STRATEGIC MANAGEMENT Min

STRATEGIC MANAGEMENT – 22MBA0301
UNIT-1
INTRODUCTION- CONCEPTS IN STRATEGICMANAGEMENT
1.1 : CONCEPTS IN STRATEGIC MANAGEMENT:-

1.1.1 : MEANING OF STRATEGIC MANAGEMENT:-
The term ‘strategic management’ includes two words – ‘strategy’ & ‘management’.
‘Strategy’ means a plan of action designed to achieve a long term or overall aim. This
is the means by which long-term objectives will be achieved; ‘management’ means the
process of dealing with or controlling things or people.
Strategic management can be defined as the art and science of formatting, implementing,
and evaluating cross-functional decisions that enable an organization to achieve its
objectives. Strategic Management focuses on integrating management, marketing,
finance/ accounting, production, operations, research and development, and
information system to achieve organization success.
The term ‘strategic Management’ is used synonymously with term ‘strategic planning’.
The purpose of Strategic management is to exploit and create new and different
opportunities for tomorrow.
DEFINITION:-
“Strategic Management is concerned with making decision about organization’s future
direction and implementing those decisions”.
- LIOYD L. BYARS.
“Strategic Management is a strain of decisions and actions, which leads to the
development of an effective strategy or strategies to help achieve corporate objectives.”
- GLUECK.
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1.1.2. CHARACTERISTICS OF STRATEGIC MANAGEMENT:

Characteristics of strategic management include following;
Systematic phenomenon
Multi disciplinary
Characteristics of Hierarchical
Strategic management
Dynamic
Multi dimensional
I. STRATEGY IS A SYSTEMATIC PHENOMENON:

 Strategy involves a series of action plans, no way contradictory to each
other because a common theme runs across them.
 It is not merely a good idea; it is making that idea happen too.
 Strategy is a unified, comprehensive and integrated plan of action.
II. IT IS MULTIDISCIPLINARY:
 Strategy involves marketing, finance, human resource and operations to
formulate and implement strategy.
 Strategy takes a holistic view. It is multidisciplinary as a new strategy
influences all the functional areas, i.e. marketing financial human resource
and operations.
III. IT IS HIERARCHICAL:
 On the top come corporate strategies, then come business unit strategies, and
finally functional strategies.
 Corporate strategies are decided by the top management, Business Unit level
strategies by the top people of individual strategic business units, and the
functional strategies are decided by the functional heads.
IV. IT IS DYNAMIC:
 Strategy is to create a fit between the environment and the organization’s
actions.
 As environment itself is subject to fast change, the strategy too has to be
dynamic to move in accordance to the environment.
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 Success of Microsoft appears to be very simple as far as software for

personal computers are concerned, but Microsoft strategy required
continuous decisions in a turbulent and dynamic environment to remain
leader.
V. IT IS MULTIDIMENSIONAL:
 Strategy not only tells about vision and objectives, but also the way to
achieve them.
 So, it implies that the organization should possess the resources and
competencies appropriate for implementation of strategy as well as strong
performance culture, with clear accountability and incentives linked to
performance.
1.1.3. GUIDELINES FOR EFFECTIVE STRATEGIC MANAGEMENT:-

Following are the important guidelines for effective strategic Management;
 Strategic management should be a people process more than a
paper process.
 It should be a learning process for all managers and employees.
 Keep the strategic management process as simple and no
routine aspossible.
 Strategic management should vary assignments, team
memberships, meeting formats, and even planning calendar.
 It should challenge the assumptions underlying the current
corporatestrategy.
 It should welcome bad news.
 An important guideline for effective strategic management is
open-mindedness.
 Do not purpose too many strategies at once.
1.2. SRATEGIC MANAGEMENT AS PROCESS:

A process is the flow of information through interrelated stages of analysis toward the
achievement of an aim. Strategic management as a process has several important
implications;
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 First, a change in any component will affect several or all of the components. For
e.g.; forces in external environment may influence the nature of a company’s
mission and vice versa.
 Second implication of viewing of strategic management as a process is that
strategy formulation and implementation are sequential.
 Third is necessity of feedback (analysis of post implementation results) from
institutionalization, review and evaluation to the early stages of the process.
 Fourth, the need to regard strategic management as a dynamic system.
As a process, strategic management includes the following steps;
Components of Strategic Management Process
A. ENVIRONMENTAL SCANNING: :-
Environmental scanning is the monitoring, evaluating, and dissemination ofinformation
from the internal and external environments. Its purpose is to identify strategic factors
those external and internalelements will determine the future of the corporation. The
simplest way to conduct environmental scanning is through SWOT Analysis.SWOT is
an acronym of strength, weakness, opportunities, and threats for aspecific company.
a) External Environment:-
External environment consists of opportunities and threats that are outside
the organization. External factors are not typically within the control of top
management. Example: - Technological factors, legal factors, competitors,
social &culture factors and so on.
b) Internal Environment:-
Internal environment of a corporation consists of variables (strengths and
weakness) that are within the organization. Top management has control on all
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these factors. Example:- company’s structure, culture and resources. There are
some drawbacks of environmental analysis:
 Environmental analysis does not predict the future, nor does it
eliminate uncertainty for any organization.
 Environmental analysis is not a sufficient guarantor of
organizational effectiveness.
 The potential of environmental analysis is often not realizedbecause of
how it is practiced.
B. STRATEGY FORMULATION:
Strategy formulation means formulating of long term organizational plans that
would assist in carrying –out organization activities in best possible way.Strategy
formulation is essential for optimum functioning of the organization. Strategy
formulation involves developing corporate vision, mission, setting objectives,
formulating strategies which are as follows;
a) Vision of The Organization:-
An organizations vision statement can be explained as a position that
organization aspires to achieve in the future. A vision statement is developed by top
management which may include CEO, President, managing director, chairman etc.,
b) Mission Of The Organization:-
A mission statement descried the reason for the existence of the
organization. It specific the organizational culture and values and also sets guiding
points for carrying out business activities of organization.
c) Objectives:-
Organizational plans are usually long term and the craft long-term objectives. Objectives
are the results that one expects out of the business activities. The objectives envelope
areas like organization’s profitably, competitive position, public image, ROI (return on
investment), productivity, employees growth etc.,
d) Strategies:-
A strategy of an organization is a detailed plan which helps the
organization in realizing its mission and objectives. Strategies are formulated for
achieving competitive advantage.
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e) Policies:-
Policies refer to set of instructions that are used for strategy formulating
and strategy implementation. Policies focus on achieving corporate goals by ensuring
optimumallocation of resources.
C. STRATEGY IMPLEMENTATION:-
After formulating a strategy, next step is to ensure effective implantation of
formulated strategies. Strategies are implemented with the help of;
 Programmers (actions or steps needed to implement a single use planand they
help in putting strategies into action.
 Budgets:- (declaration of organization’s programmed in monetary terms)
 Procedures:- (step-by-step explanation of order in which a task is to becarried
–out) Without successful implementation, as well devised strategy is of no use.
D. EVALUATION AND CONTROL:-

Evaluation and control is final step in the process of strategic management. After
implementing a strategy, it must be evaluated on a regular basis. Successful evaluation
of strategy is based on suitable and prompt feedback. Control should be imposed that it
produces intended remedial action. The amount of control that needs to be imposed
is based on differentbetween actual and expected results.
1.3. DEVELOPING A STRATEGIC VISION:-
MEANING OF VISION:-
A vision statement can be referred as the statement defining company’slong-term
goals. A vision statement can exceed from one line to a few paragraphs highlightswhat
the organization wants to achieve in future. Vision statement is common, mutual and for
every employee in theorganization. Vision statement is simple, unique, and competitive
in nature. A good vision statement encourages the organization to take risks and to
pursue innovation ideas to stay competitive in market.
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1.3.1. DEVELOPING A STRATEGIC VISION:-

For developing a vision statement, following steps are included;
Understanding organizationConduct an audit
Narrow down the vision
Set-up the context for vision statementsCreate New Future Scenarios Formulate
Alternate vision statements
Secret the final vision Statement
a) UNDERSTANDING THE ORGANIZATION:-

The foremost step of formulating a vision statement to understand theorganization.
To understand the organization in a better way. The following detailsshould be
considered:
 Nature of the industry.
 Mission and purpose of the organization.
 Kind of value it is providing to the society.
 Structure of the organization.
b) CONDUCT AN AUDIT:-
Once the understanding of organization has been achieved, the next step is to conduct
as audit to access the current position of the organization. Following aspects are to be
analyzed at this stages;
 Current direction of the organization.
 Organizational structure.
 Organizational activities.
 Compensation and remuneration plans.
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c) NARROW DOWN THE VISION:-

After conducting the audit, the next thing to do is to narrow down the visionstatement.
Narrowing down here implies considering the factors that are needed to form a vision
statement.
d) SET-UP THE CONTENT FOR VISION STATEMENT:-
In this step, the strategic leaders should anticipate the future aspects of theorganization.
Some of the aspects to be considered are:-
 Anticipation and categorization of future developments which mayaffect the
vision.
 Anticipate the probability of fulfilling the expectations.
 Assigning the probability of occurrence to each expectation.
e) CREATE NEW FUTURE SCENARIOS:-

As soon as the expectations are anticipated and their effect and probability fulfillment
are understood, next step creation of new scenarios should considered. This is to
associate those expectations to form a new scenario which involves a variety of
possibilities in future anticipated by leaders.
f) FORMULATED ALTERNATIVE VISION STATEMENTS:-
Here, the possible future alternatives are discovered and decided. Alternative vision
statements for each direction are formulated.
g) SELECT THE FINAL VISION STATEMENT:-
This is the final stage where the strategic leaders would select the best among the
alternative vision statements. For selecting best one, it is necessary to closely analysis
the vision Statements.
1.3.2. EXAMPLES OF CORPORATE VISION STATEMENT:-

Following are some of the examples of vision statement;
BHEL:- “ A world class innovative, competitive and Profitable engineering enterprise
providing total business solutions:-
WIPRO:-“Be among the 10 most admired Indian corporations.”
COLGATE-PALMOLIVE: - “to be the company of first choice in oraland personal
hygiene by continuously caring for consumers and partners.”
MICROSOFT: “Empower every person and every organization on theplanet to
achieve more”.
NIKE: “Bring inspiration and innovation to every athlete in the world.
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APPLE: “To produce high-quality, low cost, easy to use products that incorporate
high technology for the individual”.
SONY: “To be a company that inspires and fulfills your curiosity”.
1.3.3. BASIC ELEMENTS OF A VISION STATEMENT:- Vision is simply a

combination of 3 basis elements;
 An organization’s fundamental reason for existence beyond just making money.
 Its timeless, unchanging core values. The core values define the enduring
character of an organization that remains unchanged as it experiences changes in
technology, competition, management styles etc.,
 Huge but, achievable aspirations for its future.
COMPONENTS OF VISION STATEMENTS:
 It is written in the present, not future tense. They describe what we will feel,
hear, think, say and do as if we had reached our vision now.
 It is summarised with a powerful phrase. That phrase forms the first paragraph
of the vision statement. The powerful phrase is repeated in whatever
communication mediums you have to trigger memory of thelonger statement. It
is not a brand strap-line.
 It describes an outcome, the best outcome we can achieve. It does not confuse
vision with the business goal and objectives for a particular period of time. A
vision statement, therefore, does not provide numeric measures of success.
 It evokes emotion. It is obviously and unashamedly passionate. However, it
separates the hard aspect of vision in what we see, hear and do from the soft aspect
of vision in what we think and feel.
 It helps build a picture, the same picture, in people’s minds.
1.4. MISSION:
1.4.1. MEANING AND DEFINITION OF MISSION STATEMENT:-
Organizations are founded for a purpose. Although the purpose may change over time,
it is essential that stakeholders understand the reason for the organization’s existence
that is the organization’s mission. The mission is an enduring statement of purpose that
distinguishers one business from other similar firms.
A mission statement reveals the long-term vision of an organization in terms of;
 What it wants to be
 Where exactly it wants to go
 Whom its wants to serve
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The obvious purpose of a mission statement is to give a public announcement to

insiders and outsiders about what the firm’s stands for, what makes the firm different.
The mission statement is generally expressed in a board manner and it is unlikely that
it can be ever achieved completely.
DEFINITION:-
“The mission reflects the essential purpose of the organization, concerning particularly
why it is in existence, the nature of business it is in, and the customers it seeks to serve
and satisfy.”
-ACCORDING TO THOMSON.
1.4.2. CHARACTERISTICS OF A MISSION STATEMENT:-
Clarity
Broad and enduringRealistic
CHARACTERISTICS Specific
Identity and image
a) CLARITY:
The mission statement should be clear enough to lead to action. The corporate dream
must be presented in crystal-clear manner preferablyin a positive tone. For example:
SBI – “with you, all the way”.
b) BROAD AND ENDURING:-
The mission statement is a grand design of the firm’s future. So, it should be in a board
manner. However, a mission statement should not be so narrow as to restrict the firm’s
operations nor should it be too general to make itself meaningless. To make things clear,
mission statements come in two forms ; primary mission (a general category of business
to be engaged in and secondary mission defining everything more specifically Telco for
example is in the transportation business primary business.
c) REALISTIC:
Missions should be register and achievable. Air India would be deluding believing that
is not true itself if it adopted the mission to become the world’s favorite’s airline.
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d) SPECIFIC:
Mission should be specific.Mission must define the competitive scope within which the
company will operate that is the range of industries in which a company will operate
industrial goods consumer goods services.
 Range of products and applications the company will supply.
 Range of products and applications the company will supply.
 Range of regions countries in which a company will operate.
 Company’s core competencies.
Example: Mc Donald’s could probably enter the solar energy business but that would
not take advantage of its core competencies providing low cost food and fast service to
large number of customers.
e) IDENTITY AND IMAGE:
The mission sets a firm apart from other firms of its style.Through the mission statement
the firm wants to maintain its distinct image and character in terms of excellent quality
and service latest technology a unique produced offerings etc.
For example;
 An Asian paint stresses leadership though excellent.
 MTNL presents it as the lifeline of destine and Mumbai.
 Bajaj Auto offers value for money for years.
EXAMPLES OF MISSION STATEMENTS:

Bharat heavy electrical ltd (BHEL):
To achieve and maintain a leading position as suppliers of quality equipment’s systems
and service to serve and national and international market in the field of energy.
Cadbury India :
To attain leadership position in the confectionary market and achieve astrong
national presence in the food drinks sector.
C) Coca Cola:
To refresh the world. To inspire moments of optimism and happiness. Tocreate value
and make a difference.
P&G:
We will provide branded products and services of superior quality and value that
improve the lives of the world’s consumers.
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Wal-Mart:
Helps people around the world save money and live better — anytime andanywhere
— in retail stores, online and through their mobile devices.
1.4.3. BENEFITS OF MISSION:
a) MOTIVATES EMPLOYEES:
Mission statements motivate employees of the organization to enhance their skills not
only personal gains and also for achieving the common organizational goals. Mission
statement helps to create an environment of shared values among employees and guide
them in their regular activities.
b) SETS CORE VALUES:
A mission statement sets core values within the organization. It identifies the direction
in which the organization wishes to proceed andalso determines the ways in which the
objective is to be achieved. If at times the organization loses its track and engages in
some unethicalactivates the mission statement helps in bringing it back on the track.
c) DESCRIBE ORGANIZATIONAL GOALS:
A mission statement defines the goals that are to be achieved by theorganization.
It portrays a clear picture about the business it deals in and the fundamental idea about
the organization. Whatever its form, a mission statement should give readers a clear
ideaabout what a business does.
d) IMPROVES ORGANIZATION PERFORMANCE:
Mission statement helps the organization to improve its financial position by balancing
and enhancing the overall organizational performance. If the organization mission
statement is achievable and feasible it motivated the employs to stretch their abilities
to outperform themselves.
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1.4.4.COMPONENTS OF MISSION STATEMENTS:-

The components of Mission statement include the following:-
Products and services
Technology
Target market
COMPONENTS OF Policy for employees
MISSION Public images
a. PRODUCTS OR SERVICES:
A mission statement should indicate the products or survives the organization deals in.
For example: The mission statement of Assurant is to be the premier provider of
targeted specialized insurance products and related services in North America and
selected other markets.
b. TECHNOLOGY:
A mission statement should describe about the technology being implemented for
achieving the organizational goals. This helps the organization in acquiring better
technology vendors.
c. TARGET MARKET:-
An organization should indicate the type of market it serves in a missionstatement.
For example: while the mission of a cosmetic company may serve only forwomen
a company producing shaving creams would serve only for men.
d. POLICY FOR EMPLOYEES:
A mission statement should indicate its policies regarding its employees sothat they
realize their importance in the organization.
e. PUBLIC IMAGE:
By formulating a mission statement, strategic leaders are able to convey the basic
features and function of the organization which helps in creating appositive public
images.
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COMPARISSION OF VISION AND MISSION STATEMENTS OF

COMPANIES:
COMPANY VISION MISSION

Inspire the world and create Inspire the world with our
the future innovative technologies,
SAMSUNG products and design that
enrich the people lives and
contribute to social prosperity
by creating a new
future.
To be a globally respected To achieve our objectives inan
corporation that provides best- environment of fairness,
INFOSYS of-breed business solutions, honesty, and courtesy towards
leveraging technology, our clients, employees,
delivered by vendors and
best-in-class people. society at large.
To create a better everydaylife Offer a wide range of well-
IKEA (company that manufactures for the many people. designed; functional home
home furnishing products) furnishing products at pricesso
low that as many people
as possible will be able toafford
them.
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AMAZON To be earth’s most customer- We strive to offer our

centric company, where customers the lowest possible
customers can find and prices, the best available
discover anything they might selection, and the utmost
want to buy online. convenience.
To provide access to the Organize the world’s
GOOGLE world's information in one information and make it
click. universally accessible and
useful.
To be a leading, competitive, Our mission of "good food,
nutrition, health and wellness good life" is to provide
company delivering improved consumers with the best
NESTLE shareholder value by being a tasting, most nutritious choices
preferred corporate citizen in a wide range of food and
preferred employer preferred beverage categoriesand eating
supplier occasions, from
selling preferred products. morning to night.
Sustain itc’s position as oneof To enhance the wealth
the most valuable corporations generating capability of the
ITC (imperial tobacco through worldclass enterprise in a globalizing
company) performance, creating growing environment, delivering
value for Indian economy and superior and sustainable
company’s stakeholder value
stakeholders.
1.5. OBJECTIVES:
1.5.1. MEANING OF OBJECTIVE:-
An objective indicates the result that the organizations expect to achieve inthe long
run. It is an end result the end point something the youth aim for and try to reach. It is a
desired result towards which behavior is directed in an organization. The organization
may or may not reach the desired state but the chances of doing so are greater if the
objectives are farmed and understood properly. Objectives are the product of specific
concrete thinking.
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1.5.2 : CLASSIFICATION OF OBJECTIVES:

Objectives are classified as follows;
Classification of Objectives ––––––
 Primary objectives
 Secondary Objectives
 Short term objectives
 Medium term objectives
 Long-term objectives
 Financial Objectives
 Non-Financial Objectives
A. PRIMARY OBJECTIVES:-
Primary objectives are those which are concerned with fulfilling the needs of primary
stakeholders and consumers. They are long term goals of the organization hence
these also called asstrategic objectives. Primary objectives of an origination can be
surviving in competitionmaximizing profit increasing market share etc.
Example: The primary purpose of a business is to maximize profits for itsowners or
stakeholders while maintaining corporate social responsibility.
B. SECONDARY OBJECTIVES:-
Secondary objectives also called as tactical objectives. Secondary objectives are set to
perform daily operation smoothly. These objectives address the issue of wages,
composition incentives, recognition etc.
C. SHORT TERM OBJECTIVES:
Short term objectives are set to achieve short term targets. These are set for up to one
year or one financial year. For an organization short term objective can be used for
increasing salesreducing the layout turnover etc.
D. MEDIUM- TERM OBJECTIVE:
Medium term objectives are set for the period of the months to five years. Medium term
objectives convert into short term objectives with the passage of time. For e.g.
introducing variants of existing product modification in existingrotational structure
etc.
E. LONG TERM OBJECTIVE:
Long term objectives are broad and inspiring in nature. The duration of long term
objective in more than five years. For e.g. diversifying the business acquiring or
merging a new businessglobal expansion of business etc.
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F. FINANCIAL OBJECTIVES:
Financial objectives are associated with monetary benefits. Financial objectives of an
origination can be maximizing sales increaserevenue by 20 reducing product cost etc.
These objectives may be short term as well as medium term.
G. NON FINANCIAL OBJECTIVES:
Non-financial objective are not associated with monetary benefits. These objectives a
help the organization to evaluate the intangible aspects ofa business such as stability,
health, long term success, culture, values etc.
1.5.3. ROLE OF OBJECTIVES:-

Objectives serve the following function;
Role of Objectives:
 Direction
 Benchmark for Success
 Basis for Managerial Functions.
 Basis for Organ existence
 Basis for Various plans
A. DIRECTION:
Objectives provide guidelines for origination efforts they keep attentionfocused on
common purpose. Every activity is directed toward the objectives every individual
contributes to meet the goals.
B. BENCHMARK FOR SUCCESS:
Objectives eve as performance standards against width actual performance be checked.
They provide a bench mark for assessment. Objectives help in the control of human
effort in an organization.
C. Motivation:
Objectives of one level are a source of inspiration and motivation to achieve goals at
higher levels. Workers strive hard to achieve innovation and challenging goals rational
and attainable objectives motivate employee to work hard.
D. Basis for Managerial Functions:-
Objectives provide basis for all managerial functions. Planning, organizing, staffing,
directing and controlling are directed towards organizational objective. Unless
organizational objectives are clearly identified, managerial functions will not be
effectively carried out.
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E. Basis for Organizational Existence:-

Objectives provide foundation or legitimacy to business organization. An organization
will not come into existence if it has no objective to achieve. Objectives enable the
organization to make its profile (identify its strengths and weakness) and relate it with
environmental profile (opportunities and threats).
1.6. MEANING OF POLICIES:
The term policy is derived from the Greek word “Politician” relating to policy that is
‘citizen’ and Latin work “polities” meaning ‘polished’, that is ‘to say clear’. A policy
is a deliberate system of principles to guide decisions and achieve rational outcomes. A
policy is a statement of intent, and is implemented as a procedure or protocol. Policies
are generally adopted by a governance body within an organization. Policies can assist
in both subjective and objective decision making.
DEFINITION:
The term “Policy” is defined by KOONTZ and O ‘DONNEL as “policies are general
statements or understandings which guide mangers thinking in decision making”.
George R.TERRY defined “policy is a verbal written or implied overall guide setting
up boundaries that supply the general limits and direction in which managerial action
will take place”.
1.6.1. CHARACTERISTICS OF POLICIES:
Although different businesses may have different policies, any businesspolicy has the
same seven features. A business policy must be specific, clear, uniform, appropriate,
simple, inclusive and stable.
 SPECIFIC:
If a policy is not specific, implementation becomes inconsistent and unreliable. For
example, "Employees may not park in the guest parking lot."
 CLEAR:
A business policy has no ambiguity. It is written in easy-to-understand language. For
example, "Immediate release of employment is the result of company drivers having
two points on their driving record."
 UNIFORM:
The policy should be a standard that everyone can follow from the top management to
the plant workers. For example, "Anyone entering the construction site must have a
protective hat, shoes and glasses on at all times."
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 APPROPRIATE:
Business policies should be relevant to organizational goals and needs. For example,
"Discrimination and sexual harassment accusations are investigated with disciplinary
action applicable based on investigation findings."
 SIMPLE:
Policy must be understood by all that it applies to within the business. For example, "No
smoking within 100 feet of welding operations designated by the painted yellow floor
lines."
1.6.2. TYPE OF POLICIES:

A. On the Basis of Source:
(i) Originated Policy.
(ii) Appealed Policy.
(iii) Implied Policy.
(iv) Externally imposed policy.
i. ORIGINATED POLICY:
By originated policy they refer to policy which originates from the top management
itself. These policies are aimed at guiding the managers and their subordinates intheir
operations. They flow basically from the organization’s objectives as defined by top
management.
ii. APPEALED POLICY:
It is meant decisions given in case of appeals in exceptional cases up to management
hierarchy. In case of doubts, an executive refers to higher authority on how he should
handle the matter.
iii. IMPLIED POLICY:
Implied policy is meant policies which emanate from conduct. It also originates where
existing policies are not enforced.
iv. EXTERNALLY IMPOSED POLICY:
Policies may be imposed externally that is from outside the organization on such as by
Government control or regulation, trade associations and trade union etc.
B. On the Basis of different Levels:
I. Basic Policies.
II. General policies.
III. Departmental Policies.
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i. BASIC POLICIES:
Policies which are followed by top management level are called as basicpolicies. For
example, the branches will be opened in different place where the sales exceed
Rs.5lakhs.
ii. GENERAL POLICIES:
These policies affect the middle level management and more specific than basic
policies.
Example:
Payment will be provided for overtime work only if it is allowed by the management.
iii. DEPARTMENT POLICIES:
These policies are highly specific and applicable to the lower levels of
management.
Example:
Tea will be provided free for workers in night shifts.
C. On the Basis of Managerial Functions:

Policies arise from decision pertaining to fundamental managerial functionsare called
managerial policies.
These include the following policies:
I. Planning policies.
II. Organization policies.
III. Motivation and control policies.
i. PLANNING POLICIES:
Planning policies involve the future course of action. Mere policies are formulated as to
achieve the targets regarding the future. Planning policies may formulate for whole
organization or for divisional departments.
ii. ORGANIZATION POLICIES:
These policies are highly specific to organizational goals and objectives.
iii. MOTIVATION AND CONTROL POLICIES:
Here policies are formulated to motivate people and control the activities, which lead to
achieve the organizational objectives with the fullest satisfaction of employees.
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1.7. FACTORS THAT SHAPE A COMPANY’S STRATEGY:

Many situational considerations enter into crafting strategy. Crafting Strategy is the first
“season” in an organization’s “annual” cycle. These factors vary from situation to
situation. Anyway, these factors are as follows:-
1.7.1. FACTORS THAT SHAPE A COMPANY’S STRATEGY:
Societal, political regulatory and citizenship considerationsCompetitive conditions and overall

industry attractivenessThe Company’s market opportunities and external threats
Company resource, strength, competencies, and competitive capabilities the personal ambitions,
businesses philosophy, and ethical beliefs
i. SOCIETAL, POLITICAL REGULATORY AND CITIZENSHIP

CONSIDERATIONS:
All organizations operate within a society. Hence, social expectations, values, and
ethical considerations play a vital role in shaping a strategy. Moreover, economic,
societal, political, regulatory, and citizenship factors limit the strategic actions a
company can or should take.
ii. COMPETITIVE CONDITIONS AND OVERALL INDUSTRY
ATTRACTIVENESS:
A company’s strategy should be tailored to fit industry and competitive conditions.
Various competitive conditions like price, product quality, performance features;
service, warranties, and so on plays a vital role in shaping a strategy.
III. THE COMPANY’S MARKET OPPORTUNITIES AND EXTERNAL
THREATS:
A good strategy aims at capturing a company’s best growth opportunities. It also aims
at defending against external threats to its well-being and future performance.
Iv. COMPANY RESOURCE, STRENGTH, COMPETENCIES, AND
COMPETITIVE CAPABILITIES:
One of the most crucial strategy-shaping considerations is whether a company has or
can acquire the resources, competencies, and capabilities needed to execute a strategy
proficiently.
v. THE PERSONAL AMBITIONS, BUSINESSES PHILOSOPHY, AND
ETHICAL BELIEFS OF MANAGERS:
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Various studies indicate that manager’s ambitions, values, business philosophies,

attitude toward risk, and ethical beliefs have an important influence on strategy.
1.8. ENVIRONMENTAL SCANNING:

1.8.1. MEANING:
Organizational environment consists of both external and internal factors. Environment
must be scanned so as to determine development and forecasts of factors that will
influence organizational success. Environmental scanning refers to possession and
utilization of information about occasions, patterns, trends, and relationships within an
organization’s internal and external environment. It helps the managers to decide the
future path of the organization. Scanning must identify the threats and opportunities
existing in the environment.
1.8.2. PROCESS OF ENVIRONMENTAL SCANNING:

Environmental scanning is a useful managerial tool for assessing the environmental
trend. The following process is adopted for environmental scanning.
i. STUDY THE FORCES AND NATURE OF THE ENVIRONMENT:
In the first step of environmental scanning, the forces of the environment that have got
significant bearing in the growth and development of the business should be identified.
They may be political, economic, sociology-cultural, technological, legal, physical
environment and global components. After this, the nature of the environmental
components is studied. The nature of environment may be simple or complex. It may
also be stable or volatile.
ii. DETERMINE THE SOURCES OF INFORMATION:
After studying the process and nature of the environment, the sources of collecting
information from the environment should be determined. There are different sources
through which information on business environment may be collected. They are as
follows: Secondary sources: Newspapers, book, research articles, industrial and trade publications,
government publication, and annual report of the competitors.
Mass media: Radio, TV and Internet.
Internal sources: Internal reports, management information
system, data network, and employee.
External agencies: Consumers, marketing intermediaries and suppliers.
Formal studies: Formal research and study by employee, research agencies, and
educational institutions.Spying and surveillance of the competitors.
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iii. DETERMINE THE APPROACH OF ENVIRONMENTAL

SCANNING:
After determining the sources of information the approach of environmental analysis
should be determined. There are mainly three approaches to environmental scanning.
They are:
 Systematic approach:
Under this approach, a systematic method is adopted for environmentalscanning. The
information regarding market and customer, government policy, economic and social
aspects are continuously collected.
 Ad-hoc Approach:
Under this, specific environmental components are only analyzed through survey and
study. It is not a continuous process.
 Processed form approach:
Under this, the information collected from internal and external sources are used after
processing them.
iv. SCAN AND ASSESS THE TREND:
This is the final step of environmental scanning process. It involves a detailed and micro
study of the environment to identify the early signals of potential changes in the
environment. It also detects changes that are already under way and shows the trend of
theenvironment. The trend should be assessed in terms of opportunities and threats.
1.8.3. TECHNIQUES/METHODS OF ENVIRONMENTAL SCANNING:

There are different techniques/methods of environmental scanning. They arediscussed
below:
i. Executive opinion method:
It is also called executive judgment method. Under this environment is forecasted on
the basis of opinion and views oftop executives. A panel is formed consisting of these
executives.
ii. Expert opinion method:
Under this, environment forecasting is based an opinion of outside experts orspecialist.
The experts have better knowledge about market conditions and customertaste and
preferences. This method is similar to executive opinion method. However, it uses
external experts.
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iii. Delphi method:

This method is extension of expert opinion method. It involves forming a panel of
experts and questioning each member of thepanel about the future environmental trend.
Later, the responses and summarized and returned to the members forassessment.
iv. Extrapolating method:
Under this method, the past information is used to predict the future. Different methods
used to extrapolate the future are time series, trendanalysis and regression analysis.
v. Historical analogy:
Under this, the environmental trends are analyzed with the help of othertrends which are
parallel to historical trend.
TECHNIQUES:
For scanning the environment companies often use number of techniques depending n
their specific requirement n terms of quantity quality cost relevance the following
techniques are generally pressed into service while carrying out environment scanning.
SWOT analysis
ETOP
Techniques
i. SWOT ANALYSIS:
SWOT (acronym for the internal strengths and weaknesses of a firm and the
environmental opportunities and threats facing that firm).SWOT helps an organization
match its strengths and weakness with opportunities and threats operations in the
environment.
STRENGHTS: internal capabilities of a firm which can be use to gain competitive
advantage over its rivals.
WEAKNESS: limitations or constraints which tend to decrease thecompetencies
of the firm in comparison to rivals.
OPPORTUNITIES: major favorable conditions in a firm’s
environment which help a firm strengthen its position.
THREATS: major unfavorable conditions in a firm’s environmentwhich may
pose a risk or damage firms position.
ii. ETOP:
ETOP is the acronym for environment threats and opportunity profile. It is nothing but
a summarized picture of e environmental factors and their likely impact on the
organization. Generally ETP is prepared in the following manner.
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a. LIST ENVIRONMENT FACTORS

List of different aspects of the relevant environment. For example, economic
environment may be divided into rate of economic growth, national income, savings
investments, rate of inflation fiscal policy monarchy policy etc.
b. ACCESS IMPORTANCE OF ENVIRONMENTAL FACTORS
AF this stage the importance of each environments factor is accessed closely and
expressed in qualitative or quantitative factors. It is worth mentioning here that not all
the identified environmental factorswill have the same degree of importance.
iii. PEST:
PEST is the acronym for political economic sociological and technological factors. It is
important to consider all these factors at the time of environmental scanning.
a. POLITICAL FACTORS:
Are there any other political factors that are likely to change?
When is the countries next local state or national election?
What is the likely timescale of proposed legislation changes?
b. ECONOMIC FACTORS:
How stable is the current economy? Is it growing declining or
stagnating?
Are key exchange rates stable or do they tend to vary significantly.
What is the unemployment rate?
Affect of globalization on ecommerce environment?
c. SOCIO-CULTURAL FACTORS:
Population growth rate.
Society levels of health education and social mobility?
Religious beliefs and lifestyle of population.
Impact of socio cultural factors on business.
d. TECHNOLOGY FACTORS:
New technologies
Access of competitors to new technology
Affect of infrastructure changes on work patterns.
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Unit-2
STRATEGIC ANALYSIS AND CHOICE
2.1. TOOLS AND TECHNIQUES:

2.1.1. STRATEGIC ANALYSIS:-
Strategic analysis enables the firm to recognize its strategic position in the internal and
external corporate environmental.The basic purpose of strategic analysis is to generate
strategic alternatives for the organizational to gain competitive advantage by
formulating and offering superior value to its stake holders.While formulating the
strategy, a firm must have knowledge about 3c’s like;
i) Competencies :-
Competencies can be in the form of skills, knowledge and relationships.
 What is one’s area of expertise?
 What are one’s capabilities?
 What liabilities does one have?
 What are the avenues of making money?
ii) Competition:-
Competition covers all the areas of competition from regulation to real life.
 What is the basis of competition?
 From where the threats can arise?
 Which market segments are under pressure and where is the company better
placed?
iii) Customers :-
This area comprises of existing customers, prospective customers andseveral market
segments.
 Here, the firm needs to answer the questions regarding :What are their needs?
 How can their needs be fulfilled?
 Which categories of customers are more profitable?
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2.1.2. PROCEDURE OF STRATEGIC ANALYSIS:-
i. PERFORM AN ENVIRONMENTAL ANALYSIS OF CURRENT

STRATEGIES:
Starting from the beginning, a company needs to complete an environmentalanalysis of
its current strategies. Internal environment considerations include issues such as
operational inefficiencies, employee morale, and constraints from financial issues.
External environment considerations include political trends, economic shifts, and
changes in consumer tastes.
ii. DETERMINE THE EFFECTIVENESS OF EXISTING STRATEGIES:
A key purpose of a strategic analysis is to determine the effectiveness of the current
strategy amid the prevailing business environment. Strategists must ask themselves
questions such as: Is our strategy failing or succeeding? Will we meet our stated goals?
Does our strategy align with our vision, mission, and values?
iii. FORMULATE PLANS:
If the answer to the questions posed in the assessment stage is “No” or “Unsure,” we
undergo a planning stage where the company proposes strategic alternatives. Strategists
may propose ways to keep costs low and operations leaner. Potential strategic
alternatives include changes in capital structure, changes in supply chain management,
or any other alternative to a business process.
iv. RECOMMEND AND IMPLEMENT THE MOST VIABLE STRATEGY:
Lastly, after assessing strategies and proposing alternatives, we reach the
recommendation. After assessing all possible strategic alternatives, we choose to
implement the most viable and quantitatively profitable strategy.After producing a
recommendation, we iteratively repeat the entire process. Strategies must be
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implemented, assessed, and re-assessed. They must change because business

environments are not static.
2.2. PORTER’S FIVE FORCE MODEL:

Five forces model was created by M. Porter in 1979 to understand how five key
competitive forces are affecting an industry. The five forces identified are:
These forces determine an industry structure and the level of competition in that
industry. The stronger competitive forces in the industry are the less profitable it is.
i. THREAT OF NEW ENTRANTS.

This force determines how easy (or not) it is to enter a particular industry. If an
industry is profitable and there are few barriers to enter, rivalry soonintensifies.
When more organizations compete for the same market share, profits start to fall. It is
essential for existing organizations to create high barriers to enter todeter new
entrants.Threat of new entrants is high when:
 Low amount of capital is required to enter a market;
 Existing companies can do little to retaliate;
 Existing firms do not possess patents, trademarks or do not haveestablished
brand reputation;
 There is no government regulation;
ii. BARGAINING POWER OF SUPPLIERS:
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Strong bargaining power allows suppliers to sell higher priced or low qualityraw
materials to their buyers. This directly affects the buying firms’ profits because it has
to pay more for materials. Suppliers have strong bargaining power when:
 There are few suppliers but many buyers;
 Suppliers are large and threaten to forward integrate;
 Few substitute raw materials exist;
 Suppliers hold scarce resources;
iii. BARGAINING POWER OF BUYERS:
Buyers have the power to demand lower price or higher product quality fromindustry
producers when their bargaining power is strong. Lower price means lower revenues
for the producer, while higher qualityproducts usually raise production costs. Both
scenarios result in lower profits for producers.Buyers exert strong bargaining power
when:
 Buying in large quantities or control many access points to the finalcustomer;
 Only few buyers exist;
 Switching costs to other supplier are low;
 They threaten to backward integrate;
 There are many substitutes;
 Buyers are price sensitive.
iv. THREAT OF SUBSTITUTES:
This force is especially threatening when buyers can easily find substitute products
with attractive prices or better quality and when buyers can switch from one product or
service to another with little cost. For example, to switch from coffee to tea doesn’t
cost anything, unlike switching from car to bicycle.
v. RIVALRY AMONG EXISTING COMPETITORS:
This force is the major determinant on how competitive and profitable anindustry is
In competitive industry, firms have to compete aggressively for a marketshare,
which results in low profits. Rivalry among competitors is intense when:
 There are many competitors;
 Exit barriers are high;
 Industry of growth is slow or negative;
 Products are not differentiated and can be easily substituted;
 Competitors are of equal size;
 Low customer loyalty.
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2.2.1. USING THE PORTER’S FIVE FORCE MODEL:

We now understand that Porter’s five forces framework is used to analyze industry’s
competitive forces and to shape organization’s strategy according to the results of the
analysis. But how to use this tool? We have identified the following steps:
Step 1. Gather the information on each of the five forces
Step 2. Analyze the results and display them on a diagram
Step 3. Formulate strategies based on the conclusion. 

Step 1. GATHER THE INFORMATION ON EACH OF THE FIVE
FORCES:
 What managers should do during this step is to gather information about their
industry and to check it against each of the factors (such as “number of
competitors in the industry”) influencing the force.
 We have already identified the most important factors in the table below.
Step 2. ANALYZE THE RESULTS AND DISPLAY THEM ON A
DIAGRAM:
 After gathering all the information, you should analyze it and determine how each
force is affecting an industry.
 For example, if there are many companies of equal size operating in the slow
growth industry, it means that rivalry between existing companies is strong.
o Remember that five forces affect different industries differently so don’t
usethe same results of analysis for even similar industries!
Step 3. FORMULATE STRATEGIES BASED ON THE CONCLUSIONS:
 At this stage, managers should formulate firm’s strategies using the resultsof
the analysis
 For example, if it is hard to achieve economies of scale in the market, the
company should pursue cost leadership strategy.
 Product development strategy should be used if the current market growth is
slowand the market is saturated
2.3. BCG MATRIX:

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Boston Consulting Group (BCG) Matrix is a four celled matrix (a 2 * 2 matrix)

developed by BCG, USA. It is the most renowned corporate portfolio analysis tool. It
provides a graphic representation for an organization to examine different businesses in
its portfolio on the basis of their related market share and industry growth rates. It is a
two dimensional analysis on management of SBU’s (Strategic Business Units). In other
words, it is a comparative analysis of business potential and the evaluation of
environment.According to this matrix, business could be classified as high or low
according to their industry growth rate and relative market share.
Relative Market Share = SBU Sales this year leading competitors sales this year.
Market Growth Rate = Industry sales this year - Industry Sales last year.
The four cells of this matrix have been called as stars, cash cows, questionmarks and
dogs. Each of these cells represents a particular type of business.
Figure: BCG Matrix

I. STARS:
Stars represent business units having large market share in a fast growing industry.
They may generate cash but because of fast growing market, stars require huge
investments to maintain their lead. Net cash flow is usually modest. SBU’s located in
this cell are attractive as they are located in a robustindustry and these business units
are highly competitive in the industry. If successful, a star will become a cash cow when
the industry matures.
II. CASH COWS:
Cash Cows represent business units having a large market share in a mature, slow
growing industry. Cash cows require little investment and generate cash that can be
utilized for investment in other business units. These SBU’s are the corporation’s key
source of cash, and are specifically the core business. They are the base of an
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organization. These businesses usually follow stability strategies. When cash cows lose
their appeal and move towards deterioration, then a retrenchment policy may be
pursued.
III. QUESTION MARKS:

 Question marks represent business units having low relative market shareand
located in a high growth industry.
 They require huge amount of cash to maintain or gain market share.
 They require attention to determine if the venture can be viable.
 Question marks are generally new goods and services which have a good
commercial prospective.
 There is no specific strategy which can be adopted.
 If the firm thinks it has dominant market share, then it can adoptexpansion
strategy, else retrenchment strategy can be adopted.
 Most businesses start as question marks as the company tries to
enter ahigh growth market in which there is already a market-share.
 If ignored, then question marks may become dogs, while if huge investment is
made, and then they have potential of becoming stars.
IV. DOGS:
 Dogs represent businesses having weak market shares in low-growth
markets.
 They neither generate cash nor require huge amount of cash.
 Due to low market share, these business units face cost disadvantages.
 Generally retrenchment strategies are adopted because these firms can
gain market share only at the expense of competitor’s/rival firms.
 These business firms have weak market share because of high costs, poor
quality, ineffective marketing, etc.
 Unless a dog has some other strategic aim, it should be liquidated if thereare
fewer prospects for it to gain market share.
 Number of dogs should be avoided and minimized in an organization.
2.3.1. LIMITATIONS OF BCG MATRIX:
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The BCG Matrix produces a framework for allocating resources among different
business units and makes it possible to compare many business units at a glance. But
BCG Matrix is not free from limitations, such as-
 BCG matrix classifies businesses as low and high, but generally businesses can
be medium also. Thus, the true nature of business may not be reflected.
 Market is not clearly defined in this model.
 High market share does not always leads to high profits. There are high costs also
involved with high market share.
 Growth rate and relative market share are not the only indicators of profitability.
This model ignores and overlooks other indicators of profitability.
 At times, dogs may help other businesses in gaining competitive advantage. They
can earn even more than cash cows sometimes.
 This four-celled approach is considered as to be too simplistic.
2.4. GE MODEL:
The GE / McKinsey matrix is a portfolio analysis matrix for business units developed
in the 1970’s. It was developed by McKinsey & Company as part of a consulting
assignment for General Electric . In practice, the addition "McKinsey" is almost always
omitted and only referred to the General Electric Matrix.
DEFINITION:
GE-McKinsey nine-box matrix-
Is a strategy tool that offers a systematic approach for the multi businesscorporation to
prioritize its investments among its business units?
GE-McKinsey
Is a framework that evaluates business portfolio, provides further strategic implications
and helps to prioritize the investment needed for each business unit (BU).
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In 1970s, General Electric was managing a huge and complex portfolio of

unrelated products and was unsatisfied about the returns from its investments in the
products. At the time, companies usually relied on projections of future cash flows,
future market growth or some other future projections to make investment decisions,
which was an unreliable method to allocate the resources. Therefore, GE consulted the
McKinsey & Company and as a result the nine-box framework was designed. The nine-
box matrix plots the BUs on its 9 cells that indicate whether the company should invest
in a product, harvest/divest it or do a further research on the product and invest in it if
there’re still some resources left. The BUs are evaluated on two axes:
 industry attractiveness and
 A competitive strength of a unit.
I. INDUSTRY ATTRACTIVENESS
 Industry attractiveness indicates how hard or easy it will be for a company to
compete in the market and earn profits.
 The more profitable the industry is the more attractive it becomes.
 When evaluating the industry attractiveness, analysts should look how anindustry
will change in the long run rather than in the near future, because the
investments needed for the product usually require long lasting commitment.
 Industry attractiveness consists of many factors that collectively determine the
competition level in it.
 There’s no definite list of which factors should be included to determine industry
attractiveness, but the following are the most common:
 Long run growth rate
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 Industry size
 Industry profitability: entry barriers, exit barriers, supplier power, buyer
power, threat of substitutes and available complements (use Porter’s
Five Forces analysis to determine this)
 Industry structure (use Structure-Conduct-Performance framework to
determine this)
 Product life cycle changes
 Changes in demand
 Trend of prices
 Macro environment factors (use PEST or PESTEL for this)
 Seasonality
 Availability of labor
 Market segmentation
II. COMPETITIVE STRENGTH OF A BUSINESS UNIT OR A PRODUCT:
Along the X axis, the matrix measures how strong, in terms of competition, a particular
business unit is against its rivals.In other words, managers try to determine whether a
business unit has a sustainable competitive advantage (or at least temporary competitive
advantage) or not.If the company has a sustainable competitive advantage, the next
question is:“For how long it will be sustained?”
The following factors determine the competitive strength of a business unit:
 Total market share 
 Market share growth compared to rivals 
 Brand strength (use brand value for this)
 Profitability of the company
 Customer loyalty
 VRIO resources or capabilities (use VRIO framework to determine this)
 Your business unit strength in meeting industry’s critical success factors (use
Competitive Profile Matrix to determine this)
 Strength of a value chain (use Value Chain Analysis and Benchmarking to
determine this)
 Level of product differentiation 
 Production flexibility


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INVEST/GROW BOX.
 Companies should invest into the business units that fall into these boxes asthey
promise the highest returns in the future.
 These business units will require a lot of cash because they’ll be operating in
growing industries and will have to maintain or grow their market share.
 It is essential to provide as much resources as possible for BUs so therewould
be no constraints for them to grow.
 The investments should be provided for R&D, advertising, acquisitions andto
increase the production capacity to meet the demand in the future.
SELECTIVITY/EARNINGS BOX:
 You should invest into this bus only if you have the money left over the
investments in invest/grow business units group and if you believe that BUs will
generate cash in the future.
 These business units are often considered last as there’s a lot of uncertainty with
them.
 The general rule should be to invest in business units which operate in huge
markets and there are not many dominant players in the market, so the
investments would help to easily win larger market share.
HARVEST/DIVEST BOX:
 The business units that are operating in unattractive industries don’t have
sustainable competitive advantages or are incapable of achieving it and are
performing relatively poorly fall into harvest/divest boxes.
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DIFFERENCES BETWEEN BCG MATRIX AND GE/MCKINSEY
MATRIX:
BASIS FOR BCG MATRIX GE MATRIX

COMPARISSION
MEANING BCG Matrix is a growth BCG Matrix is a growth
sharemodel, representing growth sharemodel, representing growth
of business and the market share of business and the market share
enjoyed by the enjoyed by the
firm. firm.
NUMBER OF CELLS Four Nine
FACTORS Market share and Market Industry attractiveness and
growth Business strengths
OBJECTIVE To help companies deploy their To prioritize investment among
resources among various various business units.
business units.
CLASSIFICATION The matrix uses two types of The matrix uses three types of
classification i.e high and low classification i.e
high/medium/low and
strong/average/weak
LIMITATIONS Has many limitations Overcomes many limitations of
BCG and is an
improvement over it
2.5. SWOT ANALYSIS

SWOT analysis involves the collection and portrayal of information about internal and
external factors which have, or may have, an impact on business.
2.5.1. MEANING OF SWOT:
SWOT is a framework that allows managers to synthesize insights obtained
from an internal analysis of the company’s strengths and weaknesses with those from
an analysis of external opportunities and threats.SWOT is widely accepted tool due to
its simplicity and value of focusing on the key issues which affect the firm.The aim of
SWOT is to identify the strengths and weaknesses that are relevant in meeting
opportunities and threats in particular situation.
2.5.2. WHAT IS SWOT ANALYSIS?
The answer to the question is simple: it’s a tool used for situation (business or personal)
analysis! SWOT is an acronym which stands for:
Strengths: factors that give an edge for the company over its competitors.
Weaknesses: factors that can be harmful if used against the firm by its competitors.
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Opportunities: favorable situations which can bring a competitive advantage.
Threats: unfavorable situations which can negatively affect the business.
Strengths and weaknesses are internal to the company and can be directly managed by
it,While the opportunities and threats are external and the company can only anticipate
and react to them.
2.5.3. HOW TO PERFORM THE ANALYSIS?
SWOT can be done by one person or a group of members that are directlyresponsible
for the situation assessment in the company.Basic SWOT analysis is done fairly easily
and comprises of only few steps:
Step 1. Listing the firm’s key strengths and weaknesses.
Step 2. Identifying opportunities and threats.
2.6. TOWS MATRIX:

 The TOWS Matrix is derived from the SWOT Analysis model, which stands for
the internal Strengths and Weaknesses of an organization and the external
Opportunities and Threats that the business is confronted with.
 The acronym TOWS is a variant of this and was developed by the American
international business professor Heinz we rich.
 The TOWS Matrix is aimed at developing strategic options from an external-
internal analysis and is a practical tool, particularly in the fields of business and
the TOWS Matrix helps businesses to identify their strategic options.
Take note of the following specific elements of a TOWS matrix:
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1. Strengths-Opportunities Strategies: SO strategies or maxi-maxi strategies
involve the use of strengths to maximize strengths.
2. Weaknesses-Opportunities Strategies: WO strategies or mini-maxi strategies
involve minimizing weaknesses by taking advantage of opportunities,
3. Strengths-Threats Strategies: ST strategies or maxi-mini strategies involve
using strengths to minimize threats.
4. Weaknesses-Threats Strategies: WT strategies or mini-mini strategies involve
minimizing weaknesses and avoiding threats.
STRATEGIES:
The above-mentioned factors can be linked to each other, leading to strategies:
S-O STRATEGY–
Develop plans that leverage the strengths of the company to capitalize on opportunities.
A few ideas could be to diversify into new markets, improve the quality of products and
reduce the costs of top-selling products.
S-T STRATEGY–
Use the company's strengths to counter external threats. If the company hasa strong
research and development department, for example, start new product development
projects to enter different markets.
How can the organization use its skilled staff to compete with cheaper workers
employed by competitors? A smart approach for the organization would be to
communicate to the outside world that their staff has accredited diplomas and that it’s
important for housing co-operatives to comply with legal requirements and safety
standards.
W-O STRATEGY–
After identifying weaknesses, focus on ways to resolve them in a goal to take advantage
of opportunities. This might require finding new and cheaper suppliers, developing more
aggressive marketing campaigns and reviewing operational processes to reduce costs.
How can partnerships with vocational education centers help the organization to
improve itself and put more effort into customer acquisition? By presenting itself as an
accredited apprenticeship provider, the organization will put itself on the market again
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and its shows that adapt to changing times and wants to offer different kinds of
maintenance to businesses and housing co-operatives.
W-T STRATEGY –
Find ways to minimize weaknesses and counter threats. This could involve closing out
poor-selling products, terminating under-performing employees and developing more
aggressive selling techniques.
How can the organization better position itself in the market and thus reduce the threat
posed by competitors? By presenting itself as an accredited apprenticeship provider, the
organization can claim that they are a serious competitor and can possibly offer
maintenance services by apprentices at reduced rates, with the work still being done by
an accredited company.
2.7. MARKET LIFE CYCLE MODEL:

PLC is an S-shaped curve which exhibits the relationship of sales with respect to the
time it takes for a product to pass through the four successive stages of introduction
(slow sales growth), growth (rapid market acceptance), maturity (slowdown in growth
rate) and decline (sharp downward drift).
 If markets business or industries are substituted for a product the concepts of PLC
could work just as well.
 The main advantage of the life cycle concept is that it can be used to diagnose a
portfolio f products (or markets, business or industries) in orderto establish the
stage at which each of them exists.
 For example, expansion may be a feasible alternative for businesses in the
introductory and growth stages.
o Mature business may be used as sources of cash for investment in other
business which needs resources.
o A combination of strategies like selective harvesting retrenchment and so
onmay be adopted for declining businesses.
 In this way a balanced portfolio of business may be built by exercising a
strategies choice based on the life cycle concept.
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Various strategies used in different phases of PLC are as follows,
a. INTRODUCTION PHASE:
 This phase marks the launch of the product in a market.
 Organizationally this phase is characterized by high operational costs arisingout
of inefficient production levels or bottlenecks high learning time, unwillingness
of the trade to deal in the product demand of higher marginsor extended credit
terms and advertising.
 During this phase firm’s requirement for cash is very high as all expenses have to
be met.
 Generally the supplier’s media and others are not willing to give credit. Hence all
payments have to be made in cash.
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According to P. KOTLER, management can pursue one of the fourstrategies on the basis
of high low price and promotion.
i. RAPID SKIMMING STRATEGY:
 This strategy of high price and high promotion works effectively only when
the customer awareness for the product is not very high, or for those who
are aware willingness to pay any price to possess or buy it is high.
 Here the marketers want to cover the cost as much as possible during the
launch phase of gather product.
 This strategy also works when the market size for the product.
 This strategy also works when the market size for the product is large and
the threat from competition is imminent.
 Most consumer electronics and non-durables could be classified in this
group.
 This is the reason why most consumer electronics like TV, VCR, music
system video games and so forth are initially priced high and then gradually
reduced to maintain market share.
ii. SLOW SKIMMING STRATEGY:
 This strategy is based on the assumption that the firm has sufficient time to
recover its prelaunch expenses.
 Here the company launches the product at high price but spends lesser
money on the promotion.
 The resultant profitability is more as company is able to charge higher price
but the marketing costs are lower.
 This happens when the technology being used by the firm is highly
sophisticated and competition will have to invest substantial resources to
get this technology.
 Further since most competitors may not have the required quantum of
resources competition may be limited to just one or two large companies.
 Another environment characteristic supporting this strategy is that the
market size for the product is limited and those who are aware are willing
to pay any price to buy it.
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iii. RAPID PENETRATION STRATEGY:
 The strategy of rapid penetration is based on the same assumption and
environment conditions as the ones mentioned under the rapid skimming
strategy.
 The only difference between rapid skimming and penetration is the firm’s
long term objectives.
 Here the company charges low price and spends heavily on the promotional
efforts.
 If the objectives is marked share and profit maximization in the long run and
intensive competition or other entry barriers characterize the marketa firm
may choose to enter the market with this strategy.
b. MATURITY PHASE:
 Most products that survive the heat of competition and even customers
approval enter the maturity phase.
 This phase is characterized by slowing of growth rates of sales and
profits. In fact a decline in profits seems to appear now.
 This phase is also marked by cut throat competition which often tends to
narrow down to a price and promotion war.
 Maturity phase also sees a boom in the market demand as more and more
customers are now willing to accept the product.
 For an effective management the marketing manager should.
 Improve the quality of the product.
 Give proper attention to increase the usage among the current
customers.
 Try to convert non users into users of the product that is creative
new buyers.
 Give proper emphasis to advertisement and promotional
programmes.
 Try to discover new uses for the product.
c. DECLINE PHASE:
 This is the last and most crucial stage.
 Sales may decline for a number of reasons technical advances arrival of
new products at low cost changes in fashion consumer preference etc.
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 Sales and profits continue to fall at this stage. If the substitutes are more
attractive and in latest fashion buyers may turn their eyes towards them.
According to STANTON, cost control is increasingly important to generate profitsby
the following alternatives.
Improve the product in a functional sense or revitalize it in some manner. Make sure that
the marketing and production programmes are as efficientas possible. Streamline the
product assortment by pruning out unprofitable sizes and models. Frequently this tactic
will decrease sales and increase profits. Run out the product that is cut all costs to the
bare minimum level thatwill optimize profitability over the limited remaining life of the
product.
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UNIT-3 STRATEGY FORMULATON
1.1. FORMULATION OF STRATEGY AT CORPORATE

LEVEL:
1.1.1. STRATEGY FORMULATION:
Strategy Formulation is an analytical process of selection of the best suitable course of action
to meet the organizational objectives and vision.
It is one of the steps of the strategic management process. The strategic plan allows an
organization to examine its resources, provides a financial plan and establishes the most
appropriate action plan for increasing profits. It is examined through SWOT analysis. SWOT is
an acronym for strength, weakness, opportunity and threat. The strategic plan should be
informed to all the employees so that they know the company’s objectives, mission and vision.
It provides direction and focus to the employees.
1.1.2. LEVELS OF STRATEGY FORMULATION:
There are three levels of strategy formulation used in an organization:
a) Corporate level strategy: This level outlines what you want to achieve: growth, stability,
acquisition or retrenchment. It focuses on what business you are going to enter the
market.
b) Business level strategy: This level answers the question of how you are going to
compete. It plays a role in that organization which has smaller units of business and each is
considered as the strategic business unit (SBU).
c) Functional level strategy: This level concentrates on how an organization is going to
grow. It defines daily actions including allocation of resources to deliver corporate and
business level strategies.
Hence, all organizations have competitors, and it is the strategy that enables one business to
become more successful and established than the other.
1.1.3. FORMULATING STRATEGIES AT CORPORATE LEVEL:
 Corporate level strategies generally pertain to large corporations with multi-businesses
as to how they manage and allocate resources among these businesses.
 Such a strategy helps the management in balancing resources with market opportunities
in each business area.
 Top managers are responsible for formulating corporate level strategy, and they
generally look ahead for five years or longer.
 At the corporate level, top managers have two types of decisions to make when
formulating a strategy. First, they must develop a master plan also known as “grand
strategy” which is consistent with the overall directionfor the organization. Second, they
must develop a “portfolio strategy” that will determine the types of organization activities
and allocation of resources to these activities.
I. GRAND STRATEGY:
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A “grand strategy” is a comprehensive general strategy which provides the basis for strategic
direction that will accomplish the organization’s long- term goals. Grand strategies include three
types of strategies, namely growth, stability and retrenchment. While in stability strategy,
management maintains the status quo if the company is doing well and does not want to take
risks associated with more aggressive growth, both the growth strategy and retrenchment
strategy have a number of different ways to achieve the results.
II. STABILITY STRATEGY:
Stability strategy implies “to leave the well enough alone.” If the environment is stable and the
organization is doing well, then it may believe that it is better to make no changes. An
organization would apply stability strategy if it is satisfied with the same product line, serving
the same consumer groups and maintaining the same market share and the management does not
want to take any risks that might be associated with expansion. For example, WD-40 Company
with a single product, petroleum – based lubricant, has been around since the 1950s. The
management of the company has little or no interest in changing the status quo and seems happy
to keep the good thing going as usual.
iii. RETRENCHMENT STRATEGIES:
Retrenchment primarily means reduction in product, services or personnel. This strategy is
generally useful in the face of tough competition, scarcity of resources and declining economy.
Under certain situations, retrenchment strategy becomes highly necessary for the very survival
of the company, even though it may reflect poorly on the management of such a company.
Retrenchment strategies include harvest, turnaround, divestiture, bankruptcy and liquidation.
1.2. FORMULATING STRATEGIES AT BUSINESS LEVEL:
After formulating corporate-level strategies, managers attend to business level strategies for a
multi-business corporation. Guided by the direction set by corporate level strategy, business
level strategy is concerned with managing the interests and operations of a particular line of
business, especially with its competitive position in the market. With the end-goal of satisfying
customers' needs with your product or service, use business-level strategies to find your
competitive advantage.
1.2.1. TYPES OF BUSINESS LEVEL STRATEGIES:
I. COST LEADERSHIP:
Cost leadership means offering the best price for products. Today's globalized markets make
price a significant factor in selling to your customers. Big box stores use generic models for
pricing, keeping costs lower than most. Digital marketplaces don't require the major retail
overhead that brick- and-mortar stores do. The cost leadership strategy considers the cost to
make the goods, transport and deliver them to customers. The price point is further affected by
whether supplies are readily available and the cost your business to switch suppliers or vendors
if their prices became too high.
For example, a wooden toy manufacturer might use a specific type of wood to make the
company's toys. If that wood becomes unavailable from regular suppliers because of unforeseen
circumstances, the cost of switching affects the bottom line and potential pricing.
II. DIFFERENTIATION:
 When a product isn't the least expensive on the market, businesses need to find a way
to differentiate them.
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 Identify the features and benefits of the product or service that make it worth more money.
For example, a Mercedes is more expensive than a Honda. While many buy the Honda
for the price and reliability, Mercedes has differentiated itself as a luxury automobile with
higher standards of quality and added features.
III. FOCUSED LOW COST:

 The focused low-cost strategy is similar to cost leadership; the company is trying to beat
competitor's prices.
 However, in this business-level strategy, the business is focusing its marketing efforts in
a specific way.
 This is most commonly seen when a company targets government contracts. It needs to
beat competitors pricing but isn't trying to beat the general consumer pricing.
 Focused differentiation takes the differentiation strategy one step further.
 It finds the added value of the products and services and then targets a small market niche.
 For example, a travel company may not be able to compete with the online travel sites for
hotels and airfare. However, it might be able to target families seeking kid-friendly
cruises or business travelers who need accommodations for conferences.
 This type of focused differentiation helps a business define a niche whereit is profitable
and not competing solely on price.
IV. INTEGRATED LOW COST/DIFFERENTIATION:

This business-level strategy combines low cost with differentiation. This model is becoming
increasingly popular in global markets becauseit allows flexibility in both price and added
value. While it is a successful strategy for large corporations such as Southwest Airlines,
executing this strategy requires finding the sweet spot of price and value. In Southwest's case, it
offers low-cost airfare with easy travel access to flights and in-flight perks. For a small-business
owner, the sweet spot must be competitive in price, though not necessarily the lowest and it must
have a value-added component for consumers to justify the extra cost.
1.3. STRATEGY FORMULATION IN FUNCTIONAL LEVELS:

A functional-level strategy focuses on the major functional areas of the company and is
formulated primarily to support business level strategy. The functional-level strategy is narrower
in scope than a business-level strategy because each strategy deals with each of the major
functions of business such as marketing, finance, operations, human resources, research and
development and information systems. Even though each strategy is separately developed for
each business function, they must all be coordinated with each other and integrated with the
business-level strategy.
a. MARKETING:
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 The goal of the marketing strategy is to establish customer loyalty and to reach out to new
markets.
 No matter how good the product is, people have to know about it before they buy and in
that respect marketing strategy may be the most important functional strategy.
For example, when Coca-Cola decided to expand in its Japanese market, it developed a wide
range of marketing strategies, including establishing a distribution sales force, installing a
number of vending machines at strategic locations and investing heavily into promotion of the
product.
 As a result, Coca-Cola- captured nearly 70 percent of Japanese market for soft drinks.
b. FINANCE:
The financial strategy deals with acquisition of financial resources, analyzing cost structure,
estimating profit potential, accounting functions and so on. The financial resources may be
acquired by floating stock offering, loans from banks or other private sources. For example, the
new European Disneyland outside Paris was financed by issuing special classes of stock while
Continental Airlines borrowed a lot of money to finance its growth in the 1980s.
c. OPERATIONS:
The operations function involves production processes, inventory levels, quality of product,
quality of raw materials, making adjust ments in plant capacity and so on. It primarily stems
from the company’s market strategy, which, for example, may require high quality, high priced
products or low priced, low quality mass produced products. Some of the current innovative
ideas that may be incorporated in an operation (or production) strategy are automation, use of
robotics and so on. For a multi-national organization, a production strategy may involve locating
facilities in countries where raw materials and human resources are cost efficient.
d. HUMAN RESOURCES:
 An effective human resources strategy is useful in a number of related areas.
 These areas include number of employees required, training needs, skill levels required,
compensation, performance appraisal and so on.
 Relationship with labor unions is an important aspect of human resources strategy.
Executive development programs require strategic attention.
For example, if an organization anticipates opening new plants in the near future, it must
plan on locating and developing potential managers for these plants. Training managers
for foreign assignments is a very important strategic task for international organizations.
e. RESEARCH AND DEVELOPMENT:

 When business-level strategy involves innovations in the areas of product development
or improvement in service, the research and development (R & D) function supports this
strategy.
 The R&D strategy may include a policy in protecting the company’s patents and
licenses.
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 MERK & Co. has a strong commitment to research and development programs and its
success has been due to a number of new-product breakthroughs which has given it a
f. INFORMATION SYSTEMS:
o Information systems strategy supports the business-level strategy by providing
necessary and relevant information to all functional areas and all levels of
management.
o The availability of advanced technology computers can store and analyze data, and
convert such data into useful information which can be presented to management for
decision making purposes.
o Managing information system is an important aspect of efficient operations.
STRATEGIC ALTERNATIVES:
Strategic alternatives are strategies that a business develops to set the direction, for
which human and material resources will be applied, for a greater chance of achieving
selected goals. Generally, a company develops strategic alternatives when it's
struggling and seeking a new direction to increase profits, or even simply to save itself
from dissolution or bankruptcy.
A) STABILITY STRATEGY:
When an enterprise is satisfied by its present position, it will not like to change from
here and it will be a stability strategy. Stability strategy will be successful when the
environment is stable. This strategy is exercised most often and is less risky as a course
of action. A stability strategy of a concern for example will be followed when the
organization is satisfied with the same product, serving the same consumer groups
and maintaining the same market share.
STABILITY STRATEGIES CAN BE OF THE FOLLOWING TYPES:
(I) NO-CHANGE STRATEGY:
 Stability strategy is a conscious decision to do nothing new, that is to continue
with the present work.
 It does not mean an absence of strategy, rather taking no decision in it is a
strategy.
 When external environment is predictable and organizational environment is
stable then a businessman may like to continue with the present situation. There
may be major opportunities or threats operating in the environment.
 There may be no new threat from competitors or no new competing product may
be coming into the market, under these circumstances it will be prudent to
continue the present strategies.
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 The small and medium firms generally operate in a limited market and supply
products and services with the use of time tested technology, such firms will
prefer to continue with their present work.
(II) PROFIT STRATEGY:
Sometimes things change in such a way that the firm has to adopt changes in its working.
There may be unfavorable external factors such as increase in competition, recession in
the industry, government attitude, industry down turn etc. Under these situations it
becomes difficult to sustain profitability.
A supposition is that the changed situation will be a temporary phase and old situation
will again return. The firm will try to sustain profitability by controlling expenses,
reducing investments, raise prices, cut costs, increase productivity etc. These measures
will help the firm in sustaining current profitability in the short run.
With the opening of markets, Indian industry is facing lot of problems with the presence
of multinationals and reduction in tariff on imports. The firms will have to adjust their
policies to the changing environment otherwise they will find it difficult to stay in the
market.
Profit strategy will be successful for a short period only. In case things do not improve
to the advantage of the firms then this strategy will only deteriorate their position.
This strategy can work only if problems are temporary.
(III) PROCEED-WITH CAUTION STRATEGY:
 Proceed with caution strategy is employed by firms that wish to test the ground
before moving ahead with full-fledged grand strategy or by those firms which
had a rapid pace of expansion and now wish to rest for a while before moving
ahead.
 The pause is sometimes essential because intervening period will allow
consolidation before embracing on further expansion strategies.
 The main object is to let the strategic changes seep down the organizational
levels, allow structural changes to take place and let the system adapt to new
strategies.
1. GROWTH STRATEGY:
Growth may mean expansion and diversification of operations of the enterprise. The
management is not satisfied with their present status, the environment is changing,
favorable opportunities are available, in such cases growth strategy will be helpful in
expansion as well as diversification. The growth strategy may be implemented
through product development, market development, diversification, vertical
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integration or merger. In product development, new products are added to the existing
ones or new products replace the old ones when they are obsolete.
In market development strategy, new customers are approached or those markets are
explored which were not covered earlier. In diversification both new products and new
markets are added. The enterprise may also enter entirely new lines. In vertical
integration, the backward or forward lines may also be taken up.
A company may start producing its own raw materials or it may start processing its own
output before marketing. For example, a weaving unit may start making thread and
ginning of cotton (backward integration) or it may start producing readymade garments
(forward integration).
In merger, two or more concerns may join their resources to take advantage of financial
or marketing factors. Growth should be properly planned and controlled otherwise it
may bring adverse results. Since growthis an indication of effective management it is
not only essential but desirable too.
GROWTH STRATEGIES MAY BE DESCRIBED AS FOLLOWS: (I) GROWTH THROUGH
CONCENTRATION:
 Growth involves converging resources in one or more of enterprise’s businesses
in terms of their respective customer needs, customer functions or alternative
technologies in such a way that it results in growth.
 This strategy involves the investment of resources in a product line for an
identified market with the help of proven technology. It may be done in a number
of ways.
 The enterprise may focus on existing markets with present products by using
market penetration or it may attract new users for existing products or it may
introduce newer products in existing markets by concentrating on product
development.
 The concentration strategy will apply when industry possesses high growth
potential and the firm should be strong enough to sustain the growth.
(II) GROWTH THROUGH INTEGRATION:
 Under integration strategy the firm continues serving the same customers but
increases the scope of its business definition.
 Integration involves taking up more activities than taken up earlier. There can be
backward integration as well as forward integration.
 There are activities ranging from procurement of raw materials to marketing of
finished products. The firm may move up or down of the value chain for
increasing its scope of work.
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 Several process based industries such as petrochemicals, steel, textiles etc. have
integrated firms. These firms deal with products with a value chain extending
from the basic raw materials to ultimate consumer.
 The firms operating at one end of the value chain attempt to move up or down in
the process while integrating activities adjacent to their present activities.
 While adopting integration strategy the firm must take into account the
alternative cost of make or buy. If the cost of manufacturing one’s product is
less than the cost of procuring it from the market only then this activity should
be integrated. Similarly, if the cost of selling the finished product is lesser than
the price paid to the sellers to do the same thing then it will be profitable to
move down on the value chain.
(III) GROWTH THROUGH DIVERSIFICATION:
 Diversification strategy involves a substantial change in the business definition,
singly or jointly, in terms of customer functions, customer groups or alternative
technologies of one or more of a firm’s business.
 When an organization takes up an activity in such a manner that it is related
to the existing business it is called concentric diversification.
 The firm may market more products to the same customers, a new product or
service may be offered to the same customers, these are the cases of
diversification of business activities.
 Growth may also be undertaken by taking up those activities which are unrelated
to the existing business, a cigarette company may diversify into hotel industry,
and it will be a case of conglomerate diversification.
 Diversification strategies are helpful in spreading risk over several businesses.
If environmental and regulatory factors block growth then diversification may
be a proper way.
(IV) GROWTH THROUGH CO-OPERATION:
 There is a view that firms operate in a competing market. When one firm gains
in its market share then one or more firms lose this share.
 It is a win-lose situation where if one wins then one or several others have to
lose. But thinkers like James Moore, Ray Noorda, and Barry J. Nalebuff are of
the view that competition could co-exist with cooperation.
 The strategies could take into account the possibility of mutual cooperation
with competitors while competing with them at the same time so that market
potential could expand.
 The co-operative strategies can take the form of mergers, acquisitions, joint
ventures and strategic alliances.
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 All these strategies taken separately or jointly can help the growth of a firm.
(V) GROWTH THROUGH INTERNATIONALIZATION:
 International strategies are a type of growth strategies that require firms to market
their products or services beyond the national or domestic market.
 A firm would have to assess the international environment and evaluate its own
capabilities and to form strategies to enter foreign markets.
 The firm may start exporting products or services to foreign countries or it may
set up a subsidiary in other countries for producing and marketing the products
or services there.
 In such situations the firm would have to implement the strategies and monitor
and control its foreign operations.
 International strategies require a different strategic perspective than the
strategies implemented in national context.
2. RETRENCHMENT OR RETREAT STRATEGY:
An enterprise may retreat or retrench from its present position in order to survive or
improve its performance. Such a strategy may be adopted during a period of recession,
tough competition, and scarcity of resources and reorganization of company in order
to reduce waste. This strategy, though reflecting failure of the company to some degree
becomes highly necessary for the survival of the company. When an organization
chooses to focus on ways and means to reverse the process of decline, it adopts a
turnaround strategy. If it cuts off the loss- making units, divisions, curtails
product line or reduces the functions performed, it adopts a disinvestment
strategy. If these actions do not work then the activities may be totally abandoned and
the unit may be liquidated.
(I) TURNAROUND STRATEGIES:
 Retrenchment may be done either internally or externally.
 Internal retrenchment is done to improve internal working. This usually takes the
form of an operating turnaround strategy. In contrast, a strategic turnaround is a
more serious form of external retrenchment and leads to disinvestment or
liquidation.
 Turnaround strategies may be adopted in different ways. One way may be that
the existing chief executive and management team handles the turnaround
strategy with the help of specialist or external consultant. The success of this
approach will depend upon the type of credibility the chief executive has with
banks and other financing institutions.
 In another situation, the present chief executive withdraws from the scene
temporarily and the work is done by the outside specialist employed for this job.
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 The third approach to execute the turnaround strategy involves the replacement
of the existing team or merging the sick organization with a healthy one.
(II) DISINVESTMENT STRATEGIES:
 It involves the sale or liquidation of a portion of business or major division or
profit center etc.
 Disinvestment is usually a part of rehabilitation or restructuring plan.
 This strategy is adopted when turnaround strategy has failed.
 A firm may disinvest in two ways. A part of the company is divested by spinning
it off as a financially and managerially independent company, with the parent
company retaining or not retaining partial ownership. Alternatively, the firm may
sell a unit outright.
(III) LIQUIDATION STRATEGIES:
It involves the closing down of a firm and selling its assets. It is considered to be the
last resort because it leads to seriousconsequences such as loss of employment for
workers and other employees, termination of opportunities where the firm could pursue
any future activities and also the stigma of failure which will be attached with this action.
3. COMBINATION STRATEGY:
A large firm, active in a number of industries may adopt a combined strategy. It
represents mix of the three strategies mentioned above. A large concern may adopt
growth strategy’ on one side and retreat strategy in the other area. In order to make this
strategy effective there should be right people who can take objective and intelligent
decisions by considering various factors.
There may not be a concern which has adopted only one strategy throughout. The
complexity of doing business demands that different strategies be adopted to suit the
situational demands made upon the organization. A company which has adopted a
stability strategy for long may like to use expansion strategy later. Similarly a firm which
has seen expansion for quite some time may like to consolidate its working. Multi-
business companies have to follow multiple strategies.
ADDITIONAL DATA:
What are some ways to implement a retrenchment strategy without
creating a lot of resentment and conflict with labor unions?
 If the problems are not critical, the focus should be to reducing unnecessary
overhead & the company should try to justify the cost of functional activities.
 At that stage, the HR department should be fully activated to emphasis &
encourage the employee to involve in productive improvement.
 The History tells us that hundreds of companies become stronger & productive
as well as organized by applying these discipline. On the other side many
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companies faces much destructive situation when they prefer downsizing to

reduce the cost of company’s activities.
 Through divestment, the company would be able to keep productive division on
a track having much focus.
 Moreover, Strong board of director can keep the management on a right way
because it is notice that when a company fell in crisis, the top management
usually perceives that crisis not harmful for company’s strength. So they keep
focus on profit maximization rather than making the ground safe to play a safe
shot in future.
 After the layoff, remaining employees will also indulge in Ex-employees duties.
The moral of productive employees also hampered & they feel their jobs
unsecure.
 Ultimately, they will shift in another company for seeking better job. When they
will do so, the overall performance will also fall down & company would have
to face much more problems than past.
“Be too forceful, output may improvebut vitality will take a hit”
 It is proved that last in first out approach for layoff is better if company is near
to sell out. The organization should route out long- standing activities that added
little business value.
 The organization should consolidate or centralize key functions. Regarding
Value chain, the company should analyze current supplier & procurement
practices.
 Many organization stop overdoing on company’s strength to reduce cost level.
Hereby, the practice is written which was successfully implemented by the
renowned company to handle the retrenchment strategy without resentment &
conflicting with labor unions.
“The management should make clear that every single one would have to come up with
ideas for cost cutting.”
 To Conclude, by focusing on job rotation, value added jobs, empowering existing
employees, keeping focus on future and outsourcing are the ways to implement a
retrenchment strategy without creating a lot of anger and unhappiness regarding the
job
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UNIT-4
STRATEGY IMPLEMENTATION
INTRODUCTION:
Strategy implementation is the translation of chosen strategy into organizational
action so as to achieve strategic goals and objectives. Strategyimplementation is also
defined as the manner in which an organization should develop, utilize, and
amalgamate organizational structure, controlsystems, and culture to follow strategies
that lead to competitive advantage and a better performance. Organizational structure
allocates special valuedeveloping tasks and roles to the employees and states how these
tasks and roles can be correlated so as maximize efficiency, quality, and customer
satisfaction-the pillars of competitive advantage. But, organizational structure is not
sufficient in itself to motivate the employees.
An organizational control system is also required. This control system equips managers
with motivational incentives for employees as well as feedback on employees and
organizational performance. Organizational culture refers to the specialized collection
of values, attitudes, norms andbeliefs shared by organizational members and groups.
Strategic implementation is critical to a company's success, addressing the who,

where, when, and how of reaching the desired goals and objectives. It focuses on the
entire organization. Implementation occurs after environmental scans, SWOT analyses,
and identifying strategic issues and goals. Strategy implementation is the time-taking
part of the overall process, as it puts the formulated plans into actions and desired
results.
PREREQUISITES OF STRATEGY IMPLEMENTATION:

I. INSTITUTIONALIZATION OF STRATEGY:
First of all the strategy is to be institutionalized, in the sense that the one who framed it
should promote or defend it in front of the members, because it may be undermined.
II. DEVELOPING PROPER ORGANIZATIONAL CLIMATE:
Organizational climate implies the components of the internal environment that
includes the cooperation, development of personnel, the degree of commitment and
determination, efficiency, etc., which converts the purpose into results.
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III. FORMULATION OF OPERATING PLANS:

 Operating plans refers to the action plans, decisions and the programs, that take
place regularly, in different parts of the company.
 If they are framed to indicate the proposed strategic results, they assist in
attaining the objectives of the organization by concentrating on the factors which
are significant.
IV. DEVELOPING PROPER ORGANIZATIONAL STRUCTURE:
 Organization structure implies the way in which different parts of the
organization are linked together.
 It highlights the relationships between various designations, positions and roles.
 To implement a strategy, the structure is to be designed as per the requirements
of the strategy.
V. PERIODIC REVIEW OF STRATEGY:
Review of the strategy is to be taken at regular intervals so as to identify whether the
strategy so implemented is relevant to the purpose of the organization. As the
organization operates in a dynamic environment, which may change anytime, so it is
essential to take a review, to know if it can fulfillthe needs of the organization.
NOTE:
Even the best-formulated strategies fail if they are not implemented
in an appropriate manner. Further, it should be kept in mind that, if there is an alignment
between strategy and other elements like resource allocation, organizational structure,
work climate, culture, process and reward structure, then only the effective
implementation is possible.
PROCESS OF STRATEGY IMPLEMENTATION:
To ensure an effective and successful implementation of strategies, followingsteps are
needed;
STEP-1: EVALUATION AND COMMUNICATION OF STRATEGIC PLAN:
The strategic plan, which was developed during the Strategy Formulation stage, will be
distributed for implementation. However, there is still a need to evaluate the plan,
especially with respect to the initiatives, budgets and performance. After all, it is
possible that there are still inputs that will crop up during evaluation but were missed
during strategy formulation. There are several sub-steps to be undertaken in this step.
 Align the strategies with the initiatives. First things first, check that the strategies
on the plan are following the same path leading to the mission and strategic goals of the
organization.
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 Align budget to the annual goals and objectives. Financial assessments

conducted prior will provide an insight on budgetary issues. You have to evaluate how
these budgetary issues will impact the attainment of objectives, and see to it that the
budget provides sufficient support for it. In the event that there are budgetary
constraints or limitations, they must first be addressed before launching fully into
implementation mode.
 Communicate and clarify the goals, objectives and strategies to all members of
the organization. Regardless of their position in the organization’s hierarchy, everyone
must know and understand the goals and objectives of the organization, and the
strategies that will be employed to achieve them.
STEP-2: DEVELOPMENT OF AN IMPLEMENTATION STRUCTURE:
 The next step is to create a vision, or a structure, that will serve as a guide or
framework for the implementation of strategies.
 Establish a linking or coordination mechanism between and among the
various departments and their respective divisions and units. This is mainly
for purposes of facilitating the delegation of authority and responsibility.
 Formulate the work plans and procedures to be followed in the
implementation of the tactics in the strategies.
 Determine the key managerial tasks and responsibilities to be performed, and
the qualifications required of the person who will perform them.
 Determine the key operational tasks and responsibilities to be performed, and
the qualifications required of the person who will perform them.
 Assign the tasks to the appropriate departments of the organization.
 Evaluate the current staffing structure, checking if you have enough
manpower, and if they have the necessary competencies to carry out the tasks.
This may result to some reorganization or reshuffling of people
 Communicate the details to the members of the organization. This may be in
the form of models, manuals or guidebooks.
STEP-3: DEVELOPMENT OF IMPLEMENTATION SUPPORT POLICIES AND
PROGRAMS:
 Some call them “strategy-encouraging policies” while others refer to them as
“constant improvement programs”.
 Nonetheless, these are policies and programs that will be employed in aid of
implementation.
A. Establish a performance tracking and monitoring system. This will bethe basis of
evaluating the progress of the implementation of strategies, and monitoring the rate of
accomplishment of results, or if they were accomplished at all. Define the indicators for
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measuring the performance of every employee, of every unit or section, of every

division, and of every department.
B. Establish a performance management system. Quite possibly, the aspect of
performance management that will encourage employee involvement is a recognition
and reward structure. When creating the reward structure, make sure that it has a clear
and direct link to the accomplishment of results, which will be indicated in the
performance tracking and monitoring system.
C. Establish an information and feedback system. that will gather feedback and results
data, to be used for strategy evaluation later on. Again, communicate these policies and
programs to the members of the organization.
STEP-4: BUDGETING AND ALLOCATION OF RESOURCES:
 It is now time to equip the implementers with the tools and other capabilities to
perform their tasks and functions.
 Allocate the resources to the various departments, depending on the results of
financial assessments as to their budgetary requirements.
 Disburse the necessary resources to the departments, and make sure everything
is properly and accurately documented.
 Maintain a system of checks and balances to monitor whether the departments
are operating within their budgetary limits, or they have gone above and beyond
their allocation.
STEP-5: DISCHARGE OF FUNCTIONS AND ACTIVITIES:
It is time to operationalize the tactics and put the strategies into action, aided by
strategic leadership, utilizing participatory management and leadership styles.
Throughout this step, the organization should also ensure the following:
a. Continuous engagement of personnel by providing trainings and
reorientations.
b. Enforce the applicable control measures in the performance of the tasks.
c. Evaluate performance at every level and identify performance gaps, ifany,
to enable adjusting and corrective actions.
1. TYPES OF STRATEGY:
Types of strategies include the following;
i. Competitive Strategy
ii. Corporate Strategy
iii. Business Strategy
iv. Functional Strategy and
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v. Operating Strategy
I. COMPETITIVE STRATEGY:
Competitive strategy is the first of the types of strategies in strategic management.
Competitive strategy refers to a plan that combines the influence of external situation
along with the integrative apprehensions of the inner situation of an organization. The
competitive strategy aims at gaining competitive advantage in the marketplace against
the competitors.
Examples of the competitive strategy include differentiation strategy, low-cost strategy,
and focus or market-niche strategy. The objective of the competitive strategy is to win
the customer’s heart by satisfying their needs, and finally to outcompete the
competitors and attain competitive advantages.
II. CORPORATE STRATEGY:
It is second of the types of strategies in strategic management. Corporate strategy is
formulated at the top level by the top management of a diversified company (in our
country, a diversified company is popularly known as ‘group of companies’, such as
Bashundhara Group, Partex Group, Beximco Group, Square Group and 5M Group).
 Such strategy describes the company’s overall corporate strategy defines the long-
term objectives and generally affects all the business-nits under its umbrella.
 A corporate strategy, for example of Bashundhara, may be acquiring the major
tissue paper companies in Bangladesh in order to become the unquestionable
market leader.
III. BUSINESS STRATEGY:
o Business strategy is formulated at the business-unit level. It is popularly known
as ‘business-unit strategy’.
o This strategy emphasizes the strengthening of the company’s competitive
position of products or services.
o Business strategies are composed of competitive and cooperative strategies.
o The business strategy covers all the activities and tactics for competing in
contradiction of the competitors and the behaviors management addresses
numerous strategic matters.
o Business strategy is usually formulated in line with the corporate strategy. The
main focus of the business strategy is on product development, innovation,
integration, market development, diversification and the like.
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IV. FUNCTIONAL STRATEGY:

 Functional strategy refers to a strategy that emphasizes a particular functional area
of an organization.
 It is formulated to achieve some objectives of a business unit by maximizing
resource productivity. Occasionally functional strategy is named departmental
strategy.
 Examples of functional strategy comprise production strategy, marketing strategy,
human resource strategy and financial strategy.
 The functional strategy is concerned with developing distinctive competence to
provide a business unit with a competitive advantage.
 Functional strategies are adapted to support the competitive strategy. For example,
a company following a low-cost competitive strategy needs a production strategy
that emphasizes on reduction cost operation and also a human resource strategy
that emphasizes on retaining the lowest possible number of employees who are
highly qualified to work for the organization.
 Other functional strategies such as marketing strategy, advertising strategy, and
financial strategy are also to be formulated appropriately to support the business-
level competitive strategy.
V. OPERATING STRATEGY:
 Operating strategy is formulated as the operating units of an
organization.
 A company may develop operating strategy. As an instance, for its sales
territories.
 An operating strategy is formulated at the field level usually to achieve immediate
objectives.
 In some companies, managers develop an operating strategy for each set of
annual objectives in the departments or divisions.
2. OFFENSIVE STRATEGIES:
An offensive competitive strategy is a type of corporate strategy that consists of
actively trying to pursue changes within the industry. Companies that go on the
offensive generally invest heavily in research and development (R&D) and technology
in an effort to stay ahead of the
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competition. They will also challenge competitors by cutting off new orunderserved
markets, or by going head-to-head with them.
Defensive competitive strategies, by contrast, are meant to
counteract offensive competitive strategies
2.1 : OFFENSIVE COMPETITIVE STRATEGY TYPES:

There are several types of offensive competitive strategies, each with its own
advantages and disadvantages.
a) An "end run strategy" eschews direct competition and instead seeks to exploit
untouched markets or neglected segments, demographic groups or areas.
b) A "preemptive strategy" is simply the natural advantage a company has when it is
the first to serve a particular marketplace or demographic. It can be exceptionally hard
to unseat. Also known as "first-mover" advantage.
c) A "direct attack strategy" is more aggressive than the end run or preemptive
offensive competitive strategies. Such a strategy may entail comparisons to competing
products or companies that are unflattering, a price war, or even a competition as to
who can introduce new product features at a faster pace. The direct attack may also
borrow tactics of the previously listed strategies, all with the goal of taking charge of
the public conversation through marketing campaigns.
d) An "acquisition strategy" seeks to remove a competitor by buying it. As such, it is
a strategy employed by the wealthiest or best capitalized competitor. Such a strategy
offers the advantage of instantly incorporating new markets, customer bases or
corporate intelligence. Since it is such an expensive strategy it must be used judiciously,
and with the possibility of corporate antitrust rules or local competition laws in mind.
3. DEFENSIVE STRATEGY:
Defensive strategies are management tools that can be used to fend off (defend
oneself against) an attack from a potential competitor. Defending your business
strategically is about knowing the market you're best equipped to operate in and about
knowing when to widen your appeal to enter into new markets.
In contrast to offensive strategies -- which are aimed to attack your market competition
-- defensive strategies are about holding onto what you have and about using your
competitive advantage to keep competitors at bay.
3.1 : APPROACHES TO DEFENSIVE STRATEGIES:
There are two approaches to defensive strategy in strategic management;
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i. The first approach is aimed at blocking competitors who are attempting to take
over part of your business's market share. Cutting the price of your products, adding
incentives or discounts to encourage customers to buy from you or increasing your
advertising and marketing campaigns are the best common ways of going about this.
ii. The second approach is more passive. Here, you announce new product
innovations, plan a company expansion by opening a new chain or reconnect with old
customers to encourage them to buy from you. This is still a method to prevent the
competition from taking away your customers and earning, but it is done in a more
relaxed and less- aggressive manner, whereas the first approach is active and direct.
3.2 : TYPES OF DEFENSIVE STRATEGIES:

i. Retrenchment
ii. Divestiture
iii. Liquidation
I. RETRENCHMENT STRATEGY:
o When the organization faces declining sales & profits then it considers the
retrenchment strategy in which it reorganizes its activities by reducing its
assets & costs.
o By doing so the organization actually reverses the affects of declining profit
& sales.
o It is also called as reorganization or turnaround strategy. The basic
distinctive competence of an organization is fortified through effectively
designed retrenchment strategy.
o When an organization applies retrenchment strategy, pressure is exerted
from shareholders, media & employees on the strategists who perform their
functions with limited resources.
II. DIVESTITURE:
 Divestiture is one of defensive strategies in which part or division of an
organization is sold. For further strategic investments or acquisitions, certain
capital is raised trough divestiture.
 It is considered to be component of retrenchment strategy in which those
projects of the Business Organization are closed that need heavy capital, are
unprofitable & that are not suitable with the other activities of the business
organization.
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III. LIQUIDATION:
Liquidation is the selling of all the assets of the organization in parts in order to cash
their tangible worth. It is quite difficult emotional strategy as the element of defeat is
recognized in it. Therefore in the condition when the organization is bearing loss
completely then it is wise act that all the operations of the filed business should be
closed down so that there should not be any further loss of money.
4. VERTICAL INTEGRATION:
Vertical integration is when a company controls more than one stage of the supply chain.
That's the process businesses use to turn raw material into a product and get it to the
consumer. There are four phases of the supply chain: commodities, manufacturing,
distribution, and retail. A company vertically integrates when it controls two or more of
these stages.
There are two types of vertical integration;

i. Forward integration is when a company at the beginning of the supply chain controls
stages farther along. Examples include iron mining companies that own "downstream"
activities such as steel factories.
ii. Backward integration is when a business at the end of the supply chain takes on
activities "upstream." An example is when a movie distributor, such as Netflix, also
manufactures content.
4.1 TYPES OF VERTICAL INTEGRATION:
I. FORWARD OR DOWNSTREAM INTEGRATION:
 When the company takes control over its consumer company or say distribution
centre, to which the company sell its products, it is known as forward integration.
 The strategy aims at attaining higher economies of scale and occupying larger share
in the market.
 Due to the drastic change in the technology, in the 21st century and increase in the
number of internet users, the forward integration strategy gained much importance.
 There are a number of manufacturing entities, which exist online, and sell their
items directly to the customers, thus bypassing the intermediaries in the supply
chain process.
II. BACKWARD OR UPSTREAM INTEGRATION:
When the company acquires its suppliers and manufacturer of raw materials, then the
merger is termed as backward integration. In upstream integration, the company enters
the business of input providers, so as to create effective supply and possess greater
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dominance over production. The strategy aims at improving the company’s operational
efficiency, save costs and also increases the profit margins.
NOTE:
When it comes to implementation, vertical integration is the most difficult strategy,
which is not only expensive but also hard to take back.
III. BALANCED INTEGRATION:
 Balanced integration is the combination of both forward and backward
integration.
4.2 : ADVANTAGES AND DISADVANTAGES OF VERTICAL INTEGRATION:
A. ADVANTAGES:
I. POSITIVE DIFFERENTIATION CAN BE CREATED:
 Vertical integration creates predictability because more information is available
to the organization.
 There is more access to production inputs.
 Retail channels produce real-time information that isn’t filtered by third parties.
 Distribution requirements can be adjusted to promote specific items to unique
demographics.
 By being in more control, from start to finish, an organization can adapt quickly
to changes so that the most effective result can be achieved.
II. ASSET INVESTMENTS CAN FOCUS ON SPECIALIZATION:
 Instead of seeking our vendors and contractors with specific skill sets, vertical
integration allows an organization to invest into internal assets that can specialize
in the skill set that is required.
 This allows a company to differentiate itself from others within its industry,
creating a specific brand message and value proposition that resonates consistently
with its customer base.
III. IT CAN INCREASE A BRAND’S LOCAL MARKET SHARE:
 Because an organization controls more of its supply chain, it can leverage
specific benefits that a local demographic may need.
 This allows the organization to obtain a larger market share because they can
create a value proposition that is better than what the competition offers.
IV. TRANSACTION COSTS ARE LOWER THROUGHOUT THE SUPPLY CHAIN:
 With a high level of vertical integration, brands can reduce the transaction costs
that occur throughout their supply chain.
 This is done through the power to leverage the size and scope of the supply chain
when dealing with suppliers and vendors that are not part of the integrated process.
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V. QUALITY ASSURANCE CAN BE BUILT INTO THE SYSTEM:

 When vertical integration is successful, it allows an organization to put more eyes on
the quality of what is being produced.
 From the initial supply to the final sale, a better Q/A process within the system creates
a value proposition that is more reliable.
 In return, greater customer satisfaction occurs, which builds brand loyalty and return
revenues.
VI. IT OPENS NEW MARKETS:
 Whether an organization moves forward or backward with their vertical integration,
the process can open new markets to the business.
 By partnering with or purchasing other vendors, proprietary information,property,
or technologies can create local access that may have been unavailable to a brand and
business before the acquisition or partnership.
 When this occurs, more profits can be achieved because there is a bigger base of
leads to pursue.
VII. STABILITY IS CREATED:
 Companies that have vertically integrated can withstand economic changes than
companies that have not.
 The stability that is created with supply chain control eliminates unpredictability.
B. DISADVANTAGES OF VERTICAL INTEGRATION:
I. IT REDUCES FLEXIBILITY:
 Brands that work with several vendors or contractors have a certain flexibility that
vertical integration normally does not provide.
 Businesses that have integrated vertically may have a few choices with their supply
chain, but a business that uses third parties can make changes whenever they wish
without maintenance costs within their infrastructure.
II. THERE MAY BE UNFORESEEN BARRIERS WHEN ENTERING A NEW MARKET:
 Vertical integration does limit competition, but only when the corporation focused
on this process has access to the materials necessary to be competitive in the first place.
 If raw materials are scarce or a brand’s information access to a local demographic is
limited, then even with vertical integration firmly in place, market entry may not be
possible.
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III. CONFUSION IS CREATED EASILY AND OFTEN:

 Vertical integration falls under one specific brand, but the entities within the supply
chain may operate as a distinct business. This creates confusion because customers
think they are working with one company, only to realize that they are working with a
different company.
 Google is an example of this. It operates as a subsidiary of Alphabet Incorporated,
along with companies like Waymo and Verily.
IV. IT ISN’T A CHEAP INVESTMENT:
 Capital is required to make a vertical integration effort possible. Even if the
integration occurs through partnerships, an investment into specific patents, processes,
or proprietary data is often required as part of the deal. New forward or backward
vertical integration efforts may require building new facilities, hiring new staff, and
understanding new processes that are unfamiliar to the corporation.
V. ITS NOT SIMPLE:
 Vertical integration requires companies to get involved in new aspects of the supply
chain where they are usually unfamiliar.
 If you are in the retail sector and sell shirts, you know how to present that product to
the customer in the most effective way.
 If you were asked to create that shirt from scratch, you would struggle to produce it.
 You would even need to source the raw fabrics. When fully integrated, vertical
integration saves time and money, but it isn’t a simple process toget there.
 The advantages and disadvantages of vertical integration show it is a useful investment
to make if the capital exists to make it.
5. HORIZONTAL STRATEGY:
It is a type of integration strategies pursued by a company in order to strengthen its
position in the industry. A corporate that implements this type of strategy usually
mergers or acquires another company that is in the same production stage. For
example, Disney merging with Pixar (movie production), Exxon with Mobile (oil
production, refining and distribution) or the infamous Daimler Benz and Chrysler merger
(car developing, manufacturing and retailing).
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The purpose of horizontal integration (HI) is to grow the company in size, increase
product differentiation, achieve economies of scale, reduce competition or access new
markets. When many firms pursue this strategy in the same industry, it leads to industry
consolidation (oligopoly or even monopoly)
HI can occur in a form of mergers, acquisitions or hostile takeovers.
 Merger is the joining of two similar sizes, independent companies to make one
joint entity.
 Acquisition is the purchase of another company.
 Hostile takeover is the acquisition of the company, which does not want to be
acquired.
5.1 : HORIZONTAL STRATEGY MAY BE AN EFFECTIVE STRATEGY WHEN:

i. Organization competes in a growing industry.
ii. Competitors lack of some capabilities, competencies, skills or resources that the
company already possesses.
iii. Horizontal strategy would lead to a monopoly that is allowed by agovernment.
iv. Economies of scale would have significant effect.
v. The organization has sufficient resources to manage M&A(mergers andacquisitions).
5.2 HORIZONTAL INTEGRATION EXAMPLES:
Companies using horizontal integration
ACQUIRING COMPANY ACQUIRED COMPANY
Amazon.com Whole Foods
Porsche Volkswagen
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Daimler Benz Chrysler
Kraft Foods Cadbury
Quaker Oats Snapple
PepsiCo Quaker Oats
Pfizer Wyeth
Pfizer Pharmacia Corporation
Glaxo Wellcome SmithKline Beecham
AT&T T-Mobile
AT&T Bell South
Mittal Steel Arcelor
HP Compaq
Oracle PeopleSoft
Delta Northwest Airlines
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United Airlines Continental
JPMorgan Chase Bank One
Microsoft Taleo
Microsoft Yahoo!
Apple Authentic
BP Amoco
5.3 ADVANTAGES OF HORIZONTAL INTEGRATION STRATEGY:

I. HIGHER EFFICIENCY:
 Since the companies work together, they yield more services or products.
 However it cost less to purchase an existing product than to start another one from
score.
 Horizontal integration becomes more profit when the company grows insize.
 Cost of developing is less when compared to total income. This helps thecompany to
save money and increase profits. They also have more strength over supplier and
distributor. It reduces the competitor.
II. ECONOMIES OF SCALE:
 Economies of scale give expense-playing point to the companies through
extension of their product yield.
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 The point when products are prepared in bigger amounts, the normal expense for
every unit decreases; in this manner we expand the productivity of the company.
 Incorporating evenly furnishes the companies with more extensive access to diverse
unreached markets, bringing about an increment sought after of their product.
 Achieving to economies of scale by HI can help the company to accomplish require
imposing business model and ignore from the business sector.
III. ECONOMIES OF SCOPE:
 Horizontal integration allows achieving economies of scope.
 Since companies sharing the resources, it helps removing costredundancy.
 It is likewise less expensive to offer the same product from differentareas than it
might be to present a totally new product extend.
 Horizontal integration brings interaction between the companies.
IV. INTERNATIONAL TRADE:
 Integrating horizontally helps the company to enter outside businessesimmediately.
 This diminishes the expense of international trade by permitting thecompany to
both handle and offer the product in the foreign market.
5.4 DISADVANTAGES OF HORIZONTAL STRATEGY:
I. DESTROYED VALUE:
M&A rarely add value to the companies. More often M&A fail and destroy the value of
the companies involved in it because expected synergies never materialize.
II. LEGAL REPERCUSSIONS:
HI can lead to a monopoly, which is highly discouraged by many governments due to
lack of competition. Therefore, governments usually have to approve any larger M&A
before they can happen.
III. REDUCED FLEXIBILITY:
Large organizations are harder to manage and they are less flexible in introducing
innovations to the market.
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6. TAILORING STRATEGY TO FIT SPECIFIC INDUSTRY AND COMPANY

SITUATIONS:
INTRODUCTION:
The variety of factors that dominates in the industry as well as the level and extent of
competition among the players in the industry has a vital role in determining the
situation in the industry or sector itself. In many cases regardless of the extent of
competition however there is prevailing industry situation that business organizations
have to live with.
The variety of factors prevailing in the industry and the environmentat large redounds
to industry categories groups or types which are discussed below.
6.1 STRATEGIES FOR COMPETING IN EMERGING INDUSTRIES OF FUTURE:
As the term implies new or emerging industry refers to a kind of market or industry
situation in the early stages of development and typically with small number of players.
The industry is characterized by any of the following.
1. New and unproven market
2. Proprietary technology
3. Low entry barriers
4. Experience curve effects may permit cost reductions as volume builds.
5. Buyers are first time users.
6. Marketing invokes inducing initial purchase and overcoming customersconcerns’
7. Possible difficulties in securing raw materials and
8. Firms struggle to fund research and development operations and build resource
capabilities for rapid growth.
CHALLENGES IN EMERGING INDUSTRIES:

1. TECHNOLOGY IN UNCERTAIN AND UNIT COSTS ARE HIGH:
Early on it is neither clear which product configuration will be the most successful nor is
it known what the most efficient production methods will be. Such uncertainties prevent
standardization and this drives up costs. With time and volume it is possible to reap the
benefits of economies of scale and experience but until that point is reached doing
business acquiring clients delivering the product or mitigating the entry of competitors
is an expensive and often losing game.
2. KEY RESOURCES ARE SCARCE AND EXPENSIVE:
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In emerging industries suppliers tend to be scarce and unreliable. Under a restricted

offering of suppliers in conjunction with a growing demand for them prices go up
quickly.
3. INFRASTRUCTURE IS ABSENT:
A developed infrastructure underlying the take off the industry does not exist in
emerging niches. There are no appropriate distribution channels and marketing tools
qualified employees and so on.
4. QUALITY OF PRODUCTS OR SERVICES IS LOW AND TRANSFER COSTS AND
PERCEIVED OBSOLESCENCE ARE HIGH:
The emerging industry has to learn how to operate optimally and while doing so its
products, services may suffer all kinds of quality problems which in turn depress
demand. High initial switching costs the cost to customer for changing suppliers may
also out the brakes on the growth of demand. Also as customers become increasingly
aware of how one generation of a product is quickly outdated by the next one they may
decide to delay their purchase to await later and greater improvement.
5. CONSUMERS ARE INEXPERIENCED AND CONFUSED:
The combination of numerous offerings and an uneducated customers base exacts a
high labor costs to industry participants first it is necessary to convince consumers of the
advance of the generic product then it is necessary to engage in the fierce competition
to differentiate a specific offering from that of others in the industry.
6. LOW ENTRY BARRIERS AND A FLOOD OF ENTREPRENEURS:
New industries with low entry barriers may attract many individuals who decide to
resign from their secure permanent jobs and jump into the market as entrepreneurs. A
cascade of small new companies may thus flood the industry.
7. REGULATIONS MAY BE DETRACTORS:
The emergence of rules and regulations can abruptly slow downthe development of
the embryonic industry.
8. STRATEGY IS UNCERTAIN:
In an emerging industry no one has identified the appropriate strategy thus there may
be as May strategic approaches combinations of market performance cost technology
and scale as there are competitors. Some may work others will not only the future will
tell.
9. THREATENED INCUMBENTS MAY RETALIATE:
Well established resource abundant competitors in other industries indirectly
competing with the new industry may fiercely reset the emergence of the later.
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STRATEGY TO BE SUCCESSFUL IN EMERGING MARKET:

To be successful in an emerging industry companies usually have to pursue one or more
of the following strategic avenues. Try to win the early race for industry leadership with
risk taking entrepreneurship and a bold creative strategy. Broad or focused
differentiation strategies keyed to technological or product superiority typically offers
the best chance for early competitive advantage. Push to perfect the technology to
improve product quality and to develop additional attractive performance features.
Form strategic alliances with key suppliers to gain access to specialized skills
technological capabilities and critical materials or components. Try to capture any first
mover advantages associated with early commitment to promising technologies
allying with the most capable suppliers expanding product selection improving styling
capturing experiences curve effects and getting well positioned in new distribution
channels. Pursue new customer groups, new user applications and entry into new
geographical areas (perhaps utilizing strategic partnerships or joint ventures if financial
resources are constrained).
6.2. STRATEGIC FOR COMPETING IN RAPIDLY GROWING MARKETS:

To be able to grow at a pace exceeding the market average a company generally must
have a strategy that incorporates one or more of the following elements.
I. DRIVING DOWN COSTS PER UNIT SO AS TO ENABLE PRICE REDUCTIONSTHAT

ATTRACT DROVES OF NEW CUSTOMERS:
Charging a lower price always has strong appeal in markets where customers are price
sensitive and lower prices can help push up buyers demand by drawing new customers
into the marketplace. But since rivals can lower their prices a company must really be
able to drive its unit costs down faster than rivals such that it can use it low cost
advantage to under price rivals.
II. PURSUING RAPID PRODUCT INNOVATION:
Pursuing rapid product innovation both to set company’s product offeringapart from
rivals and to incorporate attributes that appeal to growing numbers of customers.
Differentiation strategies when keyed to product attributes that draw in large numbers
of new customers help bolster a company’s reputation for product superiority and lay
the foundation for sales gains in excess of the overall rate of market growth. If the
market is one where technology is advancing rapidly and product life cycles are short
then it becomes especially important to be first to market with next generation
products.
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III. GAINING ACCESS TO ADDITIONAL DISTRIBUTION CHANNELS AND SALES

OUTLETS:
Pursuing wider distribution access so as to reach more potential buyers is a particularly
good strategic approach for realizing above average sales gains.But usually this requires
a company and forcing rivals into playing catch up.
IV. EXPANDING COMPANY’S GEOGRAPHIC COVERAGE:

Expanding into areas either domestic or foreign where the company does not have a
market presence can also be an effective way to reach more potential buyers and pave
the way for gains in sales that outpace the overall market average.
V. EXPANDING THE PRODUCT LINE TO ADD MODELS/STYLES THAT APPEAL TO
WIDER RANGE OF BUYERS:
 Offering buyers a wider selection can be an effective way to draw new customers
in numbers sufficient to realize above average sales gains.
 Makers of MP3 players and cell phones are adding new models to stimulate buyer
demand.
6.3 : STRATEGIES FOR COMPETING IN MATURING INDUSTRIES:
A maturing industry is one that is moving form rapid growth to significantly slower
growth. An industry is said to be mature when nearly all potential buyers are already
users of the industry’s products mar consistsmainly of replacement sales to existing
users with growth hinging on the industry’s ability to attract new buyers and convince
existing buyers to up their usage.
1. SLOWING GRWOTH IN BUYER DEMAND GENERATES MORE HEAD TO HEAD

COMPETITION FOR MARKET SHARE:
Firms that want to continue on a rapid growth start looking for ways to take customers
away from competitors. Outbreaks of price cutting increased advertising and other
aggressive tactics to gain market share are common.
2. BUYERS BECOME MORE SOPHISTICATED OFTEN DRIVING HARDER
BARGAIN ON REPEAT PURCHASES:
Since buyers have experience with the product and are familiar with competing brands
they are better able to evaluate different brands and can use their knowledge to
negotiate a better deal with sellers.
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3. COMPETITION OFTEN PRODUCES GREATER EMPHASIS ON COST ANDSERVICE:

As sellers all begin to offer the product attributes buyers prefer buyer choices
increasingly depend on which seller offers the best combination of price and service.
4. FIRMS HAVE A TOPPING-OUT PROBLEM IN ADDING NEW FACILITIES: Reduced
rates of industry growth mean slowdowns in capacity expansion formanufactures and
slowdowns in new store growth for retail chains. Withslower industry growth adding
too much capacity too soon can create oversupply conditions that adversely Affect
Company profits well into thefuture.
5. PRODUCT INNOVATION AND NEW END USE APPLICATIONS ARE HARDERTO
COME BY:
Producers find it increasingly difficult to create new product features findfurther uses
for the product and sustain buyer excitement.
6. INDUSTRY PROFITABILITY FALLS TEMPORARILY OR PERMANENTLY:
Slower growth increased competition more sophisticated buyers and occasional periods
of overcapacity put pressure on industry profit margins. Weaker less efficient firms are
usually the hardest hit.
STRATEGIC MOVES IN MATURING INDUSTRIES:

1. REDUCING MARGINAL PRODUCTS AND MODELS:
A wide selection of models features the growth stage when buyer’s needs are still
evolving. But such variety can become too costly as price competition stiffens and key
demand thus profit margins are squeezed. Maintaining many product versions works
against achieving design parts inventory and production economics at the
manufacturing levels and can increase inventory stocking costs for distributors and
retailers.
2. MORE EMPHASIS ON VALUE CHAIN INNOVATION:
Efforts to re-invent the industry value chain can have a fourfold pay-off lower costs
better product or service quality greater capability to turn out multiple or customized
product versions and shorter design to market cycles.Manufactures can mechanize high
cost activities re-design production lines to improve labor efficiency, build flexibility into
the assembly process so that customized product versions can be easily produced and
increase use of advanced technology (robotics computerized controls and automatic
guided vehicles). Suppliers of parts and components, manufactures and distributors can
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collaborate on the use of internet technology and e-commerce techniques to streamline

various value chain activities and implement cost saving innovations.
3. INCREASING SALES TO PRESENT CUSTOMERS:
In a mature market growing by taking customers away from rivals may not be as
appealing as expanding sales to existing customers. Strategies to increase purchase by
existing customers can involve providing complementary items and ancillary services
and finding more ways for customers to use the product.
 For example, convenience stores have boosted average sales per customer by
adding video rentals, automated teller machines, gasoline pumps and deli counters (a
small shop that sells high-quality foods).
4. PURCHASING RIVAL FIRMS AT BARGAIN PRICES:
Sometimes a firm can acquire the facilities and assets of struggling rivals quite cheaply.
Bargain priced acquisitions can help to create a low cost position if they also present
opportunities for greater operating efficiency. The most desirable acquisitions are those
that will significantly enhance the acquiring firm’s competitive strength.
5. EXPANDING INTERNATIONALLY:
As its domestic market matures a firm may seek to enter foreign markets where
attractive growth potential still exists and competitive pressures are notso strong. Many
multinational companies are expanding into such emerging country markets as China
India Brazil Argentina, and Malaysia where the long term growth prospects are quite
attractive. Strategies to expand internationally also make sense when a domestic firm’s
skills reputation and product are readily transferable to foreign markets.
6. BUILDING NEW OR MORE CAPABILITIES:
The stiffening pressures of competition in a maturing or already mature market can

often be combated by strengthening the company’s resource base and competitive
capabilities. This can mean adding new competencies or capabilities Deeping existing
competencies to make them harder to imitate or striving to make core competencies
more adaptable to changing customer requirements and expectations.
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6.4 : STRATEGIES FOR FIRMS IN STAGNANT OR DECLINING INDUSTRIES:
STRATEGIC OPTIONS IN A STAGNANT OR DECLINING INDUSTRY
As a business ventures is destined to continue doing business in a varying market

condition sometimes adverse and at other times favorable it has to keep up the fight
and compete in declining market scenario or else fold up and start another new
business.
To be able to compete in a stagnant or declining markets or industry doing the following

strategies options will be of help.
1. PURSUE FOCUS STRATEGY:
 Stagnant or declining markets like other markets are composed of numerous

segments or niches.
 Frequently one or more of these segments is growing rapidly despite stagnation in
the industry as a whole.
 An astute(showing an ability to accurately assess situations) competitor who zeroes
in on fast growing segments and does a first rate job of meeting the needs of buyers
comprising these segments can often escape stagnating sales and profits and even
gain decided competitive advantage.
2. STRESS DIFFERENTIATION BASED ON QUALITY IMPROVEMENT OR PRODUCT

INNOVATION:
 Either enhanced quality or innovation can rejuvenate demand by creating

important new growth segments or inducing buyers to trade up.
 Successful products innovation opens up an avenue for competing besides
meeting or beating rivals prices.
 Differentiation based on successful innovation has the additionaladvantage
of being difficult and expensive for rivals firms to imitate.
EXAMPLE:Sony has build a solid business selling high quality TVs, an industry where
market demand has been relatively flat in the world’s industrialized nations for some
years.
3. WORK DILIGENTLY FOR COST REDUCTION:
Companies in stagnant industries can improve profit margins and return on investment
by pursuing innovative cost reduction year after year. Potential cost saving actions
includes.
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7. STRATEGY AND LEADERSHIP:

Leadership is one of the most relevant aspects of the organizational setting. Leadership
is described as the process of social influence in which oneperson can enlist the aid and
support others in the accomplishment of a common task.
According to ALAN KEITH leadership is ultimately about creating a way for people to
contribute to making something extraordinary happen.
Leadership is highly significant determinant in implementing managerial strategy. The

structural determinates provide a foundation and base line for implementing strategy
and the process determinants provide guidelines channels media and systems through
which strategy is implemented.
7.1 : LEADERSHIP STYLES:
Leadership style refers to the approach taken by the leader in trying to evoke
compliance and elicit acceptance from follower. Leadership style is also referred to be
various other designations models of leadership. Theory of leadership system of
leadership pattern of leadership and managerial grid
Style of leadership can be of following three types.
1. AUTHORITARIAN STYLE:
Autocratic leader is also known as a dictator. It could also be considered as one man
show. The role of the leader is restricted merely to dictating the instructions to his
subordinates. In this leadership style leader does not get involved with the members of
the team. He decides the policies and procedures without discussing with his
subordinates. In this style of leadership all decisions are taken by the leader only.
2. BEHAVIOR STYLE:
In this style of leadership the authority rested with leader is decentralized. Leader takes
every decision in coordinates with the team members. This style of leadership is people
oriented and directsupervision of the staff is not required. This type of leadership style
keeps the employees well informed about the policies of the organizations and work is
delegated to achieve better results. Instead of acting as a leader he considers himself to
be a member of the group
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3. SITUATIONAL STYLE:
Free rein or laissez leadership style refers to a condition where theleader does not lead
but leaves the major decisions on the group itself. Such a leader is represented by the
chairperson who is dependent on his subordinates. All the goals are decided by the
group. The group members have to solve problems and motivate themselves. Leader
job isto keep contact with outsides and give information to his term.
7.2 : KEY STRATEGIC LEADERSHIP ACTIONS:
1. DETERMINING STRATEGIC DIRECTIONS:
Determining the strategic direction involves specifying the image and character the firms
seeks to develop over time. The strategic direction is framed within the context of the
conditions strategic leader expect their firm to face in five infive ten or more years.
The ideal long term strategic directions have two parts.
a. CORE IDEOLOGY: it motivates employees through the company’s heritage.
b. ENVISIONED FUTURE: it encourages employees to stretch beyond their expectations

of accomplishment and requires significant change and progress in order to be realized.
The environed future serves as a guide to many aspects of a firm’s strategy
implementation process including motivation leadership employee empowerment and
organizationaldesign.
2. EFFECTIVELY MANAGING THE FIRM’S RESOURCE PORTFOLIO:

 Effectively managing the firm’s portfolio of resources may be the most important
strategic leadership task.
 The firm’s resources are categorized as financial capital human capital social
capital and organizational capital.
 Clearly financial capital is critical to organizational success strategic leaders
understand this reality.
3. SUSTANINING AN EFFECTIVE ORGANISATIONAL CULTURE:
 Organizational culture as a complex set of ideologies symbols and core values that
is shared throughout the firm and influences the way business is conducted.
 A firm can develop core competencies in terms of both capitulates it possesses and,
the way the capitulates are leveraged new strategies to produce desired outcomes.
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4. EMPHASING ETHICAL PRACTICES:

The effectiveness of processes used to implement the firms strategies increases when
they are based on ethical practices. Ethical companies encourage and enable people at
all organizational levels to act ethically when doing what is necessary to implement the
firm’s strategies. In turn ethical practices and the judgment on which they are based
create social capital in the organization in that goodwill available to individuals and
groups if the organization increases. Alternately when unethical practices evolve in an
organization they may become acceptable to many managers and employees
throughout the organization.
RESOURCE ALLOCATION AS A VITAL PART OF STRATEGY

INTRODUCTION:
Resource allocation deals with the procurement and commitment of financial,
physical and human resources to strategic tasks for the achievement of organizational
objectives. Resource allocation is both a one time and continuous process. When a new
project implemented it would require the allocation of resources. An ongoing g concern
would also require a continual infusion of resources. Strategy implementation should
deal with boththese types of resource allocation.
In strategic planning, a resource allocation decision is a plan for using available

resources especially human resource especially in the near term to achieve goals for the
future. It is the process of allocating resources among the various projects or business
units.
Resource allocation is a major management activity that allows for strategy

execution. In organization that does not use a strategic management approach to
decision making resource allocation is often based on political or personal factors.
FACTOS AFFECTING RESOURCE ALLOCATION
1. OBJECTIVES OF ORGANIZATION:
Employees of any organization tend to judge the importance given by strategist to task
on the basis of the amount of resource allocated to them.
2. PREFERENCE OF DOMINANT STRATEGISTS:
The dominant strategists most often the CEO tend to affect the process of resource
allocation. Their preferences are reflected in the way the resource get allocate.
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3. INTERNAL POLITICS:
Resource is often misconstrued as power. Those departmental units which are able to
attract more resource are perceived as being more powerful.
4. EXTERNAL INFLUENCES:
Apart from internal politics external influences also affect resource allocation. These
influences arise the two government policies and stipulation the demands of external
shareholders financial institution community and others.
APPROACHES TO RESOURCE ALLOCATION:
The experts think of three broad approaches to sound resourceallocation which are
as follows.
5. USING ANALYTICAL CONCEPTUAL MODELS:
 These are growth share matrix stop light and sectional policy.
 Matrix models are widely used for resource allocation especially in case of multi
SBU’s firms.
 The rationale behind resource allocation is governed by the factors of competitive
capabilities market share business strengths on one hand and growth prospects and
industry attractiveness of business segments on the other.
6. PRODUCT LIFE SYSTEM OF BUDGETING:
 This approach suggests that resource allocation is expected to match the stages in
the life cycle or a product.
 The resource requirements vary with each stage of product life cycle as these stages
have their own characteristics and implications.
For example; when the firm wants to go in for retrenchment strategy in case of a
product division one might think of zero based budgeting that means that resource
allocation should depend on budget requests are justified right from its scratch
where previous year reference will not come at all.
 The other ways are traditional capital budgeting and performance budgeting in
additional to zero base budgeting.
7.CAPITAL BUDGETING:
Capital budgeting is the planning of deployment of financial resource of an organization

for the purpose of maximizing the long term profit ability of the organization. In this
budget various techniques like average rate of return payback period internal rate of
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return and net present value are used to determine where a rupee put will earn
maximum profit.
8. PERFORMANCE BUDGETING:
A performance budgeting is an input/output or cost/result budgeting. It emphasis on

financial measurements of performance which can be related to financial measurement
in explaining changes and deviations from planned performance.
a. ZERO BASE BUDGETING:

Zero base budgeting is based on a system where each function irrespective of the fact
whether it is old or new must be justified in its entirety each time a new budget is
formulated. It requires each manager to justify his entire budget in detail fromscratch
that is zero bases. Each manager states why he should spend any money at all.
b. STRATEGIC BUDGEITNG:
Budgets drive business and organizations by laying out its financial limitations and
tracking spending and revenue throughout time. Strategic budget management refers
to the process of altering budgets to meet goals and bringing costs in line with earnings
to avoid long and short term deficits. While strategic budget management can’t solve
every financial problem it is essential tooperating an organization smoothie.
9. PLANNING SYSTEMS FOR SRATEGY IMPLEMENTATION:

The normal of form strategic planning is sufficient to permit every manager to develop
and implement a system appropriate to his circumstances a system that will produce
significantly greater benefits than costs. At the same time it can be said that there are
big gaps in the knowledge which when filled makes it easier for managers to design and
implement formal strategic planning systems for organization.
It is not that strategic planning less attention to operational planning. Rather emphasis
is on implementations of strategies. The reason is that environments are likely to
become more turbulent and complex making it even more essential that a company
pursue those strategies that will best adapt the organization to changed circumstances.
The business plan is an important tool in the implementation process. The business plan
is typically a short term and more concrete document than the strategic plan and it tends
to focus more closely on operationalconsiderations such as sales and cash flow trends.
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9.1 : TYPICAL PLANNING SYSTEMS FOR STRATEGY IMPLEMENTATION:

Therefore the implementation process needs some plans to be made which are as
follows,
1. TIME FRAME:
Since the implementation process takes much time than to formulate it. Therefore a
timeframe must be predefined before implementation sothat all the processes can be
completed within time limit.
2. COST-EFFICIENCY:
The management should select only those strategies to be implemented which are
economically feasible or cost efficient. If any strategy needs more than budgeted cost
for implementing then it is better to drop it.
3. MEANINGFUL CHANGE:
The implementation of a strategy causes some changes in the existing system. The
important thing is that the changes occurred in the system must be meaningful or can
be said that leads to benefit or no loss.
4. ADAPTABILITY:
A strategy should be implemented only when the existing system is sufficiently flexible
or it has the adaptability to accept the change.
5. TRAINING SESSIONS:
Before completely working on implemented strategy the employee and staffs should be
trained so that they can work on it. Because in the absence of employee support the
implementation will not be successful.
6. MEASURABLE IN TERMS OF PERFORMANCE:
The effect of strategy implementation should be efficiently measurement in terms of
the performance or outcome of the system so that it can be judged that it is affecting
negatively or positively.
7. NEW OPPORTUNITIES:
A strategy is implemented to gain competitive advantage in the cutthroat competition.
Therefore the implementation of strategy should lead to new opportunities for growth
and achieve benefits.
8. AVAILABILITY OF RESOURCES:
A strategy should be implemented when there is chance of availability of resources
required for implementation. If the resource are hardly available or costing much then
the management should either take alternative solutions or make necessary changes in
it.
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9. ACHIEVABLE TARGET:
Only those strategies should be thought to implement whose target can be achieved by
the system. If the target is not achievable duet o any combination of constraints then
better is to leave it.
10. AVAILABLE ALTERNATIVES:
The management should evaluate the existing alternatives in terms of various
constraints so that it proves to be best alternative to be implemented and can be
successfully implemented.
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UNIT-5
STRATEGY EVALUATION AND CONTROL
INTRODUCTION:
Strategic evaluation and control could be defined as the process ofdetermining the
effectiveness of a given strategy in achieving the organizational objectives and taking
corrective action wherever required. The final stage in strategic management is strategy
evaluation and control. All strategies are subject to future modification because internal
and external factors are constantly changing. In the strategy evaluation and control
process managers determine whether the chosenstrategy is achieving the organization's
objectives.
 The fundamental strategy evaluation and control activities are:
 reviewing internal and external factors that are the bases for
current strategies,
 measuring performance, and
 Taking corrective actions.
THE PROCESS OF STRATEGY EVALUATION CONSISTS OF FOLLOWING STEPS:

1. FIXING BENCHMARK OF PERFORMANCE:
While fixing the benchmark, strategists encounter questions such as - what benchmarks
to set, how to set them and how to express them. In order to determine the benchmark
performance to be set, it is essential to discover the special requirements for performing
the main task. The performance indicator that best identify and express the special
requirements might then be determined to be used for evaluation. The organization can
use both quantitative and qualitative criteria for comprehensive assessment of
performance. Quantitative criteria include determination of net profit, ROI, earning per
share, cost of production, rate of employee turnover etc. Among the Qualitative factors
are subjective evaluation of factors such as - skills and competencies, risk taking
potential, flexibility etc.
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2. MEASUREMENT OF PERFORMANCE :
The standard performance is a benchmark with which the actual performance is to be
compared. The reporting and communication system help in measuring the
performance. If appropriate means are available for measuring the performance and if
the standards are set in the right manner, strategy evaluation becomes easier. But
various factors such as manager’s contribution are difficult to measure. Similarly
divisional performance is sometimes difficult to measure as compared to individual
performance. For measuring the performance, financialstatements like - balance sheet,
profit and loss account must be prepared on an annual basis.
3. ANALYZING VARIANCE :
While measuring the actual performance and comparing it withstandard performance
there may be variances which must be analyzed. The strategists must mention the
degree of tolerance limits between which the variance between actual and standard
performance may be accepted. The positive deviation indicates a better performance
but it is quite unusual exceeding the target always. The negative deviation is an issue of
concern because it indicates a shortfall in performance. Thus in this case the strategists
must discover the causes of deviation and must take corrective action to overcome it.
4. TAKING CORRECTIVE ACTION:
Once the deviation in performance is identified, it is essential to plan for a corrective
action. If the performance is consistently less than the desired performance, the
strategists must carry a detailed analysis of the factors responsible for such performance.
If the strategists discover that the organizational potential does not match with the
performance requirements, then the standards must be lowered. Another rare and
drastic corrective action is reformulating the strategy which requires going back to the
process of strategic management, reframing of plans according to new resource
allocation trend and consequent means going to the beginning point of strategic
management process.
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SIGNIFICANCE OF STRATEGIC EVALUATION AND CONTROL:

 The significance of strategy evaluation lies in its capacity to co-ordinatethe
task performed by managers, groups, departments etc, through control of
performance. Strategic Evaluation is significant because of various factors such as;
 Developing inputs for new strategic planning.
 The urge for feedback, appraisal and reward.
 Development of the strategic management process.
 Judging the validity of strategic choice.
 They provide direction. They enable management to make sure that the
organization is heading in the right direction and that corrective action is taken where
needed.
 They provide guidance to everybody. Everyone within the organization, both
managers and workers alike, learn what is happening, how their performance compares
with what is expected, and what needs to be done to keep up the good work or improve
performance.
 They inspire confidence. Information about good performance inspires
confidence in everybody. Those within the organization are likely to be more motivated
to maintain and achieve better performance in order to keep up their track record.
Those outside – customers, government authorities, shareholders – are likely to be
impressed with the good performance.
 Controls do not just guard the money: they also provide data for decision-
making.
 Provide constant feedback on the extent to which the strategies are
achieving their goals.
 Identify potential problems at an early stage and propose possible solutions.
 Monitor the accessibility of the strategies to all sectors of the target population.
 Monitor the efficiency with which the different components of the project are
being implemented and suggest improvements.
 Evaluate the extent to which the strategy is able to achieve its general
objectives.
 Provide guidelines for the planning of future projects.
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1. ESTABLISHING STRATEGIC CONTROLS:

Strategic control processes ensure that the actions required to achieve strategic goals
are carried out, and checks to ensure that these actions are having the required
impact on the organization. An eﬀective strategic control process should by
implication help an organization ensure that is setting out to achieve the right things,
and that the methods being used to achieve these things are working. Establishing
strategic control system includes following steps;
I. DETERMINE WHAT TO CONTROL:
The first step in the strategic control process is determining the major areas to control.
Managers usually base their major controls on the organizational mission, goals and
objectives developed during the planning process. Managers must make choices
because it is expensive and virtually impossible to control every aspect of the
organizations.
II. SET CONTROL STANDARDS:
The second step in the strategic control process is establishing standards. A control
standard is a target against which subsequent performance will be compared. Standards
are the criteria that enable managers to evaluate future, current, or past actions. They
aremeasured in a variety of ways, including physical, quantitative, and qualitative terms.
Five aspects of the performance can be managed and controlled: quantity, quality, time
cost, and behavior. Standards reflect specific activities or behaviors that are necessary
to achieve organizational goals.
III. MEASURE PERFORMANCE:
Once standards are determined, the next step is measuringperformance. The actual
performance must be compared to the standards. Many types of measurements taken
for control purposes are based on some form of historical standard. These standards
can be based on data derived from the PIMS (profit impact of market strategy)
program, published information that is publicly available, ratings of product / service
quality, innovation rates, and relative market shares standings. Strategic control
standards are based on the practice of competitive benchmarking – the process of
measuring a firm’s performance against that of the top performance in its industry.
The
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proliferation of computers tied into networks has made it possible for managers to
obtain up-to-minute status reports on a variety ofquantitative performance measures.
Managers should be careful to observe and measure in accurately before taking
corrective action.
IV. COMPARE PERFORMANCE TO STANDARDS:
The comparing step determines the degree of variation between actual performance
and standard. If the first two phases have been done well, the third phase of the
controlling process – comparing performance with standards – should be
straightforward. However, sometimes it is difficult to make the required comparisons
(e.g., behavioral standards). Some deviations from the standard may be justified
because of changes in environmental conditions, or other reasons.
V. DETERMINE THE REASONS FOR THE DEVIATIONS:
The fifth step of the strategic control process involves finding out: “why performance
has deviated from the standards?” Causes of deviation can range from selected achieve
organizational objectives. Particularly, the organization needs to ask if the deviations are
due to internalshortcomings or external changes beyond the control of the organization.
 A general checklist such as following can be helpful:
1. Are the standards appropriate for the stated objective and strategies?
2. Are the objectives and corresponding still appropriate in light of the current
environmental situation?
3. Are the strategies for achieving the objectives still appropriate in light of the
current environmental situation?
4. Are the firm’s organizational structure, systems (e.g., information), and
resource support adequate for successfully implementing the strategies and therefore
achieving the objectives?
5. Are the activities being executed appropriate for achieving standard?
VI. TAKE CORRECTIVE ACTION:
 The final step in the strategic control process is determining the need for
corrective action.
 Managers can choose among three courses of action:
a) They can do nothing.
b) They can correct the actual performance.
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c) They can revise the standard.

 When standards are not met, managers must carefully assess the reasons why
and take corrective action. Moreover, the need to check standards periodically to ensure
that the standards and the associated performance measures are still relevant for the
future.
1.1 : PREMISE CONTROL:

The business strategy you’ve chosen was likely based on some assumptions you made
about what you believed would happen several years in the future. Whether those
assumptions are about your target audience, your competitors, or product
development, premise control lets you test those assumptions to see if they’re still valid.
 For example, if you own a skateboard company, you may have assumed
that your ideal buyers were Millennial, but you may discover that premise was flawed
after premise control measures reveal that the fastest-growing skateboard consumers
are actually an entire generation younger.
1.2 : STRATEGIC SURVEILLANCE CONTROL

 It’s impossible for you to anticipate every external threat that could impact the
success of your business, which is why strategic surveillance control lets you identify
information sources that monitor these external forces.
 Examples of these information sources are financial journals, trade magazines,
newspapers, economic forums, and industry conferences.
 These sources are often the first to identify the potential challenges that
businesses in your industry will face, and may even offer potential responses to these
challenges.
1.3 : SPECIAL ALERT CONTROL:
 At some point in time, your company will go through a rough patch that’s
triggered by some kind of unexpected occurrence that impacts your business in a
negative way.
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 This could include a sudden crash in the U.S. stock market, a domestic terrorist
attack, or even a natural disaster that affects your customers’ buying habits.
 Special alert control helps your business respond to these events without
having to change your entire strategy to deal with this new event.
 For example, after the September 11, 2001, terrorist attacks in the U.S., many
commercial airlines were forced to adopt stricter safety protocols to account for the
intense fears that passengers had about flying on a plane.
1.4 : IMPLEMENTATION CONTROL
 As you begin to implement a business strategy, you must use implementation
control measures to assess whether or not your plan needs adjustment.
 Common types of implementation control include setting performance
standards, measuring actual performance, analyzing the reasons your staff failed to
meet specific performance standards, and developing a plan to correct performance
deviations.
 Implementation control also includes things such as budgets, schedules, and
milestones that the company is trying to achieve.
2. ROLE OF THE STRATEGISTS:
There are various kinds of strategists like managers, board of directors, chief executive
officers, entrepreneurs, senior management, SBU- level executives, corporate
planning staff, consultants, middle level managers, executive assistants.
I. BOARDS OF DIRECTORS:
 Boards of directors are the owners of an organization such asshareholders,
controlling agencies, government, financial institutions, etc.
 They are responsible for governance of an organization, technology
collaboration, new product development and senior managementappointments.
 They guide the senior management in setting and accomplishing objectives,
review and evaluate organization performance.
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II. THE CHIEF EXECUTIVE OFFICER:

 Chief executive officer is answerable for all aspects of strategic
management from the formulation to the evaluation of strategy.
 They play a major role in strategic decision making and providethe
direction for the organization so that it can achieve its purpose.
 They assist in setting the mission of the organization.
 They are responsible for deciding the objectives, formulatingand
implementing the strategy.
III. ENTREPRENEURS:
 Entrepreneurs are strategist who starts a new business, initiator, searches for
change, and respond to it and exploits it’s as an opportunity.
 By their nature, entrepreneurs play a proactive role.
 They are implementers and evaluators of strategies.
IV. SENIOR MANAGEMENT:
 Senior management or top management consists of managers at highest level
managerial hierarchy. They look after renovation, technology up progression,
diversification and expansion and also focus on new product development.
 They assist the board and chief executives in formulating, implementing and
evaluating the strategy.
V.SBU LEVEL EXECUTIVES:
 SBU level executives are profit center heads or divisional heads.
 They manage a diversified company as a portfolio of businesses, each business
having a clearly defined product-market segment and a unique strategy.
 SBU executives maintain harmonization with other SBUs in the organizing,
formulating and implementing the SBU level strategy.
VI. CORPORATE PLANNING STAFF:
 Corporate planning staff plays a supporting role.
 They put in order and communicate the strategic plans.
 They make available administrative support and fulfill the function of assisting
the introduction, working and maintenance of strategic management system.
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VII. CONSULTANTS:
 Consultants may be individuals, academicians or consultancy companies who
are specialized in strategic management activities.
 They will advise and assist managers to improve the
performance and effectiveness of an organization.
 They provide services of corporate strategy and planning.
VIII. MIDDLE LEVEL MANAGERS:
 Middle level managers look after operational matters, so they rarely playan
active role in strategic management.
 They are the implementers of decision taken by top level and followersof
policy guidelines.
 They contribute to generation of ideas and in development of strategic
alternative.
 They also help in setting objectives at departmental level.
IX. EXECUTIVE ASSISTANT:
 An executive assistant will assist the chief executive in the performanceof his
duties in various ways.
 They assist the chief executive in data collection, analysis and insuggesting
alternatives.
 Coordinating activities with internal staff and outsiders and acting as afilter
for information are also performed by the executive assistant.
THE ROLE OF STRATEGIST IN ORGANIZATIONS:
A powerful strategist plays the major important roles like sooth sayer, sculptor,
politician, and guru and jail buster. A strategist must be a soothsayer or seer who helps
his team to imagine the future world within which they will be competing. They begin
by reading the palm of the organization and also identify its competencies and unique
strengths. They then use the crystal ballof scenarios, and imaginative thinking to help
the team to visualize the future within which the business will operate. A
strategist should also be a sculptor like an artist ‘who carves a form’ out of raw
materials. The sculptor strategist creates a unique role or purpose for the organization.
They predict the reason why the organization will be successful within the soothsayer’s
imagined future. The sculptor begins by defining the organization’s future target
markets. They then provide the future shape of the organization by defining why its
future customers will choose to support it, rather than any
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future imagined competitor. So the strategist changes systems, structures, rewards,

alliances, products and services to ensure that everything supports the organizational
purpose.
 A politician is someone who is ‘skilled in the art of maneuvering and
manipulation.’ The politician strategist knows the power players in the organization.
They know what drives each leader and they also know who is motivated by what
external and internal factors. 
 A guru is ‘a person who gives personal spiritual guidance to his disciples.’ The
strategist guru, shows how each individual employee in the company, can contribute to
the greater, noble goal. They help individual employees to discover their inimitable
personal purpose. Thenthey show them how to channel their energy and talent towards
living their purpose, whilst acting in ways that support the company’s goal. A strategist
must also plays a role of jail buster, while at work, many employees find that their
talents, passions, creativity, imagination, and energy are locked behind bars of the
company culture. Timid managers who want to ‘be in control’, and ‘avoid making
mistakes’, often hide the keys to creativity, energy, passion, self-assurance, and
innovation. The jail buster strategist shows employees how to break out from their
prison of tediousness and fear without alerting their fearful managers. They provide the
key to unlocking their talents, creativity, and energy.
3. BENCHMARKING TO EVALUATE PERFORMANCE:

WHAT IS BENCHMARKING?
Benchmarking is a process where different companies compare their nature of work
with other companies in the same field of business and they set certain type of standard
of working. It is a matter of work from different companies which creates some standard
for the work they deliver. And this standard of their work is considered and called as
benchmarking. This benchmarking allows different companies to compare their work
ability with other companies.
3.1: SOME TYPES OF BENCHMARKING:
Benchmarking is mainly used to assess the competitive insight and also gather the
information based on the performance which was done throughout the product or
organization development process. With the
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help of this benchmarking process, we can evaluate and identify the process to eliminate
hindrances which helps further in improving and enhancing our performance.
There are two primary types of benchmarking:
INTERNAL BENCHMARKING:
In this type of benchmarking the comparison of practices and performance is done
between teams, individuals or groups within anorganization.
EXTERNAL BENCHMARKING:
In external benchmarking process, the comparison of organizational performance
towards the company peers or across companies.
These above discussed benchmarking processes can be further diluted as follows;
1. PROCESS BENCHMARKING:
Benchmarking is usually a process to see how the competitors are working or how they
are able to gain success. When using process benchmarking, the data is gathered via
research, surveys, and website visits. All these information is helpful for people who are
working on similar kind of tasks and objectives.
2. PERFORMANCE METRICS:
Here when comparing competitors or analyzing clients, numerical metrics are gathered
as information. The details later are used to identify performance gaps, prioritize tasks,
etc., and then work accordingly.
3. STRATEGIC BENCHMARKING:
Strategic benchmarking analyzes how top companies compete and use best strategies
to achieve success in this competitive market. This type is mainly helpful for all the
organizations which are aiming for their long term goals. There are different types of
benchmarking which helps in understanding the actual concept of the benchmarking
process. Most of the benchmarking process involves a legitimate competitive element
in different types of business.
4. SWOT:
 As per the abbreviation goes, it can be elaborated as strength,weakness,
opportunities and threat.
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 It is a combination made of strength & weakness with opportunities &

threat.
 In this type of benchmarking process, most of the companies providetheir
own strength, weakness, opportunity and threat.
 And finally, the result of all this analysis covers up a new idea of changeinside
the company itself.
5. PEER BENCHMARKING:
There is some kind of criteria which needs to be considered while benchmarking and
these criteria provide some sort of dimension for all the companies. And in this peer
benchmarking the competition is among those industries or companies which deal with
a similar field of work. Therefore, the comparison is among those companies which
deliver similar work field.
6. GROUP BENCHMARKING:
It is one of the forms of combined benchmarking where in which a group of companies
joins hands with some relevant association and that association helps them provide the
report that can be necessary to deliver their benchmarking aspects. Therefore, group
benchmarking or collaborative benchmarking allows all the information of the different
companies through those associations and actual work of those associations is that they
need to provide better reports of benchmarking of their companies.
7. BEST PRACTICE BENCHMARKING:
In this form of benchmarking the companies look forward to those companies which
already made their impression on the business field. The practices which they followed
to be in the top list of the best companies are followed and incorporated by the rest of
the company which aspire to be similar like that successful company. Therefore, it is
necessary to create benchmarking where in which it includes all the best practices
delivered and reported by the company.
3.2 : BENCHMARKING PROCESS:

Benchmarking process is a process in which all the different steps are included which
helps all the companies from the similar or different work field find out their strengths
and weakness. These steps provide all
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the aspects of the companies which can provide them an actual success rate of their
company.
1. DETERMINING ASPECTS OF THE COMPANY:
In this phase of benchmarking the company identifies all the aspects of their company
which can help them determine their benchmarking criteria with the rest of the
company. Therefore, in this phase of work the company finds out all the important
aspects of their companies, which can rank them as one of the best in the industry and
also can deliver information such as their success rate and element of their work order.
2. PLANNING AND RESEARCH:
In this planning and research phase, the company provides necessary information about
the different aspects of their company. After understanding all the aspects of the
company, the company arranges for planning phase where these aspects of companies
are examined for the goodness sake of the company and finally it goes through a
research phase where all the planned aspects are researched completely for the best of
the companies.
3.COLLECTION OF DATA:
At this stage of benchmarking, all the data collected from the planning and research
department are maintained through some sort of methods and measures. Therefore,
these methods help the company provide the final and comparative aspects of the
company which can consider themselves different from the rest of the company. And
the final data collected through this collection stages are considered as a fact of
comparison.
4.EXAMINATION:
In this stage of benchmarking all the finding and output delivered by the planning and
research department are examined for the purpose of overall development of the
company. Therefore, this stage examines or analyzes all those findings from the previous
phase to deliver the final word of benchmarked aspects of the company
DEVELOPMENT:
5.
At this stage of benchmarking the final examined data collected from theexamination
stage can be provided with the necessary recommendation
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of development of the company. After examining the output of the benchmarking

aspects of the company, the same company will create some development programs
within the company to improve their working efficiency of the company.
6. INCORPORATION:
In this final stage of benchmarking all the aspects that are examined and developed are
finally incorporated in the company for the overall development of the company. After
finding the aspect which needs to be incorporated in the company, the company can
provide a particular supportive environment for such change in the company. Therefore,
all the necessary facts and those matters of the company which can turn it into a
successful company need to be incorporated in the company.
3.3 : ADVANTAGES OF BENCHMARKING:
There are several advantages of benchmarking. Most of the common benefits of the
benchmarking help to improve the productivity of the company. Moreover, these
advantages can provide a clear picture about the key factors of benchmarking in the
company. And an increased productivity elements, display the successful features of the
company.
1. IMPLEMENTS CREATIVE IDEAS:
 One of the common type of benchmarking where in which all the beneficial
aspects of the company are creatively implemented for the overall development of the
company.
 The benchmarking process helps the company find out their key features
and after finding out the key features of their company, that company compares it with
another company to complete the picture.
 And if there are any filling to be needed, then the company starts implementing
creative ideas for the company.
2. INCREASED COMPETITIONS:
 Most of the time while doing business and while running a successful company,
that company faces some strong competition from the rest of the companies.
 And that competition helps the current company to maintain their position
even better in terms of their success rate of the company.
 Therefore, as per the statement of benchmarking process it definitely increases
healthy competition among different companies.
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3. DEVELOPING IMPROVEMENT:
 It is clear about benchmarking that it deals with those findings of the company
and another company which helps them find their position in the business market.
 And if there are any chances or space available for improvement in the
company activities, then the company needs to develop those improvements in the
company for the growth of the company in its own terms.
4. IDENTIFIES ESSENTIAL ACTIVITIES:
 One of the best possible advantages of the benchmarking is that it can help all
the companies to identify their own essential activities that can improve the profits of
the company.
 Therefore, after benchmarking it is very much important for all the companies
to be identified in the list of companies, which is in a run and where it can deliver the
victory of their company effectively.
5. QUALITY OF WORK:
 Because of benchmarking once the company identifies their strengths and
weakness compared with the rest of the company, and then it is quite clear that all the
aspects of the company need to be improved at a time to time basis.
 And finally the company can deliver some sort of ways which can deliver
quality in their working order. Therefore, benchmarking makes things clear and creates
some sort of awareness among the company working environment.
6. INCREASED PERFORMANCE:
 As it is explained earlier that the benchmarking process, identifies all the
features and elements of the company which can lead them towards its success.
 And eventually, it also provides essential signals regarding the need and
wants of the company.
 Once the company finds out about the actual requirements of the company,
then it can increase its work performance as per the comparison aspects.
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3.4 : DISADVANTAGES OF BENCHMARKING:

As the company can receive some sort of benefits from these benchmarking processes,
then it is quite obvious that the company can be covered with some of the disadvantages
as well. And those disadvantages are as follows.
1. STABILIZED STANDARDS:
 Most of the company compares their working environment with another
company which is earning quite well in the similar field of work.
 After finding out the reason for the improved success rates, the company can
incorporate those ideas of that company to improve their productivity.
 And eventually, they stabilize their standard to that one aspect, without its
course of action.
2. INSUFFICIENT INFORMATION:
 Sometimes it happens that while comparing the aspects of different companies,
the information acquiring company can be left behind with their information gathering
techniques.
 And that is why it can face tremendous loss in their business because of
insufficient information about the company.
 Therefore, it is very essential for all the companies that they need to be sure of
their information about that another company.
3. DECREASED RESULTS:
 Most of the time when a company sets its standard and try to improve that
standard by implementing some new and creative ideas, then at that time the company
need to look at those companies which are doing quite good in their similar type of
business.
 And analyze the actual problem in their company.
 Once the company finds out the actual reason, then they need to research
well about the element that whether it is feasible for the company or not.
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4. LACK OF CUSTOMER SATISFACTION:

 Most probably during the benchmarking process the company finds out those
outputs which can need to be improved and developed for the sake of the overall growth
of the company.
 Hence, for that the company needs to look into the matters which can
increase their productivity along with their customer satisfaction.
 Therefore, instead of incorporating the ideas that another company used in
their company, it can check for its feasibility in their own company.
5. LACK OF UNDERSTANDING:
 As most of the companies keep an eye on their competition instead of their
own growth, it is quite clear for all the company that such type of obsession with another
company cannot lead the company anywhere.
 Therefore, it is advisable for all the companies that they need to understand
the need for benchmarking in their company instead of spying on another company.
6. INCREASED DEPENDENCY:
 Most of the companies think that benchmarking helps they improve their
company position as it helped those successful companies to be in the top.
 But most of the companies forget that those companies which made
themselves to that top position have earned their hard work.
 Therefore, instead of depending on the ideas which made that company
successful, they can build their own network to make them independent for the better
future.
4. STRATEGIC INFORMATION SYSTEMS:

Strategic information systems (SIS) are information systems that are developed in
response to corporate business initiative. They are intended to give competitive
advantage to the organization. They may deliver a product or service that is at a lower
cost, that is differentiated, that focuses on a particular market segment, or is
innovative.
Strategic information management (SIM) is a salient feature in the world of information
technology (IT). In a nutshell, SIM helps businesses and organizations categorize, store,
process and transfer the information they
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create and receive. It also offers tools for helping companies apply metrics and
analytical tools to their information repositories, allowing them to recognize
opportunities for growth and pinpoint ways to improve operational efficiency.
Strategic Information Systems are different from other comparable management
information systems as:
 They change the way the firm competes.
 They are associated with higher project risk.
 They are innovative (and not easily copied)
4.1 : CHARACTERISTICS OF STRATEGIC INFORMATION SYSTEMS:

AUTOMATION:
I.
IT professionals design strategic information management systems to automate the
management of incoming and outgoing information to the greatest possible degree.
While each company has its own unique IT needs, strategic information management
systems typically include built-in controls that filter, sort, categorize and store
information in easy-to-manage categories.
CUSTOMIZATION:
II.
Strategic information management systems are typically customized to meet the unique
needs of each individual company. Incoming and outgoing data can be sorted and cross-
referenced according to a wide range of individually specified controls and parameters,
which include the company's business verticals and horizontals, individual clients,
demographics, geographic location and business function.
III. ORGANIZATION AND ACCESS:
Strategic information management systems are extensively categorized, allowing for an
optimal level of organization. Access controls can be as strict or as lax as the client wants,
allowing for company-wide access to information databases or limiting information
accessibility to keypersonnel. User-specific controls can also be set, in case employees
need access to certain information but management wants to limit their access to
sensitive data.
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IV. BENEFITS:
The benefits of strategic information management can be felt from the executive level
right down to the functional staff level. It can help businesses expand their operations
into new areas, set goals, measure performance and improve overall productivity.Have
an external (outward looking) focus.
V.RISKS:
Some of the risks involved with strategic information management systems include
implementation challenges, incompatibility with client databases and human error. As
with other IT management techniques, data protection and information security is also
an ongoing concern.
4.2 : USES OF STRATEGIC INFORMATION SYSTEM:

I. CREATING HURDLES FOR THE ENTRY OF A COMPETITOR:
 In this, a firm uses information systems to supply products and services that are
hard to duplicate or that are used primarily to aid highly specialized networks of
business.
 This strategy stops the entry of competitors in the market as they find the
cost of giving such services at a very high price.
II. IMPROVING MARKETING BY GENERATING DATABASE:
 Information system also gives the firms and organization an edge over their
competition by generating stronger databases to enhance their sales and marketing
tactics.
 It treats existing information as a useful resource.
 For instance, a business firm may use its updated databases to monitor the
purchase of the customers and to locate many segments of the market.
III. LOCKING CUSTOMERS AND SUPPLIERS:
 It is an essential way of getting the advantage of competition by making the
customers and suppliers permanent.
 In this information systems strategy are implemented to provide benefits to
the customer and the suppliers so that it may change their mind and it becomes hard
for them to switch over to the other competitor so that they continue to provide the
services.
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IV. LOWERING THE COSTS OF THE PRODUCTS:

 It may help the firms lower their costs and allowing them to give products and
services at a much smaller cost than their competitors.
 Thus such a strategy can provide the expansion and growth of the firm
V. LEVERAGING TECHNOLOGY IN THE VALUE CHAIN:
 In this way, the organizations pinpoint the particular activities in the business,
where competitive market strategies can be applied and where the strategically
information systems can be more effective.
5. GUIDELINES OF PROPER CONTROL:
Measuring performance is a crucial part of Evaluation and Control. The lack of
quantifiable objectives or performance standards and the inability of the information
system to provide timely, valid information are two obvious control problems.
In designing a control system, top management should remember that controls should
follow strategy. Unless controls ensure the use of the proper strategy to achieve
objectives, dysfunctional side effects may completely undermine the implementation of
the objectives.
The following guidelines are very important to develop the control system in any
organization:
 Controls should involve only the minimum amount of information needed to
give a reliable picture of events. Too many controls create confusion. Focus on the
strategic factors by following the 80/20 rule: Monitor those 20% of the factors that
determine 80% of the results.
 Controls should monitor only meaningful activities and result. .
 Controls should be timely.
 Controls should be long term and short term
 Controls should pinpoint exceptions.
 Controls should be used to reward meeting or exceeding standards
rather than to punish failure to meet standards.
6. STRATEGIC SURVILLIANCE:
Compared to premise control and implementation control, strategic surveillance is
designed to be a relatively unfocused, open, and broad search activity."... Strategic
surveillance is designed to monitor a broad range of events inside and outside the
company that are likely to threaten the course of the firm's strategy."
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The basic idea behind strategic surveillance is that some form of general monitoring of
multiple information sources should be encouraged,with the specific intent being the
opportunity to uncover important yet unanticipated information.
Strategic surveillance appears to be similar in some way to "environmental scanning."
The rationale, however, is different. Environmental, scanning usually is seen as part of
the chronological planning cycle devoted to generating information for the new plan.
By way of contrast, strategic surveillance is designed to safeguard the established
strategy on a continuous basis. Small businesses use strategic surveillance to observe
events inside and outside the business that will likely affect its strategy. The goal of this
surveillance is to keep ahead of competitors and changes in the business climate.
6.1 : EXAMPLES OF STRATEGIC SURVILLIANCE:

Reviewing Outside Literature
 One example of everyday strategic surveillance by small business is the review
of outside literature relating to business activities. This literaturecan include reading The
Wall Street Journal, Business Weekly, or any other trade publication. These
newspapers and periodicals offer insight into business trends or trends that are
becoming outdated. This is a relatively inexpensive way for small businesses to observe
business trends that will affect their company strategy.
ENVIRONMENTAL FACTORS
Watching environmental factors is another example of strategic surveillance.
 For example, the mad cow epidemic immediately affected what the fast food
industry served. Restaurants stopped serving beef and began serving chicken and
vegetarian alternate dishes. The fast food industry knew that this epidemic would
immediately affect their business so it changed its menu to avoid revenue losses.
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ATTENDING TRADE CONFERENCES

Another example of strategic surveillance is attending trade conferences in your line of
business. Every type of business holds various trade conferences throughout the year to
introduce new products and to discuss ideas for the future. These conferences are a
perfect way to viewthe competition and to test new ideas or products. Customers also
attend these conferences so small businesses can view how the customers will react to
possible changes.
SOCIAL NETWORKING WEBSITES
 Another example of strategic surveillance is watching social networking
websites.
 This is an inexpensive way to observe how clients and competitors will react to
a company changing strategy and to receive their comments.
 For example, most companies place on their websites "Follow us on Face book
and Twitter." This enables consumers to connect with companies on these social
websites by making comments aboutproblems with the company or posting things they
like about the company.
 These comments are then read by the company and other consumers.
7. STRATEGIC AUDIT:
A strategic audit is an examination and evaluation of areas affected by the operation of
a strategic management process within an organization. A strategy audit may be needed
under the following conditions:
 Performance indicators show that a strategy is not working or isproducing
negative side effects.
 High-priority items in the strategic plan are not being accomplished.
 A shift or change occurs in the external environment.
 Management wishes:
(1) To fine-tune a successful strategy and
(2) To ensure that a strategy that has worked in the past continues to bein
tune with subtle internal or external changes that may have occurred.
A strategy audit is a review of a company’s business plan and strategies to identify
weaknesses and shortcomings and enable a successful development of the company.
The strategy audit secures that all necessary
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information for the development of the company are included in the business plan and
that the management supports it.
A strategic audit is an in-depth review to determine whether a company is meeting its
organizational objectives in the most efficient way. Additionally, it examines whether
the company is utilizing its resources fully. A successful strategic audit is beneficial to
any company.
7.1. PROCESS OF STRATEGIC AUDIT:

The process of conducting a strategic audit can be summarized intothe following
stages:
I. RESOURCE AUDIT:
The resource audit identifies the resources available to a business. Someof these can be
owned (e.g. plant and machinery, trademarks, retail outlets) whereas other resources
can be obtained through partnerships, joint ventures or simply supplier arrangements
with other businesses.
II. VALUE CHAIN ANALYSIS:
Value Chain Analysis describes the activities that take place in a business and relates
them to an analysis of the competitive strength of the business. Influential work by
Michael Porter suggested that the activities of a business could be grouped under two
headings:
1. Primary Activities - those that are directly concerned with creating and delivering a
product (e.g. component assembly)
 Support Activities, which whilst they are not directly involved in production,
may increase effectiveness or efficiency (e.g. human resource management). It is rare
for a business to undertake all primary and support activities. Value Chain Analysis is
one way of identifying which activities are best undertaken by a business and which are
best provided by others ("outsourced").
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III. CORE COMPETENCE ANALYSIS:

Core competencies are those capabilities that are critical to a business achieving
competitive advantage. The starting point for analyzing core competencies is
recognizing that competition between businesses is as much a race for competence
mastery as it is for market position and market power. Senior management cannot focus
on all activities of a business and the competencies required undertaking them. So the
goal is for management to focus attention on competencies that really affect
IV. PERFORMANCE ANALYSIS:
The resource audit, value chain analysis and core competence analysis help to define
the strategic capabilities of a business. After completing such analysis, questions that
can be asked that evaluate the overallperformance of the business. These questions
include:
 How have the resources deployed in the business changed over time? This is
historical analysis
 How do the resources and capabilities of the business compare with others in
the industry? This is industry norm analysis
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 How do the resources and capabilities of the business compare with "best-in-
class" - wherever that is to be found? This is benchmarking.
 How has the financial performance of the business changed over time, and how
does it compare with key competitors and the industry as a whole? This is ratio analysis.
V. PORTFOLIO ANALYSIS:
Portfolio Analysis analyses the overall balance of the strategic business units of a
business. Most large businesses have operations in more than one market segment, and
often in different geographical markets. Larger, diversified groups often have several
divisions (each containing many business units) operating in quite distinct industries. An
important objective of a strategic audit is to ensure that the business portfolio is strong
and that business units requiring investment and management attention are
highlighted. This is important - a business should always consider which markets are
most attractive and which business units have the potential to achieve advantage in the
most attractive markets.
VI. SWOT ANALYSIS:
 SWOT is an abbreviation for Strengths, Weaknesses, Opportunities and Threats.
 SWOT analysis is an important tool for auditing the overall strategicposition of
a business and its environment.
SWOT analysis is a method for analyzing a business, its resources and its environment.
It focuses on the internal strengths and weaknesses of an organization.
 SWOT analysis aims to discover:
 What the business does better than the competition
 What competitors do better
 Whether it is making the most of the opportunities available
 How a business should respond to changes in its external
environment
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8. STRATEGY AND CORPORATE EVALUATION AND FEEDBACK ININDIAN

CONTEXT:
The final stage in strategic management is strategy evaluation and control. All strategies
are subject to future modification internal and external factors are constantly changing.
In the strategy evaluation and control process in India managers determine whether the
chosen strategy is achieving the organizations objectives. The fundamental strategy
evaluation and control activities are reviewing internal and external factors that are the
bases for current strategy measuring performance and taking corrective actions. Some
of the examples of strategy and corporate evaluation process adopted by Indian
companies are as follows.
1. STRATEGIC EVALUATION AND CONTROL AT THE APOLLO HOSPITALS

NETWORK:
Apollo hospitals enterprise limited (AHEL) has the distinction of being the first and the
largest corporate hospital network in modeled on the hospital corporation of America
the world’s largest private healthcare providers.
The Apollo network owns and manages more than 40 hospitals in India and some
neighboring countries. It serves 7.4 million customers and aims at increasing bed
capacity by around 30% every year. There are more than 50 clinical departments for
patient care manned by about 7000 medical professionals. The technological capability
of AHEL is seen in the state of the art equipments for diagnostic and therapeutic
purposes and in cases of using advanced medical procedures. The strategic control
appears to be centralized in the executive team led by Dr. REDDY.
The performance evaluation model at AHEL called the Apollo clinical excellence model
is based on the identification of key performance areas such as clinical professionals
support personnel equipment patients and environment of care.
2. STRATEGIC EVALUATION AT CENTAL PUBLIC ENTERPRISES IN INDIA:
The government of India is the owner of 245 central public sector enterprises (CPSEs)
employing 16.5lac persons with a cumulative investment of over ₹76,000crore net worth
of over ₹4,00,000crore generating net profit of over ₹76,000crore in 2006 that is about
11% of the GDP of India.
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In 1987-88 the government of India introduced the system of memorandum of

understanding for performance evaluation of CPSEs. MOU is a freely negotiated
agreement between the public enterprise and the administrative ministry. Under the
agreement the enterprises undertake to achieve the targets set in the agreement at the
beginning of the year. The MOU covers both financial performance as well as non
financial performance. Under this system performance of the company is categorized
into five categories namely excellent, very good, good, fair and poor. The measurement
of performance is based on the standards devised through balanced scorecard approach
and includes both financial and non financial parameters having equal weight of 50%
each. The non financial parameters are further divided into dynamic parameters (30%)
enterprise specific parameters (10%) and sector specific parameters (10%).
3. TATA AND BALANCED SCORECARD:
Balanced scorecard is a comprehensive performance measurement system that
balances traditional financial measures with operational measures. TATA MOTORS is the
largest and most prominent market leader in the manufacture of commercial business
vehicles in India. In the year 2000 its commercial vehicles business unit (CVBU) suffered
its first loss in it’s more than fifty years history. This loss was motors to take a profound
look into itself to find reason in this debacle.
Subsequently the executive director of CBVU, Mr. RAVI KANT called for stringent cost
cutting across unit operations supported by more effective formulation and execution
of strategy. To augment this process the management of TATA MOTERS resolved to
adopt the balanced scorecard and performance framework as the key tool in the
endeavor to re-build the organizational performance chart. The challenge here was to
undertake deployment of the balanced scorecard across all the functional units and
departments of the CBVU.
INTERNATIONAL CONTEXT
Some of the examples of strategy and corporate evaluation processesadopted by
international companies are as follows.
1. BSC AT PHILIPS:
When a management tool becomes popular it is only logical to questionwhether it is a
fad or the future. One has broad appeal. Approximately 50% of
112 | P a g e
fortune 1,000 companies in north America and about 40% in Europe use a version of the
BSC according to a recent survey by Bain and Co. the number of software and consulting
firms currently providing BSC related products and services supports these statistics. But
do companies think the BSC is here to stay? Philips electronic does. This worldwide
conglomerate has gathered its more than 250,000 employees in 150 countries around
the card because it sees this tool as the future not a trendy tool. The key benefit for
Philips: management can streamline the complicated process of running a complex
international complex with diverse product lines and divisions. Here is how it cascades
throughout the organization.
The drive to implement the balanced scorecard at Philips electronicscame from the top
down as a directive from the board of management in Europe to all Philips divisions and
companies worldwide. The directive went to all Philips divisions and companies and
their quality departments with the effort in the medical division headed by the quality
steering committee that reports to the president of Philips medical systems.
Philips electronics has used the balanced scorecard to align company vision focus
employees on how they fit into the big picture and educate them on what drives the
business. An essential aid to communicating the business strategy the BSC works as a
vehicle to take key financial indicators and create quantitative expressions of the
business strategy. In fact Philips electronics management team uses it to guide the
quarterly business reviews worldwidein order to promote organizational learning and
continuous improvement.
The tool has helped Philips electronics focus on factors critical for their business success
and align hundreds of indicators that measures their markets operations and
laboratories. The business variables crucial for creating value which are known as the
four critical success factors (CSFs) on the Philips electronics BSC are,
a. Competence (knowledge, technology, leadership, and teamwork)
b. Processes (drivers for performance)
c. Customers (value propositions) and
d. Financials (value, growth and productivity)
113 | P a g e
2. BENCHMARKING AT XEROX
The history of Xerox goes back to 1938 when CHESTER CARLSON a patent attorney and
part time inventor made the first xerographic image in the
U.S Carlson struggled for over five years to sell the invention as many companies did not
believe there as a market for it. Finally in 1944 the battle memorial institute in Columbus
Ohio, contracted with Carlson to refine his new process which Carlson called electro
photography.
a. Xerox defined benchmarking as the process of measuring its products service
and practices against its toughest competitors identifying the gaps and establishing
goals. Our goal is always to achieve superiority in quality product reliability and cost.
Gradually Xerox developed its own benchmarking model. This model involved tens steps
categorized under five stages planning analysis integration action a PLANNING:
determine the subject to be benchmarked identify the relevant best practice
organizations and select/develop the most appropriate data collection techniques.
b. ANALYSIS: assess the strengths of competitors and compare Xerox’s
performance with that of its competitors. This stage determines the current competitive
gap and the projected competitive gap.
c. INTEGRATION: establish necessary goals on the basis of the data collected to
attain best performance integrate the goals into the company’s formal planning
processes. This stage determines the new goals or targets of the company and the way
in which these will be communicated across the organization.
d. ACTION: implement action plans established and assess them periodically to
determine whether the company is achieving its objectives. Deviations from the plan
are also tackled at this stage.
e. MATURITY: determine whether the company has attained a superior
performance level. This stage also helps the company to determine whether
benchmarking process has become an integral part of the organizations formal
management process.
Xerox collected data on key processes of best practice companies. There critical
processor were then analyzed to identify and define improvement opportunities. For
example Xerox identified ten key factors that were related to marketing. These were.
114 | P a g e
1. Customer marketing
2. Management
3. Asset management
4. Business management
5. Human resource management and
6. Information technology. Customer engagement
7. Order fulfillment
8. Product maintenance
9. Billing and collection
10. Financial
These ten key factors were further divided into 67 sub-processes. Eachof these sub-
processes then became a target for improvement. The five stage process involved the
following activities.
Purpose of acquiring data from the related benchmarking companies Xerox subscribed
to the management and technical databases referred to magazines and trade journals
and also consulted professional associations and consulting firms.
115 | P a g e

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STRATEGIC MANAGEMENT – 22MBA0301

1.1 : CONCEPTS IN STRATEGIC MANAGEMENT:-

1.1.2. CHARACTERISTICS OF STRATEGIC MANAGEMENT:

I. STRATEGY IS A SYSTEMATIC PHENOMENON:

 Success of Microsoft appears to be very simple as far as software for

1.1.3. GUIDELINES FOR EFFECTIVE STRATEGIC MANAGEMENT:-

1.2. SRATEGIC MANAGEMENT AS PROCESS:

Components of Strategic Management Process

D. EVALUATION AND CONTROL:-

1.3. DEVELOPING A STRATEGIC VISION:-

1.3.1. DEVELOPING A STRATEGIC VISION:-

Understanding organizationConduct an audit

Narrow down the vision

Alternate vision statements

Secret the final vision Statement

a) UNDERSTANDING THE ORGANIZATION:-

c) NARROW DOWN THE VISION:-

e) CREATE NEW FUTURE SCENARIOS:-

1.3.2. EXAMPLES OF CORPORATE VISION STATEMENT:-

1.3.3. BASIC ELEMENTS OF A VISION STATEMENT:- Vision is simply a

The obvious purpose of a mission statement is to give a public announcement to

EXAMPLES OF MISSION STATEMENTS:

1.4.3. BENEFITS OF MISSION:

1.4.4.COMPONENTS OF MISSION STATEMENTS:-

MISSION Public images

COMPARISSION OF VISION AND MISSION STATEMENTS OF

COMPANY VISION MISSION

AMAZON To be earth’s most customer- We strive to offer our

1.5.2 : CLASSIFICATION OF OBJECTIVES:

1.5.3. ROLE OF OBJECTIVES:-

E. Basis for Organizational Existence:-

1.6.2. TYPE OF POLICIES:

C. On the Basis of Managerial Functions:

1.7. FACTORS THAT SHAPE A COMPANY’S STRATEGY:

1.7.1. FACTORS THAT SHAPE A COMPANY’S STRATEGY:

Societal, political regulatory and citizenship considerationsCompetitive conditions and overall

i. SOCIETAL, POLITICAL REGULATORY AND CITIZENSHIP

Various studies indicate that manager’s ambitions, values, business philosophies,

1.8. ENVIRONMENTAL SCANNING:

1.8.2. PROCESS OF ENVIRONMENTAL SCANNING:

iii. DETERMINE THE APPROACH OF ENVIRONMENTAL

1.8.3. TECHNIQUES/METHODS OF ENVIRONMENTAL SCANNING:

iii. Delphi method:

a. LIST ENVIRONMENT FACTORS

2.1. TOOLS AND TECHNIQUES:

2.1.2. PROCEDURE OF STRATEGIC ANALYSIS:-

i. PERFORM AN ENVIRONMENTAL ANALYSIS OF CURRENT

implemented, assessed, and re-assessed. They must change because business

2.2. PORTER’S FIVE FORCE MODEL:

i. THREAT OF NEW ENTRANTS.

2.2.1. USING THE PORTER’S FIVE FORCE MODEL:

2.3. BCG MATRIX:

Boston Consulting Group (BCG) Matrix is a four celled matrix (a 2 * 2 matrix)

Figure: BCG Matrix

III. QUESTION MARKS:

2.3.1. LIMITATIONS OF BCG MATRIX:

In 1970s, General Electric was managing a huge and complex portfolio of

BASIS FOR BCG MATRIX GE MATRIX

2.5. SWOT ANALYSIS