This document discusses three levels of strategy in organizations - corporate, business, and functional strategies. It also describes different types of strategies used by organizations, including growth, retrenchment, stability, and diversification strategies. Retrenchment strategies aim to correct weaknesses and reverse declining performance, and may include turnaround, divestment, bankruptcy, or liquidation. Growth strategies seek to increase size and market share through concentration, diversification, mergers and acquisitions, or strategic alliances.

1. Strategic Management
UNIT-III NMBA 041
DR. ZIAUL HASSAN BAKHSHI

2. Three Levels of Strategy
Corporate level: board of
directors, CEO & administration
[Highest]
Business level: business and
corporate managers [Middle]
Functional level: Product,
geographic, and functional area
managers [Lowest]

3. Corporate Strategies
• Corporate strategies deal with corporation’s
overall direction and its management of its
businesses

4. Goals & Objectives
Corporate goals and objectives include:
– Profitability (net profits)
– Growth (increase in total assets, etc.)
– Utilization of resources (ROE or ROI)
– Market leadership (market share)

5. Corporate Strategies
Corporate Strategy
–Growth
–Stability
–Retrenchment

6. Corporate Growth Strategies
Market
Penetration
Product
Expansion
Diversification
Market
Expansion
Products
Same New
Markets
NewSame

7. Corporate Objectives and Resource Allocation
• Corporate objectives specify the
achievement of desired levels of
performance during particular time
periods.

8. Corporate Objectives and Resource Allocation
Corporate objectives and
resource allocation affect
marketers in 2 basic ways:
1) In setting the
objectives for different
organizational levels.
for the development
and Implementation of
marketing strategies.
2) Providing guidance

9. Value chain is a series of departments
that carry out value-creating activities to
design, produce, market, deliver, and
support a firm’s products

10. Value chain analysis (internal)
• Value chain analysis enables
consideration of internal activities and
processes, thus understanding where
costs are incurred, and where value is
added
• Examines organisation in terms of
primary activities (core business
processes) and support activities

11. Application of the Internet in Value Chain
• Improving operational effectiveness versus
improving strategic positioning
• Effects on stages in the value chain
– Inbound Logistics
– Operations
– Outbound Logistics
– Marketing and Sales
– After-Sales Service

12. Managing the Marketing Effort
Marketing Control
Controlling is measuring and evaluating results and
taking corrective action as needed
• Operating control
• Strategic control

13. Managing the Marketing Effort
Marketing Control
Operating control involves checking ongoing
performance against annual plan and taking
corrective action as needed
Strategic control involves looking at whether the
company’s basic strategies are well matched to its
opportunities

14. Managing the Marketing Effort
Marketing Control
Marketing audit is a comprehensive, systematic,
independent, and periodic examination of a
company’s environment, objectives, strategies, and
activities to determine problem areas and
opportunities

15. Basic Concepts of Strategic Management
Functional Strategy
–Technological leadership
–Technological followership

16. SWOT Matrix
Four Types of Strategies
Strengths-Opportunities (SO):
Use a firm’s internal strengths to take advantage of external opportunities
Weaknesses-Opportunities (WO):
Improving internal weaknesses by taking advantage
of external opportunities
Strengths-Threats (ST):
Use a firm’s strengths to avoid or reduce the impact of external threats.
Weaknesses-Threats (WT):
Defensive tactics aimed at reducing internal weaknesses and avoiding
external threats

17. SWOT Analysis
• Internal Environment:
– Strengths
– Weaknesses
• External Environment:
– Opportunities
– Threats

18. SWOT Matrix
Leave Blank
Strengths – S
List Strengths
Weaknesses –
W
List Weaknesses
Opportunities –
O
List Opportunities
SO Strategies
Use strengths to take
advantage of
opportunities
WO Strategies
Overcoming
weaknesses by taking
advantage of
opportunities
Threats – T
List Threats
ST Strategies
Use strengths to avoid
threats
WT Strategies
Minimize weaknesses
and avoid threats

19. Develop a new employee
benefits package
=Strong union activity
(threat)
+
Poor employee morale
(weakness)
Develop new products for older
adults
=
Decreasing numbers of
young adults (threat)
+Strong R&D (strength)
Pursue horizontal integration
by buying competitor's facilities
=
Exit of two major foreign
competitors from the
industry (opportunity)
+
Insufficient capacity
(weakness)
Acquire Cellfone, Inc.=
20% annual growth in the
cell phone industry
(opportunity)
+
Excess working capacity
(strength)
Key Internal Factor Key External Factor Resultant Strategy
Matching Key Factors to Formulate Alternative Strategies

20. Strengths: Weaknesses:
1. R and D almost complete
2. Basis for strong management team
3. Key first major customer acquired
4. Initial product can evolve into range
of offerings
5. Located near a major centre of
excellence
6. Very focused management/staff
7. Well-rounded and managed
business
1. Over dependent on borrowings -
Insufficient cash resources
2. Board of Directors is too narrow
3. Lack of awareness amongst
prospective customers
4. Need to relocate to larger premises
5. Absence of strong sales/marketing
expertise
6. Overdependence on few key staff
7. Emerging new technologies may
move market in new directions
Threats: Opportunities:
1. Major player may enter targeted
market segment
2. New technology may make products
obsolescent
3. Economic slowdown could reduce
demand
4. Euro/Yen may move against $
5. Market may become price sensitive
6. Market segment's growth could
attract major competition
1. Market segment is poised for rapid
growth
2. Export markets offer great potential
3. Distribution channels seeking new
products
4. Scope to diversify into related
market segments

21. Key Strategies
1. Accelerate product launches by strengthening R and D team
2. Extend links with key technology centres
3. Raise additional venture capital
4. Expand senior management team in sales/marketing
5. Recruit non-executive directors
6. Strengthen human resources function and introduce share
options for staff
7. Appoint advisers for intellectual property and finance
8. Seek new market segments/applications for products

22. SWOT Matrix
Leave Blank
Strengths – S
List Strengths
Weaknesses – W
List Weaknesses
Opportunities – O
List Opportunities
SO Strategies
Match and determine
strategy
WO Strategies
Match and determine
strategy
Threats – T
List Threats
ST Strategies
Match and determine
strategy
WT Strategies
Match and determine
strategy
Inset key strategies into correct box element of the Matrix

23. SWOT Analysis
RetreatProtect
1. …
2. …
StrenghtenAttack
1. …
2. …
1. …
2. …
1. …
2. …
Self
Environment
WeaknessesStrengths
Oppor-
tunities
Threats

24. Limitations with SWOT Matrix
• Does not show how to achieve a competitive
advantage
• Provides a static assessment in time
• May lead the firm to overemphasize a single
internal or external factor in formulating
strategies

25. TOWS Matrix
List strengths List weaknesses
STRENGTHS - S WEAKNESSES - W
OPPORTUNITIES - O SO STRATEGIES WO STRATEGIES
THREATS - T ST STRATEGIES WT STRATEGIES
List opportunities
Use strengths to take
advantage of
opportunities
Overcome
weaknesses by taking
advantage of
opportunities
List threats Use strengths to avoid
threats
Minimize weaknesses
and avoid threats

26. 26
Three levels of strategy in organizations—corporate,
business, and functional strategies.

27. Types of strategies are used by organizations
 Questions addressed by different strategic level:
– Corporate strategy
• In what industries and markets should we compete?
– Business strategy
• How are we going to compete for customers in this
industry and market?
– Functional strategy
• How can we best utilize resources to implement our
business strategy?

28. 28
Types of strategies are used by organizations
Growth and diversification strategies:
– Growth strategies
• Seek an increase in size and the expansion of current
operations.
– Types of growth strategies:
• Concentration strategies
• Diversification strategies
– Related diversification
– Unrelated diversification
– Vertical integration

29. 29
Types of strategies are used by organizations
 Restructuring and divestiture strategies:
– Readjusting operations when an organization is in trouble.
– Retrenchment
• Correcting weaknesses by making changes to current operations.
• Liquidation
• Restructuring
– Downsizing and rightsizing
• Restructuring through divestiture

30. Corporate Strategies
Corporate Strategy
–Retrenchment
–Stability
–Growth

31. 31
Strategies in Action
Defined
• Regrouping through
cost and asset
reduction to reverse
declining sales and
profit. Sometimes it is
called turnaround or
reorganizational
strategy.
Example
• A company sold off a
land and 4 apartments
to raise cash needed.
It introduce expense
effective control
system.
Retrenchment
(turnaround)

32. Strategies in Action
Guidelines for Retrenchment
 Firm has failed to meet its objectives and goals consistently over
time but has distinctive competencies
 Firm is one of the weaker competitors
 Inefficiency, low profitability, poor employee morale, and
pressure from stockholders to improve performance.
 When an organization’s strategic managers have failed
 Very quick growth to large organization where a major internal
reorganization is needed.
32

33. Retrenchment Strategies
• Turnaround
• Captive
• Divestment
• Bankruptcy
• Liquidation

34. Retrenchment strategies
• Types:
1- Turnaround:
Eliminating unprofitable outputs,
pruning/cutting assets, reducing size of work
force, rethinking firm’s products lines and
customer groups.
2- Divestment: sell one of business units
3- Liquidation: last resort strategy
34

35. Growth Strategies
• Concentration
– Horizontal integration
– Vertical integration
• Diversification
– Concentric diversification
– Conglomerate diversification
Any of these four growth strategies may be though
internal development or external acquisitions,
mergers, or joint ventures.

36. Growth strategies
Growth strategies:
They result increase in sales, market share and profit: the types:
• Internal growth: Increase internal capacity of organization
without acquiring other firms.
• Conglomerate Diversification: Acquiring unrelated business.
• Merger: Two roughly similar size firms combine into one. To
benefit of synergy.
• Strategic alliance: Temporary partnerships
36

37. Diversification
• Issue #1: When there is a reduction in managerial
(employment) risk, then there is upside and downside effects
for stockholders:
– On the upside, managers will be more willing to learn firm-
specific skills that will improve the productivity and long-run
success of the company (to the benefit of stockholders).
– On the downside, top-level managers may have the economic
incentive to diversify to a point that is detrimental to
stockholders.

38. Diversification
• Issue #2: There may be no economic value to stockholders in
diversification moves since stockholders are free to diversify by
holding a portfolio of stocks. No one has shown that investors pay a
premium for diversified firms -- in fact, discounts are common.
– A classic example is Kaiser Industries that was dissolved as a holding
company because its diversification apparently subtracted from its
economic value.
• Kaiser Industries main assets: (1) Kaiser Steel; (2) Kaiser Aluminum; and (3)
Kaiser Cement were independent companies and the stock of each
were publicly traded. Kaiser Industries was selling at a discount which
vanished when Kaiser Industries revealed its plan to sell its holdings.

39. Benefits of Diversification
A. More attractive terrain
• Faster growth
• Greater profitability
• More stability
B. Access to resources
• Physical assets and access to markets
• Technologies and skills
• Expertise
C. Sharing of activities (any activity)

40. 40
Diversification Strategies
• Concentric diversification
• Conglomerate diversification
• Horizontal diversification

41. 41
Strategies in Action
Defined
• Adding new, but
related, products
or services
Example
• National Westminister
Bank PLC in Britain
bought the leading
British insurance
company, Legal &
General Group PLC.
Concentric
Diversification

42. Strategies in Action
Guidelines for Concentric Diversification
 Competes in no- or slow-growth industry
 Adding new & related products increases sales of current
products
 New & related products offered at competitive prices
 Current products are in decline stage of the product life cycle
 Strong management team
42

43. 43
Strategies in Action
Defined
• Adding new,
unrelated products
or services
Example
• Consultant
Construction
Engineering acquired
Bisects factory.
Conglomerate
Diversification

44. Strategies in Action
Guidelines for Conglomerate Diversification
 Declining annual sales and profits
 Capital and managerial talent to compete successfully in a new
industry
 Financial synergy between the acquired and acquiring firms
 Exiting markets for present products are saturated
44

45. 45
Strategies in Action
Defined
• Adding new,
unrelated products
or services for
present customers
Example
• The El-Awda Co.
provide ice-cream
product to present
customer
Horizontal
Diversification

46. Strategies in Action
Guidelines for Horizontal Diversification
 Revenues from current products/services would increase
significantly by adding the new unrelated products
 Highly competitive and/or no-growth industry w/low margins
and returns
 Present distribution channels can be used to market new
products to current customers
 New products have counter cyclical sales patterns compared to
existing products
46

47. Stability Strategies
• Pause
• Proceed-with-caution
• No change
• Profit

48. Business Strategy
Emphasizes on improving the
competitive position of a firm’s
strategic business
– Also referred to as competitive
strategies

49. Porter’s Competitive Strategies
• Competitive Advantage:
– Lower cost strategy
• Design, produce, market more efficiently than
competitors
– Differentiation strategy
• Unique and superior value in terms of product quality,
features, service

50. Porter’s Competitive Strategies
–Competitive Scope:
• Refers to the Breadth of the company’s target
market
–Compete head to head in large
market?
–Focus on niche?

51. Porter’s Generic Competitive Strategies

52. Porter’s Competitive Strategies
• Cost Leadership:
– Low-cost competitive strategy
– Aimed at broad mass market
– Aggressive construction of efficient-scale
facilities
– Cost reductions/Cost minimization

53. Porter’s Competitive Strategies
• Differentiation:
– Broad mass market
– Unique product or service
– Charge premiums
– Lower customer sensitivity to price

54. Porter’s Competitive Strategies
• Cost focus:
– Low cost competitive strategy
– Focus on particular buyer group or market
– Niche focused
– Seek cost advantage in target market

55. Porter’s Competitive Strategies
• Differentiation focus:
– Focus on particular group or geographic market
– Seek differentiation in targeted market segment
– Serve special needs of narrow target market