection, retrieval, & storage
Keeping managers informed
Coordination of activities among divisions
Allow firm to reduce costs
168
 Stages of the Industry Life Cycle
Stage
Introduction Growth Maturity Decline
Factor

Generic Differentiation DifferentiationDifferentiation

strategies Overall cost
Overall cost leadership
leadership Focus
Market Low Very large Low to Negative
growth rate moderate

Number of Very few Some Many Few

segments

Intensity of Low Increasing Very intense Changing

competition

Emphasis on Very high High Low to Low

product moderate
design

169
 Stages of the Industry Life Cycle
Stage
Introduction Growth Maturity Decline
Factor

Emphasis on Low Low to High Low

process moderate
design

Major Research and Sales and Production General

functional Development marketing management
area(s) of and finance
concern

Overall Increase Create Defend Consolidate,

objective market share consumer market share maintain,
awareness demand and extend harvest, or
product life exit
cycles

170
 Evaluation and Control

Return on
Investment
(ROI)

Earnings per
Traditional
Share
Financial (EPS)
Measures
Return on
Equity
(ROE)

171
THANK YOU.

172