Strategic Management. Common Subject

1
HIMANSHU GHANGAS +91-9996067333

Strategic Management
Unit – 1
Strategic management:
Strategic management is the management of an organization’s resources to achieve its goals and
objectives. Strategic management involves setting objectives, analyzing the competitive environment,
analyzing the internal organization, evaluating strategies and ensuring that management rolls out the
strategies across the organization. At its heart, strategic management involves identifying how the
organization stacks up compared to its competitors and recognizing opportunities and threats facing an
organization, whether they come from within the organization or from competitors.
Strategic management is divided into several schools of thought. A prescriptive approach to strategic
management outlines how strategies should be developed, while a descriptive approach focuses on how
strategies should be put into practice. These schools differ over whether strategies are developed through
an analytic process in which all threats and opportunities are accounted for, or are more like general
guiding principles to be applied.
Importance of Strategic management:
1) Setting Goals
Strategic planning is the process that produces key decisions that dictate the identity and purpose
of a company or organization. This includes the formulation of goals. These goals will direct the
energy of the company in a specific direction. Without strategic management and planning, most
companies will not achieve success.

2) Achieving Goals
Defining your goals is just part of strategic management. Once you know what your goals are, you
need to create a step-by-step process by which you can achieve them. The attainment of these
goals means that you are fulfilling the vision of your company's identity that you initially created
when you began the strategic management process.
3) Designating Resources
Once you have determined your goals and processes, you will have an idea of what resources are
required for both. The term "resources" can be applied to anything you need to achieve your goal--
manpower, funding, knowledge or skill sets. Strategic planning allows you to determine which
resources you require from the get-go, drastically easing the whole process of attaining your goals.
4) Expecting the Unexpected
As with any situation in life, unexpected scenarios arise. While a plan should be implemented, there
is a certain amount of "rolling with the punches" that is required. Strategic management means
that you may need to react to dynamic situations that you didn't foresee. Place contingency plans
into effect--you may lose a critical resource or you may get sued, but you're prepared for anything
and everything for which you're not prepared.
2
Key concepts for strategic management:
1) Goal Setting
At the core of the strategic management process is the creation of goals, a mission statement,
values and organizational objectives. Organizational goals, the mission statement, values and
objectives guide the organization in its pursuit of strategic opportunities. It is also through goal
setting that managers make strategic decisions such as how to meet sales targets and higher
revenue generation. Through goal setting, organizations plan how to compete in an increasingly
competitive and global business arena.
2) Analysis Strategy Formation

Analysis of an organization's strengths and weaknesses is a key concept of strategic management.
Other than the internal analysis, an organization also undertakes external analysis of factors such as
emerging technology and new competition. Through internal and external analysis, the
organization creates goals and objectives that will turn weaknesses to strengths. The analyses also
facilitate in strategizing ways of adapting to changing technology and emerging markets.
3) Strategy Formation
Strategy formation is a concept that entails developing specific actions that will enable an
organization to meet its goals. Strategy formation entails using the information from the analyses,
prioritizing and making decisions on how to address key issues facing the organization. Additionally,
through strategy formulation an organization seeks to find ways of maximizing profitability and
maintaining a competitive advantage.
4) Strategy Implementation
Strategy implementation is putting the actual strategy into practice to meet organizational goals.
The idea behind this concept is to gather all the available and necessary resources required to bring

the strategic plan to life. Organizations implement strategies through creating budgets, programs
and policies to meet financial, management, human resources and operational goals. For the
successful implementation of a strategic plan, cooperation between management and other
personnel is absolutely necessary.
5) Strategy Monitoring
A final concept is monitoring of the strategy after its implementation. Strategy monitoring entails
evaluating the strategy to determine if it yields the anticipated results as espoused in the
organizational goals. Here, an organization determines what areas of the plan to measure and the
methods of measuring these areas, and then compares the anticipated results with the actual ones.
Through monitoring, an organization is able to understand when and how to adjust the plan to
adapt to changing trends.
3
Objectives in Strategic management:
1) Strategic Objectives
Strategic objectives deal with the firm's position in the model. You might do this, for example, by
positioning the firm relative to the external forces – bargaining power of customers, bargaining
power of suppliers, threat of new entrants, threat of substitutes, and competition within the
industry – that can impact a business. Strategic objectives might include expanding market share,
changing market position or under-cutting a competitor's costs.
2) Financial Objectives
Managers use financial objectives to measure strategic performance. For example, if the firm's
strategic objective is to increase efficiency, the financial objective could be to increase return on
assets or return on capital. Financial objectives, derived from management accounting, are more
concrete.
3) Short-run Objectives
Financial and strategic objectives can either be short-run or long-run objectives. Short-run
objectives deal with the immediate future. They typically focus on tangible goals that management
can realize in a short time. An example of a short-run objective might be to increase monthly sales.
4) Long-run Objectives
Long-run objectives target the firm's long-term position. While short-run objectives focus on a
firm's annual or monthly performance, long-run objectives concern themselves with the firm's
development over several years. Examples of long-term objectives might be to become the market
leader or to attain sustainable growth.

Different level of strategies:
1) Corporate Level Strategy
Corporate level strategy occupies the highest level of strategic decision making and covers actions
dealing with the objective of the firm, acquisition and allocation of resources and coordination of
strategies of various SBUs for optimal performance.
Top management of the organization makes such decisions. The nature of strategic decisions tends
to be value-oriented, conceptual and less concrete than decisions at the business or functional
level.
2) Business-Level Strategy
Business level strategy is – applicable in those organizations, which have different businesses-and
each business is treated as strategic business unit (SBU). The fundamental concept in SBU is to
identify the discrete independent product / market segments served by an organization.
Since each product/market segment has a distinct environment, a SBU is created for each such
segment. For example, Reliance Industries Limited operates in textile fabrics, yarns, fibers, and a
4
variety of petrochemical products. For each product group, the nature of market in terms of
customers, competition, and marketing channel differs.
Therefore, it requires different strategies for its different product groups. Thus, where SBU concept
is applied, each SBU sets its own strategies to make the best use of its resources (its strategic
advantages) given the environment it faces. At such a level, strategy is a comprehensive plan
providing objectives for SBUs, allocation of resources among functional areas and coordination
between them for making optimal contribution to the achievement of corporate-level objectives.
Such strategies operate within the overall strategies of the organization. The corporate strategy
sets the long-term objectives of the firm and the broad constraints and policies within which a SBU
operates. The corporate level will help the SBU define its scope of operations and also limit or
enhance the SBUs operations by the resources the corporate level assigns to it. There is a difference
between corporate-level and business-level strategies.
For example, Andrews says that in an organization of any size or diversity, corporate strategy
usually applies to the whole enterprise, while business strategy, less comprehensive, defines the
choice of product or service and market of individual business within the firm. In other words,
business strategy relates to the ‘how’ and corporate strategy to the ‘what’. Corporate strategy
defines the business in which a company will compete preferably in a way that focuses resources to
convert distinctive competence into competitive advantage.’
Corporate strategy is not the sum total of business strategies of the corporation but it deals with
different subject matter. While the corporation is concerned with and has impact on business
strategy, the former is concerned with the shape and balancing of growth and renewal rather than
in market execution.
3) Functional-Level Strategy
Functional strategy, as is suggested by the title, relates to a single functional operation and the
activities involved therein. Decisions at this level within the organization are often described as
tactical. Such decisions are guided and constrained by some overall strategic considerations.

Functional strategy deals with relatively restricted plan providing objectives for specific function,
allocation of resources among different operations within that functional area and coordi-nation
between them for optimal contribution to the achievement of the SBU and corporate-level
objectives.
Below the functional-level strategy, there may be operations level strategies as each function may
be dividend into several sub functions. For example, marketing strategy, a functional strategy, can
be subdivided into promotion, sales, distribution, pricing strategies with each sub function strategy
contributing to functional strategy.
5
Characteristics of Strategy:
1. Strategy is a systematic phenomenon:
Strategy involves a series of action plans, no way contradictory to each other because a common theme
runs across them. It is not merely a good idea; it is making that idea happen too. Strategy is a unified,
comprehensive and integrated plan of action.
2. By its nature, it is multidisciplinary:
Strategy involves marketing, finance, human resource and operations to formulate and implement
strategy. Strategy takes a holistic view. It is multidisciplinary as a new strategy influences all the functional
areas, i.e., marketing, financial, human resource, and operations.
3. By its influence, it is multidimensional:
Strategy not only tells about vision and objectives, but also the way to achieve them. So, it implies that the
organisation should possess the resources and competencies appropriate for implementation of strategy
as well as strong performance culture, with clear accountability and incentives linked to performance.
4. By its structure, it is hierarchical:
On the top come corporate strategies, then come business unit strategies, and finally functional strategies.
Corporate strategies are decided by the top management, Business Unit level strategies by the top people
of individual strategic business units, and the functional strategies are decided by the functional heads.

5. By relationship, it is dynamic:
Strategy is to create a fit between the environment and the organisation’s actions. As environment itself is
subject to fast change, the strategy too has to be dynamic to move in accordance to the environment.
Success of Microsoft appears to be very simple as far as software for personal computers are concerned,
but Microsoft strategy required continuous decisions in a turbulent and dynamic environment to remain
leader.
6. The purpose of strategy is to create competence (things firm does better than competitors), synergy
(between different parts of the organisation and their activities) and value creation so as to attain vision
and mission.
An organisation can reach its destiny (vision) only if it can create value for the firm and its stakeholders
(mission). Value creation involves economic value addition (profits for the company), customer value
6
addition (Value customers perceive in relation to competitors), people value addition (Value gained from
enabling employees to be most productive resource.) so as to fulfil the needs of all concerned.
7. Strategy requires searching for new sources of advantage:
To achieve sustainable long term competitive advantage the firm must invent new rules and new games to
become unique and create wealth. Simply copying the leader means value is destroyed for all the firms.
Thus to look different, strategy differentiation is a must.
8. Strategy is almost always the result of some type of collective decision-making process:
The vision, mission, objectives, and corporate strategies are determined by top management. Business
Unit strategies are decided by heads of business units and functional plans by functional heads. But the top
management consent is a must. It is the senior management which resolves paradoxes between the
conflicting objectives, existing functions and future activities, and the resources allocation.
Strategic management process:

1) Clarify Your Vision
The purpose of goal-setting is to clarify the vision for your business. This stage consists of
identifying three key facets: First, define both short- and long-term objectives. Second, identify the
process of how to accomplish your objective. Finally, customize the process for your staff, give each
person a task with which he can succeed. Keep in mind during this process your goals to be
detailed, realistic and match the values of your vision. Typically, the final step in this stage is to
write a mission statement that succinctly communicates your goals to both your shareholders and

your staff.
2) Gather and Analyze Information

Analysis is a key stage because the information gained in this stage will shape the next two stages.
In this stage, gather as much information and data relevant to accomplishing your vision. The focus
of the analysis should be on understanding the needs of the business as a sustainable entity, its
strategic direction and identifying initiatives that will help your business grow. Examine any
external or internal issues that can affect your goals and objectives. Make sure to identify both the
strengths and weaknesses of your organization as well as any threats and opportunities that may
arise along the path.
7
3) Formulate a Strategy
The first step in forming a strategy is to review the information gleaned from completing the
analysis. Determine what resources the business currently has that can help reach the defined goals
and objectives. Identify any areas of which the business must seek external resources. The issues
facing the company should be prioritized by their importance to your success. Once prioritized,
begin formulating the strategy. Because business and economic situations are fluid, it is critical in
this stage to develop alternative approaches that target each step of the plan.
4) Implement Your Strategy

Successful strategy implementation is critical to the success of the business venture. This is the
action stage of the strategic management process. If the overall strategy does not work with the
business' current structure, a new structure should be installed at the beginning of this stage.
Everyone within the organization must be made clear of their responsibilities and duties, and how
that fits in with the overall goal. Additionally, any resources or funding for the venture must be
secured at this point. Once the funding is in place and the employees are ready, execute the plan.
5) Evaluate and Control

Strategy evaluation and control actions include performance measurements, consistent review of
internal and external issues and making corrective actions when necessary. Any successful
evaluation of the strategy begins with defining the parameters to be measured. These parameters
should mirror the goals set in Stage 1. Determine your progress by measuring the actual results
versus the plan. Monitoring internal and external issues will also enable you to react to any
substantial change in your business environment. If you determine that the strategy is not moving
the company toward its goal, take corrective actions. If those actions are not successful, then
repeat the strategic management process. Because internal and external issues are constantly

evolving, any data gained in this stage should be retained to help with any future strategies.
OR
The process is not a one time implementation but we can think strategic management process as a loop
which keeps on going to achieve the objectives as per the need.
8
1. Goal Setting:
The vision and goals of the organization are clearly stated. The short-term and long-term goals are defined,
processes to achieve the objectives are identified and current staff is evaluated to choose capable people
to work on the processes.
2. Analysis:
Data relevant to achieve the goals of the organization is gathered, potential internal and external factors
that can affect the sustainable growth of the organization are examined and SWOT analysis is also
performed.
3. Strategy Formulation:
Once the analysis is done, the organization moves to the Strategy Formulation stage where the plan to
acquire the required resources is designed, prioritization of the issues facing the business is done and
finally the strategy is formulated accordingly
4. Implementation:
After formulation of the strategy, the employees of the organization are clearly made aware of their roles
and responsibilities. It is ensured that funds would be available all the time. Then the implementation
begins.

5. Strategy Evaluation:
In this process, the strategies being implemented are evaluated regularly to check whether they are on
track and are providing the desired results. In case of deviations, the corrective actions are taken.
As shown in the figure, the five stages are not stand-alone and constantly interact with each other in order
to ensure better management of the business.
9
Concept of Strategic decision making:
Managers of successful businesses do more than simply find a way to make money and sell stuff. Not only
do they handle the day to day stuff of selling, they also think of the big picture and make decisions that will
get the company to where it wants to go. This is called strategic decision- making, where decisions are
made according to a company's goals or mission. This type of decision making guides the choices that are
made, aligning them with the company objective. It requires out of the box thinking as managers need to
consider possible future scenarios that may or may not happen. It is these scenarios that will determine in
which direction a company will go.
For example, the manager of a dog food company notices that dog owners want more quality and fresh
foods rather than kibbles, that can last 10 years on the shelf, even if those kibbles provide a similar
nutritional value. The company's mission statement is to be the best company that sells the healthiest dog
food. To align the company with the changing needs and wants of its customers, the manager decides to
shift the company's products to focus more on freshness. Yes, this means a reduced shelf life, but it does
mean a higher profit margin because dog owners are more than willing to pay more for fresh quality foods.
These are important features of strategic decision making:
1) Strategy is at many times at tangent with marketing decisions

2) There is immense risk involved while taking strategic decisions
3) Strategic decisions involve a lot of Ifs and Buts
4) Strategy implementation timelines
5) Preparing for the competition’s response
Strategic intent:
Strategic Intent can be understood as the philosophical base of strategic management process. It implies

the purpose, which an organization endeavor of achieving. It is a statement, that provides a perspective of
the means, which will lead the organization, reach the vision in the long run.
Strategic intent gives an idea of what the organization desires to attain in future. It answers the question
what the organization strives or stands for? It indicates the long-term market position, which the
organization desires to create or occupy and the opportunity for exploring new possibilities.
Strategic Intent Hierarchy -
10
1) Vision: Vision implies the blueprint of the company’s future position. It describes where the
organization wants to land. It is the dream of the business and an inspiration, base for the planning
process. It depicts the company’s aspirations for the business and provides a peep of what the
organization would like to become in future. Every single component of the organization is required
to follow its vision.
2) Mission: Mission delineates the firm’s business, its goals and ways to reach the goals. It explains
the reason for the existence of business. It is designed to help potential shareholders and investors
understand the purpose of the company. A mission statement helps to identify, ‘what business the
company undertakes.’ It defines the present capabilities, activities, customer focus and business
makeup.
3) Business Definition: It seeks to explain the business undertaken by the firm, with respect to the
customer needs, target audience, and alternative technologies. With the help of business
definition, one can ascertain the strategic business choices. The corporate restructuring also
depends upon the business definition.
4) Business Model: Business model, as the name implies is a strategy for the effective operation of the
business, ascertaining sources of income, desired customer base, and financing details. Rival firms,
operating in the same industry relies on the different business model due to their strategic choice.
5) Goals and Objectives: These are the base of measurement. Goals are the end results, that the
organization attempts to achieve. On the other hand, objectives are time-based measurable
actions, which help in the accomplishment of goals. These are the end results which are to be
attained with the help of an overall plan, over the particular period.
11
Unit – 2
Environment appraisal:
For finding business's available opportunities and risks, environmental appraisal is needed. Environmental
appraisal means to analyze all the factors of business environments. Following are the main stages
involved in environment appraisal.
Stages in environment appraisal:

1st Stage : Factors Affecting Environmental Appraisal
Following are the main factors affecting environmental appraisal
a) Factors relating to environment
We can not evaluate equally two organisation in same environment. we have to study every organisation's
complexity and flexibility.
b) Factors relating to Organisation
Age of organisation will affect our environmental appraisal. We also see the organisation's size for doing
business and its market type. What are the services and products, it is providing?
c) Factors Relating to Strategies
Policy makers play important role in appraisal. Age, education and experience of policy maker will affect
the environmental appraisal.

2nd Stage : Identification of Environmental Factors
In second stage we have to identification of environmental factors on the basis of following issue
a) Critical Issues
b) High Priority Issues
c) Low Priority Issues
3rd Stage : Structuring the Environmental Appraisal
This is the third stage of environmental appraisal. In this stage, we create the structure of environmental
appraisal. One side of structure will be our strengths and other side will be our weaknesses. By comparing
both, we estimate our surviving power in the environment of business.
12
PEST Analysis:
PEST analysis (political, economic, socio-cultural and technological) describes a framework of macro-
environmental factors used in the environmental scanning component of strategic management. It is part
of an external analysis when conducting a strategic analysis or doing market research, and gives an
overview of the different macro-environmental factors to be taken into consideration. It is a strategic tool
for understanding market growth or decline, business position, potential and direction for operations.
The basic PEST analysis includes four factors:
1) Political factors are basically how the government intervenes in the economy. Specifically, political
factors have areas including tax policy, labour law, environmental law, trade restrictions, tariffs, and
political stability. Political factors may also include goods and services which the government aims
to provide or be provided (merit goods) and those that the government does not want to be
provided (demerit goods or merit bads). Furthermore, governments have a high impact on the
health, education, and infrastructure of a nation.
2) Economic factors include economic growth, interest rates, exchange rates, inflation rate. These
factors greatly affect how businesses operate and make decisions. For example, interest rates affect
a firm's cost of capital and therefore to what extent a business grows and expands. Exchange rates
can affect the costs of exporting goods and the supply and price of imported goods in an economy.
3) Social factors include the cultural aspects and health consciousness, population growth rate, age
distribution, career attitudes and emphasis on safety. High trends in social factors affect the
demand for a company's products and how that company operates. For example, the ageing
population may imply a smaller and less-willing workforce (thus increasing the cost of labour).
Furthermore, companies may change various management strategies to adapt to social trends
caused from this (such as recruiting older workers).
4) Technological factors include technological aspects like R&D activity, automation, technology
incentives and the rate of technological change. These can determine barriers to entry, minimum

efficient production level and influence the outsourcing decisions. Furthermore, technological shifts
would affect costs, quality, and lead to innovation.
Organisational appraisal:
An Organisational Appraisal is a process which can look at an organisation and appraise it in a given
context. Some tools appraise an organisation in preparation of an award (for example, EFQM, Business
Excellence, Baldridge, Investors in People etc) others look at the performance of an organisation in
preparation for a buy-out/ buy-in, raising venture capital etc.
Organisational appraisal is the process of reviewing the development, work environment, personnel, and
operation of a business or another type of association. This review is often performed in response to crisis,
but may also be carried out as part of a demonstration project, in the process of taking a program to scale,
or in the course of regular operations. Conducting a periodic detailed organizational analysis can be a
useful way for management to identify problems or inefficiencies that have arisen in the organization but
have yet to be addressed, and develop strategies for resolving them.
13
Porter’s value chain model:
The Porter’s value chain concept says that there is a chain of events which occur in a company right from
the procurement of raw materials to the delivery of goods as well as the post sales service. This chain is
made up of 9 steps and the process can be changed in any of the nine steps to add further value to the
final product. The Porter’s value chain can be a reference model for Holistic marketing. If a company wants
to add customer value in all the processes that it does, it has to refer to the Value Chain.
Primary activities of Porter’s value chain are as follows:
1) Inbound logistics
Bring raw material from source to the company. The value chain can be enhanced in this step by improving
the quality of raw material as well as optimizing the cost of inbound logistics.

2) Operations
Converting the raw material to finished goods is the job of Operations. The customer value is increased
majorly in this step if the operations are up to mark and the product is manufactured in the right manner
and meets quality standards. You can take example of Television or Air conditioners to understand the
importance of Operations and manufacturing in the Value chain.
3) Outbound logistics
Sending finished goods from manufacturing point to distributors and retailers. The value chain receives a
boost if the out bound logistic activities are carried out in time with optimal costs and the product is
delivered to end customers with minimum affect to the quality of the product. Food products can be an
example of how value can be added during outbound logistics by delivering product on time with best
quality.
14
4) Marketing and sales
The marketing and sales apply push as well as pull strategy to increase the sales of the product. The
company exists to make profits and if profits can be increased by marketing and sales, than the company
has to use these tools. However, marketing needs to be done in the right manner to build brand equity and
sales should be done in the proper channel without any false commitments given to customers to add
value to the end product and the brand.
5) Service
The post sales service is the most important because it directly affects the word of mouth publicity of the
product. If the service is not upto mark, no one will buy the product and the brand will lose market share
and may be taken out of the market eventually. Thus service is very important in the Porter’s value chain.
Secondary activities involved in the Porter’s Value chain are as follows
6) Procurement
The management of vendors and the procurement of the raw material on a timely basis is where
procurement comes in.
7) Technology development
No product can survive if the company does not keep it updated as per the latest technology.

8) Human resource management
The right people in the right place can make all the difference for the company and hence the HR
department is a support activity most important for the firm.
9) Firm infrastructure
Without a proper infrastructure, and lack of government handling or legal support, a firm might face a big
hurdle. Similarly, administration department will help in maintenance of the facilities in a firm.
The secondary activities like Technology and the right people are the elements which add differentiation
for the company. Samsung proved that Technology can destroy a big competitor like Nokia. Similarly,
Southeast airlines proves that people are important to a company and that you can be the most favored
airline because of the people in your organization.
15
Types of strategies:
1) Corporate level strategies –
 Growth Strategy
Growth strategies look at methods to get more revenues from the sales of products or goods.
Industry leaders often talk about vertical and horizontal strategies when referring to growth
strategies. A vertical strategy seeks growth by taking over various components of the operations
path. For example, a restaurant that decides to farm its own ingredients is using a vertical growth
strategy. By taking over part of the supply chain, the restaurant is better able to control quality and
supply needs.
A horizontal growth strategy refers to a business extending its reach of existing products or services
to new geographic areas or new target markets. If that same restaurant decided to have delivery
services for its lunch menu, this strategy is a horizontal growth strategy.
 Diversification Strategy
Diversification strategy looks at the company's products and services, and then develops a strategy
for successful marketing and sales. Two main diversification strategies exist: a single-business
strategy and a dominant-business diversification strategy. The single-business strategy limits the
number of products or services to a few, if not one. A company using this strategy seeks to be the
leader in the niche.
An example of single-business strategy is a carpet cleaner that exclusively markets services for
carpet cleaning to homeowners and restoration services. This single-business strategy could
transition to a dominant-business diversification strategy by also offering restoration services. The
transition might involve other cleaning and general contracting services, along with the primary
carpet cleaning services.
 Stability Strategy

It is possible for a company to reach its optimal market share goals. Rather than scale up, company
leaders might choose a stability strategy that takes the existing success under existing platforms to
maintain market share. Methods include making processes more cost efficient through automation,
cutting costs where possible and negotiating better costs on materials or distribution margins.
This strategy also requires leaders to focus on customer retention. This is a popular strategy during
adverse economic periods. However, there are times when this strategy makes sense for a small
business, regardless of the external business environment. A dentist who doesn't have the space or
time to take on additional patients but who needs to keep his existing patients happy and to also
develop a list of new patients as his base, would fall off via natural attrition and would benefit by
using a stability strategy.
16
The Grand Strategies
The Grand Strategies are the corporate level strategies designed to identify the firm’s choice with respect
to the direction it follows to accomplish its set objectives. Simply, it involves the decision of choosing the
long term plans from the set of available alternatives. The Grand Strategies are also called as Master
Strategies or Corporate Strategies.
There are four grand strategic alternatives that can be followed by the organization to realize its long-term
objectives:
The Stability Strategy is adopted when the organization attempts to maintain its current position and
focuses only on the incremental improvement by merely changing one or more of its business operations
in the perspective of customer groups, customer functions and technology alternatives, either individually
or collectively.
The Expansion Strategy is adopted by an organization when it attempts to achieve a high growth as HIMANSHU GHANGAS +91-9996067333
compared to its past achievements. In other words, when a firm aims to grow considerably by broadening
the scope of one of its business operations in the perspective of customer groups, customer functions and
technology alternatives, either individually or jointly, then it follows the Expansion Strategy.
17
The Retrenchment Strategy is adopted when an organization aims at reducing its one or more business
operations with the view to cut expenses and reach to a more stable financial position.
The Combination Strategy means making the use of other grand strategies (stability, expansion or
retrenchment) simultaneously. Simply, the combination of any grand strategy used by an organization in
different businesses at the same time or in the same business at different times with an aim to improve its
efficiency is called as a combination strategy.
2) Business level strategies:

1) Cost Leadership
Cost leadership means offering the best price for products. Today's globalized markets make price a
significant factor in selling to your customers. Big box stores use generic models for pricing, keeping
costs lower than most. Digital marketplaces don't require the major retail overhead that brick-and-
mortar stores do. The cost leadership strategy considers the cost to make the goods, transport and
deliver them to customers. The price point is further affected by whether supplies are readily
available and the cost your business to switch suppliers or vendors if their prices became too high.
For example, a wooden toy manufacturer might use a specific type of wood to make the company's

toys. If that wood becomes unavailable from regular suppliers because of unforeseen
circumstances, the cost of switching affects the bottom line and potential pricing.
2) Differentiation
When a product isn't the least expensive on the market, businesses need to find a way to
differentiate themselves. Identify the features and benefits of the product or service that make it
worth more money. For example, a Mercedes is more expensive than a Honda. While many buy the
Honda for the price and reliability, Mercedes has differentiated itself as a luxury automobile with
higher standards of quality and added features.
3) Focused Low Cost

The focused low-cost strategy is similar to cost leadership; the company is trying to beat
competitor's prices. However, in this business-level strategy, the business is focusing its marketing
efforts in a specific way. This is most commonly seen when a company targets government
contracts. It needs to beat competitors pricing but isn't trying to beat the general consumer pricing.
18
4) Focused Differentiation
Focused differentiation takes the differentiation strategy one step further. It finds the added value
of the products and services and then targets a small market niche. For example, a travel company
may not be able to compete with the online travel sites for hotels and airfare. However, it might be
able to target families seeking kid-friendly cruises or business travelers who need accommodations
for conferences. This type of focused differentiation helps a business define a niche where it is
profitable and not competing solely on price.
5) Integrated Low Cost/Differentiation

This business-level strategy combines low cost with differentiation. This model is becoming
increasingly popular in global markets because it allows flexibility in both price and added value.
While it is a successful strategy for large corporations such as Southwest Airlines, executing this
strategy requires finding the sweet spot of price and value. In Southwest's case, it offers low-cost
airfare with easy travel access to flights and in-flight perks. For a small-business owner, the sweet
spot must be competitive in price, though not necessarily the lowest, and it must have a value-
added component for consumers to justify the extra cost.
3) Functional level strategies:

The third level of strategic planning is functional strategies, which are derived from the tactical strategies.
Each functional area or department is assigned the specific goals and objectives it must achieve to support
the higher-level strategies and planning. Functional strategies specify outcomes to be achieved from the
daily operations of specific departments or functions. Functional strategies reflect that strategic and
tactical objectives typically require the involvement of multiple functional areas, such as departments,
divisions, and branches. Thus, the tactical plan is divided into the tasks and objectives of each functional
area.

For example, the functional strategy for the marketing department in support of the business' goal to
increase market share is likely to include identification of new market segments, brand identification
programs, and others. Additionally, the production function may be assigned a reduced rejection rate for
the product in question.
The functional areas of a business that are commonly assigned function-specific goals are human
resources, production, research and development, marketing, and perhaps information technology. Of
course, the functional areas that are assigned functional strategies depend on the plan itself and vary by
industry, organization, or size. A functional strategy, for any business, large or small, focuses the
achievement of a goal on the skills and abilities of individual departments and their employees. In other
words, a functional strategy is a short-term plan for achieving one or more goals of a business by one or
more functional areas.
19
Porter’s five force model:
Threat of new entrants This force determines how easy (or not) it is to enter a particular industry. If an
industry is profitable and there are few barriers to enter, rivalry soon intensifies. When more organizations
compete for the same market share, profits start to fall. It is essential for existing organizations to create
high barriers to enter to deter new entrants. Threat of new entrants is high when:
 Low amount of capital is required to enter a market;

 Existing companies can do little to retaliate;
 Existing firms do not possess patents, trademarks or do not have established brand reputation;
 There is no government regulation;
 Customer switching costs are low (it doesn’t cost a lot of money for a firm to switch to other
industries);
 There is low customer loyalty;
 Products are nearly identical;
 Economies of scale can be easily achieved.
Bargaining power of suppliers Strong bargaining power allows suppliers to sell higher priced or low quality
raw materials to their buyers. This directly affects the buying firms’ profits because it has to pay more for
materials. Suppliers have strong bargaining power when:
 There are few suppliers but many buyers;

 Suppliers are large and threaten to forward integrate;
 Few substitute raw materials exist;
 Suppliers hold scarce resources;

 Cost of switching raw materials is especially high.
Bargaining power of buyers Buyers have the power to demand lower price or higher product quality from
industry producers when their bargaining power is strong. Lower price means lower revenues for the
producer, while higher quality products usually raise production costs. Both scenarios result in lower
profits for producers. Buyers exert strong bargaining power when:
 Buying in large quantities or control many access points to the final customer;
 Only few buyers exist;
 Switching costs to other supplier are low;
 They threaten to backward integrate;
 There are many substitutes;
 Buyers are price sensitive.
20
Threat of substitutes This force is especially threatening when buyers can easily find substitute products
with attractive prices or better quality and when buyers can switch from one product or service to another
with little cost. For example, to switch from coffee to tea doesn’t cost anything, unlike switching from car
to bicycle.
Rivalry among existing competitors This force is the major determinant on how competitive and profitable
an industry is. In competitive industry, firms have to compete aggressively for a market share, which
results in low profits. Rivalry among competitors is intense when:
 There are many competitors;

 Exit barriers are high;
 Industry of growth is slow or negative;
 Products are not differentiated and can be easily substituted;
 Competitors are of equal size;
 Low customer loyalty.
Although, Porter originally introduced five forces affecting an industry, scholars have suggested including
the sixth force: complements. Complements increase the demand of the primary product with which they
are used, thus, increasing firm’s and industry’s profit potential. For example, iTunes was created to
complement iPod and added value for both products. As a result, both iTunes and iPod sales increased,
increasing Apple’s profits.
Corporate Level Strategic Analysis

Effective organizations operate under the careful direction of their owners, directors and managers. These

individuals set corporate-level strategic analysis operations to determine their efficiency.
 Types
Corporate level strategic analysis uses several tools, including political, economic, social and
technological (PEST) analysis, scenario planning, five forces analysis and SWOT analysis. PEST analysis
examines the company’s operating environment, while scenario planning involves creating different
executable plans. Five forces analysis looks at the internal or external factors influencing business
operations, and SWOT outlines the company’s strengths, weaknesses, opportunities and threats.
 Function
Strategic analysis can help a company plan which strategy it should employ in the business
environment. These strategies include growing operations by diversifying operations, stabilizing
operations to maximize profits or retrenchment, in which the companies may consolidate operations
to improve functionality or longevity.
 Effects
Analyzing business operations is a control measure that helps business owners and managers ensure
their company is running as best as possible. Instituting strategies with measurable results helps to
understand the return on investment and gauge the value added to the company.
21
BCG matrix:
Boston Consulting Group (BCG) Matrix is a four celled matrix (a 2 * 2 matrix) developed by BCG, USA. It is
the most renowned corporate portfolio analysis tool. It provides a graphic representation for an
organization to examine different businesses in it’s portfolio on the basis of their related market share and
industry growth rates. It is a two dimensional analysis on management of SBU’s (Strategic Business Units).
In other words, it is a comparative analysis of business potential and the evaluation of environment.
According to this matrix, business could be classified as high or low according to their industry growth rate
and relative market share.
Relative Market Share = SBU Sales this year leading competitors sales this year.
Market Growth Rate = Industry sales this year - Industry Sales last year.
The analysis requires that both measures be calculated for each SBU. The dimension of business strength,
relative market share, will measure comparative advantage indicated by market dominance. The key
theory underlying this is existence of an experience curve and that market share is achieved due to overall
cost leadership.
BCG matrix has four cells, with the horizontal axis representing relative market share and the vertical axis
denoting market growth rate. The mid-point of relative market share is set at 1.0. if all the SBU’s are in
same industry, the average growth rate of the industry is used. While, if all the SBU’s are located in
different industries, then the mid-point is set at the growth rate for the economy.

Resources are allocated to the business units according to their situation on the grid. The four cells of this
matrix have been called as stars, cash cows, question marks and dogs. Each of these cells represents a
particular type of business.
22
1) Stars- Stars represent business units having large market share in a fast growing industry. They may
generate cash but because of fast growing market, stars require huge investments to maintain their
lead. Net cash flow is usually modest. SBU’s located in this cell are attractive as they are located in a
robust industry and these business units are highly competitive in the industry. If successful, a star
will become a cash cow when the industry matures.
2) Cash Cows- Cash Cows represents business units having a large market share in a mature, slow
growing industry. Cash cows require little investment and generate cash that can be utilized for
investment in other business units. These SBU’s are the corporation’s key source of cash, and are
specifically the core business. They are the base of an organization. These businesses usually follow
stability strategies. When cash cows loose their appeal and move towards deterioration, then a
retrenchment policy may be pursued.
3) Question Marks- Question marks represent business units having low relative market share and
located in a high growth industry. They require huge amount of cash to maintain or gain market
share. They require attention to determine if the venture can be viable. Question marks are
generally new goods and services which have a good commercial prospective. There is no specific
strategy which can be adopted. If the firm thinks it has dominant market share, then it can adopt
expansion strategy, else retrenchment strategy can be adopted. Most businesses start as question
marks as the company tries to enter a high growth market in which there is already a market-share.
If ignored, then question marks may become dogs, while if huge investment is made, then they
have potential of becoming stars.
4) Dogs- Dogs represent businesses having weak market shares in low-growth markets. They neither
generate cash nor require huge amount of cash. Due to low market share, these business units face
cost disadvantages. Generally retrenchment strategies are adopted because these firms can gain
market share only at the expense of competitor’s/rival firms. These business firms have weak
market share because of high costs, poor quality, ineffective marketing, etc. Unless a dog has some
other strategic aim, it should be liquidated if there is fewer prospects for it to gain market share.
Number of dogs should be avoided and minimized in an organization.

Limitations of BCG Matrix
The BCG Matrix produces a framework for allocating resources among different business units and makes
it possible to compare many business units at a glance. But BCG Matrix is not free from limitations, such as-
1) BCG matrix classifies businesses as low and high, but generally businesses can be medium also.
Thus, the true nature of business may not be reflected.
2) Market is not clearly defined in this model.
3) High market share does not always leads to high profits. There are high costs also involved with
high market share.
4) Growth rate and relative market share are not the only indicators of profitability. This model
ignores and overlooks other indicators of profitability.
5) At times, dogs may help other businesses in gaining competitive advantage. They can earn even
more than cash cows sometimes.
6) This four-celled approach is considered as to be too simplistic.
23
GE 9 Cell matrix:
Another popular “Corporate Portfolio Analysis” technique is the result of pioneering effort of General
Electric Company along with McKinsey Consultants which is known as the GE NINE CELL MATRIX.
GE nine-box matrix is a strategy tool that offers a systematic approach for the multi business enterprises to
prioritize their investments among the various business units. It is a framework that evaluates business
portfolio and provides further strategic implications.
Each business is appraised in terms of two major dimensions – Market Attractiveness and Business
Strength. If one of these factors is missing, then the business will not produce desired results. Neither a
strong company operating in an unattractive market, nor a weak company operating in an attractive
market will do very well.
The vertical axis denotes industry attractiveness, which is a weighted composite rating based on eight
different factors. They are:
1) Market size and growth rate

2) Industry profit margins
3) Intensity of Competition
4) Seasonality
5) Product Life Cycle Changes
6) Economies of scale
7) Technology
8) Social, Environmental, Legal and Human Impacts
This matrix was developed in 1970s by the General Electric Company with the assistance of the consulting
firm McKinsey & Co, USA. This is also called GE multifactor portfolio matrix'. The GE matrix has been
developed to overcome the obvious limitations of BCG matrix. This matrix consists of nine cells, (3X3)
based on two variables.
 business strength
 industry attractiveness
24
Industry life cycle analysis:
With respect to global industry analysis, there are many key elements related to return expectations.
1) Demand
To begin with global industry analysis, an estimation of demand is needed. This could also include
an analysis of substitutes for the company's product. In this context, demand analysis is based on
worldwide demand.
2) Value Creation
This element focuses on the sources of value that can be extracted through the value chain. The
value chain consists of suppliers of raw materials, but also the delivery firms that deliver the
finished product to the consumers.
3) Industry Life Cycle
Analyzing the industry life cycle in a global context is important much like it is in domestic industry
analysis. It is important to understand an industry's growth prospects to determine an appropriate
growth rate.
4) Competition
Competition in a global industry is much more complicated as the analysis is done with global
industries and laws in mind.
The industry life cycle is made up of the following stages:
1) Pioneering Phase
2) Growth Phase
3) Mature Growth Phase
4) Stabilization/Maturity Phase
5) Deceleration/Decline Phase
25
1)Pioneering Phase
This phase is characterized by low demand for the industry's product and large upstart costs. Industries in
this phase are typically start-up firms, with large upfront costs and few sales.
2) Growth Phase
After the pioneering phase, an industry can transfer into the growth phase. The growth phase is
characterized by little competition and accelerated sales. Industries in this phase have typically survived
the pioneering phase and are beginning to recognize sales growth.
3) Mature Growth Phase
After the growth phase, an industry will reach the mature growth phase. The mature growth phase is
characterized above average growth, but no longer accelerating growth. Industries in this phase now face
increasing competition and, as a result, profit margins begin to erode.
4) Stabilization/Maturity Phase
After the growth phases, an industry will enter in the stabilization/maturity phase. The
stabilization/maturity phase is characterized by growth that is now average. Industries in this phase have
significant competition and the return on equity is now more normalized. This is typically the longest phase
an industry will go through.

5) Deceleration/Decline Phase
The deceleration follows the growth and maturity phases. The deceleration/decline phase is characterized
by declining growth as demand shifts to other substitute (new) products.
Subjective factors in strategic choice:
 Strategies adopted in the previous period;

 Personal preferences of decision- makers
 Management’s attitude toward risk;
 Pressure from stakeholders;
 Pressure from corporate culture; and
 Needs and desires of key managers
26
Process of strategic choice:
1) Focusing on alternatives – The aim of this step is to narrow down the choice to a manageable number
of feasible strategies. It can be done by visualizing a future state and working backwards from it. Managers
generally use GAP analysis for this purpose. By reverting to business definition it helps the managers to
think in a structured manner along any one or more dimensions of the business.
- At corporate level strategic alternatives are – expansion, stability, retrenchment, combination

- At Business leve strategic aternatives are – cost leadership, differentiation or focused business
strategy.
2) Analyzing the strategic aternatives – the alternatives have to be subjected to a thorough analysis which
reply on certain factors known as selection factors. These selection factors determine the criteria on the
basis of which theevaluation will take place. They are :
- Objective factors – These are based on analytical techniques and are hard facts used to facilitate
strategic choice.
- Subjective factors – These are based on one’s personal judgement, collectiveor descriptive factors.
3) Evaluation of strategies – Each factor is evaluated for its capability to help the organization to achieve
its objectives. This step iinvolves bringing together analysis carries out on the basis of subjective and
objective factors. Successive iterative steps of analysizing different alternatives lie at the heart of such
evaluation.
4) Making a strategi choice – A strategic choice must lead to a clear assessment of alternative which is the
most suitable alternative under the existing conditions. A blueprint has to be made that will describe the
strategies and conditions under which it operates. Contigency strategies must be also devised.
27
Unit – 3
Strategy implementation:
Strategy implementation is a term used to describe the activities within an workplace or organisation to
manage the activities associated with the delivery of a strategic plan.
Strategy implementation is the translation of chosen strategy into organizational action so as to achieve
strategic goals and objectives. Strategy implementation is also defined as the manner in which an
organization should develop, utilize, and amalgamate organizational structure, control systems, and
culture to follow strategies that lead to competitive advantage and a better performance. Organizational
structure allocates special value developing tasks and roles to the employees and states how these tasks
and roles can be correlated so as maximize efficiency, quality, and customer satisfaction-the pillars of
competitive advantage. But, organizational structure is not sufficient in itself to motivate the employees.
Strategy implementation requires the following activities to be undertaken:
 Strategy articulation - Building consensus within the team responsible for delivery of the strategy
about the outcomes to be achieved
 Strategy validation - Engaging with stakeholders and others to confirm strategic outcomes being
pursued are acceptable
 Strategy communication - Convert strategic objectives into clear short-term operating objectives
that can be assigned to groups for delivery
 Strategy monitoring - Monitor the progress of the organisation in delivering the strategic objectives
 Strategy engagement - Managerial interventions designed to ensure organisation successfully
achieves chosen strategic outcomes
Relationship between strategy formulation and implementation:
28
Strategy implementation:

The second stage of strategic management, after strategy formulation, is “strategy implementation” or,
what is more familiar to some as “strategy execution”. This is where the real action takes place in the
strategic management process, since this is where the tactics in the strategic plan will be transformed into
actions or actual performance.
Needless to say, it is the most rigorous and demanding part of the entire strategic management process,
and the one that will require the most input of the organization’s resources. However, if done right, it will
ensure the achievement of objectives, and the success of the organization.
If strategy formulation tackles the “what” and “why” of the activities of the organization, strategy
implementation is all about “how” the activities will be carried out, “who” will perform them, “when” and
how often will they be performed, and “where” will the activities be conducted.
And it does not refer only to the installation or application of new strategies. The company may have
existing strategies that have always worked well in the past years, and are still expected to yield excellent
results in the coming periods. Reinforcing these strategies is also a part of strategy implementation.
29
The basic activities in strategy implementation involve the following:
1) Establishment of annual objectives

2) Formulation of policies for execution of strategies
3) Allocation of resources
4) Actual performance of tasks and activities
5) Leading and controlling the performance of activities or tactics in various levels of the organization
Project:
A project is defined as a “temporary endeavor with a beginning and an end and it must be used to create a
unique product, service or result”. Further, it is progressively elaborated. What this definition of a project
means is that projects are those activities that cannot go on indefinitely and must have a defined purpose.
A project is an activity to meet the creation of a unique product or service and thus activities that are
undertaken to accomplish routine activities cannot be considered projects. For instance, if your project is
less than three months old and has fewer than 20 people working on it, you may not be working in what is
called a project according to the definition of the term.
Five features of project:
 Defined beginning, end, schedule, and approach

 Use resources specifically allocated to the work
 End results have specific goals (time, cost, performance/quality)
 Follows planned, organized approach
 Usually involves a team of people

Resource allocation in strategic management:
1) Coordinate project and operational effectively by establishing a comprehensive program
management strategy. Evaluate project proposals on a monthly or quarterly basis to decide which
ones gets sponsorship. Consolidate multiple similar efforts under one program leader; this tends to
enable the use of key resources more effectively and allow you to make critical deadlines.
2) Employ software tools, such project management software such as Microsoft Project,
dotProject.net or Basecamp, to identify project tasks, allocate resources effectively, avoid
overallocation and prevent employee burnout. Approve budgets, finish dates and the amount of
flexibility in the deadlines if you are a company executive to help project managers make decisions
aligned with the company's strategic goals.
30
3) Delay tasks until staff have time available to work on them or split up tasks and hire additional
workers to prevent staff from working more than 40 hours in a typical week and becoming burned
out.
4) Outsource routine tasks to companies that specialize in a particular function, such as payroll
processing, customer service or technical support.
5) Train employees so they have the required skills and job tasks get completed on time to ensure
timely delivery of products and services. Train less experienced workers to complete job tasks if you
experience unexpected demand or attrition. Obtain specialized training from authorized providers
to ensure that your company runs a safe workplace that complies with local, state and federal
regulations.
6) Manage suppliers by analyzing work flow of resource materials from one process to the next.
Gather input from experts before considering alternative solutions to backlogs. Take prompt action
to rectify problems if a supplier provides poor quality materials or delivers them late. Require that
the supplier improves the quality of raw materials and provides them on time.
Structural Considerations in Strategic Implementation:

Before implementing a new or revised strategy, company leaders must ensure the organizational structure
can support the planned activities. After identifying the tasks that the company must perform well to
succeed, company executives configure organizational hierarchies to support primary strategic goals and
achieve competitive advantages. They also identify areas of weakness that pose risks and devise
techniques for handling crises. Successful strategic implementation depends on structuring the
organization’s employees so they can most effectively use the tools and resources available to create
quality products and services.

1) Structuring Activities
To prevent their staff from spending time on activities not directly related to achieving companies'
strategic goals, managers identify tasks that can be outsourced to third-party vendors. Structuring
work this way allows experts to perform these jobs, typically at a lower cast, while employees focus
on their core competencies supporting main businesses. For example, computer manufacturers
typically outsource assembly while focusing internally on design, sales and distribution duties.
2) Aligning Functions to Strategic Objectives

Before corporate leaders can implement new strategyies, they need to ensure that all personnel in
the organizational structure possess the necessary skills, knowledge and resources to accomplish
the tasks. Work must flow from one function to another so leaders should establish clear processes
with policies and procedures that define roles and responsibilities. The strategy must be consistent
across all departments, adaptive to changes, competitively advantageous and technically feasible.
31
3) Establishing Authority
Successfully implementing a new strategy requires that managers and employees understand what
activities require executive approval and which decisions employees have the empowerment to
make without further approval. Ideally, decision makers should be those people who are closest to
the situation and most knowledgeable about the impact. By avoiding micro-managing the
organization, managers streamline operations and eliminate wasteful tasks. If the organization is
structured to allow employees the flexibility to make critical decisions, they must also be held
accountable for their actions.
4) Developing Partnerships
Strategic implementations require personnel to work together to achieve specific, measurable,
attainable, relevant and time-constrained goals and objectives. Establishing a common balanced
scorecard prevents groups from competing against each other to succeed individually at the
expense of the whole company. If company executives foster a cooperative environment between
departments, managers share resources, personnel and knowledge effectively. Additionally, the
organizational structure should encourage new employees to seek out coaching and mentoring
from corporate executives. By encouraging learning and development, company leaders establish a
framework for sustainable growth.
Behavioural implementation
Behavioural implementation deals with those aspects of strategyimplementation that have impact on
behavior of people in theorganization.Since human resources form an integral part of theorganization,
their activities and behavior need to be directed in acertain way. Any departure may lead to the failure of
strategy.

The five major issues involved in Behavior Implementation are:
 Leadership.
 Corporate Culture.
 Corporate policies & use of power.
 Personal Values & Ethics.
 Social Responsibility
Leadership Implementation:‡
 The role of appropriate leadership in strategic success is highly significant.
 Leadership plays a critical role in the successand failure of enterprise.
 It is considered as one of the most important elements affecting organizational performance.
32
Role of leadership in strategic implementation:
Communicating Plans
Strategic implementation begins with setting goals and communicating these to workers. Prioritize your
objectives, put resources at employees' disposal, explain the processes and, above all, transmit your vision
to your team. Communicating well means your listeners comprehend your words and are able to put them
into action. For example, when describing how to implement a new software program, use layman's terms
when talking to those who are not computer specialists. Give the information in small, digestible chunks
and test understanding before moving on.
Giving Out Assignments
Proper delegation helps guarantee a smooth implementation of business strategy. The manager charged
with strategic implementation must be able to pick out the people and teams best able to move the
project forward. Leading the implementation requires taking pains to discover and test the abilities gifts of
her staff. She should establish mini-leaders over various segments of the process who understand the
scope of the implementation. These people will report directly to the overall manager and will be
responsible for guiding their own groups. Pick enthusiastic, imaginative and people-oriented employees for
these roles.
Monitoring Execution
Participate in all avenues of the strategic implementation. Ask questions while observing what your
employees do in order to understand all the processes involved. Ask your group leaders for weekly
progress updates. Keep abreast of the problems that arise and handle them expeditiously. Document the

process carefully so you and others can refer to the literature for future ventures. Be flexible. If something
does not work well in the way you have designed it, find other avenues until you find something that works
better. Always take care not to micromanage your employees as you monitor the processes but instead be
an involved leader who joins in the work to make it better.
Encouraging Staff
Your attitude will prove contagious for the staff. If you are energetic and willing to give your best to the
company, others will follow suit. When encouraging your staff you need to be a consistent role model who
stays on tasks, works to solve problems and keeps to a schedule. You want your employees to emulate
your behavior without having to lecture them on what how to act and perform in the workplace. For
example, if you are always on time and get to work quickly on the implementation process, your staff will
understand the need to do so as well. Create a culture of encouragement by praising hard work,
passionate exhibitions and creativity in individual efforts. Your staff will appreciate the recognition.
33
Theory of leadership states:
A leader must:
 Develop new qualities to perform effectively.

 Be a visionary.
 Exemplify the values, goals and culture of the organization.
 Pay attention to strategic thinking and intellectual activities.
 Lead by empowering others.
 Create leadership at lower levels.‡
 Delegate authority and place emphasis on motivation.
Styles of Leadership:
1) Risk Taking: Willing to take risks.

2) Technology: Use of planning, qualified personnel and techniques.
3) Organicity: Extent of organizational structural flexibility.
4) Participation: Involvement of managers.
5) Coercion: Domination by Top Management.
Corporate Culture
The phenomenon that often distinguishes good organization from bad organization is termed asCorporate
Culture.
The well managed organizations apparently have distinct cultures that are in some way responsible for

their ability to successfully implement strategies.
Why is corporate culture so important?
To survive and prosper in a ever-changing environment,adaptability is key.
SA industries need more than gradual adjustment tochanging circumstances; we need to shift paradigms.
The central challenge: to create and lead an adaptive enterprise.
Why is corporate culture so important?
No CEO can single-handedly make changes to an organisations genetic code‡
Lasting organisational transformation requires a change in people
 ±A fundamental shift in µthe way we do things around here

 ±Corporate culture change is a prerequisite for successful business transformation
34
Culture is important:
 ±because it powerfully influences the behaviour of employees

 ±because it is difficult to change and
 ±because its near invisibility makes it hard to address directly
Composition of Corporate Culture:
It is the set of important assumptions-oftenunstated ±that members of an organizationshare in common.
There are two major assumptions in common:
- Beliefs.
- Values.
Beliefs are assumptions about reality & arederived and reinforced by experience.
Values are assumptions about ideals that aredesirable and worth striving for.
When beliefs and values are shared in anorganization, they create a corporate culture.
Corporate politics and use of power:

All corporate cultures include a political component and therefore all organizationsare political in nature.
Organizational members bring with themtheir likes, dislikes, views, opinions, prejudices and inclinations
when they enter organization.
Understanding Power & Politics:

Power is defined as the ability to influenceothers and corporate politics is the carrying out of the activities
not prescribed by the policies for the purpose of influencing the distribution of advantages within the
organization.
Politics is related to the use of Power but it is not similar.
Changing corporate culture:
1) Develop enterprise strategy as “what to focus on” in achieving the vision

2) Design a set of values
3) Identify behaviours needed from management and employees toexecute strategy
4) Communicate all of this in coherent and compelling ways
5) Drive for total contextualisation down to an individual level. The role of every line manager is key
6) Articulate the company’s vision as a concise word picture describing what the organisation aspires
to become. Keep it simple, motivational and realistic.
35
Personal values:
Personal values are the general expression of what is most important for you. A value expresses the worth
of something, and in this case what you categorical like and dislike. So they are like categories for all your
preferences in life. Values are formed starting in early childhood and are later consciously re-evaluated and
can therefore be changed.
By comparing two values you can discover which is representing something that is more important than
the other. Therefore you rate the one value over the other.
Personal values are generally operating in the background. They influence everything what you do but
usually it happens on auto-pilot. You just know intuitively what you like and dislike and decide accordingly.
36
Unit – 4
Strategy Evaluation And Control:

The final stage in strategic management is strategy evaluation and control. All strategies are subject to
future modification because internal and external factors are constantly changing. In the strategy
evaluation and control process managers determine whether the chosen strategy is achieving the
organization's objectives. The fundamental strategy evaluation and control activities are: reviewing
internal and external factors that are the bases for current strategies, measuring performance, and taking
corrective actions.
Strategic evaluation and control ensure that the right things are done in the right manner and at the right
time.It continually assesses the changing environment to uncover events that may significantly affect the
course of the strategy.
Strategic evaluation and control is exercise by top management.It is long term oriented.It focuses on
external environment.It is proactive and provides early warning about the performance of the strategy.
The characterise of strategy evaluation and control are :
1) Right direction :Strategy evaluation and control ensures that the strategy is moving in the right
direction.It is objective oriented.
2) Proactive :Strategy evaluation and control is an early warning system of control.It pro acts by
continual questioning the direction of strategy.It is based on timely information.
3) Future oriented:Strategy evaluation and control aims to steer the future direction of strategy.
4) Focus :Strategic evaluation and control focuses on forces and events in the external environment.
5) Time horizon:Strategic evaluation and control has a long term time horizon.

6) Responsibility :Strategic evaluation and control is the responsibility of top management.
7) Techniques :Strategic evaluation and control is based on environment surveillance,premises
reexamination,implementation review,information gathering and special alert technique.
8) Corrective actions:They are the essence of strategic evaluation and control.It is action oriented.
9) Timely evaluation and control alerts management about problems before they critical.It is essential
to face dynamics environments.It ensures environmental relevance.
Principles of strategy evaluation:

 Consistency has to do with whether the way the business operates matches the objectives the
business strives for. When a business sets objectives or goals, they can evaluate their daily
operations to see if it has met these goals.
 Consonance refers to how well the business reacts to the change of surroundings. If consumers'
preferences change, or a competitive business is built next door, a business needs to be able to
adapt and still be successful.
37
 Advantage has to do with whether the business is competitive. If a consumer purchases products at
their business instead of at another store, the business can remain competitive.
 Feasibility is concerned with whether the business has the resources and tools to function. As times
change and technology grows, a company needs to have the resources to still remain successful.
Strategic control:
It takes into account the changing assumptions that determine a strategy, continually evaluate the strategy
as it is being implemented and take the necessary steps to adjust the strategy to the new requirements.
Operational control:
It is aimed at allocation and use of organizational resources through evaluation of performance of
organizational units, divisions, SBU’s to assess their contribution in achieving organizational objectives.
Difference between strategic control and operational control:

1) Strategic control requires data from more sources. The typical operational control problem uses
data from very few sources.
2) Strategic control requires more data from external sources. Strategic decisions are normally taken
with regard to the external environment as opposed to internal operating factors.
3) Strategic control are oriented to the future. This is in contrast to operational control decisions in
which control data give rise to immediate decisions that have immediate impacts.

4) Strategic control is more concerned with measuring the accuracy of the decision premise.
Operating decisions tend to be concerned with the quantitative value of certain outcomes.
5) Strategic control standards are based on external factors. Measurement standards for operating
problems can be established fairly by past performance on similar products or by similar operations
currently being performed.
6) Strategic control relies on variable reporting interval. The typical operating measurement is
concerned with operations over some period of time: pieces per week, profit per quarter, and the
like.
38
Process of strategic evaluation:
1) Fixing benchmark of performance
 While fixing the benchmark, strategists encounter questions such as - what benchmarks to set, how
to set them and how to express them.
 In order to determine the benchmark performance to be set, it is essential to discover the special
requirements for performing the main task.
 The organization can use both quantitative and qualitative criteria for comprehensive assessment
of performance.
 Quantitative criteria includes determination of net profit, ROI, earning per share, cost of
production, rate of employee turnover etc. Among the Qualitative factors are subjective evaluation
of factors such as - skills and competencies, risk taking potential, flexibility etc.
2) Measurement of performance
 The standard performance is a bench mark with which the actual performance is to be compared.
 The reporting and communication system help in measuring the performance.
 For measuring the performance, financial statements like - balance sheet, profit and loss account
must be prepared on an annual basis.
3) Analyzing Variance
 While measuring the actual performance and comparing it with standard performance there may
be variances which must be analyzed.
 The strategists must mention the degree of tolerance limits between which the variance between
actual and standard performance may be accepted.
4)Taking Corrective Action

 Once the deviation in performance is identified, it is essential to plan for a corrective action.
 If the performance is consistently less than the desired performance, the strategists must carry a
detailed analysis of the factors responsible for such performance.
39
Techniques of Strategic Evaluation
1) Gap Analysis
 The gap analysis is one strategic evaluation technique used to measure the gap between the
organization’s current position and its desired position.
 The gap analysis is used to evaluate a variety of aspects of business, from profit and production to
marketing, research and development and management information systems.
 Typically, a variety of financial data is analyzed and compared to other businesses within the same
industry to evaluate the gap between the organization and its strongest competitors.
2) SWOT Analysis
 The SWOT analysis is another common strategic evaluation technique used as a part of the strategic
management process. The SWOT analysis evaluates the organization’s strengths, weaknesses,
opportunities and threats.
 Strengths and weaknesses are internal factors, while opportunities and threats are external factors.
 This identification is essential in determining how best to focus resources to take advantage of
strengths and opportunities and combat weaknesses and threats.
3) PEST Analysis
 Another common strategic evaluation technique is the PEST analysis, which identifies the political,
economic, social and technological factors that may impact the organization’s ability to achieve its
objectives.
 Political factors might include such aspects as impending legislation regarding wages and benefits,

financial regulations, etc
 Economic factors include all shifts in the economy, while social factors may include demographics
and changing attitudes. Technological pressures are also inevitable as technology becomes more
advanced each day.
 These are all external factors, which are outside of the organization’s control but which must be
considered throughout the decision making process.
4) Benchmarking
 Benchmarking is a strategic evaluation technique that’s often used to evaluate how close the
organization has come to its final objectives, as well as how far it has left to go.
 Organizations may benchmark themselves against other organizations within the same industry, or
they may benchmark themselves against their own prior situation.
 A variety of performance measures, as well as policies and procedures, may be evaluated regularly
to identify where adjustments are necessary to maintain the sustainable competitive advantage.
40
The types of strategic controls are:
1) Premise control
2) Implementation control
3) Strategic surveillance
4) Special alert control
1) Premise Control
 Every strategy is based on certain planning premises or predictions.

 Premise control has been designed to check systematically andcontinuously whether or not the
premises set during the planning and implementation process are still valid.
 It involves the checking of environmental conditions. Premises are primarily concerned with two
types of factors:
a. Environmental factors (for example, inflation, technology, interest rates, regulation, and
demographic/social changes).
b. Industry factors (for example, competitors, suppliers, substitutes, and barriers to entry)
2) Implementation Control
 Implementing a strategy takes place as a series of steps, activities, investments and acts that occur
over a lengthy period.
 The two basis types of implementation control are:

a. Monitoring strategic thrusts (new or key strategic programs): Two approaches are useful in enacting
implementation controls focused on monitoring strategic thrusts: (1) one way is to agree early in the
planning process on which thrusts are critical factors in the success of the strategy or of that thrust; (2) the
second approach is to use stop/go assessments linked to a series of meaningful thresholds (time, costs,
research and development, success, etc.) associated with particular thrusts.
b. Milestone Reviews: Milestones are significant points in the development of a programme, such as points
where large commitments of resources must be made. A milestone review usually involves a full-scale
reassessment of the strategy and the advisability of continuing or refocusing the direction of the company.
41
3) Strategic Surveillance
 Strategic surveillance is designed to monitor a broad range of events inside and outside the
company that are likely to threaten the course of the firm's strategy.
 The basic idea behind strategic surveillance is that some form of general monitoring of multiple
information sources should be encouraged, with the specific intent being the opportunity to
uncover important yet unanticipated information.
 Strategic surveillance appears to be similar in some way to "environmental scanning." Strategic
surveillance is designed to safeguard the established strategy on a continuous basis.
4) Special Alert Control
 Another type of strategic control is a special alert control.

 "A special alert control is the need to thoroughly, and often rapidly, reconsider the firm's basis
strategy based on a sudden, unexpected event."
 The analysts of recent corporate history are full of such potentially high impact surprises (i.e.,
natural disasters, chemical spills, plane crashes, product defects, hostile takeovers etc.).
 An example of such event is the acquisition of your competitor by an outsider. Such an event will
trigger an immediate and intense reassessment of the firm's strategy. Form crisis teams to handle
your company's initial response to the unforeseen events.
Role of Organizational Systems in Strategic Evaluation

Strategic Evaluation is as important as strategy formulation. It sheds light on the efficiency and
effectiveness of the comprehensive plans in achieving the desired results. Role of organizational systems in

strategic evaluation is presented below.
Role of organizational systems in strategic evaluation : Strategic evaluation operates in the context of
various organizational systems. An organization develops various systems which help in integrating various
parts of the organization. The major organizational systems are: informa-tion system, planning system,
motivation system, appraisal system and development system. All these organizational systems play their
role in strategic evaluation and control. Some of these systems are closely and directly related and some
are indirectly related to evaluation and control. In connection with the role of organizational systems in
strategic evaluation, the following systems may be important.
Evaluation and control action is guided by adequate informa-tion from the beginning to the end.
Management information and management control systems are closely interrelated which the information
system is designed on the basis of control system. Every manager in the organization must have adequate
information about his performance, standards and how he is contributing to the achievement of
organizational objectives. There must be a system of information tailored to the specific management
needs at every level, both in terms of adequacy and timeliness.
42
Planning System
Planning is the basis for control in the sense that it provides the entire spectrum on which control function
is based. In fact, these two terms are often used together in the designation of the department which
carries production planning, scheduling and routing. It emphasizes that there is a plan which directs the
behavior and activities in the organization. Control measures these behavior and activities and suggests
measures to remove deviation. Thus, there is a reciprocal relationship between planning and control.
Motivation System
Motivation system is not only related to evaluation and control system but to the entire organizational
processes. Lack of motivation on the part of managers is a significant barrier in the process of evaluation
and control. Since the basic objective of evaluation and control is to ensure that organizational objectives
are achieved. Motivation plays a central role in this process. It energizes managers and other employees in
the organization to perform better which is the key for organizational success.
Appraisal System
Appraisal or performance appraisal system involves systematic evaluation of the individual with regard to
his performance on the job and his potential for development. While evaluating an individual, not only his
performance is taken into consideration but also his abilities and potential for better performance. Thus,
appraisal system provides feedback for control system about how individuals are performing.
Development System

Development system is concerned with developing personnel to perform better in their present positions
and likely future positions that they are expected to occupy. Thus, development system aims at increasing
organizational capability through people to achieve better results. These results become the basic for
evaluation and control. Role of organizational systems in strategic evaluation should not be undermined.
43
Mc Kinsey’s 7s Framework:
The McKinsey 7 Framework is a management model developed by well-known business consultants Robert
H. Waterman, Jr. and Tom Peters (who also developed the MBWA-- "Management By Walking Around"
motif, and authored In Search of Excellence) in the 1980s. This was a strategic vision for groups, to include
businesses, business units, and teams. The 7Ss are structure, strategy, systems, skills, style, staff and
shared values.
The model is most often used as an organizational analysis tool to assess and monitor changes in the
internal situation of an organization.
The model is based on the theory that, for an organization to perform well, these seven elements need to
be aligned and mutually reinforcing. So, the model can be used to help identify what needs to be realigned
to improve performance, or to maintain alignment (and performance) during other types of change.
Whatever the type of change – restructuring, new processes, organizational merger, new systems, change
of leadership, and so on – the model can be used to understand how the organizational elements are
interrelated, and so ensure that the wider impact of changes made in one area is taken into consideration.
The seven interdependent elements:

The basic premise of the model is that there are seven internal aspects of an organization that need to be
aligned if it is to be successful
Hard elements of 7s:
Strategy - By using mission and vision the organization’s objectives become clear. You can find these

elements in the strategic planning of an organization.
Structure - How is the organization structured and which hierarchical layers are there.
Systems - Systems are all formal and informal methods of operation, procedures and communication
flows.
Soft elements of 7s:
Style - Style is all about leadership and management styles.
Shared values - The standards and values and other forms of ethics within an organization in which vision,
corporate culture and identity are the key elements.
Skills - These concern both the skills of the organization and those of the employees.
Staff - This soft element is about the employees, their competences and job descriptions.
44
Application of the 7S Framework
The 7S Framework is mainly used to trace performance problems in an organization to subsequently
change and/or improve these. With a blueprint or (photo) of these performance problems, several
elements could be put to use in a targeted manner. It is important in this to compare the present situation
(IST) with the desired and future situation (SOLL). The 7S Framework constitutes a good framework, in
which possible gaps and inconsistencies between IST and SOLL can be traced and adjusted.

McKinsey 7S Framework example
 Strategy - The commercial education provider is fully focused on adult MBA education. They offer a
series of courses and aim to be largest provider in the Netherlands.
 Structure - Given the size of the organisation, it is important that there is a proper structure, and so
a product classification has been made; each branch has its own training managers, representatives
and subject teachers. This hierarchy is clear to both employees and students. In addition, there are
many supporting departments such as ICT, administration and planning.
 Systems - The organisation uses an internal Customer Relationship Management system to keep
up-to-date with student progress, contracts and internship agreements. Students have an online
learning environment that is linked to the internal system so that everyone is aware of the
student’s well-being.
45
 Style - The organisation was founded 10 years ago by a passionate pioneer and has a friendly and
open atmosphere right from the beginning. As a leader, he considers it important that work is done
according to procedures and legislation, but everyone can further determine their own goals and
are thus self-governing. This creates a pleasant working environment and a good mutual
understanding.
 Shared values - You are friendly to one another within the organisation, birthdays are celebrated
with cake and a small gift, drinks every Friday afternoon and a teacher’s day twice a year. The
student always remains top priority, both in and outside the office.
 Skills - The organisation only works with teachers who have made their mark in the industry; as
representatives, they can present study material very well. Employees are expected to know the
exact guidelines issued by the Ministry of Education and how to integrate them into the lesson
program.
 Staff - In addition to skills, it is also important that the staff knows what their responsibilities are
and dare to take it. Problems in class or with individual students must be reported to the head
office in order to cooperatively find a solution.
46

Strategic Management. Common Subject

Uploaded by

Document Information

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Strategic Management. Common Subject

Uploaded by

Copyright:

Available Formats

1

HIMANSHU GHANGAS +91-9996067333

Importance of Strategic management:

HIMANSHU GHANGAS +91-9996067333

2) Analysis Strategy Formation

HIMANSHU GHANGAS +91-9996067333

HIMANSHU GHANGAS +91-9996067333

HIMANSHU GHANGAS +91-9996067333

2. By its nature, it is multidisciplinary:

3. By its influence, it is multidimensional:

4. By its structure, it is hierarchical:

HIMANSHU GHANGAS +91-9996067333

7. Strategy requires searching for new sources of advantage:

Strategic management process:

HIMANSHU GHANGAS +91-9996067333

2) Gather and Analyze Information

4) Implement Your Strategy

5) Evaluate and Control

HIMANSHU GHANGAS +91-9996067333

HIMANSHU GHANGAS +91-9996067333

These are important features of strategic decision making:

1) Strategy is at many times at tangent with marketing decisions

HIMANSHU GHANGAS +91-9996067333

Strategic Intent Hierarchy -

HIMANSHU GHANGAS +91-9996067333

Stages in environment appraisal:

Following are the main factors affecting environmental appraisal

a) Factors relating to environment

b) Factors relating to Organisation

c) Factors Relating to Strategies

HIMANSHU GHANGAS +91-9996067333

b) High Priority Issues

c) Low Priority Issues

3rd Stage : Structuring the Environmental Appraisal

The basic PEST analysis includes four factors:

HIMANSHU GHANGAS +91-9996067333

Primary activities of Porter’s value chain are as follows:

HIMANSHU GHANGAS +91-9996067333

Secondary activities involved in the Porter’s Value chain are as follows

HIMANSHU GHANGAS +91-9996067333

1) Corporate level strategies –

HIMANSHU GHANGAS +91-9996067333

2) Business level strategies:

HIMANSHU GHANGAS +91-9996067333

3) Focused Low Cost

5) Integrated Low Cost/Differentiation

3) Functional level strategies:

HIMANSHU GHANGAS +91-9996067333

 Low amount of capital is required to enter a market;

 There are few suppliers but many buyers;

HIMANSHU GHANGAS +91-9996067333

 There are many competitors;

Corporate Level Strategic Analysis

HIMANSHU GHANGAS +91-9996067333

HIMANSHU GHANGAS +91-9996067333

HIMANSHU GHANGAS +91-9996067333

1) Market size and growth rate

HIMANSHU GHANGAS +91-9996067333

The industry life cycle is made up of the following stages:

HIMANSHU GHANGAS +91-9996067333

3) Mature Growth Phase

HIMANSHU GHANGAS +91-9996067333

Subjective factors in strategic choice:

 Strategies adopted in the previous period;