Porter’s Generic Strategies (Business Level/ Competitive):

According to Michael Porter, organizations may pursue a differentiation, overall cost

leadership, or focus strategy at the business level.

i. In the Differentiation Strategy, the firm seeks to be unique in its industry. This is
the strategy in which an organization seeks to distinguish itself from competitors
through the quality of its products or services. Firms that successfully implement a
differentiation strategy are able to charge more than competitors because
customers are willing to pay more to obtain the extra value they perceive. Apple,
Rolex.
ii. Cost Leadership Strategy means becoming the low – cost leader in an industry.
This is the strategy in which an organization attempts to gain a competitive
advantage by reducing its costs below the costs of competing firms. Bangladesh is
the best example for cost leadership in RMG sector, Symphony is another example
in mobile phone sector.
iii. Niche means tergeting on specific customers or region where other competitors do
not go or do not target. This is the strategy in which an organization concentrates
on a specific regional market, product line, or group of buyers. Example: Nike
target on athletes, Easy brand target on young generation.
 Corporate-Level Strategy is the strategy that determines what businesses a
company is in or wants to be in, and what it wants to do with those businesses. It’s based
on the mission and goals of the organization and the roles that each business unit of the
organization will play. The decisions about which businesses, industries, and markets an
organization will enter and how to manage these different businesses are based on an
organization’s corporate strategy.

The Types of Corporate Strategy:

The three main types of corporate strategies are growth, stability and renewal.

1. A Growth Strategy is when an organization expands the number of markets served or

products offered, either through its current business (es) or through new business (es).
Because of its growth strategy, an organization may increase revenues, number of
employees, or market share. Organizations grow by using following ways:
i. Concentration: A strategic approach in which a business focuses on a single
market or product. This allows the company to invest more resources in
production and marketing in that one area, but carries the risk of significant losses
in the event of a drop in demand or increase in the level of competition.
ii. Vertical Integration: Vertical integration is a strategy used by a company to gain
control over its suppliers or distributors in order to increase the firm’s power in the
marketplace, reduce transaction costs and secure supplies or distribution channels.
A vertical integration strategy means the firm expands by, perhaps, producing its
own raw materials, or selling its products direct. Thus, Apple opened its own
Apple stores.
iii. Horizontal Integration: It is a type of integration strategies pursued by a company
in order to strengthen its position in the industry. A corporate that implements this
type of strategy usually mergers or acquires another company that is in the same
production stage.
 iv. Diversification: Generally, diversification means expansion of business either
through operating in multiple industries simultaneously (product diversification)
or entering into multiple geographic markets (geographic market diversification)
or starting a new business in the same industry. This strategy involves widening
the scope of the organization across different products and market sectors. The
strategy is to enter into a new market or industry which the organization is not
currently in, whilst also creating a new product for the new market.
2. Stability Strategy: Stability strategy is a corporate strategy in which an organization
continues to do what it is currently doing. Examples of this strategy include continuing to
serve the same clients by offering the same product or service, maintaining market share,
and sustaining the organization’s current business operations. The organization doesn’t
grow, but doesn’t fall behind, either.
3. Renewal Strategy: Renewal strategies are those startegies which address declining
performance. The two main types of renewal strategies are retrenchment and turnaround
strategies. A retrenchment strategy is a short-run renewal strategy used for minor
performance problems. This strategy helps an organization stabilize operations, revitalize
organizational resources and capabilities, and prepare to compete once again. When an
organization’s problems are more serious, more drastic action—the turnaround strategy
—is needed. Managers do two things for both renewal strategies: cut costs and restructure
organizational operations. However, in a turnaround strategy, these measures are more
extensive than in a retrenchment strategy.
Porter’s Five forces model
In any industry, five competitive forces dictate the rules of competition. Together, these
five forces determine industry attractiveness and profitability, which managers assess
using these five factors:
1. Threat of New Entrants: How likely is it that new competitors will come into the
industry?
2. Threat of Substitutes: How likely is it that other industries’ products can be
substituted for our industry’s products?
3. Bargaining Power of Buyers: How much bargaining power do buyers (customers)
have?
4. Bargaining Power of Suppliers: How much bargaining power do suppliers have?
5. Current Rivalry: How intense is the rivalry among current industry competitors?

Organizational Design is creating or changing an organization’s structure. This

section introduces and describes these elements--- job specialization, departmentalization,
reporting relationships, distribution of authority and coordination.
Job Specialization is the degree to which the overall task of the organization is
broken down and divided into smaller component parts.

Benefits and Limitations of Specialization:

Job specialization provides four benefits to organizations:

 First, workers performing small, simple tasks will become very proficient at each
task.
  Second, transfer time between tasks decreases. If employees perform several
different tasks, some time is lost as they stop doing the first task and start doing
the next.
 Third, the more narrowly defined a job is, the easier it is to develop specializedm
equipment to assist with that job.
 Fourth, when an employee who performs a highly specialized job is absent or
resigns, the manager is able to train someone new at relatively low cost.
Limitations of Specialization: On the other hand, job specialization can have negative
consequences. The foremost criticism is that workers who perform highly specialized
jobs may become bored and dissatisfied. The job may be so specialized that it offers no
challenge or stimulation. Boredom and monotony set in, absenteeism rises, and the
quality of the work may suffer. Furthermore, the anticipated benefits of specialization do
not always occur.
Alternatives to Specialization: To counter the problems associated with
specialization, managers have sought other approaches to job design that achieve a better
balance between organizational demands for efficiency and productivity and individual
needs for creativity and autonomy. Five alternative approaches are job rotation, job
enlargement, job enrichment, job characteristics approach, and work teams.
Job Rotation involves systematically moving employees from one job to another.
Job rotation means systematically moving workers from one job to another.

When incumbents become bored with routine jobs, job rotation is an answer to it.
Here jobs remain unchanged, but the incumbents shift from one job to another.

On the positive side, it increases the intrinsic reward potential of a job because of
the different skills and abilities needed to perform it. Workers become more competent in
several jobs, know a variety of jobs, and improve the self-image, personal growth.

Job Enlargement was developed to increase the total number of tasks workers
perform. As a result, all workers perform a wide variety of tasks, which presumably
reduces the level of job dissatisfaction.
 Job enlargement means assigning workers additional same-level activities. Job
enlargement changes the jobs to include more and/or different tasks. It refers expanding
the number of tasks or duties assigned to a given job. Job enlargement is naturally
opposite to work simplification.

Job Enrichment means redesigning jobs in a way that increases the opportunities for
the worker to experience feelings of responsibility, achievement, growth, and recognition.
It assumes that increasing the range and variety of tasks is not sufficient by itself to
improve employee motivation. Thus, job enrichment attempts to increase both the
number of tasks a worker does and the control the worker has over the job. To implement
job enrichment, managers remove some controls from the job, delegate more authority to
employees and structure the work in complete, natural units. These changes increase
subordinates’ sense of responsibility. Another part of job enrichment is to continually
assign new and challenging tasks, thereby increasing employees’ opportunity for growth
and advancement.
An enriched job will have more responsibility, more autonomy (vertical enrichment),
and more variety of tasks (horizontal enrichment) and more growth opportunities. The
employee does more planning and controlling with less supervision but more self-
evaluation.
The Job Characteristics Approach is an alternative to job specialization that does
take into account the work system and employee preferences. The job characteristics
approach suggests that jobs should be diagnosed and improved along five core
dimensions:
1. Skill variety: The number of things a person does in a job
2. Task identity: The extent to which the worker does a complete or identifiable portion
of the total job
3. Task significance: The perceived importance of the task
4. Autonomy: The degree of control the worker has over how the work is performed
5. Feedback: The extent to which the worker knows how well the job is being performed
 Strategic Plan is a general plan outlining decision about resource allocation,
priorities, and action steps necessary to reach strategic goals. These plans are set by the
board of directors and top management, generally have an extended time horizon, and
address questions of scope, resource deployment, competitive advantage, and synergy.

Vision: What an organization wants to do, wants to be.

Mission: How an organization is going to achieve its vision.

A Tactical Plan aimed at achieving tactical goals, is developed to implement

specific parts of a strategic plan. Tactical plans typically involve upper and middle
management and, compared with strategic plans, have a somewhat shorter time horizon
and a more specific and concrete focus.

An Operational Plan focuses on carrying out tactical plans to achieve operational

goals. Developed by middle- and lower-level managers, operational plans have a short-
term focus and are relatively narrow in scope. Each one deals with a fairly small set of
activities.

Strategy is a course of action that a company choose to achieve its objectives in a

competitive situation.
The Major Ingredients in TQM:
Strategic Commitment: The starting point for TQM is a strategic commitment by top
management. Such commitment is important for several reasons. First, the
organizational culture must change to recognize that quality is not just an ideal but
also an objective goal that must be pursued. Second, a decision to pursue the goal of
quality carries with it some real costs—for expenditures such as new equipment and
facilities. Thus, without a commitment from top management, quality improvement
will prove to be just a slogan or gimmick, with little or no real change.
Employee Involvement: Making employee responsible for each and every action
related with the products and services of the organization. At the same time,
empowering the employee in the quality related issues.
Technology: New forms of technology are also useful in TQM programs. Automation
and robots, for example, can often make products with higher precision and better
consistency than people. Investing in higher-grade machines capable of doing jobs
more precisely and reliably often improves quality.
Materials: Another important part of TQM is improving the quality of the materials
that organizations use. Suppose that a company that assembles stereos buys chips and
circuits from another company. If the chips have a high failure rate, consumers will
return defective stereos to the company whose nameplate appears on them, not to the
company that made the chips. The stereo firm then loses in two ways: refunds to
customers and a damaged reputation.
Methods: Improved methods can improve product and service quality. Methods are
operating systems used by the organization during the actual transformation process.
TQM Tools and Techniques: Beyond the strategic context of quality, managers can
also rely on several specific tools and techniques for improving quality. Among the
most popular today are value-added analysis, benchmarking, outsourcing, reducing
cycle times, ISO 9000:2000 and ISO 14000, statistical quality control (SQC), and Six
Sigma.
Value-Added Analysis is the comprehensive evaluation of all work activities,
materials flows, and paperwork to determine the value that they add for customers.
Such an analysis often reveals wasteful or unnecessary activities that can be
eliminated without jeopardizing customer service.
Benchmarking is the process of learning how other firms do things in an
exceptionally high-quality manner. Some approaches to benchmarking are simple and
straightforward.
Benchmarking is the process of comparing the cost, cycle time, productivity, or
quality of a specific process or method to another that is widely considered to be an
industry standard or best practice. Essentially, benchmarking provides a snapshot of
the performance of your business and helps you understand where you are in relation
to a particular standard.
Bechmarking is also referred to as "best practice benchmarking" or "process
benchmarking", it is a process used in management and particularly strategic
management, in which organizations evaluate various aspects of their processes in
relation to best practice, usually within a peer group defined for the purposes of
comparison. This then allows organizations to develop plans on how to make
improvements or adopt best practice, usually with the aim of increasing some aspect
of performance.
Outsourcing Another innovation for improving quality is outsourcing, which is the
process of subcontracting services and operations to other firms that can perform them
cheaper or better. If a business performs each and every one of its own administrative
and business services and operations, it is almost certain to be doing at least some of
them in an inefficient or low-quality manner. If those areas can be identified and
outsourced, the firm will save money and realize a higher-quality service or operation.
Reducing Cycle Time: Another popular TQM technique is reducing cycle time. Cycle
time is the time needed by the organization to develop, make, and distribute products
or services. If a business can reduce its cycle time, quality will often improve.
ISO 9000:2000 and ISO 14000 is still another useful technique for improving quality
is ISO 9000. ISO 9000:2000 refers to a set of quality standards created by the
International Organization for Standardization; the standards were revised and
updated in 2000. These standards cover areas such as product testing, employee
training, recordkeeping, supplier relations, and repair policies and procedures. Firms
that want to meet these standards apply for certification and are audited by a firm
chosen by the organization’s domestic affiliate (in the United States, this is the
American National Standards Institute, or ANSI). These auditors review every aspect
of the firm’s business operation in relation to the standards.
Statistical Quality Control is another quality control technique is SQC. As the term
suggests, SQC is concerned primarily with managing quality. Moreover, it is a set of
specific statistical techniques that can be used to monitor quality. Acceptance
sampling
involves sampling finished goods to ensure that quality standards have been met.
Acceptance sampling is effective only when the correct percentage of products that
should be tested (for example, 2, 5, or 25 percent) is determined. This decision is
especially important when the test renders the product useless. Batteries, wine, and
collapsible steering wheels, for example, are consumed or destroyed during testing.
Another SQC method is in-process sampling, which involves evaluating products
during production so that needed changes can be made.
Six Sigma: Six Sigma was developed in the 1980s for Motorola. The tool can be used
by manufacturing or service organizations. The Six Sigma method tries to eliminate
mistakes. Although firms rarely obtain Six Sigma quality, it does provide a
challenging
target. Sigma refers to a standard deviation, so a Six Sigma defect rate is six standard
deviations above the mean rate; one sigma quality would produce 690,000 errors per
million items. Obtaining three sigmas is a bit more challenging—66,000 errors per
million. Six Sigma is obtained when a firm produces a mere 3.4 mistakes per million.
Implementing Six Sigma requires making corrections until errors virtually disappear.
Six Sigma ensures superior quality of products by removing the defects in the
processes and systems. Six sigma is a process which helps in improving the overall
processes and systems by identifying and eventually removing the hurdles which
might stop the organization to reach the levels of perfection. According to sigma, any
sort of challenge which comes across in an organization’s processes is considered to
be a defect and needs to be eliminated.
Organizations practicing Six Sigma create special levels for employees within the
organization. Such levels are called as: “Green belts”, “Black belts” and so on.
Individuals certified with any of these belts are often experts in six sigma process.
According to Six Sigma any process which does not lead to customer satisfaction
is referred to as a defect and has to be eliminated from the system to ensure
superior quality of products and services. Every organization strives hard to
maintain excellent quality of its brand and the process of six sigma ensures the same
by removing various defects and errors which come in the way of customer
satisfaction.
The process of Six Sigma originated in manufacturing processes but now it finds its
use in other businesses as well. Proper budgets and resources need to be allocated for
the implementation of Six Sigma in organizations.
 Following are the two Six Sigma methods:
 DMAIC
 DMADV
DMAIC focuses on improving existing business practices. DMADV, on the other hand
focuses on creating new strategies and policies.
DMAIC has Five Phases
D - Define the Problem.
M - Measure and find out the key points of the current process.
A - Analyze the data.
I - Improve the current processes.
C - Control the processes.
DMADV Method
D – Design
M – Measure
A – Analyze
D – Design
V - Verify

Comparison of Six Sigma and Total Quality Management:

Six-Sigma is a relatively newer concept than Total Quality Management but not
exactly its replacement. The basic difference between Total Quality Management and
Six Sigma is that TQM delivers superior quality manufactured goods whereas six sigma
on the other hand results in better results. Total Quality management refers to continuous
effort by employees to ensure high quality products. The process of Six Sigma
incorporates many small changes in the systems to ensure effective results and better
customer satisfaction.

Total Quality Management involves designing and developing new systems and
processes and ensures effective coordination among various departments. New Processes
are developed based on various customer feedbacks and researches.
The main focus of Total quality management is to maintain existing quality
standards whereas Six Sigma primarily focuses on making small necessary changes
in the processes and systems to ensure high quality.

The process of Total quality management involves improvement in existing policies and
procedures to ensure high quality. Six-Sigma focuses on improving quality by
minimizing and eventually eliminating defects from the system. The process of total
Quality management ensures that every single member associated with the organization
is working towards the improvement of existing processes, systems, services and work
culture for long term quality products/services. Six Sigma, on the other hand focuses on
first identifying and eventually removing various defects and obstacles which might
come in the way of organization’s success.

“Kaizen” refers to a Japanese word which means “improvement” or “change for the
better”. Kaizen is defined as a continuous effort by each and every employee (from the
CEO to field staff) to ensure improvement of all processes and systems of a particular
organization.

Kaizen works on the following basic principle:

“Change is for good”.

Kaizen means “continuous improvement of processes and functions of an organization

through change”.

Implementing Kaizen tools is not the responsibility of a single individual but involves
every member who is directly associated with the organization. Every individual,
irrespective of his/her designation or level in the hierarchy needs to contribute by
incorporating small improvements and changes in the system.

Plan-Do-Study-Act (PDsA): is a systematic series of steps for gaining valuable learning

and knowledge for the continual improvement of a product or process. It is also known as
the Deming Wheel, or Deming Cycle. t is a rapid test of improvement. When a change
idea is generated, the PDSA cycle allows for a structured approach to rapid testing of the
idea on a small scale.
Plan-Do-Check-Act (PDCA): The PDCA model was the pre-cursor to the PDSA
model, but still a preferred method for many. The key difference being one stage in
the cycle – the Check stage. This stage is where those working on the project assess
whether what they intended to achieve has actually happened. At this point,
practitioners would check expected results with the actual results. Therefore, PDCA
encourages you to check during every cycle of the process.
Lean Manufacturing: The core idea of lean manufacturing is actually quite simple,
where it says to work relentlessly on eliminating waste from the manufacturing
process.
Lean Six Sigma is a fact-based, data-driven philosophy of improvement that values
defect prevention over defect detection. It drives customer satisfaction and bottom-
line results by reducing variation, waste, and cycle time, while promoting the use of
work standardization and flow, thereby creating a competitive advantage. It applies
anywhere variation and waste exist, and every employee should be involved. Lean Six
Sigma combines the strategies of Lean and Six Sigma. Lean principles help to reduce
or eliminate process wastes. Six Sigma focuses on variation - reduction in process.
Thereby, the principles of Lean Six Sigma help to improve the efficiency and quality
of the process.
Lean Six Sigma is a process improvement methodology designed to eliminate
problems, remove waste and inefficiency, and improve working conditions to provide
a better response to customers’ needs. It combines the tools, methods and principles
of Lean and Six Sigma into one popular and powerful methodology for improving
organization’s operations.