Strategic Management

MM ZG611/QM ZG611/ MBA

ZG611/ POMZG611/ POMSSZG611
Mid-term Review: L1-L10
BITS Pilani Dr. Neetu Yadav
Pilani|Dubai|Goa|Hyderabad neetu.yadav@pilani.bits-pilani.ac.in
 Mid-term Test
Type: Closed Book Test
Syllabus: L1-L10
Questions type: Theoretical
No numerical
Coverage- Lecture slides
Refer Text Book- Wheelen, Thomas L. and J. David Hunger, Concepts in Strategic
Management and Business Policy, Pearson Education, 13th ed

10/28/2017 Merged MMZG611 2

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 L-1: Introduction to Strategic Management

10/28/2017 Merged MMZG611 3

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 What is Strategy?
Dictionary: Strategy is a plan, method, or a series of maneuvers or stratagems for
obtaining a specific goal or result.
Strategy is about understanding what you do, looking out over the long-term future
to determine what you want to become, andmost importantlyfocusing on how
you plan to get there.
Military: Strategy is concerned with drafting the plan of war, shaping the individual
campaigns and within these, deciding on the individual engagements. (On War by
Clausewitz)
Management: Strategy is a plan or pattern that integrates an organizations major
goals, policies and action sequences into a cohesive whole.
To Drucker Strategy is a purposeful action.
10/28/2017 Merged MMZG611 4
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Theories of Organizational Adaptation
Population ecology suggests that once an organization is successfully
established in a particular niche, it is unable to adapt to changing
conditions. Inertia prevents organization from changing in a significant
manner.

Institution theory suggests that organizations can and do adapt to

changing conditions by imitating other successful organizations. The
theory, however does not explain how or by whom successful new
strategies are developed in the first place.

10/28/2017 Merged MMZG611 5

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Theories of Organizational Adaptation
Strategic choice perspective: Organizations adapt to change and have the
ability to reshape their environment. The decisions of a firms
management have at least as great an impact on firm performance as
overall industry factors.

Organizational learning theory: Organizations adapt defensively to a

changing environment and use knowledge to improve their relationship
with the environment.

10/28/2017 Merged MMZG611 6

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Basic Model of Strategic Management

10/28/2017 Merged MMZG611 7

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Strategic Management Process

10/28/2017 Merged MMZG611 8

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 L-2: Elements of Strategic Management Process

10/28/2017 Merged MMZG611 9

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Three Types of Strategy

10/28/2017 Merged MMZG611 10

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Three Types of Strategy
Corporate Strategy- Company's overall direction in terms of its general
attitude toward growth and the management of its various business and
product lines. Three main categories-Growth, Stability, Retrenchment

Business Strategy-Occurs at the business unit or product level, it

emphasizes improvement of the competitive position of corporations
products or services in specific industry or market segment

Functional Strategy- Approach taken by functional area to achieve

corporate and business unit objectives and strategies by maximizing
resource productivity
10/28/2017 Merged MMZG611 11
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Crafting Strategy-Henry Mintzberg
Manager-Craftsman, Strategies-Clay
Strategies are both plans for future and patterns from the past
Strategies need not to be deliberate, they can also emerge
There is no one best way to make strategy
To manage strategy is to craft thought and action, control and
learning, stability and change.

10/28/2017 Merged MMZG611 12

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 4 P Strategy by Mintzberg
Perspective describes the Vision & direction.

Plan is often referred to an Intended Strategy, it is the deliberate course

of action charting path towards strategic objectives.

Positioning becomes the mediating force between the Organization and

the environment i.e. between internal & external context.

Patterns describe a series of consistent decisions and actions over time.

They are the basis for Emergent Strategies.
10/28/2017 Merged MMZG611 13
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Types of Strategy by Mintzberg

10/28/2017 Merged MMZG611 14

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 L-3: Environmental Scanning and Industry Analysis

10/28/2017 Merged MMZG611 15

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Environmental Scanning
Environmental scanning: The monitoring, evaluation and dissemination
of information from the external and internal environments to key
people within the corporation

Positive correlation between Environmental Scanning and Profit

75 % executives state-Global, social, environmental, business trends are

increasily important to corporate strategy (McKinsey & Company, 2008)

10/28/2017 Merged MMZG611 16

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Environmental Variables

10/28/2017 Merged MMZG611 17

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Scanning Societal Environment
STEEP Analysis
Sociocultural
Technological
Economic
Ecological
Political-legal
Also known as PESTEL analysis (Political, Economic, Sociocultural,
Technological, Ecological, Legal Factors)

10/28/2017 Merged MMZG611 18

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Porters Approach to Industry Analysis

10/28/2017 Merged MMZG611 19

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 External Factors Analysis Summary

10/28/2017 Merged MMZG611 20

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 L-4: Industry Analysis

Application of Porters Five Forces

Case Discussion-Low-cost Carriers in India

10/28/2017 Merged MMZG611 21

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 L-5: Organizational Analysis (I)

10/28/2017 Merged MMZG611 22

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Resource-based Approach

Resources-Organizations assets and basic building blocks

Tangible Assets: Plant, Equipment, Finances, Human Assets
Intangible Assets: Technology, Culture, Reputation
Capabilities- Corporations ability to exploit its resources
Marketing capabilities, HRM capabilities
Dynamic Capabilities- Capabilities that are constantly being
changed and reconfigure to make them more adaptive to
uncertain environment.
10/28/2017 Merged MMZG611 23
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Resource-based Approach
Competency- A cross-functional integration and coordination of
capabilities

Core competency- A collection of competencies that cross divisional

boundaries, is wide-spread throughout the corporation and is
something the corporation does exceedingly well

Distinctive competencies- The core competencies that are superior to

those of the competition

10/28/2017 Merged MMZG611 24

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Core Competence
Prahalad and Hamel- Core competencies are collective learning in the organization,
especially how to coordinate diverse production skills, and integrate multiple
streams of technologies.
Eg: Sony-Miniaturization
Philips- Optical-media
Honda-Engines
Unlike physical assets, competencies do not deteriorate as they are applied and
shared, they grow
Three tests can be applied to identify core competence:
1. it provides potential access to wide variety of markets
2. It makes a significant contribution to the perceived customer benefits of the end product
3. Core competence should be difficult for competitors to imitate
10/28/2017 Merged MMZG611 25
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 VRIO Framework
VRIO framework (Barney)- To evaluate firms competencies:
Value: Does it provide customer value and competitive advantage?
Rareness: Do no other competitors possess it?
Imitability: Is it costly for others to imitate?
Organization: Is the firm organized to exploit the resources?

Barney (1991): Firm resources and sustained competitive advantage

https://business.illinois.edu/josephm/BA545_Fall%202011/S10/Barn
ey%20(1991).pdf
10/28/2017 Merged MMZG611 26
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 L-6: Organizational Analysis (II)

10/28/2017 Merged MMZG611 27

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Porter Value-chain analysis

10/28/2017 Merged MMZG611 28

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Strategic R&D Issues

Impact of technological discontinuity on strategy-

10/28/2017 Merged MMZG611 29

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Strategic Operations issues
Experience Curve (Learning curve)-Unit production costs
decline by some fixed percentage each time the total
accumulated volume of production units doubles
(The more experience a firm has in producing a particular product, the
lower its costs)

"Building Strategy on the Experience Curve," by Pankaj Ghemawat (March-April 1985),Harvard

business review.
(https://hbr.org/1985/03/building-strategy-on-the-experience-curve)
The Experience Curve (http://www.economist.com/node/14298944)

10/28/2017 Merged MMZG611 30

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Internal Factor Analysis Summary

10/28/2017 Merged MMZG611 31

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 L-7: Business Strategy

10/28/2017 Merged MMZG611 32

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 SFAS Matrix
S1: List the most important EFAS, IFAS.
S2: Assign weights as per importance, total weight 1.00
S3: Rating 5 (outstanding) 1(poor)
S4: Weighted score-multiply weight and rating
S5: Duration-Short-term (<1 yr), intermediate-term (1-3 yrs),
long-term (3 and beyond)
S6: Comments

10/28/2017 Merged MMZG611 33

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 TOWS Matrix

10/28/2017 Merged MMZG611 34

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Porters Competitive Strategies
Competitive Strategy raises the following questions:
Should we compete on the basis of lower cost, or should we
differentiate our products or services on some basis other than cost,
such as quality, or service?

Should we compete head to head with our major competitors for the
biggest but most sought-after share of the market, or should we
focus on a niche in which we can satisfy a less sought-after but also
profitable segment of the market?

10/28/2017 Merged MMZG611 35

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Porters Generic Strategies

10/28/2017 Merged MMZG611 36

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 L-8: Business Strategy

10/28/2017 Merged MMZG611 37

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Risks in Competitive Strategies

10/28/2017 Merged MMZG611 38

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Issues in Competitive Strategies

Stuck in the middle: When a company has no competitive advantage and is

doomed to below-average performance.
K-Mart- Imitating both Wal-Marts low-cost strategy and Targets quality
differentiation strategy
Toyota and Honda Auto companies (High quality products at lower costs thus
achieving higher market share)
Entrepreneurial firms follow focus strategies where they focus their product or
service on customer needs in a market segment and differentiate based on
quality and service

10/28/2017 Merged MMZG611 39

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Timing Tactics: When to Compete
Timing tactics: When a company implements a strategy

First movers
Late movers

(Netscape V/S Microsoft)

10/28/2017 Merged MMZG611 40

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Half-Truth of First-Mover Advantage
Two factors that powerfully influence a first movers fate:
The pace at which the technology of the product in question is evolving
The pace at which the market for the product is expanding.

10/28/2017 Merged MMZG611 (Source: Harvard Business Publishing,412005)

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 L-9: Corporate Strategy

10/28/2017 Merged MMZG611 42

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Directional Strategy (Grand Strategy)

10/28/2017 Merged MMZG611 43

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Growth Strategies
Concentration Growth
Vertical growth

Horizontal growth

Diversification
Concentric Diversification

Conglomerate Diversification

10/28/2017 Merged MMZG611 44

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Diversification Strategies
Concentric (Related) diversification: Growth into a related
industry when a firm has a strong competitive position but
attractiveness is low
Synergy: When two businesses will generate more profits
together than they could separately
Conglomerate (Unrelated) diversification: Growth into an
unrelated industry
Management realizes that the current industry is unattractive
Firm lacks outstanding abilities or skills that it could easily transfer
to10/28/2017
related products or services in other industries
Merged MMZG611 45
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 L-10: Corporate Strategy

10/28/2017 Merged MMZG611 46

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Stability Strategies
Stability strategies: Continuing activities without any
significant change in direction
Pause/Proceed with caution strategy: An opportunity to rest before
continuing a growth or retrenchment strategy
No change strategy: Continuance of current operations and policies
Profit strategies: To do nothing new in a worsening situation but instead
to act as though the companys problems are only temporary

10/28/2017 Merged MMZG611 47

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Retrenchment strategies
used when the firm has a weak competitive position in
some or all of its product lines from poor performance.

Turnaround Strategy
Captive Company Strategy
Sell-out/Divestment Strategy
Liquidation Strategy

10/28/2017 Merged MMZG611 48

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Turnaround strategy
Turnaround strategy emphasizes the improvement of
operational efficiency when the corporations problems are
pervasive but not critical
Contraction: Effort to quickly stop the bleeding across the
board but in size and costs
Consolidation: Stabilization of the new leaner corporation

10/28/2017 Merged MMZG611 49

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 Portfolio analysis

Management views its product lines and business units as a

series of investments from which it expects a profitable return.

Popular portfolio analysis techniques include:

BCG Matrix
GE Business Screen

10/28/2017 Merged MMZG611 50

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 BCG Growth-Share Matrix

10/28/2017 Merged MMZG611 51

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
 GE Business Screen

10/28/2017 Merged MMZG611 52

BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
10/28/2017 Merged MMZG611 53
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956