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Unit - 1

Strategic Management – Evolution

In the initial days, typically in early 1920s till the 1930s, managers used to do
day-to-day planning methods. However, after that, managers have tried to
anticipate the future. They have tools like preparation of the budgets and by
using control systems like capital budgeting and management by objectives, and
various other tools. However, as these techniques and tools were unable to
emphasize the role of the future adequately.
The next step was to try and use long-range planning, which was soon replaced
by strategic planning, and later by strategic management, a term that is
currently being used to describe the process of strategic decision-making.

Strategic Management – Definition

Strategic management can be defined as the formal process for defining

company vision & mission, assess internal & external environment, formulate
strategies under resource constraints, implement strategies, and evaluate the
strategies. Strategic management is the art and science of formulating,
implementing and evaluating cross function decision that enable the business to
achieve its objectives.

Lamb Robert (1984) – Strategic management is an on-going process that

evaluates and controls the business and the industries in which the company is
involved; assesses its competitors and sets goals and strategies to meet all
existing and potential competitors; and then reassesses each strategy annually
or quarterly [i.e., regularly] to determine how it has been implemented and
whether it has succeeded or needs replacement by a new strategy to meet
changed circumstances, new technology, new competitors, a new economic
environment, or a new social, financial, or political environment.

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Learned (1965) – It is the study of the functions and responsibilities of general
management and the problems which affect the character and success of the
total enterprise.

Schendel and Hofer (1979) – Strategic management is a process that deals with
the entrepreneurial work of the organisation, with organisational renewal and
growth, and, more particularly, with developing and utilizing the strategy which
is to guide the organisation’s operations.

Bracker (1980) – Strategic management entails the analysis of internal and

external environments of firms to maximize the utilization of resources in
relation to objectives.

Jemison (1981) – Strategic management is the process by which general

managers of complex organisations develop and use a strategy to co-align their
organisation’s competence and the opportunities and constraints in the
environment.

Van Cauwenbergh and Cool (1982) – Strategic management deals with the
formulation aspects (policy) and the implementation aspects (organisation) of
calculated behaviour in new situations and is the basis for future administration
when repetition of circumstances occurs.

Schendel and Cool (1988) – Strategic management is essentially work associated

with the term entrepreneur and his function of starting (and given the infinite
life of corporations) renewing organisations.

Fredrickson (1990) – Strategic management is concerned with those issues

faced by managers who run entire organisations, or their multifunctional units.

Teece (1990) – Strategic management can be defined as the formulation,

implementation, and evaluation of managerial actions that enhance the value of
a business enterprise.
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Five stages of strategic management process
There are many schools of thought on how to do strategic management, and
academics and managers have developed numerous frameworks to guide the
strategic management process. In general, the process typically includes five
phases:

• assessing the organization's current strategic direction;

• identifying and analyzing internal and external strengths and weaknesses;

• formulating action plans;

• executing action plans; and

• evaluating to what degree action plans have been successful and making
changes when desired results are not being produced.

Objectives Of Strategic Management

1. To exploit and create new and different opportunities for tomorrow

2. To provide the conceptual frameworks that will help a manager understand

the key relationships among actions, context, and performance.
3. To put an organisation into a competitive position.
4. To sustain and improve that position by the deployment and acquisition of
appropriate resources and by monitoring and responding to environmental
changes.
5. To monitor and respond to the demands of key stakeholders.
6. To find, attract, and keep customers.
7. To ensure that the company is meeting the needs and wants of its customers,
which is a cornerstone in providing the quality product or service that customers
really want.
8. To sustain a competitive position.
9. To utilize the company’s strengths and take full advantage of its competitor’s

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weaknesses.
10. To understand the various concepts involved like strategy, policies, plans and
programmes.
11. To have knowledge about environment—how it affects the functioning of an
organisation.
12. To determine the mission, objectives and strategies of a firm and to visualize
how the implementation of strategies can take place.
13. To find the solutions of problems in real-life business.
14. To develop analytical ability to identify threats and opportunities present in
the environment.
15. To develop the skills of strategic decision making.

Characteristics of Strategic Management

The following are the characteristics of strategic management:

• Involvement of top management

• Handles long-term issues
• Offers competitive advantage
• Future-oriented
• Long-term implications
• It affects operational challenges positively
• Organisation-wide impact
• It tends to be complex
• Facilitates strategic implementation

Features of Strategic Management

1. Conscious Process

Strategies are a product of the developed conscience and intellect that we

humans proudly possess and employ. Strategic management implies the usage of
the brain and the heart and is not a routine ever-continuing process. It requires

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great skill and experience to be carried out effectively and requires a full
application of one’s conscience.

2. Requires Foresight

The future is uncertain. We cannot predict what will happen. However, on the
basis of the information that is available to us, we will be able to presume certain
things about the future.

3. Dependent on Personal Qualities

The above two considerations make it amply clear that Strategic Management is
heavily dependent on the personal qualities of the managers occupying the top-
level positions.

4. Goal-Oriented Process

The process of Strategic Management is a goal-oriented process. The process is

done with the intention and goal of analyzing the various elements through SWOT
analysis and other tools and to develop a plan or strategy that effectively allows
the business to maneuver itself around every hurdle and make use of its strength.

5. Facilitates decision making

Strategic Management plays an integral role in making important decisions.

Whenever a manager has to make a decision he has to think about the bearing of
such a decision on the overall strategy and the business’ trajectory.

6. Primary Process

Strategic Management is the primary process in any business. The strategies that
the business has to apply in its activities is developed at the initial stage itself and
only after the creation of the strategy that other processes commence by making
the strategy as its basis.

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7. Pervasive Process

Strategic Management is a pervasive process seen in all levels of the business.

The core strategies are formulated for the entire business by the top-level
management and strategies to efficiently achieve the overall goal so laid down by
the top-level management is developed through the various lower business units.

8. Allows for Risk Management

Risk management can be considered as a subset or a specific form of strategic

management. Risk is the probability of a future loss and risk management
involves formulating various strategies to combat the risks making risk
management a form or variety of strategic management.

9. Drives Innovation

The development of strategy is not a simple process and requires making the best
out of often very restrictive situations. This drives innovations and allows
managers to approach problems from different angles and solve problems more
efficiently. After all, necessity is the mother of all inventions.

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 UNIT-2

Corporate strategies
A corporate strategy is a valuable tool for expanding and defining the values of a
company. Companies use corporate strategies to create and identify long-term
goals aimed toward improvement and success. Understanding what a corporate
strategy is can help you increase overall profits and financial stability for your
company. In this article, we discuss corporate strategies by defining what they
are, listing their different types and components and providing steps to evaluate a
corporate strategy with examples. A corporate strategy is a long-term plan that
outlines clear goals for a company. While the objective of each goal may differ,
the ultimate purpose of a corporate strategy is to improve the company.

❖ Corporate strategy is the design framework of the firm growth and

development.
❖ Its main objectives is the growth of the company in a particular direction,
extent, pace and timing.
❖ Corporate strategy involves the objectives design, implementation, control of
the objectives of firms which are helpful for growth of company’s.
❖ It determines the company’s mission, vision and long-term development and
growth of firms.
❖ Corporate policy depends on its corporate strategy management will be made
by strategist of the company.

Nature & Scope

Corporate strategy is basically concerned with the choice of businesses, products
and markets of the company’s. Nature, scope and concerns of corporate strategy
as outlined below:

❖ It can be involved and viewed with objectives designed framework strategy

of the firm.

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 ❖ A strategy designed framework is filling the firm’s strategic planning gap.
❖ Actually, it is concerned with the different choice of the firm’s products and
markets. It generally involves the changes/ additions / deletions in the firm’s
existing product market postures in businesses. It serves the customers needs
and requirements and meets and serves the business requirement.
❖ It's able to ensure that the right fit to businesses and how to achieve between
the firm’s and its business environment.
❖ vIt helps and focuses to build up the relevant competitive advantages for the
firm’s in the market.
❖ Both corporate objectives and corporate strategy bring together and describe
the firm’s business concepts.

CONCEPT OF CORPORATE STRATEGY

The word strategy is derived from the Greek word “strategtia” which was used
first around 400 B.C. This connotes the art and science of directing military forces.
In 18 19 Introduction to Corporate Strategy business parlance, there is no definite
meaning assigned to strategy.

A few definitions stated below may clarify the concept of corporate strategy:

KENNETH ANDREWS(1955), “The pattern of objectives, purpose, goals and the

major policies and plans for achieving these goals stated in such a way so as to
define what business the company is in or is to be and the kind of company it is or
is to be” This definition refers to the business definition.

IGOR ANSOFF(1965) explained the concept of strategy as “the common thread

among the organizations, activities and product markets, that defines the
essential nature of business that the organization was or planned to be in future”.
The definition stressed on the commonality of approach that exists in diverse
organizational activities.

HENRY MINTZBERG (1987) explains that “strategies are not always the outcome
of rational planning. ………….a pattern in a stream of decisions and actions. The
definition makes a distinction between intended strategies and emergent
strategies.

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FUNCTIONS OF CORPORATE STRATEGY
Corporate strategy performs the following functions:

1. It provides a dual approach to problem solving. Firstly, it exploits the most

effective means to overcome difficulties and face competition. Secondly, it
assists in the deployment of scarce resources among critical activities.
2. It focuses attention upon changes in the organizational set up,
administration of organizational process affecting behaviour and the
development of effective leadership.
3. It offers a technique to manage changes. The management is totally
prepared to anticipate, respond and influence to look at changes. It also
offers a different way of thinking.
4. It furnishes the management with a perspective whereby, the latter gives
equal importance to present and future opportunities.
5. It provides the management with a mechanism to cope with highly complex
environment characterized by diversity of cultural, social, political and
competitive forces.

Process of Corporate Strategic Planning

Corporate Strategic Planning is a companywide approach at the business unit
and corporate level for developing strategic plans to achieve a longer-term
vision. The process includes defining the corporate strategic goals and intentions
at the top and cascading them through each level of the organization. Many
organizations confuse the annual budgeting process with corporate planning.
Corporate strategic planning should come first and annual budgeting should be
driven by the strategy, not by prior year’s budget spend.

Strategic planning process steps

Before you begin the strategic planning process, it is important to review some
steps to set you and your organization up for success.

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 1. Determine your strategic position

This preparation phase sets the foundation for all work going forward. You need to
know where you are to determine where you need to go and how you will get
there.

Involve the right stakeholders from the start, considering both internal and external
sources. Identify key strategic issues by talking with executives at your company,
pulling in customer insights, and collecting industry and market data. This will give
you a clear picture of your position in the market and customer insight.

2. Prioritize your objectives

Once you have identified your current position in the market, it is time to determine
objectives that will help you achieve your goals. Your objectives should align with
your company mission and vision.

Prioritize your objectives by asking important questions such as:

• Which of these initiatives will have the greatest impact on achieving our company
mission/vision and improving our position in the market?
• What types of impact are most important (e.g. customer acquisition vs.
revenue)?
• How will the competition react?
• Which initiatives are most urgent?
• What will we need to do to accomplish our goals?
• How will we measure our progress and determine whether we achieved our
goals?

Objectives should be distinct and measurable to help you reach your long-term
strategic goals and initiatives outlined in step one. Potential objectives can be
updating website content, improving email open rates, and generating new leads
in the pipeline.

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3. Develop a plan

Now it's time to create a strategic plan to reach your goals successfully. This step
requires determining the tactics necessary to attain your objectives and
designating a timeline and clearly communicating responsibilities.

Strategy mapping is an effective tool to visualize your entire plan. Working from
the top-down, strategy maps make it simple to view business processes and
identify gaps for improvement.

Be prepared to use your values, mission statement, and established priorities to

say “no” to initiatives that won’t enhance your long-term strategic position.

4. Execute and manage the plan

Once you have the plan, you’re ready to implement it. First, communicate the plan
to the organization by sharing relevant documentation. Then, the actual work
begins.

Turn your broader strategy into a concrete plan by mapping your processes. Use
key performance indicator (KPI) dashboards to communicate team responsibilities
clearly. This granular approach illustrates the completion process and ownership
for each step of the way.

5. Review and revise the plan

The final stage of the plan—to review and revise—gives you an opportunity to
reevaluate your priorities and course-correct based on past successes or failures.

On a quarterly basis, determine which KPIs your team has met and how you can
continue to meet them, adapting your plan as necessary. On an annual basis, it’s
important to reevaluate your priorities and strategic position to ensure that you
stay on track for success in the long run.

Strategy formulation

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Strategy formulation is the process of establishing goals and determining the
proper plan of action to achieve those goals. An organization uses strategy
formulation to plan for success and make improvements to workplace strategies as
needed. Strategy formulation is essential for achieving and measuring the
attainability of goals. After creating strategies, an organization typically educates
its employees so they know the organization's purpose, workplace objectives and
goals.

Levels of strategy formulation

In business, there are three levels of strategy. Defining a strategy for each of
these levels may help your team align your efforts and optimize your operations.
It may also help you visualize the future of the organization and determine what
steps you should take to scale your operations along with changing market
conditions. Here are the three levels of strategy:

Corporate level: How you structure the organization and coordinate across
business units

Business level: How you target and retain customers and compete with other
organizations in your market

Functional level: How you plan to grow and improve the organization

6 steps to execute strategy formulation

When formulating a strategy, consider the following steps:

1. Develop a strategic mission

A strategic mission is a foundational statement that includes the organization's

values and long-term goals. To identify your company values, think of practices you
would like to see your employees implementing on a daily basis. A strategic mission
is a high-level understanding of a company's purpose and philosophies, and it can

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guide your strategies. The three major components of a strategic mission are as
follows:

Time: Think of where you'd like the business to be in one, five and 10 years from
now. Having long-term perspective can help you identify aspects of your strategic
mission which may involve your target market, customers and challenges.

Core values: Understanding core values can help you decide how to achieve goals
and identify why you're working toward achieving these goals, how they could
affect the company and what outcome they may produce. A mission often includes
core values that have a deeper meaning to the organization.

Business description: A description of what the organization does and hopes to

achieve can also assist with developing a strategic mission. Ask yourself what
industry your organization is in, what you hope to create and how you plan to sell
your goods or services.

2. Establish organizational goals

Organization goals are actionable objectives that can bring your team closer to
achieving your strategic mission and improving your operations. Understanding
what you're working toward can help you develop appropriate processes and
procedures to reach your business goals efficiently. To identify organizational goals,
consider the following factors:

Target market: This factor identifies a specific demographic and market an

organization would like to sell its products or services to.

Customers: Identifying purchasing habits and behaviors of target customers is a

large part of developing a business goal, so consider how they might use your
product and what factors guide purchasing decisions.

Offerings or goods: Reflect on how you can distinguish and improve your products
or services, explore the benefits of your offerings and determine what price point
is best to sell the products or services.

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Adaptation to changes and challenges: Anticipating obstacles and planning
solutions to them can help an organization develop a plan of action to mitigate risk
and excel.

3. Create departmental plans

Then, you can dissect your goals and develop a plan for each department, team or
business unit. This help you create tasks for employees to reach company goals and
improve key performance indicators (KPIs). At this stage, you can establish
numerical targets that you aim or establish practical goals toward which you can
take action. Here are some examples of departmental goals:

• Develop and use a customer database.

• Improve workplace safety.
• Invest in customer management.
• Convert more than 10 leads per month.
• Increase company revenue by 15%.

4. Conduct a performance analysis

After gaining perspective on what to achieve, an organization might conduct a

performance analysis on internal and external departments to assess its current
performance. This may help you learn if the organization is competitive and
valuable, if its goals are attainable and if it aligns with trends in the industry. An
analysis can reveal gaps between your stasis and your goals, and it may help you
determine what techniques are the best fit for your needs/

One common type of analysis you might perform is a SWOT analysis, which
investigates the following:

S: Strengths

W: Weaknesses

O: Opportunities for growth

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T: Threats to the business

A SWOT analysis helps you objectively assess your current operations while also
making future plans. You can use this tool to identify risks, implement management
procedures and policies, reduce error and develop realistic predictions for sales. An
effective SWOT analysis can help you implement proactive strategies to help you
remain resilient.

5. Implement a plan of action

Define what methods you plan to use to active your strategy. You can also make
adjustments to your strategies as market or industry changes occur. It may be
helpful to have regular meetings with management across all departments to
discuss how the strategy applies to their team's work. Allocate business resources
accordingly so each team can promote organizational goals

6. Revise your strategy as needed

As you implement a new strategy to reach organizational goals, be sure to monitor

your progress and consistently conduct analyses to evaluate the effectiveness of a
strategy. Using metrics to evaluate the results of your strategy may help you make
objective, data-backed decisions. Remember to monitor industry news and
relevant financial markets so you can adapt your strategy accordingly. It's vital to
set regular times to review progress and re-evaluate strategies like every month,
quarter or year.

Project Life Cycle

Project life cycle is a workflow of activities defined in the systematic ways to gain
maximum benefits from business project. A project stands out for its life cycle,
which is usually presented as consisting of phases. The number of phases and
their designation may vary from one application to another, from one application
area to another and from one author to another.

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The project engineer will sometimes define the phases of the project under its
responsibility by taking account of parameters specific to the project or the
company culture. Project plan may keep on changing depending on the
complexity, budget and size of the project. These differences limit in any way
valid and relevance of the model. But when we are discussing about business
project management, it is highly recommended that an engineer should follow
the below four phases of the business project life cycle structure in any type of
project model. With you follow the proper project model, it will benefit you in
many ways

Project Life Cycle Stages:

Let us understand about various stages involved in project life cycle when we are
discussing about business project management. Below listed are the stages and
phases of project life cycle.

1. Identification Phase:

This is the first stage of project life cycle. It is also known as initiation phase. In
this stage project objectives are identified and requirements are clarified. Apart
from this, business opportunities, business problems and business needs are
discussed. Further investigation is done to find the feasibility

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Once project is been approved, hiring of employees and managers are conducted.
Team are built to deliver the business project. Finally detailed planning is been
performed on the project by key members of the projects. Here comes the next
stage of project which is planning.

2. Planning Phase:

In project planning phase, scope of the project is defined more accurately. Once
the project team is been finalized and work is been identified, schedules of
deliverables and estimated cost are been figured out. Detailed planning is
established for its duration; timelines, resources and expenditures, as well as
policies and management procedures.

In planning stage, it is a good time to identify possible risk and prepare the risk
management strategies. Further you can create a communication plan for project
stakeholders describing risks, planning, scope and delivery timelines. Finally after
drafting and presenting project plan, acceptance plan is been prepared by project
managers. It is assumed that all the project planning activities are been
completed and now project is ready to move to next phase of implementation.

3. Implementation, Monitoring and Controlling Phase:

This is the third stage of project life cycle. In this phase product or service is
actually carried out according to plan and in accordance with the applicant’s
requirements. Project managers keep close watch on implementation activities,
since this is one of the important stages of life cycle. During this stage, team carry-
on with task assigned to them and daily status report is been presented to
management to track the activities and schedule of the activities. Apart from this
stakeholder are also been communicated on the activities on regular basis.

4. Closure Phase:

This is the final stage of project life cycle. In this stage product or service is been
delivered to customer or a client for evaluation. Project documentations like user
manuals and other documents are been handed over to the client. All key
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members and stakeholders are been communicated regarding closure of the
project. Lastly, documentation of lessons learn is been prepared by team
members for the purpose of examinations and self learning for the future
projects.

Portfolio Analysis
Portfolio analysis in strategic management involves analyzing every aspect
of product mix to identify and evaluate all products or service groups offered by
the company on the market, to prepare the detailed strategies for each part of the
product mix to improve the growth rate.

It can also be used to make a strategic decision about strategic business units.
Portfolio analysis in strategic management has, as its major objective, the optimal
gathering of the resources among the business activities comprising a diversified
business portfolio.

1. Analysis

The organization’s first reason to conduct a portfolio analysis in strategic

management is to determine every product mix’s current position and determine
which SBUs (strategic business unit) need more or less investment. Management

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needs to create the organization’s entire portfolio to analyze the present
opportunities and threats to the market and the product.

2. Formulate Growth Strategy

Another aspect that management wants to formulate from the portfolio analysis in
strategic management is the growth strategy. According to other products and
markets, they develop a different strategy according to their potential threats and
opportunities. Portfolio analysis in strategic management helps in laying down the
strategy of expansion as well

3. To Take Decisions Regarding Product Retention

Another reason for corporate portfolio analysis in strategic management is to

determine the life of the product i:e, to determine which product should be
retained longer and which product should be removed from the product line.

Process For Portfolio Analysis

Step 1: Identify Lines Of Business

The first step of business portfolio analysis in strategic management is to identify

all the current business lines and strategic business units.

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Step 2: Group Lines Of Business

An organization has three levels of business operation, which are:

• broad membership – directly support the objectives in the strategic plan

• support functions – deliver the core business benefits to members
• money-makers – the source of revenues which support core businesses

Step 3: Compare Core Businesses With Mission

After separating the activities, the next step in portfolio analysis in strategic
management is to compare the core starts with vision and mission and defined
goals and objectives. The business should directly support the statements. If the
comparison differs, then companies should discontinue allocating the resources in
that sector.

Step 4: Define Products In Each Line Of Business

The next step of portfolio analysis in strategic management is to categorize each

relevant product line I;e, subdivide, and define each product relevant product
line.

Step 5: Apply The Program Evaluation Matrix

The Program Evaluation Matrix helps in determining the fundamental question of

portfolio analysis in strategic management, which are:

• Good fit with our other programs?

• Easy to implement?
• Low alternative coverage in the marketplace?
• Is competitive position strong?
Step 6: Determine The Alternatives

At this stage, identification of alternatives is made i:e the competitors.

Identification of similar products and their coverage area in the market. And the
coverage is classified into:

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 • Low coverage – few comparable programs offered elsewhere.
• High coverage –many similar programs are offered elsewhere.

Step 7 Determine Program Fit

Ideally, the association will be segregated into two types of programs:

1.Well-fitting, accessible programs where the association has a strong position

and competes aggressively for a dominant position.

2. Well-fitting, difficult programs with low coverage that the association has the
unique, strong capability to provide to essential stakeholders.

SWOT
SWOT Analysis is the most renowned tool for audit and analysis of the overall
strategic position of the business and its environment. Its key purpose is to identify
the strategies that will create a firm specific business model that will best align an
organization’s resources and capabilities to the requirements of the environment
in which the firm operates.

In other words, it is the foundation for evaluating the internal potential and
limitations and the probable/likely opportunities and threats from the external
environment. It views all positive and negative factors inside and outside the firm
that affect the success. A consistent study of the environment in which the firm
operates helps in forecasting/predicting the changing trends and also helps in
including them in the decision-making process of the organization.

An overview of the four factors (Strengths, Weaknesses, Opportunities and

Threats) is given below-

1. Strengths - Strengths are the qualities that enable us to accomplish the

organization’s mission. These are the basis on which continued success can be
made and continued/sustained.

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 Strengths can be either tangible or intangible. These are what you are well-
versed in or what you have expertise in, the traits and qualities your employees
possess (individually and as a team) and the distinct features that give your
organization its consistency.
Strengths are the beneficial aspects of the organization or the capabilities of an
organization, which includes human competencies, process capabilities,
financial resources, products and services, customer goodwill and brand
loyalty. Examples of organizational strengths are huge financial resources,
broad product line, no debt, committed employees, etc.
2. Weaknesses - Weaknesses are the qualities that prevent us from
accomplishing our mission and achieving our full potential. These weaknesses
deteriorate influences on the organizational success and growth. Weaknesses
are the factors which do not meet the standards we feel they should meet.
Weaknesses in an organization may be depreciating machinery, insufficient
research and development facilities, narrow product range, poor decision-
making, etc. Weaknesses are controllable. They must be minimized and
eliminated. For instance - to overcome obsolete machinery, new machinery can
be purchased. Other examples of organizational weaknesses are huge debts,
high employee turnover, complex decision making process, narrow product
range, large wastage of raw materials, etc.
3. Opportunities - Opportunities are presented by the environment within which
our organization operates. These arise when an organization can take benefit
of conditions in its environment to plan and execute strategies that enable it to
become more profitable. Organizations can gain competitive advantage by
making use of opportunities.
Organization should be careful and recognize the opportunities and grasp them
whenever they arise. Selecting the targets that will best serve the clients while
getting desired results is a difficult task. Opportunities may arise from market,
competition, industry/government and technology. Increasing demand for
telecommunications accompanied by deregulation is a great opportunity for
new firms to enter telecom sector and compete with existing firms for revenue.
4. Threats - Threats arise when conditions in external environment jeopardize the
reliability and profitability of the organization’s business. They compound the
vulnerability when they relate to the weaknesses. Threats are uncontrollable.
When a threat comes, the stability and survival can be at stake. Examples of
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 threats are - unrest among employees; ever changing technology; increasing
competition leading to excess capacity, price wars and reducing industry
profits; etc.

Advantages of SWOT Analysis

a. It is a source of information for strategic planning.
b. Builds organization’s strengths.
c. Reverse its weaknesses.
d. Maximize its response to opportunities.
e. Overcome organization’s threats.
f. It helps in identifying core competencies of the firm.
g. It helps in setting of objectives for strategic planning.
h. It helps in knowing past, present and future so that by using past and current
data, future plans can be chalked out.

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 UNIT-3
What are Porter's Generic Strategies?

Porter's Generic Strategies is a group of four categories of competitive

strategy: Differentiation, Cost Leadership, Focus (Cost), Focus
(Differentiation).

Generic Strategies
These three approaches are examples of "generic strategies," because they can be
applied to products or services in all industries, and to organizations of all sizes.
They were first set out by Michael Porter in 1985 in his book, "Competitive
Advantage: Creating and Sustaining Superior Performance."
Porter called the generic strategies "Cost Leadership" (no frills), "Differentiation"
(creating uniquely desirable products and services) and "Focus" (offering a
specialized service in a niche market). He then subdivided the Focus strategy into
two parts: "Cost Focus" and "Differentiation Focus."

These are shown in figure 1 below.

1. The Cost Leadership Strategy

Porter's generic strategies are ways of gaining competitive advantage – in other

words, developing the "edge" that gets you the sale and takes it away from your

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competitors. There are two main ways of achieving this within a Cost Leadership
strategy:

• Increasing profits by reducing costs, while charging industry-average prices.

• Increasing market share by charging lower prices, while still making a reasonable
profit on each sale because you've reduced costs.
You, therefore, need to be confident that you can achieve and maintain the number
one position before choosing the Cost Leadership route. Companies that are
successful in achieving Cost Leadership usually have:

• Access to the capital needed to invest in technology that will bring costs down.
• Very efficient logistics.
• A low-cost base (labor, materials, facilities), and a way of sustainably cutting
costs below those of other competitors.
The greatest risk in pursuing a Cost Leadership strategy is that these sources of cost
reduction are not unique to you, and that other competitors copy your cost
reduction strategies. This is why it's important to continuously find ways of
reducing every cost. One successful way of doing this is by adopting the
Japanese Kaizen philosophy of "continuous improvement."

2. The Differentiation Strategy

Differentiation involves making your products or services different from and more
attractive than those of your competitors. How you do this depends on the exact
nature of your industry and of the products and services themselves, but will
typically involve features, functionality, durability, support, and also brand image
that your customers value.

To make a success of a Differentiation strategy, organizations need:

• Good research, development and innovation.

• The ability to deliver high-quality products or services.
• Effective sales and marketing, so that the market understands the benefits
offered by the differentiated offerings.
26
Large organizations pursuing a differentiation strategy need to stay agile with their
new product development processes. Otherwise, they risk attack on several fronts
by competitors pursuing Focus Differentiation strategies in different market
segments.

3. The Focus Strategy

Companies that use Focus strategies concentrate on particular niche markets and,
by understanding the dynamics of that market and the unique needs of customers
within it, develop uniquely low-cost or well-specified products for the market.
Because they serve customers in their market uniquely well, they tend to build
strong brand loyalty amongst their customers. This makes their particular market
segment less attractive to competitors.

As with broad market strategies, it is still essential to decide whether you will
pursue Cost Leadership or Differentiation once you have selected a Focus strategy
as your main approach: Focus is not normally enough on its own.

But whether you use Cost Focus or Differentiation Focus, the key to making a
success of a generic Focus strategy is to ensure that you are adding something extra
as a result of serving only that market niche. It's simply not enough to focus on only
one market segment because your organization is too small to serve a broader
market (if you do, you risk competing against better-resourced broad market
companies' offerings).

The "something extra" that you add can contribute to reducing costs (perhaps
through your knowledge of specialist suppliers) or to increasing differentiation
(though your deep understanding of customers' needs).

Diversification strategy (Horizontal and vertical)

Diversification strategy is one of the four main strategies for growth identified by
Igor Ansoff in 1957, which enables companies to look at other markets they could
tap into, or new products they could launch to increase their reach and revenue.

The Ansoff Matrix given by “lgor Ansoff”

27
These four growth strategies were identified by Ansoff using a 2×2 matrix (now
known as the Ansoff Matrix) and was made up of new or existing products on one
axis and new and existing markets on the other. The Ansoff matrix is a widely used
strategic planning tool that provides a simple, yet effective framework to help
companies plan and implement an effective growth strategy.

Diversification strategy, as we already know, is a business growth strategy

identified by a company developing new products in new markets. That definition
tells us what diversification strategy is, but it doesn’t provide any valuable insight
into why it’s an ideal business growth strategy for some companies or how it’s
implemented.

Types of diversification strategy

1.Horizontal diversification
If your company decides to add products or services that are unrelated to what you
offer currently, but may meet some more needs of your existing customers, this is
known as horizontal diversification.

Horizontal diversification is typically the diversification strategy with the least

amount of risk involved, as you’re working mostly within familiar customer and
market segments. Say you’re the CEO of the Dunder Mifflin Paper Company — it
might make complete sense to move into the production of printers. This is a
different product altogether, but it has the potential to attract many of your

28
existing customers. (And with excellent quality control, hopefully those printers
won’t catch on fire.)

Pros and Cons of Horizontal Diversification

Following are the advantages of this type of diversification:

• As the company starts to offer products that complement its existing product
line, it may result in economies of scale. Particularly the selling and
distribution expenses. And this eventually translates into lower cost
reduction.
• It enables the firm to expand its product line. Also, it makes the company’s
product line more robust.
• This strategy may allow a company to attract new customers even for its core
products. The new product may attract new customers, who may also buy
the company’s current product.
• It helps a company to better its quality, both of existing and new products.
Since a company analyses its complete existing product line before coming
up with a new product, it gives it an opportunity to improve the existing
products.
• This type of diversification supports several various optimizations by
encouraging a company to come up with products that fit the market.
• It helps in increasing the skill set of the employees as they now are
responsible for overseeing two or more products.
• Such a strategy gives companies greater price control.

Following are the drawbacks of this type of diversification:

• A company gets more susceptible to regulatory changes.

• If an existing customer is not satisfied or there is some dispute with the new
product, they may also stop buying the core product.
• This diversification strategy does not focus on adding new customers.

2.Vertical diversification
Vertical diversification is also known as vertical integration, and occurs when a
company moves up or down the supply chain by combining two or more stages of

29
production normally operated by separate companies. This typically means the
company decides to start taking over some or all of the functions related to the
production and distribution of their core product, such as the purchase of raw
material, manufacturing processes, assembly, distribution and sale.

For example, If you’re a retailer, vertical diversification might mean moving into
manufacturing the products you currently sell. While this can help lower costs by
covering all the needs of your business “in house”, the downside is that it can
reduce the flexibility of your business and reduce the opportunity for horizontal
diversification in the future.

There are two forms of vertical diversification, which are identified by the
direction you move in the supply chain.

i. Forward diversification
If you’re at the beginning of a supply chain in terms of your business positioning,
you might decide you want to control operations further along the chain as well.
An example of this could be a mining company that decides it wants to expand
into processing and development of its raw product.

ii. Backward diversification

If you’re closer to the end of a supply chain, you can think about how to diversify
into the markets that funnel into your product. For example, Netflix began as a
media distribution platform, but now manufactures its own content.

Advantages and Disadvantages of Vertical Diversification

Following are the advantages of this type of diversification:

• This strategy helps companies to reduce the cost of production.

• It also allows companies to better the quality of supplies and acquire crucial
resources.
• By using this strategy, a company can improve coordination in the supply
chain.
• This strategy enables a company to secure the distribution channels and
develop new competencies.

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 • Eventually, this strategy may lead to higher revenues and more market
share.
• A firm may also use such a strategy to invest in specialized assets.

Following are the disadvantages of this type of diversification:

• Such a strategy may result in higher costs if a company is unable to efficiently

manage and integrate the activities.
• Generally, this strategy helps companies to reduce competition. So, the lack
of competition may make a company complacent and result in inferior
quality products.
• The use of this strategy may result in less flexibility.
• A company using this strategy grows bigger in size and thus, faces a higher
risk of legal repercussions.
• Combining the synergies of the two companies may get difficult for the
management.

3.Concentric diversification
Concentric diversification occurs when a company enters a new market with a
new product that is technologically similar to their current products and therefore
are able to gain some advantage by leveraging things like industry experience,
technical know-how, and sometimes even manufacturing processes already in
place. Concentric diversification can be beneficial if sales are declining for one
product, as loss in revenue can be offset by a rise in sales from other products.
4.Conglomerate diversification
If you’re looking to diversify into completely new markets with unrelated
products to reach brand new customer bases, this is known as conglomerate
diversification. The term conglomerate refers to a single corporate group
operating multiple business entities within entirely different industries. The
parent company that owns all of the individual entities is known as a
conglomerate, and it became one by successfully implementing a conglomerate
diversification strategy.

Active and Passive alternatives

31
32
 Unit -4
Growth Strategies

‘Growth Strategy’ refers to a strategic plan formulated and implemented for

expanding firm’s business. Every firm has to develop its own growth strategy
according to its own characteristics and environment.

I. Internal Growth Strategies

Internal growth strategy refers to the growth within the organisation by using
internal resources. Internal growth strategy focus on developing new products,
increasing efficiency, hiring the right people, better marketing etc. Internal
growth strategy can take place either by expansion, diversification and
modernisation.

#1. Expansion: Business expansion refers to raising the market share, sales
revenue and profit of the present product or services. The business can be
expanded through product development, market development, expanding the
line of product etc.

33
Expansion leads to better utilisation of the resources and to face the competition
efficiently. Business expansion provides economics of large-scale operations.

Business can be expanded through:-

a. Market penetration strategy

b. Market Development strategy

c. Product Development strategy

#2. Diversification: Diversification is another form of internal growth strategy.

The purpose of diversification is to allow the company to enter new lines of
business that are different from current operations.
There are four types of diversification:

a) Vertical diversification

b) Horizontal diversification

c) Concentric diversification

d) Conglomerate diversification

#3. Modernisation: Modernisation involves replacing worn-out and obsolete

machines etc. by modern machines and equipment’s operated according to latest
technology; to achieve objectives like better quality, cost reduction etc.
Modernisation is a growth strategy in the sense that it helps to achieve more and
qualitative production at lower costs; thus helping to increase sales and profits for
the enterprise.

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2. External Growth Strategies:

1. Mergers

A merger takes place when two firms agree to form a new company. Shareholders
and managers of those two businesses bring both firms together under a common
Board of Directors (BOD) with shareholders from both businesses owning shares in
the newly merged business proportionally to their past holdings.

Disadvantages of Merger:-

1. Brand Projection.
2. Big size and scale.
3. Customer Services.
4. Lack of Human Approach. Valuation problems.
5. Dysynergy effect.
6. Failure to integrate well.
7. Long Incubation Period.

Mergers are of the following four types:

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(a) Horizontal Mergers:

In this type of merger, different business units which have been competing with
one another in the same business line join together and form a combination. The
Indian Jute Mills Association, the Indian Paper Mill Makers’ Association and
Associated Cement Companies (ACC) are some popular examples of horizontal
merger.

(b) Vertical Mergers:

Vertical merger arises as a result of integration of those units which are engaged in
different stages of production of product. It is also known as sequence or process
merger. Vertical merger may be backward or forward. When manufacturers at
successive stages of production integrate backwards up to the source of raw
materials; it is known as backward merger.

(c) Concentric Merger:

(Concentric means having the same centre) Concentric merger takes place when
companies which are similar either in terms of technology or marketing system,
combine with each other i.e. combining units do production with the same
technology or use the same distribution channels.

(d) Conglomerate Merger:

(Conglomerate means a larger company that is formed by joining together different

firms). When two or more unrelated or dissimilar firms combine together; it is
known as a conglomerate merger. It implies dissimilar products or services under
common control. When e.g. a footwear company combines with a cement
company or a ready-made garment manufacturer etc.; a conglomerate merger
comes into existence.

2. Acquisitions / Takeovers

An acquisition happens when a company buys enough shares (more than 50%) in
another target firm and becomes the controlling owner of it. An acquisition is quite
similar to a takeover, in that, one company will purchase a majority stake in the
other. However, it is usually on a pre-planned, friendly and orderly manner in which

36
both parties strongly agree as it is beneficial to both firms. In an acquisition, the
company that acquires the target company will be entitled to all the target
company’s assets such as cash, land, buildings, equipment, patents, trademarks,
etc., as well as liabilities such as bank loans, etc.

Takeovers are hostile. In contrast to an acquisition, a takeover occurs when a

company purchases enough shares (more than 50%) in another target firm and
becomes the controlling owner of it. However, the purchase is done without the
permission of the company or its Board of Directors (BOD). To encourage
shareholders of the target company to sell their shares, the offer price will most
likely to be well above the value of the shares as quoted on the stock market.

Types of. Acquisitions / Takeovers

i) Amalgamation or consolidation is the merger and acquisition of many

smaller companies into a few much larger ones. In the context of financial
accounting, consolidation refers to the aggregation of financial statements of a
group company as consolidated financial statements. The taxation term of
consolidation refers to the treatment of a group of companies and other entities as
one entity for tax purposes. Under the Halsbury's Laws of England, 'amalgamation'
is defined as "a blending together of two or more undertakings into one
undertaking, the shareholders of each blending company, becoming, substantially,
the shareholders of the blended undertakings. There may be amalgamations,
either by transfer of two or more undertakings to a new company or the transfer
of one or more companies to an existing company".

Types of business amalgamations

• Statutory Merger: a business combination that results in the liquidation of

the acquired company's assets and the survival of the purchasing company.

• Statutory Consolidation: a business combination that creates a new

company in which none of the previous companies survive.

• Stock Acquisition: a business combination in which the purchasing company

acquires the majority, more than 50%, of the Common stock of the acquired
company and both companies survive.

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 • Variable interest entity

Reasons to perform amalgamation:-

1. To acquire new technologies.

2. To enter a new market.

3. To finance the new company less expensively.

4. To increase the customer base.

5. To expand the business in new geographical areas.

6. To eliminate competition in the market.

7. To achieve synergy by bargaining with suppliers and customers.

8. To introduce a new product in the market.

Advantages of amalgamation.

1. The first and most important advantage of choosing for amalgamation is the
elimination of competition in the market. When two or more competing
companies come together, the competition automatically gets eliminated.

2. The operating cost of the business can be curtailed by opting amalgamation.

3. Research and development facilities can be improved.

4. The controlled price of goods in the market.

5. Diversification can be achieved.

6. Amalgamation is one of the best ways when a company wants to expand its
business.

38
 7. The goodwill of a company increases in the market when it associates with a
more prominent company.

8. Managerial effectiveness can be achieved by opting for amalgamation.

9. Amalgamation results in an increased market share of the newly formed

company.

10. Diversification can be achieved using amalgamation.

11. Amalgamation is the best solution for reviving the business of failing
companies.

12. Amalgamation is an excellent way of creating a monopoly in the market.

13. The last but not least advantage of amalgamation is the tax advantage.

Disadvantages

1. Amalgamation sometimes eliminates the healthy competition in the market.

2. Amalgamation can also result in increased debt.

3. Companies taking part in amalgamation lose their identity, which affects the
goodwill of the company and its products.

4. The monopoly achieved through amalgamation is not always healthy for the
market.

5. The amalgamation of two or more companies results in the reduction of the

number of employees. That means employees working in the companies
become unemployed, which is not healthy for the economy.

6. The management of newly formed companies becomes very complicated.

39
ii) sales of asset a company can sell its asset to another company and cease to
exist. If company A sells its asset to B company, it is acquired and A companies
goes out of existence.

iii) Holding Company Acquisition, It is a quasi form of merger. It involves the

acquisition of either the total or the majority of firm's share capital or stock by a
company. The purpose is to manage and control another company. If A company
buys 66.67% and more of the equity capital in B, B company is the subsidiary of A
company where B does not go into liquidation but its managemen and control is
resting with company A.

3. Joint Ventures (JV)

A Joint Venture (JV) happens when two businesses agree to work closely together
on a particular project. They create a new legal entity (a new company) to do so.
Sometimes, it benefits two businesses to work closely together on a new business
opportunity which they would not be able to pursue individually. Those two
companies in the Joint Venture (JV) will do a 50:50 split of the costs, risks, control,
responsibilities and profits or losses in a business project.

Advantages of Joint Ventures:

(i) In case joint venture involves a foreign partner, the problem of foreign exchange
is solved to a great extent; if the foreign partner brings latest machines etc. from
the other country.

(ii) Through joint venture approach, risk of business is shared among partners. In
fact, high risk involved in a new project can be reduced considerably by mutual
sharing of such risk.

(iii) The foreign partner in a joint venture can provide advanced technology, not
available within the country

(iv) Joint venture of companies, within the same country, helps to reduce
competition.

(v) Joint venture strategy provides opportunity to small firms to become big
through joining with others and add to their prospects of survival.

40
(vi) In joint-venture, the managerial competence of co-venturers is integrated
towards better managerial efficiency.

Limitations of Joint Ventures:

(i) Problems arise in matter of agreement on equity participation; as both partners

to a joint venture may desire to have majority of stake in joint venture.

(ii)Differences in the culture of countries which co-venturers belong to may create

problems of achieving mutual understanding; and may lead to conflicts.

(iii)Lack of co-ordination among thinking and actions of co-venturers may affect

successful functioning of the joint venture. For example, co-venturers may not
agree on common objectives of the joint venture or the composition of the board
of directors.

+ 10 Problem faced by joint venture:-

10. Lack of Joint Venture Experience
When it comes to your first joint venture, it seems like Murphy's Law take
precedence. Before jumping into your first Joint Venture, please do yourself a big
favor and talk to a trusted advisor or design firm owner that has Joint Venture
experience. It's a small investment of time that can save countless hours of
aggravation and substantial dollars.

9. Competing Against Your JV Partners on Other Projects

Let's say your JV has an exclusive long-term arrangement to pursue educational
projects in the State of Louisiana. Eventually you will wind up competing against
each other on non-educational projects or you could wind up competing against
each other on educational projects outside of Louisiana. Consider the implications
and how you might deal with them before the situation arises.

8. No Joint Control of the Cash

I have seen many joint venture partners get involved in disputes among the
partners. When it comes to financial disputes, the JV partner with the checkbook
usually wins. You can level the playing field by insisting upon a joint checking

41
account that requires dual signatures. By this I mean that a signature of each joint
venture firm is required on every check disbursed.

7. Thinking Your JV Partner is a Good Business Person

Let's face it, many firms that do a terrible job of managing their finances. Your
partner might be one of them. Proceed with caution.

6. Failure to recognize there is no such thing as equal partners

Chances are that one party will do a lot more than the other to earn the fee.
Chances are it will be you who contributes more than 50% of the effort. Try to
recognize that each party brings something different to the table - this is why we
needed a JV partner to begin with. Address the level of effort and fee split before
you start the project.

When it comes to financial disputes, the partner with the checkbook usually
wins.

-- Herb Cannon

5. Your JV partner has a conflict of interest

Let's assume that your partner has long-standing relationship with the client. You
were brought into this project because it was too large or they required your
expertise and reputation to win a major commission. Once the JV has won the
project, you may have served your purpose and your partner is now more
interested in their relationship with the client than maintaining JV relations,
including you in the project decisions or making a profit. Address your concerns
early on.

4. Thinking your JV partner will look out for your interests

Refer to #7. They might not even be looking out for their own interests. You must
be proactive in your JV relationship. If you are concerned about your own
interests, it is up to you to take care of it.

3. Forgetting that you now have a partner

In our efforts to please our clients and produce a great project, it is easy to forget
that we now have a partner. Make sure that you lay down ground rules as to each

42
party's decision-making authority and when consultation is needed with your
partner.

2. No Regular Financial Update

Usually one of the partner firms will be put in charge of the JV finances. Make
sure that monthly financial statements are provided along with invoice copies and
bank statements. No partner should be put in the position of asking for the
information, it should be distributed every month automatically.

1. There Is No Way to End the Joint Venture

Yes, a Joint Venture is like a marriage. Your pre-nuptial agreement should spell
out the specifics of how to end the joint venture. It's a lot easier to negotiate a
fair deal when both parties still like each other.

Organizational structure

An organizational structure details how certain activities are delegated toward

achieving an organization's goal. It outlines an employee's role and various
responsibilities within a company. The more authority employees have, the higher
up they'll be on the organizational structure. In addition, the more organized a
structure is, the more efficiently a company operates.

Types of Organizational Structure

There are seven basic types of organizational structure:

(1) functional, (2) divisional by geographic area, (3) divisional by product, (4)
divisional by customer, (5) divisional by process, (6) strategic business unit (SBU),
and (7) matrix. Companies, like people and armies, strive to be better
organized/structured than rivals, because better organization can yield
tremendous competitive advantages. There are countless examples throughout
history of incidents, battles, and companies where superior organization overcame
massive odds against the entity.

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ORGANIZATIONAL FAILURES – CAUSES

Most business failures are due to internal and external causes.

I. Internal causes of Organizational Failures:

1. Ineffective Management style: The CEO or the founder of

a company is often is reluctant to delegate authority or
refuses to do so. The CEO may lack trust or faith in the
subordinate managers. This may lead to poor relationship
between the CEO and the rest of the management team.
2. Over – diversification: The business may resort to
unwarranted diversification to reduce risk. However, over
diversification may lead to overburden on functional areas
such as production, marketing finance and HRM.
3. Weak Financial Position: A company may face financial
problems due to various reasons which may lead to downfall
of the organization. The financial problems may be due to
the following cases:
i) Poor Management of working capital
ii) Poor management of fixed capital
iii) Defective credit policy
iv) Lack of retained earnings
4. Marketing Problems:A Company may become sick due to
marketing problems. Some marketing problems include:
i) Poor product design
ii) Defective pricing strategy
iii) Ineffective promotion mix
iv) Faulty distribution strategies
5. Defective HRM:A firm may adopt defective HR policies and
practices. The HRM problems may be due to the following
causes:
i) Poor manpower planning
ii) Faulty recruitment and selection
ii) Faulty placement of employees
iii) Lack of training and development

44
6. Poor Production Policies:A firm may suffer losses on
account of poor production processes and practices such as
follows’
i) Lack of Production planning and control
ii) Faulty inventory management
iii) Lack of quality control
iv) Lack of emphasis on R & D

II. External causes:

1) Government Policies: At times, changes in Government

policies may have an adverse effect on the domestic firms. For
instance, government may liberally allow foreign firms to enter
the Indian markets, and as such the domestic firms may have to
face heavy competition.
2) Poor financial climate: The poor financial climate may prevail
in the economy due to recession in the market. Therefore,
business firms may find it difficult to obtain funds from banks
and financial institutions
3) Malpractices by Competitors: the competitors may adopt
malpractices to malign the name of the other organizations.
Some of the malpractices include:
a) Duplication of products
b) Unethical comparative advertising and publicity
c) Pressurizing the dealers not to stock the products of the
other organization
d) Pressurizing the suppliers to delay the supplies or to supply
poor quality of materials to other organizations etc.
4) Other external causes:There are several other external
causes that can have adverse effect on the business firms.
Some of such causes may include floods, earthquakes, wars
and other calamities. Recession in the international markets
may also have an adverse effect on the working of business
organizations.

45
Line and Staff Functions
The line functions are those which are direct responsibility for achieving the
organizational goals. Production and Sales (and sometimes finance) are classified
as line functions. Line positions are engaged with line personnel and line managers.
Line personnel carry out the primary activities of a firm and are considered
significant to the basic functioning of the organization. Line managers make the
majority of the decisions and direct line staff work to achieve company goals. An
example of a line manager is a finance executive.

The staff functions are those who provide service & help and advice the line to
work most effectively in accomplishing the objectives of the enterprise. Staff
positions serve the business by indirectly supporting line functions. Staff positions
include staff personnel and staff managers. Staff personnel contribute technical
competencies to support line personnel and aid top management in various
business activities. Staff managers provide support, advice, and knowledge to other
individuals in the chain of command.

Corporate Development
Corporate Development has a lasting impact on the business and other concerned
agencies due to its numerous considerations and immense advantages viz.,
improved corporate performance and better corporate governance.

46
Corporate development is an expression, by which a company can consolidate its
business operations and strengthen its position for achieving its short-term and
long-term corporate objectives - synergetic, dynamic and continuing as a
competitive and successful entity.

Corporate development structure

Corporate development is usually implemented in large companies led by a

corporate development executive with a mergers and acquisitions
(M&A) background. They are typically certified public accountants (CPA) or hold
a master’s degree in business administration. Team members likely have
experience in investment banking and law.

In general, a corporate development team includes:

• Vice president or head of corporate development

• Director or senior director

• Manager or associate

• Analyst

Their responsibilities typically include:

• Identifying potential target companies

• Developing relationships with target companies

• Conducting mergers and acquisition-related activities (negotiation, diligence

and integration)

• Securing financing

• Performing financial modeling and analysis

• Managing portfolios

• Improving the customer experience

• Communicating strategic plans to company executives

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Need for Corporate Development
Corporate development is concerned with arranging the business activities of the
corporate as a whole so as to achieve certain predetermined objectives at
corporate level.

Such objectives include the following:

1. Growth and Expansion: Corporate development helps a firm to

grow and expand. For instance, merger may enable a company
to grow faster as compared to firms that undertake internal
expansion.
2. Competitive Advantage: Corporate development may enable
an organization to gain competitive advantage in the market.
For instance takeover or merger may enable a firm to gain
economies of large scale production and distribution. Therefore,
a firm would be in a better position to produce quality goods and
at lower prices.
3. Corporate image: Corporate development may be undertaken
to improve the image of the firm to improve its performance.
Improved performance enables a firm to improve its image.
4. Concentration on core business: Corporate development may
be undertaken to enable a firm to focus on core business. In
some cases, a firm may find it difficult to manage growing
business, and therefore, it may divest non core business to
concentrate on core business.

48
5. Debt servicing problem: Some firms may face the problem of
debt burden. They may find it difficult to service the debt .i.e.,
repayment of loan installment and interest. Some firms may
divest a part of the business so as to generate funds for the
purpose of repayment of debt.
6. Market Share: Corporate development may be undertaken to
increase market share. For instance, firms may adopt the
strategy of merger or takeover in order to increase the market
share. The merger or takeover may enable the firm to take the
advantage of goodwill of enjoyed by the merged firms.
7. Mismatch Problem: Development may be undertaken to
overcome the problem of mismatch of business. At times, a
business firm may take over another business or entered into a
new line of business which may not match with the current line
of business.
8. Obsolete Products: At times, a firm may withdraw obsolete
products from the market. After withdrawing obsolete products
the firm can utilize its resources on existing brands.

Types of Corporate Development:

The most commonly applied tools of corporate development are :-amalgamation,

merger, demerger, acquisition, joint venture, disinvestments etc. Corporate
development refers to reorganizing a business firm. It may include a major
reorganizing such as in the case of mergers, or a minor development such as

49
downsizing of workforce. The main purpose of corporate development is to make
best use of resources in order to generate higher return on investment.

The 5-step approach to evaluation of organizational structure

Identify the If your ultimate aim is to change people's behaviour,
problem you need to be clear what it is you are trying to
change and why there is currently a need for this to
happen

Review the What you intend to do should be grounded in the

evidence evidence of 'what works' and why. Service providers
should review the available evidence in order to plan
activities which can be expected to achieve the
intended behaviour change. The evidence should
guide what you do and help you to understand the
process through which it should work.

Draw a logic A logic model is a diagram which shows, step-by-

model step, why the activities you plan should achieve your
aims. The logic model forms the basis for evaluating
the whole project - you are going to test whether
these steps happened as you predicted.

Identify Use the logic model to identify indicators (i.e.

Indicators and measurements or observations) that things actually
monitor your happen as you predicted. You will need to collect
model data about your project FROM THE START on inputs,
activities, users, short, medium and long-term
outcomes.

Evaluate logic Analyse the data you've collected on your various

model indictors to evaluate how well your project worked
for your various users. Report on whether your data
suggests the logic model worked as planned. Be
honest about any areas which were less effective.

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Change management
Change management is a systematic approach to dealing with the transition or
transformation of an organization's goals, processes or technologies. The purpose
of change management is to implement strategies for effecting change, controlling
change and helping people to adapt to change.

Process of Management of Change

1. Identifying need for a change: The first step in the process of

management of change is to identify the need for a change.
Often a need for a change arises due t forces in the external
environment such as technological factor may force the
management to introduce a change in the organization. Internal
factors may require a change in the organization such as high
cost of production, high maintenance costs. Fall in sales,
decline in profits, increase in employee grievances, increases in
absenteeism etc.

2. Decision on elements of change: After identifying the need for

a change, the management must decide in the elements which
require a change. For instance a company’s sales may decline
due to faulty promotion, defective pricing policies and problems
in distribution, problems in the product.

3. Planning for change: After identifying the elements that require

a change, eh management should plan for a change. Planning
for a change need to answer the following questions like who
should introduce a change? When to introduce a change? How to
introduce a change?

4. Assessing Possible Impact: The management should also

assess the impact other change on the stake holders such as
employees, customers, etc. For instance, introduction of new
technology may have a direct impact on the work force such as
reduction in work force, Problem of social networking and need

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or additional training.

5. Communicating the change: The management must

communicate the change to the various stakeholders. For
instance, if there is change in the price of goods, the
management must inform to the customers, dealers, sales -
force and other concerned parties.

6. Overcoming the resistance to change: At times there may be

resistance to change. For instance, employees may resist
automation for the fear of retrenchment, problem of adjustment
to new technology, etc.

7. Introducing a change: The management introduces the

change after communicating and on overcoming the resistance,
if any. According to the Paul O’Neill introduction of a change
involves a three step procedure:
• Unfreezing means that the old ideas and practices need to
be kept aside so that new one can be learned.
• Changing means the new ideas and practices are accepted
and learnt by the employees.
• Refreezing means the new techniques which are learnt is
put into practice.

8. Review: There must be a review to ensure that the change is

progressing in the right direction. The change should bring the
desired results. For this purpose, the management should
constantly monitor the performance of the change process. If
there are any problems due to the change, such problems
should be handled immediately. The timely identification of
problems and appropriate solutions to such problems will enable
the change to bring the desired results into the organization.

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 Unit -5

Strategy Implementation

Strategy implementation is crucial because it concerns action rather than just

brainstorming ideas. It enables a team to understand that the strategies presented
are viable. Strategy implementation serves as a great tool for team development
as every member can participate in the process. It relies on thorough
communication and the right tools.

7 Key Steps in the Strategic Implementation Process

1. Set Clear Goals and Define Key

Variables

2. Determine Roles, Responsibilities, and

Relationships

3. Delegate the Work

4. Execute the Plan, Monitor Progress

and Performance, and Provide
Continued Support

5. Take Corrective Action (Adjust or

Revise, as Necessary)

6. Get Closure on the Project, and

Agreement on the Output

1. Set Goals

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Ensure from the onset that all goals are realistic and attainable within your set
timeframe and resource allocation. Determine whether the goals are companywide
or department specific. Then identify any key variables or obstacles that may arise
and develop contingency plans.

2. Determine Roles

Communicate your implementation strategy with your team. This will help you
establish what responsibilities each department will take on and outline your
action plan for colleagues and stakeholders.

3. Assign Work

Assign tasks to your team members. Each individual should understand the
overarching goal and how their specific assignment supports it. Deadlines should
be clearly communicated to ensure the project stays on task.

4. Execute and Monitor

It’s time to put your strategic plan into action. All team members should have the
resources they need to complete the task at hand. Regularly check in with your
team to monitor progress and address any roadblocks that may arise.

5. Adjust and Revise

This is often the most important step of the process. As issues or challenges arise,
shift your approach, and take corrective action to your process as needed. So long
as you share updates with your team and all stakeholders, staying agile
throughout strategic implementation will greatly improve your project outcome.

6. Complete the Job

Continue to check in on your team members to ensure the project is on track and
that no additional resources are needed to achieve the goal. Update all

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stakeholders with any important details of the job or delays in your team’s
progress.

7. Review and Reflect

The final step of the process is to conduct a retrospective of the strategy

implementation. Reflect on the overall process, and review what went well and
what did not. Use these learnings to improve your strategy for future projects.

ELEMENTS OF EFFECTIVE STRATEGIC PLANNING

Organizational climate

Organizational climate refers to an employee's long-lasting perception of the

working environment and culture of the business they work for. You can think of

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climate as similar to personality: every person has a unique personality, and every
organization has a unique climate.

According to Forehand and Gilmer, “Climate consists of a set of characteristics that

describe an organisation, distinguish it from other organisations are relatively
enduring over time and influence the behaviour of people in it.”

Factors that affect organizational climate, including:

• Working with a competent manager

• Working with cooperative, agreeable employees

• Perception of risk

• Levels of conflict and how it is dealt with

• Having confidence in the appropriate records

• Employee responsibility

• Operating procedures

• The degree of centralization

• Employee safety

• Physical space

• Organizational values

• Leadership and decision making styles

• The goals and mission of the organization

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Impact of organizational climate

• It can operate as a constraint system – Organizational climate provides

employees with information on what kind of behavior will be rewarded or
punished. Therefore, it can influence the behavior of those who value the
rewards on offer.

• It helps employees form a perception of the organization – In turn, this

perception influences an employee’s behavior.

• It affects leader efficacy – Higher leader efficacy equates to

improved employee retention, customer happiness, and higher revenue.

• It influences employee happiness and productivity – A positive organizational

climate can lead to happier, more motivated employees, improved job
satisfaction, and ultimately greater efficiency and productivity.

• It helps a business achieve its long-term goals – The organizational climate has
the power to impact your employee’s performance, your business
performance, and your ability to achieve goals.

Leadership - Definition and Qualities of a Strategic Leader

Strategic leadership refers to a manager’s potential to express a strategic vision for
the organization, or a part of the organization, and to motivate and persuade
others to acquire that vision. Strategic leadership can also be defined as utilizing
strategy in the management of employees. It is the potential to influence
organizational members and to execute organizational change. Strategic leaders

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 create organizational structure, allocate resources and express strategic vision.
Strategic leaders work in an ambiguous environment on very difficult issues that
influence and are influenced by occasions and organizations external to their own.

The main objective of strategic leadership is strategic productivity. Another aim of

strategic leadership is to develop an environment in which employees forecast the
organization’s needs in context of their own job. Strategic leaders encourage the
employees in an organization to follow their own ideas. Strategic leaders make
greater use of reward and incentive system for encouraging productive and quality
employees to show much better performance for their organization.

A few main traits / characteristics / features / qualities of effective

strategic leaders that do lead to superior performance are as follows:

Loyalty- Powerful and effective leaders demonstrate their loyalty to their vision by their

words and actions.

Keeping them updated- Efficient and effective leaders keep themselves updated about

what is happening within their organization. They have various formal and informal sources of

information in the organization.

Judicious use of power- Strategic leaders makes a very wise use of their power. They must play

the power game skillfully and try to develop consent for their ideas rather than forcing their

ideas upon others. They must push their ideas gradually.

Have wider perspective/outlook- Strategic leaders just don’t have skills in their narrow

specialty but they have a little knowledge about a lot of things.

Motivation- Strategic leaders must have a zeal for work that goes beyond money and power

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and also they should have an inclination to achieve goals with energy and determination.

Compassion- Strategic leaders must understand the views and feelings of their subordinates,

and make decisions after considering them.

Self-control- Strategic leaders must have the potential to control distracting/disturbing moods

and desires, i.e., they must think before acting.

Social skills- Strategic leaders must be friendly and social.

Self-awareness- Strategic leaders must have the potential to understand their own

moods and emotions, as well as their impact on others.

Readiness to delegate and authorize- Effective leaders are proficient at delegation. They are

well aware of the fact that delegation will avoid overloading of responsibilities on the leaders.

Articulacy- Strong leaders are articulate enough to communicate the vision(vision of

where the organization should head) to the organizational members in terms that boost

those members.

Constancy/ Reliability- Strategic leaders constantly convey their vision until it becomes

a component of organizational culture.

Strategic Planning

Strategic planning is the art of creating specific business strategies,

implementing them, and evaluating the results of executing the plan, in regard
to a company’s overall long-term goals or desires. It is a concept that focuses
on integrating various departments (such
as accounting and finance, marketing, and human resources) within a company

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to accomplish its strategic goals. The term strategic planning is essentially
synonymous with strategic management.

Strategic Planning Process

The strategic planning process requires considerable thought and planning on the
part of a company’s upper-level management. Before settling on a plan of action
and then determining how to strategically implement it, executives may consider
many possible options. In the end, a company’s management will, hopefully, settle
on a strategy that is most likely to produce positive results (usually defined as
improving the company’s bottom line) and that can be executed in a cost-efficient
manner with a high likelihood of success, while avoiding undue financial risk.

3 Strategic Planning Process are as follows:-

1. Strategy Formulation

In the process of formulating a strategy, a company will first assess its current
situation by performing an internal and external audit. The purpose of this is to help
identify the organization’s strengths and weaknesses, as well as opportunities and
threats (SWOT Analysis). As a result of the analysis, managers decide on which
plans or markets they should focus on or abandon, how to best allocate the
company’s resources, and whether to take actions such as expanding operations
through a joint venture or merger.

2. Strategy Implementation

After a strategy is formulated, the company needs to establish specific targets or

goals related to putting the strategy into action, and allocate resources for the
strategy’s execution. The success of the implementation stage is often determined
by how good a job upper management does in regard to clearly communicating the
chosen strategy throughout the company and getting all of its employees to “buy
into” the desire to put the strategy into action.

3. Strategy Evaluation

Strategy evaluation involves three crucial activities: reviewing the internal and
external factors affecting the implementation of the strategy, measuring

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performance, and taking corrective steps to make the strategy more effective. For
example, after implementing a strategy to improve customer service, a company
may discover that it needs to adopt a new customer relationship management
(CRM) software program in order to attain the desired improvements in customer
relations.

Strategy implementation
Strategy implementation is the act of executing a plan to reach the
desired goal or set of goals. The brainstorming process helps formulate
these ideas, while the implementation process puts those strategies
or plans into action. Strategy implementation depends heavily on
feedback and status reports to ensure the strategy is working and to
rework any areas that may need improvement.
5 Tips for effective strategy implementation
Effective strategy implementation means the team reaches its end
goal before the deadline and learns more about themselves, the
project and the company along the way. Here are some tips for
effective strategy implementation:
1. stablish frequent communication
You can facilitate communication through company tools, such as
project management software or messaging software. Managers can
make themselves more available by setting up office hours or leaving
their email addresses open for the entirety of the workday.
2. Promote honesty
Being honest with the team and with yourself can help everyone grow
and reach the goal, which can create a more cohesive team and
facilitate trust among team members. If there's a challenge that's
holding back the team, looking at it through an honest view can give a
more complete perspective of the problem.
3. Ensure clarity
Goals and strategies often work best when you define them clearly. A
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good strategy typically includes clear goals and specific methods of
reaching those goals.
4. Offer team support
When challenges arise, a supportive team uses its collective
knowledge to address and resolve the problem quickly so the project
can move forward. You can encourage team support by
providing communication tools and modeling what a support figure
looks like.
5. Provide the right tools for the job
Not having the proper tools to complete a project can be challenging.
A great way to help the team move forward and reach its goal is to
provide the right tools for the job.

The Strategic Control Process

Every technique of strategic evaluation follows the same method. Here are the six
steps involved in the strategic control process:

1. Determining What To Control

Prioritize evaluation of elements that relate directly with the mission and vision of
the organization and which can affect the organization’s goals.

2. Setting Standards

Past, present and future actions must be evaluated. Setting qualitative or

quantitative control standards help in determining how managers can evaluate
progress and measure goals.

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3. Measuring Performance

Measuring, addressing and reviewing performance on a monthly or quarterly

basis can help determine a strategy’s progress and ensure that standards are
being met.

4. Comparing Performance

Performance comparison is done to determine if an organization is falling short of

the set benchmark and if these gaps between target and actuals are normal for
that industry.

5. Analyzing Deviations

If there are deviations, managers have to analyze performance standards and

determine why performance was below par.

6. Corrective Action

If a deviation is due to internal factors such as resource shortage, then managers

can act to sort them out. But if it’s caused by external factors that are beyond
one’s control, then incorrect actions can worsen the outcome.
Traditional control concepts have to be replaced by the strategic control process,
as it recognizes the unique needs of long-term strategies.

Importance Of Strategic Control

Let’s look at the importance of strategic control:

• Measuring Progress

Strategic control can help measure organizational progress. As a strategy is

chosen or implemented, an outcome is determined based on the likeliness. In

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strategic management, it’s important to measure results during and after
implementation. This allows timely corrective actions as well.

• Feedback For Future Actions

Since strategic management is continuous, it helps in recycling actions that are

essential for achieving the objectives of an organization. This acts as inputs for
making adjustments and implementing them in other future processes.

• Rewards And Recognition Based On Performance

A reward system based on performance that recognizes employees throughout

the implementation period is crucial for performance, desired outcome and talent
retention.
The purpose of strategic control is to let managers identify changes in
circumstances and allow them to modify strategies.

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