■ TABLE OF CONTENTS

1. Environmental Analysis & ETOP Pg 3

2. Porter's Five Forces Model Pg 5

3. Organisational Analysis – OCP & SAP Pg 8

4. Corporate Level Strategies Pg 10

5. Business Level Strategies Pg 12

6. Strategic Analysis & Choice of Strategy Pg 13

7. Corporate Portfolio Analysis – BCG Matrix Pg 15

8. GE / McKinsey 9-Cell Matrix Pg 17

9. Quick Revision Summary Pg 19

 1. ■ Environmental Analysis & ETOP

Environmental Analysis means studying everything that is happening OUTSIDE the company
that can affect its business. Before making any strategy, a company must understand its
environment — just like a farmer checks the weather before planting crops!

Why is Environmental Analysis Important?

• Identifies Opportunities: What new chances exist in the market that the company can grab?
• Identifies Threats: What dangers or challenges exist outside that could harm the company?
• Better Decision Making: Understanding the environment helps managers make smarter
strategic choices.
• Reduces Uncertainty: Analysing the environment reduces the 'surprises' that can shock a
business.

Types of Business Environment:

Type Description

Macro / External Forces OUTSIDE company control — Political, Economic, Social,

Environment Tech, Legal, Environmental (PESTLE)

Micro / Task Forces directly interacting with the company — Competitors,

Environment Suppliers, Customers, Distributors

Forces INSIDE the company — Resources, Culture, Capabilities,

Internal Environment
Employees

What is ETOP?
■ Definition: ETOP = Environmental Threat and Opportunity Profile. ETOP is a tool that helps
a company SUMMARISE its environmental analysis. It shows which environmental factors are
Opportunities (+) and which are Threats (–) for the company, and how IMPORTANT each factor is.

How to Prepare an ETOP?

• Step 1: Identify all important environmental sectors (Economic, Social, Political, Tech, Legal,
Competitive, etc.)
• Step 2: For each sector, study: Is it an opportunity or a threat for our company?
• Step 3: Rate the impact — High (+3 or -3), Medium (+2 or -2), Low (+1 or -1), or Neutral (0)
• Step 4: Prepare a summary table (the ETOP) and analyse the findings
• Step 5: Use the ETOP insights to make better strategic decisions
ETOP Visual Diagram (Sample):
ETOP – Environmental Threat and Opportunity Profile (Sample)

+3

+2

+1

0 -2 0

Economic Technological Political Social Competitive Legal

Bar above baseline (+) = Opportunity | Bar below baseline (–) = Threat | Score scale: –3 to +3

ETOP Table – Example for Maruti Suzuki:

Environmental Sector Impact Score Reason / Observation

Economic Environment High (+3) Rising middle class; more people buying cars

Technological Environment High (+3) EV technology; connected car features

Political Environment Medium (+2) Government's Make in India policy helps

Social Environment Low (+1) Increasing preference for personal transport

Tata Nexon EV, Hyundai challenging market

Competitive Environment Threat (–2)
share

Emission norms need investment but are

Legal / Regulatory Neutral (0)
manageable

Natural Environment Medium (+2) Push for green vehicles opens new segment

■ Real Example: After doing ETOP, Maruti Suzuki found: Technology and Economic factors are
strong Opportunities. So it invested heavily in SUVs (Brezza, Grand Vitara) and started developing
EVs (e-Vitara) to capture the growing market. Competition was a threat, so it also improved quality
and after-sales service.
■ Key Point: ETOP converts complex environmental information into a simple, visual, easy-to-use
summary. It is a compass that guides strategic decision-making.
 2. ■■ Porter's Five Forces Model of Competition

Michael Porter (Harvard Professor) introduced the Five Forces Model in 1979. This model helps a
company understand HOW COMPETITIVE and PROFITABLE an industry is. It identifies 5 forces
that shape competition in any industry.

■ Simple Idea: Before entering any business, you must ask: How tough is the competition?
Porter's 5 Forces gives you a complete picture of competitive intensity.

Porter's Five Forces Diagram:

Threat of New
Entrants

Bargaining Power Industry Rivalry Bargaining Power

of Suppliers (Competitors) of Buyers

Threat of
Substitutes

The central force (Industry Rivalry) is shaped by all 4 surrounding forces.

■ FORCE 1: Threat of New Entrants

What it means: How EASY is it for NEW companies to enter this industry and start competing with
you?
Why it matters: If it is easy to enter, more competitors will come → competition increases → profits
fall.

High Threat (Bad for existing players) when:

■ Low investment needed to start
■ No special technology required
 ■ Easy to get customers
■ No strong brand needed

Low Threat (Good for existing players) when:

■ Huge capital investment needed
■ Strong brand loyalty exists
■ Special technology or patents required
■ Government licences required

■ Real Example: The telecom industry has LOW threat of new entrants because you need:
billions of rupees, government spectrum licences, and nation-wide infrastructure. That is why only
Jio, Airtel, and Vodafone-Idea exist in India — it is too hard for new players to enter.

■ FORCE 2: Bargaining Power of Suppliers

What it means: How much POWER do the suppliers (who provide raw materials) have over your
company?
Why it matters: If suppliers have high power, they can charge HIGH prices → your costs rise →
profits fall.

High Supplier Power (Bad for company) when:

■ Very few suppliers in the market
■ Supplier's product is unique or critical
■ Switching to another supplier is costly
■ Supplier can also sell directly to customers

Low Supplier Power (Good for company) when:

■ Many suppliers available
■ Company can easily switch suppliers
■ Company itself is a large buyer
■ Raw materials are widely available

■ Real Example: Apple's biggest challenge: TSMC (Taiwan) is the ONLY company that makes
Apple's chips. TSMC has VERY HIGH bargaining power over Apple. If TSMC raises prices or
faces problems, Apple cannot easily switch. This is why Apple is now trying to develop its own
chips.

■ FORCE 3: Bargaining Power of Buyers

What it means: How much POWER do the CUSTOMERS have to demand lower prices or better
quality?
Why it matters: If buyers have high power, they can force prices down → company earns less profit.

High Buyer Power (Bad for company) when:

■ Few large customers who buy in bulk
■ Products are standard (not unique)
■ Customers can easily switch to competitors
■ Buyers know all market prices
Low Buyer Power (Good for company) when:
■ Many small buyers — no single buyer dominates
■ Product is unique or specialised
■ Buyers are loyal to the brand
■ Switching costs are high for buyers

■ Real Example: Walmart has VERY HIGH buying power over its suppliers. Because Walmart
buys in such massive quantities, it forces suppliers to lower prices. In India, BigBazaar and DMart
similarly squeeze suppliers for lower costs — giving them a bargaining advantage.

■ FORCE 4: Threat of Substitutes

What it means: How easy is it for customers to switch to a DIFFERENT product that serves the
same need?
Why it matters: If substitutes are easily available, customers will switch when your price rises → you
lose customers.

High Substitute Threat (Bad for company) when:

■ Many alternatives exist at similar price
■ Substitutes offer equal or better quality
■ Customers are not loyal to your product

Low Substitute Threat (Good for company) when:

■ No direct substitutes available
■ Your product has unique features substitutes can't match
■ High switching costs for customers

■ Real Example: Newspapers face a HIGH threat from substitutes — news apps (Times of India
app, Inshorts, Google News) provide the same information FREE on mobile. This is why
newspaper circulation has been falling every year as readers switch to digital alternatives.

■■ FORCE 5: Rivalry Among Existing Competitors

What it means: How INTENSE is the competition AMONG existing players in the industry?
Why it matters: High rivalry means constant price wars, heavy advertising, and frequent new product
launches → all eating into profits.

High Rivalry (Bad for all players) when:

■ Many competitors of similar size
■ Industry growth is slow
■ Products are similar (hard to differentiate)
■ High fixed costs force companies to sell more

Low Rivalry (Good for all players) when:

■ Few competitors in the market
■ Industry is growing fast (room for everyone)
■ Products are clearly differentiated
■ Players have focused on different customer segments
■ Real Example: The Indian paint industry (Asian Paints, Berger, Nerolac, Kansai) has HIGH
rivalry. All four companies offer similar products, compete on the same price points, and spend
crores on advertising. Asian Paints maintains its lead through superior distribution — present in
65,000+ towns vs Berger's 30,000+.

Overall Summary – Porter's Five Forces:

High = Bad
Low =
Force For Why?
Good
Company

Easy entry = more competitors =

Threat of New Entrants HIGH LOW
low profit

Supplier Power HIGH LOW Powerful suppliers raise your costs

Buyer Power HIGH LOW Powerful buyers push prices down

Threat of Substitutes HIGH LOW Easy alternatives = customers leave

Industry Rivalry HIGH LOW Intense competition reduces profits

■ Key Point: A company should ENTER an industry where all 5 forces are LOW (less competition,
more profit). Example: Microsoft's enterprise software business (Azure) has LOW forces — high
switching costs, few substitutes, weak suppliers, and massive entry barriers.
 3. ■ Organisational Analysis – OCP & SAP

After analysing the EXTERNAL environment, a company must analyse its own INTERNAL
environment — its own strengths and weaknesses. This is called Organisational Appraisal. Two
key tools are: OCP (Organisational Capability Profile) and SAP (Strategic Advantage Profile).

3A. ■ OCP – Organisational Capability Profile

■ Definition: OCP = Organisational Capability Profile is a tool that helps a company assess its
internal capabilities across different functional areas. It rates each area on a scale from 'Superior'
to 'Inferior' compared to competitors.

■ Simple Analogy: Think of OCP like a student's report card. It shows how well you perform in
each subject (Finance, Marketing, HR, Operations, etc.) compared to the class average
(competitors).

Areas Covered in OCP:

Financial Capability
How strong is the company financially?
■ Ability to raise capital (loans, shares)
■ Cash flow management
■ Profitability and cost control
■ Financial ratios (ROI, debt-to-equity)

■ Real Example: Reliance Industries has excellent financial capability — it can raise billions in
capital and has high credit ratings, allowing it to fund massive projects like Jio.

Marketing Capability
How strong is the company in marketing and selling?
■ Brand strength and recognition
■ Distribution network
■ Sales force effectiveness
■ Customer relationship management
■ Advertising and promotion ability

■ Real Example: Hindustan Unilever (HUL) has SUPERIOR marketing capability — its products
reach every village in India through 8 million retail outlets. That distribution strength is a key
organisational capability.

Operations / Production Capability

How efficient is the company in producing goods or delivering services?
 ■ Production technology and equipment
■ Quality control systems
■ Supply chain management
■ Capacity and scalability

■ Real Example: Toyota's 'Toyota Production System' (TPS) is a world-famous operations

capability. Their ability to produce cars with near-zero defects is a major competitive strength.

Human Resource Capability

How strong is the company's workforce?
■ Quality and skills of employees
■ Training and development programmes
■ Employee motivation and retention
■ Leadership pipeline

■ Real Example: Infosys and TCS maintain strong HR capability by running large training
campuses (Mysore campus for Infosys, TCS iON for TCS) that continuously upskill thousands of
employees.

Research & Development (R&D;) Capability

How good is the company at innovation and creating new products?
■ Number of patents held
■ R&D; budget as % of revenue
■ Speed of new product development
■ Collaboration with research institutions

■ Real Example: DRDO (Defence Research and Development Organisation) and private
companies like Bharat Forge invest heavily in R&D; to develop defence technology — a critical
national capability.

General Management Capability

How good is the company's top leadership and management?
■ Quality of top management
■ Strategic vision of leadership
■ Corporate governance practices
■ Decision-making speed

■ Real Example: Tata Group's general management capability is globally respected. Leaders like
Ratan Tata and N. Chandrasekaran built a culture of ethics, long-term thinking, and global
expansion.

OCP Rating Scale Example (for a company like Maruti Suzuki):

Capability Area Rating Reason
Financial Capability Superior (+2) Strong cash flows, low debt

Marketing Capability Superior (+2) Largest dealer network in India

Operations Capability Above Avg (+1) Efficient Manesar plant

HR Capability Average (0) Good but attrition is medium

R&D; Capability Below Avg (–1) Relies heavily on Suzuki Japan for tech

IT / Digital Capability Below Avg (–1) Slower than Tata Motors in digitalisation

3B. ■ SAP – Strategic Advantage Profile

■ Definition: SAP = Strategic Advantage Profile is similar to OCP but focuses specifically on
COMPETITIVE ADVANTAGES — areas where the company is significantly BETTER or WORSE
than its direct competitors. SAP helps identify where the company's real strengths lie that can be
leveraged in strategy.

Difference Between OCP and SAP:

Tool Focus Purpose

Looks at ALL capability areas (like a full report

OCP Broad internal review
card)

Focuses only on COMPETITIVE strengths &

SAP Competitor-focused
weaknesses (how you compare to rivals)

How SAP is Prepared:

• Step 1: Identify main functional areas (Finance, Marketing, HR, Operations, R&D;)
• Step 2: Compare your company to your TOP 2-3 competitors in each area
• Step 3: Rate each area: Superior / Above Average / Average / Below Average / Inferior
• Step 4: Identify your STRATEGIC ADVANTAGES (areas of clear strength)
• Step 5: Build strategies that EXPLOIT these advantages and FIX the weaknesses

■ Real Example: SAP Example — Asian Paints vs Berger Paints: Asian Paints SUPERIOR areas:
Distribution (65,000 towns), Brand, Supply Chain Berger's SUPERIOR areas: Premium product
range, international presence Asian Paints builds its strategy around its superior distribution SAP
— going deeper into rural India where Berger has weak presence.
■ Key Point: OCP + SAP together give a COMPLETE picture of internal strength. Combined with
ETOP (external analysis), they form the basis for SWOT analysis and ultimate strategy
formulation.
 4. ■■ Corporate Level Strategies

Corporate Level Strategies are made by the TOP MANAGEMENT (CEO, Board of Directors) and
decide the OVERALL direction of the entire company — which businesses to be in, how to allocate
resources across businesses, and how to grow or restructure the company.

■ GROWTH STRATEGIES
What it means: The company wants to EXPAND — increase revenues, market share, or enter new
businesses.

A. Concentration / Intensive Growth

Focus all energy on growing your CURRENT business in current markets.
• Market Penetration: Sell MORE of existing products to existing customers. Example: Maggi
offering combo packs, discounts to sell more to existing Maggi buyers.
• Market Development: Sell existing products to NEW markets. Example: Patanjali expanding
from Uttarakhand to all of India and then globally.
• Product Development: Create NEW products for existing customers. Example: Amul
launching ice cream, chocolates, cheese for its existing dairy customers.

B. Integration
Grow by taking control of your supply chain.
• Vertical Integration (Forward): Take control of the next step (distribution/retail). Example:
Reliance Retail — Reliance now sells its own products in its own stores.
• Vertical Integration (Backward): Take control of the previous step (raw material). Example:
Tata Steel mining its own iron ore instead of buying from others.
• Horizontal Integration: Acquire or merge with a COMPETITOR. Example: Zomato acquiring
Blinkit (formerly Grofers) to enter quick commerce.

C. Diversification
Enter completely NEW industries or markets.
• Related Diversification: Enter a new business RELATED to existing one. Example: ITC
(tobacco) diversifying into hotels, FMCG, stationery — using the same distribution network.
• Unrelated Diversification (Conglomerate): Enter a business with NO connection to current
one. Example: Tata Group in steel + software (TCS) + cars + hotels + telecom — unrelated
diversification.

■■ STABILITY STRATEGY
What it means: The company decides to MAINTAIN its current position — no major changes, focus
on efficiency.

When is it used?
When the environment is stable; company is already profitable; rapid growth is risky.
• No-Change Strategy: Keep doing what you're doing. Example: A profitable local restaurant
that does not want to expand — just maintains quality and loyal customers.
 • Profit Strategy: Maintain short-term profits by cutting costs. Used when facing temporary
challenges.
• Pause / Proceed-with-Caution: Slow down growth to consolidate and strengthen before the
next big move.

■ RETRENCHMENT STRATEGIES
What it means: The company decides to SHRINK or EXIT — when it is in financial difficulty or a
business is failing.

Types of Retrenchment:
• Turnaround Strategy: Cut costs drastically and restructure to bring a failing business back to
profitability. Example: Jet Airways tried (but failed) to turnaround before shutting down.
• Divestiture: SELL a part of the business. Example: Tata Motors sold Jaguar Land Rover to
Tata Motors but later retained. Alternatively, HUL sold its Slim-Fast brand.
• Liquidation: SHUT DOWN the entire business and sell all assets. Last resort. Example:
Kingfisher Airlines was liquidated after years of losses.
• Captive Company: Become a supplier to one large customer to survive. Common in small
manufacturers.

■ COMBINATION STRATEGY
What it means: Large companies use MULTIPLE strategies at the SAME TIME for different business
units.

Example:
• Tata Group simultaneously::
• → Growth Strategy:: TCS expanding globally in IT services.
• → Stability Strategy:: Tata Steel maintaining steady operations in India.
• → Retrenchment:: Tata sold its soap brand Hamam to Unilever to focus on core businesses.

Ansoff's Product-Market Growth Matrix:

Existing Market Ansoff's Growth Matrix

MARKET PRODUCT
PENETRATION DEVELOPMENT
(Existing Prod (New Product
Existing Mkt) Existing Mkt)
New Market

MARKET DIVERSIFICATION
DEVELOPMENT
(Existing Prod (New Product
New Mkt) New Mkt)

Existing Product New Product

Ansoff Matrix shows 4 growth options based on Products (new/existing) and Markets (new/existing).
 5. ■ Business Level Strategies (Porter's Generic
Strategies)

Business Level Strategies deal with HOW a specific business unit competes in its market.
Michael Porter identified THREE Generic Strategies that any business can use to gain a
competitive advantage over rivals.

■ STRATEGY 1: Cost Leadership

What it means: Be the CHEAPEST producer in the industry. Offer products at the lowest price or
earn higher profit at industry-average prices.

How to achieve it:

• Achieve economies of scale (produce in large quantities → cost per unit falls)
• Tight cost control in every department
• Efficient operations and supply chain
• Use technology to reduce human labour

■ Real Example: Big Bazaar / DMart in India. Walmart globally. They negotiate hard with
suppliers, keep overheads very low (no fancy stores), and pass savings to customers. DMart's
'everyday low price' strategy has made it India's most profitable retailer.

■■ Risk: Risk: A competitor finds an even cheaper way to produce. Or customers begin valuing
quality over price.

■ STRATEGY 2: Differentiation
What it means: Offer a UNIQUE product or service that customers are willing to pay a premium
price for.

How to achieve it:

• Superior product quality or features
• Strong brand image and reputation
• Exceptional customer service
• Cutting-edge technology or design
• Unique experience that competitors cannot copy easily

■ Real Example: Apple — Every Apple product is unique in design, ecosystem, and experience.
Customers pay 2-3x the price of Android phones because they value the Apple brand. In India,
Royal Enfield motorcycles are priced much higher than similar bikes — but customers pay for the
heritage, sound, and community.

■■ Risk: Risk: The premium price gap becomes too large and budget customers switch to
cheaper options.
 ■ STRATEGY 3: Focus Strategy
What it means: Serve a NARROW, SPECIFIC TARGET SEGMENT extremely well — either through
lowest cost OR differentiation within that niche.

How to achieve it:

• Choose a specific geographic area, customer group, or product type
• Understand the niche customer's needs better than anyone else
• Tailor products, pricing, and service specifically for that niche
• Two types: Cost Focus (cheapest in niche) and Differentiation Focus (unique in niche)

■ Real Example: Tanishq (Tata) — Focus strategy on premium gold jewellery for Indian women. It
does NOT try to sell everything — just high-quality, trustworthy gold jewellery with a warranty and
hallmark. In contrast, Malabar Gold uses broader differentiation. Internationally: Ferrari focuses
ONLY on ultra-luxury sports cars (niche differentiation).

■■ Risk: Risk: The niche market might shrink. Or larger competitors might enter your niche with
more resources.

Porter's Generic Strategies – Summary Table:

Strategy Market Scope Competitive Advantage Example

DMart, Walmart,
Cost Leadership Broad Lowest cost producer
SpiceJet

Apple, Royal Enfield,

Differentiation Broad Unique product / brand
Starbucks

Budget airlines for

Cost Focus Narrow Cheapest in niche
business travellers

Ferrari, Tanishq, Rolls

Diff. Focus Narrow Unique in niche
Royce
 6. ■ Strategic Analysis and Choice of Strategy

After analysing the environment (ETOP) and the organisation (OCP/SAP), and identifying possible
strategies, a company must CHOOSE THE BEST STRATEGY. This is called Strategic Choice. It
is about selecting the strategy that best matches the company's capabilities with market
opportunities.

The Strategic Analysis & Choice Process:

Generate Strategic Alternatives
Based on ETOP + OCP/SAP + SWOT, list ALL possible strategies the company
■ Step 1 could follow.
Example: Maruti Suzuki alternatives: (a) Focus on EVs, (b) Expand to premium
segment, (c) Enter new markets like Africa, (d) Partner with Toyota for hybrid tech.

Evaluate Each Alternative

Test each strategy against key criteria: Does it fit our strengths? Can we afford it? Is
it acceptable to stakeholders? Is it feasible?
■ Step 2 Example: Maruti evaluates 'Enter Africa' strategy: Market is growing (+), BUT
logistics are complex (-), competition from Chinese brands (-), capital needed is high
(–). Score: Moderate.

Apply Selection Criteria

Use formal frameworks to evaluate each option: Suitability (Does it fit?),
■ Step 3 Acceptability (Will stakeholders accept?), Feasibility (Can we do it with available
resources?)

Select the Best Strategy

Choose the strategy that scores highest on all criteria and aligns best with the
company's strategic intent and goals.
■ Step 4 Example: Maruti chose to partner with Toyota for EVs — leveraging Toyota's
expertise (Feasible), building on existing relationship (Acceptable), fits future market
trends (Suitable).

Implement and Review

■ Step 5 Execute the chosen strategy and continuously monitor results. If results fall short,
revisit earlier steps.

Key Criteria for Evaluating and Choosing Strategy:

Suitability: Does this strategy fit the company's current situation?
 • Does it address the opportunities and threats from ETOP? Does it use the company's
strengths (OCP/SAP)?

Acceptability: Will key stakeholders accept this strategy?

• Will shareholders, employees, and customers approve? Does it meet financial return
expectations? What are the risks?

Feasibility: Can the company actually DO this strategy?

• Do we have enough money, people, technology, and time? What resources are needed?

SWOT Matrix for Strategic Choice:

STRENGTHS (S) Internal positive WEAKNESSES (W) Internal
factors negative factors

OPPORTUNITIES SO Strategy (Maxi-Maxi) Use

WO Strategy (Mini-Maxi) Overcome
(O) External positive Strengths to grab Opportunities Best
Weaknesses using Opportunities
factors Strategy!

THREATS (T) WT Strategy (Mini-Mini) Minimise

ST Strategy (Maxi-Mini) Use Strengths
External negative Weaknesses AND Threats Worst
to minimise Threats
factors position!

■ Real Example: Jio's SO Strategy (using Strength to grab Opportunity): Strength: Huge Reliance
financial muscle + existing infrastructure. Opportunity: India's massive underserved telecom
market in 2016. SO Strategy: Launch free unlimited data to capture 400 million users in record
time!
 7. ■ Corporate Portfolio Analysis – BCG Matrix

Large companies have MULTIPLE businesses (called SBUs — Strategic Business Units). How
should a company decide which businesses to invest in, which to milk for cash, and which to shut
down? The BCG Matrix (Boston Consulting Group, 1970) provides the answer.

■ Simple Idea: Think of a company like an investor with many stocks. Some stocks are growing
fast, some are steady cash earners, some are declining. The BCG Matrix helps decide: which
stocks (businesses) to buy more of, hold, or sell.

The BCG Matrix – Two Dimensions:

• X-Axis — Relative Market Share: How big is the company's share compared to the
LARGEST competitor? (High = left side, Low = right side)
• Y-Axis — Market Growth Rate: Is the market growing fast or slow? (High = top, Low =
bottom)

BCG Matrix Chart:

BCG Growth-Share Matrix

? ★
High QUESTION MARK STAR
(Problem Child)
Market Growth Rate → High

■ ■
Low DOG CASH COW

High Low

Relative Market Share → High

Each circle (SBU) is placed in a quadrant based on its Market Share and Industry Growth Rate.
 ■ STAR | High Growth + High Market Share
Stars are businesses that have a HIGH market share in a FAST-GROWING market. They generate
high revenue but also need heavy investment to maintain leadership.

Strategic Actions:
• Invest heavily to maintain market position
• Stars become Cash Cows when market slows down
• Considered the BEST position in BCG Matrix

■ Real Example: Jio (Reliance) in 2017-2020 was a STAR — rapidly growing telecom market,
huge market share. Netflix globally is a Star — fast-growing streaming market, leader in
subscribers.

■ QUESTION MARK | High Growth + Low Market Share

Question Marks (also called Problem Children) have LOW market share in a FAST-GROWING
market. They need massive investment but may or may not succeed. The company must DECIDE:
invest more or exit?

Strategic Actions:
• These need the toughest decisions — invest to become Star, or exit?
• High cash consumption, low cash generation
• Future is uncertain — hence the name 'Question Mark'

■ Real Example: When Ola launched Ola Electric, it was a Question Mark — the EV market was
growing fast, but Ola had a small share. It required massive investment with uncertain outcome.
Now it is moving toward being a Star as EV adoption rises.

■ CASH COW | Low Growth + High Market Share

Cash Cows have HIGH market share in a SLOW-GROWING (mature) market. They generate more
cash than they consume. Companies 'milk' Cash Cows to fund Stars and Question Marks.

Strategic Actions:
• Minimal investment needed — market is mature
• Generates surplus cash that is used to fund other SBUs
• Defend market position, do not invest in growth

■ Real Example: HUL's (Hindustan Unilever) Lifebuoy soap is a Cash Cow — it dominates the
market but soap industry growth is slow. HUL uses Lifebuoy profits to fund new innovations.
Maruti's Alto is a Cash Cow — consistently high market share in entry-level segment.

■ DOG | Low Growth + Low Market Share

Dogs have LOW market share in a SLOW-GROWING market. They neither generate much cash nor
have growth potential. Usually candidates for divestiture or closure.
Strategic Actions:
• Consider selling or closing this business
• If kept, manage costs strictly — no major investment
• Sometimes kept for strategic reasons (brand loyalty, niche customers)

■ Real Example: Nokia's feature phones business became a DOG when smartphones took over
— slow market growth, declining market share. Nokia eventually sold its phone business to
Microsoft. In India, Ambassador cars (Hindustan Motors) were classic Dogs.

BCG Matrix – Strategic Prescriptions:

Cell Strategy Reason

Star Invest heavily Maintain leadership; becomes Cash Cow later

Question Mark Invest OR Exit Invest in promising ones; exit weak ones

Cash Cow Milk / Defend Protect market share; extract cash for other SBUs

Dog Divest / Harvest Sell or close; avoid throwing good money after bad

■ Key Point: The ideal BCG portfolio: Many Cash Cows (funding), some Stars (growth), a few
selective Question Marks (future Stars), and as few Dogs as possible.
 8. ■ GE / McKinsey 9-Cell Matrix

The GE-McKinsey Matrix was developed by General Electric (GE) with the help of consulting
firm McKinsey in the 1970s. It is an IMPROVED version of the BCG Matrix — it uses MORE
factors (not just 2) to evaluate business units, giving a more realistic picture.

BCG vs GE Matrix – Key Differences:

Factor BCG Matrix GE / McKinsey Matrix

Number of Cells 4 cells (2x2) 9 cells (3x3)

Business Strength (multiple

X-Axis Relative Market Share (simple)
factors)

Industry Attractiveness (multiple

Y-Axis Market Growth Rate (simple)
factors)

Measurement Quantitative only Quantitative + Qualitative

Accuracy Less accurate More accurate and realistic

Complexity Simple More complex but more insightful

The Two Dimensions of GE Matrix:

Dimension 1: Industry Attractiveness (Y-Axis) — How attractive is the industry?
• Market size and growth rate
• Industry profitability
• Competitive intensity (Porter's 5 Forces)
• Technological requirements
• Environmental and regulatory factors
• Each factor is given a weight and score → Total = Industry Attractiveness Score
(High/Medium/Low)

Dimension 2: Business Strength / Competitive Position (X-Axis) — How strong is

the SBU?
• Market share and growth
• Brand strength and quality
• Production capacity and efficiency
• Profitability of the SBU
• R&D; capability and technology
• Each factor is weighted and scored → Total = Business Strength Score (Strong/Medium/Weak)
GE Matrix – 9 Cell Chart:
GE / McKinsey 9-Cell Matrix
Strong Medium Weak

High INVEST / INVEST / SELECTIVE

GROW GROW GROWTH
Industry Attractiveness (High → Low)

Medium INVEST / SELECTIVE HARVEST /

GROW GROWTH DIVEST

Low SELECTIVE HARVEST / HARVEST /

GROWTH DIVEST DIVEST

Business Strength / Competitive Position (Strong → Weak)

Green = Invest/Grow | Yellow = Selective Growth | Red = Harvest/Divest

The Three Strategic Zones:

■ GREEN ZONE – INVEST / GROW
Cells: Top-left 3 cells (High Attractiveness + Strong/Medium Business Strength)
Strategy: These businesses are worth INVESTING in. The industry is attractive AND the company is
strong or can become strong. Prioritise resources here.

■ Real Example: Jio Platforms in 5G — High industry attractiveness (5G growing fast) + Strong
business position (largest subscriber base in India) → INVEST / GROW.

■ YELLOW ZONE – SELECTIVE GROWTH

Cells: Middle diagonal cells (Medium Attractiveness OR Medium Business Strength)
Strategy: These businesses are AVERAGE on both dimensions. Be selective — invest only in areas
that can improve. Do not invest blindly, but do not abandon either.
 ■ Real Example: A regional airline operating in India — medium industry attractiveness (growing
but volatile), medium competitive position. Selectively improve on-time performance and routes.

■ RED ZONE – HARVEST / DIVEST

Cells: Bottom-right 3 cells (Low Attractiveness + Weak/Medium Business Strength)
Strategy: These businesses are in trouble. The industry is not attractive AND the company's position
is weak. HARVEST profits (stop investing, extract cash) or EXIT (sell/close).

■ Real Example: Nokia's feature phones (2010-2015): Low industry attractiveness (smartphones
killing feature phones) + Weakening position. Classic Red Zone — Nokia eventually sold the
division.

Example — Tata Group Portfolio in GE Matrix:

Industry Attra Business
Tata SBU GE Zone Reason
ctiveness Strength

Global IT
GREEN –
TCS (IT Services) High Strong boom +
Invest/Grow
Market leader

EV boom +
Tata Motors EVs High Medium GREEN – Invest Nexon #1 in
India

YELLOW – Steel market

Tata Steel Medium Strong
Selective fluctuates

Lost to Jio;
Tata Teleservices Low Weak RED – Divest
sold to Airtel

YELLOW – Luxury tourism

Taj Hotels Medium Strong
Selective growing

■ Key Point: GE Matrix advantage: It uses MULTIPLE factors, making it more realistic than BCG.
However, the weighting and scoring involve subjective judgement — so managers must use good
data and business knowledge to score accurately.
 9. ■ Quick Revision Summary – Unit 3

Environmental Studying external environment (Political, Economic, Social, Tech, Legal)

Analysis to find Opportunities & Threats.

Environmental Threat & Opportunity Profile — rates each environmental

ETOP sector from –3 (threat) to +3 (opportunity). Visual summary of external
environment.

5 forces shaping industry competition: (1) Threat of New Entrants, (2)

Porter's Five Forces Supplier Power, (3) Buyer Power, (4) Threat of Substitutes, (5) Industry
Rivalry.

Organisational Capability Profile — rates internal capabilities (Finance,

OCP
Marketing, HR, Ops, R&D;) to find strengths & weaknesses.

Strategic Advantage Profile — focuses on WHERE you are better or

SAP
worse than direct competitors. Identifies competitive edges.

Corporate Level Growth (Concentration, Integration, Diversification), Stability,

Strategies Retrenchment (Turnaround, Divestiture, Liquidation), Combination.

4 growth options: Market Penetration (same product, same market),

Ansoff Matrix Product Development, Market Development, Diversification (new
product, new market).

Business Level Porter's 3 Generic: Cost Leadership (cheapest), Differentiation (unique),

Strategies Focus (serve a niche). Each creates competitive advantage.

Generate alternatives → Evaluate (Suitability, Acceptability, Feasibility)

Strategic Choice
→ Choose best strategy using SWOT Matrix.

4 cells: Star (high share, high growth), Cash Cow (high share, low
BCG Matrix growth), Question Mark (low share, high growth), Dog (low share, low
growth).

9 cells using Industry Attractiveness (Y) + Business Strength (X).

GE Matrix Zones: Green (Invest), Yellow (Selective), Red (Harvest/Divest). More
detailed than BCG.
■ Exam Tips (Unit 3): 1) For ETOP — always draw the table with sector, impact score, and
reason columns. 2) For Porter's 5 Forces — give ONE example per force. 3) BCG Matrix — draw
the 2x2 grid and label all 4 cells with examples. 4) GE Matrix — explain both axes with factors,
then describe the 3 zones. 5) For Strategic Choice — always mention Suitability, Acceptability,
Feasibility.

Unit 3 – Strategy Formulation | Detailed Notes with Visual Charts | Strategic Management