Levels of strategy exist at the corporate, SBU, and functional levels. Strategic management involves environmental scanning, strategy formulation, implementation, and evaluation. It is the dynamic process of realizing organizational strategic intent through strategies that are formulated, implemented, and controlled. The strategic management process has four phases - establishing strategic intent, formulating strategies, implementing strategies, and evaluating strategies. Porter's five forces model analyzes industry competition and includes factors like rivalry, potential entrants, substitutes, suppliers, and buyers. Benchmarking identifies best practices from other organizations to improve performance. The triple bottom line expands performance measurement to include social and environmental impacts, not just financial measures.

1. STRATEGIC COST AND
REVENUE MANAGEMENT
PROF. RAGHUNANDAN HELWADE

3. LEVELS OF STRATEGY OPERATION:
Corporate strategy
SBU
A
SBU
B
SBU
c
Mrktg. finance Operation R&D
HR
Corporate Level
Strategy
SBU Top mgmt Le
Strategy
Functional Level
Strategy

4. CONCEPT OF STRATEGY MANAGEMENT:
 Strategic management is the set of managerial decision
and action that determines the long-run performance of
a corporation.
 It includes environmental scanning (both external and
internal), strategy formulation (strategic or long range
planning), strategy implementation, and evaluation and
control.
 The study of strategic management therefore
emphasizes the monitoring and evaluating of external
opportunities and threats in lights of a corporation’s
strengths and weaknesses.

5. STRATEGIC MANAGEMENT
 Strategic Management is defined as the
dynamic process of formulation, implementation,
evaluation and control of strategies to realise the
organisation’s strategic intent.
 Acc.to Glueck, “Strategic Management is a
stream of decisions and actions which leads to
the development of an effective strategy of
strategies to help achieve corporate objectives.

6. FOUR PHASES IN STRATEGIC MANAGEMENT
PROCESS:
Strategic Control
Establishment
of Strategic
Intent
Formulation
Of
Strategies
Implementation
Of
Strategies
Strategic
Evaluation

7. PHASES OF STRATEGIC MANAGEMENT PROCESS:
sr phases elements
1) Establishing the hierarchy of
strategic intent
1) Creating and communicating a
vision
2)Designing a mission statement
3) Defining the business
4) Setting the objectives
2) Formulation of strategies 1) Performing envtal appraisal
2) Performing organizational
appraisal
3) Considering corporate level
strategies
4)Considering business level
strategies
5) Undertaking strategic analysis
6) Exercising strategic choice
7) Formulating strategies
8) Preparing strategic plan

8. CONTD..
Sr. phases Elements
3) Implementation of strategies 1) Activating strategies
2) Designing structures and
systems
3) Managing behavioral
implementation
4) Managing functional
implementation
5) Operationalising strategies
4) Performing strategic
evaluation and control
1) Performing strategic evaluation
2) Exercising strategic control
3) Reformulating strategies

9. Hired Michael Eisner - 1984
1. Increased admission prices at theme parks
1984 - $186 m 1989 - $787 m
2. Focused on movie studios (character development)
1984 - $2.42 m 1994 - $845 m
3. Diversified into television (ABC), hotels, retail stores,
sport team, cruise line, publishing, consumer
products, licensing, etc. (Huey & McGowan, 1995)
Walt Disney Company
Market Cap: 1984 = $2 billion 1994 = $28 billion
2018 = ??

10. PORTER’S FIVE FORCES OF COMPETITION FRAMEWORK
SUPPLIERS
POTENTIAL
ENTRANTS
SUBSTITUTES
BUYERS
INDUSTRY
COMPETITORS
Rivalry among
existing firms
Bargaining power of suppliers
Bargaining Power of Buyers
Threat of
New
Entrants
Threat of
Substitutes

11. TAKEAWAY 2: ESSENTIALS OF STRATEGIC ANALYSIS
Porter’s Model of Five Strategic Forces Affecting
Competition:
Industry
competition
Intensity of
rivalry
among
firms and
their
competitive
behavior
New
entrants
Threat of
new
competitors
entering
the market
Substitute
products or
services
Threat of
substitute
products or
services
Bargaining
power of
suppliers
Ability of
resource
suppliers to
influence
the cost of
products or
services
Bargaining
power of
customers
Ability of
customers
to influence
the price
they will
pay for
products or
services

12. COMPANY
Substitute
Products
Suppliers
New
entrants
Rival
Firms
Economic Condition
hnolo
gy
Socio-Cultural
Demographics
Legisla
tive &
Regula
tion
MACRO
ENVIRONMENT

13. COMPETITION IN RIVALS
 Competition between existing players
 Strongest among all
 Pressure result in decrease in prices, margins and
ultimately profitability

14.  When possible?
 Increasing number
 More in diverse rivals
 Slow market growth
 Less demand
 Less product differentiation (Std. Products)
 Low switching cost
 When Exit barriers are high

15.  How to overcome?
 Price changes
 Product differentiation
 Strong distribution channel
 Exploiting relationships

16. POTENTIAL ENTRANTS
 Threat depend on size & resources
 Entry easy if less Entry barriers
 Entry Barriers:- Difficulties in entering the market

17.  Barriers to entry
 Economies of scale
 Brand preference, Customer loyalty
 High capital requirement
 Government policies
 Retaliation by established ones
 Strong distribution

18.  Exit Barriers:
 Difficulties in leaving the market
 High capital investments
 Specialized assets
 Interrelationships
 Emotional barriers
 Regulations & restrictions

19.  Barriers Scenario:-
 Low entry barriers & low exit barriers
 High entry barriers & low exit barriers
 Low entry barriers & high exit barriers
 High entry barriers & high exit barriers

20.  Potential New Entrants
 When possible?
 Entry barriers are less
 Profit is high
 Higher demand

21.  New entrants create risk to market share, profit margin
 How to overcome ?
 Create Entry Barriers
 Creating switching cost by differentiation

22. SUPPLIERS BARGAINING POWER
 Situation in which suppliers dictate business
 When possible?
 Very important material for buyer
 Monopoly or oligopoly
 Switching cost is more
 Few or no substitutes
 Differentiated products

23.  How to overcome ?
 Creation of alternate sources
 Backward integration

24. BUYER’S BARGAINING POWER
 Pressure by customer on volume & profit margin
 Strong bargaining power of customer is near to -
Monopsony
 When possible?
 Few customers
 Large volume purchase
 Large number of suppliers

25.  Switching cost is minimum
 Well informed customer
 How to overcome ?
 Finding new customers
 Forward integration
 Product differentiation

26. SUBSTITUTES PRODUCTS
 Alternate products with lower price & better
performance
 Example – Sugar & artificial sweetener
 Eyeglass, Lenses – Laser surgery
 News paper – Internet news
 Sometimes not easily identified

27.  When possible?
 Buyers inclination
 Provides better options
 Currently monopolistic situation
 How to overcome ?
 Change pricing strategy
 Extra value addition

29. THE VALUE CHAIN CONCEPT
 Identifies the separate activities and business processes
performed to design, produce, market, deliver, and support a
product / service
 Consists of two types of activities
 Primary activities
 Support activities

30. Value Chain Analysis

31. COMPETENCE
 It is an activity that a company has learned to perform well
 Combination of experience and learning
 Select people with required knowledge & skill – upgrade their
individual abilities - mould individual efforts into co-operative
group effort – Organizational ability – Competence

32. CORE COMPETENCE
 A competitively important activity that a company performs
better than other activity
 Proficiently performed internal activity that is central (not
peripheral) to a company’s strategy, competitiveness &
profitability
 Important as it is related to strategy & contribute to success
in market

33.  Generally CC is in people
 Competence can become CC if it is central to strategy
 Innovative products
 Efficient supply chain management
 Faster product launch
 Accuracy in customer orders
 High quality products in low cost

34.  Examples :
 Microsoft - IT based innovations
 Walt Disney World Parks - Efficient operation of theme
parks
 Maruti Suzuki India Ltd. – 1) Strong Customer Base and
brand Image 2)Well developed sales and service network
throughout India 3) Very Strong knowledge of Indian
market
 Honda – Engines
 Canon - Optics and microprocessor controls

35. DISTINCTIVE COMPETENCE
 A competitively valuable activity that company performs
better than rivals
 Even more important than CC
 Gives unmatched capability to company
 Important factor in strategy
 Produces competitive edge

36.  Toyota – Low price & high quality products
 Motorola – Defect free manufacturing (Six Sigma)
 Intel – Powerful microprocessors

37. Components of
Internal Analysis
Discovering Core
Competencies
Resources
• Tangible
• Intangible
Capabilities
Core
Competencies
Competitive
Advantage
Value Creation
Four Criteria
of Sustainable
Advantages
• Valuable
• Rare
• Costly to Imitate
• Nonsubstitutable
Value
Chain
Analysis
• Outsource

38. BENCHMARKING
Prof. Raghunandan Helwade

39. WHAT IS BENCHMARKING
A method for identifying and importing
best practices in order to improve
performance
The process of learning, adapting, and
measuring outstanding practices and
processes from any organization to
improve performance

40. WHY BENCHMARK
Identify opportunities to improve
performance
Learn from others’ experiences
Set realistic but ambitious targets
Uncover strengths in one’s own
organization
Better prioritize and allocate resources

41. Citizens demand effective and responsive
government
Voters resent waste of tax dollars
People ask for greater accountability of
government
Weak economy forces government to
provide more services with less resource
PUBLIC SECTOR BENCHMARKING

42. TYPES OF BENCHMARKING:
 1 : Strategic Benchmarking
How public, private, and nonprofit
organizations compare with each other.
It moves across industries and cities to
determine what are the best strategic
outcomes.

43. TYPES OF BENCHMARKING:
 2 : Performance Benchmarking
How public, private, and nonprofit
organizations compare themselves with
each other in terms of product and
service. It focuses on elements of cost,
technical quality, service features, speed,
reliability, and other performance
comparisons.

44. TYPES OF BENCHMARKING:
 3: Process Benchmarking
How public, private, and nonprofit
organizations compare through the
identification of the most effective
operating practices from many
organizations that perform similar work
processes.

45. BENCHMARKING PROCESS
Planning
Collecting
Data
Analysis
Improving
Practices

46. 1. PLANNING
Determine the purpose and scope of the
project
Select the process to be benchmarked
Choose the team
Define the scope
Develop a flow chart for the process
Establish process measures
Identify benchmarking partners

47. 2. COLLECTING DATA
Conduct background research to gain
thorough understanding on the process
and partnering organizations
Use questionnaires to gather information
necessary for benchmarking
Conduct site visits if additional information
is needed
Conduct interviews if more detail
information is needed

48. 3. ANALYSIS
Analyze quantitative data of partnering
organizations and your organization
Analyze qualitative data of partnering
organizations and your organization
Determine the performance gap

49. 4. IMPROVING PRACTICES
Report findings and brief management
Develop an improvement implementation
plan
Implement process improvements
Monitor performance measurements and
track progress
Recalibrate the process as needed

50. WHAT IS SUSTAINABILITY
 A strategy by which communities seek economic
development approaches that also benefit the local
environment and quality of life

51. IS A PROCESS OF ACHIEVING HUMAN
DEVELOPMENT
Contributed through effective management of social
,economic and environment benefits

52. GLOBAL DRIVERS OF SUSTAINABILITY
 Increasing Industrialization
 Proliferation & Interconnection of Civil Stakeholders
 Emerging Technology
 Effects of Globalization- poverty, inequity,
population explosion

53. TRIPLE BOTTOM LINE
TBL“ or "3BL",

54. WHAT IS TBL
 An expanded spectrum of values and criteria for
measuring organizational and societal success –
economic, environmental, social.
 In the private sector, a commitment to CSR implies
a commitment to some form of TBL reporting.

55. The Triple Bottom Line is made up of "Social, Economic
and Environmental"
"People, Planet, Profit "

56. TRIPLE BOTTOM LINE ACCOUNTING
 Expanding the traditional reporting framework
 Take into account environmental and social
performance in addition to financial performance.
 Company's responsibility to 'stakeholders' rather
than shareholders.

57. LEGISLATION
 Legislation permitting corporations to adopt a 'Triple
Bottom Line' is under consideration in some
jurisdictions.
 The triple bottom line has been adopted as a part of
the State Sustainability Strategy

58. WHAT IS TRIPLE BOTTOM LINE REPORTING?
􀂃 “At its narrowest TBL reporting is a
framework
for measuring and reporting corporate
(organizational) performance against
economic,
social and environmental parameters”
www.sustainability.com
􀂃 A move from one dimensional economic
reporting to three dimensional economic,
social
and environmental reporting

59. HOW IS TBL REPORTING
ACCOMPLISHED?
Economic
 􀂃 Generally Accepted Accounting Principles
 􀂃 Customers
 􀂃 Suppliers
 􀂃 Employees
Social
 􀂃 Bribery and corruption
 􀂃 Political contributions
 􀂃 Child labor
 􀂃 Security practices
 􀂃 Indigenous rights
 􀂃 Training and diversity
Environmental
 􀂃 Energy
 􀂃 Water
 􀂃 Biodiversity
 􀂃 Emissions, effluents, and waste

60. HOW IS TBL REPORTING ACCOMPLISHED?
Through the application of what is called the
Global
Reporting Initiative 2002 or GRI and is defined as
“a
common framework for sustainability reporting”

61. Started in 1997 by the Coalition for
Environmentally
Responsible Economies and the United
Nations
GRI became independent in 2002, and is
an official
collaborating centre of the United Nations
Environment Programme (UNEP) and
works in cooperation with UN Secretary-
General Kofi Annan’s Global Compact.

62. GLOBAL REPORTING INITIATIVE
GRI
􀂃 The Global Reporting Initiative attempts to make the
Triple Bottom Line operational
􀂃 VISION
The Global Reporting Initiative’s (GRI) vision is that
reporting on economic, environmental, and social
performance by all organizations becomes as routine
and comparable as financial reporting. GRI
accomplishes this vision by developing, continually
improving, and building capacity around the use of
its Sustainability Reporting Framework.

63. HOW ORGANIZATIONS STRATEGICALLY MANAGE
CSR THROUGH TRIPLE BOTTOM LINE REPORTING
TBL reporting enables organizations to:
􀂃 Measure and manage their financial and
non-financial
performance and impacts, or lack thereof
􀂃 Have their performance and impacts
verified
independently
􀂃 Communicate effectively with consumers,
governments, investors, employees, other
stakeholders and watchdog groups

64.  The implementation of a TBL reporting approach to
CSR is an incremental process, dealing with the
complex and contestable issues involved in
attempting to effectively integrate economic,
environmental and social performance
measurement into a single report

65. “You cannot talk about CSR unless
you love your people and your
country”

66. SUSTAINABILITY AND CSR
 "Corporate social reponsibility", or CSR for short, is about a
company's responsibility for society in the sense of sustainable
business practices.
 CSR refers to a company's responsibility for its impact on
society. This includes social, environmental and economic
aspects, as for example outlined in the internationally
recognised reference documents on CSR, chief among them the
fundamental ILO declaration on multinational enterprises and
social policy, the OECD Guidelines for Multinational enterprises,
the UN Guiding Principles on Business and Human Rights, the
UN Global Compact and ISO 26000. More specifically, CSR for
example involves fair business practices, staff-oriented human
resource management, economical use of natural resources,
protection of the climate and environment, sincere commitment
to the local community and also responsibility along the global
supply chain.

67. SUSTAINABILITY
 Sustainability is responsibility for the impact that the organization exerts
on its surroundings, in business, environmental and social terms.
Conscious management of the impact translates into lower costs,
improved external relations and better managed risks.
 Sustainability is skilled positioning of the organization in the economic
reality, taking account of the social and economic challenges,
environmental opportunities and threats. The awareness that the
organization functions within a broader framework, amid complex
interrelations with many stakeholder groups, allows it to get ready and
make use of the opportunities linked with sustainability.
 Sustainability is awareness that each entity is surrounded by
stakeholders. Building and cultivating good relations with stakeholders
based on engagement and dialogue is crucial, because it not only affects
the possibilities to manage risks, but also supports development and
gives the organization a competitive edge.
 Sustainability is transformation and development of the organization as
well as creation of its long-term value based on innovation as well as
intellectual and relation capital.

68. BENEFITS FOR BUSINESSES
 Business transformation and sustainable approach to
management translate into:
 Identification of the areas that create the organization’s long-
term value
 Reduction of operating costs due to more effective resource
management across the entire supply chain
 Effective economic, social and environmental risk
management
 Business stability relying on good relations with key
stakeholders
 Building loyalty and trust of customers through a dialogue and
engagement
 Sustainability is a response to the challenges of the modern
world which transforms potential threats and risks into
development opportunities for organizations from the public
and private sectors.

69. GRAND STRATEGIES
Raghunandan Helwade

70. GRAND STRATEGIES
Four main corporate strategies:
1. Stability Strategy
2. Growth/Expansion Strategy
3. Retrenchment Strategy
4. Combination Strategy

71. STABILITY STRATEGY
 The basic approach is ‘maintain present course:
steady as it goes.’
 In an effective stability strategy, companies will
concentrate their resources
 where the company presently has or can rapidly
develop a meaningful competitive
advantage in the narrowest possible product-market
scope consistent with the
firm’s resources and market requirement's.

72. REASONS FOR ADOPTING STABILITY
STRATEGIES:
 Managers of small business desire a satisfactory level of
profits rather than increased profits.
 Maintenance of status quo involves less risk than a more
growth strategy.
 Change may upset the smooth operations and result in
poor performance especially, if the firm considers itself
successful with the present level of operations.
 Changing operations to pursue a more aggressive growth
strategy usually requires an increased investment and
managerial support. Firms, which cannot provide
resources, may continue with the stability strategy.

73.  Some executives maintain with the stability strategy due
to inertia for change.
 In some cases, firms are forced to adopt stability strategy,
if they operate in a low-growth or no-growth industry.
 Sometimes, firms may find that the cost of growth is more
than the benefits of the same.
 Firms that dominate its industry through their superior
size and competitive advantage may pursue stability to
reduce their chances of being prosecuted for engaging in
monopolistic practices.
 Smaller firms that concentrate on specialized products or
services may choose stability because of their concern
that growth will result in reduced quality and customer
service.

74. TYPES OF STABILITY STRATEGY
Pause/Proceed with Caution
No Change
Profit policy

75. EXAMPLES OF STABILITY STRATEGIES
ADOPTED BY COMPANIES:
 Steel Authority of India Ltd(SAIL) has adopted stability strategy
because of over capacity in steel sector. Instead it has
concentrated on increasing operational efficiency of its various
plants rather than going for expansion. Others industries are
‘heavy commercial vehicle’, ‘coal industry.
 Apart from over capacity, regulatory restrictions in some
industries have forced companies to adopt stability strategy.
Cigarette, liquor industries fall in this category because of strict
control over capacity expansion. Both these industries require
license under the provisions of Industries (Development and
regulations) Act, 1951.
 Many companies in public sector have been forced to adopt
stability strategy because of government’s policy of cutting the
role of public sector and budgetary support for expansion of these
companies has been withdrawn.

76. GROWTH/EXPANSION STRATEGIES
 A growth strategy is one that an enterprise pursues when it
increases its level of objectives upward in significant
increment, much higher than an exploration of its past
achievement level. The most frequent increase indicating a
growth strategy is to raise the market share and or sales
objectives upward significantly.
 If we look at the corporate performance in the recent years,
we find how the various organizations have grown both in
terms of sales and profit as well as assets.
 For example: Reliance Industries Limited, Infosys
Technologies Ltd

77. EXPANSION STRATEGY
 Organizations may select a growth strategy to
increase their profits, sales and/ or market share.
They also pursue growth strategy to reduce cost of
production per unit. Growth Strategies involve a
significant increase in performance objectives.
 These strategies are adopted when firms
remarkably broadens the scope of their customer
groups, customer functions and alternative
technologies either singly or in combination with
each other.

78. REASONS FOR ADOPTING GROWTH
STRATEGIES:
 In the long run, growth is necessary for the very survival of the
organizations themselves, particularly when the environment
is quite volatile.
 Growth offers many economies because of large scale
operations.
 Growth Strategy is taken up because of managerial motivation
to do so. Managers with high degree of achievement and
recognition always prefer to grow.
 There are certain intangible advantages of growth. These may
be in the form of increased prestige of the organization,
satisfaction to employees and social benefits. Example:
Growing companies have high level of prestige in the
corporate world,
 e.g., Reliance, Infosys, TATA Motors, Hindustan Unilever, etc.

79. TYPES OF GROWTH / EXPANSION
STRATEGIES:
 (i)Concentric Expansion Strategy: The first route of growth is to
expand the present line of business. It can be aimed at market
penetration, market development and / or product development.
 Market Penetration: The organization tries to capture market share
in the existing product and aims at expanding its business at a rate
higher than the industry growth.
 Example: Reliance has captured substantial market share in textile
yarn and intermediaries, ITC has captured substantial market share
in cigarettes.
 Market/Product Development: Attempt is made to increase sales
by developing new markets either geography-wise or segment-wise.
 Example: Many companies which find that the urban market is
saturated and there is little scope for expansion, opt for developing
new market in rural areas. Some of the companies which have made
keen attempt to develop rural market are HUL,ITC (personal
products), Colgate (oral care products), LG (TV), Videocon
(Consumer durables), etc.

80. BENEFITS OF CONCENTRIC EXPANSION
STRATEGY:
 A firm that is familiar with an industry would naturally like
to invest more in known business rather than unknown
ones. Eg. Bajaj Auto
 It involves minimal organizational changes.
 It enables the firm to master one or a few businesses and
enable it to specialize by gaining an in depth knowledge
of these businesses.
 Managers face fewer problems when dealing with known
situations. Past experience is valuable as it is replicable.

81. LIMITATIONS OF CONCENTRIC
EXPANSION STRATEGY:
 “Putting all one’s eggs in one basket has its own
problems” these are as follows-
 Concentration strategies are heavily dependent on the
industry.
 Factors like product obsolescence, fickleness of markets,
and emergence of newer technologies are threats to
concentrated firms.
 Concentration strategies may result in doing too much of
a known thing. This may create an organizational inertia;
managers may not be able to sustain interest and find the
work less challenging and less stimulating.
 Cash flow problem.

82. (II) INTEGRATION STRATEGY:
 When firms use their existing base to expand in the
direction of their raw materials or the ultimate
consumers, or, alternatively they acquire
complimentary or adjacent businesses, integration
takes place. Integration basically means combining
activities related to the present activity of a firm.

83. TYPES OF INTEGRATION STRATEGY:
 Vertical Integration:
 When an organization starts making new products
that serve its own needs, vertical integration takes
place. Any new activity undertaken with the purpose
of either supplying inputs (such as raw materials) or
serving as a customer for outputs (such as,
marketing of firm’s product) is vertical integration.

84. BACKWARD INTEGRATION:
 :- retreating to the source of raw materials.
 Example: Reliance started its business with textiles and went
for backward integration to produce PFY and PSF, critical raw
materials for textiles, PTA and MEG-raw materials for PSF
and PFY, paraxylene -raw materials for PTA and MEG, and
finally naphtha for producing paraxylene.
 NaphthaàParaxyleneàPTA + MEGàPSf(fibres) and PFY
yarnsà Textiles
 Forward Integration: moves the organization nearer to the
ultimate customer
 Example: Expansion strategies at Modern Group, consisting
of five companies having a combined turnover of Rs.115 crore
in 1989, involved diversification in the form of backward and
forward integration.

85. FORWARD INTEGRATION
 It took place at Modern Suiting when it diversified
into worsted suiting. With an investment of Rs.7
crore, it acquired sulzer looms, sophisticated fabric
processing facilities and other sophisticated
equipments to manufacture a premium terry wool
suiting with the brand name ‘Amadeus’.

86. HORIZONTAL INTEGRATION:
 When an organization takes up the same type of products at the
same level of production or marketing process, it is said to follow a
strategy of horizontal integration
 For Example: When a luggage company takes over its rival luggage
company
 Horizontal Integration strategy may be frequently adopted with a view
to expand geographically by buying a competitor’s business, to
increase the market share or to benefit from economies of scale.
 Takeover of Neyveli Ceramics and Refractories Ltd. (Neycer) by
Spartek Ceramics India Ltd. in the early 1990s. Both the companies
were in sanitary ware and tile production. By acquiring Neycer,
Spartek became the largest ceramic tile manufacturer in the country.
 Ultratech Cement & Grasim Merger.

87. (III) EXPANSION THROUGH
DIVERSIFICATION:
 Diversification is the process of entry into a business
which is new to an organization either marketwise or
technology wise or both.
 Diversification may involve internal or external, related or
unrelated, horizontal or vertical, and active or passive
dimensions------ either singly or collectively.
 Example: “ “ITC Ltd.” (a cigarette major) into hotel,
FMCG,paper and packaging; edible oils,etc.

88. TYPES OF DIVERSIFICATION STRATEGY:
 • Concentric Diversification
• Conglomerate Diversification

89. CONCENTRIC DIVERSIFICATION:
 Concentric Diversification: When an organization takes up an
activity in such a manner that it is related to the existing business
definition of one or more of a firm’s business, either in terms of
customer groups, customer functions or alternative technologies, it
is called Concentric Diversification.
 For example: a company in the sewing machine business
diversifies into kitchenware and household appliances, which are
sold to housewives through a chain of retail stores.
 Conglomerate Diversification: When an organization adopts a
strategy which requires taking up those activities which are
unrelated to the existing business definition of one or more of its
business, either in terms of their respective customer groups,
customer functions or alternative technologies.
 For Example:
 –– Essar Group in shipping, marine construction, oil support
services, and iron and steel.

90. (IV) EXPANSION THROUGH
COOPERATION:
 This can be done through simultaneous competition and
cooperation among rival firms for mutual benefit.
 Types of Cooperative Strategies:
 Merger Strategy: A merger is a combination of two or more
organizations in which one acquires the assets and liabilities of
the other in exchange for shares or cash, or both the
organizations are dissolved, and the assets and liabilities are
 combined and new stock is issued.
 Example: Nirma Detergents Ltd., Nirma Soaps and Detergents
Ltd., and Shiva Soaps and Detergent Ltd. With Nirma Ltd.
 Acquisition or Takeover Strategy: Acquisition or Takeover is the
attempt of one firm to acquire ownership or control over another
firm against the wishes of the latter’s management. But in
practice it can be hostile or friendly.
 Example: Tata Tea’s takeover of Consolidated Coffee (a grower of
coffee beans) and Asian Coffee (a Processor)

91.  Joint Venture Strategy:
 Joint Ventures are partnerships in which two or more
firms carry out a specific project or corporate in a
selected area of business. It can be temporary;
disbanding after the project is finished, or long-term.
Ownership of the firms remains unchanged.
 “Even a successful joint venture may not last forever.
Nor does the collapse of a joint venture always imply
failure. Actually, corporate partnerships are formed
 for specific and time bound objectives which, once
achieved, leave little reason for the alliance to be
continued. Joint Ventures that last longer do so
becausetheir objectives have been redesigned”.

92. EXAMPLES:
 • IBM World Trade Corporation and Tata Industries Ltd. Created
joint venture to form Tata Information Systems Ltd. The stated
purpose was to make it India’s top information technology
company
 • Cummins Engine Company and TELCO formed a joint venture
to manufacture Telco Engines
 • Reliance Industries and Nynex Corporation
 • Tata Industries and Bell Canada
 • Ashok Leyland and Singapore Telecom
 Strategic Alliances: Strategic Alliance is a combination of the
efforts of two or more organizations to develop competitive
advantage In Strategic Alliance, two or more partners join hands
together for certain specified objectives, generally, for certain
specific period. When these objectives are achieved, partners
terminate their alliance.

93. STRATEGIC ALLIANCES
 Examples: Oberoi group of Hotels’ has entered into
Strategic Alliance with
 ‘Lufthansa Airlines’, ‘Hong Kong Bank’, and
‘Mercury Travels’. All these four
 organizations undertake promotional activities
jointly. Any person who stays in
 Oberoi hotels gets bonus point. His bonus point
increases if he travels by
 Lufthansa, uses Hong Kong Bank facilities, and
engages Mercury Travel’s services.
 On the basis of his accumulated bonus points, he
gets various prizes including
 free air ticket to New York

94. (V) INTERNATIONALIZATION STRATEGY:
 International Strategy is a type of expansion
 strategy that requires firms to market their products
or services beyond the domestic or national market.
Firm would have to assess the international
environment, evaluate its own capabilities, and
devise strategies to enter foreign markets.

95. TYPES OF INTERNATIONAL STRATEGIES:
INTERNATIONAL STRATEGY
 Firms adopt International Strategy when they create
value by transferring products and services to
foreign markets where these products and services
are not available. International firm, by maintaining
a tight control over its overseas operations, offers
standardized products and services in different
countries with little or no differentiation .Like IBM,
Kellogg, Proctor & Gamble, Microsoft, etc adopt this
strategy for the different countries they operate in.

96. MULTIDOMESTIC STRATEGY:
 Firm adopts a Multidomestic Strategy when they try to
achieve a high level of local responsiveness by
matching their products and services offerings to the
national conditions operating in the countries they
operate in. Multidomestic firm attempts to extensively
customize their products and services according to
the local conditions operating in the different
countries. Like Coca Cola, McDonald, Pizza Hut, etc.

97. GLOBAL STRATEGY:
 The global firms try to focus intensively on a low cost
structure by leveraging their expertise in providing
certain products and services, and concentrating the
production of these standardized products and
services at a few favourable locations around the
world. These products and services are offered in an
undifferentiated manner in all countries the global firm
operates in, usuallyat competitive prices.
 Transnational Strategy: Firms adopt a Transnational
strategy when they adopt a combined approach of
low-cost and high local responsiveness
simultaneously for their products and services.

98. RETRENCHMENT & COMBINATION
STRATEDGY

99. RETRENCHMENT STRATEGY
 Retrenchment strategy is followed when an organization
substantially reduces the scope of its activities.
 These are a response to decline in industries and markets.

100. CONSEQUENCES OF DECLINE
 Diminishing profitability
 Dwindling cash flows
 Shrinking market share
 Increasing debt
 Loss of credibility and goodwill
 Disengagement of suppliers, creditors and customers

101. RETRENCHMENT STRATEGIES
Retrenchment
Turnaround Divestment Liquidation

102. TURNAROUND STRATEGIES
 It involves reversing a negative trend and turning around
the organization the organization to profitability.
 Action plans
• Analysis of product, market place and production logic.
• Clear thinking about the market place and production
logic.
• Implementation of plans by target-setting, feedback and
remedial action.

103. DIVESTMENT STRATEGIES
 Also called divestiture or cutback
 Strategy involves the sale or liquidation of a portion of
a business, or a major division, profit centre or SBU.
 E.g.:
Hindustan Uniliver ltd, divested its marine foods business to
Mumbai based Temptation Foods, which is a fruit and vegetables
company .
Temptation foods will get HUL’s customers across the world as its
marine foods division is the largest single export entity in the
country.
HUL had already sold its seafood processing plant in Andhra
Pradesh and shut down operations in Gujarat.

104. LIQUIDATION STRATEGIES
 Involves closing down an organization and selling its
assets.
 Considered most extreme and unattractive & as the last
resort
E.g.
Punjab Wireless systems (punwire) was put under
liquidation under the orders of the Punjab and Haryana
High Court on a private petition, owing to the company’s
inability to discharge its debts and liabilities.

105. COMBINATION STRATEGIES
Also referred as Mixed or Hybrid Strategies
Mixture of Stability, expansion or retrenchment strategies applied
either simultaneously (at the same time in different businesses) or
sequentially (at different times in same business)
E.g.:
A paints company augments its offering of decorative paints to
provide a wider variety to its customers (stability) and expands its
product range to include industrial and automotive paints
(expansion). Simultaneously; it decides to close down the division
which undertakes large-scale painting contract jobs (retrenchment)

106. Combination
Simultaneous Sequential Simultaneous
& Sequential
Simultaneous :- At the same time in different business.
Sequential:- At different times in same business.