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CA – Intermediate

“Success is not final, failure is not fatal;

it is the courage to continue that counts”

Paper 7-B

Shree Ganesh

Index Sr. No.

Chapter No. Chapter (Topic) Page No.

1 1 Introduction to Strategic Management 1.1 – 1.13

2 2 Dynamics of Competitive Strategy 2.1 – 2.30

3 3 Strategic Management Process 3.1 – 3.11

4 4 Corporate Level Strategies 4.1 – 4.20

5 5 Business Level Strategies 5.1 – 5.13

6 6 Functional Level Strategies 6.1 – 6.23

7 7 Organization Structure And Strategic Leadership 7.1 – 7.19

8 8 Strategy Implementation And Control 8.1 – 8.23

9 List of Person’s

10 ICAI MCQ’s

For More Visit: www.ExpertStudyPlanner.com

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Shree Ganesh

Questions likely to be asked in exam;

1. Explain concepts (2 Marks each),

2. Correct and Incorrect, with reasons (2 Marks each),

3. Case study (4 – 5 Marks each),

4. Distinguish Between (4 – 5 Marks each),

5. Answer in brief (5 Marks each),

6. Descriptive question (6 – 8 Marks),

7. MCQ (15 Marks)

Study Plan;

Chapter’s Hours

No. Name Rev. 1 Rev. 2 Final Rev.

1 Introduction to Strategic Management 02:00 01:30 01:00

2 Dynamics of Competitive Strategy 04:30 03:00 03:00

3 Strategic Management Process 01:30 01:00 01:00

4 Corporate Level Strategies 01:45 01:00 01:00

5 Business Level Strategies 02:00 01:30 01:00

6 Functional Level Strategies 02:15 01:00 01:00

7 Organisation and Strategic Leadership 02:00 01:00 01:00

8 Strategy Implementation and Control 02:00 02:00 01:00

Total Hours 18:00 12:00 10:00


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Chapter 1: Introduction to Strategic Management

pg. 1

What do you mean by strategy?

A plan of action intended to complete a specific goal. e.g. Exam, Sports, etc…

Pathway, Direction, Planning, Ways and mean to achieve aim…

Strategy mean bridging the gap between means and ends.

What is Business?

As per famous management guru

‘Peter F Drucker,“Business exist for profit”

Objectives of Business;

Survival, Stability, Efficiency, Growth, Profitability, Wealth Maximisation.


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Relationship between organization and environment

Internal Environment (6 M’s)

1. Man (HRM)2. Machinery (Assets)3. Material4. Money (FM)5. Marketing Research (Marketing Mix)6. Management Structure (Organization Structure)


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Business Policy;

The origin of business policy can be traced back to 1911,

When Harvard Business School introduced an integrative course in management aimed at the creation of general management capability among business executives.

Concept of strategy?

Strategic Management can be defined as, (ICAI MCQ’s)

The art and science of Formulating, Implementing & Evaluating Cross-Functional decisions that enable an organization to achieve its objectives.

Strategy Consider as: A long term plan,

A game plan,

A comprehensive process,

An analysis, planning and implementation,

A plan adopted for survival, stability and growth of business.


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Introduction;

A typical dictionary defines the word ‘strategy’ as something that has to do with war and ways to win over enemy.

We may define the term ‘strategy’ as a long range blueprint of an organization’s.

However, strategy is no substitute for sound, alert and responsible management.

Strategy can never be perfect, flawless and optimal.

Allowances are made for possible miscalculations and unanticipated events.

In large organisations, strategies are formulated at the corporate, divisional (business) and functional (operational) levels.

Corporate strategies are formulated by the top managers.

Strategic Management is essential for the survival and growth of business organizations in dynamic business environment.

Strategic management is not a bundle of tricks and magic. It is a deliberate managerial process. (C or IC)

The term ‘strategic management’ refers to the managerial process of;

Developing a strategic vision,

Setting objectives,

Crafting a strategy,

Implementing,

Evaluating the strategy and

Initiating corrective adjustments where deemed appropriate.


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The overall objectives of strategic management are twofold:

1. To create competitive advantage,

2. To guide the company successfully through all changes in the environment.

Importance (Benefits) of Strategic Management:

The strategic management gives a direction to the company to move ahead.

It defines the goals and mission.

It helps management to define realistic objectives and goals which are in linewith the vision of the company.

Strategic management helps organisations to be proactive instead of reactive inshaping its future.

Organisations are able to analyse and take actions instead of being merespectators.

Strategic management seeks (attempt) to prepare the organisation to face thefuture and act as pathfinder to various business opportunities.

Strategic management serves as a corporate defence mechanism againstmistakes and pitfalls.

Limitations of Strategic Management;

Strategic management is a costly process.

Strategic management is a time-consuming process.

Environment is highly complex and turbulent (unstable).


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It is difficult to understand the complex environment and exactly pinpointhow it will shape-up in future?

It is difficult to clearly estimate the competitive responses to a firm’sstrategies.

Classification of Strategy;

“Strategy is partly proactive and partly reactive.” do you agree?

Yes, Strategy is partly proactive and partly reactive.


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In Proactive Strategy, organizations will analyse possible environmental scenarios and create strategic framework after proper planning and set procedures and work on these strategies in a predetermined manner.

However, in reality no company can forecast both internal and external environment exactly.

Everything cannot be planned in advance.

It is not possible to anticipate moves of rival firms, consumer behaviour, evolving technologies and so on.

There can be significant deviations between what was visualized and what actually happens.

Strategies need to be modified in the light of possible environmental changes. There can be significant or major strategic changes when the environment demands.

Reactive strategy is triggered by the changes in the environment and provides ways and means to cope with the negative factors or take advantage of emerging opportunities.

It is based on Unanticipated. Competitor’s strategies, Market changes require changes in planned strategy is known as Reactive Strategy.

Strategic Levels in Organisations;


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Example;

Corporate Level; This (Corporate) level of management consists of;

1. The Chief Executive Officer (CEO),

2. Other Senior Executives,


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3. The Board of Directors (BOD) and

4. Corporate Staff.

Those individuals are mainly decision making authority of the organisation.

The role of Corporate Level of management includes; (Tasks of the strategic manager);

To set corporate vision, mission and goals,

Determining what business it should be in,

Allocation of resources,

Formulating strategies,

Implementing strategies,

Providing leadership to the organisation, etc…

Strategic Management in Govt. & Non Profit Organisations;

Organizations can be classified as commercial and non-commercial on the

basis of the interest (object) they have. A commercial organization has profit as

its main aim. We can find many organizations around us, which do not have any

commercial objective of making profits.

E.g. ICAI, NGO’s such as Help-Age, Child Relief and You.

Their main aim is to provide services to members, beneficiaries or public at large.

Educational institutions;

Medical organizations;

Governmental agencies and departments.

* Refer ICAI, study material for descriptive answer (1.11)


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Educational institutions;

The first all-Internet law school, Concord University School of Law, possess

nearly Two Hundred (200) students who can access lectures anytime and chat at

fixed times with professors.

Online college degrees are becoming common and represent a threat to

traditional colleges and universities. E.g. Online MBA.

Medical institutions;

Hospitals are beginning to bring services to the patient as much as bringing the

patient to the hospital.

The whole strategic landscape (environment) of healthcare is changing because of

the Internet.

Intel recently began offering a new secure medical service whereby doctors and

patients can conduct sensitive business on the Internet.

Backward integration strategies that some hospitals are pursuing include acquiring

ambulance services, waste disposal services, and diagnostic services.

Millions of persons research medical ailments (disease) online, which is causing a

dramatic shift in the balance of power between doctor, patient, and hospitals.


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Governmental agencies and departments;

Central, State, Municipal Agencies, Public Sector units, departments are

responsible for formulating, implementing, and evaluating strategies that use

taxpayers’ money in the most cost-effective way to provide services and programs.

Strategic-management concepts increasingly are being used to enable some

organizations to be more effective and efficient.

Important Correct, Incorrect;

Q. Control systems run parallel with strategic levels?

Ans. Correct:

There are three strategic levels in an organisation – corporate, businessand functional.

Control systems are required at all the three levels, at the top level,strategic controls are built to check whether the strategy is beingimplemented as planned and the results produced by the strategy arethose intended.

Down the hierarchy (i.e. Business & Functional) management controlsand operational controls are built in the systems.

Operational controls are required for day-to-day management of business.

Q. Strategists in governmental organizations operate with less strategic autonomy

than their counterparts in private firms?

Ans. Correct:


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Public enterprises generally cannot diversify into unrelated businesses or

merge with other firms.

Governmental strategists usually enjoy little freedom in altering the

organizations’ missions or redirecting objectives.

Legislators and politicians often have direct or indirect control over major

decisions and resources.

Issues become politicized, resulting in fewer (less) strategic choice

alternatives.

Q. Strategic management is not needed in non-profit organisations?

Ans. Incorrect:

Strategic management applies equally to profit as well as non - profit

organizations.

Though non-profit organizations are not working for the profit, they have to

have purpose, vision and mission.

They also work within the environmental forces and need to manage

strategically to stay afloat to accomplish their objectives.

For the purpose of continuity and meeting their goals, they also need to have

and manage funds and other resources just like any other for profit

organization.


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Q. Compared to for-profit firms, non-profit and governmental organizations often

function as a monopoly?

Ans. Correct:

Though non-profit organizations are not working for the profit, they have to

have purpose, vision and mission.

They also work within the environmental forces and need to manage

strategically to stay afloat to accomplish their objectives.

They produce a product or service that offers little or no measurability of

performance, and are totally dependent on outside financing.


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Chapter 2: Dynamics of Competitive Strategy

Dynamics of Competitive Strategy

Competitive Strategy

Competitive strategy of a firm evolves out of consideration of several factors that are external to it.

The external environment affects the internal environment of the firm.

The objective of a competitive strategy are;

Generate competitive advantage, (So) Increase market share, and (Hence) Beat competition.

A competitive strategy consists of moves (steps) to…

Attract customers.

Withstand competitive pressures.

Strengthen market position.

Having a competitive advantage is necessary for a firm to compete in the market.

Competitive advantage comes from a firm’s ability to perform activities more effectively than its rivals.

But what is more important is whether the competitive advantage is sustainable? By knowing if it is a leader, challenger, or follower, it can adopt appropriate competitive strategy.


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Competitive landscape; Introduction;

Competitive landscape is a business analysis which identifies competitors, either direct or indirect.

An in-depth investigation and analysis of a firm’s competition allows it to assess the competitor’s strengths and weaknesses in the marketplace and helps it to choose and implement effective strategies that will improve its competitive advantage.

Understanding of competitive landscape requires an application of “competitive intelligence”.

Steps to understand the Competitive Landscape;

Identify the competitor, Understand the competitors, Determine the strengths of the competitors, Determine the weaknesses of the competitors, Put all of the information together.

STRATEGIC ANALYSIS;Introduction;

Strategy formulation is not a task in which managers can get by with intuition, opinions, instincts, and creative thinking.

But it is a Judgments about what strategies to pursue need to flow directly from analysis of a firm’s external environment and its internal resources & capabilities.

The two most important situational considerations (factors) are:

Industry and Competitive Conditions, and

An organisation’s own competitive capabilities, resources, internal strengths,weaknesses, and market position.


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Issues (Factors, Problems) to consider for Strategic Analysis:

Strategy evolves over a period of time. (Long term)

Balance of external and internal factors (Potential of the organization).

Risk (External and Internal).

Methods of Industry and Competitive Analysis;


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Methods of Industry and Competitive Analysis;

What is Industry?

Industry is “a group of firms whose products have same and similar attributes such that they compete for the same buyers.” For e.g.

Telecom Industry

Identifying the Strongest/ Weakest Companies: (Strategic Group Mapping)

A strategic group consists of those rival firms with same, similar competitive approaches and positions in the market.

Strategic group mapping, is a useful analytical tool for comparing the market positions of each firm separately.

The procedure for constructing a Strategic Group Mapping;

Identify the competitive characteristics that differentiate firms in theindustry.

Plot the firms on a two-variable map using pairs of thesedifferentiating characteristics.

Assign firms that fall in about the same strategy space to the samestrategic group.

Draw circles around each strategic group, making the circlesproportional to the size of the group’s respective share of total industrysales revenues.


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Dominant Economic Features of the Industry; (Key Industry Traits)

Size and nature of market.

The number of buyers and their relative sizes.

Number of rivals and their relative market share.

Market growth rate and position in the business life.

Capital requirements and the ease of entry and exit.

Whether industry profitability is above/below par?

Scope of competitive rivalry.

i.e. (local, regional, national, international, or global).

Triggers of Change (Driving Forces)

Introduction;

An industry’s economic features and competitive structure revealed a lot about its fundamental character but little about the ways in which its environment may be changing.

The life-cycle stages are strongly linked to changes in the overall industry growth rate.

Driving Forces;

While it is important to judge what growth stage an industry is in, there’s more analytical value in identifying the specific factors causing fundamental industry and competitive adjustments.

Industry and competitive conditions change because forces are in motion that creates incentives (opportunity) or pressures (threat) for changes.

The most dominant forces are called driving forces because they have the biggest influence on the industry’s structure and competitive environment.


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Analyzing driving forces has two steps:

1. Identifying what the driving forces are? and

2. Assessing the impact they will have on the industry.

Most common driving forces;

Increasing globalization.

Product innovation.

Marketing innovation.

Changes in cost and efficiency.

Entry or exit of major firms.

Changes in the long-term industry growth rate.

The internet and e-commerce opportunities and threats it breeds in theindustry.

KEY SUCCESS FACTORS (KSF’S)

Introduction;

This are the key elements that affect the ability of a firm or industry to

prosper in the market.

For e.g. JIO Cost efficient i.e. Economical for customers.

They form the rule that figure whether a company will be financially or

competitively successful.

Some of the successful key factors are;

Core competitions,

Business outcome (result),

Competitive capabilities,


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Internal & External recourses,

Strategy in production, marketing, etc…

How to find out or identify the KSF’s of an industry?

On what basis do customer select between the competing brands of sellers?

What product qualities are crucial?

What competitive capabilities does a seller need to have to be competitively

successful?

What does it take for seller to achieve a sustainable competitive advantage?

Core Competence;

For e.g. Core Competency of Super-markets:

Lower prices,

Securing low cost supplies,

Managing in – store activities more efficiently,

Computerized stock/ordering systems,

Own brand labels, etc…

Introduction;

Core competencies are capabilities that serve as a source of competitive advantage for a firm over its rivals.

C.K. Prahalad and Gary Hamel have advocated a concept of core competency.

Definition;

Competency is defined as a, “Combination of skills and techniques rather than individual skill or separate technique.”

Therefore, core competencies cannot be built on one capability or single technological know-how, instead, it has to be the integration of many resources.


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According to C.K. Prahalad and Gary Hamel,

Major core competencies are identified in three (3) areas;

Competitor differentiation, Customer value, and Application to other markets (i.e. within the organisation).

Competitor Differentiation,

The company can consider having a core competence if the competence is unique and it is difficult for competitors to imitate (i.e. Copy).

Customer Value,

When purchasing a product or service it has to deliver a fundamental benefit for the end customer in order to be a core competence.

Application to other markets (i.e. within the organisation).

Core competence must be applicable to the whole organization; it cannot be only one particular skill or specified area of expertise.

Examples;

Hindustan Unilever Limited (HUL) Marketing and Sales is a core competence.

Wal-Mart Focused on lowering its operating costs.

How to build Core Competencies;

1. Valuable,2. Rare,3. Costly to imitate, (copy or follow)4. Non-Substitutable.


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1. Valuable;A firm created value for customers by effectively using capabilities to exploit

opportunities.

2. Rare;Core competencies are very rare capabilities and very few of the competitors

possess this.

3. Costly to imitate (copy or follow)Costly to imitate means such capabilities that competing firms are unable to

develop easily. For e.g. Intel

4. Non-SubstitutableCapabilities that do not have strategic equivalents are called non-substitutable

capabilities. For e.g. Tata and Apple.

Value Chain Analysis

Primary Activities Support Activities Inbound Logistics, Firm Infrastructure, Operations, Human Resource Management, Outbound Logistics, Technology Development, Marketing & Sales, & Procurement. Service.

Introduction;

A value chain is a set of activities that a firm operating in a specific industry performs in order to deliver a valuable product or service for the market.

Value chain analysis was originally introduced as an accounting analysis.

The two basic steps of identifying separate activities and assessing the value added from each were linked to an analysis of an organization’s competitive advantage by Michael Porter.


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One of the key aspects of value chain analysis is the recognition that organizations are much more than a random collection of Man (people), Machines, Material, and Money.

These resources are of no value unless deployed into activities and organised into systems and routines which ensure that products or services are produced which are valued by the final consumer/user.

Primary Activities;

Inbound logistics; Inbound logistics is concerned with receiving, storing, distributing inputs

(e.g. Handling of raw materials, warehousing, inventory control).

Operations; Operations - Comprise the transformation of the inputs into the final product

form (e.g. Production, assembly, and packaging).

Outbound logistics; Outbound logistics - involve the collecting, storing, and distributing the

product to the buyers (e.g. Processing of orders, warehousing of finished goods, and delivery).


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Marketing and Sales; Marketing and sales - how buyers can be convinced to purchase the product

(e.g. Advertising, promotion, distribution).

Service; Service - involves how to maintain the value of the product after it is

purchased (e.g. Installation, repair, maintenance, and training).

Support Activities;

Firm Infrastructure; Firm Infrastructure - the activities which are not specific to any activity area

such as general management, planning, finance, and accounting are categorized under firm infrastructure.

Infrastructure also consists of the structures and routines of the organization which sustain its culture.

Human Resource Management; HRM - involved in recruiting, hiring, training, development and

compensation.

Technology Development; Technology Development - these activities are intended to improve the

product and the process, can occur in many parts of the firm.

Procurement; Procurement - concerned with the tasks of purchasing inputs such as raw

materials, equipment, and even labour.

Competitive Advantage;

Why do some companies succeed while others fail?

How did Apple return from near obsolescence in the late 1990s and become the world leader and a dominant technology company of today?


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Why did Hindustan Motors do so well for several decades?

In the Indian airline industry, how has Indigo Airlines managed to keep increasing its revenues and profits through both good times and bad, while rivals struggled?

Introduction;

Competitive advantage allows a firm to gain an edge over rivals when competing.

For most, if not all, companies, achieving superior performance relative to rivals is the ultimate challenge. If a company’s strategies result in superior performance, it is said to have a competitive advantage.

“If you don’t have a competitive advantage, don’t compete”

- Jack Welch

Competitive advantage is the position of a firm to maintain and sustain a favourable market position when compared to the competitors.

Competitive advantage is ability to offer buyers something different and thereby providing more value for the money.

It is achieved advantage over rivals when a company’s profitability is greater than average profitability of firms in its industry. It is the result of a successful strategy.

This position gets translated into higher market share, higher profits when compared to those that are obtained by competitors operating in the same industry.

Competitive advantage may also be in the form of low cost relationship in the industry or being unique in the industry along dimensions that are widely valued by the customers in particular and the society at large.


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Competitive Advantage depends upon four major characteristics of resources and capabilities:

Durability,

Transferability,

Imitability, &

Appropriability.

What is Value Creation?

The concept of value creation was introduced primarily for providing products and services to the customers with more worth.

Value is measured by a product’s;

Features, Quality, Availability, Durability, Performance and by its Services for which customers are willing to pay.

Competitive advantage leads to superior profitability. At the most basic level, how profitable a company becomes depends on three factors:

(1) The value customers place on the company’s products;

(2) The price that a company charges for its products; and

(3) The costs of creating those products.

The value customers place on a product reflects the utility they get from a product—the happiness or satisfaction gained from consuming or owning the product.

Utility must be distinguished from price.


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Utility is something that customers get from a product.

Thus, we can say that the value creation is an activity or performance by the firm to create value that increases the worth of goods, services, business processes or even the whole business system.

Ultimately, this concept gives business a competitive advantage in the industry and helps them earn above average profits/returns.

Internal and External Analysis; (Portfolio Analysis)

Introduction;

The business portfolio is the collection of businesses and products that make up the company. The best business portfolio is one that fits the company's strengths and helps exploit the most attractive opportunities. The company must:

Analyze: It’s current business portfolio and decide which businesses should receive more or less investment, and

Develop Growth Strategies: For adding new products and businesses to the portfolio, whilst at the same time deciding when products and businesses should no longer be retained.

Strategic business unit (SBU)

Introduction;

SBU is a unit of the company that has a separate mission and objectives and which can be planned independently from other company businesses.

The SBU can be a company division, a product line within a division, or even a single product or brand.


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Characteristics of SBU’s;

Single business or collection of related businesses that can be planned forseparately,

Has its own set of competitors. E.g. Lux & Dove,

Has a manager who is responsible for strategic planning and profit.

Helps comparisons between divisions.

Improving the allocation of resources.

Experience Curve;

Introduction;

Experience curve is an important concept used for applying a portfolio approach.

The concept is akin (similar) to a learning curve which explains the efficiency increase gained by workers through repetitive productive work.

Experience curve is based on the commonly observed phenomenon that unit costs decline as a firm accumulates experience in terms of a cumulative volume of production.

The implication is that larger firms in an industry would tend to have lower unit costs as compared to those for smaller companies, thereby gaining a competitive cost advantage.


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The concept of experience curve is relevant for a number of areas in strategic management.

Considered a barrier for new firms,

Used to build market share,

Discourage competition.

Product Life Cycle

Introduction;

Product life cycle (PLC) has to do with the life of a product in the market with respect to business/commercial costs and sales measures;

S-shaped curve,

PLC, which exhibits (indicate) the relationship of sales with respect to time for a product that passes through the four successive stages of product life cycle.

The different stages in a product life cycle are:

Introduction(Slow sales growth)

Growth(Rapid market acceptance)

Maturity(Slowdown in growth)

Decline(Sharp downward shift)


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Product Life Cycle

There are four categories of PLC:

1. Introduction (Embryonic) Stage;

The introduction of the product is characterized by a rapid growth market, very little competition and (still) high sales prices.

2. Growth Stage;

The market continues to strengthen and sales increase, there are few (if any) competitors.

3. Maturity Stage;

The market and market shares are stable, there is an established customer base and the price is lowered because of the growing competition.

4. Decline (Ageing) Stage;

The demand for the product decreases and companies are abandoning the market. Companies stop consolidating or leave the market.

Igor ANSOFF’S Product Market Growth Matrix;

Introduction;

The Igor Ansoff Growth matrix is a tool that helps businesses decide their product and market growth strategy.

Ansoff’s product/market growth matrix suggests that a business’ attempts to grow depend on whether it markets (offer) new or existing products in new or existing markets.


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Market Penetration:

Market penetration refers to a growth strategy where the business focuses onselling existing products into existing markets.

It is achieved by making more sales to present customers without changingproducts in any major way.

Penetration might require greater spending on advertising or personal selling.

Risk involved in this strategy is less as compared to other strategies.

For e.g.

Market Development:

Market development refers to a growth strategy where the business seeks(attempts) to sell its existing products into new markets.

It is a strategy for company growth by identifying and developing newmarkets for current company products.

This strategy may be achieved through new geographical markets.

Risk involved in this strategy is moderate as compared to other strategies.

For e.g.


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Product Development:

Product development refers to a growth strategy where business aims tointroduce new products into existing markets.

It is a strategy for company growth by offering modified or new products tocurrent markets.

Risk involved in this strategy is moderate as compared to other strategies.

For e.g.

Diversification:

Diversification refers to a growth strategy where a business markets newproducts in new markets.

It is a strategy by starting up or acquiring businesses outside the company’scurrent products and markets.

Typically the business is moving into markets in which it has little or noexperience.

Risk involved in this strategy is high as compared to other strategies.

For e.g.

ADL MATRIX

Introduction;

The ADL matrix from Arthur D. Little.

ADL is a portfolio management method that is based on product life cycle

thinking.

ADL Matrix is a 2 dimensional matrix.

Where on ‘Y’ Axis it represent competitive position of the firm.

Where on ‘X’ Axis it represent life cycle of the firm.


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The business strengths measure is a categorization of the corporation's SBU's

into one of five competitive positions.

Competitive Position

Arthur D. Little formulated five categories for the competitive position within

the ADL matrix:

‘y’ Axis

1. Dominant

2. Strong

3. Favourable

4. Tenable

5. Weak

Business Life Cycle

There are four categories of BLC:

1. Introduction (Embryonic) Stage2. Growth Stage3. Maturity Stage4. Decline (Ageing) Stage

‘x’ Axis

Competitive Position;

1. Dominant:

This is a comparatively rare position and in many cases is attributable either to a monopoly or a strong and protected technological leadership.

2. Strong:

By virtue of this position, the firm has a considerable degree of freedom over its choice of strategies and is often able to act without its market position being unduly threatened by its competitions.


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3. Favourable:

This position, which generally comes about when the industry is fragmented and no one competitor stand out clearly, results in the market leaders a reasonable degree of freedom.

4. Tenable:

Although the firms within this category are able to perform satisfactorily and can justify staying in the industry, they are generally vulnerable in the face of increased competition from stronger and more proactive companies in the market.

5. Weak:

The performance of firms in this category is generally unsatisfactory although the opportunities for improvement do exist.

Limitations of ADL Matrix;

There is no standard life cycle length.

Determining the current industry life cycle phase is difficult.

Competitors may influence the length of the life cycle.

BCG GROWTH-SHARE MATRIX;

Introduction;

The BCG Growth-Share Matrix is a portfolio planning model developed by Bruce Henderson of the Boston Consulting Group in the early 1970's.

Growth share matrix also known for its cow and dog metaphors is popularly used for resource allocation in a diversified company.

Using the BCG approach, a company classifies its different businesses on a two-dimensional growth - share matrix.


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The Vertical Axis (i.e. Y Axis) represents market growth rate and provides a measure of market attractiveness.

The Horizontal Axis (i.e. X Axis) represents relative market share and serves as a measure of company strength in the market.

Conventional strategic thinking suggests there are four possible strategies for each SBU:

1. Build Share: here the company can invest to increase market share (for exampleturning a "question mark" into a star)

2. Hold: here the company invests just enough to keep the SBU in its presentposition (preserve market share)

3. Harvest: here the company reduces the amount of investment in order tomaximize the short-term cash flows and profits from the SBU. This may have theeffect of turning Stars into Cash Cows.

4. Divest: the company can divest the SBU by phasing it out or selling it - in orderto use the resources elsewhere (e.g. investing in the more promising "questionmarks").


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Limitations;

It neglects the effects of synergy between business units.

Market growth is not the only indicator for attractiveness of a market.

High market share is not the only success factor.

A high market share does not necessarily lead to profitability all the time.

A business with a low market share can be profitable too. e.g. BMW

The model neglects small competitors that have fast growing market shares.

Q. An industry comprises of only two firms-Soorya Ltd. and Chandra Ltd. From the

following information relating to Soorya Ltd.,

Prepare BCG Matrix. (Past exam question)

Steps;

1. Find out product which has highest market share & market growth rate.

Will be considered as Star

2. Find out product which has lowest market share & market growth rate.

Will be considered as Dog

3. Find out product which has higher market share.

Will be considered as Cash Cow

4. Remaining product will be considered as Question Mark.

For answer refer ICAI study material, homework section, Q. 7 (page 2.53)


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General Electric Matrix [“Stop-Light” Strategy Model]

Introduction;

This model has been used by General Electric Company (developed by GE with the assistance of the consulting firm McKinsey & Company).

This model is also known as Business Planning Matrix.

GE Nine-Cell Matrix and GE Model.

The strategic planning approach in this model has been inspired from traffic control lights.

The lights that are used at crossings to manage traffic are: Green Go Yellow Caution Red Stop

This model uses two factors while taking strategic decisions:

The Vertical Axis (i.e. Y Axis) represents Market Attractiveness.

The Horizontal Axis (i.e. X Axis) represents Business Strength.

The Market attractiveness is measured by a number of factors like:

Size of the market, Competitive intensity, Market growth rate, Availability of Technology, Industry profitability Pricing trends,

Etc…

The Business strength is measured by a number of factors like: Market share, Distribution efficiency, Market share growth rate, Brand image, Profit margin, Customer loyalty

Etc…


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Investment: Basis on market attractiveness for growth & expansion.

Protect: No fresh investment rather it is willing to have the security of thegiven investment. So that does not result in losses.

Harvest: Situation where low priority was given.

Divest: Finally decided to sale a business unit.

SWOT Analysis; Relationship between organization and environment;

Introduction;

For the generation of a series of strategic alternatives or choices, it is necessary to analyse the firm’s internal strengths and weaknesses and its external opportunities and threats.


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The identification and analysis of strengths, weaknesses, opportunities, and threats is normally referred to as SWOT analysis.

The major purpose of SWOT analysis is to enable the management to create a firm - specific business model that will best align, fit, or match an organisational resources and capabilities to the demands of the environment in which it operates.

Strength:

Strength is an inherent capability of the organization which it can use to gainstrategic advantage over its competitors.

Weakness:

A weakness is an inherent limitation or constraint of the organization whichcreates strategic disadvantage to it.

Opportunity:

An opportunity is a favourable condition in the organisation’s environmentwhich enables it to strengthen its position.

Threat:

A threat is an unfavourable condition in the organisation’s environmentwhich causes a risk for, or damage to, the organisation’s position.

The significance of SWOT analysis lies in the following points:

It provides a logical framework of analysis.

It presents a comparative account.

It guides the strategist in strategy identification.


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SWOT analysis helps managers to craft a business model that will allow a

company to gain a competitive advantage in its industry.

Q. To which industries the following developments offer opportunities and threats?

“Increasing trend in India to organize IPL (Cricket) type of tournaments in other

sports also.” (Past exam question)

Ans; Explain Opportunity & Threat (Refer note)

Opportunity : Favourable condition # strengthen its position.

Threat : Unfavourable condition # causes a risk

The IPL (Cricket) tournament is highly profit and entertainment driven. A number of entities and process are involved in this IPL type tournament. IPL (Cricket) type of tournament would offer opportunities/threats to the following industries:

Opportunities Threats

Stadium Entertainment Industry Sports Industry TV serials, Media Industry Theatres,

Sports channels, Theme Parks, etc… Advertisers, etc… Tourism and Hotel Industry

Transport Event Management

TOWS Matrix; Introduction:

Through SWOT analysis organisations identify their strengths, weaknesses, opportunities and threats.

While conducting the SWOT Analysis managers are often not able to come to terms with the strategic choices that the outcomes demand.

Heinz Weihrich developed a matrix called TOWS matrix by matching strengths and weaknesses of an organization with the external opportunities and threats.


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The incremental benefit of the TOWS matrix lies in systematically identifying relationships between these factors and selecting strategies on their basis.

Thus TOWS matrix has a wider scope when compared to SWOT analysis.

TOWS analysis is an action tool whereas SWOT analysis is a planning tool.

The TOWS Matrix is tool for generating strategic options. Through TOWS matrix four distinct alternative kinds of strategic choices can be identified.

SO (Maxi-Maxi):

SO is a position that any firm would like to achieve. The strengths can beused to capitalize or build upon existing or emerging opportunities. Suchfirms can take lead from their strengths and utilize the resources to build upthe competitive advantage.

ST (Maxi - Mini):

ST is a position in which a firm strives to minimize existing or emergingthreats through its strengths.

WO (Mini - Maxi):

The firm needs to overcome internal weaknesses and make attempts toexploit opportunities to maximum.


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WT (Mini-Mini):

WT is a position that any firm will try to avoid. A firm facing external threatsand internal weaknesses may have to struggle for its survival. WT strategy isa strategy which is pursued to minimize or overcome weaknesses and as faras possible, cope with existing or emerging threats.

Globalization;

Meaning;

The process by which businesses or other organizations develop international influence or start operating on an international scale.

In simple economic terms, globalization refers to the process of integration of the world into one huge market.

A company which has gone global is called a multinational (MNC) or a transnational (TNC).

The global company views the world as one market, minimises the importance of national boundaries.

To be specific, a global company has three characteristics:

It is a conglomerate of multiple units but all linked by common ownership.

Multiple units draw on a common pool of resources, such as money, credit,information, patents, trade names and control systems.

The units respond to some common strategy. Besides, its managers andshareholders are also based in different nations.


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Why do companies go global?

There are several reasons why companies go global. These are discussed as follows:

The first and foremost reason is need to grow.

It is being realised that the domestic markets are no longer adequate andrich.

Companies often set up overseas plants to reduce high transportation costs.E.g. Hyundai,

There can be varied other reasons such as need for reliable or cheaper sourceof raw-materials, cheap labour, etc…

The rise of services to constitute the largest single sector in the worldeconomy;

Globalization has made companies in different countries to form strategicalliances and leverage their respective comparative and competitiveadvantages.

Distinguish Between MNC vs. TNC;


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Chapter 3: Strategic Management Process

Strategic Planning;

Planning means deciding what needs to done in the future and generatingblueprints for action.

Good planning is an important constituent of good management.

Planning involves determination of the course of action to attain thepredetermined objectives.

It bridges the gap between where we are to where we want to go.

Thus, planning is future oriented in nature.

Types of Planning’s;

1. Strategic Planning,

2. Operational Planning.

1. Strategic Planning;

Strategic plans are made by the senior management for the entire organization after taking into account the organization’s strength and weaknesses in the light of opportunities and threats in the external environment.

2. Operational Planning;

Operational plans on the other hand are made at the middle and lower level management. They specify details on how the resources are to be utilized efficiently for the attainment of objectives.


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A major functions (task) of planning’s;

Dealing with uncertainty;

Impact of uncertainty;

1. Dealing with uncertainty;

Strategic uncertainty, which has far reaching implications, is a key construct instrategy formulation.

A typical external analysis will emerge with dozens of strategic uncertainties.

To be manageable, they need to be grouped into logical clusters or themes.

Strategic uncertainty is represented by a future trend or event that has inherent unpredictability.

Information gathering and additional analysis will not be able to reduce the uncertainty.

2. Impact with uncertainty;

Each element of strategic uncertainty involves potential trends or events thatcould have an impact on present, proposed, and even potential businesses.

For example, a trend toward Aayurvedic Products may present opportunities for a firm producing/ manufacturing herbal product on the basis of a strategic uncertainty.

STRATEGIC DECISION MAKING;

Decision making is a managerial process of selecting the best course of action out of several alternative courses for the purpose of accomplishment of the organizational goals.

Decisions may be operational, i.e. which relate to general day-to-dayoperations.

They may also be strategic in nature.


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The major dimensions (Characteristics) of strategic decisions are as follows;

Strategic decisions require top-management involvement.

Strategic decisions involve commitment of organisational resources.

Strategic decisions are likely to have a significant impact on the long termprosperity of the firm.

Strategic decisions are future oriented.

Strategic decisions usually have major multifunctional or multi-businessconsequences.

Strategic Intention (purpose)

Strategic Management is defined as a dynamic process of; Formulation, Implementation, Evaluation, and Control of strategies(Why) to realise the organization’s strategic intent.

Introduction:

Strategic intent refers to purposes of what the organization strives for.

Senior managers must define “what they want to do” and “why they want todo”.

“Why they want to do” represents strategic intent (purpose) of the firm.

Clarity in strategic intent is extremely important for the future success andgrowth of the enterprise, irrespective of its nature and size.


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Strategic intent can be understood as the philosophical base of strategicmanagement.

Element of Strategic Intent;

Business Definition:

It try to explain the business undertaken by the firm, with respect to the customer needs, target markets, and alternative technologies. With the help of business definition, one can ascertain the strategic business choices.

Organisational restructuring also depends upon the business definition.

Business Model:

Business model, as the name implies is a strategy for the effective operation of the business, ascertaining sources of income, desired customer base, and financial details.

Rival firms, operating in the same industry rely on the different business model due to their strategic choice.


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Vision:

A Strategic vision is,

A road map of a company’s future providing particulars about,

Product,

Market to be pursued,

Customer,

Technology to be focused,

would improve its current market position and future prospects.

Vision implies the blueprint of the company’s future position.

A strategic vision shows management’s aspirations for the business, providing aview of “where we are going”.

It describes where the organisation wants to land.

Every sub system of the organization is required to follow its vision.

For e.g.

To be a world class corporate constantly furthering the interest of all its stakeholders.

The three elements of a strategic vision are:

1. “Who we are and where we are now?”

2. “Where we are going?”

3. Communicating the strategic vision in clear, exciting terms that inspireorganization wide commitment.


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Essentials of a strategic vision:

The entrepreneurial challenge in developing a strategic vision is to thinkcreatively about how to prepare a company for the future.

A well-articulated strategic vision creates enthusiasm among the members ofthe organisation.

Forming a strategic vision is an exercise in intelligent entrepreneurship.

The best-worded vision statement clearly enhance the direction in whichorganization is headed.

Mission;

Introduction;

A company’s mission statement is typically focused on its present business scope – i.e. “who we are? And what we do?”

Mission statements broadly describe an organizations;

Present capabilities,

Customer focus,

Activities, and

Business makeup.

Mission statement should reflect the philosophy of the organizations that isperceived by the senior managers.

A good mission statement should be precise, clear, feasible, distinctive andmotivating.

Mission and business definition, as the two ideas are absolutely central tostrategic planning.


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Why an organization should have a mission?

To ensure consensus of purpose within the organization.

To develop a basis, or standard, for allocating organizational resources.

To provide a basis for motivating the use of the organization’s resources.

To establish a general tone or organizational climate.

To serve as a focal point.

To facilitate the translation of objective and goals into a work structure.

To specify organizational purposes.

Points (tips) to be considered while writing mission statement;

To establish the special identity of the business - one that typically distinct itfrom other similarly positioned companies.

Needs which business tries to satisfy, customer groups it wishes to target andthe technologies and competencies it uses and the activities it performs.

Good mission statements should be unique to the organisation for whichthey are developed.

The mission of a company should not be to make profit. Surpluses may berequired for survival and growth, but cannot be mission of a company.

Goals & Object;

Goals are the end results, that the organization attempts to achieve.

Objectives are time-based measurable targets, which help in the accomplishment of goals.


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However, in practice, no distinction is made between goals and objectives and both the terms are used interchangeably.

Objectives are organization’s performance targets.

The results and outcomes it wants to achieve. They (objective) function as yardsticks for tracking an organization’s performance and progress.

Business organization translates their vision and mission into goals and objectives.

Characteristics of Objectives:

Objectives should define the organization’s relationship with its environment.

Objectives should be facilitative towards achievement of mission andpurpose.

Objectives should be measurable and controllable.

Objectives should provide the basis for strategic decision-making.

Objectives should provide standards for performance appraisal.

Objectives should be concrete and specific.

Objectives should be related to a time frame.

Objectives should be challenging.

Long-term Objectives:

As a rule, a company’s set of financial and strategic objectives ought to include both short-term and long-term performance targets.

Long-term objectives represent the results expected from pursuing certain strategies.

The time frame for objectives and strategies should be consistent, usually from two to five years.


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Profitability. Employee Relations. Productivity. Technological Leadership. Competitive Position. Public Responsibility. Employee Development. Etc…

Strategic Management Model;

Introduction;

Identifying an organization’s vision, mission, goals and objectives, is the starting point for strategic management process.

The strategic management process is dynamic and continuous.

A change in any one of the major components in the model can necessitate a change in any or all of the other components.

Therefore, strategy formulation, implementation, and evaluation activities should be performed on a continual basis, not just at the end of the year or semi-annually.

The strategic management process never really ends.

This model like any other model of management does not guarantee sure-shot success.


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Generally, there is give-and-take among hierarchical levels of an organization.

Many organizations conduct formal meetings semi-annually to discuss and update the firm’s vision/ mission, opportunities/ threats, strengths/ weaknesses, strategies, objectives, policies, and performance.

Creativity from participants is encouraged in meeting.

Good communication and feedback are needed throughout the strategic management process.

Stages in Strategic Management;

Crafting and executing strategy are the heart and soul of managing a business enterprise.

1. Developing a strategic vision and formulation of statement of mission, goals

and objectives,

First a company must determine what directional path the company should

take and what changes in the company’s product – market – customer –

technology – focus would improve its current market position and its future

prospect.

2. Environmental and organizational analysis,

This stage is the diagnostic phase of strategic analysis. It entails two types of

analysis:

i. Environmental scanning

External environment of a firm consists of economic, social,

technological, market and other forces which affect its functioning. The

firm’s external environment is dynamic and uncertain.

ii. Organisational analysis

Organisational analysis involved a review of financial resources,

technological resources, productive capacity, marketing and distribution


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effectiveness, research and development, human resource skills and so

on.

3. Formulation of strategy,

The strategic alternatives may be designated as stability strategy, growth/

expansion strategy and retrenchment strategy. A company may also follow a

combination these alternatives called combination strategy.

4. Implementation of strategy, &

Implementation and execution is an operations-oriented, activity aimed at

shaping the performance of core business activities in a strategy-supportive

manner. It is the most demanding and time-consuming part of the strategy-

management process.

5. Strategic evaluation and control.

The final stage of strategic management process – evaluating the company’s

progress, assessing the impact of new external developments, and making

corrective adjustments – is the trigger point for deciding whether to continue or

change the company’s vision, objectives, strategy, and/or strategy-execution

methods.


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Chapter 4: Corporate Level Strategies

Business Life Cycle;

Introduction StageMarket Penetration Strategy

Growth StageGrowth/Expansion Strategy

Maturity StageStability Strategy

Decline StageRetrenchment/ Turnaround Strategy

Strategies;

Competitive Strategies Collaboration Strategies

Focus, Joint Venture,

Differentiation, & Strategic Alliance,

Cost Leadership. Merger & Acquisition.

It may be noted that there is no water tight compartmentation between different typologies (i.e. organisation is free to opt any strategy by matching their S&W).

TYPOLOGIES OF STRATEGIES

Introduction:

Businesses follow different types of strategies; to enter the market, to stay and grow in the market.


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A large number of strategies with different nomenclatures have been employed by different businesses and also suggested by different authors on strategy.

For instance, William F Glueck and Lawrence R Jauch discussed four generic strategies including;

1. Stability,

2. Growth,

3. Retrenchment and

4. Combination.

These strategies have also been called Grand Strategies, Directional Strategies & Corporate by many other authors.

Grand Strategies, Directional Strategies & Corporate Strategies;

Strategy Basic Feature

Stability The firm stays with its current businesses and product markets; maintains the existing level of effort; and is satisfied with incremental growth.


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Expansion Here, the firm seeks (attempt) significant growth-maybe within the current businesses; maybe by entering new business that are related to existing businesses; or by entering new businesses that are unrelated to existing businesses.

Retrenchment The firm retrenches some of the activities in some business(es), or drops the business as such through sell-out or liquidation.

Combination The firm combines the above (Stability, Growth & Retrenchment) strategic alternatives in some permutation/combination so as to suit the specific requirements of the firm.

1. Stability Strategy;

Introduction:

One of the important goals of a business enterprise is stability to safeguard its existing interests.

The strategic decisions focus on incremental improvement of functional performance.

Stability strategy is not a ‘do nothing’ strategy.


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It involves keeping track of new developments to ensure that the strategy continues to make sense.

This strategy is typical for those firms whose product have reached the maturity stage of product life cycle.

Small organizations may also follow stability strategy to consolidate their market position and prepare for the launch of growth strategies.

Characteristics of Stability Strategy;

A firm opting for stability strategy stays with the same business, sameproduct – market.

Maintaining same level of effort as at present.

Stability strategy does not involve a redefinition of the business of thecorporation.

It is basically a safety-oriented, status quo (existing state of affairs) orientedstrategy.

It does not warrant much of fresh investments.

It involves minor improvements in the product and its packaging.

The risk is also less.

Major Reasons for Stability Strategy;

A product has reached the maturity stage of the product life cycle.

It is less risky as it involves less changes and the staff feels comfortable withthings as they are.

The environment faced is relatively stable.

Expansion seems to be threatening.


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2. Growth/ Expansion Strategy;

Introduction;

Growth/ Expansion strategy is implemented by redefining the business by enlarging the scope of business and substantially increasing investment in the business.

Expansion also includes diversifying, acquiring and merging businesses.

This strategy may take the enterprise along relatively unknown and risky paths, full of promises and pitfalls.

Characteristics of Growth/ Expansion Strategy;

Expansion strategy involves a redefinition of the business of thecorporation.

Expansion strategy is the opposite of stability strategy.

Expansion strategy leads to business growth.

Expansion strategy is a highly versatile strategy.

A firm opting for the expansion strategy can generate many alternativeswithin the strategy by altering its propositions regarding products, marketsand functions and pick the one that suits it most.

Expansion strategy holds within its fold two major strategy routes: Intensification, Diversification.

Major Reasons for Growth/Expansion Strategy;

When environment demands increase in pace of activity.

Expansion may lead to greater control over the market vis-a-vis (w.r.t.)competitors.


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Advantages from the experience curve and scale of operations may accrue.

Types of Growth/Expansion Strategy;

2-A Expansion through Intensification

Market Penetration:

Highly common expansion strategy is market penetration/ concentration on the current business. The firm directs its resources to the profitable growth of its existing product in the existing market.


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Market Development:

It consists of marketing present products, to customers in related market areas by adding different channels of distribution or by changing the content of advertising or the promotional media.

Product Development:

Product development involves substantial modification of existing products or creation of new but related items that can be marketed to current customers through establish channels.

2-B Expansion through Diversification;

Introduction;

Diversification can be related or unrelated to existing businesses of the firm. Based on the nature and extent of their relationship to existing businesses, diversification have been classified into four broad categories:

Vertically integrated diversification,

Horizontally integrated diversification,

Concentric diversification, &

Conglomerate diversification.

Innovative and creative firms always look for opportunities and challenges to grow, to venture into new areas of activity and to break new frontiers with the zeal of entrepreneurship.

They feel that diversification offers greater prospects of growth and profitability than expansion.

Another reason for diversification lies in its synergistic advantage.


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Chapter 4: Corporate Level Strategies For e.g.

i. Vertically Integrated Diversification:

In vertically integrated diversification, firms opt to engage in businesses that are related to the existing business of the firm. The firm remains vertically within the same process sequence moves forward or backward in the chain and enters specific product/process steps with the intention of making them into new businesses for the firm.

The characteristic feature of vertically integrated diversification is that here, the firm does not jump outside the vertically linked product-process chain.


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Forward and Backward Integration:

BACKWARD INTEGRATION;

It is a step towards, creation of effective supply by entering business of inputproviders.

Strategy employed to expand profits and gain greater control over production ofa product whereby a company will purchase or build a business that willincrease its own supply capability or lessen its cost of production.

For example, a large supermarket chain considers to purchase a number of farmsthat would provide it a significant amount of fresh produce.

FORWARD INTEGRATION:

It is moving forward in the value chain and entering business lines that useexisting products.

Forward integration will also take place where organizations enter intobusinesses of distribution channels.

For example, a coffee bean manufacture may choose to merge with a coffee cafe.

ii. Horizontal Integrated Diversification:

Through the acquisition of one or more similar business operating at the same stage of the production-marketing chain that is going into complementary products, by-products or taking over competitors’ products.

For e.g., offering ‘AKG’ earphone (complementary product) with Samsung premium device.


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Note: Example is just for reference (do not write in exam)

iii. Concentric Diversification:

Concentric diversification too amounts to related diversification. In concentric diversification, the new business is linked to the existing businesses through process, technology or marketing.

The new product is a spin-off from the existing facilities and products/processes. This means that in concentric diversification too, there are benefits of synergy with the current operations.

However, concentric diversification differs from vertically integrated diversification in the nature of the linkage the new product has with the existing ones. While in vertically integrated diversification, the new product falls within the firm’s current process-product chain, in concentric diversification, there is a departure from this vertical linkage. The new product is only connected in a loop-like manner at one or more points in the firm’s existing process/technology/ product chain.


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iv. Conglomerate Diversification:

In conglomerate diversification, no such linkages exist; the new businesses/ products are disjointed from the existing businesses/products in every way; it is a totally unrelated diversification.

In process/technology/function, there is no connection between the new products and the existing ones.

Conglomerate diversification has no common thread at all with the firm’s present position.

For example, A cement manufacturer diversifies into the manufacture of steel and rubber products.

2-C Expansion through Mergers and Acquisitions;

Introduction;

Acquisition or merger with an existing concern is an instant means of achieving the expansion.

Merger and acquisition in simple words are defined as a process of combining two or more organizations together.

Organizations consider merger and acquisition proposals in a systematic manner, so that the marriage will be mutually beneficial, a happy and lasting affair.

There is a thin line of difference between the two terms but the impact of combination is completely different in both the cases.

Some organizations prefer to grow through,

Mergers,

Acquisition &

Takeover.


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Merger is considered to be a process when two or more companies come together to expand their business operations.

In such a case the deal gets finalized on friendly terms and both the organizations share profits in the newly created entity.

For e.g. Formation of Brook Bond Lipton India Ltd. through the merger of Brook Bond and Lipton India.

Acquisition, When one organization takes over the other organization and controls all its business operations, it is known as acquisitions.

In this process of acquisition, one financially strong organization overpowers the weaker one.

For e.g. WalMart acquired Flipkart of India

Takeover, A deal in case of an acquisition is often done in an unfriendly manner, it is more or less a forced association where the powerful organization either consumes the operation or a company in a weaker position is forced to sell its entity.

For e.g. In 2000,Tata Tea took over Tetley Tea

Expansion through M & A;

Horizontal Merger,

Vertical Merger,

Co-generic Merger, &

Conglomerate Merger.


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Horizontal Merger;

The types of mergers are similar to types of diversification.

Horizontal merger is a combination of firms engaged in the same industry. It isa merger with a direct competitor.

The principal objective behind this type of merger is to achieve economies ofscale in the production process by shedding duplication of installations andfunctions, widening the line of products, decrease in working capital and fixedassets investment, getting rid of competition and so on.

For example, formation of Brook Bond Lipton India Ltd. through the merger ofLipton India and Brook Bond.

Vertical Merger:

It is a merger of two organizations that are operating in the same industry but atdifferent stages of production or distribution system.

This often leads to increased synergies with the merging firms.

If an organization takes over its supplier/producers of raw material, then it leadsto backward integration.

On the other hand, forward integration happens when an organization decidesto take over its buyer organizations or distribution channels.

Vertical merger results in many operating and financial economies. Verticalmergers help to create an advantageous position by restricting the supply ofinputs to other players, or by providing the inputs at a higher cost.

Co-generic Merger:

In Co-generic merger two or more merging organizations are associated in someway or the other related to the production processes, business markets, or basicrequired technologies.


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Such merger include the extension of the product line or acquiring components that are required in the daily operations.

It offers great opportunities to businesses to diversify around a common set of resources and strategic requirements.

For example, an organization in the white goods category such as refrigerators can diversify by merging with another organization having business in kitchen appliances.

Conglomerate Merger:

Conglomerate mergers are the combination of organizations that are unrelated toeach other.

There are no linkages with respect to customer groups, customer functions andtechnologies being used.

There are no important common factors between the organizations inproduction, marketing, research and development and technology. In practice,however, there is some degree of overlap in one or more of these factors.

For example, Walt Disney Company and the American Broadcasting Company.

2-D Expansion through Strategic Alliance;

Introduction:

A strategic alliance is a relationship between two or more businesses that enables each to achieve certain strategic objectives which neither would be able to achieve on its own.

The strategic partners maintain their status as independent and separate entities, share the benefits and control over the partnership, and continue to make contributions to the alliance until it is terminated.


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Strategic alliances are often formed in the global marketplace between businesses that are based in different regions of the world.

Advantages of Strategic Alliance;

Strategic alliance usually are only formed if they provide an advantage to all the parties in the alliance. These advantages can be broadly categorised as follows:

1. Organizational:

Strategic alliance helps to learn necessary skills and obtain certain capabilities from strategic partners.

Strategic partners may also help to enhance productive capacity, provide a distribution system, or extend supply chain.

Strategic partners may provide a good or service that complements thereby creating a synergy.

2. Economic:

There can be reduction in costs and risks by distributing them across the members of the alliance.

Greater economies of scale can be obtained in an alliance, as production volume can increase, causing the cost per unit to decline.

3. Strategic:

Rivals can join together to cooperate instead of compete.

Vertical integration can be created where partners are part of supply chain.

Strategic alliances may also be useful to create a competitive advantage by the pooling of resources and skills.


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4. Political:

Sometimes strategic alliances are formed with a local foreign business to gain entry into a foreign market either because of legal barriers to entry.

Forming strategic alliances with politically-influential partners may also help improve your own influence and position.

Disadvantages of Strategic Alliance;

Strategic alliances do come with some disadvantages and risks.

The major disadvantage is sharing.

Strategic alliances may also create a potential competitor.

1. The major disadvantage is sharing.

Strategic alliances require sharing of resources & profits and also sharing knowledge & skills that otherwise organisations may not like to share.

Sharing knowledge and skills can be problematic if they involve trade secrets.

Agreements can be executed to protect trade secrets, but they are only as good as the willingness of parties to abide by the agreements or the courts willingness to enforce them.

2. Strategic alliances may also create a potential competitor.

An ally (group) may become a competitor in future when it decides to separate out.

3. Retrenchment Strategy;

Introduction:

It is followed when an organization substantially reduces the scope of its activity.


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This is done through an attempt to find out the problem areas and diagnose the causes of the problems.

Next, steps are taken to solve the problems.

These steps result in different kinds of retrenchment strategies.

If the organization chooses to focus on ways and means to reverse the process of decline, it adopts at turnaround strategy.

If it cuts off the loss - making units, divisions, or SBUs, curtails its product line, or reduces the functions performed, it adopts a divestment strategy.

If none of these actions work, then it may choose to abandon the activities totally, resulting in a liquidation strategy.

Retrenchment Strategy can be;

Turnaround Strategy, Divestment Strategy, Liquidation Strategy.

i. Turnaround Strategy;

Introduction:

Retrenchment may be done either internally or externally.

For internal retrenchment to take place, emphasis is laid on improving internal efficiency, known as turnaround strategy.

There are certain conditions or indicators which point out that a turnaround is needed if the company has to survive.

These danger signals are:

Constant negative cash flow from business(es),

Uncompetitive products or services,

Declining market share,


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Deterioration in physical facilities,

Over-staffing, high turnover of employees, and low morale,

Mismanagement, etc…

Action Plan for Turnaround;

1. Assessment of current problems,

2. Analyze the situation and develop a strategic plan,

3. Implementing an emergency action plan,

4. Restructuring the business, &

5. Returning to normal.

The important elements of turnaround strategy are as follows:

Changes in the top management,

Neutralising external pressures,

Identifying quick payoff activities,

Quick cost reductions,

Revenue generation,

Asset liquidation for generating cash,

Better internal coordination.

ii. Divestment Strategy;

Introduction:

Divestment strategy involves the sale or liquidation of a portion of business,

or a major division, profit centre or SBU.

Divestment is usually a part of rehabilitation or restructuring plan and is adopted

when a turnaround has been attempted but has proved to be unsuccessful.


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The option of a turnaround may even be ignored if it is obvious that divestment is

the only answer.

iii. Liquidation Strategy;

Introduction:

A retrenchment strategy considered the most extreme and unattractive is

liquidation strategy, which involves closing down a firm and selling its assets.

It is considered as the last resort because it leads to serious consequences such as

loss of employment for workers and other employees, termination of opportunities,

etc…

Liquidation strategy may be unpleasant as a strategic alternative but when a “dead business is worth more than alive”, it is a good proposition.

For instance, the real estate owned by a firm may fetch it more money than the actual returns of doing business.

Q. Many small-scale units, proprietorship firms, and partnership ventures liquidate

frequently but medium-and large-sized companies rarely liquidate in India.

(C or IC)

Ans; The company management, government, banks and financial institutions, trade

unions, suppliers and creditors, and other agencies are extremely reluctant to take a

decision, or ask, for liquidation.

Characteristics of Retrenchment/Turnaround Strategy:

Obsolescence of product/process,

Business becoming unprofitable,

Inability to cope up with cut throat competition,


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Industry overcapacity,

Failure of existing strategy, etc…

Retrenchment/Turnaround, Divestment & Liquidation Strategy;

A Retrenchment/ Turnaround, Divestment, & Liquidation strategy may be

adopted due to various reasons:

Constant negative cash flow from business(es),

A business that had been acquired proves to be a mismatch and cannot be

integrated within the company.

Technological up-gradation is required if the business is to survive but

where it is not possible for the firm to invest in it, a preferable option would

be to divest.

A better alternative may be available for investment.

4. Combination Strategy;

Introduction:

The above strategies (i.e. Stability, Growth, and Retrenchment) are not mutually exclusive.

It is possible to adopt a mix of the above to suit particular situations.

An enterprise may seek stability in some areas of activity, expansion in some and retrenchment in the others.

Major Reasons for Combination Strategy;

The organization is large and faces complex environment.

The organization is composed of different businesses, each of which lies in adifferent industry requiring a different response.


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Chapter 5: Business Level Strategies

Introduction:

Business level strategies are the courses of action adopted by an organisation for each of its businesses separately, to serve identified customer groups and provide value to the customers by satisfaction of their needs.

In the process, the organisation uses its competencies to gain, sustain and enhance its strategic or competitive advantage.

Competitive rivalry has the most effect on the firm’s business level strategies than the firm’s other strategies (i.e. Corporate, Functional level strategies) ICAI MCQ

Porter’s Five Forces Model-Competitive Analysis;

Introduction:

A powerful and widely used tool for systematically diagnosing the significant competitive pressures in a market and assessing the strength and importance of each is the Porter’s five-force model of competition.

This model holds that the state of competition in an industry is a composite of competitive pressures operating in five areas of the overall market.


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1. Threat of new entrants:

New entrants place a limit on prices and affectthe profitability of existing players.

The new capacity and product range the newentrants bring increases competitive pressure.

Bigger the new entrant, the more severe the competitive effect & new entrants isconsidered as a significant source of competition. ICAI MCQ

2. Threats from substitutes:

Substitute products are a latent source of competitionin an industry.

Substitute products offering a price advantage and/or performance improvementto the consumer can have significant impact.

Real estate, insurance, bonds and bank deposits for example are clear substitutesfor common stocks, because they represent alternate ways to invest funds.

3. Bargaining power of customers:

The bargaining power of the buyers influences not onlythe prices that the producer can charge but alsoinfluence costs and investments of the producer.

This force will become heavier depending on the possibilities of the buyersforming groups or cartels, particularly in case of industrial products.

4. Bargaining power of suppliers:

Often suppliers can exercise considerable bargainingpower.

Suppliers can influence the profitability of an industryin a number of ways.


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The bargaining power of suppliers determines the cost of raw materials andother inputs of the industry and, therefore, can affect industry attractiveness andprofitability.

5. Rivalry among current players:

The rivalry among existing players is quite obvious.

This is what is normally understood as competition.

The impact is evident more at functional level in the prices being charged,advertising, and pressures on costs, product and so on.

Barriers to entry:

Threats of new entrants, common barriers to entry;

Introduction;

A firm’s profitability tends to be higher when other firms are blocked from entering the industry.

New entrants can reduce industry profitability because they add new production capacity leading to increase supply of the product even at a lower price and can substantially erode (gradually destroy) existing firm’s market share position.

Porter’s five forces model considers new entrants as a significant source of competition.

To discourage new entrants, existing firms can try to raise barriers to entry. Barriers (restrictions) to entry represent economic forces (or ‘hurdles’) that slow down or delay or prevent entry by other firms. Common barriers to entry include:

Capital requirements,

Economies of scale, (C or IC) Important*

Product differentiation,


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Switching costs,

Brand identity,

Access to distribution channels, &

Possibility of aggressive re-taliation (counter-attack) by existing players.

(i) Capital Requirements:

When a large amount of capital is required to enter an industry, firms lackingfunds are effectively barred from the industry, thus enhancing the profitability of existing firms in the industry. This makes the entry of new companies into this sector very difficult.

(ii) Economies of Scale:

Economies of scale refer to the decline in the per-unit cost of production asvolume grows. A large firm that enjoys economies of scale can produce high volumes of goods at successively lower costs. This tends to discourage new entrants. This acts as a barrier for new entrants.

(iii) Product Differentiation:

Product differentiation refers to the physical or perceptual differences, or enhancements, that make a product special or unique in the eyes of customers.

Firms in the personal care products and cosmetics industries actively engage in product differentiation to enhance their products’ features.

Differentiation works to reinforce entry barriers because the cost of creating genuine product differences may be too high for the new entrants.

(iv) Switching Costs:

To succeed in an industry, new entrant must be able to persuade existing customers of other companies to switch to its products. To make a switch, buyers may need to test a new firm’s product, negotiate new purchase contracts, and train personnel to use the equipment, or modify facilities for product use.

Buyers often incur substantial financial costs in switching between firms. When such switching costs are high, buyers are often reluctant to change.


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(v) Brand Identity:

The brand identity of products or services offered by existing firms can serve as another entry barrier. New entrants often encounter significant difficulties in building up the brand identity, because to do so they must commit substantial resources over a long period.

For example, during the 1970s, Japanese companies such as Toyota, Nissan, and Honda had to spend huge sums on new product development and promotional activities to overcome the American consumer’s preference for domestic cars.

(vi) Access to Distribution Channels:

The unavailability of distribution channels for new entrants poses another significant entry barrier. Despite the growing power of the internet, many firms may continue to rely on their control of physical distribution channels to sustain a barrier to entry to rivals. Often, existing firms have significant influence over the distribution channels and can retard or impede their use by new firms.

For example, because of control over distribution channels in India by HUL, P & G and Godrej etc., small entrepreneurs find it very difficult to sell their products through the existing channels.

(vii) Possibility of Aggressive Retaliation (counter-attack):

Sometimes the mere threat of aggressive retaliation (counter-attack) by existingfirm can discourage entry by other firms into an existing industry.

For example, introduction of products by a new firm may lead existing firms to reduce their product prices and increase their advertising budgets.

Business Level Strategies;

Introduction;

An organization’s core competencies should be focused on satisfying customerneeds or wants in order to achieve above average returns. This is done throughBusiness-level strategies.

Business level strategies detail actions taken to provide value to customers andgain a competitive advantage by exploiting core competencies in specific,individual product or service markets.


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Business-level strategy is concerned with a firm’s position in an industry, relativeto competitors and to the five forces of competition discussed above.

Customers are the foundation of an organization’s business-level strategies.

Business level strategy is concerned with issues such as:

Meeting the needs of key customers.

Achieving advantage over competitors.

Avoiding competitive disadvantage.

Michael Porter’s Generic Strategies;

Introduction:

According to Porter, strategies allow organizations to gain competitive advantage from three different bases:

Focus,

Porter called these base generic strategies.

Differentiation, and

Cost leadership.

These strategies have been termed generic because they can be pursued by any type or size of business firm and even by not-for-profit organisations.

Focus;

It means producing products and services that fulfil the needs of small groups of consumers.

Differentiation;

It is a strategy aimed at producing products and services considered unique industry wide and directed at consumers who are relatively price-insensitive.


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Cost leadership;

It emphasizes producing standardized products at a very low per-unit cost for consumers who are price-sensitive.

1. Focus Strategies;

Meaning;

It means producing products and services that fulfil the needs of small groups of consumers.

A successful focus strategy depends on an industry segment that is of sufficient size, has good growth potential, and is not crucial to the success of other major competitors.

Strategies such as market penetration and market development offer substantial focusing advantages.

Focus strategies are most effective when consumers have distinctive preferences or requirements and when rival firms are not attempting to specialize in the same target segment.


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Focused cost leadership;

A focused cost leadership strategy requires competing based on price to target anarrow market. A firm that follows this strategy does not necessarily charge the lowest prices in the industry. Instead, it charges low prices relative to other firms that compete within the target market.

Focused differentiation;

A focused differentiation strategy requires offering unique features that fulfil thedemands of a narrow market. As with a focused low-cost strategy, narrow markets are defined in different ways in different settings. Some firms using a focused differentiation strategy concentrate their efforts on a particular sales channel, such as selling over the internet only.

For e.g. Rolls-Royce sells limited number of high-end, custom-built cars.

Achieving Focused Strategy;

To achieve focused cost leadership/differentiation, following are the measures that could be adopted by an organization:

Selecting specific niches (slot) which are not covered by cost leaders and

differentiators.

Creating superior skills for catering to such niche markets.

Generating high efficiencies for serving such niche markets.

Developing innovative ways in managing the value chain.

Advantages of Focused Strategy;

Premium prices can be charged by the organisations for their focusedproduct/ services.

Due to the tremendous expertise about the goods and services thatorganisations following focus strategy offer, rivals and new entrants may findit difficult to compete.


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Disadvantages of Focused Strategy; The firms lacking in distinctive competencies may not be able to pursue focus strategy.

Due to the limited demand of product/services, costs are high which cancause problems.

In long run, the niche (slot) could disappear or be taken over by largercompetitors by acquiring the same distinctive competencies.

2. Differentiation Strategy;

Meaning;

It is a strategy aimed at producing products and services considered unique industry wide and directed at consumers who are relatively price-insensitive.

This strategy is aimed at broad mass market and involves the creation of a product

or service that is perceived by the customers as unique.

The uniqueness can be associated with product design, brand image, features, technology, and dealer network or customer service.

Because of differentiation, the business can charge a premium for its product.

Differentiation does not guarantee competitive advantage, especially if standard products sufficiently meet customer needs or if rapid imitation (copy) by competitors is possible.

Basis of Differentiation

Product,

Pricing, and

Organization.


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Achieving Differentiation Strategy;

To achieve differentiation, following are the measures that could be adopted by an organization to incorporate:

Offer utility for the customers and match the products with their tastes and

preferences.

Elevate the performance of the product.

Offer the promise of high quality product/service for buyer satisfaction.

Rapid product innovation.

Taking steps for enhancing image and its brand value.

Fixing product prices based on the unique features of the product and buying

capacity of the customer.

Advantages of Differentiation Strategy;

Rivalry - Brand loyalty acts as a safeguard against competitors. It meansthat customers will be less sensitive to price increases, as long as the firm cansatisfy the needs of its customers.

Buyers – They do not negotiate for price as they get special features andalso they have fewer options in the market.

Suppliers – Because differentiators charge a premium price, they can affordto absorb higher costs of supplies and customers are willing to pay extra too.

Entrants – Innovative features are an expensive offer. So, new entrantsgenerally avoid these features because it is tough for them to provide thesame product with special features at a comparable price.

Substitutes – Substitute products can’t replace differentiated productswhich have high brand value and enjoy customer loyalty.

Disadvantages of Differentiation Strategy;

In long term, uniqueness is difficult to sustain.


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Charging too high a price for differentiated features may cause the customer

to switch-off to another alternative.

Differentiation fails to work if its basis is something that is not valued by the

customers.

3. Cost Leadership Strategy;

Meaning;

It is emphasizes producing standardized products at a very low per-unit cost for consumers who are price-sensitive.

It is a low cost competitive strategy that aims at broad mass market.

It requires vigorous pursuit of cost reduction in the areas of procurement, production, storage and distribution of product or service and also economies in overhead costs.

Because of its lower costs, the cost leader is able to charge a lower price for its products than its competitors and still make satisfactory profits.

For e.g. McDonald’s fast food restaurants have successfully followed low cost leadership strategy.

Achieving Cost Leadership Strategy;

To achieve cost leadership, following are the actions that could be taken:

Forecast the demand of a product or service promptly.

Optimum utilization of the resources to get cost advantages.

Achieving economies of scale leads to lower per unit cost of product/service.

Standardisation of products for mass production to yield lower cost per unit.

Invest in cost saving technologies and try using advance technology for smart

working.

Resistance to differentiation till it becomes essential.


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Advantages of Cost Leadership Strategy;

Rivalry - Competitors are likely to avoid a price war, since the low cost firmwill continue to earn profits after competitors compete away their profits.

Buyers – Powerful buyers/customers would not be able to exploit the costleader firm and will continue to buy its product.

Suppliers – Cost leaders are able to absorb greater price increases before itmust raise price to customers.

Entrants – Low cost leaders create barriers to market entry through itscontinuous focus on efficiency and reducing costs.

Substitutes – Low cost leaders are more likely to lower costs to inducecustomers to stay with their product, invest to develop substitutes, purchasepatents.

Disadvantages of Cost Leadership Strategy;

Cost advantage may not be remaining for long as competitors may also

follow cost reduction technique.

Cost leadership can succeed only if the firm can achieve higher sales

volume.

Cost leaders tend to keep their costs low by minimizing advertising, market

research, and research and development, but this approach can prove to be

expensive in the long run.

Technology changes are a great threat to the cost leader.

Best-Cost Provider Strategy;

Introduction:

The new model of best cost provider strategy is a further development of three generic strategies.


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It is directed towards giving customers more value for the money by emphasizing both low cost and upscale differences.

The objective is to keep costs and prices lower than those of other sellers of comparable products.

Best-cost provider strategy involves providing customers more value for the money by emphasizing low cost and better quality difference. It can be done:

Through offering products at lower price than what is being offered by rivalsfor products with comparable quality and features or

Charging similar price as by the rivals for products with much higher qualityand better features.


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Chapter 6: Functional Level Strategies

Introduction;

Strategy of one functional area cannot be looked at in isolation.

Different functional areas of the business are interlinked together and how a functional strategy is synergised with other functional strategies determines its effectiveness.

Functional strategies are designed to help in the implementation of corporate and business unit level strategies.

Functional strategies play two important roles;

Firstly, they provide support to the overall business strategy.

Secondly, they spell out as to how functional managers will work so as toensure better performance in their respective functional areas.

Importance of Functional strategies;

Functional strategies provide a sense of direction to the functional staff.

Functional strategies act as basis for controlling activities in the differentfunctional areas of business.

Functional strategies help in bringing harmony and coordination as they areformulated to achieve major strategies.

Similar situations occurring in different functional areas are handled in aconsistent manner by the functional managers.


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Marketing Strategy;

Introduction;

Marketing is a social and managerial process.

Marketing induces in moving people closer to making a decision to purchase and facilitate a sale.

The marketing process is the process of;

Analysing market opportunities,

Selecting target markets,

Developing the marketing mix, (i.e. 4 P’s)

Managing the marketing effort. (i.e. Strategic Marketing Techniques)

Objectives of Marketing;

1. Delivering Value to Customers,

Marketing alone cannot produce superior value for the customers. It needs

to work in coordination with other departments to accomplish this. Marketing acts

as part of the organizational chain of activities.

2. Connecting with customers,

To succeed in today’s competitive marketplace, companies must be customer

centred. They must win customers from competitors and keep them by delivering

greater value.

Marketing Mix;

Marketing mix forms an important part of overall competitive marketing strategy.

The marketing mix is the set of controllable marketing variables that the firm blends to produce the response it wants in the target market. These variables are often referred to as the “4 P’s”.


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P’s (Seller’s Perception) C’s (Buyer’s Perception)

Product Customer Solution

Price Customer Cost

Place Convenience

Promotion Communication

1. Product;

Product stands for the combination of “goods-and-service” that the company offers to the target market.

Strategies are needed for managing existing product over time, adding new ones and dropping failed products.

Strategic decisions must also be made regarding branding, packaging and other product features such as warranties.

Products are;

Industrial or Consumer products,

Essentials or Luxury products,

Durables or Perishables.

2. Price;

Price stands for the amount of money customers have to pay to obtain the product.

Necessary strategies pertain to the location of the customers, price flexibility, related items within a product line and terms of sale.

The price of a product is its composite expression of its value and utility to the customer, its demand, quality, reliability, safety, the competition it faces, the desired profit and so on.

Skimming Pricing Policy,

Penetration Pricing Policy. (Refer bellow p.g. no. 5-6)


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3. Place;

Place stands for company activities that make the product available to target consumers.

One of the most basic marketing decision is choosing the most appropriate marketing channel.

Strategies applicable to the intermediaries such as wholesalers and retailers must be designed.

The distribution policies of a company are important determinants of the functions of marketing.

4. Promotion;

Promotion stands for activities that communicate the merits of the product and persuade target consumers to buy it.

Strategies are needed to combine individual methods such as advertising, personal selling, and sales promotion into a coordinated campaign.

In addition promotional strategies must be adjusted as a product move from an earlier stage to a later stage of its life.

Modern marketing is highly promotional oriented.

Promotion Techniques;


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Personal selling:

Personal selling is one of the oldest forms of promotion.

It involves face-to-face interaction of sales force with the prospective customersand provides a high degree of personal attention to them.

In personal selling, oral communication is made with potential buyers of aproduct with the intention of making a sale.

It may initially focus on developing a relationship with the potential buyer, butend up with efforts for making a sale.

Personal selling suffers from a very high costs as sales personnel are expensive.

Advertising:

Advertising is a non-personal, highly flexible and dynamic promotional method.

A sale is a function of several variables out of which advertising is only one.

Choice of appropriate media is important for effectiveness of the message.

The magazines, hoardings, display boards, radio, television and internet.

The media for advertising includes pamphlets, brochures, and newspapers.

Publicity:

Publicity is also a non-personal form of promotion similar to advertising.

However, no payments are made to the media as in case of advertising.

Publicity is communication of a product, brand or business by placinginformation about it in the media without paying for the time or media spacedirectly.

Thus, it is way of reaching customers with negligible cost.

Basic tools for publicity are press releases, press conferences, reports, stories, andinternet releases.


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These releases must be of interest to the public.

Sales promotion:

Sales promotion is an omnibus. Term that includes all activities that areundertaken to promote the business. Activities like discounts, contests, moneyrefunds, instalments, exhibitions and fairs constitute sales promotion.

All these are meant to give a boost to the sales.

Sales promotion done periodically may help in getting a larger market share toan organization.

Pricing Policy;

1. Skimming Pricing Policy,

Prices are set at a very high level. The product is directed to those buyers whoare relatively price insensitive but sensitive to the novelty of the new product.

For example, new model of mobile is released by;

2. Penetration Pricing Policy,

In Penetration firm keeps a temptingly low price for a new product whichitself is selling point. A very large number of the potential consumer may be able to afford and willing to try the product.

For example, the pricing kept by Reliance Jio is penetration.

iPhone, Vivo NEX


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Expanded (Modern) Marketing Mix;

Introduction:

Typically, all organizations use a combination of 4 P’s in some form or the other. However, the above elements of marketing mix are not fully comprehensive.

It is relevant to discuss a few more elements that may form part of an organizational marketing mix strategy.

They have got more currency (value) in recent years.

Growth of services has its own share for the inclusion of newer elements in marketing. A few P’s included later are as follows:

P’s (Seller’s Perception) C’s (Buyer’s Perception)

People Caring

Process Co-ordinated

Physical evidence Comfort

People:

All human actors who play a part in delivery of the market offering and thus influence the buyer’s perception, namely the firm’s personnel and the customer.

Process:

The actual procedures, mechanisms and flow of activities by which the product, service is delivered.

Physical evidence:

The environment in which the market offering is delivered and where the firm and customer interact.


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Strategic Marketing Techniques;

Social Marketing Place Marketing

Augmented Marketing Organization Marketing

Service Marketing Differential Marketing

Direct Marketing Concentrated Marketing

Relationship Marketing Synchro – Marketing

Enlightened Marketing De-marketing

Person Marketing

Social Marketing;

It refers to the design, implementation, and control of programs seeking to increase the acceptability of a social ideas, cause, or practice among a target group.

e.g., the publicity campaign for prohibition of smoking in Delhi explained theplace where one can and can’t smoke.

Augmented Marketing;

It is provision of additional customer services and benefits built around the core and actual products that relate to introduction of hi-tech services like movies on demand, online computer repair services, etc... Such innovative offerings provide a set of benefits that promise to elevate customer service to unprecedented levels.

Services Marketing;

It is applying the concepts, tools, and techniques, of marketing to services.


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Services is any activity or benefit that one party can offer to another that is essentially intangible and does not result in the banking, savings, retailing, educational or utilities.

e.g. Hair Styling, Counselling, Hospitality, etc…

Direct Marketing;

Marketing through various advertising media that interact directly with consumers, generally calling for the consumer to make a direct response.

Direct marketing includes catalogue selling, e-mail, telecomputing, electronic marketing, shopping, and TV shopping.

Relationship Marketing;

The process of creating, maintaining, and enhancing strong, value-laden relationships with customers and other stakeholders.

e.g., Airlines offer special lounges at major airports for frequent flyers.

Thus, providing special benefits to select customers to strengthen bonds. It will go a long way in building relationships.

Enlightened Marketing;

It is a marketing philosophy holding that a company’s marketing shouldsupport the best long-run performance of the marketing system; its five principles include;


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1. Customer-oriented Marketing,2. Innovative Marketing,3. Value Marketing,4. Sense-of-mission Marketing, And5. Societal Marketing.

Person Marketing;

People are also marketed.

Person marketing consists of activities undertaken to create, maintain or change

attitudes and behaviour towards particular person.

e.g., politicians, sports stars, film stars, etc. i.e., market themselves to get votes, orto promote their careers.

Place Marketing;

Place marketing consists of activities undertaken to create, maintain or

change attitudes and behaviour towards particular places say,

Business sites marketing,

Tourism marketing.

Organization Marketing;

It consists of activities undertaken to create, maintain, or change attitudes

and behaviour of target audiences towards an organization.

Both profit and non-profit organizations practice organization marketing.

e.g.,


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Differential Marketing;

It is a market-coverage strategy in which a firm decides to target several market segments and designs separate offer for each.

e.g., Hindustan Unilever Limited has,Popular Segment Premium Segment Lifebuoy Dove Lux Pears Rexona

Concentrated Marketing;

It is a market-coverage strategy in which a firm goes after a large share of one or few sub-markets.

e.g., Patanjali Ayurved,

Synchro Marketing;

When the demand for a product is irregular due to season, some parts of the day, or on hour basis, causing idle capacity or overworked capacities, synchro-marketing can be used to find ways to alter the pattern of demand through flexible pricing, promotion, and other incentives.

e.g., Products such as movie tickets can be sold at lower price over week days togenerate demand.

De-marketing;

It includes marketing strategies to reduce demand temporarily or permanently. The aim is not to destroy demand, but only to reduce or shift it.

This happens when there is overfull demand. e.g., Zoological parks are over-crowded on Saturdays, Sundays and holidays.Here demarketing can be applied to regulate demand.


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Supply Chain Management;

Meaning:

The term supply chain refers to the linkages between suppliers, manufacturers and customers.

Supply chains involve all activities like; Sourcing and procurement of material, Conversion, and Logistics.

Planning and control of supply chains are important components of its management.

Supply chain management is defined as

The process of Planning, Implementing, and Controlling the supply chain operations.

It is a cross-functional approach to managing the movement of raw materials into an organization and the movement of finished goods out of the organization toward the end-consumer.

It encompasses all movement and storage of raw materials, work-in-process inventory, and finished goods from point-of-origin to point-of- consumption.

Supply chain management is a tool of business transformation and involves delivering the right product at the right time to the right place and at the right price. It reduces costs of logistics of an organisations and enhances customer service by linkages between suppliers, manufacturers and customers. Supply chain management is an extension of logistics management.


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Logistics Management;

Introduction;

Management of logistics is a process which integrates the flow of supplies into, through and out of an organization.

To achieve a level of service which ensures that the right materials are available;

at the right place,

at the right time,

of the right quality, and

at the right cost.

Organizations try to keep the cost of transporting materials as low as possible consistent with safe and reliable delivery.

Logistics Management is a small portion of Supply Chain Management that deals with management of goods in an efficient way.

Supply chain management helps in logistics and enables a company to have constant contact with its distribution team, which could consist of;

Trucks, Trains, or Any other mode of transportation.


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Improvement in logistics can results in savings in cost of doing business.

These savings can also reveal in the profits of the company.Some examples of how logistics can help a business are as follows:

• Cost savings,

• Reduced inventory,

• Improved delivery time,

• Customer satisfaction,

• Competitive advantage.

Implementing Supply Chain Management System;

A successful implementation of supply management system requires a change from managing individual functions to integrating activities into key supply chain processes.

It involves collaborative work between buyers and suppliers.

A key requirement for successfully implementing supply chain will be network of information sharing and management.

Product Development, Outsourcing,

Procurement, Customer Services,

Manufacturing, Performance Management.

Physical Distribution,

Distinction Between;

LOGISTICS MANAGEMENT SUPPLY CHAIN MANAGEMENT

Meaning Management of logistics is a process which integrates the flow of supplies into, through and out of an organization.

The term supply chain refers to the linkages between suppliers, manufacturers and customers.

Objective Customer Satisfaction Competitive Advantage


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Evolution The concept of Logistics has been evolved earlier.

Supply Chain Management is a modern concept.

One in another

Logistics Management is a fraction of Supply Chain Management.

Supply Chain Management is the new version of Logistics Management.

Incudes Logistical activities typically include management of inbound and outbound goods, transportation, warehousing, handling of material, fulfilment of orders, inventory management, supply/ demand planning.

Naturally, management of supply chains include closely working with channel partners – suppliers, intermediaries, other service providers and customers.

Example

Financial Strategy;

Introduction;

The financial strategies of an organization are related to several areas of financial management considered central to strategy implementation.

These include:

Capital Structure decision, Developing projected financial statements/budgets, Management (i.e. usage, application) of funds, & Evaluating the worth of a business.


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Strategists need to formulate strategies (i.e. plan) in these areas so that they are implemented.

For e.g. of Some Financial decisions are:

To raise capital with short-term debt, long-term debt, preferred stock, or common

stock.

To determine an appropriate dividend pay-out ratio.

To lease or buy fixed assets.

To establish a certain percentage discount on accounts within a specified period

of time. (e.g. 2/10 net 30)

To determine the amount of cash that should be kept on hand.

To extend the time of accounts receivable.

Evaluating the worth of a business;

Evaluating the worth of a business is central to strategy implementation because integrative, intensive, and diversification strategies are often implemented by acquiring other firms.

Other strategies, such as retrenchment may result in the sale of a division of a firm itself.

Various approaches for determining a business’s worth can be grouped into three main approaches:

First Approach in evaluating the worth of a business is determining its net worthor stockholders’ equity.

Particulars Amount

Share Capital XX Add : R & S (less Goodwill) XX Add : Under Valued Assets XX Less : Overvalued Assets (XX)

Net Worth XX


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Second Approach to measuring the value of a firm. A conservative rule of thumbis to establish a business’s worth as five times the firm’s current annual profit.

Value of Firm = 5 times of Current Annual Profit

Third Approach to determine a business’s worth. It involves three methods.

First Method

Firm’s worth = Base on the selling price of a similar company.

Second Method

Price Earnings Ratio = MPS ÷ EPS

Third Method

Outstanding Shares method

= No. of Shares x MPS

Note : Do refer projected financial statements (budgets) and it’s limitation Page no. 6.13

Production (Operation) Strategy;

Introduction;

The production system is concerned with the activities directed towards creation of products and services for customers. It covers factors such as capacity, location, layout, design, work systems, automation, and so on.

Decisions are long terms in nature. Production system affects the followings;

What products are offered? (i.e. Nature of product or service)

Which market and (i.e. market to be target)

How these markets are served. (i.e. manner in which market to be served)

Production/Operations Planning and Control;

It is an aggregate production planning; materials supply; inventory, cost, and quality management; and maintenance of plant and equipment.


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Here, the aim of strategy implementation is to see how efficiently resources are utilized and in what manner the day-to-day operations can be managed in the light of long-term objectives.

Operations planning and control provides an example of an organizational activity that is aimed at translating the objectives into reality.

Some companies use quality as a strategic tool.

Research and Development Strategy;

Introduction;

Research and development (R&D) personnel can play an integral part in strategy implementation. These individuals are generally charged with developing new products and improving old products in a way that will allow effective strategy implementation.

Strategies such as product development, market penetration, and concentric diversification require that new products be successfully developed and that old products be significantly improved.

Technological improvements that affect consumer and industrial products and services shorten product life cycles. R&D policies can enhance strategy implementation efforts to:

Emphasize product or process improvements.

Be leaders or followers in R&D.

Develop robotics or manual-type processes.

Spend a high, average, or low amount of money on R&D.

Perform R&D within the firm or to contract R&D to outside firms.

Use university researchers or private sector researchers.

There must be effective interactions between R&D departments and other functional departments in implementing different types of generic business strategies.


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A critical question is whether a firm should develop research and development expertise internally or outside to external agencies. The following guidelines can be used to help make this decision:

Technical Progress

Market Growth

Action Other point

1 Slow Moderate In-house R&D Act as significant barriers to new entrants.

2 Fast Slow Outsource R&D may be very risky.

3 Slow Fast Outsource No enough time for in-house R&D.

4 Fast Fast Outsource R&D expertise should be obtained through acquisition of a well-established firm in the industry.

*Refer page no. 6.20

Human Resource Strategy;

Introduction;

The human resource management helps the organization to effectively deal with the external environmental challenges. The function has been accepted as a partner in the formulation of organization’s strategies and in the implementation of such strategies through human resource planning, employment, training, appraisal and rewarding of personnel.

The human resource department must develop performance incentives that clearly link performance and pay to strategies.

A well-designed strategic-management system can fail if insufficient attention is given to the human resource dimension. Human resource problems that arises when a business implements strategies can usually be traced to one of three causes:

1. Obstruction (disruption) of social and political structures,

2. Failure to match individuals’ aptitudes with implementation tasks, and

3. Inadequate top management support for implementation activities.


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Commonly used methods that match managers with strategies to be implemented include transferring managers, developing leadership workshops, offering career development activities, promotions, etc…

Achieving Competitive advantage;

Introduction;

In Human Resource management (HRM), the strategist tries to achieve a competitive advantage for his organization. The competitive advantage may be in the form of low cost relationship in the industry or being unique in the industry along dimensions that are widely valued by the customers in particular and the society at large.

The role of human resources in enabling the organization to effectively deal with the external environmental challenges, the human resource management function has been accepted as a strategic partner in the formulation of organization’s strategies and in the implementation of such strategies. The following points should be kept in mind:

Recruitment and selection:The workforce will be more competent if a firm can successfully identify,

attract, and select the most competent applicants.

Training:The workforce will be more competent if employees are well trained to

perform their jobs properly.

Appraisal of performance:The performance appraisal is to identify any performance deficiencies

experienced by employees due to lack of competence. Such deficiencies, once identified, can often be solved through counselling, coaching or training.

Compensation:A firm can usually increase the competency of its workforce by offering pay

and benefit packages that are more attractive than those of their competitors. This practice enables organizations to attract and retain the most capable people.


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Strategic Human Resource Management (SHRM);

Introduction;

The human resource strategy of a business should reflect and support the corporate strategy. An effective human resource strategy includes the way in which the organization plans to develop its employees and provide them suitable opportunities and better working conditions so that their optimal contribution is ensured.

The success of an organization depends on its human resources. This means how they are acquired, developed, motivated and retained organization play an important role in organizational success.

The Human Resource Management practices of an organization may be an important source of competitive advantage. For this strategic focus, should be given on the following points:

Pre-selection practices,

Selection practices, &

Post-selection practices.

The prominent (important) areas where the human resourcemanager can play strategic role are as follows:

Providing purposeful direction:

The human resource manager must be able to lead people and the organizationtowards the desired direction involving people right from the beginning.

The most important task of a HR manager is to ensure that the objectives of anorganization are internalized by each individual working in the organization.

Building core competency:

The human resource manager has a great role to play in developing corecompetency by the firm.


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A core competence is a unique strength of an organization which may not be shared by others.

This may be in the form of human resources, marketing capability, or technological capability.

It needs creative, courageous and dynamic leadership having faith in organization’s human resources.

Creating competitive advantage:

Creating and maintaining a competitive advantage in the globalized market isthe object of any organization.

There are two important ways a business can achieve a competitive advantageover the others.

The first is cost leadership which means the firm aims to become a lowcost leader in the industry.

The second competitive strategy is differentiation under which the firmseeks (aim) to be unique in the industry in terms of dimensions that arehighly valued by the customers. Putting these strategies into effect carriesa heavy premium on having a highly committed and competentworkforce.

Facilitation of change:

The human resource manager will be more concerned with substance ratherthan form, accomplishments rather than activities, and practice rather thantheory.

The HR function will be responsible for furthering the organization not justmaintaining it.

Human resource manager will have to devote more time to promote changesthan to maintain the status quo.

Managing workforce diversity:

In modern organizations, management of diverse workforce is a great challenge.


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Workforce diversity can be observed in terms of male and female workers, young and old workers, educated and uneducated workers, unskilled and professional employee, etc…

Moreover, many organizations also have people of different castes, religious and nationalities.

The workforce in future will comprise more of educated and self-conscious workers. They will ask for higher degree of participation and avenues for fulfilment.

Money will no longer be the sole motivating force for majority of the workers. Non-financial incentives will also play an important role in motivating the workforce.

Empowerment of human resources:

Empowerment means authorizing every member of an organization to take uphis/her own destiny realizing his/her full potential.

It involves giving more power to those who, at present, have little control whatthey do and little ability to influence the decisions being made around them.

Development of works ethic and culture:

As changing work ethic requires increasing emphasis on individuals, jobs willhave to be redesigned to provide challenge.

Flexible starting and quitting times for employees may be necessary. Focus willshift from extrinsic (external) to intrinsic motivation.

A vibrant work culture will have to be developed in the organizations to createan atmosphere of trust among the employees and to encourage creative ideas bythem.


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Chapter 7: Organization Structure And Strategic Leadership

Organisation Structure;

Introduction:

A competitive advantage is created when there is a proper match between strategy and structure.

Selecting the organizational structure and controls that result in effective implementation of chosen strategies is a fundamental challenge for managers, especially top-level managers. C or IC (ans. 7.3)

In today’s emerging business scenario, skills related to strategic, organizational and leadership processes are necessary.

Changes in corporate strategy often require changes in the way an organization is structured for two major reasons.

Structure largely dictates;

How operational objectives and policies will be established to achieve thestrategic objectives?

How resources will be allocated to achieve strategic objectives?

According to Chandler,

Changes in strategy lead to changes in organizational structure.

Structure should be designed or redesigned to facilitate the strategic pursuit of a firm and, therefore, structure should follow strategy.


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Chandler’s Strategy-Structure Relationship;

Every firm is influence by numerous external and internal forces. But no firm could change its structure in response to each of these forces, because to do so would lead to disorder (chaos).

However, when a firm changes its strategy, the existing organizational structure may become ineffective. (Refer bellow notes Symptoms of an ineffective organizational structure)

Changes in organisational structure can facilitate strategy-implementation efforts, but changes in structure should not be expected to make a bad strategy good , to make bad managers good , or to make bad products sell.

If a proposed strategy required massive structural changes it would not be an attractive choice. In this way, structure can shape the choice of strategy. (Forward & Backward Linkages) Chp. 8 (8.6)

But a more important concern is determining what types of structural changes are needed to implement new strategies and how these changes can best be accomplished.


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Symptoms of an ineffective organizational structure include;

Too many levels of management,

Too large a span of control, and

Too many unachieved objectives.

Too many meetings attended by too many people,

Too much attention being directed toward solving

interdepartmental conflicts,

Types of Organisation Structure;

Simple Structure, SBU Structure,

Functional Structure, Matrix Structure,

Divisional Structure, Network Structure,

Multi-Divisional Structure, Hourglass Structure,

Simple Structure;

Introduction:

Simple organizational structure is most appropriate for companies that follow a single - business strategy and offer a line of products in a single geographic market.

A simple structure is an organizational form in which the owner-manager makes all major decisions directly and monitors all activities, while the company’s staff merely serves as an executor.

The simple structure also is appropriate for companies implementing focused cost leadership or focused differentiation strategies.

To coordinate more complex organizational functions, companies should abandon the simple structure in favour of the functional structure.


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The functional structure is used by larger companies and by companies with low levels of diversification.

Functional Structure;

Introduction:

A widely used structure in business organisations is functional type because of its simplicity and low cost.

Besides being simple and inexpensive, a functional structure also promotes specialization of labour, encourages.

The functional structure consists of; CEO or MD, Corporate Staff & Functional Managers.

The functional structure enables the company to overcome the growth - related constraints of the simple structure,(&) enabling or facilitating communication and coordination.

However, compared to the simple structure, there also are some potential problems.

Differences in functional specialization and orientation may delay communications and coordination.

Thus, the chief executive officer must integrate functional decision-making and coordinate actions of the overall business across functions.

Functional specialists often may develop a narrow perspective, losing sight of the company’s strategic vision and mission.

When this happens, this problem can be overcome by implementing the multidivisional structure.


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Divisional Structure;

Introduction:

As a firm, grows year after year it faces difficulty in managing different products and services in different markets.

Some form of divisional structure generally becomes necessary to motivate employees, control operations, and compete successfully in diverse locations.

The divisional structure can be organized in one of the four ways; By Geographic Area, By Product or Service, By Customer, or By Process.

With a divisional structure, functional activities are performed both centrally and in each division separately.

A divisional structure by geographic area is appropriate for organizations whose strategies are formulated to fit the particular needs and characteristics of customers in different geographic areas.

E.g. HUL.

The divisional structure by product (or services) is most effective for implementing strategies when specific products or services need special emphasis.

E.g. General Motors, P & G (Procter & Gamble), etc…

A divisional structure by customer’s airline companies have two major customer divisions: passengers and freight or cargo services. Banks are often organised in divisions such as personal banking, corporate banking, etc…


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A divisional structure by process is similar to a functional structure. Divisional structure accountable for profits or revenues. Whereas functional departments are not accountable for profits or revenues.

Advantages of Divisional Structure; Accountability, Career development opportunities for managers, Employee morale is generally higher in a divisional structure than it is in

centralized structure.

Limitation of Divisional Structure; Divisional structure is costly,

1. Each division requires functional specialists who must be paid.2. Second, there exists some duplication of staff services, facilities, and

personnel.3. Third, managers must be well qualified because the divisional design

forces delegation of authority better-qualified individuals requires highersalaries.

Difficult to maintain consistency.

Multi Divisional Structure;

Introduction:

Multidivisional (M-form) structure is composed of operating divisions where each division represents a separate business to which the top corporate officer delegates responsibility for day-to-day operations and business unit strategy to division managers.

Multidivisional or M-form structure was developed in the 1920s.


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In response to coordination & control-related problems in large firms.

Because of that, Top managers became over-involved in solving short-run problems and neglected long-term strategic issues.

Multidivisional structure calls (needed) for:

Creating separate divisions, each representing a distinct business, Each division would house its functional hierarchy, Division managers would be given responsibility for managing day-to-day

operations, A small corporate office that would determine the long-term strategic

direction of the firm and exercise overall financial control over the semi-autonomous divisions.

Strategic Business Unit (SBU) Structure;

Introduction:

The concept is relevant to multi-product, multi-business enterprises. An SBU is a grouping of related businesses.

It is impractical for an enterprise with a multitude (assembly) of businesses to provide separate strategic planning treatment to each one of its products/businesses.

It has to necessarily group the products/businesses into a manageable number of strategically related business units and then take them up for strategic planning.

A strategic business unit (SBU) structure consists of at least three levels, with a corporate headquarters at the top, SBU groups at the second level, and divisions grouped by relatedness within each SBU at the third level.


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Individual SBUs are treated as profit centres and controlled by corporate headquarters.

The SBU structure is composed of operating units where each unit represents a separate business to which the top corporate officer delegates responsibility for day- to-day operations and business unit strategy to its managers.

Characteristics of SBU’s;

Single business or collection of related businesses that can be planned for

separately,

Has its own set of competitors. E.g. Lux & Dove,

Has a manager who is responsible for strategic planning and profit.

Helps comparisons between divisions.

Improving the allocation of resources.

Matrix Structure;

Introduction:

A matrix structure is the most complex of all designs because it depends upon both vertical and horizontal flows of authority and communication (hence the term matrix).

In matrix structures, functional and product forms are combined simultaneously at the same level of the organization.

Employees have two superiors,

A product or project manager (usually temporary) and

A functional manager.(Home department, reasonably permanent).


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Matrix structure combines the stability of the functional structure with the flexibility of the division by product form.

People from these functional units are often assigned temporarily to one or more product units or projects.

The product units or project are usually temporary and act like divisions.

Despite its complexity, the matrix structure is widely used in manyindustries, including

Construction, Healthcare, Research and defence.

Network Structure;

Introduction:

Network structure could be termed as “non-structure” by its virtual elimination of in-house business function.

Many activities are outsourced.

A corporation organized in this manner is often called a virtual organization.

The network structure becomes most useful when the environment of a firm is unstable and is expected to remain so.

Under such conditions, there is usually a strong need for innovation and quick response.

Instead of having salaried employees, it may contract with people for a specific project or length of time.


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Rather than being located in a single building or area, an organization’s business functions are scattered worldwide.

Companies like Airtel use the network structure in their operations function by subcontracting manufacturing to other companies in low-cost.

Advantages of Network Structure;

Increased flexibility and adaptability to cope with rapid technological changeand shifting patterns of competencies.

Gathering efficiencies from other firms who are concentrating their efforts intheir areas of expertise.

Limitation of Divisional Structure;

The availability of numerous potential partners can be a source of trouble.

It a particular firm overspecializes on only a few functions, it runs the risk ofchoosing the wrong functions & thus becoming non-competitive.

Hourglass Structure;

Note WIPRO proposed for Hourglass Structure, yet to implement.

Introduction:

In the recent year’s information technology and communications have significantly altered the functioning of organizations.

The role played by middle management is diminishing (reducing) as the tasks performed by them are increasingly being replaced by the technological tools.


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The structure has a short and narrow middle-management level.

Hourglass organization structure consists of three layers with constricted middle layer.

Information technology links the top and bottom levels in the organization taking away many tasks that are performed by the middle level managers.

Contrary to traditional middle level managers who are often specialist, the managers in the hourglass structure are generalists and perform wide variety of tasks.

Advantages of Hourglass Structure;

Reduced costs.

Helps in enhancing responsiveness by simplifying decision making.

Decision making authority is shifted close to the source of information so that

it is faster.

Limitation of Hourglass Structure;

The promotion opportunities for the lower levels diminish significantly.

Continuity at same level may bring monotony (routine, lack of variety) and

lack of interest and it becomes difficult to keep the motivation levels high.

Organisations try to overcome these problems by assigning challenging

tasks, transferring laterally and having a system of proper rewards for

performance.

Strategy Supportive Culture;

Introduction:

Every organisation has a unique organizational culture.

It has its own philosophy and principles, its own history, values, and rituals, its own ways of approaching problems and making decisions, its own work climate.


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Its own ingrained (established) beliefs and thought patterns, and practices that define its corporate culture.

Q. Corporate culture. Also, elucidate the statement “Culture is a strength that canalso be a weakness”.

Answer

The phenomenon which often distinguishes good organizations from bad ones could be summed up as ‘corporate culture’.

Corporate culture refers to a company’s values, beliefs, business principles, traditions, and ways of operating and internal work environment.

Every corporation has a culture that exerts powerful influences on the behaviour of managers.

Culture affects not only the way managers behave within an organization but also the decisions they make about the organization’s relationships with its environment and its strategy.

“Culture is a strength that can also be a weakness”. This statement can be explained by splitting it in to two parts.

Culture as a strength:

As a strength, culture can facilitate communication, decision-making &control and create cooperation & commitment.

An organization’s culture could be strong and cohesive when it conducts itsbusiness according to a clear and explicit set of principles and values, whichthe management devotes considerable time to communicating to employeesand which values are shared widely across the organization.

Culture as a weakness:

As a weakness, culture may obstruct the smooth implementation of strategyby creating resistance to change.


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An organization’s culture could be characterized as weak when many subcultures exist, few values and behavioural norms are shared and traditions are rare.

In such organizations, employees do not have a sense of commitment and loyalty with the organisation.

Q. Write a short note on importance of corporate culture.

Q. Explain briefly the role of culture in promoting better strategy execution.

Answer; (Try to write at least 4 points)

Strong culture promotes good strategy execution when there’s fit and impels execution when there’s negligible fit.

A culture grounded in values, practices, and behavioural norms that match what is needed for good strategy execution helps energize people throughout the organization to do their jobs in a strategy-supportive manner.

A culture built around such business principles as listening to customers, encouraging employees to take pride in their work, and giving employees a high degree of decision-making responsibility.

This is very conducive to successful execution of a strategy of delivering superior customer service.

A strong strategy-supportive culture makes employees feel genuinely better about their jobs and work environment and the merits of what the company is trying to accomplish.

Employees are stimulated to take on the challenge of realizing the organizational vision, do their jobs competently and with enthusiasm, and collaborate with others.


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Q. What steps would you suggest to change a company’s problem culture?

Answer;

Changing problem cultures is very difficult because of deeply held values and habits. It takes concerted management action over a period of time to replace an unhealthy culture with a healthy culture or to root out certain unwanted cultural obstacles and instil ones that are more strategy-supportive.

The first step is to diagnose which aspect of the present culture are strategy supportive and which are not.

Then, managers have to talk openly and directly to all concerned about those aspects of the culture that have to be changed.

The talk has to be followed swiftly by visible, aggressive actions to modify the culture-actions that everyone will understand are intended to establish a new culture more in tune with the strategy.

The menu of culture-changing actions includes revising policies and procedures, altering incentive compensation, recruiting and hiring new managers and employees, replacing key executives, communication on need and benefit to employees and so on.

Leadership Style;

Introduction;

Strategic leadership sets the firms direction by developing and communicating vision of future, formulate strategies in the light of internal and external environment, brings about changes required to implement strategies and inspire the staff to contribute to strategy execution.


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A manager as a strategic leader has to play many leadership roles to play:

Visionary Policy Maker Motivator Culture Builder Crisis Manager Spokesperson Resource Acquirer and Allocator, etc…

For example: N. R. Narayan Murthy, is known as a celebrated business leader because of the values he had institutionalised over his tenure as CEO of Infosys.

Dhirubhai Ambani, pioneer of Reliance Group, was an icon in himself because of his ability to conceptualise and create sweeping strategies, to reach corporate goals, and proficiency in implementing his strategic vision.

A Strategic leader has several responsibilities, including thefollowing:

Making strategic decisions.

Formulating policies and action plans to implement strategic decision.

Ensuring effective communication in the organisation.

Managing human capital (perhaps the most critical of the strategic leader’s

skills).

Managing change in the organisation.

Creating and sustaining strong corporate culture.

Sustaining high performance over time.

Thus, the strategic leadership skills of a company’s managers represent resources

that affect company performance. And these resources must be developed for the

company’s future benefit.


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Q.9 (b) (May 2018)

Ram and Shyam are two brothers engaged in the business of spices. Both have different approaches to management. Ram prefers the conventional and formal approach in which authority is used for explicit rewards and punishment. While, on the other hand, Shyam believes in democratic participative management approach, involving employees to give their best.

Analyse the leadership style followed by Ram and Shyam. (5 Marks)

Transformational Leadership style;

Introduction;

Such a leadership motivates followers to do more than originally affected to do by stretching their abilities and increasing their self-confidence, and also promote innovation throughout the organization.

Uses charisma and enthusiasm to inspire people to exert them for the good of the organization.

Transformational leadership style may be appropriate in turbulent environments.

In industries at the very start or end of their life-cycles.

In poorly performing organizations when there is a need to inspire a company.


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Transactional Leadership style;

Introduction;

It prefer a more formalized approach to motivation, setting clear goals with explicit rewards or penalties for achievement or non-achievement.

Focuses more on designing systems and controlling the organization’s activities and are more likely to be associated with improving the current situation.

Transactional leadership style may be appropriate in static environment.

In mature industries, and in organizations that are performing well.

It is suitable for well performed organizations.

Entrepreneurship and Intrapreneurship;

Introduction;

1. Entrepreneur(s);

Meaning:

An entrepreneur is a person who searched for business opportunity and starts a new enterprise to make use of that opportunity.


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An entrepreneur is an individual who conceives the idea of starting a new venture, takes all types of risks, not only to put the product or service into reality but also to make it an extremely demanding one.

An entrepreneur is one who:

Initiates and innovates a new concept.

Recognises and utilises opportunity.

Faces risks and uncertainties.

Establishes a start-up company.

Adds value to the product or service.

Takes decisions to make the product or service a profitable one.

Is responsible for the profits or losses of the company.

2. Intrapreneur(s);

Meaning:

The terms Entrepreneur and Intrapreneur are frequently used in the business world. Many people use these terms interchangeably because they think that they both contain the same elements.

However there is a fine line of difference in these terms; The former (Entrepreneur) refers to a person who starts his own business

with a new idea or concept,

The latter (Intrapreneur) represents an employee who promotes innovationwithin the limits of the organisation.

An intrapreneur is nothing but an entrepreneur who operates within the boundaries of an organisation.

He is an employee of a large organisation, who is vested (given) with authority of initiating creativity and innovation in the company’s products, services and projects, redesigning the processes, workflows and systems.

The intrapreneurs believe in change and do not fear failure.


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The job of an intrapreneur is extremely challenging.

They discover new ideas, look for such opportunities that can benefit the whole organisation and take risks, promote innovation to improve the performance and profitability of the organisation.

They get recognition and reward for the success achieved by them.

It has now become a trend that large corporations appoint intrapreneur within the organisation, to bring operational excellence and gain competitive edge in the market.


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Chapter 8: Strategy Implementation And Control

Introduction;

Strategic management process does not end when the firm decides what strategies to pursue.

There must be a translation of strategic thought into strategic action.

Strategy implementation requires introduction of change in the organisation to make organisational member adapt to the new environment.

Strategic control is an integral part of strategic management.

It focuses on whether the strategy is being implemented as planned and the results produced are those intended.

In addition, we will also have an overview of the emerging concepts in strategic management, namely, strategy audit, business process reengineering and benchmarking.

Strategy Implementation;

Strategy implementation concerns the managerial exercise of putting a freshly chosen strategy into action.

Strategic implementation is concerned with translating a strategic decision into action.

The allocation of resources to new courses of action will need to be undertaken, and there may be a need for adapting the organization’s structure to handle new activities as well as training personnel and devising appropriate systems.

Relationships between Strategy Formulation and Implementation;

Many managers fail to distinguish between strategy formulation and strategy implementation.

A company will be successful only when the Strategy formulation is sound and implementation is excellent.


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Organization success is a function of good strategy and proper Implementation.

Often people, blame the strategy model for the failure of a company while the main flaw might lie in failed implementation.

Square A is the situation where a company apparently has formulated a very competitive strategy, but is showing difficulties in implementing it successfully.

This can be due to various factors, such as the lack of experience (e.g. for startups), the lack of resources, missing leadership and so on.

In such a situation the company will aim at moving from square A to square B, given they realize their implementation difficulties.

Square B is the ideal situation where a company has succeeded in designing a sound and competitive strategy and has been successful in implementing it.

Square C is denotes for companies that haven’t succeeded in coming up with a sound strategy formulation and in addition are bad at implementing their flawed strategic model.

Their path to success also goes through business model redesign and implementation/execution readjustment.

Square D is the situation where the strategy formulation is flawed (unsound), but the company is showing excellent implementation skills.

When a company finds itself in square D the first thing they have to do is to redesign their strategy before readjusting their implementation/execution skills.


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It needs to be emphasized that ‘strategy’ is not synonymous with ‘long-term plan’ but rather consists of an enterprise’s attempts to reach some preferred future state by adapting its competitive position as circumstances change.

While a series of strategic moves may be planned, competitors’ actions will mean that the actual moves will have to be modified to take account of those actions.

List of to be C or IC questions;

Strategy formulation concepts and tools do not differ greatly for small, large,for-profit, or non-profit organizations.

However, strategy implementation varies substantially among different typesand sizes of organizations.

Even the most technically perfect strategic plan will serve little purpose if it isnot implemented effectively.

A technically imperfect plan that is implemented well will achieve more thanthe perfect plan that never gets off the paper on which it is typed.

Successful strategy formulation does not guarantee successful strategyimplementation.

Strategy Formulation vs. Strategy Implementation;

Strategy Formulation Strategy Implementation Strategy formulation focuses on effectiveness.

Strategy implementation focuses on efficiency.

Strategy formulation is preliminary an intellectual process.

Strategy implementation is preliminary an operational process.

Strategy formulation requires conceptual intuitive and analytical skills.

Strategy implementation requires motivational and leadership skills.


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Strategy formulation requires co-ordination among the executives at the top level.

Strategy implementation requires co-ordination among the executives at the middle and lower level.

Strategy formulation is primarily an entrepreneurial activity, based on strategic decision-making.

Strategy implementation of strategy is mainly an administrative task based on strategic as well as operational decision-making.

Linkages;

Two types of linkages exist between these two phases of strategic management.

The forward linkages deal with the impact of strategy formulation on strategy implementation,

While the backward linkages are concerned with the impact in the opposite direction.

Forward Linkages;

The different elements in strategy formulation starting with objective setting through environmental and organizational appraisal, strategic alternatives and choice to the strategic plan determine the course that an organization adopts for itself.


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With the formulation of new strategies, or reformulation of existing strategies, many changes have to be effected within the organization.

For instance, the organizational structure has to undergo a change in the light of the requirements of the modified or new strategy. The style of leadership has to be adapted to the needs of the modified or new strategies.

In this way, the formulation of strategies has forward linkages with their implementation.

Backward Linkages;

Organizations tend to adopt those strategies which can be implemented with the help of the present structure of resources combined with some additional efforts. Such incremental changes, over a period of time, take the organization from where it is to where it wishes to be.

Issues (problems) in Strategy Implementation;

The different issues involved in strategy implementation cover practicallyeverything that is included in the discipline of management studies.

A strategist, therefore, has to bring a wide range of knowledge, skills,attitudes, and abilities.

The implementation tasks put to test the strategists’ abilities to allocateresources, design organisational structure, formulate functional policies, andto provide strategic leadership.

Given below in sequential manner the issues in strategy implementation which are to be considered:


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Project implementation,

Procedural implementation,

Resource allocation,

Structural implementation,

Functional implementation,

Behavioural implementation, etc…

It should be noted that the sequence does not mean that each of the above activities are necessarily performed one after another.

Many activities can be performed simultaneously, certain other activities may be repeated over time; and there are activities, which are performed only once.

Thus there can be overlapping and changes in the order in which these activities are performed.

Strategic Change;

Introduction:

The changes in the environmental forces often require businesses to make modifications in their existing strategies and bring out new strategies.

Strategic change is a complex process that involves a corporate strategy (Chp. 4) focused on new markets, products, services and new ways of doing business.

Q. Specify the steps that are needed to introduce strategic change in anorganization.

Answer:

1. Recognize the need for change,

2. Create a shared vision to manage the change, &

3. Institutionalize the change.


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1. Recognize the need for change,

The first step is to diagnose aspects of the corporate culture that are strategy supportive or not.

This basically means going for environmental scanning involving appraisal of both internal and external capabilities may be through SWOT analysis.

The idea is to determine where the gap lies and scope for change exists.

2. Create a shared vision to manage the change,

Objectives and vision of both individuals and organization should match. There should be no conflict between them.

This is possible only if the management and the organization members follow a shared vision.

Senior managers need to constantly and consistently communicate the vision not only to inform but also to overcome resistance.

3. Institutionalize the change,

This is basically an action stage which requires implementation of changed strategy. Creating and sustaining a different attitude towards change is essential to ensure that the firm does not slip back into old ways of thinking or doing things.

All these changes should be set up as a practice to be followed by the organization and be able to transfer from one level to another as a well settled practice.

Kurt Lewin’s Model of Change;

To make the change lasting, Kurt Lewin’s proposed three phases of the change process for moving the organization from the present to the future. These stages are,

1. Unfreezing the situation,,

2. Changing to the new situation &

3. Refreezing.


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1. Unfreezing the situation,

Unfreezing is the process of breaking down the old attitudes and behaviours, customs and traditions so that they start with a clean slate.

The process of unfreezing simply makes the individuals aware of the necessity for change and prepares them for such a change.

Lewin proposes that the changes should not come as a surprise to the members of the organization. Sudden and unannounced change would be socially destructive and morale lowering.

2. Changing to the new situation,

Once the unfreezing process has been completed and the members of the organization recognise the need for change and have been fully prepared to accept such change, their behaviour patterns need to be redefined.

H.C. Kellman has proposed three methods for reassigning new patterns ofbehaviour.These are Compliance, Identification and Internalisation.

3. Refreezing,

Refreezing occurs when the new behaviour becomes a normal way of life. The new behaviour must replace the former behaviour completely for successful and permanent change to take place.

In order for the new behaviour to become permanent, it must be continuously reinforced so that this new acquired behaviour does not diminish.

H.C. Kellman has proposed three methods for reassigning new patterns ofbehaviour.


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Compliance:

It is achieved by strictly enforcing the reward and punishment strategy for good or bad behaviour.

Fear of punishment, actual punishment or actual reward seems to change behaviour for the better.

Identification:

Identification occurs when members are psychologically impressed upon to identify themselves with some given role models whose behaviour they would like to adopt and try to become like them.

Internalization:

Internalization involves some internal changing of the individual’s thought processes in order to adjust to the changes introduced.

They have given freedom to learn and adopt new behaviour in order to succeed in the new set of circumstances.

Change process is not a onetime application but a continuous process due to dynamism and ever changing environment.

The process of unfreezing, changing and refreezing is a cyclical one and remains continuously in action.

Strategic Control;

Introduction:

Controlling is one of the important functions of management, and is often regarded as the core of the management process.


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It is a function intended to ensure and make possible the performance of planned activities and to achieve the pre-determined goals and results.

Control is intended to regulate and check

Organizational Control;1. Operational Control,

2. Management Control &

3. Strategic Control.

There are three types of organizational control;

Operational Control:

The thrust of operational control is on individual tasks or transactions as against total or more aggregative management functions.

For example, procuring specific items for inventory is a matter of operational control, in contrast to inventory management as a whole.

Many of the control systems in organisations are operational and mechanistic in nature.

A set of standards, plans and instructions are formulated.

Management Control:

When compared with operational control, management control is more inclusive and more aggregative, in the sense of adopting the integrated activities of a complete department, division or even entire organisation.

The basic purpose of management control is the achievement of enterprise goals – short range and long range – in a most effective and efficient manner.

The term management control is defined by Robert Anthony.

Strategic Control:

According to Schendel and Hofer “Strategic control focuses on the dual questions of whether:


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i. The strategy is being implemented as planned; and

ii. The results produced by the strategy are those intended.”

There is often a time gap between the stages of strategy formulation and its implementation. A strategy might be affected on account of changes in internal and external environments of organisation.

There are four types of strategic control;

1. Premise Control:

A strategy is formed on the basis of certain assumptions or premises (theories) about the environment.

Over a period of time those premises may not remain valid.

Premise control is a tool for systematic and continuous monitoring of the environment to verify the validity and accuracy of the premises on which the strategy has been built.

It primarily involve monitoring two types of factors:- i. Environmental factors & ii. Industry factors.

2. Strategic Surveillance:

Strategic surveillance is unfocussed.

It involves general monitoring of various sources of information to uncover unanticipated information having a bearing on the organizational strategy.


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It involves casual environmental browsing. Reading financial and other newspapers, business magazines, attending meetings, conferences, discussions and so on can help in strategic surveillance.

3. Special alert control:

At times, unexpected events may force organizations to reconsider their strategy.

Sudden changes in government, natural calamities, unexpected merger/acquisition by competitors, industrial disasters and other such events may trigger an immediate and intense review of strategy.

To cope up with such eventualities, the organisations form crisis management teams to handle the situation.

4. Implementation control:

Managers implement strategy by converting major plans into concrete, sequential actions that form incremental steps.

Implementation control is directed towards assessing the need for changes in the overall strategy in light of unfolding events and results.

Strategic implementation control is not a replacement to operational control.

Unlike operational control, it continuously monitors the basic direction of the strategy. The two basic forms of implementation control are:

i. Monitoring strategic thrusts (sudden push),

ii. Milestone Reviews.

i. Monitoring strategic thrusts (sudden push),

Monitoring strategic thrusts helps managers to determine whether the overall strategy is progressing as desired or whether there is need for readjustments.


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ii. Milestone Reviews.

All key activities necessary to implement strategy are segregated in terms of time, events or major resource allocation.

It normally involves a complete reassessment of the strategy.

It also assesses the need to continue or refocus the direction of an organization.

Strategy Audit;

Introduction:

A strategy audit is an examination and evaluation of areas affected by the operation of a strategic management process within an organization.

An assessment of the external environment shows where changes happen and where organization’s strategic management no longer match the demands of the marketplace.

Based on such analysis, the organization can improve business performance by periodically conducting such an audit.

The core of Strategy Audit, for any corporate entity, lies on two important questions:

How well is the current strategy working?

How well will the current strategy be working in future?

How can this be evaluated in present and future?

How urgent is there a need to change the strategy?

Need of Strategy Audit:

When the performance indicators reflect that a strategy is not working

properly or is not producing desired outcomes.

When the goals and objectives of the strategy are not being accomplished.


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When a major change takes place in the external environment of the

organization.

When the top management plans:

to fine-tune the existing strategies and introduce new strategies and

to ensure that a strategy that has worked in the past continues to be in-

tune with subtle internal and external changes that may have occurred

since the formulation of strategies.

Strategy Audit includes three basic activities:

Examining the underlying bases of a firm’s strategy,

Comparing expected results with actual results, and

Taking corrective actions to ensure that performance conforms to plans.

Richard Rumelt’s Criteria for Strategy Audit: (IMP)

Consistency,

Consonance (According to),

Feasibility, &

Advantage.

1. Consistency,

A strategy should not present inconsistent goals and policies.

Organizational conflict and interdepartmental bickering are often symptoms of managerial disorder, but these problems may also be a sign of strategic inconsistency.

2. Consonance, (According to)

Consonance refers to the need for strategists to examine sets of trends, aswell as individual trends, in auditing strategies.

A strategy must represent an adaptive response to the external environment and to the critical changes occurring within it.


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One difficulty in matching a firm’s key internal and external factors in the formulation of strategy is that most trends.

3. Feasibility,

A strategy must neither overtax available resources nor create unsolvablesub-problems.

The final broad test of strategy is its feasibility; that is, can the strategy be attempted within the physical, human, and financial resources of the enterprise.

In auditing a strategy, it is important to examine whether an organization has demonstrated in the past that it possesses the abilities, competencies, skills, and talents needed to carry out a given strategy.

4. Advantage,

A strategy must provide for the creation, maintenance of a competitiveadvantage in a selected area of activity.

Competitive advantages normally are the result of superiority in one of three areas: Resources, Skills, or Position.

Reasons why strategy evaluation is more difficult today include thefollowing trends:

A dramatic increase in the environment’s complexity.

The increasing difficulty of predicting the future with accuracy.

The increasing number of variables in the environment.

The rapid rate of obsolescence of even the best plans.

The increase in the number of both domestic and world events affecting

organizations.

The decreasing time span for which planning can be done with any degree

of certainty.


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Business Process Reengineering;

Introduction:

Definition,

BPR refers to the analysis and redesign of workflows and processes both

within and between the organisation.

The orientation of the redesign effort is radical (complete), i.e., it is a total deconstruction and rethinking of a business process in its entirety (whole) unconstrained by its existing structure and pattern.

Its objective is to obtain quantum gains in the performance of the process in terms of time, cost, output, quality, and responsiveness to customers. Through the use of IT systems.

“Business process reengineering means starting all over, starting from scratch.”

Reengineering is about business reinvention & not business enhancement, business modification or business improvement.


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What is a Business Process?

A process is a set of logically related tasks or activities oriented towardsachieving a specified outcome.

A business process involves a number of steps performed by different peoplein different departments.

For e.g. Order, is one of the common process found almost in every organization.

A set of interconnected processes comprise a business system.

Some processes turn out to be extremely critical for the success and survival of

the enterprise and they are known as ‘Core Business Processes’.

BPR focuses on such critical business processes out of the many processes that goon in any company.

A core business process creates value by the capabilities it provides to thecompetitiveness.

Reasons for BPR;

The operational excellence of a company is a major basis for itscompetitiveness.

Continuous improvement is lacking in the organisation. The company is farbehind the industry standards, and needs rapid quantum leaps inperformance.

Dramatic improvement in performance is the prerequisite for overcomingcompetition.

How to compete is more important than deciding about where to compete?

Factors have accelerated the needs to improve business process;i.e. Rationale (Ground, Logic) of BPR;

1. Technology,2. Opening up of Indian Economy, &


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3. Need for better product & service by customer.

Steps in BPR are as follows;

1. Determining objectives,2. Identify customers and determine their needs,3. Study the existing processes,4. Formulate a redesign process plan, &5. Implement the redesigned process.

1. Determining objectives,

Objectives are the desired end results of the redesign process which the management and organization attempts to realise.

They will provide the required focus, direction, and motivation for the redesign process and help in building a comprehensive foundation for the reengineering process.

2. Identify customers and determine their needs,

The process designers have to understand customers - their profile, their steps in acquiring, using and disposing a product.

The purpose is to redesign business process that clearly provides value addition to the customer.

3. Study the existing processes,

The study of existing processes will provide an important base for the process designers.

The purpose is to gain an understanding of the ‘what’, and ‘why’ of the targeted process.

4. Formulate a redesign process plan,

Formulation of redesign plan is the real crux of the reengineering efforts. Customer focused redesign concepts are identified and formulated.

In this step alternative processes are considered and the best is selected.


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5. Implement the redesigned process,

Implementation of the redesigned process and application of other knowledge gained from the previous steps is key to achieve dramatic improvements.

It is the joint responsibility of the designers and management to operationalise (implement) the new process.

Role of Information Technology in BPR;

The accelerating pace at which information technology has developed during the past few years had a very large impact in the transformation of business processes.

Impact of IT-systems are identified as: Compression of time

Overcoming restrictions of geography and/or distance

Restructuring of relationships.

IT-initiatives, thus, provide business values in three distinct areas:

Efficiency – by way of increased productivity,

Effectiveness – by way of better management,

Innovation – by way of improved products and services.

All these can bring about a radical (complete) change in the quality of products and services, thereby improving the competitiveness and customer satisfaction.

IT is a critical factor in the success of bringing this change.

Central Thrust of BPR:

BPR is a multi-dimensional approach in improving the business performance its thrust area may be identified as “the reduction of the total cycle time of a business process.”


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Total cycle may be explained in terms of;

1. Customer need.

2. Time to manufacture product or provide service.

3. Customer satisfaction.

Problems in BPR:

It disturbs established hierarchies and functional structures.

Involves resistance among the work-force.

Reengineering involves time and expenditure, at least in the short run, that

many companies are reluctant to go through the exercise.

Even there can be loss in revenue during the transition period.

Setting of targets is tricky and difficult.

Benchmarking;

Introduction:

Benchmarking is an approach of setting goals and measuring productivity based on

best industry practices.


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It gives information against which performances can be measured.

Benchmarking helps in improving performance by learning from best practices

and the processes by which they are achieved.

Benchmarking is a process of continuous improvement in search for competitive

advantage.

It measures a company’s products, services and practices against those of its

competitors or other acknowledged leaders in their field.

For e.g.

Xerox pioneered this process in late 70’s by benchmarking its manufacturing

costs against those of domestic and Japanese competitors and got dramatic

improvement in the manufacturing cost.

Firms can use benchmarking process to achieve improvement in diverse range

of management functions like:

Maintenance operations,

Assessment of total manufacturing costs,

Product development,

Product distribution,

Customer services,

Plant utilization levels,

Human resource management, etc…

Steps in Benchmarking are as follows;

1. Identifying the need for benchmarking.

2. Clearly understanding existing business processes.

3. Identify best processes.


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4. Compare own processes and performance with that of others.

5. Prepare a report and Implement the steps necessary to close the performance

gap.

6. Evaluation.

1. Identifying the need for benchmarking,

This step will define the objectives of the benchmarking exercise. It will also involve selecting the type of benchmarking.

Organizations identify realistic opportunities for improvements.

2. Clearly understanding existing business processes,

This step will involve compiling information and data on performance.

Information and data is collected by different methods such as interviews, visits and filling of questionnaires.

3. Identify best processes.

Within the selected framework, best processes are identified.

These may be within the same organization or external to it.

4. Compare own processes and performance with that of others.

Benchmarking process also involves comparison of performance of the organization with the performers of other organization.

Any gap between the two analyzed to make further improvement.

5. Prepare a report and Implement the steps necessary to close the performancegap.

A report on the Benchmarking initiatives containing recommendations is prepared.

Such a report includes the action plan(s) for implementation.


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6. Evaluation.

A business organization must evaluate the results of the benchmarking process in terms of improvements vis-à-vis (w.r.t.) objectives and other criteria set for the purpose.

It also periodically evaluate and reset the benchmarks in the light of changes in the conditions that impact its performance.


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List of author(s)

Sr. No. Name For

1 William F. Glueck Define Strategy

2 C.K. Prahalad and Gary Hamel Core Competence

3 Igor Ansoff Ansoff Growth Matrix (1957)

4 Arthur D. Little ADL Matrix (1980)

5 Bruce Henderson BCG Matrix (1970) Boston Consulting Group

6 General Electric Company G. E. Matrix (McKinsey & Company)

7 Heinz Weihrich TOWS Matrix

8 William & Lawrence Grand, Directional & Corporate Strategies

9 Michael Porter Generic (3) Strategy MP – G3 – FDC Porter’s 5 Forces, Value Chain Analysis

10 Chandler Chandler’s Strategy-Structure Relationship Changes in strategy lead to changes in organizational structure. Therefore, structure should follow strategy.

11 Kurt Lewin’s Model of Change (U, C & R)

12 H.C. Kellman 3 Methods for Reassigning. Proposed three methods for reassigning new patterns of behaviour. These are Compliance, Identification and Internalisation

13 Richard Rumelt Rumelt’s Criteria for Strategy Audit Consistency, Consonance (According to), Feasibility & Advantage (ICAI MCQ)

14 Robert Anthony Defined the term Management control

15 Schendel and Hofer Defined the term Strategic control


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© The Institute of Chartered Accountants of India

Paper 7B Strategic Management (New Course)

1. Which of these basic questions should a vision statement answer?

(a) What is our business?

(b) Who are our competitors?

(c) Where we are to go?(d) Why do we exist?

2. According to Porter, what is usually the most powerful of the five competitive forces?

(a) Rivalry among existing firms

(b) Potential development of substitute products

(c) Bargaining power of buyers and suppliers

(d) Potential entry of new competitors

3. An organization that has a low relative market share position and competes in a slow-

growth industry is referred to as a .

(a) Dog(b) Question Mark

(c) Star

(d) Cash Cows

4. What type of organizational structure do most small businesses follow?

(a) Divisional structure(b) Functional structure(c) Hour Glass structure

(d) Matrix structure

5. Which section of the SWOT TOWS Matrix involves matching internal strengths with

external opportunities?

(a) The WT cell

(b) The SW cell

(c) The SO cell(d) The ST cell

6. In evaluating strategies, which one of Rumelt’s criteria for evaluating strategies, refers to

the need for strategists to examine sets of trends?

(a) Consistency

(b) Consonance(c) Feasibility

(d) Advantage


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7. What can be defined as the art and science of formulating, implementing and evaluating

cross-functional decisions that enable an organization to achieve its objectives?

(a) Strategy formulation

(b) Strategy evaluation

(c) Strategy implementation

(d) Strategic management

8 An important activity in is taking corrective action.

(a) Strategy evaluation(b) Strategy implementation

(c) Strategy formulation

(d) Strategy leadership

9. Which of the following is not a limitation of SWOT (Strengths, Weaknesses, Opportunity,

Threats) analysis?

(a) Organizational strengths may not lead to competitive advantage

(b) SWOT gives a one-shot view of a moving target(c) SWOT's focus on the external environment is too broad and integrative(d) SWOT overemphasizes a single dimension of strategy

10. The competencies or skills that a firm employs to transform inputs into outputs are:

(a) Tangible resources(b) Intangible resources

(c) Organizational capabilities

(d) Reputational resources

11. The emphasis on product design is very high, the intensity of competition is low, and the

market growth rate is low in the stage of the industry life cycle.

(a) Maturity(b) Introduction

(c) Growth

(d) Decline

10. A narrow market focus is to a differentiation-based strategy as a(a) Broadly-defined target market is to a cost leadership strategy

(b) Growth market is to a cost-based strategy

(c) Technological innovation is to a cost-based strategy

(d) Growth market is to a differentiation-based strategy


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11. The most probable time to pursue a harvest strategy is in a situation of(a) High growth(b) Decline in the market life cycle

(c) Strong competitive advantage

(d) Mergers and acquisitions

12. Vertical integration may be beneficial when

(a) Lower transaction costs and improved coordination are vital and achievable through

vertical integration.

(b) Flexibility is reduced, providing a more stationary position in the competitive

environment.

(c) Various segregated specializations will be combined.

(d) The minimum efficient scales of two corporations are different.

13. One of the primary advantages of diversification is sharing core competencies. In

order for diversification to be most successful, it is important that

(a) The target market is the same, even if the products are very different.

(b) The products use similar distribution channels.

(c) The methods of production are the same.

(d) The similarity required for sharing core competencies must be in the valuechain, not in the product.

14. Individual investors are reliant on upon the organisation's managers to

(a) Maximize short-term returns in the form of dividends.

(b) Add value to their investments in a way that the stockholders could not accomplish

on their own.

(c) Achieve risk reduction at a lower cost than stockholders could obtain on their own.

(d) Diversify the stockholder's investments in order to reduce risk.

17. Horizontal integration is concerned with(a) Production(b) Quality

(c) Product planning

(d) All of the above

18. Change in company’s ----------------- gives rise to problems necessitating a new ------------

---- to be made.

(a) Structure, Strategy

(b) Strategy, Structure


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(c) Structure, Structure

(d) Strategy, Strategy

19. The reasons for acquisition are(a) Increased market power

(b) Increased diversification

(c) Increased speed to market

(d) All of the these

20. Competitive rivalry has the most effect on the firm's strategies than the firm's other

strategies.

(a) Business level(b) Corporate level

(c) Functional level

(d) All of these

21. A firm successfully implementing a differentiation strategy would expect:

(a) Customers to be sensitive to price increases.

(b) To charge premium prices.(c) Customers to perceive the product as standard.

(d) To automatically have high levels of power over suppliers.

22. Conglomerate diversification is another name for which of the following?

(a) Related diversification

(b) Unrelated diversification(c) Portfolio diversification

(d) Acquisition diversification

23. When to two organisations combine to increase their strength and financial gains

along with breaking the trade barriers is called-----------

(a) Hostile takeover

(b) Liquidation(c) Merger(d) Acquisition

24. Internal are activities in an organization that are performed especially well.

(a) Opportunities

(b) Competencies(c) Strengths(d) Management


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25. Financial objectives involve all of the following except:

(a) Growth in revenues

(b) Larger market share(c) Higher dividends

(d) Greater return on investment


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