BPSM

Chanderprabhu Jain College of Higher Studies & School of Law
Plot No. OCF, Sector A-8, Narela, New Delhi – 110040
(Affiliated to Guru Gobind Singh Indraprastha University and Approved by Govt of NCT of Delhi & Bar Council of India)
Semester: Sixth Semester
Name of the Subject:
BPSM

Strategic Management
A set of managerial decisions and actions that
determines the long-run performance of a
corporation.
Includes:
Internal and external environment scanning
Strategy formulation
Strategy implementation
Evaluation and control

6
Identify
current
mission
and
strategic
goals
Conduct
competitive
analysis:
•strengths
•weakness
•opportunity
•threats
Develop
specific
strategies:
•corporate
•business
•functional
carry out
strategic
plans
maintain
strategic
control
assess
organisational
factors
assess
environmental
factors
Strategy implementationStrategy formulation

Strategic Management means-
Sustainable competitive advantage occurs when a firm
implements a value-creating strategy of which other
companies are unable to duplicate the benefits or find it
too costly to imitate.
An important basis for sustainable competitive advantage
is the development of resources and capabilities.
Core competencies are resources and capabilities (often
related to functional-level skills) that serve as a source of
competitive advantage for a firm over its rivals.

Strategy Making : Design or Process?Strategy Making : Design or Process?
Strategy as Design
Planning and
rational choice
INTENDED
STRATEGY
Many decision makers
responding to multitude of
external and internal forces
REALIZED STRATEGY
EMERGENT
STRATEGY
Strategy as Process
Mintzberg’s Critique of Formal Strategic Planning:
•The fallacy of prediction – the future is unknown
•The fallacy of detachment -- impossible to divorce formulation from
implementation
•The fallacy of formalization --inhibits flexibility, spontaneity,
intuition and learning.
Mintzberg’s Critique of Formal Strategic Planning:
•The fallacy of prediction – the future is unknown
•The fallacy of detachment -- impossible to divorce formulation from
implementation
•The fallacy of formalization --inhibits flexibility, spontaneity,
intuition and learning.

The Evolution of Strategic ManagementThe Evolution of Strategic Management
DOMINANT
THEME
MAIN
ISSUES
CONCEPTS
&
TECHNIQUES
IMPLEMENT-
ATION
1950s 1960s Early-mid Late1970s Late 1980s Late 1990s
1970s early 1980s early 1990s early 2000s
Budgetary Corporate Corporate Analysis of Quest for Strategic
planning & planning strategy industry & competitive innovation
control competition advantage The “New
Economy”
Financial control Planning growth Diversifica- Positioning Competitive Innovation &
ion advantage knowledge
Budgeting Forecasting & Portfolio Analysis of Resource Dynamic
project appraisal investment planning. industry & analysis. sources of
planning Synergy competition Case advantage
market competences Knowledge
share management
cooperation
Emphasis on Rise of Diversifi- Industry/market Restructuring Virtual orga-
financial corporate planning cation. selectivity. BPR. nization.
management departments Quest for Active asset Refocusing Alliances
& formal global management Outsourcing Quest for
planning market share critical mass

The Basic Framework
Strategy: the Link between the
Firm and its Environment
The Basic Framework
Strategy: the Link between the
Firm and its Environment
THE FIRM
Goals &
Values
Resources &
Capabilities
Structure &
Systems
THE
INDUSTRY
ENVIRONMENT
Competitors
Customers
Suppliers
STRATEGY
STRATEGY

Positioning
Resources
& Capabilities
Organization
The Role of Strategy In Business is to Generate and Sustain Value via the
Linkages Between Position, Resources, and Organization

Resources
•Tangible Resources
•e.g., physical capital
•Organizational Capabilities
•e.g., routines and standard operating procedures
•Intangible Resources
•e.g., trademarks, “know-how”

Definition of strategy
The term “strategy” is intended to focus on the
interdependence of the adversaries’ decisions
and on their expectations about each other’s
behavior” (Thomas Schelling The Strategy of
Conflict)
“Strategy can be defined as the determination of
the basic long-term goals and objectives of an
enterprise, and the adoption of courses of
action and the allocation of resources
necessary for carrying out those goals.”
(Alfred D.)

BPSM
Environmental Analysis

External Environment
A firm’s EXTERNAL ENVIRONMENT is broken
down into three parts:
● General
● Industry
● Competitor
A firm’s strategic actions are influenced by the
conditions in all three parts.

General Environment
Dimensions in the broader society that
influence an industry and the firms within it
Industry Environment
Set of factors that directly influences a firm
and its competitive actions and response
Competitor Environment
Focuses on each company against which a
firm directly competes

THE DEMOGRAPHIC SEGMENT
Demographic segments are commonly analyzed on
a global basis because of their potential effects
across countries’ borders and because many firms
compete in global markets.
Demographic Segment
Population size
Age structure
Geographic distribution
Ethnic mix
Income distribution

THE ECONOMIC SEGMENT
This segment refers to the nature and direction of
the economy in which a firm competes or may
compete. Firms generally seek to compete in
relatively stable economies with strong growth
potential. With globalization and the
interconnectedness of nations, firms must scan,
monitor, forecast, and assess the health of their host
nation and the health of the economies outside their
host nation.

THE POLITICAL/LEGAL SEGMENT
This segment represents how organizations and
governments mutually try to influence each other,
and how firms try to understand these influences
(current and projected) on their strategic actions.
Political/Legal Segment
Antitrust laws
Taxation laws
Deregulation philosophies
Labor training laws
Educational philosophies and policies

THE SOCIOCULTURAL SEGMENT
The sociocultural segment is concerned with a society’s
attitudes and cultural values. Because attitudes and values
form the cornerstone of a society, they often drive
demographic, economic, political/legal, and technological
conditions and changes.
Sociocultural Segment
Women in the workforce
Workforce
Diversity attitudes about the quality of work life
Shifts in work and career preferences
Shifts in product and service preference characteristics

THE TECHNOLOGICAL SEGMENT
Technological changes occur through new
products, processes, and materials. The
technological segment includes the
activities involved in creating new knowledge
and translating that knowledge into new
outputs, products, processes, and materials.
Given the rapid pace of technological change
and risk of disruption, it is vital for firms to
study this segment.

THE GLOBAL SEGMENT
Markets and consumers are more global. This
segment includes relevant new global markets,
existing markets that are changing, important
international political events, and critical cultural
and institutional characteristics of global markets.
Global Segment
Important political events
Critical global markets
Newly industrialized countries
Different cultural and institutional attributes

THE PHYSICAL ENVIRONMENT SEGMENT
Concerned with trends oriented to sustaining the world’s physical
environment, firms recognize that ecological, social, and economic systems
interactively influence what happens in this particular segment. This
segment refers to potential and actual changes in the physical environment
and business practices that are intended to positively respond to and deal
with those changes.
Physical Environment Segment
Energy consumption
Practices used to develop energy sources
Renewable energy efforts
Minimizing a firm’s environmental footprint
Availability of water as a resource
Producing environmentally friendly products
Reacting to natural or man-made disasters

External environments are:
Turbulent
Complex
Global
Uncertain
Ambiguous
Incomplete
Firms engage in external environmental analysis to
better understand and cope with their environments.
This analysis has four parts: scanning, monitoring,
forecasting, and assessing.

Firms use several sources to analyze the general
environment:
 trade publications
 newspapers
 business publications
 academic research
 public polls
 trade shows
 suppliers
 customers
 employees

BPSM
Internal Analysis of Resouces

Introduction
•Strategic analysis of any Business
enterprise involves two stages: Internal and
External analysis.
•Internal analysis is the systematic evaluation
of the key internal features of an
organization.

Four broad areas need to be considered
for internal analysis
•The organization’s resources, capabilities
•The way in which the organization configures
and co-ordinates its key value-adding
activities
•The structure of the organization and the
characteristics of its culture
•The performance of the organization as
measured by the strength of its products

Tangible Resources
Technological Resources
•Stock of technology, such as patents, trade-
marks, copyrights, and trade secrets
Financial Resources
• The firm’s borrowing capacity
• The firm’s ability to generate internal funds
Organizational Resources
• The firm’s formal reporting structure and
its formal planning, controlling, and
coordinating systems
Physical Resources
• Sophistication and location of a firm’s
plant and equipment
• Access to raw materials

Intangible Resources
Human Resources
• Knowledge, Managerial capabilities, Trust
Organizational routines
Innovation Resources
• Ideas, Scientific capabilities ,Capacity to innovate
Reputational Resources
• Reputation with customers, Brand name
• Perceptions of product quality, durability, and reliability
• Reputation with suppliers
• For efficient, effective, supportive, and mutually beneficial
interactions and relationships

Capabilities
Are the firm’s capacity to deploy resources that have been
purposely integrated to achieve a desired end state
Emerge over time through complex interactions among
tangible and intangible resources
Often are based on developing, carrying and exchanging
information and knowledge through the firm’s human
capital
Capabilities are often developed in specific functional
areas or as part of a functional area
The foundation of many capabilities lies in:
•The unique skills and knowledge of a firm’s employees
•The functional expertise of those employees

Value Chain Analysis
Allows the firm to understand the parts of its
operations that create value and those that do not
A template that firms use to:
•Understand their cost position
•Identify multiple means that might be used to
facilitate implementation of a chosen business-
level strategy

Value chain Analysis (Contd.)
•Shows how a product moves from raw-material
stage to the final customer
To be a source of competitive advantage, a resource
or capability must allow the firm:
•To perform an activity in a manner that is superior
to the way competitors perform it, or
•To perform a value-creating activity that
competitors cannot complete

Portfolio analysis
•A key concept with regard to successful product or
subsidiary strategy is that of portfolio.
•Portfolio analysis is used in evaluating the balance of an
organization’s range of products.
•A broad portfolio can spread risk across more than one
market.
•A narrow portfolio mean that the organalization
become more specialized in its knowledge of fewer
products and markets

The BCG Matrix
•The Boston Consulting Group (BCG) growth-share
matrix is most often used by organizations in
multiproduct and multimarket situations.
•BCG matrix offers a way of examining and making
sense of a company’s portfolio of product and market
interests.
•It based on the idea that market share in mature
markets is highly correlated with profitability and that is
relatively less expensive and less risky to attempt to win
share in the growth stage of the market.

BPSM
Strategic Planning

Strategic Planning and Strategy
The process by which a firm’s managers evaluate
the future prospects of the firm and decide on
appropriate strategies to achieve long-term
objectives is called strategic planning.
The basic means by which the company competes –
its choice of business or businesses in which to
operate and the ways in which it differentiates itself
from its competitors – is its strategy.

Strategic Formulation Process

Environmental Assessment
Gathering information and forecasting relevant
trends, competitive actions and circumstances that
will affect operations in a geographic area; should
include:
•Political instability
•Currency instability
•Nationalism
•International competition
•Environmental scanning

Internal analysis
Internal analysis determines which areas of the
firm’s operations represent strengths or weaknesses
(currently or potentially) compared to competitors,
so that the firm may use that information to its
strategic advantage
It focuses on the company’s resources and
operations, and global synergies
Strengths and weaknesses of the firm’s financial
and managerial expertise and functional capabilities
are evaluated to determine the key success factors

Competitive analysis
Assess the firm’s capabilities and key success factors
compared to those of its competitors
Enables strategic planners to determine where the firm
has distinctive competencies that will give it an
advantage
Most companies develop strategies around key
strengths or core competencies
This stage is often called a SWOT (Strengths,
Weaknesses, Opportunities, and Threats) analysis

Entry Strategy Alternatives

The strategic choice of one or more of the
entry strategies will depend on a critical
evaluation of the advantages (and
disadvantages of each in relation to the firm’s
capabilities, the critical environmental factors
the contribution that each choice would make
to the overall mission and objectives of the
company.
Strategic Choice

BPSM

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