Strategic management

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Strategic Management
• Strategic management is the study of why some firms outperform others.
• How to create a competitive advantage in the market place that is unique, valuable, and difficult to copy
• “Total organization” perspective, integrating across functional areas.
• Two perspectives of leadership: romantic view and external control perspective.
• Strategies put together an understanding of the external environment with an understanding of internal strengths and weaknesses.
• Analysis
• Strategic goals (vision, mission, strategic objectives)
• Internal and external environment of the firm
• Decisions
• What industries should we compete in?
• How should we compete in those industries?
• Actions
• Allocate necessary resources
• Design the organization to bring intended strategies to reality
Attributes of Strategic Management
• Directs the organization toward overall goals and objectives.
• Includes multiple stakeholders in decision making.
• Needs to incorporate short-term and long-term perspectives.
• Recognizes trade-offs between efficiency and effectiveness.
Strategy
Strategy is a unique, comprehensive and integrated plan of action having definite direction and competitive advantage.
 Strategy means putting things in place carefully, and with a great deal of thought. It is the opposite of just waiting for things to happen.
 Large-scale, future-oriented plan for interacting with the competitive environment to achieve objectives
 Company’s “game plan”
 Framework for managerial decisions

Mintzberg's 5 Ps for Strategy
• The word "strategy" has been used implicitly in different ways even if it has traditionally been defined in only one. Mintzberg provides
five definitions of strategy:
• Plan - consciously intended course of action
• Ploy - maneuver to outwit opponent
• Pattern - consistency in behavior
• Position - location in environment
• Perspective - way of perceiving the world
• Strategy is a plan - some sort of consciously intended course of action, a guideline (or set of guidelines) to deal with a situation. By this
definition strategies have two essential characteristics: they are made in advance of the actions to which they apply, and they are
developed consciously and purposefully.
• As plan, a strategy can be a ploy too, really just a specific manoeuvre intended to outwit an opponent or competitor. For example, a
grocery chain might threaten to expand a store, so that a competitor doesn't move into the same area; or a telecommunications
company might buy up patents that a competitor could potentially use to launch a rival product.
• If strategies can be intended (whether as general plans or specific ploys), they can also be realized. In other words, defining strategy as
plan is not sufficient; we also need a definition that encompasses the resulting behavior: Strategy is a pattern - specifically, a pattern in a
stream of actions. Strategy is consistency in behavior, whether or not intended. The definitions of strategy as plan and pattern can be
quite independent of one another: plans may go unrealized, while patterns may appear without preconception. For instance, imagine a

manager who makes decisions that further enhance an already highly responsive customer support process. Despite not deliberately
choosing to build a strategic advantage, his pattern of actions nevertheless creates one.
• Strategy is a position - specifically a mean of locating an organization in an "environment". By this definition strategy becomes the
mediating force, or "match", between organization and environment, that is, between the internal and the external context. For
example, your strategy might include developing a niche product to avoid competition, or choosing to position yourself amongst a
variety of competitors, while looking for ways to differentiate your services.
• Strategy is a perspective - its content consisting not just of a chosen position, but of an ingrained way of perceiving the world. Strategy in
this respect is to the organisation what personality is to the individual. What is of key importance is that strategy is a perspective shared
by members of an organisation, through their intentions and / or by their actions. For instance, an organization that encourages risk-
taking and innovation from employees might focus on coming up with innovative products as the main thrust behind its strategy. By
contrast, an organization that emphasizes the reliable processing of data may follow a strategy of offering these services to other
organizations under outsourcing arrangements.
Strategic Management Process
 Step 1: Identifying the organisation’s current mission, objectives, and strategies
 Mission: the firm’s reason for being
 Who we are,
 What we do, and
 Where we are now
 Goals: the foundation for further planning
 Measurable performance targets
 Step 2: Conducting an external analysis
 The environmental scanning of specific and general environments
 Focuses on identifying opportunities and threats
 Step 3: Conducting an internal analysis
 Assessing organisational resources, capabilities, activities and culture:
 Strengths (core competencies) create value for the customer and strengthen the competitive position of the firm.
 Weaknesses (things done poorly or not at all) can place the firm at a competitive disadvantage.
Steps 2 and 3 combined are called a SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats)

 Step 4: Formulating strategies
 Develop and evaluate strategic alternatives
 Select appropriate strategies for all levels in the organisation that provide relative advantage over competitors
 Match organisational strengths to environmental opportunities
 Correct weaknesses and guard against threats
 Performing environmental appraisal.
 Doing organizational appraisal.
 Considering corporate level strategies.
 Considering business level strategies.
 Strategic analysis.
 Formulating strategies.
 Preparing strategic plan.
 Step 5: Implementing strategies
 Implementation: effectively fitting organisational structure and activities to the environment
 Effective strategy implementation requires an organisational structure matched to its requirements.
 Activating strategies.
 Designing structures and systems.
 Managing behavioral implementation.
 Managing functional implementation.
 Operationalizing strategies.
Step 6: Evaluating results
 How effective have strategies been?
 What adjustments, if any, are necessary?
Corporate governance
Corporate governance refers to the system by which corporations are directed and controlled. The governance structure specifies the distribution
of rights and responsibilities among different participants in the corporation (such as the board of directors, managers, shareholders, creditors,
auditors, regulators, and other stakeholders) and specifies the rules and procedures for making decisions in corporate affairs. Governance provides
the structure through which corporations set and pursue their objectives, while reflecting the context of the social, regulatory and market
environment. Governance is a mechanism for monitoring the actions, policies and decisions of corporations. Governance involves the alignment of
interests among the stakeholders
Principles of corporate governance
 Rights and equitable treatment of shareholders:[15][16][17]
Organizations should respect the rights of shareholders and help shareholders
to exercise those rights. They can help shareholders exercise their rights by openly and effectively communicating information and by
encouraging shareholders to participate in general meetings.

 Interests of other stakeholders:
[18]
Organizations should recognize that they have legal, contractual, social, and market driven obligations
to non-shareholder stakeholders, including employees, investors, creditors, suppliers, local communities, customers, and policy makers.
 Role and responsibilities of the board:[19][20]
The board needs sufficient relevant skills and understanding to review and challenge
management performance. It also needs adequate size and appropriate levels of independence and commitment.
 Integrity and ethical behavior:
[21][22]
Integrity should be a fundamental requirement in choosing corporate officers and board members.
Organizations should develop a code of conduct for their directors and executives that promotes ethical and responsible decision
making.
 Disclosure and transparency:[23][24]
Organizations should clarify and make publicly known the roles and responsibilities of board and
management to provide stakeholders with a level of accountability. They should also implement procedures to independently verify and
safeguard the integrity of the company's financial reporting. Disclosure of material matters concerning the organization should be timely
and balanced to ensure that all investors have access to clear, factual information
IMPORTANCE OF CORPORATE GOVERNANCE
1. Changing Ownership Structure : In recent years, the ownership structure of companies has changed a lot. Public financial institutions,
mutual funds, etc. are the single largest shareholder in most of the large companies. So, they have effective control on
the management of the companies. They force the management to use corporate governance. That is, they put pressure on the
management to become more efficient, transparent, accountable, etc. The also ask the management to make consumer-friendly policies,
to protect all social groups and to protect the environment. So, the changing ownership structure has resulted in corporate governance.
2. Importance of Social Responsibility : Today, social responsibility is given a lot of importance. The Board of Directors have to protect the
rights of the customers, employees, shareholders, suppliers, local communities, etc. This is possible only if they use corporate
governance.
3. Growing Number of Scams : In recent years, many scams, frauds and corrupt practices have taken place. Misuse and misappropriation of
public money are happening everyday in India and worldwide. It is happening in the stock market, banks, financial institutions,
companies and government offices. In order to avoid these scams and financial irregularities, many companies have started corporate
governance.
4. Indifference on the part of Shareholders : In general, shareholders are inactive in the management of their companies. They only attend
the Annual general meeting. Postal ballot is still absent in India. Proxies are not allowed to speak in the meetings. Shareholders
associations are not strong. Therefore, directors misuse their power for their own benefits. So, there is a need for corporate governance
to protect all the stakeholders of the company.
5. Globalisation : Today most big companies are selling their goods in the global market. So, they have to attract foreign investor and
foreign customers. They also have to follow foreign rules and regulations. All this requires corporate governance. Without Corporate
governance, it is impossible to enter, survive and succeed the global market.
6. Takeovers and Mergers : Today, there are many takeovers and mergers in the business world. Corporate governance is required to
protect the interest of all the parties during takeovers and mergers.
7. SEBI : SEBI has made corporate governance compulsory for certain companies. This is done to protect the interest of the investors and
other stakeholders.
Vision, Mission, Goals and Objectives
• What is a vision?
A vision is a clear, comprehensive ‘photograph’ of an organization at some point in the future. It provides direction because it describes what the
organization needs to be like, to be successful within the future
7 Steps to produce a vision statement
1. Brainstorm key words or short statements covering vision, mission and values. Write each on a post it note.
2. Draw three columns on a flip chart. Label them Vision, Mission and Values. Review each post it note, discuss it and agree to place it in
one of the three columns.

3. Once all the post it notes are in columns, consider the vision column first. Group similar words or expressions and re-title if necessary.
Add further ideas. Now combine the short list of main ideas into one statement. The final wording may take several iterations. It is often
helpful to start with a phrase such as ‘we aim to become…’ or ‘our vision is to ...’
4. Repeat the procedure with Post it notes in the mission column. Arrive at an agreed statement or list of bullet points.
5. Consider the values. Remove duplication. Group post it notes into themes, and summarise these themes as single words, or short
phrases. These values can be included a wider school values consultation.
6. Review vision and mission together and decide on format of presentation. This might be one statement, or three paragraphs, bullet
points etc.
7. Present to other stakeholders for comment, improvement and eventual consensus.
A company’s mission can be defined as:
– An operation intended to carry out specific program objectives
– A higher calling or meaning, a reason for being. Often this is the reason the company was first created – to fill a need in the
marketplace or society.
– A concise statement of business strategy developed from the customer’s perspective and it should be aligned with the
company’s vision.
– The mission should answer three key questions:
1. What is it that we do?
2. How do we do it?
3. For whom are we doing it?
– Vision and Mission are
different
– A mission statement concerns what an enterprise is all about.
– A vision statement is what the enterprise wants to become.
– Strategic planning is a systematic process whose purpose is to map out how the enterprise should get from where it is today to
the future it envisions.
What About Goals and Objectives?
• Goals are an expected or desired outcome of a planning process. Goals are usually broad, general expressions of the guiding principles
and aspirations of a community.
• Objectives are precise targets that are necessary to achieve goals. Objectives are detailed statements of quantitatively or qualitatively
measurable results the plan hopes to accomplish.
– What are goals and objectives?
• Goals and Objectives:
– Goals can be rather broad, but they should be focused as directly as possible on student learning outcomes in order to be
perceived as valid by decision-makers. (For example: All students will be able to access, use, and evaluate information in any
medium, and use that information to solve problems, communicate clearly, make informed decisions, and construct new
knowledge.) Generally, goals should be few in number, since each of them can generate more than one objective; and each
objective might generate more than one activity to accomplish it.
Example

On its website, pharmaceutical company Merck includes product, customer, employee and investor interests in its mission statement. It effectively
conveys intentions to deliver desired results to each entity. Its vision statement goes into more details about the company's values and includes
the phrase "make a difference in the lives of people." This phrase ultimately means that the company makes helping the world with medicine a
higher priority than profits in its organizational strategy. The company's vision also notes a desire to be the best health care company in the world.
ENVIRONMENTAL SCANNING AND ANALYSIS
There are several factors to assess in the external situation analysis:
 Markets (customers)
 Competition
 Technology
 Supplier markets
 Labor markets
 The economy
 The regulatory environment

Evaluating a Company's Resources and Competitive Position
There are five key questions to consider in analyzing a company's own particular competitive circumstances and its
competitive position vis-à-vis key rivals:
1. How well is the present strategy working? This involves evaluating the strategy from a qualitative standpoint
(completeness, internal consistency, rationale, and suitability to the situation) and also from a quantitative
standpoint (the strategic and financial results the strategy is producing). The stronger a company's current
overall performance, the less likely the need for radical strategy changes. The weaker a company's
performance and/or the faster the changes in its external situation (which can be gleaned from industry and
competitive analysis), the more its current strategy must be questioned.
2. What are the company's resource strengths and weaknesses, and its external opportunities and threats? A
SWOT analysis provides an overview of a firm's situation and is an essential component of crafting a strategy
tightly matched to the company's situation. The two most important parts of SWOT analysis are (1) drawing
conclusions about what story the compilation of strengths, weaknesses, opportunities, and threats tells about
the company's overall situation, and (2) acting on those conclusions to better match the company's strategy,
to its resource strengths and market opportunities, to correct the important weaknesses, and to defend
against external threats. A company's resource strengths, competencies, and competitive capabilities are
strategically relevant because they are the most logical and appealing building blocks for strategy; resource
weaknesses are important because they may represent vulnerabilities that need correction. External
opportunities and threats come into play because a good strategy necessarily aims at capturing a company's
most attractive opportunities and at defending against threats to its well-being.

3. Are the company's prices and costs competitive? One telling sign of whether a company's situation is strong
or precarious is whether its prices and costs are competitive with those of industry rivals. Value chain analysis
and benchmarking are essential tools in determining whether the company is performing particular functions
and activities cost-effectively, learning whether its costs are in line with competitors, and deciding which
internal activities and business processes need to be scrutinized for improvement. Value chain analysis
teaches that how competently a company manages its value chain activities relative to rivals is a key to
building a competitive advantage based on either better competencies and competitive capabilities or lower
costs than rivals.
4. Is the company competitively stronger or weaker than key rivals? The key appraisals here involve how the
company matches up against key rivals on industry key success factors and other chief determinants of
competitive success and whether and why the company has a competitive advantage or disadvantage.
Quantitative competitive strength assessments, using the method presented in Table 4.4, indicate where a
company is competitively strong and weak, and provide insight into the company's ability to defend or
enhance its market position. As a rule a company's competitive strategy should be built around its competitive
strengths and should aim at shoring up areas where it is competitively vulnerable. When a company has
important competitive strengths in areas where one or more rivals are weak, it makes sense to consider
offensive moves to exploit rivals' competitive weaknesses. When a company has important competitive
weaknesses in areas where one or more rivals are strong, it makes sense to consider defensive moves to
curtail its vulnerability.
5. What strategic issues and problems merit front-burner managerial attention? This analytical step zeros in on
the strategic issues and problems that stand in the way of the company's success. It involves using the
results of both industry and competitive analysis and company situation analysis to identify a "worry list" of
issues to be resolved for the company to be financially and competitively successful in the years ahead. The
worry list always centers on such concerns as "how to . . . ," "what to do about . . . ," and "whether to . . ."—
the purpose of the worry list is to identify the specific issues/problems that management needs to address.
Actual deciding on a strategy and what specific actions to take is what comes after the list of strategic issues
and problems that merit front-burner management attention is developed.
Good company situation analysis, like good industry and competitive analysis, is a valuable precondition for good
strategy making. A competently done evaluation of a company's resource capabilities and competitive strengths
exposes strong and weak points in the present strategy and how attractive or unattractive the company's competitive
position is and why. Managers need such understanding to craft a strategy that is well suited to the company's
competitive circumstances.
UNIT-2
CONCEPT OF STRETCH, LEVERAGE & FIT
STRETCH : Misfit between Resources & Aspirations
LEVERAGE : Refers to concentrating, accumulating, conserving. contemplating and utilizing precious & scarce resources in such a manner that
these are stretched to meet the aspirations of a company.
FIT : Positioning the firm by matching its organizational resources to its environment.
To achieve Strategic Intent – you need to Stretch. As of today there is a misfit between resources and aspirations. So instead of looking at
resources, you will look at resourcefulness. To achieve you will stretch and make innovative use of your resources.
This leads to Leveraging your resources. Leverage refers to concentrating your resources to your strategic intent, accumulating learning,
experiences and competencies, in a manner that a scarce resource base can be stretched to meet the aspirations that an organizational resources
to its environment.
The strategic fit is the traditional way of looking at strategy. Using techniques such as SWOT analysis, which are used to assess organizational
capabilities and environmental opportunities, Strategy is taken as a compromise between what the environment has got to offer in terms of
opportunities and the counteroffer that the organization makes in the form of its capabilities.
Under fit, the strategic intent is conservative and seems to be more realistic, but you may not be aware of the potential; under stretch and
leverage it could be improbable, even idealistic, but then you look at something far beyond present possibilities and look at the potential
possibilities.

Porter's Generic Strategies
 A firm positions itself by leveraging its strengths
 Michael Porter has argued that a firm's strengths ultimately fall into one of two headings: cost advantage and differentiation.
 By applying these strengths in either a broad or narrow scope, three generic strategies result: cost leadership, differentiation, and focus
Cost Leadership Strategy
 This generic strategy calls for being the low cost producer in an industry for a given level of quality.
 The firm sells its products either at average industry prices to earn a profit higher than that of rivals, or below the average industry prices
to gain market share.
 In the event of a price war, the firm can maintain some profitability while the competition suffers losses
 Even without a price war, as the industry matures and prices decline, the firms that can produce more cheaply will remain profitable for
a longer period of time
 The cost leadership strategy always targets a broad market.
Firms that succeed in cost leadership often have the following internal strengths:
 Access to the capital required to make a significant investment in production assets; this investment represents a barrier to entry that
many firms may not overcome.
 Skill in designing products for efficient manufacturing.
 High level of expertise in manufacturing process engineering.
 Efficient distribution channels
Risks Involved
 Other firms may be able to lower their costs as well.
 As technology improves, the competition may be able to leapfrog the production capabilities, thus eliminating the competitive
advantage.
 Several firms following a focus strategy and targeting various narrow markets may be able to achieve an even lower cost within their
segments and as a group gain significant market share.
 A leading cost strategy for McDonalds is the ability to purchase the land and buildings of its restaurants
 McDonalds also developed a strong division of labor for its production processes, tight management control and product development
strategy. Creating a strong top-down style of management is another leading cost strategy for McDonalds
 Using fewer in-store managers allows the company to hire lower-wage workers to complete tasks.
 After nearing complete bankruptcy in the 1980s, Apple clawed its way back into the personal electronic industry through smart business
practices and highly desirable consumer goods.
 Apple uses low-cost direct materials to develop the cheapest consumer goods possible.
 Creating long-standing business agreements with companies like AT&T for web hosting and other applications helps Apple stay focused
on developing products rather than Internet hosting or access
Differentiation Strategy
 A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers and
that customers perceive to be better than or different from the products of the competition.

 The value added by the uniqueness of the product may allow the firm to charge a premium price for it. The firm hopes that the higher
price will more than cover the extra costs incurred in offering the unique product.
Firms that succeed in a differentiation strategy often have the following internal strengths:
 Access to leading scientific research.
 Highly skilled and creative product development team.
 Strong sales team with the ability to successfully communicate the perceived strengths of the product.
 Corporate reputation for quality and innovation.
Risks Involved
 Imitation by competitors and changes in customer tastes
 Various firms pursuing focus strategies may be able to achieve even greater differentiation in their market segments.
 Medimix herbal soap differentiated itself on the herbal plank two decades back when there were only synthetic soaps.
 A new brand of herbal soap launched in today’s context has to probably define the herbal qualities through an enhanced mix of
ingredients to convey the differentiation because `herbal’ is the proposition of several brands both new and old.
 The established Medimix brand is currently running a campaign, which conveys the brand benefits through appropriate imagery.
Focus Strategy
 The focus strategy concentrates on a narrow segment and within that segment attempts to achieve either a cost advantage or
differentiation.
 The premise is that the needs of the group can be better serviced by focusing entirely on it
 A firm using a focus strategy often enjoys a high degree of customer loyalty, and this entrenched loyalty discourages other firms from
competing directly.
 Because of their narrow market focus, firms pursuing a focus strategy have lower volumes and therefore less bargaining power with their
suppliers
 However, firms pursuing a differentiation-focused strategy may be able to pass higher costs on to customers since close substitute
products do not exist.
Firms that succeed in a Focus Strategy often have the following internal strengths:
 The firm is able to tailor a broad range of product development strengths to a relatively narrow market segment that they know very
well.
Risks Involved
 Imitation and changes in the target segments
 It may be fairly easy for a broad-market cost leader to adapt its product in order to compete directly
 Other focusers may be able to carve out sub-segments that they can serve even better.
 By successfully adopting the 'focus' strategy since 1997, PepsiCo has emerged as the second largest consumer packaged goods company
 The company has significantly strengthened its competitive position in the beverages segment.
 By acquiring leading beverages' company like Tropicana products (July 1998), South Beach Beverage Company (October 2000) and
Quaker Oats (December 2000)
Check other word file

Grand Strategies
Grand strategies are major, overarching strategies that shape the course of a business. Unlike tactics, they are focused on the long-term goals of
the business. Running your own business means pondering grand strategies involving everything from product development to liquidation.
Different strategies will, of course, fit different situations, so it is best to be familiar with a few different approaches.
Types of Grand strategies
 Stability strategy.
 Expansion strategy.
 Retrenchment strategy.
 Combination strategy.
Stability strategy
 Is adopted by an organization when it attempts at an incremental improvement of its functional performance by marginally changing one
or more of its business.
 E.g. A copier machine company provides better after sales service to improve its image and product image too.
STABILITY STRATEGIES
1. NO CHANGE STRATEGY: Conscious decision to do nothing new. Continue with present business
2 PROFIT STRATEGY: Reduce investments, cut costs , Increase productivity with external factors like: Economic recession, Govt’s attitude,
Industry downturn and competitive pressures for sustaining profitability by whatever means till situation improves.
3 PAUSE/ PROCEED WITH CAUTION : Consolidation before a firm goes for expansion.
Expansion strategy
 This strategy is followed when a company aims at high growth by increasing the scope of one or more of its businesses in terms of their
respective customer groups, functions and technology.

 Most popular corp. strategies as growth is the way of life. All progressive organizations plan for substantial growth due to increasing
economy, markets & customer needs. Followed when companies aim at high growth, broadening the scope of its business for improving
overall performance.
.
CONCENTRATION STRATEGIES
 Simple 1st
level expansion strategy, aims at convergence of resources
 Focus on Intensification / Specialization
 Rely on where you are best at i.e. focusing on limited areas
 Creating a separate niche/ identity in selective areas by investing
money, time, energy & effort in specific areas
TYPES OF CONCENTRATION STRATEGIES
 Market Penetration
 Market Development
 Product Development
Advantages of Concentration strategies
 Minimal organisational changes
 Master in one or few businesses
 Intense focusing create competitive advantage
 Managers face less problems dealing with known situations
 Developed systems and processes
 High level of predictability
Disadvantages of Concentration strategies
 Heavily dependent on one industry.
 Factors such as product obsolescence, emergence of newer technologies are threats to concentrated firms.
 Create an organisational inertia.
 Cash flow problems that pose a dilemma before a firm.
 Requires integration.
INTEGATION STRATEGIES’
 Combining activities relating to present activities of firm
 Widening scope of business
Types of Integration
Vertical Integration : Going up & down the value chain Going for forward or backward integration or both at a time.
Horizontal integration : Same type of products
Diversification Strategies

 Involves a substantial change in business definition- singly or jointly in terms of customer groups or alternative technologies of one or
more of firm’s businesses.
 Types of Diversification-
 Concentric or Related Diversification
 Conglomerate Diversification
Reasons for Concentric Diversification
 Realising Financial synergies
 Realising marketing synergies
 Realising operational synergies
 Realising personnel synergies
 Realising informational synergies
 Realising managerial synergies
Reasons for Conglomerate Diversification
 Spreading business risks
 Maximising returns
 Leveraging competencies
 Stabilising returns
 Taking advantage of emerging oppurtunities
 Migrating from businesses under threat.

DIFFERENT ENTRY MODES
 Exporting
 Licensing/ Franchising
 Contract manufacturing
 Management contracting
 Turnkey contracts
 Fully owned manufacturing facilities
 Assembly operations
 Third country location
 Mergers and acquisitions
 Counter trade
Retrenchment strategy
 This is followed when a company aims at contraction of its activities through substantial reduction or elimination of its business.
 E.g. A pharmaceutical company may withdraw from its retail operations so that it can focus on institutional sales.

Strategic Analysis & Choice
Strategic Choice
 Decision to select from among the grand strategies considered, the strategy which will best meet the enterprise’s objectives.
Process of Strategic choice
 Focusing on strategic alternatives
 Analysing the strategic alternatives
 Evaluating the strategic alternatives
 Choosing from among the strategic alternatives.
Strategic Analysis
 Strategic Analysis is the investigation of the objective and subjective factors being considered in the process of strategic choice.
Subjective factors
 Consideration for governmental policies
 Perception of Critical success factors & distinctive competencies
 Commitment to past strategic actions
 Strategist’s decision styles and attitude to risk

 Internal political considerations
 Timing and Competitor Considerations.
Tools and techiques
 SWOT Analysis
 Experience curve analysis
 Life Cycle Analysis
 Industry Analysis
 Competitor Analysis
 Corporate Portfolio Analysis
Strategies for Competing in Global Market

Competitive Advantage Cycle.
Step 1. Source of Competitive Advantage
Superior assets
Super Capabilities
Key Success Factor
Step 2. Barriers to Imitation
higher the barrier to entry to company
When the new business opportunity
coming from the Market which enters
first mover advantage
barriers to imitation
Step 3. Value proposal form of competitive advantage
Operational Excellence
Product Leadership
Customer Intimacy
Step 4.Eencroachment prevents of competitive advantage

New competitive advantage position construction effort encroachment prevents of competitive advantage
Reinvestment of profit
asset and capability accumulation
resource strengthen of competitive advantage
“Competitive strategy is about being different. It means deliberately choosing to perform activities differently or to perform different
activities than rivals to deliver a unique mix of value.”
-- Michael Porter
Competitive Strategies/advantages
Cost Leadership Strategy
The goal of Cost Leadership Strategy is to offer products or services at the lowest cost in the industry. The challenge of this strategy is to earn a
suitable profit for the company, rather than operating at a loss and draining profitability from all market players. Companies such as Walmart
succeed with this strategy by featuring low prices on key items on which customers are price-aware, while selling other merchandise at less
aggressive discounts. Products are to be created at the lowest cost in the industry. An example is to use space in stores for sales and not for storing
excess product.
Differentiation Strategy
The goal of Differentiation Strategy is to provide a variety of products, services, or features to consumers that competitors are not yet offering or
are unable to offer. This gives a direct advantage to the company which is able to provide a unique product or service that none of its competitors
is able to offer. An example is Dell which launched mass-customizations on computers to fit consumers' needs. This allows the company to make
its first product to be the star of its sales.
Innovation Strategy
The goal of Innovation Strategy is to leapfrog other market players by the introduction of completely new or notably better products or services.
This strategy is typical of technology start-up companies which often intend to "disrupt" the existing marketplace, obsoleting the current market
entries with a breakthrough product offering. It is harder for more established companies to pursue this strategy because their product offering
has achieved market acceptance. Apple has been a notable example of using this strategy with its introduction of iPod personal music players, and
iPad tablets. Many companies invest heavily in their research and development department to achieve such statuses with their innovations.
Operational Effectiveness Strategy
The goal of Operational Effectiveness as a strategy is to perform internal business activities better than competitors, making the company easier or
more pleasurable to do business with than other market choices. It improves the characteristics of the company while lowering the time it takes to
get the products on the market with a great start. State Farm Insurance pursues this strategy by promoting their agents as "good neighbors" who
actively help customers.
OLI Paradigm
Source of Global competitive advantage
Adapting to
local market
differences
Exploiting
economies of
global scale
Exploiting
economies of
global scope
Tapping the
optimal
locations for
activities and
resources
Maximizing
knowledge
transfer acros
location

Ownership advantages[1]
(trademark, production technique, entrepreneurial skills, returns to scale)[2]
Ownership specific advantages refer to the
competitive advantages of the enterprises seeking to engage in Foreign direct investment (FDI). The greater the competitive advantages of the
investing firms, the more they are likely to engage in their foreign production.
[4]
 Location advantages
[5]
(existence of raw materials, low wages, special taxes or tariffs)
[2]
Locational attractions refer to the alternative
countries or regions, for undertaking the value adding activities of MNEs.The more the immobile, natural or created resources, which
firms need to use jointly with their own competitive advantages, favor a presence in a foreign location, the more firms will choose to
augment or exploit their O specific advantages by engaging in FDI.[4]
 Internalization advantages (advantages by own production rather than producing through a partnership arrangement such as licensing
or a joint venture)[2]
Firms may organize the creation and exploitation of their core competencies. The greater the net benefits of
internalizing cross-border intermediate product markets, the more likely a firm will prefer to engage in foreign production itself rather
than license the right to do so
Unit-3
Internal growth
builds on the business’ own capabilities and resources. For most businesses, this is the only expansion method
used. Internal growth involves approaches such as:
- Designing and developing new product ranges
- Implementing marketing plans to launch existing products directly into new markets (e.g. exporting)
- Opening new business locations – either in the domestic market or overseas
- Investing in research and development to support new product development
- Investing in additional production capacity or new technology to allow increased output and sales volumes
- Training employees to help the best acquire new skills and address new technology
Whilst these approaches are not easy, they are generally considered to be lower risk than the alternative – acquisitions
or joint ventures. However, the major downside of focusing on internal development is that
the speed of change or growth in the business may be too slow.
What are the advantages and disadvantages of internal/organic growth? Here is a summary:
Advantages
Less risky than taking over other businesses
Can be financed through internal funds (e.g. retained profits)
Builds on a business’ strengths (e.g. brands, customers)
Allows the business to grow at a more sensible rate
Disadvantages
Growth achieved may be dependent on the growth of the overall market
Harder to build market share if business is already a leader
Slow growth – shareholders may prefer more rapid growth
Franchises (if used) can be hard to manage effectively
Vertical integration (VI)

is a strategy that many companies use to gain control over their industry’s value chain. This strategy is one of the major
considerations when developing corporate level strategy. The important question in corporate strategy is, whether the
company should participate in one activity (one industry) or many activities (many industries) along the industry value
chain. For example, the company has to decide if it only manufactures its products or would engage in retailing and
after-sales services as well. Two issues have to be considered before integration:
 Costs. An organization should vertically integrate when costs of making the product inside the company are
lower than the costs of buying that product in the market.
 Scope of the firm. A firm should consider whether moving into new industries would not dilute its current
competencies. New activities in a company are also harder to manage and control. The answers to previous
questions determine if a company will pursue none, partial or full VI.
The example below illustrates a general industry value chain and none, partial or full VI of a corporate operating in that
industry.
Vertical integration examples
Smartphones Industry

Unit-4
The balanced scorecard (BSC) is a strategy performance management tool - a semi-standard structured report,
supported by design methods and automation tools, that can be used by managers to keep track of the execution of
activities by the staff within their control and to monitor the consequences arising from these actions
Why are Companies Adopting a Balanced Scorecard?
• Change
Formulate and communicate a new strategy for a more competitive environment
• Growth
Increase revenues, not just cut costs and enhance productivity
• Implement
From the 10 to the 10,000. Every employee implements the new growth strategy in their day-to-day operations

Discuss the importance of evaluation and control in strategic management. Explain giving examples.
Ans: Strategic evaluation and control constitutes the final phase of strategic management. Strategic evaluation and
control could be defined as the process of determining the effectiveness of a given strategy in achieving the
organisational objectives and taking corrective action wherever required. The purpose of strategic evaluation is to
evaluate the effectiveness of strategy in achieving organisational objectives. Strategic Evaluation and Control Strategic
evaluation operates at two levels:
Strategic level - concerned more with the consistency of strategy with the environment.
Operational level – Concerned with assessing how well the organisation is pursuing a given strategy.
According to Arthur Sharplin, the purpose of strategic evaluation – “is to monitor and evaluate progress towards
organisation’s objectives and to guide or correct the process or change the strategic plan to better used with current
conditions and purposes.”
According to Hemel and Prahalad strategic control is “concerned with tracking the strategy as it is being implemented,
detecting problems or changes in underlying premises and making necessary adjustment. In contrast to post-action
control, strategic control is concerned with controlling and guiding efforts on behalf of the strategy as action is taking
place and while the end result is still several years into the future.”
Thus, it is clear that the purpose of strategic evaluation is to measure the success of the strategies employed to realise
the main objectives of the Company. Strategic evaluation and control may be defined as “the process of determining the

effectiveness of a given strategy in achieving the organisational objectives and taking corrective action whenever
required.” Management has to exercise effective control on all the departments and business units to keep them on the
right track and to guide them in the right direction. In a large business organisation, every manager of a department or a
unit has a different view point about a business problem or a strategy and inspite of well prepared plans, there will be
some deviation in some section, department or unit. Very often departmental managers and managers of business units
sometimes work at some degree of cross purposes. It is therefore the purpose of evaluation and control system to
evaluate, re-define and make more clear and explicit the strategic plans and purposes. Thus, it can be perceived that
strategic evaluation and control performs the most vital task of keeping the organisation in the proper direction.
Importance of Strategic Evaluation
Strategic evaluation and control is important for several reasons:
 It is necessary for the top management to get adequate, correct and timely feedback from different
departmental managers on the present performance of individuals and sections so that their performance can
be properly evaluated in order that good performance may be rewarded and corrective actions taken wherever
required. Feedback is absolutely necessary to keep proper control on performance.
 Strategic evaluation enables the management to check whether the strategic choice made earlier is valid now.
Evaluation provides feedback to the management to find out validity of the strategic choice and its
effectiveness.
 Strategic evaluation is important from the point of motivation of the employees. Such an evaluation throws up
good, bad and indifferent performance of individual employees at different levels including the managers and
the management can formulate a policy of promotion and rewards for continuous good performance of
employees.
 Managers at various levels of the organisation are required to take decisions while implementing the
organisation’s strategy. Strategic evaluation helps to find out whether such decisions taken by the managers at
various levels are in time with the strategic requirements of the Company.
 During the course of strategy implementation managers are required to take scores of decisions. Strategic
evaluation can help to assess whether the decisions match the intended strategy requirements. In the absence
of such evaluation, managers would not know explicitly how to exercise such discretion.
 Strategic evaluation, through its process of control, feedback, rewards, and review, helps in a successful
culmination of the strategic management process.
 The process of strategic evaluation provides a considerable amount of information and experience to strategists
that can be useful in new strategic planning.
STRATEGIC CONTROL Strategic controls take 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. In this manner, strategic controls are early warning systems and differ from post-action controls
which evaluate only after the implementation has been completed.
Types of Strategic Control
 Premise control
 Implementation control
 Strategic surveillance

 Special alert control
Premise Control: Premise control is necessary to identify the key assumptions, and keep track of any change in them so
as to assess their impact on strategy and its implementation. Premise control serves the purpose of continually testing
the assumptions to find out whether they are still valid or not. This enables the strategists to take corrective action at
the right time rather than continuing with a strategy which is based on erroneous assumptions. The responsibility for
premise control can be assigned to the corporate planning staff that can identify key assumptions and keep a regular
check on their validity.
Implementation Control: Implementation control may be put into practice through the identification and monitoring of
strategic thrusts such as an assessment of the marketing success of a new product after pre-testing, or checking the
feasibility of a diversification programme after making initial attempts at seeking technological collaboration.
Strategic Surveillance: Strategic surveillance can be done through a broad-based, general monitoring on the basis of
selected information sources to uncover events that are likely to affect the strategy of an organisation.
Special Alert Control: Special alert control is based on trigger mechanism for rapid response and immediate
reassessment of strategy in the light of sudden and unexpected events. Special Alert Control Crises are critical situations
that occur unexpectedly and threaten the course of a strategy. Organisations that hope for the best and prepare for the
worst are in an advantage position to handle any crisis. Crisis management follows certain steps: Signal detection
Preparation/prevention, Damage limitation, Recovery leading to organisational learning. The first step of signal
detection can be performed by the special alert control systems.
Q9 Write brief notes on the following:
(1) Leadership & Corporate Culture
Ans. Leadership is stated as the "process of social influence social influence in which one person can enlist the
aid and support of others in the accomplishment of a common task." It is basically a process by which a person
influences others to accomplish an objective and directs the organization in a way that makes it more cohesive and
coherent. Leaders carry out this process by applying their leadership knowledge and skills. This is called Process
Leadership
The Two Most Important Keys to Effective Leadership
 Trust and confidence
 Effective communication by leadership in three critical areas was the key to winning organizational trust and
confidence:
1. Helping employees understand the company's overall business strategy.
2. Helping employees understand how they contribute to achieving key business
objectives.
3. Sharing information with employees on both how the company is doing and how an
employee's own division is doing — relative to strategic business objectives.
Corporate Culture It is something that managers have to establish and run all the way through a business, with clear
values and beliefs, successful business principles and operations, and a suitable emphasis on human resources and
customer satisfaction. It is described as the personality of an organization, or simply as "how things are done around

here." It guides how employees think, act, and feel. Corporate culture is a broad term used to define the unique
personality or character of a particular company or organization, and includes such elements as core values and beliefs,
corporate ethics, and rules of behavior. Why is understanding the employer's corporate culture important? Because the
organization's culture will affect you in many, many ways, such as hours worked per day and per week, availability of
options such as flextime and telecommuting, how people interact with each other in the workplace, how people dress
for work, benefits offered to employees, office space, training and professional development opportunities, perks -- just
about everything related to your time at work.

Strategic management

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