introduction to Strategic Management

1. Analaysing the Environment
Module 2

2. Environment
Meaning
The birth, growth and continuous development of
organization are influenced by a wide range of
variables like employees, customers, suppliers,
producers, competition etc.
“Business environment is the aggregate of all
conditions, events and influence that surrounds
and affects it”
Keith Davis

4. External Environment
External environment is divided in two parts:
• 1)Micro Environment
• 2)Macro Environment
Micro Environment
• Suppliers
• Customers
• Competitors
• Marketing Intermediaries

5. Macro Environment
• Economic Environment
• Non Economic Environment
Non Economic Environment
• Socio cultural Environment
• Legal Environment:
• International Environment

6. Environment Scanning
The word scanning
means to look carefully
into or to examine. The
term Environmental
Scanning in business
means to “Carefully
analyze the various
factors influencing the
business”.

7. Components of Poter’s Five Forces
Model
• Threat of new entrants
• Threat of substitutes
• Bargaining power of buyers
• Bargaining power of suppliers
• Rivalry inside the industry

9. • The model is strong tool for competitive analysis
at industry level.
• It provides useful input for performing a SWOT
analysis.

10. Ex .Coca-cola
Traditional competition:
• Prices of Pepsi, local brands
• Market share
• Promotional actions of competition
New entrants:
New “look-a-like” manufacturers
Substitute products:
• Fashionable new drinks, milk drinks, coffee,

11. Suppliers:
• Price and availability of ingredients on world
market
• Quality speed safety, traceability, flexibility of
supply chain.
• Buyers/consumers:
• High as a result of intense competition both
among branded and unbranded products.
• Combined purchase power of shops, bars,
supermarkets

12. BOSTON CONSULTING GROUP MATRIX -
BCG
INTRODUCTION
BOSTON CONSULTING GROUP (BCG) MATRIX is
developed by BRUCE HENDERSON of the BOSTON
CONSULTING GROUP IN THE EARLY 1970’s.
According to this technique, businesses or
products are classified as low or high performers
depending upon their market growth rate and
relative market share.

13. FACTORS OF BCG MATRIX
 Relative Market Share
 Market Growth
MARKET SHARE-
Market share is the percentage of the total
market that is being serviced by a company,
measured either in revenue terms or unit
volume terms

14. • RMS =
Business unit sales this year
Leading rival sales this year
MARKET GROWTH RATE
Market growth is used as a measure of a
market’s attractiveness.
MGR = Individual sales - individual sales this year
last year
Individual sales last year

15. THE BCG GROWTH-SHARE MATRIX
It is a portfolio planning model which is based on
the observation that a company’s business units
and it can be classified in to four categories:
• Stars
• Question marks
• Cash cows
• Dog

17. STARS
• High growth, High market share
• Stars are leaders in business.
• They also require heavy investment, to
maintainits large market share.

18. CASH COWS
Low growth , High market share
• They are foundation of the company and often
the stars of yesterday.
• They generate more cash than required.
• They extract the profits by investing as little
cash as possible

19. QUESTION MARKS
High growth , Low market share
• Most businesses start of as question marks.
• They will absorb great amounts of cash if the
• market share remains unchanged, (low).
DOGS
• Business is situated at a declining stage.
• Number of dogs in the company should be
• minimized.

20. BCG-MATRIX FOR THE PRODUCT LINE
OF Coca-Cola
QUESTION MARKS
(HIGH GROWTH, LOW MARKET SHARE

21. STARS
(HIGH GROWTH, HIGH MARKET SHARE)

22. CASH COWS
(LOW GROWTH, HIGH MARKET SHARE

23. DOGS
(LOW GROWTH, LOW MARKET SHARE

24. GE Matrix
GENERAL ELECTRICAL
• Developed by McKinsey & Company in 1970’s.
• The GE/McKinsey Matrix is a nine-cell (3 by 3)
matrix used to perform business portfolio
analysis as a step in the strategic planning
process.
• GE is rated in terms of ‘Market Attractiveness &
Business Strength’
• It is an Enlarged & Sophisticated version of BCG

26. Classification
• Grow (Green) – Business units that fall under grow attract
high investment. Firms may go for product differentiation
or Cost leadership. Huge cash is generated in this phase.
Market leaders exist in this phase. Go ahead
• Hold (Yellow) – Business units that fall under hold phase
attract moderate investment. Market segmentation,
Market penetration, imitation strategies are adopted in
this phase. Followers exist in this phase. Wait and see
• Harvest (Red) - Business units that fall under this phase
are unattractive. Low priority is given in these business
units. Strategies like divestment, Diversification, mergers
are adopted in this phase. Sell

27. Market Attractiveness ;
Annual market growth rate
Historical profit margin
Global opportunities
Business Strength
Brand image
R & D performance
Promotional effectiveness

28. GE Matrix - Google
• Founded by: Larry Page &
Sergey Brin
• Founded in: Sept 4, 1998;
Menlo Park,California
• Industry: Internet
Services
• Operating: Worldwide

29. Green Zone – Search engine
• Primary Google Product
• Market Share: 70%
• Similar Items: Apps & YouTube.
• Ratings: 5/5

30. Yellow Zone – Chromecast
New Product in the Market
Innovative product sold at affordable price
Cost: $35 in USA

31. Red Zone – Google Books
Highly Competitive Market.
Competing against Amazon,
which was primary developed
for book store.
Similar items: Google TV &
Groups

32. Value Chain

33. Introduction
• Michel Porter proposed the value chain as a tool
for identifying ways to create more customer
value. The value chain identifies nine
strategically relevant activities that create value
and cost in a specific business. These nine value
creating activities consist of five primary
activities and four support activities.
• The primary activities represent the sequence of
brining materials into the business and
converting them into final products .

34. Primary Activities:
• Inbound Logistics
• Operations
• Outbound Logistics
• Marketing and Sales
• Service
Support Activities:
• Firm Infrastructure
• Human Resource Management
• Technology Development
• Procurement

36. • PRIMARY ACTIVITIES 1.INBOUND LOGISTICS - CONCERNED
WITH RECEIVING, STORING, DISTRIBUTING INPUTS (e.g.
HANDLING OF RAW MATERIALS, WAREHOUSING,
INVENTORY CONTROL)
• OPERATIONS - COMPRISE THE TRANSFORMATION OF THE
INPUTS INTO THE FINAL PRODUCT FORM (E.G.
PRODUCTION, ASSEMBLY, AND PACKAGING)
• OUTBOUND LOGISTICS -INVOLVE THE COLLECTING,
STORING, AND DISTRIBUTING THE PRODUCT TO THE BUYERS
(e.g. PROCESSING OF ORDERS, WAREHOUSING OF FINISHED
GOODS, AND DELIVERY)

37. SUPPORT ACTIVITIES
FIRM INFRASTRUCTURE: The activities such as
Organization structure, control system, company
culture are categorized under firm
infrastructure.
HUMAN RESOURCE MANAGEMENT: Involved in
recruiting, hiring, training, development and
compensation.
TECHNOLOGY DEVELOPMENT: These activities
are intended to improve the product and the
process, can occur in many parts of the firm.

38. • PROCUREMENT Concerned with the tasks of
purchasing inputs such as raw materials,
equipment, and even labor.

40. CORE COMPETENCY
• Core competency is a concept in management
theory introduced by, C. K. PRAHALAD and GARY
HAMEL.
• A core competency is fundamental knowledge,
ability, or expertise in a specific subject area or
skill set.

41. Core Competency Example 1: Apple

42. • A core competency is defined as something
unique that an organization has, or as something
unique it can do. A company that develops a
unique core competency can create a long
lasting competitive advantage.

43. Porter suggested four
"generic“ business
strategies that could be
adopted in order to gain
competitive advantage.
Porter’s Generic Strategy

44. Cost Leadership
This strategy involves the organization aiming to
be the lowest cost producer and/or distributor
within their industry.
Micromax
Karbon
Spice
Cost focus
A business seeks a lower-cost advantage in just
one or a small number of market segments.

45. With a differentiation
strategy the business
develops product or
service features which
are different from
competitors and appeal
to customers including
functionality, customer
support and product
quality.
Differentiation Strategy
Superior product quality (features, benefits,
durability, reliability
Branding (strong customer recognition &
desire; brand loyalty)

46. In the differentiation focus
strategy, a business aims to
differentiate within just one
or a small number of target
market segments.