Uni

t1

STRATEGI
CMANAGEMENT

Concept
,Meani
ng,
Def
ini
ti
on:

Strat
egyist hedet
ermi
nat ionoft helong-
term goal
sandobject
ivesofanent er
pri
seand
theadopt ionofthecour sesofact ionandt heal l
ocati
onofresourcesnecessaryf
or
carry
ingoutt [Link] rat
egyismanagement ’sgameplanf orstr
engtheni
ngthe
organizat
ion’
sposi
ti
on,pleasingcustomers,andachievi
ngper
for
mancet ar
gets.

Ty
pesofst
rat
egy

St
rat
egycanbef ormulatedont
hreedif
fer
entl
evel
s:
 corporat
el ev
el
 businessunitlevel
 functi
onalordepar t
ment
allev
el.

Cor
por
ateLevelSt
rategy
Cor
por
atelev
elstr
ategyfundament
all
yisconcer
nedwi
tht
hesel
ect
ionofbusi
nessesi
n
whicht hecompanyshoul dcompet eandwi t
ht hedev elopmentandcoor dinat ionoft hat
portf
oli
oofbusi nesses.
Corporatel ev elstrategyi sconcer nedwi th:
 Re ach-def iningt hei ssuest hatar ecor porater esponsi bili
ti
es;t hesemi ghti nclude
i
dent i
fy i
ngt heov erallgoal soft hecor por ati
on, t
het y pesofbusi nessesi nwhi cht he
cor porat i
onshoul dbei nv olved,andt hewayi nwhi chbusi nesseswi l
lbei nt
egr ated
andmanaged.
 Co mpet it
ive Cont act-def i
ni ng wher ei nt he cor porat i
on compet ition i st o be
l
ocal [Link] hecaseofi nsur ance:I nt hemi d-1990' s,Aet naasacor por ationwas
clear l
yi dent i
fiedwi thi t
scommer cialandpr oper tycasual tyinsur ancepr oduct [Link]
congl omer at eText ronwasnot .ForText ron,compet it
ioni nt hei nsurancemar ket s
tookpl acespeci ficall
yatt hebusi nessuni tl
ev el,throughi t
ssubsi di
ary, PaulRev ere.
(Text rondi vest edi t
selfofThePaul Rev ereCor por ationi n1997. )
 Ma nagi ngAct ivi
ti
esandBusi nessI nterrelati
onshi ps  -
 Cor por at
est rategyseekst o
dev elopsy ner giesbyshar ingandcoor dinatingst affandot herr esour cesacr oss
busi nessuni ts,inv esting f inanci alr esour cesacr ossbusi nessuni ts,and usi ng
busi nessuni tst o compl ementot hercor por atebusi nessact ivit
ies.I gorAnsof f
i
nt roducedt heconceptofsy nergyt ocor poratest rategy .
 Ma nagementPr actices -Cor por ati
ons deci de how busi ness uni ts ar et o be
gov erned:t hroughdi rectcor por atei ntervent i
on( cent r
alizati
on)ort hroughmor eor
l
ess aut onomous gov er nment( decent rali
zat i
on)t hatr eli
es on per suasi on and
rewar ds.
Corporationsar er esponsi blef orcr eatingv al
uet hrought hei rbusi [Link]
managi ngt hei rpor tfoli
oofbusi nesses,ensur ingt hatt hebusi nessesar esuccessf ulov er
thelong- t
er m,dev elopingbusi nessuni ts,andsomet imesensur ingt hateachbusi nessi s
compat iblewi t
hot her sint hepor tfolio.

BusinessUni tLev elStr

at egy
Astrategicbusi nessuni tmaybeadi vi
sion,productline,orotherprofitcenterthatcanbe
pl
annedi ndependent lyfrom theotherbusinessunitsoft hefi
rm.
Atthebusi nessuni tlev
el ,t
hestrat
egicissuesar elessaboutt hecoor di
nationofoperati
ng
uni
tsandmor eaboutdev el
opingandsust ai
ningacompet it
iveadv antagef orthegoods
andser v
icest hatarepr [Link] nesslevel,
thestrategyformul at
ionphasedeals
wit
h:

2
  posi
ti
oni
ngt
hebusi
nessagai
nstr
ival
s
 ant
ici
pat
ingchangesi
ndemandandt
echnol
ogi
esandadj
ust
ingt
hest
rat
egyt
o
accommodat ethem
 influenci
ngt henat ureofcompet i
ti
ont hroughstrategicacti
onssuchasv ert
ical
i
ntegrati
onandt hroughpoli
ti
calacti
onssuchasl obbying.
MichaelPor teridenti
fiedthreegeneri
cst r
ategies(costleadershi
p,dif
fer
enti
ati
on,and
focus)thatcan be i mpl emented atthe business uni
tlev elto cr
eat
e a competi
tiv
e
advantageanddef endagai nstt
headverseeff
ectsofthefiveforces.

FunctionalLev elStrategy
The f uncti
onall eveloft he organization ist he l eveloft he oper at ing divi
sions and
department [Link] rategicissuesatt hef unctional levelar er elatedt obusi nesspr ocesses
andt hev al
uechai [Link] i
onallevelstrategiesi nmar keti
ng,f i
nance,oper ations,human
resources,andR&Di nvol vethedevelopmentandcoor dinationofr esour cesthroughwhi ch
businessuni tl
ev elstrategiescanbeexecut edef fi
cientlyandef fectivel
y .
Functionalunitsofanor ganizati
onar einvolvedi nhigherl evel strategiesbypr ovidinginput
i
nt othebusi nessuni tlev elandcor poratelevelst rategy ,suchaspr ovidinginformat ionon
resourcesandcapabi li
tiesonwhi cht hehi gherl ev elst rat
egi [Link] he
higher-l
evelstrategyisdev eloped,t
hef unctional unitstr anslatei tintodi screteact i
on-plans
thateachdepar t
mentordi vi
sionmustaccompl ishf ort hest rategyt osucceed.

STRATEGI
CMANAGEMENT

Str
at egicmanagementi sdefinedast hear tandsci enceoff ormul ati
ng,impl ement i
ng,and
evaluating cr oss-
funct ionaldeci si
ons t hat enabl et he or gani zat
ion t o achi evei ts
objectives."Gener ally,st r
ategicmanagementi snotonl yr elatedt oasi nglespeci ali
zati
on
butcov er
scr oss- f
unct ionalorov eral
l or
gani zati
on.
• St r
ategi c managementi s a compr ehensive ar ea t hatcov er
s al mostal lthe
functionalar easoft heor ganizati
on.I tisanumbr ell
aconceptofmanagementt hat
compr i
ses al lsuch f uncti
onalar eas as mar keting,f inance & account ,human
resour ce,and pr oduct i
on & oper at i
on int oat op lev elmanagementdi scipl
ine.
Theref ore,strategicmanagementhasani mportancei nt heor ganizationalsuccess
andf ailurethananyspeci fi
cfunctional areas.
• St rategicmanagementdeal swi t
hor ganiz ati
onallev elandt opl evelissueswher eas

3
 functionaloroper
ati
onallevelmanagementdeal swi ththespeci ficareasoft he
business.
• Top-levelmanagerssuchasChai rman,Managi ng Dir
ector ,and corporat
el evel
plannersinvol
vemoreinstr
ategicmanagementpr ocess.
• Strat
egi cmanagementrel
atestosetti
ngv i
sion,missi
on,obj ecti
ves,andst r
ategi
es
thatcanbet hegui
del
inetodesignfunct
ionalstr
ategi
esinot herfuncti
onalareas
• Ther
efor
e,i
tistop-
lev
elmanagementt
hatpav
est
hewayf
orot
herf
unct
ionalor
oper
ati
onal
managementi
nanorgani
zat
ion

Def
ini
ti
on:

“Thedeter
minati
onofthebasiclong-
ter
m goals&object
ivesofanenterpr
iseandt he
adopti
onofthecour
seofact
ionandtheall
ocat
ionofr
esour
cesnecessar
yforcarr
yingout
thesegoal
s”.
-Chandl
er

STRATEGI CMANAGEMENTMODEL/STRATEGI CPLANNI NGPROCESS

I
nt oday'
shi ghlycompet i
ti
vebusi nessenv i
ronment ,budget-ori
entedpl anningor
forecast-
basedpl anningmet hodsar ei nsuffi
cientforal argecorporati
ont osur vi
veand
[Link] i
rm mustengagei nstrategicpl anni
ngt hatclearl
ydef i
nesobj ectiv
esand
assessesbot hthei nternalandext ernalsi t
uat i
ont oformulatestrategy,implementt he
strategy,eval
uatethepr ogress,andmakeadj ustmentsasnecessar ytostayont rack.
Asi mplif
iedviewoft hest r
ategicplanningpr ocessisshownbyt hefoll
owingdiagr am:

4
a)STRATEGI CI NTENT
Str
ategicint
enttakesthef orm ofanumberofcor porat
echal lengesandoppor tuniti
es,
speci
fiedasshortterm pr
[Link] rategi
cintentmustconv eyasi gni
fi
cantstretchf or
thecompany ,asenseofdirecti
on, whichcanbe  communi cated [Link] d
notfocussomuchont oday '
spr oblems,butr at
heront omor row'soppor t
uni
[Link]
i
ntentshouldspecif
ythecompet iti
vef actors,
thefactorscrit
icaltosuccessint hefuture.
Str
ategici
ntentgivesapictureaboutwhatanor ganizati
onmustgeti nt
oimmedi atel
yi n
5
orderto use t
he oppor t
unit
[Link]
egi
cint
enthel ps managementt o emphasize and
concentr
ate on the pr
iori
ti
[Link]
egi
cint
enti s,not hi
ng but
,t he i
nfl
uenci
ng ofan
organi
zati
on’
sr esourcepotenti
alandcorecompet enciestoachievewhatatf ir
stmay
seem tobeunachievabl
egoalsinthecompet
it
iveenvironment.

b)Env i
ronment alScan
Theenv i
ronment alscani ncludest hef oll
owi ngcomponent s:
 An alysi
soft hef ir
m( Int ernalenv ir
onment )
 An alysi
soft hef ir
m'si ndust ry(mi croortaskenv i
ronment)
 An alysi
soft heExt ernal macroenv ir
onment( PESTanal y
sis)
Thei nternalanalysi scani dent ifythef i
rm'sstr engthsandweaknessesandt heexternal
anal
y sisr eveal
s oppor tunit
ies and t hreats.A pr ofi
le oft he strengths,weaknesses,
oppor t
uniti
es,andt hreat
si sgener atedbymeansofaSWOTanal ysis
Anindust r
yanaly siscanbeper f
ormedusi ngaf r
amewor kdevelopedbyMi chaelPorter
known as Por ter'sf i
vef or [Link] sf r
amewor k evaluates entry barri
ers,suppli
ers,
customer s,substituteproduct s,andi ndust r
yrivalry
.

c)St r
ategyFormulat
ion
Str
ategyFormulat
ionisthedev el
opmentofl ong-
rangeplansfort
heeff
ecti
vemanagement
ofenvir
onmentalopportunit
iesandt hreats,inli
ghtofcorpor
atestr
engths&[Link]
i
ncludes def
ini
ng the corporate mission,specifyi
ng achi
evabl
e obj
ecti
ves,dev
elopi
ng
st
rategy&setti
ngpoli
cygui del
ines.

i
) Missi
on
Missi
onisthepurposeorr
easonfortheor
ganizat
ion’
sexist
ence.I
ttel
l
swhatthe
companyisprov
idi
ngtosoci
ety
,ei
theraser
viceli
kehousekeepi
ngoraproductl
i
ke
automobi
l
es.

i
i
) Object
ives
Object
ives ar
et he end r
esult
s ofplanned acti
vi
[Link] ate whatist o be
accomplishedbywhenandshoul dbequantif
ied,i
fpossi
[Link] ev
ementof
corpor
ateobject
ivesshoul
dresulti
ntheful
fi
ll
mentofacorporation’
smission.

i
i
i
)St
rat
egi
es

6
 Str
ategyi
sthecompl
explanf
orbr
ingi
ngt
heor
gani
zat
ionf
rom agi
venpost
uret
oa
desi
redposi
ti
oninaf
utur
eperi
odofti
me.

d)Poli
cies
A pol
icyisabr oadguidelinefordeci
sion-
makingthatli
nksthef ormulat
ionof
str
ategywi t
hi t
si mpl
ementati
[Link] i
ciestomakesuret hatemployees
thr
oughoutt hefi
rm makedecisions&takeacti
onsthatsuppor
tthecor
poration’
smission,
object
ives&st r
ategy.

d)St r
ategyImplementati
on
Iti
stheprocessbywhi chstr
ategy&polici
esareputint
oactionsthr
oughthedev
elopment
ofprograms,budget
s&pr [Link]
sprocessmightinv
olvechangeswit
hint
heoveral
l
cul
ture,st
ruct
ureand/ormanagementsy st
em oftheenti
reorgani
zat
ion.

i
) Pr ograms:
Iti
sast atementoftheacti
vit
iesorst epsneededtoaccomplishasi ngl
e-usepl
[Link]
makes the str
ategyacti
on [Link] nvol
verest
ructuring t
he corpor
ati
on,
changingthecompany’
sint
ernal cul
tur
eorbeginni
nganewr esearcheffor
t.

i
i) Budgets:
Abudgeti sast atementofacorporat
ionsprogram i
nt ermsofdol
[Link]
ng
&cont r
ol,abudgetl i
stst
hedetail
edcostofeachpr [Link] husnotonly
servesasadet ail
edplanofthenew st r
ategyi
nact i
on,butal
sospeci fi
esthrough
profor
maf inancialstat
ement
stheexpect edimpactont hefi
rm’sf
inancialf
utur
e

i
ii
)Pr ocedures:
Procedures,somet
imest ermedSt andar
dOperatingProcedur
es(SOP)areasystem of
sequentialst
epsortechniquesthatdescri
beindetailhowapart
icul
artaskorj
obi sto
[Link] ypi
call
ydet ai
lthevari
ousacti
vit
iesthatmustbecarr
iedoutinorderto
compl et
e.

e)Evaluat
ion&Contr
ol
Af
terthestrat
egyi
simpl
ement
edi
tisv
italt
ocont
inual
l
ymeasur
eandev
aluat
epr
ogr
ess

7
sothatchangescanbemadei fneededtokeept heov erallpl
[Link]
sisknownas
thecontr
olphaseofthestrat
egicpl
[Link] leitmaybenecessarytodevelop
syst
emst oallow f
ormonitori
ngprogress,i
tiswel lwor ththeeff
[Link]
salsowher e
perf
ormance standar
ds should be setso thatper formance maybe measur ed and
l
eadershi
pcanmakeadj ust
ment sasneededtoensur esuccess.

Ev
aluat
ionandcontrolconsi st
softhefoll
owingsteps:
i) Def
ineparamet erstobemeasur ed
ii
) Def
inetar
getv aluesforthoseparameters
ii
i) Per form measur ements
iv) Compar emeasur edresul
tstothepre-
definedst
andar
d
v) Makenecessar ychanges

STAKEHOLDERSI
NBUSI
NESS

Acorpor
atestakehol
deri
sapar tyt
hatcanaff
ectorbeaf fect
edbyt heact i
onsoft
he
busi
nessasawhol [Link]
akehol
dergroupsv
arybot hi
nt ermsoft heirinter
esti
nthe
busi
nessact
ivi
ti
esandal sothei
rpowertoinf
luencebusinessdeci
sions. Hereist
he
summary:

Thest
akehol
der
sofacompanyar
easf
oll
ows
 Shar
ehol
der
s
 Cr
edi
tor
s
 Di
rect
orsandmanager
s
 Empl
oyees
 Suppl
i
ers
 Cust
omer
s
 Communi
ty
 Gov
ernment

8
St
akehol
der Mai
nInt
erest
s Powerandi
nfl
uence

Pr
ofi
tgrowt
h,Sharepr
ice
Shar
ehol
der
s El
ect
ionofdi
rect
ors
gr
owth,
divi
dends
I
nterestandpri
nci
pal
tobe Canenforcel
oan
Cr
edi
tor
s r
epaid,maint
aincr
edi
t covenant
sandCan
r
ating wit
hdrawbankingf
aci
l
iti
es
Sal
ary,shareopti
ons,
job Makedeci
sions,
have
Di
rect
orsandmanager
s
sat
isf
action,st
atus det
ail
edi
nformati
on
Salar
ies&wages, j
ob
Staf
fturnover
,industr
ial
Empl
oyees securi
ty,j
obsat i
sfaction&
acti
on,serv
icequalit
y
mot i
vati
on
Longt er
m contracts,
Pr
ici
ng,
quali
ty,
product
Suppl
i
ers promptpay ment ,
gr owth
av
ail
abi
li
ty
ofpurchasing
Reli
ablequalit
y,valuef or
Revenue/r epeat
money ,product
Cust
omer
s business,
Wor dofmout
h
avail
abil
it
y ,
customer
recommendat ion
servi
ce

9
 Envi
ronment
,local
jobs, Indi
rectv
ial
ocalpl
anni
ng
Communi
ty
l
ocalimpact andopini
onleader
s
Oper
atel
egal
ly,
tax Regulati
on,subsi
dies,
Gov
ernment
r
ecei
pts,
jobs taxat
ion,pl
anning
VI
SION,
MISSI
ONANDPURPOSE

VISIONSTATEMENT
Visi
onst atementprovidesdir
ecti
onandi nspir
ati
onf ororganizati
onalgoal set
ti
ng.
Visi
oni s whereyouseey ourselfatt heendoft hehorizon ORmi l
estonetherei
n.I
tis
a 
singlest at
ementdr eam ORaspi r
ati
[Link] pi
callyav i
sionhast hef l
avorsof'BeingMost
admi r
ed','
Amongt het opleague'
,'
Beingknownf orinnovati
on','
beinglargestandgreat
est'
andsoon.
Typical
ly'mostpr ofi
table'
,'
Cheapest'[Link]’tfigureinv i
sionst at
ement .Unli
kegoals,
vi
sionisnotSMART.I t 
doesnothav emat hematics ORtimelinesattachedt oi
t.

Visi
oni sa sy
mbol ,andacause  t
owhi chwewantt obondt hest akehol
ders,(mostly
employeesandsomet i
meshare-holders).Astheysay ,
thepeoplewor kbest,whent heyare
workingforacause,[Link] thatcause.
Visi
onis l
ong-
term statementandt ypi
cal l
ygener i
c&gr [Link]
eav i
sionstatement
doesnotchangeunl essthecompanyi sget t
ingintoatotal
lydiff
erentkindofbusiness.

Vision 
shouldnev ercarrythe' how' 
[Link] 
exampl
e 'Tobethemostadmi r
edbrandi n
Aviati
onI ndustry'
isaf inevisionstatement,whi
chcanbespoil
edbyext endingitto'Tobe
themostadmi r
edbr andintheAv i
ati
onIndustr
ybyprovidi
ngworl
d-cl
assin-f
lightser
v i
ces'
.
Ther easonf ornotincludi
ng' how'isthat'
how'maykeeponchangingwithtime.

Challengesrelatedt oVi sionStatement:

Putti
ng-upav isioni snotachal l
[Link] oblem istomakeempl oyeesengagedwi t
hit.
Manyat i
me, termsl ikev i
sion,missi
onandst r
at egybecomemor easubj ectofscornt
han
beinglookedup- [Link] imari
l
ybecausel eadersmaynotbeabl etomakeaconnect
betweent hevision/ missionandpeopl e’
sev erydaywor [Link]
ten,empl oyeesseeagap
betweent hev ision,mi ssionandt heirgoals&pr i
ori
ti
[Link]
ft hereisav al
i
d/t
act
ical
reasonforthismi s-
mat ch, i
tisnotexpl
ained.

10
HorizonofVisi
on:
Visi
onshouldbethehori
zonof5-10year
s.I
fitisl
essthant
hat,i
tbecomestacti
cal
.Ifi
tis
ofahor i
zonof20+year
s(say
),i
tbecomesdif
ficul
tfort
hest
rat
egytorel
atet
ot hevi
sion.

Featur
esofagoodv isi
onst atement:
 E asytor eadandunder stand.
 Co mpactandCr isptoleavesomet hi
ngtopeople’
simaginat
ion.
 Gi vesthedestinati
onandnott heroad-map.
 Ismeani ngf
ulandnott ooopenendedandf ar
-f
etched.
 E xcit
epeopl eandmaket hem getgoose-bumps.
 Pr ovi
desamot ivat
ingforce,eveni
nhar dti
mes.
 Isper ceivedasachi evableandatt hesamet imeischall
engingandcompel
l
ing,
st r
etchingusbey ondwhati scomf or
table.

Visi
onisadr eam/ aspi
rati
on,fine-
tunedt orealit
y:
TheEntir
epr ocessst art
ingfrom Visi
ondownt othebusi nessobj ect
ives,ishighlyit
er ati
ve.
Thequest i
oni sfrom wher eshoul dwest [Link] r
ongl yrecommendt hatv i
sionand
missi
onst atementshoul dbemadef i
rstwithoutbei ngcol oredbyconst r
aints,capabi l
i
ties
andenvir
onment .Thiscansai dakint othev i
sionofar medf orces,t
hat’s'SafeandSecur e
countr
yfrom ext ernalt
hreats'
.Thisvisionisanon- negotiableandi tdri
vest heor ganizati
on
tofi
ndway sandmeanst oachi ev
ethei rvi
sion,byov ercomi ngconst r
aintsoncapabi l
i
ties
[Link] sionshouldbeast akeint hegr ound,aposi tion,adr eam,whi chshoul d
beprudent,butshoul dbenon- negoti
ablebarringfewr areci r
cumst ances.

MissionStat
ement
Missionofanor ganizati
onisthepur
poseforwhichtheorgani
zationi
[Link]
onisagaina
si
nglestatement ,andcar r
iesthest
atementinv er
[Link] stheroadto
achievet
hev i
[Link]  
example,f
oraluxur
yproductscompany,thevi
sioncoul
dbe' Tobe
amongmostadmi redluxur
ybrandsi
nt hewor
ld'andmissioncouldbe'Toaddstyl
etothe
l
ives'

Agoodmissi
onstat
ementwillbe:
 Clearand Cr
isp:
 Whi
l
et her
ear
edi
ff
erentv
iews,West
rongl
yrecommend t
hat

11
 missionshouldonl ypr ovi
dewhat ,andnot' how andwhen' .Wewoul dpr efert he
missionof' MakingPeopl emeett heircareer
't o'Makingpeopl emeett heircar eer
througheffecti
vecar eercounsel i
ngandeducat i
on'.Ami ssionst atementwi t
hout
'
how&when' el
ementl eavesacr eativespacewi t
ht heor ganizationtoenabl ethem
take-upwiderstrategicchoi ces.
 Ha vet o hav e a  veryv i
sible l inkage t
o t he busi ness goal s and st rategy:
For  
example 
you cannothav e a mi ssi
on (fora home f urnishing company )of
'
Br i
ngingStyletoPeopl e’
sl i
ves'whi leyourst r
ategyasksf ormasspr oductand
selli
[Link]
sbet tert hatei thery ou startsell
ing high-end pr oduct sto high v alue
customers,ORchangey ourmi ssionst at
ementt o'Helppeopl ebui ldhomes' .
 Sh ouldnotbesameast hemi ssion ofacompet ingor [Link] ouch
uponhowi t
spur posei tunique.

Mi ssi
onf ol
lowst heVi sion:
TheEnt ir
epr ocessst art
ingfrom Visi
ondownt othebusi nessobjectives,ishi
ghl
yiterative.
Thequest i
oni sfrom wher eshoul dbest art
.Ist ronglyrecommendt hatmissi
onshoul d
followthev i
[Link] sbecauset hepurposeoft heorganizati
oncoul dchangetoachi eve
theirvi
sion.
Forexampl e,toachi evet hev isi
onofanI nsur
ancecompany' Tobet hemostt r
ust ed
InsuranceCompany ',themi ssioncouldbef i
rst'
maki ngpeopl efinanciall
ysecur
e' asthei r
emphasi sisonTr aditi
[Link] aterstagethecompanycanmakei t s
mi ssi
onas' Makingmoneywor kforthepeople'whent heyal soincludet henon-
tradi
tional
unitli
nkedinv est
mentpr oducts. 

TOYOTA
Visi
on
-Toyot
aaimst oachievelong-
ter
m,st
abl
egr
owt
heconomy
,thel
ocalcommuni
ti
esi
t
serv
es,andi
tsst
akeholder
s.

Mission
-
Toy otaseekst
ocr
eat
eamor
epr
osper
oussoci
etyt
hroughaut
omot
ivemanuf
act
uri
ng.

I
BM
Vi
sion

12
Sol
uti
onsf
orasmal
lpl
anet

Missi
on
AtIBM,westri
vet ol
eadi nthei nventi
on,devel
opmentandmanufact
ureoftheindust
ry'
s
mostadvancedinfor
mationt echnologi
es,incl
udi
ngcomputersy
stems,sof
tware,stor
age
syst
emsandmi croel
ect
ronics.

Wet ranslat
et heseadv anced technol
ogi
esint
ov al
uef orourcustomer
sthr
oughour
pr
ofessionalsolut
ions,
servicesandconsul
ti
ngbusi
nessesworl
dwide.

BUSI
NESS,
OBJECTI
VESANDGOALS

A busi
ness (
also known as ent
erpr
ise 
or f
ir
m)i s an organizati
on 
engaged i
nt he t rade
of 
goods, 
servi
ces, or bot h t o 
consumers. Busi nesses ar e pr edomi nant
i
n capit
ali
st 
economies,i
nwhi chmostoft hem arepr i
vatelyowned andadmi ni
steredt o
earn 
profi
t 
toi ncr
ease the 
wealth 
oft hei
rowner [Link] nesses may al
so be  not-for
-
profi
t 
or 
stat
e-owned.A businessownedbymul t
ipleindividualsmayber eferr
edt oas
a 
company ,alt
houghthatter
m alsohasamor epr
ecisemeani ng.

Goals:I tiswher et hebusinesswantstogoi nthef utur

e,i t
sai [Link] at
ementof
purpose,[Link] ogr owthebusi
nessintoEurope.
Objecti
ves:Obj ect
ivesgivethebusi
nessacl ear
lydefi
nedt [Link]
toachievet hesetarget
[Link]
etheempl [Link]
o
measur ethepr ogr
esst owardstoi
tsst
atedaims.
TheDi f
ferencebet weengoal sandobj
ecti
ves

 Goal
sar
ebr
oad;
obj
ect
ivesar
enar
row.
 Goal
sar
egener
ali
ntent
ions;
obj
ect
ivesar
epr
eci
se.
 Goal
sar
eint
angi
ble;
obj
ect
ivesar
etangi
ble.
 
 Goal
sar
eabst
ract
;obj
ect
ivesar
econcr
ete.
 Goal
scan'
tbev
ali
dat
edasi
s;obj
ect
ivescanbev
ali
dat
ed.
 
13
CORPORATEGOVERNANCE
Corporat
e gov
ernance gener
all
yrefer
stothe setofmechanisms thati
nfl
uence t
he
decisi
onsmadebymanager swhentherei
sasepar
ati
onofowner
shipandcont
rol
.

Theevoluti
onofpubl i
cownership hascr eat
ed aseparat
ionbetweenownershi
p and
[Link] or
et he20thcentury,manycompanieswer esmall,f
amil
yownedand
fami
lyr
[Link] ,manyarelar
geinternat
ionalcongl
omer
atesthatt
radepubl
i
clyononeor
manyglobalexchanges.

Inanattemptt ocreateacorpor
ationwherestockholders'i
nterest
sar elookedafter,many
fi
rmshav ei mplementedat wo-
tiercorpor
[Link] hef i
rstti
eri stheboar dof
dir
ector
s:t heseindiv
idual
sareel ect
edbyt heshar eholder
soft hecor porat
[Link] he
secondtieristheuppermanagement :t
heseindi
vidualsarehiredbyt heboardofdirector
s.

Shar
ehol
der
s

Ashareholderorstockholderisani ndi v
idualori nsti
tution( includingacor porat
ion)that
l
egal
lyownsoneormor esharesofst ockinapubl icorpr ivatecor por
[Link]
eholders
ownthestock,butnotthecor por ati
oni tself
.
St
ockholdersaregrantedspeci alprivilegesdependi ngont hecl assofst [Link]
mayincl
ude:
 Th er i
ghttosellthei
rshar es,
 Th er i
ghttovoteont hedi rectorsnomi natedbyt heboar d,
 Th er i
ghttonomi natedirectors( al
thought hisisv erydi ff
icultinpracti
cebecauseof
minorit
yprotect
ions)andpr oposeshar ehol
derr esolutions,
 Th er i
ghttodivi
dendsi ftheyar edecl ared,
 Th er i
ghttopurchasenewshar esissuedbyt hecompany , and

Boar
dofDi
rect
ors

Elected by the shar

eholders,the board ofdirect
orsis made up oftwo types of
representat
[Link]
irsttypeinvol
vesindi
vidual
schosenfr
om wit
[Link]

14
canbeaCEO,CFO,manageroranyot herpersonwhowor ksfort
hecompanyonadai l
y
[Link] hertypeofr epresent
ati
v eischosenext ernall
yandisconsider
edtobe
i
ndependentf rom t
hecompany .Theroleoft heboardist omonitort
hemanagersofa
corporat
ion,acti
ngasanadv ocateforst ockholder
[Link],theboar
dofdi r
ect
ors
tr
iestomakesur ethatshar
eholders'i
nterestsarewellserv
ed.

Boardmember scanbedi v i
dedi nt ot hr
eecat egor i
es:
 Ch airman–Techni callythel eaderoft hecor por ation,t hechai rmanoft heboar di s
responsi bl ef orr unni ng t he boar d smoot hlyand ef [Link] sorherdut ies
typical lyi ncl udemai ntainingst r
ongcommuni cationwi tht hechi efexecut iveof ficer
and hi gh- level execut ives, f ormul ating t he company '
s busi ness st r
at egy ,
repr esent ingmanagementandt heboar dtot hegener alpubl i
candshar ehol der s,
and mai nt aining cor poratei ntegr i
ty.A chai rman i sel ected f r
om t he boar d of
direct ors.
 InsideDi rect ors–Thesedi rectorsar er esponsi blef orappr ovinghi gh-l
ev elbudget s
prepar edbyuppermanagement ,impl ement i
ngandmoni tori
ngbusi nessst r
at egy ,
andappr ov ingcor ecor por atei niti
ativesandpr oj ect
s.I nsidedi rectorsar eei ther
shar ehol der sorhi gh-levelmanagementf rom wi thint hecompany .Insidedi rect ors
helppr ov i
dei nternalper spect iv
esf orot herboar dmember [Link] ndiv i
dualsar e
alsor efer redt oasexecut iv edi rectorsi ftheyar epar tofcompany '
smanagement
team.
 Ou tsideDi rect ors–Whi l
ehav i
ngt hesamer esponsi bi
liti
esast heinsidedi rectorsi n
det ermi ni ngst rategicdi rectionandcor poratepol icy,out sidedi r
ectorsar edi f
fer ent
i
nt hatt heyar enotdi rectlypar toft hemanagementt [Link] poseofhav ing
out side di rect orsi st o pr ovide unbi ased and i mpar tialper spect iv
eson i ssues
broughtt ot heboar d.

ManagementTeam
Astheothert
ierofthecompany,t
hemanagementt
eam i
sdi
rect
lyr
esponsi
blef
ort
heday
-
to-
dayoperat
ions(andprof
it
abi
l
ity
)oft
hecompany.
 Chi
efExecut
iveOf
fi
cer(
CEO)–Ast
het
opmanager
,theCEOi
sty
pical
l
yresponsi
ble
fortheent
ir
eoper at
ionsofthecor
porati
onandrepor
tsdi
rect
lyt
othechai
rmanand
boardofdirect
ors.I
tistheCEO'sresponsi
bil
i
tytoimpl
ementboarddeci
sionsand
i
niti
ati
vesandtomai ntai
nthesmoothoperati
onofthefi
rm,wit
htheassi
stanceof

15
 [Link]
en,theCEO wil
lalsobedesignat
edast hecompany'
s
presidentandt
her
efor
ealsobeoneoftheinsi
dedi
rect
orsontheboar
d(ifnott
he
chairman).
 Chi
efOper
ati
onsOf
fi
cer(
COO)– Responsi
blef
ort
hecor
por
ati
on'
soper
ati
ons,
the 
COOl ooksafteri
ssuesrel
atedtomarketi
ng,sal
es,product
ionandper
sonnel.
Mor e hands-on t
han the CEO,the COO l
ooks aft
erday -
to-
dayacti
vi
ti
es whil
e
provi
dingf eedbacktot [Link] i sof t
enr ef
err
edt oasaseniorv i
ce
presi
dent.
 Chi
efFi
nanceOf
fi
cer(
CFO)– Al
so r
epor
ti
ng di
rect
lyt
othe CEO,t
he CFO i
s
responsible for analy
zing and r evi
ewi
ng f i
nancial data,r eporti
ng f i
nancial
per f
ormance,prepari
ngbudgetsandmoni tor
ingexpendi t
uresandcost [Link] s
requiredtopresentthi
sinfor
mat i
ontotheboardofdi r
ectorsatr egularinter
val
sand
prov i
de thi
si nfor
mat i
on to sharehol
ders and regulatory bodi es such as the
Secur i
ti
esandExchangeCommi ssion(SEC).Alsousual lyreferredtoasaseni or
vicepr esi
dent,theCFO r outi
nelychecksthecor poration'
sf i
nancialhealthand
i
nt egri
ty.

Need&Si gnificance
1) Changi ngowner shipStr
ucture:
Thepr ofi
leofcor porat
eowner shiphaschangedsi
gnif
icant
[Link]
icfi
nancial
i
nsti
tuti
onsar et hesinglelargestshareholderisthemostoft helar
gecor porat
ionsinthe
pr
ivatesector
.I nsti
tuti
onalinvestorsandmut ualfundshavenow becomesi ngl
yorj oi
ntly
di
rectchal
lengest omanagementofcompani es.

2)SocialResponsi bi
li
ty:
A companyi sa l egalent i
tywi thoutphy sicalexi
[Link],iti s
managedbyboar dofdi rect
or swhi chisaccount ableandr esponsi
bletoshareholder swho
provi
det [Link] ealsor equi
redt oactint heinter
estsofcustomers,lenders,
suppli
ersandt helocalcommuni tyf orenhancingshar ehol
der sval
ue.
3)Scams
I
nr ecentyearssev eralcor porat
ef raudshav eshakent hepubli
cconf idence.
Al ar
genumberofcompani eshav ebeent r
ansf er
redt oZgr oupbyt heBombayst ock
exchange.
4)CorporateOligarchy:

16
 Shareholderacti
vi
sm andshar ehol
derdemocracyconti
nuetoremainmy ths
i
[Link] l
otsy st
em i sst i
llabsent
.Proxi
esarenotal l
owedt ospeakatt he
meeti
[Link] eholders’associ ati
on,invent
or’
s educat
ion and awareness have not
emergedasacount ervail
ingforce.
5)Globali
zation
As Indian compani es wentto over
seas marketsforcapi t
al,cor
porate
gov
ernancebecomeabuzzwor ld.

Fundament alPr incipl

esofCor porat
eGover nance.
1)Tr anspar ency
Itmeansaccur ate,adequat e&t i
mel ydisclosur eofr el
evantinformationto
thestakeholder [Link] t
houttransparency,iti simpossi blet omakeanypr ogresst owards
goodgov [Link] nessheadsshoul drealizethattr ansparencyalsocr eatesimmense
sharehol
derv alue.
2)Account abil
ity
Cor porateGovernancehast obeat opdownappr [Link] rman,Boar dof
Dir
ectors & Chi ef Executi
ves mustf ulf
illt hei
rr esponsi bil
i
ties to make cor por
ate
governancear eal i
tyinIndi
[Link] abil
it
yal sof avourstheobjectiv
eofcr eati
ng
sharehol
dersv alue
3)Mer i
tBasedManagement
Ast rongBoardofDi r
ectorsisnecessar yt ol eadandsuppor tmer itbased
management .Theboar dhast obeani ndependent ,strongandnon-par ti
sanbodywher e
thesolemot iveshoul dbedecision-makingt hroughbusi nesspr udence.

Tr
endsi
nCor
por
ateGover
nance:
 Boar
dsar
eget
ti
ngmor
einv
olv
ednotonl
yinr
evi
ewi
ng&ev
aluat
ingcompany
st
rat
egi
cbutal
soi
nshapi
ng.
 I
nst
it
uti
onali
nvest
orssuchaspensi
on’
sfunds,mut
ualf
unds,& i
nsur
ance
compani
esarebecomingacti
veonboards,andareputt
ingi
ncr
easepr
essur
e
ontopmanagementt
oi mpr
ovecor
porat
eper f
ormances.
 Noneaf
fi
li
atedout
sidedi
rect
orsar
eincr
easi
ngt
hei
rnumber
sandpoweri
n
publ
i
clyhel
dcorpor
ati
on’sasCEO’ sloosent
hei
rgripsonboar
ds. Out
side
membersar
etaki
ngchargeofannualCEOeval
uat
ion.
 Boar
dsar
eget
ti
ngsmal
l
er,
par
ti
all
ybecauseoft
her
educt
ioni
nthenumberof
17
 i
nsidersbutal
sobecauseboar
dsdesirenew direct
orst
ohav
especi
ali
zed
knowledge&exper
ti
sei
nst
eadofgener
alexper
ience.
 Boar
dscont
inuet
otakemor
econt
rolofboar
dfunct
ionsbyei
therspl
i
tti
ngt
he
combi
nedchair/
CEO positi
onint
otwosepar
ateposi
ti
onsorest
abl
i
shi
nga
l
eadoutsi
dedi
rectorposi
ti
on.
 As cor
por
ati
ons become mor
e gl
obal
,they ar
eincr
easi
ngl
ylooki
ng f
or
i
nter
nat
ional
exper
iencei
nthei
rboar
dmember
s.

CORPORATESOCI
ALRESPONSI
BILI
TY

Corpor at
e soci alr esponsibil
i
tyi sthe inter
action between business and t he soci
al
envi
ronmenti nwhi chi texi
[Link] guedt hatcorpor
atesocialresponsibil
it
yrest
son
twopr emi ses:socialcont r
act,whichisani mpl i
edsetofr ightsandobl igati
onsthatare
i
nher enttosoci alpolicyandassumedbybusi ness,andmor alagent,whichsuggeststhat
businesseshav eanobl i
gati
ont oacthonorablyandt orefl
ectandenf orcev al
uesthatare
consistentwi t
ht hoseofsoci ety.

TheThr eePer specti

vesofSoci al Responsi bil
ity
The t hree per spect iv
es of cor por ate soci al r esponsi bil
ity are economi c
responsi bil
i
ty,publ i
cr esponsi bil
ity,andsoci alr esponsi veness. Thet hreeper spect i
ves
representa cont i
nuum ofcommi t mentt o soci alresponsi bil
ityi ssues,r anging f r
om
economi cresponsi bil
ityatt helow endandsoci alr esponsiv enessatt hehi [Link]
economi cresponsi bil
it
yper spectivear guest hatt heonl ysoci alr esponsi bil
it
yofbusi ness
i
st omaxi mi zepr ofit
swi thint he“ rulesoft hegame. ” Mor eov er,thepr oponent soft his
viewpoi ntarguet hator ganizationscannotbemor alagent [Link] yindi vi
dualscanbemor al
agent s.I ncont r
ast,thepubl i
cr esponsi bili
typer spectiv
ear guest hatbusi nessesshoul d
actinawayt hatisconsi stentwi thsoci ety’sv iewofr esponsi blebehav ior,aswel laswi th
established l aws and pol icy. Fi nal l
y,the pr oponent s oft he soci alr esponsi veness
perspect iv
ear guet hatbusi nessesshoul dpr oact i
velyseekt ocont ributet osoci etyina
positive way . Accor ding t ot hi
sv i
ew,or gani zati
ons shoul d dev elop an i nter
nal
environmentt hatencour agesandsuppor tset hical behavioratani ndi vi
dual l
ev el
.

Di
ff
erentappr
oachesofCSR

18
 Thest ockholderview ismuchnar rower,andonl yv i
ewst hest ockholders( i.
e.,
owner s)ofaf ir
[Link] ockholdervi
ew oft heor gani
zati
onwoul dtendt obeal igned
closert otheeconomi cresponsibi
li
tyv
iewofsoci alresponsi
bil
it
[Link] akeholderv i
ewof
theorgani zati
onarguesthatany onewhoisaf f
ect
edbyorcanaf fecttheact i
vi
ti
esofaf ir
m
hasal egiti
mate“stake”[Link] oadr angeofpopul [Link]
stakehol dervi
ewcaneasi lyincl
udeacti
onst hatmightbel abel
edpubl i
cr esponsibil
it
yand
socialresponsiveness.

St
akehol
der
s:Al
lthosewhoar
eaf
fect
edbyorcanaf
fectt
heact
ivi
ti
esofanor
gani
zat
ion.

[Link]
maryStakehol
der
s:Thepr i
marystakehol
dersofaf i
rm ar
ethosewhohaveafor
mal,
off
ici
al,orcontr
actualr el
ati
onship wit
ht he organi
zati
on. They i
ncl
ude owner
s
(st
ockhol
ders)
,empl
oy ees,customers,
andsupplier
s.

[Link]: Thesecondarystakehol
der
sofaf irm ar
eot hersoci
etal
groupsthatareaffectedbyt heact
ivi
ti
esofthefir
[Link] ncludeconsumergroups,
special
int
erestgr
oups, envi
ronmentalgr
oups,andsoci
etyatl
arge.

Theglobal
izat
ionoft hebusi nessenv i
ronmenthashadar emarkableimpactonissuesof
soci
alresponsibi
li
ty. Asor ganizat
ionsbecomei nvolv
edinthei nter
nat
ionalfi
eld,they
oft
enfindthatthei
rst akeholderbasebecomeswi [Link] esult,t
hey
mustcopewi thsocialr esponsibil
it
yrelat
edissuesacrossabroadr angeofculturaland
geogr
aphicori
entati
ons.

The fourst r
ategiesforsocialr esponsi
bil
i
tyrepresenta r
ange,wi ththe reaction
str
ategyononeend( i
.e.
,donothing)andtheproactionst
rat
egyont heotherend( do
much) . Thedef enseandaccommodat i
onstrat
egiesareint hemiddle. (reacti
on,
defense,accommodat ion,andproacti
on).Examplesoffir
mst hathavepursuedt hese
str
ategiesareasf ol
lows:

 React
ion: Ov
er40y
ear
sago,t
hemedi
caldepar
tmentoft
heManv
il
leCor
por
ati
on
discover
edevi
dencetosuggestt
hatasbest
osi
nhal
ati
oncausesadebil
it
ati
ngandoft
en
fatall
ungdi
[Link]
hanlooki
ngforway
stoprovi
desaferwor
kingcondi
ti
onsfor

19
 companyempl
oyees,t
hefi
rm chosetoconcealt
heev
idence.I
tappear
sthatt
obacco
compani
eshav
edonethesamet hi
ng.
 Def
ense:Ov
ert
hey
ear
s,r
athert
handemonst
rat
ingsoci
alr
esponsi
venessi
nter
msof
ai
rpoll
uti
onreducti
ons,vehi
clesafety
,andgasshortages,t
heautomobil
ecompanies
di
dli
tt
letoconfr
[Link]
ly,
thehighdemandforpi
ckupt
rucks
andSUVsencouragestheproblem t
oconti
nue.
 Accommodat
ion:Manyf
inanci
alser
vicecompani
es,al
ongwi
thmeet
ingt
hemi
nimum
r
equi
rement
sofdisclosur
eregulat
ions,
maintai
namoreproact
ivecodef
orv
olunt
ary
, on
-
demand di
scl
osureofbanki nformati
on r
equest
ed bycust
omer sorbyanyot her
memberoft
hepublic.
 Pr
oact
ion:Bect
onDi
cki
nson&Companyi
samedi
cal
-suppl
yfi
rmt
hathast
arget
edi
ts
chari
tabl
econtri
butionst
opr oj
ectsi
tbelieves“
willhel
peli
minateunnecessar
ysufferi
ng
anddeathfrom diseasearoundtheworld.”Simil
arly
,Star
bucksmakescont r
ibut
ionsto
l
iter
acyprogramsandwasoneoft hefi
rstcompani estogi
vehealt
hbenefit
stopar t
ners.

20
UNIT–I I
ExternalEnvir
onment-Por ter’
sFiveForcesModel -
Str
ategicGroupsCompet i
ti
veChanges
during Industr
yEv oluti
on-Globali
zat
ion and IndustryStruct
ure -Nat ionalCont
extand
Compet iti
veadv antageResour ces-Capabili
ti
esandcompet encies–corecompetencies-
Lowcostanddi f
ferentiat
ionGener i
cBuildi
ngBl ocksofCompet it
iveAdvantage-Di
sti
nctive
Compet encies-Resour cesandCapabi l
i
tiesdurabili
tyofcompet i
tiveAdv ant
age-Avoi
ding
fai
l
ur esandsust ainingcompet i
ti
veadvantage-
Casest udy.

21
BUSI NESSENVI RONMENT
Af ir
m’ senvi
ronmentr epresentsal
lint
ernalorexternalforces,factors,orcondit
ionsthat
exertsomedegr eeofi mpactont hestrat
egies,decisi
onsandact ionst akenbythefirm.
Therear etwotypesofenv ir
onment :
Inter
nalenv i
ronment– per t
aini
ngtot heforceswi thi
nt heor ganizati
on( Ex:Functi
onal
areasofmanagement )and
Externalenvi
ronment–per t
aini
ngt otheexternalforcesnamel ymacr oenv i
ronmentor
gener alenvi
ronmentand mi cr
o envi
ronmentorcompet it
ive env i
ronment( Ex:Macr o
env i
ronment–Pol i
ti
cal envi
ronmentandMi cr
oenv ir
onment–Cust omer s).

EXTERNALENVI
RONMENT

Itrefer
st otheenv i
ronmentt hathasani ndi rectinfl
uenceont hebusi [Link] actorsare
uncont r
oll
able by t he busi [Link] t wo t ypes ofext ernalenv ir
onmentar e micro
env i
ronmentandmacr oenvi
ronment .
a)MI CROENVI RONMENTALFACTORS
These ar e externalf actorsclose t ot he companyt hathav e a di r
ecti mpacton t he
organizati
onspr [Link] actor sinclude:
i)Shar ehol ders
Anyper sonorcompanyt hatownsatl eastoneshar e( apercent ageof
owner shi p)inacompanyi sknownasshar [Link] ehol
dermayal so
ber efer redtoasa" stockhol der".Asor gani zati
onr equiresgr eateri nward
investmentf orgrowt ht heyf acei ncreasingpr essuret omov ef rom pr i
vate
owner shi pt o [Link] ert his mov ementunl eashes t he f orces of
shar ehol derpressureont hest rategyofor ganizati
ons.
ii
)Suppl ier
s
Ani ndi vidualoranor gani zationi nvolv
edi nt heprocessofmaki ngapr oduct
orser v iceav ai
lablef oruseorconsumpt ionbyaconsumerorbusi nessuser
isknownassuppl ier.I ncreasei nraw mat er i
alpriceswi l
lhav eaknockon

22
 affectont hemar ket i
ngmi xst r ategyofanor gani zati
[Link] icesmaybe
forcedupasar esul [Link] osersuppl ierr elat i
onshi pi sonewayofensur ing
compet iti
v eandqual it
ypr oduct sf oranor gani zat i
on.
i
ii)Di stribut ors
Ent i
tyt hatbuy snon- compet ingpr oduct sorpr oduct -l
ines,war ehousest hem,
andr esel lst hem t or etail
ersordi rectt ot heenduser sorcust omer sisknown
asdi st ri
but or .Mostdi stri
but orspr ovidest rongmanpowerandcashsuppor t
tot hesuppl i
erormanuf act urer'spr omot i
onalef for [Link] l
yal so
prov i
de a r ange ofser vices ( such as pr oducti nformation,est imat es,
techni calsuppor t,af ter-sales ser vices,cr edit)t ot heircust omer [Link] ten
get t
ingpr oduct st ot heendcust omer scanbeamaj orissuef orf i
[Link]
distri
but orsusedwi lldet ermi net hef i
nalpr iceoft hepr oductandhow i ti s
present edt ot heendcust omer .Whensel lingv i
ar et ail
ers,forexampl e,the
retail
erhascont rolov erwher et hepr oduct sar edi splayed,how t heyar e
priced and how mucht heyar epr omot ed i [Link] so gai na
compet iti
v eadv ant agebyusi ngchangi ngdi st ri
but i
onchannel s.
i
v )Cust omer s
Aper son,company ,orot herent itywhi chbuy sgoodsandser v i
cespr oduced
by anot herper son,company ,orot herent i
tyi s known as cust omer .
Organi zat i
ons sur v i
v e on t he basi s ofmeet i
ng t he needs,want s and
prov i
di ngbenef it
sf ort heircust omer [Link] lur et odosowi l
lresul tinaf ail
ed
businessst rategy.
v)Compet i
tors
Acompanyi nt hesamei ndust ryorasi mi lari ndust rywhi chof fersasi milar
productorser vi
cei sknownascompet itor .Thepr esenceofoneormor e
compet itorscanr educet hepr i
cesofgoodsandser vicesast hecompani es
attemptt ogai nal argermar ketshar [Link] i
ti
onal sor equirescompani es
tobecomemor eef fi
cienti nor dert or educecost [Link] -f
oodr estaurant s
McDonal d' sandBur gerKi ngar ecompet itors,asar eCoca- Col aandPepsi ,
andWal -Mar tandTar get.
vi)Medi a
Posi ti
v eoradv ersemedi aat tent iononanor gani sationspr oductorser vi
ce
cani nsomecasesmakeorbr eakanor gani sat i
on..Consumerpr ogr ammes
withawi derandmor edi rectaudi encecanal sohav eav erypower fuland

23
 posi
ti
vei
mpact
,hf
orci
ngor
gani
sat
ionst
ochanget
hei
rtact
ics.

b)MACROENVI RONMENTALFACTORS
Anor gani zat i
on' smacr oenv ir
onmentconsi stsofnonspeci fi
caspect si ntheor gani zat i
on's
surroundi ngs t hathav et he pot entialt o af fectt he organizati
on' s [Link]
compar edt oaf irm' staskenv ironment ,thei mpactofmacr oenv i
ronment alvar iablesi s
l
essdi rectandt heor gani zat ionhasamor el i
mitedi mpactont heseel ement soft he
environment .Themacr o env ironmentconsi stsoff orcest hator i
gi nateout sideofan
organizat i
onandgener allycannotbeal teredbyact i
onsoft heor ganizat i
[Link] herwor ds,
af i
rm maybei nf l
uencedbychangeswi thint hiselementofi tsenv ironment ,butcannot
i
tselfinf l
uencet heenv ironment .Macr oenv ironmenti ncludespol i
tical,economi c,soci al
andt echnol ogi calf actor [Link] irm consi derstheseaspar tofitsenv i
ronment alscanni ngt o
betterunder standt het hreat sandoppor tunit
iescr eatedbyt hev ari
ablesandhowst rategic
plansneedt obeadj ustedsot hef i
rm canobt ainandr etaincompet iti
v eadv antage.
i
)Pol it
icalFact ors
Politicalf actor sincl udegov er
nmentr egul at
ionsandl egalissuesanddef inebot h
formalandi nformalr ulesunderwhi cht hef i
rm mustoper [Link] es
i
ncl ude:
•t axpol i
cy
•empl oymentl aws
•env ir
onment alregul ati
ons
•t rader est rictionsandt ariffs
•pol iti
cal st abi l
it
y
i
i)Economi cFact or s
Economi cf actorsaf fectt hepur chasingpowerofpot enti
alcust omer sandt hef i
rm's
costofcapi [Link] oll
owi ngar eexampl esoffactorsinthemacr oeconomy :
•economi cgr owt h
•int erestr ates
•exchanger ates
•inf l
at i
onr at e
i
ii)Soci alFact ors
Soci alf act orsi ncludet hedemogr aphicandcul turalaspectsoft heext ernalmacr o
env i
ronment .These f act ors affectcust omerneeds and t he size ofpot ential
mar ket [Link] al f
act orsinclude:

24
 •healthconsci ousness
•populationgr owthr at
e
•agedi st
ribution
•careerat t
it
udes
•emphasi sonsaf ety
i
v)Technol ogicalFact ors
Technologicalf actors can l owerbarr
iersto entry,reduce minimum effici
ent
producti
onl evel
s,andi nfl
uenceoutsour
cingdeci
[Link] echnologi
calf
actors
i
nclude:
•R&Dact ivit
y
•automat ion
•technologyi ncentiv
es
•rateoftechnol ogicalchange

25
Mi chaelPor ter’s5f orcesmodel
Por ter’
s5f orcesmodeli soneoft hemostr ecogni zedf ramewor kf ortheanal y sisof
busi nessst [Link] ter,thegur uofmoder ndaybusi nessst rat
egy,usedt heor etical
framewor ksder i
vedf rom I ndust
rialOr ganizati
on( IO)economi cst oder i
vefivef or ces
whi chdet erminet hecompet i
ti
veintensityandt hereforeat t
ract i
venessofamar ket .Thi s
theor eti
calframewor k,basedon5f orces, descri
best heat t
ri
but esofanat tr
act
ivei ndust ry
and t hussuggest swhen oppor tuniti
eswi l
lbegr eater,and t hreatsless,i
nt heseof
i
ndust ri
es.
At t
ractivenessi nt hiscont extref
erst ot heov erallindustrypr ofit
abil
it
yandal sor eflects
upont heprof i
tabil
ityofthef ir
m underanal [Link]“ unat tr
active”industr
yisonewher et he
combi nati
onoff orcesact st odri
vedownov erallprof i
tabil
it
y .Av eryunatt
ract
ivei ndust ry
woul dbeoneappr oaching“ purecompet i
ti
on”,from t heper spectiv
eofpur ei ndust r i
al
economi cstheor y.

26
Thesef
orcesaredefi
nedasf ol
lows:
a) Thet hr
eatoftheentryofnewcompet it
ors
b) Thei nt
ensi
tyofcompet i
tiv
erival
ry
c) Thet hr
eatofsubsti
tuteproductsorser
vices
d) Thebar gai
ningpowerofcustomer s
e) Thebar gai
ningpowerofsuppliers

Themodeloft heFi veCompet it

iveForceswasdev elopedbyMi [Link]
[Link]
ers
modelisbasedont hei nsightt
hatacor poratest
rat
egyshouldmeett heopport
unit
iesand
thr
eat
si nt
heor ganizationsexternalenvi
[Link]
all
y,competit
ivest
rat
egyshould
baseonandunder standingofi ndustr
yst r
uctur
esandt hewayt [Link]

27
i
dentifi
edf ivecompeti
ti
v efor
cest hatshapeev eryi
ndustryandev erymar [Link]
deter
mi net heint
ensit
yofcompet i
tionandhencet heprof i
tabi
li
tyandat tracti
venessofan
i
ndust r
y .Theobject
iveofcorporatestrat
egyshoul dbet omodi f
yt hesecompet i
ti
veforces
i
nawayt hatimprov
est heposit
ionoft heorganizat
[Link] t
sanal y
sisof
thedrivingf or
cesinani ndustr
y .Basedont hei nf
ormationder i
vedf rom theFi v
eFor ces
Analysis,managementcandeci dehowt oinfluenceortoexpl oi
tpar ti
cul
archar acteri
sti
cs
oftheirindustr
y.

TheFi
veCompet
it
iveFor
cesar
ety
pical
l
ydescr
ibedasf
oll
ows:

a) Bargai
ningPowerofSupplier
s
Theter
m'supplier
s'compr
isesal
lsour
cesf
ori
nput
sthatar
eneededi
nor
dert
opr
ovi
de
goodsorserv
ices.

Suppl
i
erbar
gai
ningpoweri
sli
kel
ytobehi
ghwhen:
 Themar
keti
sdomi
nat
edbyaf
ewl
argesuppl
i
ersr
athert
hanaf
ragment
edsour
ce
ofsuppl
y
 Ther
ear
enosubst
it
utesf
ort
hepar
ti
cul
ari
nput
 Thesuppl
i
erscust
omer
sar
efr
agment
ed,
sot
hei
rbar
gai
ningpoweri
slow
 Theswi
tchi
ngcost
sfr
om onesuppl
i
ert
oanot
herar
ehi
gh
 Ther
eist
hepossi
bil
i
tyoft
hesuppl
i
eri
ntegr
ati
ngf
orwar
dsi
nor
dert
oobt
ainhi
gher
pr
icesandmar
gins

Thi
sthr
eati
sespeci
all
yhi
ghwhen
 Thebuy
ingi
ndust
ryhasahi
gherpr
ofi
tabi
l
ityt
hant
hesuppl
yi
ngi
ndust
ry
 For
war
dint
egr
ati
onpr
ovi
deseconomi
esofscal
efort
hesuppl
i
er
 The buy
ing i
ndust
ryhi
nder
sthe suppl
yi
ng i
ndust
ryi
nthei
rdev
elopment(
e.g.
r
eluct
ancet
oacceptnewr
eleasesofpr
oduct
s)
 TheBuy
ingi
ndust
ryhasl
owbar
ri
erst
oent
ry.

Insuchsit
uat
ions,thebuyingi
ndust
ryoftenf
acesahighpressur
eonmarginsfrom t
hei
r
suppl
ier
[Link]
ionshi
pt opower
fulsuppl
i
erscanpotent
ial
lyr
educest
rategi
copti
ons
fort
heorgani
zati
on.
28
b) Bar
gai
ningPowerofCust
omer
s

Si
mil
arl
y,t
hebargai
ningpowerofcust
omersdeter
mineshowmuchcust omerscan
i
mposepressur
eonmar gi
nsandv ol
[Link]
omersbargai
ningpowerisl
ikel
yto
behi
ghwhen
 Theybuyl
argev
olumes;
ther
eisaconcent
rat
ionofbuy
ers
 Thesuppl
yi
ngi
ndust
rycompr
isesal
argenumberofsmal
loper
ator
s
 Thesuppl
yi
ngi
ndust
ryoper
ateswi
thhi
ghf
ixedcost
s
 Thepr
oducti
sundi
ff
erent
iat
edandcanber
epl
acesbysubst
it
utes
 Swi
tchi
ngt
oanal
ter
nat
ivepr
oducti
srel
ati
vel
ysi
mpl
eandi
snotr
elat
edt
o
hi
ghcost
s
 Cust
omer
shav
elowmar
ginsandar
epr
icesensi
ti
ve
 Cust
omer
scoul
dpr
oducet
hepr
oductt
hemsel
ves
 Thepr
oducti
snotofst
rat
egi
cal
impor
tancef
ort
hecust
omer
 Thecust
omerknowsaboutt
hepr
oduct
ioncost
soft
hepr
oduct
 Ther
eist
hepossi
bil
i
tyf
ort
hecust
omeri
ntegr
ati
ngbackwar
ds.

c) ThreatofNewEnt rants
Thecompet it
ioninanindustrywil
lbethehi gher,t
heeasi
eriti
sf orot
hercompanies
to enterthisindustr
[Link] such a situati
on,new ent r
ants could change maj
or
determinant
soft hemar ketenv i
ronment( [Link],pri
ces,customer
l
oyalty)[Link] waysal at
entpr essur
eforr
eactionandadj ust
ment
forexisti
ngplayersinthi
si ndustr
[Link] hreatofnew entri
eswi l
ldependont he
extenttowhichtherearebarri
erstoentry.
Thesear ety
pical
ly
 Economi
esofscal
e(mi
nimum si
zer
equi
rement
sforpr
ofi
tabl
eoper
ati
ons)
,
 Hi
ghi
nit
ial
inv
est
ment
sandf
ixedcost
s
 Costadv
ant
agesofexi
sti
ng pl
ayer
sduet
o exper
iencecur
veef
fect
sof
oper
ati
onwi
thf
ull
ydepr
eci
atedasset
s
 Br
andl
oyal
tyofcust
omer
s
 Pr
otect
edi
ntel
l
ect
ual
proper
tyl
i
kepat
ent
s,l
i
censeset
c,
 Scar
cit
yofi
mpor
tantr
esour
ces,
[Link]
i
fiedexper
tst
aff

29
  Accesst
oraw mat
eri
alsi
scont
rol
l
edbyexi
sti
ngpl
ayer
s,· Di
str
ibut
ion
channel
sar
econt
rol
l
edbyexi
sti
ngpl
ayer
s
 Exi
sti
ngpl
ayer
shav
ecl
osecust
omerr
elat
ions,e.
g.f
rom l
ong-
ter
m ser
vice
cont
ract
s
 Hi
ghswi
tchi
ngcost
sforcust
omer
s
 Legi
slat
ionandgov
ernmentact
ion

d) Thr eatofSubsti
tutes
At hreatfr
om substit
utesexi
stsiftherearealternativeproductswit
hlowerpr icesof
betterperfor
mancepar ametersforthesamepur [Link]
lyattr
act
asi gnif
icantproporti
onofmar ketv ol
umeandhencer educethepotentialsales
volumef orexist
ingplayer
[Link] elat
estocompl ementaryproducts.
Simi l
arl
yt othet hr
eatofnew ent rants,t
het reatofsubst i
tut
esisdet erminedby
factorsli
ke
 Br
andl
oyal
tyofcust
omer
s
 Cl
osecust
omerr
elat
ionshi
ps
 Swi
tchi
ngcost
sforcust
omer
s
 Ther
elat
ivepr
icef
orper
for
manceofsubst
it
utes
 Cur
rentt
rends.

e) Competit
iveRival
rybet
weenExi sti
ngPl ayers
Thisforce descri
bes the int
ensity of compet i
ti
on between exi st
ing pl
ayer
s
(companies)i
nanindust
[Link] i
ti
vepressureresul
tsinpressureonpri
ces,
margi
ns,andhence,onprofi
tabi
lit
yforev erysi
nglecompanyi ntheindustr
y.
Competit
ionbetweenexi
sti
ngplay er
sisl i
kelytobehighwhen
 Ther
ear
emanypl
ayer
sofaboutt
hesamesi
ze
 Pl
ayer
shav
esi
mil
arst
rat
egi
es
 Ther
eisnotmuchdi
ff
erent
iat
ionbet
weenpl
ayer
sandt
hei
rpr
oduct
s,hence,
t
her
eismuchpr
icecompet
it
ion
 Lowmar
ketgr
owt
hrat
es(
growt
hofapar
ti
cul
arcompanyi
spossi
bleonl
yat
t
heexpenseofacompet
it
or)
 Bar
ri
ersf
orexi
tar
ehi
gh(
[Link]
veandhi
ghl
yspeci
ali
zedequi
pment
)

30
STRATEGI
CGROUPS

Str
ategicgroupsar eset soff i
rmswi thi
nani ndust
rythatsharethesameorhi ghlysimil
ar
competiti
ve att
[Link] tr
ibutesinclude pri
cing pr
acti
ces,leveloftechnology
i
nvestmentandl eadership,productscopeandscal ecapabil
it
ies,andproductquali
[Link]
i
dentif
yingstrategicgr oups,analystsandmanager sar ebetterablet ounderst
andt he
di
ffer
enttypesofst rategiesthatmulti
plefi
rmsar eadopt i
ngwithi
nt hesameindust
ry.

Str
ategicGr oupMaps
Ausefulwayt oanal yzest rategicgr oupsi st hrought hecr eat ionofst rategicgr oupmaps.
Str
ategicgr oupmapspr esentt hev ari
ouscompet iti
veposi tionst hatsi mil
arf irmsoccupy
wit
hinani ndust [Link] rategi cgr oupmapsar enotdi fficulttocr eat e;howev er,therear ea
fewsimpl egui delinesmanager swantt ousewhendev elopingt hem.
a)I dentifyKeyCompet i
ti
veAt t
ri
[Link] ionedpr ev iously,manyf i
rmsshar e
simi l
arcompet iti
v eat tr
ibut essuchaspr ici
ngpr acti
cesandpr [Link] i
rst
stepi ndev elopi ngast rategicgr oupmapi st oi dent i
fykeycompet i
tiveat tr
ibutes
thatl ogi call
ydi fferent i
atef i
rmsi nacompet it
iv eset .Thi si snotal way sknowni n
adv anceofcr eat i
ngt hemapsoi tisi mpor t
antt ober eadyt ocr eatemul ti
plemaps
usingdi fferentv ar iables.
b)Cr eat eMapBasedUponTwoKeyAt tri
buteVar [Link] hev ari
ablessel ected,
assign each v ar i
abl et ot he X and Y axi s,r espect i
v ely .Al so,sel ecta l ogical
gradat ionv aluef oreachaxi ssot hatdi ffer
enceswi llber eadilyobser [Link]
compl ete,pl oteachf ir
m’ sl ocati
onont hemapf ort hei ndust r
ybei nganal [Link]
eachf irmi spl ot teduseat hir
dv ariable—suchasr ev enue—t or epresentt heact ual
plotsi zeofeachf [Link] ngav ariablelikerev enuehel pst her eaderunder standthe
relati
v eper for manceofeachf i
rmi nt ermsoft het hirdv ar iable.
c)I dentifySt r
at egicGr [Link] loft hef irmshav ebeenpl otted,encl oseeach
groupoff ir
mst hatemer gesi nashapet hatr eflectst heposi ti
oni ngont hest r
ategic
[Link] hispoi nt ,assesswhet herornott hedi fferencesbet weeneachgr oupar e
meani ngf ulorwhet herot herv ari
abl esmustbesel ect edf rom whi chanot hersetof
strategicgr oupscanbedr awn.

31
Theabov ei sanexampl eofast r
ategicgroupmapf ortheretailIndustr
[Link] oup
creati
onandanal ysisprovi
desanef fect
ivewaytodev el
opacl ear erunderst
andi ngofhow
fi
rmswi thinanindustrycompet [Link]
cgr oupdepi ctsfi
rmswi thsi milar—i
f
notidentical
—compet it
iveattr
ibuteswi t
hintheindustr
y,themaphel psmanager sidentif
y
i
mpor tantdiffer
encesamongcompet i
ti
veposit
[Link] f
erencescanbesubj ectto
furt
heranal y
sistohelpsexplai
nmor esubtledi
ff
erencesinperfor mance.

32
COMPETI
TIVECHANGESDURI
NGI
NDUSTRYEVOLUTI
ON

Industr
yl i
fecycl
ecompr isesf ourstagesincludingfragmentati
on,growth,mat urit
yand
decli
[Link] under standing oft he indust
ryl if
ecycl
e can help competing compani es
survi
vedur ingperi
odsoft ransiti
[Link] er
alv ar
iat
ionsofthelifecycl
emodelhav ebeen
developedt oaddressthedev elopmentandt ransi
ti
onofpr oducts,marketandi ndustry
.
Themodel saresimilarbutthenumberofst agesandnamesofeachmaydi [Link]
model sincludethosedev elopedbyFox( 1973),Wasson( 1974),Anderson&Zei thaml
(1984),andHi l
l&Jones( 1998).

33
a)Fr agment at
ionSt age
Fragment ationi st hef ir
stst ageoft henew i ndust [Link] si st hest agewhent henew
i
ndust rydev elopst hebusi [Link] hisst age,t henewi ndust rynor mal lyar i
seswhenan
entrepr eneurov ercomest het winpr oblemsofi nnov ati
onandi nvention,andwor ksout
how t obr ingt henew pr oduct sorser vi
cesi ntot hemar [Link] e,airtravel
servicesofmaj orai rl
inesi nEur opewer esol dt ot het argetmar ketatahi ghpr ice.
Ther efore,t hemaj orit
yofai rl
ines'cust omer si nEur opewer et hosepeopl ewi thhigh
i
ncomeswhocoul daf f
ordpr emi um pricesf orfast ertravel.
In1985,Ry anai rmadeahugechangei nt heEur opeanai rl
inei ndust r
y .Ry anairwast he
fi
rstai rli
net oengagel ow- costairl
inesi nEur [Link] hatt ime,Ry anai r
'sser vi
ceswer e
perceiv edast hei nnovationoft heEur opeanai rlinei ndustry .Ryanai rticketsar ehalfthe
pri
ceofBr itishAi r
way [Link] t
ssal espr omot i
onswer ev [Link] smadepeopl e
thi
nkt hatai rtr
av elwasnotj ustmadef orther i
ch, butev erybody .
Ryanai rov ercamet het winpr oblemsofi nnovationandi nvent i
oni nt heai r
lineindustryby
i
nv entingai rtravelser vi
cest hatcoul dser v epassenger swi tht i
ghtbudget sandt hose
whoj ustwant edt or eacht heirdestinationwi thoutbr eakingt heirbanksav i
[Link] anair
achiev edt hisgoalbyel i
mi nati
ngunnecessar yser vi
cesof feredbyt raditi
onalai rli
[Link]
34
doesnotof f
erf reemeal s,usespaper -freeai rticket s, get sr i
dofmi lecol lect ingscheme,
utili
sessecondar yai rpor t
s,andof fersf r
equentf light [Link] echni queshel pRy anair
sav et imeandcost sspenti nai r
li
nebusi nessoper ation.
b)Shake- out
Shake- outi st hesecondst ageoft hei ndust r
yl ifecy cle.I ti st hest ageatwhi chanew
i
ndust ryemer [Link] i
ngt heshake- outst age,compet itorsst ar tt or eal isebusi ness
oppor tunitiesint heemer gingi ndust [Link] alueoft hei ndust ryal soqui ckl yr i
ses.
Forexampl e,manypeopl edi eandsuf ferbecauseofci gar ettesev eryy ear .Thus,t heUK
gov er nmentdeci ded t ol aunch a campai gn t o encour age peopl et o qui tsmoki ng.
Nicor et te,oneoft hel eadi ngcompani esi spr oduci ngsev eralni cot i
nepr oduct stohel p
peopl e qui tsmoki [Link] ofi ts wel l
-known pr oduct si ncl ude Ni cor et t
e pat ches,
Nicol ettegumsandNi cor ettelozenges.
Smoker sbegant oseeaneasywayt oqui tsmoki [Link] ndust ryst art edt oat t
ract
brandr ecogni tionandbr andawar enessamongi tst ar getmar ketdur i
ngt heshake- out
[Link] corette'spr oduct sbegant ogai npopul ar i
tyamongt hosewhowant edt oqui t
smoki ngort hosewhowant edt or educet heirdai lyci gar etteconsumpt i
on.
Dur ingt hi sper iod,anot hercompanyr eali
sedt heoppor tuni tyint hismar ketanddeci ded
toent eri tbyl aunchi ngni cotinepr oductr anges,i ncl udi ngNi cLi tegum andpat ches.I t
recent l
ywentbey ondUK boar deraf tert heUK gov er nmenti nt r
oducednon- smoki ng
pol i
cyi npubl icpl aces, i
ncl udingpubsandni ght [Link] sbusi nesst hreatcr eat edanew
busi nessoppor tunityint hei ndust ryf orNi cLi tet ol aunchanewni cot i
ne- relat edpr oduct
calledNi cTi me.
NicTi mei sawhol enew wayf orsmoker st o" getaci gar ette"–anei ght -ouncebot tl
e
cont ainsal emon- f
lavour eddr i
nklacedwi thni cot i
ne, thesameamountofni cot i
neast wo
cigar [Link] cLi t
ewasf irstav ailableatLosAngel esai rpor tsf orsmoker swhogot
uneasyonf li
ght s,butnow t heni cot i
nesof tdr i
nksar eav ailablei nsomeconv enience
stor es.
c)Mat urity
Mat urityi st het hi
rdst agei nt hei ndust r
yl i
fecy [Link] ur it
yi sast ageatwhi cht he
efficienci es oft he domi nantbusi ness modelgi v et hese or gani sations compet i
tive
adv ant age ov ercompet i
[Link] compet iti
on i nt he i ndust ryi sr at heraggr essi ve
becauset herear emanycompet itor sandpr oductsubst [Link] i
ce,compet i
ti
on,and
cooper at i
ont akeonacompl exf [Link] esmayshi ftsomeoft hepr oduct ion
ov erseasi nor dert ogai ncompet i
tiveadv antage.

35
Forexampl e,Toy ot ai soneoft hewor l
d'sl eadi ng mul ti
nat ionalcompani es,sel ling
aut omobi lest ocust omer swor l
dwi [Link] tandi mpor tt axesmeant hati t
scar s
l
osecompet iti
v enesst ot hel ocalcompet i
tor s,especi all
yi nt heEur opeanaut omobi le
i
ndust r
[Link] esul t,Toy otadeci dedt oopenaf act oryi ntheUKi nor dert opr oducecar s
andsel lthem t ocust omer si nt heEur opeanmar ket .
Thehaut ecout ur ef ashi oni ndust ryi sanot hergoodexampl [Link] ear emanywest er n-
brandedf ashi onl abel st hatmanuf act uret hei rpr oduct sov erseasbycooper ati
ngwi t h
ov erseaspar tner s,ort heycoul dseekf or eignsuppl ierswhospeci alisei npar t
icular
mat erialsori [Link] nst ance,Ni kehasf act ori
esi nChi naandThai landasbot h
count ri
eshav echeapl abourcost sandcheap,qual i
tymat erials,par ti
cul arlyr ubberand
fabr [Link] er,t hei rov erseaspar tner sar enotal l
owedt osel lshoespr oducedf or
Adi dasandNi [Link] t
emshav etobeshi ppedbackt ot heUS, andt henwi llbeex por ted
tocount ri
eswor ldwi de, incl udingChi naandThai land.
d)Decl i
ne
Decl inei st hef i
nal stageoft hei ndust ryl i
fecy [Link] inei sast agedur ingwhi chawarof
slowdest ructionbet weenbusi nessesmaydev elopandt hosewi t
hheav ybur eaucraci es
mayf ail
.I naddi tion, thedemandi nt hemar ketmaybef ull
ysat i
sf i
edorsuppl iersmaybe
runni ngout .
Int hest ageofdecl ine,somecompani esmayl eav et hei ndust ryi ftherei snodemandf or
thepr oduct sorser vicest heypr ovi
de, ort heymaydev elopnewpr oduct sorser vicest hat
meett hedemandi nt hemar [Link], t hiswi l
l createanewi ndust ry .
Forexampl e,att hebegi nningoft hecommuni cat ioni ndust r
y ,pager swer eusedast he
mai ncommuni cat ionmet hodamongpeopl ewor kingi nt hesameor gani sat i
on,suchas
doct or sandnur [Link],t hecut ti
ngedgeoft hecommuni cat i
oni ndust ryemer gedi n
thef or m oft hemobi l
[Link] cat i
onpr ocessofpager scoul dnotbe
accompl ishedwi t
houtt [Link] oanot herpager ,theuserhadt o
phonet hecal l-cent rest af fwhowoul dt ypeandsendt hemessaget oanot herpager .On
the ot herhand,peopl e who use mobi le phones can make a phone- calland send
messagest oot hermobi leswi thoutgoi ngt hroughcal l
-cent rest aff.
Inr ecenty ear s,t he f eat ures ofmobi l
e phones hav e been dev elopi ng r apidlyand
cont inual [Link] peopl ecanusemobi lest osendmul timedi amessages,t akepi ctures,
checkemai l,sur ft hei nt ernet ,readnewsandl istent omusi [Link] l
ephonef eat ur e
dev el opmenthas r eached sat uration,t hus t he new i nnov ati
on ofmobi l
e phone
technol ogyhasi ncor por atedt heuseofcomput ers.

36
Thelaunchofper sonaldigit
alassistants(PDA)isagoodexampl eoft hedecli
nestageof
themobilephonei ndust r
yast hef eaturesofmostmobi lesaresimilar
.PDAsar ehand-
heldcomput er
st hatwer eor i
ginallydesignedasaper sonalorganiserbutitbecome
muchmor emul ti-
facetedinr ecenty [Link] eknownaspocketcomput ersor
palmtopcomput [Link] emanyusesf orbothmobilephonesandcomput er
ssuch
ascomput ergames, globalpositi
oningsy st
em, vi
deorecordi
ng,t
y pewrit
ingandwirel
ess
wide-
areanetwork.

Appl
icat i
onofi ndust ryl i
fecy cle
I
tisimpor tantf orcompani est ounder st andt heuseoft heindust rylifecyclebecausei ti
s
asurvivaltool f
orbusi nessest ocompet eint heindust ryeffectiv
elyandsuccessf [Link]
mainaspect si ntermsofst rategicissuesoft hei ndust rylif
ecy cl
ear edescr i
bedbel ow:
Compet ingov eremer gingi ndust ri
es
 Th egamer ulesi nindust rycompet iti
oncanbeundet erminedandt heresour ces
maybeconst [Link], itisv italforf i
rmst oi dentif
ymar ketsegment sthatwi ll
all
owt hem t osecur eandsust ainast rongposi t
ionwi thinthei ndust ry.
 Th epr oducti nt hei ndust rymaynotbest andar disedso i ti snecessar yf or
compani est oobt ainresour cesneededt osuppor tnewpr oductdev elopmentand
rapidcompanyexpansi on.
 Th eent rybar riersmaybel ow andt hepot ent i
alcompet iti
onmaybehi gh,t hus
compani esmustadaptt oshi ftthemobi li
tybar r
iers.
 Co nsumer smaybeuncer tainint [Link] esul t,determiningt he
ti
meofent r
yt ot heindust rycanhel pcompani est ot akebusi nessoppor tuniti
es
beforet heirrivals.
Compet ingdur ingt het ransiti
ont oi ndust rymat ur it
y
 Wh en compet ition int he i ndust ryi ncreases,f ir
ms can hav e a sust ainable
compet itiveadv antaget hatwi l
lpr ovideabasi sf orcompet i
ngagai nstot her
compani es.
 Th enewpr oduct sandappl icationsar ehar dert ocomeby ,whi lebuy ersbecome
mor esophi sticat ed and di ffi
cultt o under stand int hemat ur it
yst ageoft he
i
ndust ryl i
fecycl [Link],consumerr esearchshoul dbecar riedoutandt hiscoul d
helpcompani esi nbui ldingupnewpr oductl ines.
 Sl oweri ndust rygr owt hconst rainscapaci tygr owt handof tenl eadst or educed
i
ndust rypr ofitabi li
tyandsomeconsol [Link] efore,compani escanf ocus

37
 greaterat t
ent i
ononcost st hroughst r
ategiccostanal ysis.
 Th echangei nt hei ndust ryisr at herdy nami c,and an under standi
ng oft he
i
ndust r
yl i
fecy clecan hel p compani est o moni torand t acklet hesechanges
[Link] rmscandev elopor ganisationalst ructuresandsy stemst hatcan
facil
itatet het ransition.
 So mecompani esmayseekbusi nessoppor tuniti
esov erseaswhent heindust
ries
reacht hemat uri
tyst agebecausedur i
ngt hisst age,t hedemandi nthemar ket
startstodecl ine.
Compet ingi ndecl iningi ndust ries
Thechar acter i
sticsofdecl ini
ngi ndustriesi ncl
udet hef ollowing:
 De cl
iningdemandf orpr oduct s
 Pr uningofpr oductl ines
 Sh ri
nkingpr ofitmar gins
 F alli
ngr esearchanddev elopmentadv er
tisementexpendi t
ure
 De cl
iningnumberofr iv
al sasmanyar ef orcedt ol eavet heindust r
y
Forcompani est osur vi
vet hedy nami cenv i
ronment ,itisnecessar yforthem to:
 Me asur et hei ntensityofcompet i
tion
 As sesst hecausesofdecl ine
 Si ngleoutav iablest rategyf ordecl i
nesuchasl eadershi p,l
iquidati
onandhar v
est.

INDUSTRYSTRUCTURE
Industr
yi sacol lect
ionoff ir
msof feri
nggoodsorser v i
cesthatar ecl osesubst i
tutesof
eachot [Link] ndustryconsistsoffir
mst hatdir
ectl
ycompet ewi t
heachot her
.Indust
ry
struct
urer eferst othenumberandsi zedist
ri
buti
onoff ir
msi nani ndust r
[Link]
fir
msi nani ndust rymayr [Link] str
ibutionofthe
Firm isi mpor tantf rom bot h busi
ness poli
cyand publ i
c policyv [Link] l evelof
compet i
ti
oni nani ndustryri
seswiththenumberoff i
rmsi ntheindustry.
i
)Fr agment edI ndustry
Ifallfi
rmsi nani ndustryaresmal linsizewhencompar edwi tht hesi zeoft hewhol e
i
ndust r
y,theni tisknownasf ragmentedindust
ry.I
naf ragmentedi ndustry,no
Firms hav el arge mar ket
.Each f i
rm serves only a smallpi ece oft otalmar ketin

38
competi
ti
onwithothers.
i
i)Consol
idat
edIndustry
Ifsmal
lnumberoffir
mscont r
olsal
argeshar
eoft
hei
ndust
ry'
sout
putorsal
es,
iti
sknown
asaconsoli
datedi
ndustry.

CHARACTERI STI CSOFI NDUSTRYSTRUCTURE

Af inaldi mensi onofi ndust ryt hati si mpor tantt ot heper formanceofnewf ir
msi sindust ry
struct ur [Link] ructureoft hei ndustryr eferst ot henat ureofbar ri
erst o ent r
yand
compet itivedy nami csi nt hei ndust ry .
Fourchar acteristicsofi ndust r
yst ructurear epar t
icularlyimpor tanttot heper formanceof
newf irmsi nt hei ndust ry:
 Capi talIntensi ty
 Adv ertisingI ntensi t
y
 Concent ration
 Av er agef i
rm si ze
Capi talI nt
ensi ty– measur est he impor tanceofcapi talasopposed t ol abori nt he
product i
onpr [Link] ndust ri
es,suchasaer ospace,i nvolveagr eatdealofcapi tal
andr el ativelylittlelabor .Ot heri ndust ri
es,suchast extil
es,involverelativelylit
tlecapi tal
andagr eatdeal oflabor .
Adv er tisingI ntensi t
y–Adv ertisingi samechani sm t hroughwhi chcompani esdev elopt he
reput at ionst hathel pthem sel ltheirpr oduct sandser vi
[Link] l
dbrandnamer eputation
throughadv erti
si ng,t wo condi tionsneed t o bemet .Fi r
st,theadv erti
sing hast o be
repeat edov [Link], economi esofscal eexi stinadv erti
sing.
Concent rati
on–i sameasur eoft hemar ketshar et hatisheldbyt helargestcompani esi n
ani ndust [Link] nstance,somephar maceut icalindust r
ieslikeMer ck,Pf izerandEl iLilly
accountf oralmostal loft hemar ket .
Aver agef i
rm si ze-New f irmsper form bet ter,whent heav eragef i
rm sizei ssmal l
.New
fi
rmst endt obegi nsmal l asawayt omi nimi zet her iskofEnt repreneurialmi scalculati
on.I f
theav er agef ir
m si zei sl arge,t hismayl eadt oI nabi l
i
tyt opur chasei nv ol
ume,hi gher
aver agemanuf act ur
ingandDi stributioncost .

USESOFI
NDUSTRYSTRUCTURE
 Busi
nessPol
icyandSt
rat
egy
:Byl
ooki
ngatt
hest
ruct
ureofani
ndust
ry,onecan

39
 oft
enlearnalotaboutcompet
it
ion,r
ival
ry,ent
rybar
ri
ers,andot
heraspect
sof
competi
ti
vedy
namicsint
hati
ndustr
y.
 Publ
icPol
icy
:Publ
i
cPol
i
cyVi
ew i
sthat
,reducedcompet
it
ioni
nani
ndust
ryhur
ts
consumer’si
nter
estandencour
agesdomi
nantf
ir
mst
oadoptant
icompet
it
ivet
rade
pract
ices.
 Ol
igopol
y:Akeychar
act
eri
sti
cofanol
i
gopol
y(ahi
ghl
yst
ruct
uredi
ndust
ry)i
sthat
competi
torsaremutual
lyinter
dependent
;acompetit
ivemovebyonecompanywi
l
l
al
mostcertai
nlyaf
fectthefort
unesofothercompani
esinthei
ndust
ryandt
heywi
l
l
gener
all
yrespondtothemov e-
soonerorlat
er.

GLOBALI ZATION
Globali
sati
onisthetermtodescri
bethewaycount ri
esarebecomi
ngmoreint
erconnect
ed
both economi cal
l
y and cultur
all
y. Thi
s pr ocess i
s a combinat
ion of economic,
technol
ogical
,soci
o-cul
tur
alandpoli
ti
calf
orces.

ADVANTAGES
 I
ncreasedf r
eet radebet weennat ions
 I
ncreasedl iquidityofcapi talallowi ngi nvest orsi ndev el
opednat i
onstoinvestin
developingnat ions
 Corporationshav egreaterf l
exibili
tyt ooper ateacr ossbor ders
 Globalmassmedi atiesthewor ldt ogether .
 I
ncreased f low ofcommuni cations al lows v italinformation to be shared
betweeni ndivi
dual sandcor por ati
onsar oundt hewor l
d
 Greatereaseandspeedoft ranspor t
ationf orgoodsandpeopl e.
 Reductionofcul t
ur albarr
iersincr easedt hegl obal v
il
lageeffect
 Spreadofdemocr at i
cidealst odev elopednat ions.
 Greaterinterdependenceofnat i
onst ates.
 Reductionofl ikeli
hoodofwarbet weendev el opednat ions
 I
ncreasesi nenv i
ronment al protect i
oni ndev elopednat i
ons

DI
SADVANTAGES
 Incr
easedfl
ow ofskill
edandnon- ski
l
ledjobsfrom devel
opedtodevel
opi
ng
nati
onsascorpor
ati
onsseekoutthecheapestl
abor.
 Spreadofamat eri
ali
sti
cli
fest
yleandatti
tudethatseesconsumpt
ionasthe

40
 pat htopr osper i
ty
 Internati
onalbodi esli
ket hewor ldt r
adeor ganizati
oni nfri
ngeonnat i
onaland
i
ndi vidual
 Great erriskofdi seasedbei ngtranspor t
eduni ntenti
onallybetweennat i
ons.
 Great erchanceofr eactionsf orgl obalizati
onbei ngv i
olenti nanat temptt o
preser vecul tur
al heri
tage.
 Increasedl ikeli
hoodofeconomi cdisrupti
onsi nonenat i
onef fecti
ngallnati
ons.
 Thr eatthatcont rolofwor ldmedi abyahandf ulofcor porati
onswi l
lli
mitcultur
al
expr ession.
 Takeadv ant ageofweakr egulatoryrulesindev elopingcount r
ies.
 Increasei nthechancesofci vilwarwi thindev elopingcount ri
esandopenwar
bet weendev elopingcount r i
esast heyv i
ef orresources.
 Decr easei nenv ir
onment al i
ntegri
tyaspol l
uti
ngcor porations.

I
mpactofglobal
izationoni ndustr
yst r
uctur
e
Thest
ruct
ureofani ndust
ryisaf fect
edbyglobal
i
zat
[Link]
obal
i
zat
iongav
eri
set
othe
fol
l
owi
ngtypesofindust ri
es.
 Mul tidomesticIndustr
ies
 Gl obal I
ndustr
ies

Multidomest i
cI ndust r
iesar especifi
ct oeachcount ryorgr oupofcount r
[Link] ypeof
i
nternationalindust ryis a col l
ecti
on ofessent iall
ydomest icindust
ries li
ke retail
ing,
i
nsuranceandbanki [Link] acturi
ngf aci
li
tytoproducegoodsf orsalewi thintheir
countryitsel
f.
GlobalI ndustri
esoper atewor l
dwi de,wi t
hMNCsmaki ngonl ysmal ladjustment sf or
country-specifi
cci r
cumst [Link] r
yisonei nwhi chaMNCsact i
vit
iesinone
countryar e signifi
cantlyaf fect
ed byi t
sact ivi
ti
es in ot hercountri
[Link] pr oduce
productsorser vicesi nv ari
ouslocationsthroughoutt hewor l
dandsellthem,maki ngonl y
minoradj ust
ment sforspeci f
iccountryrequirement s.
Ex:Commer cialAircrafts,Televi
sionsets,Semi conductors,copier
s,automobi l
es,wat ches
andty r
es.

41
NATIONALCONTEXTANDCOMPETI TIVEADVANTAGE:
Despitethegl obalizationofpr oduction&mar kets,manyoft hemostsuccessf ul
companiesi
ncer t
aini ndust r
iesar est i
ll
cluster
edi nasmal lnumberofcount r
ies.
Bi
otechnol ogy&comput ercompani es–U. S.
El
ectr
oni csCompany–Japan.
Chemical &Engi neeringcompany–Ger many .
Thissuggestst hatt henat i
on–st atewithinwhi chacompanyi sbasedmayhav ean
i
mpor t
antbeari
ngont hecompet i
tivepositi
onoft hatcompanyi nthegl obalmar ketpl
ace.
Compani es need t o under stand how nat ionalf actor
s can af fectcompet it
ive
advant
age,fort
hent heywi ll
abl etoident i
fy.
[Link] etheirmostsi gnif
icantcompet itorsarelikelytocomef rom.
[Link] etheymi ghtwantt ol ocatecertainproduct i
veactiv
iti
es.

Attri
butestoident i
fyNati
onalEnvi
ronment:
1. Fact orEndowment s:
A nat i
on’s positi
on i
nf actors of pr
oducti
on such as skil
led labor or t
he
i
nf r
astr
ucturenecessar yt
ocompetei nagiv
enindust
ry.
2. DemandCondi ti
ons:
Thenat ureofhomedemandf ort
heindust
ry’
sproductorser
vice.
3. Rel ati
ng&Suppor t
ingI
ndust
ries:
Thepr esenceorabsencei nanat i
onofsupplieri
ndustr
iesandr el
atedindust
ri
es
thatisi
nternational
lycompeti
ti
ve.

42
 4. Firm St
rat
egy,
Str
uctur
e&Rivalr
y:
Thecondi
ti
onsinthenat
iongover
ninghowcompani
esar
ecr
eat
ed,or
gani
zedand
managedandthenat
ureofdomesti
cri
val
ry.

COMPETITIVEADVANTAGE:
Competi
ti
veadvantageleadst
osuper i
orpr of
it
abil
it
[Link]
hemostbasi
clev
el,how
pr
ofi
tabl
eacompanybecomesdependsont hreefactors:
[Link]
splaceont hecompany ’
spr
oduct
.
[Link]
cethatacompanychargesforit
spr oducts.

43
 [Link] eatingthatval
ue.
Val
uei ssomet hing thatcustomer sassignto aproduct .I tisaf unct
ion ofthe
att
ri
butesofthepr oduct,suchasi t
sper f
ormance,desi
gn,qualit
y,&poi nt–of–scal e&
aft
ersaleserv
ice.
Acompanyt hatstrengthensthev al
ueofi t
sproducti nthepr oductsintheey esof
customersgivesitmor epr i
cingopti
ons.I tcanrai
sepricestor ef
lectthatval
ueorhol d
pri
ceslower,whichinducesmor ecustomerstopurchaseitsproduct&expanduni tsales
vol
ume.

.
A)RESOURCES:
Resourcesarethecapi
talorfi
nanci
al,phy
sical
,soci
alorhuman,t
echnol
ogicaland
or
gani
zat
ionalf
actorendowmentsthatal
l
owacompanyt ocreat
eval
uefori
tscust
omer s.

Ty
pes:
I)Tangibl
eresources:
-
Aresomet hingphy si
cal,suchasland,buil
dings,pl
ant,equipment,i
nvent
ory
andmoney .
II
)Intangibl
eresources:
-
Arenon- physicalent i
ti
est hatarethecr eati
on ofthecompanyand i ts
employees,suchasbr andnames,t hereputat
ionoft hecompany ,theknowledge
thatemployeeshav egai nedthr oughexperi
enceandt heint
ell
ectualproper
tyofthe
companyi ncl
udingpat ents,copy r
ights&tr
ademarks.

B)CAPABILI
TIES:
-
Refer
st o acompany’
sskil
lsatcoor
dinati
ng i
tsresour
ces& putt
ing t
hem t
o
pr
oduct
[Link]
l
lsr
esidei
nanor
gani
zation’
srul
es,r
outi
nesandpr
oducers.

C)COMPETENCI ES:
Competenci
esaref ir
m –specif
icstr
engthsthatallowacompanyt odiff
erenti
atei
ts
products and f
orachi eve subst
anti
all
ylowercostt han i
tsriv
als and thus gaina
compet i
ti
veadvantage.
Typesofcompetency
i
) Core compet ency:Itis an act i
vi
ty centralt oaf i
rm'
s pr ofi
tabi
li
ty and
competi
ti
venesst hatisper
for
medwel lbythef i
[Link] ecompetenciescreat
eand

44
 sustainfirm'sabil
i
tytomeett hecr i
ti
calsuccessf act
orsofparti
cularcustomer
groups.
i
i)Disti
nctivecompetency:Itisacompet it
ivel
yvaluableact
ivi
tyt
hatafirm perf
orms
betterthani t
scompet i
[Link] ovi
det hebasi sforcompeti
ti
veadv antage.
Thesear ecornerst
oneofst [Link]
desust ai
nablecompet
iti
veadv antage
becauset hesearehardtocopy .

GENERI CBUI LDINGBLOCKSOFCOMPETI TIVEADVANTAGE

Organizationstodayconf r
ontnew mar ket s,new compet it
ionandi ncreasi
ngcust omer
[Link] oday '
sor gani
zationshav etoconst antl
yr e-
engineert heirbusi
ness
practi
cesandpr ocedurestobemor eandmor eresponsivetocustomer sandcompet it
ion.
Int he 1990'sI nformati
on t echnologyand Busi ness Process re-engineeri
ng,used in
conjuncti
onwi t
heachot her,haveemer gedasi mpor tanttoolswhichgi veor gani
zati
ons
[Link] f
iciencyofanent erpr
isedependsont hequickf l
owofi nformati
on
acrossthecompl [Link]
om t hecustomert omanuf acturerstosupplier
.The
genericbui l
dingblocksofaf i
rmt ogai ncompet it
iveadvantagear e-Qual i
ty,Eff
ici
ency,
Innovati
onandCust omerr esponsiveness.

45
A)EFFI CI
ENCY–I nabusi nessorganizat i
on,i nputssuchasl and,capital
,raw material
manager i
alknow- howandt echnol
ogicalknow- howar etransformedintoout putssuchas
productsandser v i
[Link]
iciencyofoper ationsenabl esacompanyt olowert hecostof
i
nputst oproducegi venoutputandtoat taincompet it
[Link] eeproduct
ivity
i
smeasur edi ntermsofout putperempl oyee.
Forex:Japan’ sautogi antshav ecost–basedcompet i
ti
veadv antageov ertheir
nearri
valsinU.S.
B)QUALI TY–Qual it
yofgoodsandser vicesi ndicatestherel
iabil
it
yofdoi ngthejob,which
theproductisi [Link] ghqualit
ypr oduct screatear eputati
onandbr andname,
whichinturnper mitsthecompanyt ochar gehi [Link]

46
qualit
ymeansempl oyee’st i
mei snotwast edonr ework,def ecti
v ewor korsubst andard
work.
Forex:I nconsumerdur ableindust r
iessuchasmi xer s,gr i
nder s,gasst ovesand
wat erheat er
s,ISOmar ki
sabasi ci mper ati
veforsur v
iv al.
C)INNOVATI ON –I nnov ati
onmeansnewwayofdoi ngt hings.I nnov ationresultsinnew
knowledge,new pr oductdev el
opmentst r
uct uresandst rategi esi nacompany .Itoffers
somet hinguni que,whicht hecompet it
or smaynothav e,andal l
owst hecompanyt ochar ge
highprice.
Forex: Phot ocopiersdevelopedbyXer ox.
D)CUSTOMERRESPONSI VENESS–Compani esareexpect edt oprov idecust omerswhat
theyar eexact l
yi nneedofbyunder standingcust omerneedsanddesi [Link]
Responsi venessi sdet er
mi nedbycust omi zationofpr oduct s,quickdel i
v er
yt i
me,quality
,
designandpr omptaf tersalesservice.
Forex:Thepopul ari
tyofcour ierser v i
ceov erIndianpost alser viceisduet ot he
fast
nessofser v
ice.

DISTINCTI VECOMPETENCI ES
Disti
nctivecompet encei sauni quest rengt
ht hatall
owsacompanyt oachievesuper
ior
effi
ciency,quali
ty,i
nnov ati
onandcust omerr esponsi
[Link]
lowsthef i
rmt ocharge
premi um pri
ceandachi evel ow costscompar edt ori
vals,whichresul
tsinapr ofi
trate
abovet heindustr
yav erage.
Ex:Toy ot
awi thwor l
dclassmanuf act
uringprocess.
Inordertocallany t
hingadi sti
nct
ivecompet encyitshoul
dsat i
sfy3condit
ions,namel
y:
 Val
ue–di
spr
opor
ti
onat
econt
ri
but
iont
ocust
omerper
cei
vedv
alue;
 Uni
que–uni
quecompar
edt
ocompet
it
ors;
 Ext
endi
bil
i
ty–capabl
eofdev
elopi
ngnewpr
oduct
s.

Di
sti
nct
iveCompet
enci
esar
ebui
l
tar
oundal
lfunct
ional
areas,
namel
y:
 Technol
ogyr
elat
ed
 Manuf
act
uri
ngr
elat
ed
47
  Di
str
ibut
ionr
elat
ed
 Mar
ket
ingr
elat
ed
 Ski
l
lsr
elat
ed
 Or
gani
zat
ional
capabi
l
ity
 Ot
hert
ypes.

Dist
incti
veCompet enci
esar i
sef r
om t wosourcesnamel y ,
 Resour ces–Ar esourcei nanasset ,compet ency,process,ski
llorknowledge.
Resour cesmaybet angible–land,buildi
ngs,P&M ori ntangibl
e–br andnames,
reputation,patens,know- how andR&[Link] esourceisast r
engthwhi chtheco
withcompet it
iveadv antageandithast hepot ent
ialtodowel lcompar edtoits
compet i
tors.
Resources ar et he f i
rm-specifi
c assets usefulf orcr eat
ing a costordi fferent
iat
ion
advantageandt hatf ewcompet i
[Link] ol
l
owi ngaresomeexampl es
ofsuchr esources:
 Pat
ent
sandt
rademar
ks
 Pr
opr
iet
aryknow-
how
 I
nst
all
edcust
omerbase
 Reput
ati
onoft
hef
ir
m
 Br
andequi
ty.
Thest
rengt
hsandweaknessesofr
esour
cescanbemeasur
edby
,
 Company
’spastper
for
mance
 Company
’skeycompet
it
orsand
 I
ndust
ryasawhol
e.
Theext
enttowhi
chi
tisdi
ff
erentf
rom t
hatoft
hecompet
it
ors,i
tisconsi
der
edasa
st
rat
egi
casset
.

Evaluati
onofkeyr esources
A unique resour
ce isonewhi ch i
snotf ound i
n anyothercompany.A resour
ceis
consideredtobevaluableifi
thel
pstocreat
estrongdemandfort
heproduct
.
Barneyhasev ol
vedVRI Oframeworkofanal
ysistoeval
uat
ethefi
rm’
skeyresour
ce,say
 Val
ue–doesi
tpr
ovi
decompet
it
iveadv
ant
age?
 Rar
eness–doot
hercompet
it
orspossessi
t?

48
  I
mit
abi
l
ity–i
sitcost
lyf
orot
her
stoi
mit
ate?
 Or
gani
zat
ion–doest
hef
ir
m expl
oitt
her
esour
ce?

 Capabi l
it
ies – are ski
ll
s,whi ch bri
ng toget
herr esource and putthem to
[Link] ganizati
onsstructur
eandcont r
olsystem giv
esr i
seto
capabili
ti
eswhichar eintangi
[Link] dhav ebot huni
quev al
uabl
e
resources and capabil
it
ies to expl
oitresour
ces and a unique capabil
i
tyto
managecommonr esources.

Capabi
li
ti
esrefertothef i
rm'sabil
i
tytout i
li
zeit
sr esour
cesef fecti
v el
[Link]
capabi
l
ityisthe abil
it
yt o bri
ng a productto mar ketfastert han competi
[Link]
capabi
l
iti
es ar
e embedded i nt he routi
nes oft he organizati
on and ar e noteasil
y
documentedasproceduresandthusarediffi
cul
tforcompet i
torstor epl
icat
e.

DURABI LI
TYOFCOMPETI TI
VEADVANTAGE
Durabi
li
tyofcompetit
iveadvant
agereferstotherat
eatwhichthefir
m’scapabi
l
iti
esand
resour
cesdepreci
ateorbecomeobsolete.I
tdependsont
hreefact
ors:

A)Bar
ri
erst
oImi
tat
ion:

Barr
iersaref actorswhichmakei tdiff
icultforacompet itoriscopyacompany’
sdistinct
ive
compet [Link] l ongert he period fort he compet i
tortoimi t
atethe di
stinct
ive
compet ency,thegr eatertheoppor t
unitythatt hecompanyhast obui l
dastrongmar ket
posit
ioned r eputat
ion with consumer [Link]
tyr eferst othe rat
e atwhich others
dupli
cateaf irm underl
yingresourcesandcapabi l
it
ies.
Tangibl
er esourcescanbeeasi l
yi mi
tatedbuti ntangibler esour
cescannotbei
mi t
atedand
capabil
iti
escannotbei mitat
ed.

B)Capabi
l
ityofCompet
it
ors:

Whenaf i
rmi
scommi tt
edt oapart
icul
arcour
seofacti
onindoi
ngbusi
nessanddevel
ops
aspeci
fi
csetofresourcesandcapabi
li
ti
es,suchpr
iorcommit
mentsmakeitdi
ffi
cul
tto
i
mit
atetheCAofsuccessfulf
ir
ms.

49
 Amaj ordeterminantoft hecapabili
tyofcompet i
torst oimitateacompany ’s
competi
ti
v e adv antage r api
dlyi st he nat ur
e of t he compet i
tor’
s pr i
or str
ategic
commitment s&Absor pti
vecapacity.
i) Strategiccommi t
ment :
Acompany ’scommi t
mentt oapar ticularwayofdoi ngbusi nessthatist o
devel
opi
ngapar ti
cularsetofr esources&capabi l
i
ties.
ii)Absor pti
v ecapaci t
y:
Referst otheabi l
it
yofanent erpri
setoi denti
fyval
ue, assimil
ate,andusenew
knowl edge.
C)Dy nami sm ofi ndustry:Dynami ci ndustri
es ar e charact
er i
zed byhi gh rate of
i
nnovati
onandf astchangesandcompet iti
veadv antagewi l
lnotlastf oral [Link]
mostdynami ci ndustriestendt obet hosewi thaver yhighrateofpr oductinnovat
ion.
Ex: Comput erindustry.

AVOI
DINGFAI
LUREANDSUSTAI
NINGCOMPETI
TIVEADVANTAGE

Whenacompanyl osesi tscompet i

tiveadv antage,itsprofit
abil
ityf al
[Link]
companydoesnotnecessar i
lyfai l
,itmayj usthav eav erageorbel ow-averagepr ofitabil
it
y
andcanr emai ninthismodef oraconsi derablet i
me, al
thoughi tsresources&capi t
albase
i
sshr i
nking.
Reasonsf orfail
ur e:
a)Iner t
ia:
TheI nerti
aar gumentsay st hatcompani esfinditdi f
fi
culttochanget heirstrategies
&structuresi nordertoadaptt ochangi ngcompet iti
vecondi ti
ons.
b)Pr i
orst rategiccommi t
ment s:
Acompany ’spriorstrategiccommi t
mentnotonl yl imitsitsabili
tytoi mitater ival
s
butmayal socausecompet i
tiv
edi sadvantage.
c)TheI carusPar adox:
Accor dingtoMi ler,manycompani esbecomesodazzl edbyt hei
rearlysuccesst hat
theybeli
ev emor eoft hesamet ypeofef fortist hewayt of [Link] esul t,
they
canbecomesospeci alizedandi nnerdirectedt hattheyl osesi ghtofmar ketreal i
tiesand

50
t
hefundamentalr
equi
rement
sforachi
evi
ngacompet
it
iveadv
ant
[Link]
ater
,thi
s
l
eadstofai
l
ure.

St
epst
oAv
oidFai
lur
e:

a)Focusont heBui ldingBl ocksofcompet i

tiveadv ant age:
Mai ntainingacompet iti
veadv antager equiresacompanyt ocont i
nuef ocusi ngon
allfourgener icbui ldingbl ocksofcompet i
ti
veadv antage–ef fi
ciency ,quality,innov ati
on,
andr esponsi v enesst ocust omer sandt odev elopdi stincti
v ecompet enciest hatcont ribute
tosuper iorperformancei nthesear eas.
b)I nstitutecont inuousI mpr ovement&Lear ning:
Insuchady nami candf ast–pacedenv ir
onment , t
heonl ywayt hatacompanycan
maint ainacompet it
iveadv antageov ert
imei st ocont inuallyimpr ovei t
sef fi
cient l
y ,qual it
y
i
nnov at ion and r esponsi veness t o cust omer .The way t o do t hisi sr ecogni ze t he
i
mpor tanceofl earningwi t
hint heor ganizati
on.
c)Tr ackBestI ndust rialPracticeanduseBenchmar king:
Benchmar kingi sthepr ocessofmeasur ingt hecompanyagai nstt hepr oduct s,
practi
cesandser vicesofsomeofi tsmostef fi
cientgl obal compet i
tors.
d)Ov er comeI nerti
a:
Ov ercomi ngt hei nternalforcest hatar eabar r
iert ochangewi thi
nanor gani zat ionis
oneoft hekeyr equi rement sf ormai ntaini
ngacompet i
tiveadv antage.
Once t his step has been t aken,i mplement ing change r equir
es good l eader shi p,t he
j
udicioususeofpowerandappr opr i
atechangesi nor ganizati
onalst ructure& cont r
ol
systems.

51
UNIT-I I
I
Thegener icstr ategi
cal ter
natives–St abili
ty,Expansion,Ret r
enchmentandCombi nation
str
ategies-Busi nessl evelstr
ategy-Strategyi ntheGl obalEnv i
ronment-
CorporateStr
ategy-
Verti
calIntegrat i
on-Diversi
fi
cationandSt rategicAlli
ances-Bui ldi
ngandRest r
ucturi
ngt he
corporati
on-St rategicanalysisandchoi ce-Env i
ronment alThreatandOppor t
unityProfil
e
(ETOP)-Or ganizationalCapabi li
ty Pr ofi
le -St rat
egic Adv antage Prof
il
e -Cor porate
Portf
olioAnal ysis-SWOTAnal ysis-GAPAnal ysi
s-McKi nsey'
s7sFramewor k-GE9Cel l
Model -Disti
nct iv
ecompet it
iveness-Sel ecti
onofmat r
ix-BalanceScoreCard-casestudy .

52
HI
ERARCHI
CALLEVELSOFSTRATEGY

St
rat
egycanbefor
mulat
edonthr
eedi
ff
erentl
evel
s:
 CORPORATEL EVEL
 BUSINESSUNITLEVEL
 FUNCTIONALLEVEL

 CORPORATESTRATEGY
Cor por atest rategyt ell
suspr imar i
lyaboutt hechoi ceofdi rect i
onf ort hef ir
m asawhol e.
Inal argemul tibusi nesscompany ,howev er,corpor at est rategyi salsoaboutmanagi ng
variouspr oductl i
nesandbusi nessunitsf ormaxi mum v [Link] enthougheachpr oduct
l
ineorbusi nessuni thasi tsowncompet it
iveorcooper ati
v est rategyt hati tusestoobt ai
n
i
tsowncompet i
tiveadv antagei nthemar ketpl ace, t
hecor por ati
onmustcoor di
natethese
dif
f erencebusi nessst r
ategiessot hatthecor porati
onasawhol esucceeds.
Cor por atest rategyi ncludesdeci sionregardingt hef l
owoff inanci alandot herresourcesto
andf rom acompany ’
spr oductlineandbusi nessuni t [Link] oughaser iesofcoor dinati
ng
dev ices,acompanyt ransfersskillsandcapabi l
it
iesdev elopedi noneuni ttootheruni ts
thatneedsuchr esour ces.
Acor porat i
on’slst r
ategyi scomposedoft hreegener alor ientat i
ons( alsocall
edgr and
strategi es):
A)Gr owt hst rat egiesexpandt hecompany ’
sact ivi
ties.
B)St abili
tyst rat egiesmakenochanget othecompany ’scur rentact i
vi
ties.
C)Ret renchmentst rategiesreducet hecompany ’
slev el ofact ivit
ies.
D)Combi nationst r
at egi
esi sthecombi nationoft heabov et hreest r
ategi es.

53
Hav ingchosent hegener alor i
ent ati
onacompany ’
smanager scansel ectf rom mor e
speci f
iccor por at est rategi essuchasconcent rationwi t
hinonepr oductl ine/ indust ryor
diversificat i
on i nt o ot herpr oduct s/indust r
[Link] st rategi es ar e usef ulbot ht o
corpor at i
onsoper at ingi nonl yonepr oductl i
neandt ot hoseoper atingi nmanyi ndust ri
es
withmanypr oductl i
nes.
Byf art hemostwi del ypur suedcor porat edi rectionalst rategi esar et hosedesi gnedt o
achiev egr owt hi nsal es, asset s, prof i
tsorsomecombi nat [Link] est hatdobusi ness
i
nexpandi ngi ndust riesmustgr owt osur v i
[Link] inui nggr owt hmeansi ncr easi ngsal es
andachancet ot akeadv ant ageoft heexper i
encecur vet or educeperuni tcostof
product s sol d,t her eby i ncr easi ng pr of [Link] s costr educt ion becomes ext r emel y
i
mpor tanti facor por ation’si ndust r
yi sgr owingqui cklyandcompet itor sar eengagi ngi n
pri
cewar si nat tempt st oi ncr easet heirshar esoft hemar [Link] rmst hathav enotr eached
“cri
ticalmass”( thati s, gainedt henecessar yeconomyofl argescal epr oduct i
ons)wi llf ace
l
argel ossesunl esst heycanf i
ndandf i
llasmal l
,butpr of i
tabl e,ni chewher ehi gherpr ices
canbeof f setbyspeci alpr oductorser vicef eatur [Link] swhyMot or olaInc. ,cont inues
tospendl ar gesum ont hepr oductdev el opmentofcel lularphones,pager s,andt wo- way
radios,despi teaser i
ousdr op i n mar ketshar eand pr [Link] ding t o Mot or ola’
s
Chai rmanGeor geFi sher , “
what ’
satst akeher eisl eader shi p”.Ev ent hought hei ndust rywas
changi ngqui ckl y,t hecompanywaswor kingt oav oi dt heer osionofi tsmar ketshar eby
j
umpi ngi nt onewwi relessmar ket sasqui ckl yaspossi bl [Link] ngoneoft hemar ketl eader s
i
nt hisi ndust rywoul dal mostguar anteeMot orolaenor mousf ut urer et ur ns.
A Cor por ation can gr ow i nt ernally by expandi ng i ts oper at i
ons bot h gl obal ly and
domest ical l
y ,ori tcangr owext ernal l
ythr oughmer ger s, acqui siti
onandst rategi cal liances.
Amer geri sat ransact ioni nv ol vi
ngt woormor ecor por at i
onsi nwhi chst ocki sexchanged,
butf rom whi chonl yonecor por ationsur vi
[Link] ger susual lyoccurbet weenf irmsof
somewhatsi mi larsi zeandar eusual l
y“ friendly”.Ther esul tingf irmi sl i
kel yt ohav eaname
derivedf rom i tscomposi tef [Link] ei nt hePhar maI ndust ryi st hemer gi ngof
GlaxoandSmi thkl ineWi lli
amst of orm Gl axoSmi thkl i
[Link] siti
oni sthepur chaseof
acompanyt hati scompl et elyabsor bedasanoper atingsubsi diar yordi visionoft he
acqui ri
ngcor por [Link] esar ePr oct er&Gambl e’sacqui sitionofRi char dson- Vi cks,
knownf ori t
sOi lofOl ayandVi cksBr ands, andGi llette, knownf orshav ingpr oduct s.

54
TheCorporateDi
recti
onalSt r
ategiesar e:
A)Growth
(i
)Concentrat
ion
 Horizontalgrowt h
 Verti
cal gr
owt h
- For wardintegration
- Backwar dintegr ati
on
(i
i)Div
ersi
fi
cation
 Concent ri
c
 Congl omerate
B)St
abil
ity
(i
)Pause/Proceedwi thCaut ion
(i
i)NoChange
(i
ii
)Profi
t

C)Ret
renchment
(i
)Turnaround
(i
i
)Capt i
veCompany
(i
i
i)Sell
-out/Divestment
(i
v)Bankruptcy/Liqui
dati
on

A)GROWTHSTRATEGY
Acquisiti
onusual l
yoccursbetweenf i
rmsofdi f
ferentsizesandcanbeei t
herfriendl
yor
hostil
[Link] i
le acqui
sit
ions ar
e often cal
l
ed t akeover
s.A Strat
egic Al
li
ances i sa
partnership oftwo ormor e corpor
ati
ons orbusi ness uni
tsto achi
eve str
at egi
cal
ly
signif
icantobjecti
vesthataremut ual
l
ybenefici
[Link] er
yattr
act
ivestrategyfor
twokeyr easons.
 Gr
owt
hisbasedoni
ncr
easi
ngmar
ketdemandmaymaskf
lawsi
nacompany(
fl
aws
thatwoul dbeimmedi atel
yev identinast ableordecli
ningmar [Link] owingf l
ow of
revenuei nt
oahi ghl
yleveragedcor por
ati
oncancr eat
eal ar
geamountofor ganization
slack.(unusedresources)thatcanbeusedt oquickl
yresolveproblemsandconf li
cts
between departments and di visi
[Link] owth also pr
ov i
des a bi g cushion fora
turnaroundincaseast r
ategicer r
[Link] gerfi
rmsal sohav emor ebar gaining
powert handosmal lfi
rmsandar emor el
ikelytoobtai
nsuppor tfr
om keyst akehol ders

55
 i
ncaseofdi
ff
icul
ty.
 Agr
owi
ngf
ir
m of
fer
smor
eoppor
tuni
ti
esf
oradv
ancement
,pr
omot
ions,
andi
nter
est
ing
j
obs,gr owthi t
selfi
sexci ti
ngandegoenhanci ngforCEO’[Link] ketplaceand
potenti
alinvestor
stendt ov i
ew agrowingcor
porati
onasawi nneroront hemov e.
Executi
vecompensat iontendstogetbi
ggerasanorgani
zat
[Link]
ge
fi
rmsal somor ediff
iculttoacqui
rethanaresmall
erones;thusanexecut i
v e’sj
obi s
mor esecure.

(i
)CONCENTRATI ONSTRATEGY:Ifacompany ’
scurrentproductli
neshaverealgrowth
potenti
al,
concentr
ati
onofr
esourcesonthoseproductli
nesmakessenseasast rat
egy
[Link]
ati
onstrat
egiesarev ert
icalgr
owthandhor izontal
[Link]
msi nagrowingindust
rytendtochooset hesestr
ategiesbefore
theytr
ydiversi
fi
cati
ons.

 Verti
calgr owt hcanbeachi ev edbyt aki
ngov eraf unctionpreviouslyprovidedbya
supplierorbyadi st
ribut [Link] ,inef fect,growsbymaki ngi tsown
suppliesand/ orbydi stributingi tsownpr [Link] smaybedonei nor dert o
reducecost s,gaincont rolov erascar ceresource,guar anteequalityofkeyi nput ,or
obtainaccesst opotential cust omers.
Eg:Henr yFor dusedi nt er
nalcompanyr esour cest obui l
dhi sRiverRouge
Plantout sideDet [Link] acturi
ngpr ocesswasi ntegratedtot hepoi nt
thati ronor eent eredoneendoft hel ongpl antandf i
nishedaut omobi l
es
roll
edoutt heotherendi ntoahugepar ki
nglot .
CiscoSy stems,themakerofI nternetHar dwar e,chosetheext er
nalr outet o
vertical growthbypur chasingRadiata, I
nc.,amakerofchi psset sforwi rel
ess
networ [Link] s acqui siti
on gave Cisco access t otechnol ogyper mi t
ti
ng
wirelesscommuni cationsatspeeds,pr eviouslypossi bleonl ywi th wi r
ed
connect ions.

Verti
calgrowthr esultsinv er
ti
calintegrat
ion,thedegr eetowhichaf ir
ms
operatesverti
cal
lyi nmul ti
plelocat
ionsonani ndustr
y’sval
uechainfrom
ext
ractingrawmat eri
alst
omanuf acturi
ngt oret
aili
ng.
Morespeci fi
cal
ly
,assumi ngaf uncti
onpr evi
ouslyprovidedbyasupplieris
cal
ledbackwar di ntegrat
ion(goingbackwar donani ndust
ry’
svaluechain)
.

56
 The purchase ofPent asi
a Chemicals by Asi
an Pai nts Limit
ed forthe
chemicalsrequi r
ed fort he manufactur
ing ofpai nt
si s an exampl e of
backwardintegrati
on.
Assumingaf uncti
onprev i
ousl
yprovidedbyadi st
r i
butorislabel
edf or
war d
i
ntegrati
on(goi ngforwardanindustry’
svaluechain).Arvi
ndmi ll
s,Egample,
used for
wardi nt
egrati
on when itexpanded outofi tssuccessfulfabric
manufacturi
ngbusi nesst omakeandmar ketit
sownbr andedshirtsand
pants.

 Hori
zontalGr owt hcanbeachi ev edbyexpandi ngt hef i
rm’spr oduct
sintoother
geographicl ocat i
onsand/ orbyi ncreasing ther angeofpr oductsand ser
v i
ces
off
eredt ocur rentmar ket
.Int hiscase, thecompanyexpandssi dewaysatthesame
l
ocationont hei ndust ry’
sv aluechai n.
Eg:Ranbax yLabsf ollowedahor izontalgrowthst r
ategywheni text
endedi t
s
pharmaceut icals busi ness t o Europe and t o USE company can gr ow
hori
zont al lythroughi nternaldev elopmentorext er
nallythroughacqui
siti
ons
orstrategi cal l
ianceswi thanot herf i
rmi nthesamei ndustry.
Hori
zont algr owt hresul tsi nhor i
zont alint
egrati
ons–t hedegreetowhicha
fi
rm oper atesi n mul t
iplegeogr aphicl ocati
onsatt hesamepoi ntin an
i
ndust ry’sv aluechai [Link] izontalintegrati
onforafirm mayr angefr
om ful
lto
part
ial owner shiptol ongt erm cont r
act.

(i
i)DI
VERSIFCATI ON STRATEGY:Whenani ndust
ryconsoli
dat
esandbecomesmat ure,
mostoft
hesur v i
vingf
irmshavereachedthel
imit
sofgrowthusingverti
calandhorizontal
growt
[Link] i
tor
sareabletoexpandi nternat
ionall
yint
ol ess
matur
emar kets,theymayhav enochoicebuttodiver
sif
yintodif
ferentindust
ri
esifthey
wanttocont i
nuegr [Link] cdiv
ersi
fi
cati
onstrat
egiesar econcentr
icand
congl
omerate.

 Concentr
ic Di
versif
ication (Rel
ated) int
oar el
ated industr
y may be a v er
y
appr
opri
atecorporatest rat
egywhenaf ir
m hasast r
ongcompet it
iveposit
ionbut
i
ndustr
yattr
act
ivenessi [Link]
erist
icsthathav egi
venthe
companyitsdi
sti
nctivecompet ence,thecompanyusest hosev erystrengt
hsasi t
s
meansofdiver
sifi
[Link] i
rm at
temptstosecurestr
ategicfitinanewi ndustr
y

57
 wher et he f i
rm’s pr oductknowl edge,i ts manuf acturi
ng capabi l
it
ies,and t he
mar ketingski ll
situsedsoef fecti
velyint heor igi
nal industrycanbeputt ogooduse.
 Congl omer ateDi versi
ficati
on( Unrelated)t akespl acewhenmanagementr ealizes
thatthecur rentindustryisunat t
racti
v eandt hatthef irmsl acksoutstandingabi l
i
t i
es
orski ll
st hati tcoul d easil
yt ransfert or elat
ed pr oducts,orser vicesi n other
i
ndust ri
es,t hemostl i
kelystrategyi scongl omer atedi versif
icat
ion– di versi
fying
i
ntoani ndust r
yunr el
atedt oitscur [Link] hert hanmai nt
aini
ngacommon
threatt hroughoutt heirorganizati
on,st rategicmanager swhoadoptt hi
sst rategy
are pr i
mar il
y concer ned wi thf i
nanci als consi der ati
ons ofcash f l
ow orr i
sk
reductions.

B)STABI LITYSTRATEGI ES
Acor por ationmaychoosest abilit
yov ergrowt hbycontinuingi tscur
rentacti
vi
ti
eswi thout
anysi gnificantchangei ndi r
[Link] t
houghsomet i
mesv iewedasl ackofstrat
egy ,the
stabi
lityf amilyofcor poratest r
ategiescanbeappr opriat
ef orasuccessfulcorporation
operatingi nar easonablypredictableenv i
ronment.
(i
)Pause/ Pr
oceedWi t
hCaut i
onSt rategy–I neff
ect, at i
meoutoranoppor tunityto
restbef orecontinui
ngagr owthorr etr
enchmentst rategy.I
ti sav er
ydeliberate
attemptt omakeonl yi ncrement alimpr ov
ementsunt ilapar t
icul
arenvir
onment al
sit
uat i
onchanges.I tistypicall
yconcei vedasat empor arystr
ategytobeusedunt i
l
theenv i
ronment albecomesmor ehospi t
ableortoenabl eacompanyt oconsolidate
i
tsr esourcesafterprol
ongedr apidgrowt h.

(i
i)NoChangeSt rat
egy– I sadeci si
ont odonot hi
ngnew (achoi cet ocont inue
currentoperati
onandpol iciesf ort hef oreseeabl efutur
e).Rar el
yar t
icul
at edasa
defini
testrat
egy ,anochangest r
at egy’
ssuccessdependsonal ackofsi gnifi
cant
changei nacor porat
ion’ssi [Link] elati
v estabi
li
tycr eatedbyt hef i
rm’s
modestcompet iti
vepositioni nani ndustryf acingl i
ttl
eofnogr owt hencour agest he
companyt ocont i
nueoni t
scur rentcour [Link] ngonl ysmal ladjustment sf or
i
nflati
oni nthesal esandpr ofitobj ectives,t herear enoobv iousoppor tuniti
esor
thr
eat snormuchi nthewayofsi gnif i
cantst rengt [Link] essive
newcompet i
torsar eli
kelyt oent ersuchani ndust ry.
(i
ii
)Pr ofi
tStrategy–I sadeci siont odonot hingnew inwor seningsituat i
onbut
i
nsteadt oactast hought hecompany ’spr obl emsar eonl ytempor [Link] ofi
t

58
 strat
egyisanat temptt oar t
if
ici
all
ysuppor tprof
itswhenacompany ’
ssal esar e
decli
ningbyreduci nginvestmentandshor tter
m discret
ionaryexpendi
[Link]
thanannouncingt hecompany ’
spoorposi ti
ont oshareholdersandtheinv est
ment
communi tyatlarge,topmanagementmaybet emptedtof oll
owthisveryseductive
strat
[Link] hecompany ’
spr obl
emsonahost il
eenv i
ronment(suchasant i
-
businessgov ernmentpol ici
es)managementdef ersinvestmentsand /orbut s
expensestost abi
lizeprofi
tduringthisper
iod.

C)RETRENCHMENTSTRATEGI ES
Acompanymaypur suer et
renchmentst rategi eswheni thasaweakcompet i
ti
veposi t
ion
i
nsomeoral lofi tspr oductl i
nesr esultingi npoorper for mance- sal esar edownandpr ofit
s
arebecomi ng [Link] rategiesi mposeagr eatdealofpr essur etoi mpr ove
per f
or mance.
(i
)Tur nar oundSt rategy–Emphasi zest hei mpr ovementofoper ationalef f
ici
encyandi s
probabl ymostappr opr iatewhenacor porat ion’sprobl emsar eper vasi vebutnoty etcr iti
cal.
Anal ogoust oawei ghtr educt i
ondi et,t het wobasi cphasesofat ur nar oundst r
at egyar e
CONTRACTI ONandCONSOLI DATI ON.
 Cont ract ioni st hei nit
ialef for ttoqui ckly“ stopt hebl eedi ng”wi thagener al
acr osst heboar dcut backi nsi zeandcost s.
 Consol idat i
on,impl ement sapr ogram t ost abi l
i
zet henow- l
eanercor poration.
Tost r
eaml inet hecompany ,pl ansar edev el
opedt or educeunnecessar y
ov er headandt omakef unct i
onalact iviti
escostj ust if
[Link] sisacr uci al
timef ort heorgani z ati
on.I ft heconsol idat ionphasei snotconduct edi na
posi ti
v emanner ,manyoft hebestpeopl el eav et heor gani zation.
(i
i)Capt i
veSt r
at egy– I st hegi vi
ngupofi ndependencei nexchangef orsecur i
ty.A
companywi t
haweakcompet it
iveposi tionmaynotbeabl et oengagei naf ullblown
turnar oundst rategy .Thei ndust rymaynotbesuf f
icient l
yat tracti
v et oj ust i
fysuchanef fort
from ei thert hecur rentmanagementorf rom i nvestor [Link] erthel essacompanyi nt his
situationf acespoorsal esandi ncreasingl ossesunl essi ttakessomeact [Link]
desper atelysear chesf oran“ angel ”byof feringt obeacapt ivecompanyt ooneofi tslarger
cust omer sinor dert oguar ant eet hecompany ’
scont i
nuedexi stencewi thal ongt er m
cont ract.I nthisway ,t hecor porationmaybeabl et or educet hescopeofsomeofi t
s
funct i
onal acti
vities, suchasmar keting, thusr educingcost ssi gnif i
cant ly.

59
(i
ii
)SellOut/Di vestmentSt r
ategy–I facor porationwi thaweakcompet it
iveposi tioni n
i
tsindustr
yi sunabl eei t
hert opul lit
selfbyi tsboot strapsort of indacust omert owhi chit
canbecomeacapt ivecompany ,itmayhav enochoi cet oSel lOut .Thesel loutst rat egy
makessensei fmanagement scanst illobt ainagoodpr icef ori tsshar eholder sandt he
employeescankeept heirjobsbysel l
ingt heent ir
ecompanyt oanot herf i
rm.
(i
v)Bankrupt cy/LiquidationSt r
ategy–Whenacompanyf indsi tselfinthewor stpossi ble
si
tuati
onwi thapoorcompet i
tiv
eposi tioni nani ndust r
ywi t hfewpr ospect s,management
hasonlyaf ewal ternativ
es–al lofthem di [Link] sinterestedi nbuy ing
a weakcompanyi n an unat tracti
vei ndust ry,thef i
rm mustpur suea bankr uptcyor
l
iqui
dationstrategy.
 Bankr uptcy:Itinvolvesgi v i
ngupmanagementoft hef ir
mt othecour tsinr eturnf or
someset tl
ementoft hecor por ation’sobl [Link] hat
oncet hecour tdeci dest hecl aimsont hecompany ,thecompanywi l
lbest ronger
andbet t
erabl etocompet einamor eat tractiveindust ry.
Eg:GTB( GlobalTr ustBank)waspr omot edasapr ivatesect orbanki n1993,and
wasr unningsuccessf ull
yandset ti
ngr ecords.I n2004,i tbecamebankr uptunder
thepr essur eofbadl oansandmer gedwi thapubl icsect orbank,Or ientalBankof
Commer ce.
 Liquidati
on:I tisthet ermi nati
onoft hef [Link] hei ndustryisunat tract
iveand
thecompanyt ooweakt obesol dasagoi ngconcer n,managementmaychooset o
conver tasmanysal eableasset saspossi blet ocash,whi chist hendi stri
butedt o
theshar eholder safteral lobli
gationsar epai d.
Eg:Smal lbusi nessesandpar tner shipf i
rmsl iquidat ewhenoneormor epar t ners
wantt owi thdrawf rom t hebusi ness.
Liquidati
onmaybedonei nthef ollowi ngway s:
 Vol
unt
arywi
ndi
ngup.
 Compul
sor
ywi
ndi
ngupundert
hesuper
visi
onoft
hecour
t.
 Vol
unt
arywi
ndi
ngupundert
hesuper
visi
onoft
hecour
t.

[Not
e:The benef i
tofl i
quidat
ion overbankruptcyist
hatt he board ofdi
rectors,as
repr
esentat
ivesofthesharehol
ders,toget
herwithtopmanagementmakest hedeci sions
i
nsteadoft urni
ngt hem overtot hecourt,whichmaychooset oignoreshareholders
completel
y.
]

60
D)COMBI NATI ONSTRATEGI ES
Iti st he combinat i
on ofst abi l
it
y,gr owth& r etr
enchmentst rategies adopt ed byan
organisati
on, ei
theratt hesamet imei nit
sdifferentbusinesses, oratdi fferentti
mesi nthe
samebusi nesswi ththeai m ofi mpr ovingitsper f
or [Link] e,i
tiscer t
ainly
feasibleforanor gani zati
ontof ol
low ar etr
enchmentst r
at egyf orashor tperi
odoft ime
duet ogener aleconomi cconditi
onsandt henpur sueagr owt hst rategyoncet heeconomy
strengthens.
Theobv i
ouscombi nat i
onstrategiesi ncl
ude( a)retrench,thenst abili
ty;(b)retr
ench,then
growt h;(
c)st abi
li
ty,thenr et
rench;( d)stabil
it
y,thengr owth;( e)gr owtht henr et
rench,and
(f)growth,thenstabi l
i
t y
.
Reasonsf oradopt ingcombi nationst r
ategiesaregivenbel ow
•Rapi dEnv i
ronmentchange
•Liquidateoneuni t,developanot her
•Involvesbot hdivestment&acqui siti
on(takeov er)
Itiscommonl yfollowedbyor ganizationswithmul tipl
euni tdiversifiedpr oduct&Nat ional
orGl obalmar ketinwhi chasi nglest r
ategydoesnotf ital
lbusi nessesatapar ti
cularpoint
oft i
me.

 BUSI NESSSTRATEGY
Thepl ansandact ionsthatf ir
msdev isetocompet einagi venproduct/marketscopeor
settingandaskst hequestion“ How dowecompet ewithinanindustry?”i
sabusi ness
[Link] mpr ovingthecompet i
tiv
epositi
onofacompany ’sbusinessunit
’s
product sorser vi
ceswi thi
nt hespecifi
cindustryormarketsegmentt hatthecompanyor
busi nessunitserves.
Itcanbe:
A)Compet i
tive–bat tl
i
ngagai nstal
lcompetitorsf
oradv ant
agewhi chincl
udesLow- cost
l
eadership,Dif
ferenti
ati
onandFocusst r
ategies;
and/or
B)Cooper ative–wor kingwi thoneormor ecompet i
tor
st ogai
nadv antageagainstother
compet i
torswhichisalsoknownasSt r
ategical
li
ances.

Eg:Wetgrindercompani
esl
i
keShant
haandSowbhagy
aseeksdi
ff
erent
iat
ioni
nat
arget
ed
marketsegment.

61
A)COMPETI TIVEBUSI NESSSTRATEGY( PORTER’ SGENERI CSTRATEGY)
Port
er's gener i
c st rategies f ramewor k const itut
es a maj orcont ri
bution tot he
dev el
opmentoft he st rategic managementl i
[Link] i
c strategies wer ef i
rst
presentedi nt wobooksbyPr ofessorMi chaelPor teroft heHar vardBusi nessSchool
(Por t
er,1980) .Por tersuggest ed t hatsome oft he mostbasi c choices f aced by
compani esar eessent i
allyt hescopeoft hemar ket sthatt hecompanywoul dser veand
howt hecompanywoul dcompet ei nt heselectedmar [Link] it
ivestrategiesfocus
onway sinwhi chacompanycanachi evethemostadv antageousposi ti
ont hatitpossibly
cani ni t
si [Link] ofi
tofacompanyi sessent i
allythedi ff
erencebet weeni ts
revenuesandcost [Link] eforehi ghpr of
itabi
li
tycanbeachi evedt hroughachi evingt he
l
owestcost sort hehi ghestpr i
cesf acingt hecompet iti
[Link] terusedt het erms‘ cost
l
eader ship'and‘ diff
erent iati
on',wher eint helatteri sthewayi nwhi chcompani escan
earnapr icepr emium.
Mai naspect sofPor t
er '
sGener icSt rategiesAnal ysis
Accor di
ngt oPor ter,therear ethreegener icstrategiest hatacompanycanunder taket o
attaincompet i
ti
veadv ant age: costl eadership,differenti
ation,andf ocus.

62
i
)Low- CostSt rategy :I tistheabi li
tyofacompanyorabusi nessuni tt odesi gn,pr oduce
andmar ketacompar abl epr oductmor eef fi
cient l
yt hani tscompet it
ors.I tisacompet i
tive
strategybasedont hef ir
m’ sabi li
tytopr ov i
depr oduct sorser v icesatl owercostt hani ts
ri
v al
s.I ti sf or mul atedt oacqui r
easubst antialcostadv ant ageov erot hercompet itorst hat
canbepassedont oconsumer st ogainal argemar ketshar [Link] esultt hef irm canear n
ahi gherpr ofitmar gint hatresul tf rom selli
ngpr oduct satcur rentmar ketpr ices.
Eg:Whi rlpoolhassuccessf ullyusedal ow- costl eader shipst rategyt obui l
dcompet i
tive
adv ant age.
i
i)Di fferent iat i
onSt rat egy :I
ti st heabi li
tytopr ovideuni queandsuper i
orv al uet ot hebuy er
i
nt ermsofpr oductqual i
ty,speci alf eaturesoraf ter -saleser vice.I ti sacompet i
tive
strategybasedonpr ov idi
ngbuy erswi thsomet hi
ngspeci aloruni quet hatmakest hef ir
m’ s
productorser vicedi st [Link] omer sar ewi lli
ngt opayahi gherpr i
cef orapr oduct
thati sdi stincti nsomespeci alway .Super i
orv aluei scr eatedbecauset hepr oducti sof
higherqual ityandt echni cal l
ysuper i
orwhi chbui ldscompet i
tiv eadv ant agebymaki ng
cust omer smor el oyal andl ess- pr i
cesensi tivet oagi venf i
rm’spr oductorser vice
Eg:Mer cedesandBMW hav esuccessf ull
ypur sueddi ffer entiationst rategies.
i
ii)FocusSt rategy :Iti sdesi gnedt ohel paf ir
mt argetaspeci ficni chewi thinani ndust ry
.
Unl i
kebot hl ow- costl eader shi panddi fferent i
at i
onst rat egiest hatar edesi gnedt ot argeta
broaderori ndust ry-wi demar ket ,focusst r
at egiesai m ataspeci fi
candt ypical l
ysmal l
[Link] chescoul dbeapar ti
cularbuy ergr oup,anar row segmentofagi v en
productl ine, ageogr aphi corr egionalmar ket, orani chewi thdi st i
nct iv
especi altast esand
prefer ences.
Eg:Sol ect roni sahi ghl yspeci alizedmanuf act urerofci rcuitboar dsusedi nPCsandot her
elect r
oni cdev i
ceswhi chhasadopt edawel l-
def i
nedf ocusst rategy .
Combi nat ion( Stucki nt hemi ddl e)
Accor dingt oPor ter,acompany 'sfail
ur etomakeachoi cebet weencostl eader shipand
different iationessent iall
yi mpl iest hatt hecompanyi sst ucki nt hemi ddl [Link] ei sno
compet iti
v eadv ant agef oracompanyt hati sst ucki nt hemi ddl eandt her esulti sof ten
poorf inanci alper for [Link] er,therei sdi sagr eementbet weenschol arsont his
aspectoft heanal y [Link]( 1993)andMi ller( 1992)hav eci tedempi ricalexampl esof
successf ulcompani esl i
keToy otaandBenet t
on,whi chhav eadopt edmor et hanone
gener icst rategy .Bot ht hesecompani esusedt hegener i
cst rategi esofdi fferentiationand
l
owcostsi mul taneousl y,whi chl edt othesuccessoft hecompani es.

63
 B)COOPERATI VEBUSI NESSSTRATEGY( STRATEGI CALLI ANCE)
Ther ol
eofst rategical l
iancesi nshapi ngcor porateandbusi nessst r
ategyhasgr own
signi
fi
cantl
yovert hepastdecade.I nal
mostev eryindustry,all
iancesar ebecomi ngmor e
commonascompani esrealizet hatt heycannol ongeraf f
ordt hecostsofdev el
opingnew
productsorent eringnew mar ketsont hei
[Link] l
iancesar eespeci all
ypr ev
alentin
i
ndustri
es ort echnol ogies t hatchange r apidly
,such as semiconduct ors,airl
ines,
automobil
es,phar maceut icals,t elecommunications,consumerel ect
ronicsandf i
nancial
servi
[Link] oadergl oball ev el,[Link] i
rmsi nt heaut omobil
eand
elect
roni
csindustrieshav eteamedupt odevelopnewt echnologies,evenast heycompet e
fi
ercel
ytosellt
hei rexist
ingpr oduct sandentereachot her’smar kets.

ASt rategicAl li
anceisacooper ati
veagreementbet weencompani eswhoar ecompetit
ors
from differentcompani [Link] r
ategicall
iancesar eli
nkagesbet weencompani esdesigned
toachiev eanobj ecti
vefasterormor eef fici
ent
lythanifei
therfir
m attemptedtodosoon
i
[Link] veav i
talroleinextendi ngandrenewingaf irm’ssourcesofcompet i
ti
ve
advantagebecauset heyall
owcompani est oli
mitcert
ainkindsofr i
skwhenent eri
ngnew
terr
ain.
Ex:Int hebev erageindustr
y ,Nestlewor kswi t
hCoca-Col atogai naccesst otheother’
s
dist
ributi
onchannel s.
Inthecomput erhardwareindust r
y,ToshibaandSamsunghav eformedast r
ategical
li
ance
formanuf acturi
ngadv ancedmemor ychips.

FACTORSPROMOTINGTHERI
SEOFSTRATEGI
CALLI
ANCES(
OR)REASONS
FORFORMINGSTRATEGI
CALLI
ANCES

(
i) Togai naccesstof or
eignmar kets–i nthepharmaceuticalindustry,Phar maci
a
andPf i
zerhav eformedanal liancef orsmoot hmarketent ryt oaccel er
atethe
acceptanceofanewdr ug.
(
ii
) Tor educefinancialr
isks– IBM,Toshi baandSi emenshav eent eredi ntoan
all
i
ancet osharethefi
xedcost sofdev el
opi
ngnewmi cr
opr ocessors.
(
ii
i) Tobr i
ngcompl ementaryskil
l
s–I ntelformedandalli
ancewi t
hHewl ett
-Packard
(HP)touseHP’ scapabili
tyt
odev el
opPent ium mi
croprocessor s.
(
iv) Tor educepoliti
calri
sks– May tag,aU. Scompanyent eredi ntoal l
iancewi t
h

64
 Chineseappl i
ancemakerRSDt ogai
naccesst oChi na.
(
v) Toachi evecompet iti
veadvantage–GM andToy otaest abl
ishedjointventur
eby
nameNummi Corporati
on.
(
vi) To sett echnologicalstandards – Phi l
i
ps ent ered into an al l
iance wit
h
Mat sushit
atomanuf act
ureandmar kett
hedi git
al compactcasset t
e.
(
vii
) Toshapei ndustryev ol
uti
on–LucentTechnol ogiesandMot orolaenteredint
o
anal l
iancetodev el
opanewgener ati
onofDi git
alsi gnalprocessingchipsthati
s
designed to powernext -gener at
ion cel
lularphones and ot herconsumer
el
ect r
onics.

TYPESOFSTRATEGI CALLI ANCES

a)Mut ualSer
viceConsor ti
a:A MutualSer
viceConsort
ium i
sapar t
ner
shi
pofsi mil
ar
companiesinsimi l
arindustr
ieswhopooltheirr
esourcestogainabenefi
tthati
st oo
expensivet
odevelopalone.
Eg:I
BM offer
edToshibaitsexper
ti
sei
nchemicalmechani
calpol
i
shi
ngtodevel
opa
newmanuf act
uringprocess.

b)Joi
ntVentur
e:Aj oi
ntventureisacooperati
vebusinessactiv
ity
,formedbyt woormor e
separ
ateorgani
zati
onsf orst r
ategi
cpur poses,thatcreat
esan i ndependentbusiness
i
denti
tyand all
ocates ownership,operat
ionalresponsi
bil
i
ties and financi
alri
sks and
rewar
dstoeachmember ,
whilepreservi
ngthei
rseparat
eidentit
yorautonomy .
Eg:IOC and oiltanking GmbH f ormed a jointventuret o buil
d and oper
ate
ter
minat
ingser
vicesforpetr
oleum product
s.

c)Licensi
ngAr r
angement :Alicensingagreementisanagreementinwhi chthel i
censi
ng
fi
rm grantsri
ghtstoanot herfi
rmi nanothercountr
yormar kett
opr oduceand/orsel la
product.
Eg:P&Glicensedthe‘OldSpice’tr
ademarkandbusinesstoaGoa-basedcompany ,
Menezescosmet i
cs( P)Ltdforaper iodof10y earst
omanuf actur
e,sell,di
str
ibuteand
mar keti
nIndi
a,SriLankaandBangl adesh.

d)Value-Chai
nPart
nershi
p:Theval
ue-chai
npart
ner
shipisastr
ongandcl
oseal
l
iancein
whi
ch onecompanyoruni tformsal ong-t
erm arr
angementwit
hakeysupplieror
di
str
ibutorformut
ualadvant
age.

65
 Eg: Val
ue-Chai
npartnershi
pbet weenCiscoSyst
emsandi t
ssuppliers.
Allformsofst r
ategi
call
i
ancesar efi
lledwithuncer
tai
nty
.Onethornyissueinanystrategi
c
al
liancei show tocooperatewi t
houtgi v
ingawayt hecompanyorbusi nessuni
t’score
compet [Link] herissuesthatneedtobedealtwithwhent heal
l
ianceis
i
nitial
lyf ormedandothersthatemergel at
er.

Str
ategi
call
iancesuccessfactors
Thesuccessfactor
sofstrategical
li
ancesar
e:-
 Hav
eacl
earst
rat
egi
cpur
pose;
 Fi
ndaf
it
ti
ngpar
tnerwi
thcompat
ibl
egoal
sandcompl
ement
arycapabi
l
iti
es;
 I
dent
if
yli
kel
ypar
tner
ingr
isksanddeal
wit
hthem whent
heal
l
iancei
sfor
med;
 Al
l
ocat
etasksandr
esponsi
bil
i
tiest
oeachpar
tner
;
 Cr
eat
eincent
ivesf
orcooper
ati
ont
omi
nimi
zedi
ff
erencesi
ncor
por
atecul
tur
e;
 Mi
nimi
zeconf
li
ctsamong par
tner
sbycl
ari
fyi
ng obj
ect
ivesand av
oidi
ng di
rect
compet
it
ioni
nmar
ketpl
ace;
 Compr
ehensi
vecr
oss-cul
tur
alknowl
edgeshoul
dbeensur
edi
nani
nter
nat
ional
al
l
iance;
 Exchangehumanr
esour
cest
omai
ntai
ncommuni
cat
ionandt
rust
;
 Oper
atewi
thl
ong-t
ermt
imehor
izons;
 Dev
elop mul
ti
plej
ointpr
oduct
s so t
hatany f
ail
ures ar
e count
erbal
anced by
successes;
 Shar
einf
ormat
iont
obui
l
dtr
ustandkeeppr
oject
sont
arget
.Moni
torcust
omer
r
esponsesandser
vicecompl
aint
s;
 Bef
lexi
bleandwi
l
li
ngt
orenegot
iat
ether
elat
ionshi
pofenv
ironment
alchangesand
newoppor
tuni
ti
es;
 Agr
eeuponan‘
exi
tst
rat
egy
’whent
heal
l
iancei
sjudgedaf
ail
ure.

 FUNCTI ONALSTRATEGY
Functi
onalstr
ategyistheapproach,af uncti
onalareatakest oachievecor porat
eand
busi
ness unitobjecti
ves and st
rategies by maximizi
ng resource pr oductivi
[Link]
concernedwit
hdev el
opingandnurturi
ngadi sti
ncti
vecompet encetopr ovideacompany
andbusinessfi
rm wit
hacompet i
ti
veadv ant
[Link]
entati
onoft hefunct i
onalstrat
egy

66
i
sdi ctatedbyi tspar entbusi nessuni t’
sstrategy .
Eg:Abusi nessuni tf ollowingacompet i
ti
vest rategyofdi fferentiationthroughhighqual i
ty
needsamanuf acturingf unct i
onalst r
ategyt hatemphasi zesexpensi vequalit
yassurance
processov ercheaper ,high-volumepr oducti
on.
AHRf unctionalst r
at egyt hatemphasi zest hehi ri
ngandt rainingofahi ghlyskil
ledbut
costlywor kforceandamar ket i
ngf uncti
onalstrategythatemphasi zesdistri
buti
onchannel
“pull
”usi ng“ adv er
tising”t oi ncreaseconsumerdemandov er“ push”usingpr omotional
all
owancest or etai
lers.
Ifabusi nessuni twer et ofollowal owcostcompet i
ti
vest rategy ,howev eradi f
fer
entsetof
functionalst rategi
es woul d be needed t o suppor tt he busi ness st r
[Link]
Strategiesmayneedt ov aryf rom regiontor egion.
Eg:WhenMaggiNoodl esexpandedi ntoIndia,itwasmar ket edasasnackf oodandnotas
amai ncour semeal .Si nceI ndianspr eferaheav ybreakfast ,theypr ef
err
edt oeatnoodl es
i
nt heev eningasaf astt ocookandr eadyt oser veeveningmeal ,especiall
ytochildr
en.

Anyf unct
ionalstr
ategywi l
lbesuccessfulifitisbui
ltaroundcor ecompetenceand
dist
inct
ive [Link] a f
ir
m does nothav e di
sti
nct
ive compet
ence in any
functi
onalarea,
iti
sprefer
ablet
ooptforoutsour
cing.

A)OUTSOURCI NG:i spur chasingf r

om someoneel seapr oductorser vi
cet hathadbeen
prev
iouslypr ovidedi nternall
[Link] ngani ncreasinglyimpor tantpartofst rategic
deci
sionmaki ngandani mpor t
antwayt oi ncreaseef fi
ciencyandof t
enqui ckly
.Fi rms
competing in gl obali ndustri
esmusti n par t
icularsear ch wor l
dwidef ort hemost
appropri
atesuppl iers.
Eg:DaimlerChr y slerout sourceditsdesigningofcaraccessor ytoPlexionTechnol ogies
[Link] otahasout sourcedit
st ransmi ssioncomponent sdesigningt oBFL.
Thekeyt oout sour cingi stopur chasef rom out sideonl yt hoseact i
viti
est hatar enot
keytot hecompany ’sdisti
nctivecompet [Link] herwise,thecompanymaygi v eup
theverycapabi lit
iest hatmadei tsuccessf ulinthef ir
stpl ace–t husprovidingitselfon
theroadtoev entual [Link] unctionalstrategy ,
thestrategistmust .
 I
dent
if
ythecompany
’sorbusi
nessuni
t’
scor
ecompet
enci
es
 Ensur
ethatt
hecompet
enci
esar
econt
inual
l
ybei
ngst
rengt
henedand
 Managet
hecompet
enci
esi
nsuchawayt
hatbestpr
eser
vest
hecompet
it
ive
adv
ant
aget
heycr
eat
e.

67
B)MARKETINGSTRATEGY
Market
ingst
rat
egydealswi
thpri
cing,
sel
l
inganddist
ri
but
ingapr
oduct
.Usi
ngamar
ket
dev
elopmentst
rat
egy,acompanyorbusi
nessuni
tcan:
 Capt
ureal
argershar
eofanexi
sti
ngmar
ketf
orcur
rentpr
oduct
sthr
oughmar
ket
sat
urat
ionandmar
ketpenet
rat
ionor
 Dev
elopnewmar
ketf
orcur
rentpr
oduct
s.
Eg:P&G,
Col
gat
e–Pal
mol
i
ve

Usi
ngPr
oductdev
elopmentSt
rat
egy
,acompanyorbusi
nessuni
tcan
 Dev
elopnewpr
oduct
sEgi
sti
ngmar
ket
sor
 Dev
elopnewpr
oduct
sfornewmar
ket
s.
Eg:GCMMF – Amulpr oducts(Usi
ng a successf
ulbrand name t
o mar
ketother
product
si scal
l
edl
i
neextensi
onandisagoodwayt oappealtoacompany
’scur
rent
customers).

Usi
ngAdv
ert
isi
ngandpr
omot
ionst
rat
egy
,acompanyorbusi
nessuni
tcanuse
 PushSt
rat
egy–Spendi
ngal
argeamountofmoneyont
radepr
omot
ioni
nor
der
t
ogai
norhol
dshel
fspacei
nret
ail
out
let
s.
 Pul
lSt
rat
egy– spendi
ngal
argeamountofmoneyonconsumeradv
ert
isi
ng
desi
gnedt
obui
l
dawar
enesssot
hatshopper
swi
l
laskf
ort
hepr
oduct
s.

Usi
ngDi st
ri
buti
onstr
ategy
,acompanyorbusi
nessuni
tcanchooseanymet
hodof
di
str
ibut
ion,namel
y
 Usi
ngdi
str
ibut
orsanddeal
erst
osel
lthepr
oduct
s
 Sel
l
ingdi
rect
lyt
otheconsumer
s

Usi
ngPr
ici
ngst
rat
egy
,acompanyorbusi
nessuni
tcanchoose,
 Ski
m pr
ici
ngmeanshi
ghpr
ice,whent
hepr
oducti
snov
elandcompet
it
orsar
e
f
ewor
 Penet
rat
ionpr
ici
ngi
sai
medatgai
ninghi
ghmar
ketshar
ewi
thal
owpr
ice.

C)FI
NANCIALSTRATEGY
Fi
nanci
alSt
rat
egyexami
nest
hef
inanci
ali
mpl
i
cat
ionsofcor
por
ateandbusi
nessl
evel
68
 str
ategi
esopt i
onsandi denti
fi
est hebestfi
nanci
alcour
seofact
ion.I
tat
tempt
susuall
y
tomaxi mizethefinancialst
rategiesadoptedbyacompanyorabusi nessuni
[Link]
Fi
nancialstr
ategi
esmaybe:
 Achi
evi
ngt
hedesi
reddebtt
oequi
tyr
ati
oandr
ely
ingoni
nter
nall
ongt
erm
fi
nanci
ng(vi
a)cashfl
ow,(Equi
tyf
inanci
ngisprefer
redf
orr
elat
eddi
ver
sif
icat
ion
anddebtf
inanci
ngforunr
elat
eddi
v er
sif
icat
ion)
 Lev
eragedbuyout(
LBO)–acompanyi
sacqui
redi
nat
ransact
ion,whi
chi
s
namel yfi
nancedbyfundsarrangedfr
om athi
rdpartysuchasabankoffinanci
al
i
nstitut
[Link]
sfi
rm decl
inesbecauseofinfl
atedexpect
ati
on,ut
il
izat
ionofall
stock,managementburnoutandal ackofstr
ategi
cmanagementand
 Managementofdi
vi
dendst
oshar
ehol
der
s.
 Est
abl
i
shi
ngat
racki
ngst
ock–f
oll
owedbyl
argeest
abl
i
shedcor
por
ati
ons.A
tr
acki
ngstockisatypeofcommonst ocktiedt
oonepor ti
onofacorpor
ati
ons
busi
ness.I
tisact
ual
l
yanequit
yint
erest,i
ntheparentcompany
.Eg:At&T.

D)RESEARCH&DEVELOPMENTSTRATEGY
R&D St r
ategydealswi t
hpr oductandpr ocessi nnov
ati
onandi mprovement .Ital
so
dealswit
happr opri
atemixofdiffer
enttypesofR&D( Basi
c,pr
oduct,orprocess)and
withthequest
ionofhownewt echnologyshouldbeaccessedbyi nt
ernaldevelopment,
exter
nalacqui
siti
onorthroughstrat
egicall
[Link]&Dchoi cesmaybe:
 Technol
ogyl
eader
shi
pinwhi
chonepi
oneer
sani
nnov
ati
on,
Eg:Ni
keI
[Link]
 Technol
ogi
cal
fol
l
ower
shi
pinwhi
chonei
mit
atest
hepr
oduct
sofcompet
it
ors.
Eg:DeanFoodsCo.

E)OPERATI ONSSTRATEGY
Operation Str
ategy determines how and wher e a pr oductorser vice i
sto be
manuf actur
ed,the levelofv er
ticali
ntegrat
ion inthe product
ion processand t
he
deploymentofphy sicalresour
[Link] also dealwi t
htheopt imum lev
elof
technologythefi
rm shoulduseinitsoperat
[Link]
ategiesare:
 Adv
ances manuf
act
uri
ng Technol
ogy (
AMT) i
srev
olut
ioni
zi
ng oper
ati
ons
worl
dwideandshouldcont
inuet
ohav eamaj
orimpactascorporat
ionsstr
iveto
i
ntegr
ate di
ver
se busi
nessacti
vit
iesusi
ng Computeri
ntegrat
ed design and
manufact
uri
ng(CAD/CAM)
69
  Manuf
act
uri
ngst
rat
egyofaf
ir
misaf
fect
edbyapr
oduct
’sl
i
fecy
[Link]
ir
m can
optf
orei
therproduct
ionsystem
(
a)Jobshopoper at
ionsthr
oughconnect
edl
inebat
chflowor
(
b)Flexi
blemanufacturi
ngsyst
emsanddedi
catedt
ransferl
i
nes/
 Cont
inuousi
mpr
ovementst
rat
egy
 Masscust
omi
zat
ion
 Modul
arpr
oductdesi
gns

F)PURCHASI NGSTRATEGY
Purchasi
ngStrat
egydeal
swi t
hobtaini
ngtherawmater
ial
s,par
tsandsuppl
i
ersneeded
toperfor
mt heoper
ati
onsfuncti
[Link]
cpur
chasi
ngchoicesar
e
 Mul
ti
pleSour
cing–i
ssuper
iort
oot
herpur
chasi
ngappr
oachesbecause
(
a)I
tfor
cessupplier
st ocompet
ef orthebusi
nessofanimportantbuyer
,thus
r
educi
ngpurchasingcost
sand
(
b)I
fonesuppliercouldnotdel
iver,anot
herusual
l
ycould,t
husguar ant
eeing
t
hatpar
tsandsuppliedwoul
dalway sbeonhandwhenneeded.
 Sol
eSour
cing–r
eli
esononl
yonesuppl
i
erf
orapar
ti
cul
arpar
t.I
tist
heonl
y
manageablewayt oobtai
nhi ghsuper
iorqual
it
[Link]
mpl i
fythepur
chasi
ng
company’sproducti
onprocessbyusingJITratherthankeepinginv
ent
ori
[Link]
reducestr
ansacti
oncostsandbui l
dsquali
tybyhav i
ngpurchaserandsuppl
ier
worktoget
heraspar t
ner
srathert
hanasadv er
sari
es.
 Par
all
elSour
cing–Twosuppl
i
ersar
ethesol
esuppl
i
ersoft
wodi
ff
erentpar
ts,
buttheyareal
sobackupsuppl
i
ersf
oreachother
’spar
ts.I
fonevendorcannot
supplyal
lofit
spartonti
me,theotherv
endorwouldbeabletomakeupt he
dif
fer
ence.

G)LOGISTICSSTRATEGY
Logist
icsstr
ategydealswit
ht heflow ofproduct
sint
oandoutoft
hemanuf
act
uri
ng
[Link]
eetrendsareev
ident,
namel y:
 Cent
ral
i
zat
ion – Ref
erst
othe cent
ral
i
zed l
ogi
sti
cs gr
oup usual
l
ycont
ains
speci
ali
stswi
th exper
ti
sei
n di
ff
erentt
ranspor
tat
ion modessuch asr
ailor
tr
ucki
ngor
 Out
sour
cing–ofl
ogi
sti
csr
educescostandi
mpr
ovesdel
i
ver
yti
meor
 Useofi
nter
net–si
mpl
i
fiesl
ogi
sti
calsy
stem andcr
eat
edanonl
i
nesy
stem f
or
70
 i
tsret
ail
ersandsuppl
i
[Link]
orl
oosecasest
obel
osti
ndel
i
ver
yand
paper
workdoesn’
thavetobedone.

H)HRM STRATEGY
HRM Str
ategyaddr
essest
hei
ssuewhet
heracompanyorbusi
nessuni
tshoul
dtr
yto:
 Hi
real
arge [Link]
ow ski
l
led empl
oyees who r
ecei
ves l
ow pay
,per
for
m
r
epet
it
ivej
obs,
andmostl
i
kel
yqui
taf
terashor
tti
me(
Eg:McDonal
d)
 Hi
reski
l
ledempl
oyeeswhor
ecei
vedr
elat
ivel
yhi
ghpayandar
ecr
osst
rai
nedt
o
par
ti
cipat
einsel
fmanagementwor
kteams(
Eg:MNC’
s)
 Busi
nessf
ir
msar
eexper
iment
ingwi
thdi
ff
erentcat
egor
yofwor
ker
s
(
a)Par tt
imewor ker
s
(
b)Tempor aryworkers
(
c)Leasingofempl oyees
Di
versewor
kforceconsti
tutesacompet i
ti
veadv
[Link]
hahi ghdegree
ofraci
aldi
ver
sityfoll
ow agr owthstrat
egyitt
endst ohavehigherproducti
vi
tythan
ot
hers.

I
)INFORMATIONSYSTEM STRATEGY
Corpor
ati
onsaretur
ningtoISstrat
egi
est
opr
ovi
debusi
nessuni
tswi
thcompet
it
ive
advant
[Link]
Sstr
ategi
esare:
 Useofsophi
sti
cat
edi
ntr
anetf
ort
heuseofempl
oyeeswher
epr
ojectt
eam
membersli
vi
nginonecount
rycanpasst heirwor
ktot
eam member
sinanot
her
count
ryi
nwhichthewor
kdayisjustbegi
nning;
 I
Stof
orm cl
oserr
elat
ionshi
pwi
thbot
hthei
rcust
omer
sandsuppl
i
ers;
and
 I
S enabl
eswor
ker
stohav
eonl
i
necommuni
cat
ionwi
thco-
wor
ker
sinot
her
count
ri
eswhouse,
adi
ff
erentl
anguage.

STRATEGIESTOAVOI D
Sever
alstr
ategi
es,whichcouldbeconsideredcorpor
ate,busi
nessorf
unct
ional,ar
ever
y
danger
[Link] y
sisorlackcreati
vi
tymaybet r
appedint
o
consi
deri
ngsomeoft hefol
lowingst
rat
egiestoavoid,
namely:
 Fol
l
owt
heLeader–I
mit
ati
ngal
eadi
ngcompet
it
or’
sst
rat
egymi
ghtseemst
obea
goodi
dea,buti
tignor
esaf
ir
m’spar
ti
cul
arst
rengt
hensandweaknessandt
he
71
 possi
bil
ityt
[Link]:Fuj
it
suLt d,2ndl
argestcomputermaker
,
wasdrivensinethe1960’swit
htheambi t
ionofcatchingupwi [Link]
asamai nfr
amecomput er-
makerbutf
ail
edt onoti
cet hatthemai nfr
amebusiness
hadreachedmat ur
ityby1990.
 Hi
tAnot
herHomeRun – I
facompanyi
ssuccessf
ulbecausei
tpi
oneer
edan
extr
emelysuccessf
ulproduct,i
ttendst osear
chforanothersuperpr
oductt
hatwi
l
l
ensuregrowt
handpr osperi
[Link]:Palaroi
dspentalotofmoneyi ndevel
opi
ngand
“i
nstant
”moviecamera,butthepublicignor
editi
nfavourfthecamcorder
.
 Ar
msr
ace–Ent
eri
ngi
ntoaspi
ri
tedbat
tl
ewi
thanot
herf
ir
mfori
ncr
easedmar
ket
sharemi ghtincreasesal
esrev enue,butthati
ncreasewillpr
obabl
ybemor ethen
offsetbyi ncreasesinadver
tising,promoti
on,R&D,andmanuf act
uri
[Link]:
Sincetheder egulati
onofai
rl
ines,pricewarsandspecialrat
eshavecont
ri
butedto
thelow pr of
itmar gi
nsorbankruptcyofmanymaj orai
rli
nessuchasEaster
nand
Cont i
nental.
 DoEv
ery
thi
ng–Whenf
acedwi
thsev
erali
nter
est
ingoppor
tuni
ti
es,managementof
acorporat i
onmi ghthaveenoughr esourcestodevel
opeachi deai nt
oapr oject,
but
money ,timeandener gyaresoonexhaust edasthemanypr ojectsdemandl arge
i
nfusionsofr esour
[Link]:WaltDi sneyCompany ’sexperti
sei nt heenter
tainment
i
ndust r
yl editt oacquiret
heABCNet work,asthecompanypr ogr
essed,itspent
$750M t obui l
dnew t hemepar ksandbuyacr ui
sel i
ne.By2000,ev ent hough
corporatesalescontinuedt
oincrease,netincomewasf all
i
ng.
 Leasi
ngHands–Acor
por
ati
onmi
ghthav
einv
est
edsomuchi
napar
ti
cul
arst
rat
egy
thattopmanagementi sunwi l
li
ngt oacceptit
[Link]
ngthatithast oo
muchi nvestedt oquit
,thecorporati
onconti
nuestot hrow“ goodmoneyaf t
erbad”.
Eg:PAN Amer i
can Ai
rli
nes cl
ose to sel
lits pr
ofitable PAN AM Bui ldi
ng and
i
ntercontinentalHotel
stokeepi t
smoneyl osi
ngairl
inef l
[Link]
inuedtosuffer
l
osses, until
ithadsoldoffevery
thingandwentbankrupt .

BUI
LDI
NGANDRE-
STRUCTURI
NGTHECORPORATI
ON

Ther
earevariousmet
hodsfort
hefi
rmstoenterintoanewbusi
nessandr
est
ruct
uret
he
exi
sti
[Link]
msusefol
l
owingmet
hodsforbui
lding:
 St
art
-upr
out
e:I
nthi
srout
e,t
hebusi
nessi
sst
art
edf
rom t
hescr
atchbybui
l
ding
72
 faci
l
iti
es,pur
chasi
ng equi
pment
s,r
ecr
uit
ing empl
oyees,openi
ng up di
str
ibut
ion
outl
etandsoon.
 Acqui
sit
ion:Acqui
sit
ioni
nvol
vespur
chasi
nganest
abl
i
shedcompany
,compl
ete
wi
thal
lfaci
l
iti
es,
equi
pmentandper
sonnel
.
 Joi
ntVent
ure:Joi
ntv
ent
urei
nvol
vesst
art
inganew v
ent
urewi
tht
hehel
pofa
par
tner
.
 Mer
ger
:Mer
geri
nvol
vesf
usi
onoft
woormor
ecompani
esi
ntoonecompany
.
Takeover
:Acompanywhi chisinfi
nancialdist
resscanundergot hepr ocessof
takeov
er.A t
akeovercan be vol
untar
y when t he company requests another
companytot
akeovertheasset
sandli
abil
it
iesandsaveitfr
om becomi ngbankrupt.

Re-str
ucturi
ng:Re-st
ructur
inginvolvesstrategi
esf orreduci
ngthescopeoft hefir
m by
exi
ting fr
om unprofit
able [Link]
ing is a popul
arstr
ategy dur
ing post
l
iberal
izat
ionerawherediversi
fi
edor gani
zati
onsdi v
estedtoconcent
rat
eoncor ebusi
ness.
Re-str
ucturi
ngstr
ategies:
 Ret
renchment
:Ret
renchmentst
rat
egi
esar
eadopt
edwhent
hef
ir
m‟sper
for
mance
i
spoorandi
tscompet
it
iveposi
ti
oni
sweak.
 Di
vest
mentSt
rat
egy
:Di
vest
mentst
rat
egy r
equi
res dr
oppi
ng ofsome oft
he
businessesorpartofthebusi
nessofthefirm,which ar
isesf
rom consci
ous
corporatej
udgementi
nor
dert
orever
seanegat
ivet
rend.
 Spi
n-of
f:Sel
l
ingofabusi
nessuni
ttoi
ndependenti
nvest
orsi
sknownasspi
n-of
f.I
t
i
sthebestwaytorecov
ert
heini
ti
ali
nvest
mentasmuchaspossi
[Link]
ghest
bi
dderget
sthedi
vest
eduni
t.
 Management
-buy
out
:sel
l
ingof
fthedi
vest
eduni
ttoi
tsmanagementi
sknownas
managementbuy
out
.
 Har
vestst
rat
egy
:Ahar
vestst
rat
egyi
nvol
veshal
ti
ngi
nvest
menti
nauni
tinor
dert
o
maxi mizeshor t-t o-medi um term cashf l
ow fr
om thatunitbefor eli
quidat
ingit
.
Liquidati
on:Li quidationisconsi deredt obeanunat tr
acti
vestrategybecauset he
i
ndust ryisunat t
ractiveandt hef i
rmi sinaweakcompet i
ti
[Link]
spursued
asal astst epbecauset heempl oy eeslosejobsanditi
sconsideredt obeasi gnof
fail
ureoft hetopmanagement .
STRATEGI ESANALYSI SANDCHOI CE
Choiceofast rat
egyi nvol v
esanunder standingofchoicemechanism andi ssuesinvol
ved
i
[Link] ceist heev aluat
ionofal ter
nativ
estrat
egi
esandsel ectionofthebest
73
al
ter
nat
[Link]
cei
nvol
vesdeci
sion-maki
ngpr
ocessandi
tincl
udest
hef
oll
owi
ngst
eps:
-
 Focusi
ngonst
rat
egi
cal
ter
nat
ives
 Ev
aluat
ingst
rat
egi
cal
ter
nat
ives
 Consi
der
ingdeci
sionf
act
ors
- subjecti
vefactors
- objecti
vefactors
 St
rat
egi
cchoi
ce

STRATEGI
CCHOI
CEPROCESS

Focusing on strat
egi
c alt
ernati
ves:Itinv
olv
es ident
if
icati
on ofallalternat
[Link]
str
ategistexamineswhattheor gani
zati
onwantstoachi ev
e( desi
redperformance)and
whati thasr eal
lyachi
eved( act
ualperf
ormance)
.Thegapbet weenthet wopositi
ons

74
consti
tut
est hebackgr
oundforvari
ousal
ter
nat
ivesanddi
agnosi
[Link]
sisgapanal
ysi
s.
Thegapbet weenwhati sdesi
redandwhati
sachievedwi
densastheti
mepassesi
fno
str
ategyisadopt
ed.

Eval
uati
ngst
rat
egical
ternati
ves:Thenextstepistoassesstheprosandconsofvari
ous
al
ter
nati
vesandthei
rsuitabi
li
[Link] eport
fol
i
oanal
ysis,GE
busi
nessscr
eenandcorporateParent
ing.[
Descri
beeachofthese]

Consi
der
ingdeci
sionfact
ors:
(i
)Obj
ect
ivefact
ors:
-
 Env
ironment
alf
act
ors
- Vol
ati
li
tyofenvir
onment
- I
nputsuppl
yf r
om envi
ronment
- Powerf
ulstakehol
der
s
 Or
gani
zat
ional
fact
ors
- Or ganization’smi ssion
- St r
ategici ntent
- Busi nessdef i
nit
ion
- St r
engt hsandweaknesses
(
ii
)Subj
ect
ivef
actors:-
- Strat
egiesadopt edi nthepr eviousperiod;
- Personal preferencesofdeci sion-maker s;
- Management ’
sat t
itudet owar drisk;
- Pressuref r
om st akehol ders;
- Pressuref r
om cor por ateculture;and
- Needsanddesi resofkeymanager s.

Const r
uct
ingCorporatescenar io:Cor por
atescenar ioconsi
st sofpr ofor
mabal ancesheets
and income statementwhi ch f orecast
st he str
ategicalternati
v e’
simpacton v ar
ious
di
visions.
Fi
rst:3set sofesti
matedf i
gur esf oroptimisti
c,pessimisti
candmostl i
kelycondit
ionsare
manipulatedforal
leconomi cf actorsandkeyext er
nal st
rat
egi cfactors.
Second:Commonsi zefinancial statementswithpr oj
ecti
onsar edr awn.
Thir
d:Basedonhi stor
icaldat af rom previousy earsbalancesheetpr oject
ionfornext5

75
yearsforOpt i
mist ic( O),
Pessimi st
ic(P), andMostl i
kely(M)ar edev eloped.
Corporate scenar i
oi s constructed f orev ery strategic al t
ernative consideri
ng bot h
envir
onment alf act orsand mar ketcondi ti
ons.I tpr ovidessuf fi
cienti nf
ormation fora
str
ategisttomakef inaldeci
sion.
ProcessofSt rategicChoi ce:
Twot echniquesar eusedi nthepr ocessofsel ectionofast rategy,namel y:
() Dev
i il’
sAdv ocate–i nst rategicdeci sion-maki ngi sresponsi bleforidenti
fying
potentialpi tf
all
sandpr oblemsi napr oposedst r
ategicalternati
vebymaki nga
formal present ati
on.
(i
i) Di al
ect ical inquiry – i nvolves maki ng t wo pr oposals wi th cont r
asting
assumpt ionsf oreachst r
ategical t
[Link] itsanddemer i
tsoft he
proposalwi l
lbear guedbyadv ocatesbef oret hekeydeci sion-
maker [Link]
y
oneal ternat i
vewillemer gev i
ablef orimpl ement ation.

ENVI
RONMENTTHREATANDOPPORTUNI
TYPROFI
LE(
ETOP)

Meani ng ofEnv i
ronment alScanni ng:Env ir
onment alscanni ng can bedef ined ast he
process by whi ch or ganizations moni tor thei rr elevant env i
ronment t o ident i
f y
oppor tuni t
iesandt hreatsaf f
ectingt heirbusi nessf ort hepur poseoft akingst rategic
decisions.
Appr aisingt heEnv ironment :Inor dert odr aw acl earpi ctur
eofwhatoppor tuniti
esand
threatsar ef acedbyt heor gani zationatagi vent i
me.I tisnecessar ytoappr ai
set he
env i
ronment .Thi si s done bybei ng awar e oft he f actorst hataf f
ectenv i
ronment al
apprai sali dent ify
ing t he env i
ronment alf actors and st ruct uring the result
s oft his
env i
ronment al appr aisal.
Structur ingEnv ir
onment alAppr aisal:Thei dent i
fi
cat i
onofenv i
r onment ali
ssuesi shelpf ul
i
nst ruct uri
ngt heenv i
ronment alappr ai
salsot hatt hest rategi stshav eagoodi deaof
wher et heenv ironment aloppor t
uni ti
esandt hreatsl i
[Link] ear emanyt echniquest o
structur et heenv ironment alappr [Link] echniquesuggest edbyGl ueki st hat
prepar inganETOPf oranor [Link] eparat i
onofanETOPi nvol
vesdi vi
dingt he
env i
ronmenti ntodi ffer
entsect or sandt henanal yzingt hei mpactofeachsect oront he
organi zat i
on.

Env
ironmentt
hreatandoppor
tuni
typr
ofi
le(
ETOP)f
orabi
cycl
ecompany

76
S.
No Env
ironment
alsect
or Nat
ureofI
mpact

1 Economi
c UpAr
row

2 Mar
ket Hor
izont
alAr
row

3 I
nter
nat
ional DownAr
row

UpAr
rowi
ndi
cat
esFav
orabl
eImpact
DownAr
rowi
ndi
cat
esunf
avor
abl
eImpact
Hor
izont
alAr
rowi
ndi
cat
esNeut
ral
Impact

Thepr eparati
onofanETOPpr ovi
desaclearpi
cturetot hestr
ategistsaboutwhi chsect ors
andthedi ffer
entfact or
sineachsect orhaveafavorableimpactont heor ganizat
[Link] he
meansofanETOP, t heorganizati
onknowswher eitstandswithrespectt oitsenvironment.
Obviously,suchanunder standingcanbeofagr eathelpt oanor ganizati
oni nformulating
appropriatestrat
egiest otakeadv ant
ageoftheoppor t
uniti
esandcount erthethreatsinits
envi
ronment .
AdvantageofETOP
• Itprovi
desaclearofwhichsectorandsubsect or
shavefavorabl
eimpactont
he
organi
zati
on.I
thel
psint
erpr
ettheresul
tofenv
ironmentanal
ysis.
• Theorganizat
ioncanassessi
tscompeti
ti
veposit
ion.
• Appropr
iatestrat
egi
escanbef ormul
atedtotakeadvant
ageofoppor
tuni
ti
esand
count
erthethreat
.

STRATEGI
CADVANTAGEPROFI
LE(
SAP)

Everyfirm hasst r
ategi
cadv ant
agesanddi [Link],l
argef i
rmshave
fi
nancialstrengthbuttheytendt omov eslowly,compar edtosmallerfi
rms,andoften
cannotr eacttochangesqui ckl
[Link] ir
mi sequallystronginalli
tsfunct
[Link]
her
words,ev er
yfir
m hasstrengt
hsaswel lasweaknesses.
Str
ategistsmustbeawar eofthestr
ategicadvantagesorstrengt
hsofthefir
mt obeable
77
tochooset hebestoppor
tuni
tyf
ort
hefir
[Link] heotherhandtheymustregul
arl
yanalyse
theirstrategi
c disadv
ant
ages orweaknesses i
n ordertoface env
ironment
althreats
effect
ively

Examples:
The St
rategistshoul
dl ook t
o see ifthe f
irm is st
rongerint hese factor
st han it
s
competit
[Link] i
rmisstronginthemarket,
ithasast r
ategi
cadv antageinlaunchi
ng
newproductsorservi
cesandincreasi
ngmarketshareofpresentproductsandser vi
ces.

St
rat
egi
cAdv
ant
agePr
ofi
l
eforabi
cycl
ecompany

Capabi
li
ty Competit
ive st
rengt
hs or
S.
No Nat
ureofI
mpact
Fact
or weaknesses

Highcostofcapi
tal
,reserv
esand
1 Fi
nance DownAr
row
surpl
usposi
ti
onunsati
sfactor
y

2 Mar
ket
ing Hor
izont
alAr
row Fi
ercecompet
it
ioni
nindust
ry'
s

Advanced Management
3 I
nfor
mat
ion UpAr
row
i
nformati
onsy
stem

UpAr
rowi
ndi
cat
esSt
rengt
h
DownAr
rowi
ndi
cat
esWeaknesses
Hor
izont
alAr
rowi
ndi
cat
esNeut
ral

ORGANI
ZATI
ONALCAPABI
LITYPROFI
LE(
OCP)

Theor gani
zat
ionalcapabi
li
typrof
il
eisdr awnintheform [Link]
ategi
stsare
requir
edt osystemati
cal
lyassessthev ari
ousfunct
ionalareasandsubject
ivel
yassign
valuestothedif
f er
entf
uncti
onalcapabi
l
ityfact
orsandsubf act
orsalongascalerangi
ng

78
f
rom v
aluesof-
5to+5.

Capabi
li
ty Weakness(
- Strengt
h
Nor
mal(
0)
Fact
ors 5) (+5)
Fi
nanci
al -
5    
Techni
cal   0  
Human
-
5    
Resour
ce
Mar
ket
ing     5
R&D   0  

MCKI NSEY’S7SFRAMEWORK
Thef r
amewor ksuggest st hatt herei samul ti
pli
cit
yoff actorst hati nfl
uencean
organization’
s abil
it
yt o change and i t
spr opermode [Link] oft he
i
nterconnect ednessofthev ariables,itwouldbedi ff
icul
tt omakesi gnifi
cantprogress
i
nonear eawithoutmakingpr ogressi ntheothersaswel [Link] arti
ngpointor
i
mpl iedhi er
archyintheshapeoft hedi agram,anditisnotobv iouswhi choft heseven
factorswoul dbet hedr i
vingf orcei nchangingapar ti
cularorganizationatacer t
ain
pointoft [Link] i
ti
calvariableswoul dbedi ff
erentacrossor ganizationsandi nthe
sameor ganizati
onsatdif
ferentpoi ntsoftime.

79
 The7S–
a)Super or
dinat egoals–aret hefundamentalideasar oundwhi chabusinessi sbuil
t
b)Structure–sal ientfeat
uresoft heunit
s’sorgani zationalchartandinterconnecti
ons
withi
nt heoffice
c)Sy stems– pr oceduresandr out i
neprocesses,i ncludi
nghow i nformat i
onmov es
aroundt heuni t
d)Staff–per sonnelcategori
eswi thi
ntheunitandt heuset owhi chstaffareput,skil
l
base,etc
e)Style–char acteri
zati
onofhowkeymanager sbehav ei
nor dertoachievet heunit’
s
goals
f)Sharedv aluesst r
ategy–t hesignifi
cantmeani ngsorgui dingconcept sthattheunit
i
mbuesoni tsmember s
g)Skill
s–di stincti
vecapabil
iti
esofkeyper sonnel andt heuni
tasawhol e
The7Smodel canbeusedi nt woway s–

80
[Link]
der i
ng the li
nks between each oft he S’s one can identif
y st
rengths and
weaknessesofanor gani
[Link] sstrengt
horaweaknessi ni tsownr i
ght,i
tis
onl
yitsdegreeofsuppor t
, orother
wise,f
ortheotherS’swhichisrelevant
.AnyS’sthat
har
moni seswithallt
heotherS’ scanbethoughtofasstrengthandweaknesses
[Link] ghli
ghtshowachangemadei nanyoneoft heS’swillhaveanimpacton
al
ltheot her
[Link] stobeef fect
ive,t
henchangesi noneSmust
beaccompani edbycompl ement ar
ychangesintheothers.

CORPORATEPORTFOLI OANALYSI S
Whent hecompanyi si nmor et hanonebusi ness,itcansel ectmor ethanonest rategic
al
ter nativedependi ngupondemandoft hesi tuati
onpr ev ai
lingi nt hedi ff
erentportfoli
[Link]
i
snecessar ytoanal yzet heposi ti
onofdi fferentbusi nessoft hebusi nesshousewhi chi s
donebycor por at epor t
folioanal ysis.
Port f
olioanaly si sisananal yticalt oolwhichv iewsacor por ationasabasketorpor tfol
ioof
product sorbusi nessuni tst obemanagedf ort hebestpossi bler etur ns.
Whenanor gani zat ionhasanumberofpr oduct sini tspor tfolio,i tisqui t
el i
kel
yt hatt hey
willbei ndiffer entst agesofdev elopment .Somewi l
lber elativel ynew andsomemuch
ol
der .Manyor gani zationswi llnotwi sht or iskhav ingal ltheirpr oduct satt hesamest age
ofdev elopment .I ti susef ult ohav esomepr oduct swi thl imi tedgr owt hbutpr oduci ng
profitsst eadily,andsomepr oduct swi thr ealgr owt hpot ent ialbutmayst il
lbei nt he
i
ntroduct oryst age.I ndeed,t hepr oductst hatar eearningst eadi l
ymaybeusedt ofundt he
dev elopmentoft hoset hatwi llprov i
dethegr owt handpr ofitsint hef uture.
Sot hekeyst rat egyi st opr oduceabal ancedpor t
folioofpr oduct s,somewi thlowr iskbut
dullgr owthandsomewi thhi ghr iskbutgr eatpot entialforgr owt handpr ofit
[Link] swhat
wecal laspor tfol ioanal ysis.
Theai m ofpor tfol i
oanal ysisi s
1)t oanal yzei t
scur rentbusinesspor tf
olioanddeci dewhi chbusinessesshoul d
r ecei v emor eorl essi nvestment
2)t odev elopgr owt hstrategies,foraddi ngnewbusi nessest othepor t
folio
3)t odeci dewhi chbusi nessshoul dnotlongerber et ained

Bal
anci
ngt
heportf
oli
o–
Bal
anci
ngt
heportfol
iomeansthatthedif
ferentproduct
sorbusi
nessesi
nthepor
tfol
i
o
hav
etobebal
ancedwithr
espectt
ofourbasicaspects–

81
  Pr
ofi
tabi
l
ity
 Cashf
low
 Gr
owt
h
 Ri
sk

Thi
sanal
ysi
scanbedonebyanyoft
hef
oll
owi
ngt
echnol
ogi
es–
A)BCGmat i
x
B)GEninecel
lmat
ri
x

A)BCG MATRI X–t heBCGmat ri

xwasdev elopedbyBost onConsul ti
[Link]
i
sal socalled ast hegr owthshar emat [Link] sist hemostpopul arandmostsi mplest
mat ri
xtodescr i
bethecor poration’spor t
folioofbusi nessesorpr oducts.
TheBCGmat r
ixhel pstodeter minepr iori
tiesi napr oductportfoli
[Link]
i
nv estwherether eisgrowthf rom whi cht hef i
rm canbenef i
t,anddivestthosebusinesses
thathavelowmar ketshareandl owgr owt hpr ospects.
Eachoft hepr oductsorbusi nessuni t
si spl ottedonat wodimensi onalmat ri
xconsist
ing
of
a)r el
ativemar ketshare–i st her atiooft hemar ketshareoft heconcernedproduct
orbusinessuni ti
nt hei ndust rydi vi
dedbyt heshareoft hemar ketl
eader
b)mar ketgr owt hrat
e–i st heper centageofmar ketgr owth,bywhi chsalesofa
part
icularproductorbusi nessuni thasi ncreased

82
Anal
ysi
soft heBCG matr
ix– thematri
xr ef
lect
sthecont
ribut
ionoftheproduct
sor
busi
nessunit
stoit
scashf
[Link]
sanalysi
s,t
hepr
oductsorbusi
nessuni
tsar
e
cl
assi
fi
edas–
i
) Stars
i
i)Cashcows
i
ii
)Questionmar
ks
i
v)Dogs

i
)Star
s–hi
ghgr
owt
h,hi
ghmar
ketshar
e
83
Starsareproductsthatenjoyar elat
ivel
yhighmar ketshar
einastr
ongl
ygr owingmar ket
.
Theyar epotent
ial
lyprofi
tableandmaygr ow furt
hertobecomeani mportantproductor
categoryforthecompany .Thef i
rm shouldfocusonandi nv
estinthesepr oduct
sor
businessunit
[Link] f
eaturesofstarsar
e-
 Hi
ghgr
owt
hrat
emeanst
heyneedheav
yinv
est
ment
 Hi
ghmar
ketshar
emeanst
heyhav
eeconomi
esofscal
eandgener
atel
argeamount
ofcash
 Butt
heyneedmor
ecasht
hant
heygener
ate

Thehi ghgrowthratewi l
lmeant hatt heywil
lneedheavyinvestmentandwilltheref
orebe
cashuser [Link]
all
,thegeneralstrategyistotakecashfrom t
hecashcowst ofundst ars.
Cashmayal sobeinv estedsel
ectivelyinsomepr obl
em chi
ldren(quest
ionmar ks)toturn
them intostar
[Link] herproblem childr
enmaybemi l
kedorev ensoldtoprov i
def unds
elsewhere.
Ov ertheti
me,allgr
owt hmaysl owdownandt hestar
smayev entual
lybecomecashcows.
Iftheycannotholdmar ketshar
e, t
heymayev enbecomedogs.

i
i)CashCows–Lowgr owth,highmar ketshar e
Thesear et heproductareasthathavehi ghrel
ativemarketsharesbutexi
stinlow-gr
owth
mar [Link] ureandi tisassumedt hatlowerlevel
sofinvestmentwil
lbe
[Link],i
tistheref
orelikelythattheywil
lbeabletogenerat
ebot hcashand
profit
[Link] ofi
tscouldthenbet r
ansf err
edt osupportt
[Link]
eatur
esof
cashcowsar e–
 Theygener
atebot
hcashandpr
ofi
ts
 Thebusi
nessi
smat
ureandneedsl
owerl
evel
sofi
nvest
ment
 Pr
ofi
tsar
etr
ansf
err
edt
osuppor
tst
ars/
quest
ionmar
ks
 Thedangeri
sthatcashcowsmaybecomeunder
-suppor
tedandbegi
ntol
oset
hei
r
mar
ket

Althoughthemarketi
snol ongergrowing,thecashcowsmayhav ear el
ati
velyhi
ghmar ket
shareandbr i
nginhealt
hyprofi
[Link] fort
sorinvest
mentsarenecessarytomai nt
ainthe
[Link] erul
ti
mat el
ybecomedogsiftheylosethemar ketshare.
i
ii
)Quest i
onMarks–hi ghgrowth,lowmar ketshar
e
Quest i
onmarksarealsocall
edpr oblem chi
ldr
enorwildcat
[Link] eproduct
swi thlow
84
rel
ati
vemar ketsharesin highgrowt hmar [Link] ketgrowt
hmeanst hat
consi
derabl
ei nv
estmentmayst il
lber equi
redandt helow marketsharewillmeanthat
suchproductswi l
lhavediff
icul
tyingeneratingsubst
anti
[Link]
cal
ledquesti
onmar ksbecausetheor gani
zati
onmustdeci dewhethert
ostrengt
henthem
ortosel
lthem.
Thegeneralfeat
uresofquesti
onmar ksare–
 Thei
rcashneedsar
ehi
gh
 Butt
hei
rcashgener
ati
oni
slow
 Or
gani
zat
ionmustdeci
dewhet
hert
ost
rengt
hent
hem orsel
lthem
Althought heirmar ketshar eisrel
ati
velysmall,themar ketforquest i
onmar ksisgr owing
rapidl
y .I
nvestment st ocreategrowthmayy i
eldbigr esul
tsi
nt hef ut
ur e,t
houghthisisfar
from [Link]
igati
onintohowandwher et oi
nvestisadv i
sed.
i
v )Dogs–Lowgr owth,lowmar ketshare
These ar e pr oductst hathav elow mar ketshar es inlow gr owth [Link]
product swi l
lneedl ow investmentbutt heyar eunl i
kel
ytobemaj orpr of
[Link]
practi
ce,t heymayact uall
yabsorbcashr equir
edt ohol [Link] ten
regardedasunat tr
activeforthelongt er
m andr ecommendedf ordisposal
.Thegener al
featuresofdogsar e–
 Theyar
enotpr
ofi
tear
ner
s
 Theyabsor
bcash
 Theyar
eunat
tract
iveandar
eof
tenr
ecommendedf
ordi
sposal
.

Turnar
oundcanbeoneoft hestr
ategiestopursuebecausemanydogshav ebouncedback
andbecomev iabl
eandprofi
tabl
eaf terassetandcostreducti
[Link]
i
st odropordivestt
hedogswhent heyarenotprofi
table.I
fprofi
tabl
e,donotinvest,but
make the bestoutofits curr
entv al
[Link] mayev en mean sel
li
ng the di
vi
sion’s
operat
ions.

Adv
ant
ages–
 i
tiseasyt
ouse
 i
tisquant
if
iabl
e
 i
tdr
awsat
tent
iont
othecashf
lows
 i
tdr
awsat
tent
iont
othei
nvest
mentneeds

85
Li
mit
ati
ons–
 i
tist
oosi
mpl
i
sti
c
 l
i
nkbet
weenmar
ketshar
eandpr
ofi
tabi
l
ityi
snotst
rong
 gr
owt
hrat
eisonl
yoneaspectofi
ndust
ryat
tract
iveness
 i
tisnotal
way
scl
earhowmar
ket
sshoul
dbedef
ined
 mar
ketshar
eisconsi
der
edast
heonl
yaspectofov
eral
lcompet
it
iveposi
ti
on
 manypr
oduct
sorbusi
nessuni
tsf
allr
ighti
nthemi
ddl
eoft
hemat
ri
x,andcannot
easi
lybeclassi
fi
ed.
BCGmat r
ixisthusasnapshotofanor
gani
zat
ionatagi
venpoi
ntoft
imeanddoesnot
ref
lectbusi
nessesgrowingov
erti
me.

B)GENi
ne-
cel
lmat
ri
x

86
Thi
smat r
ixwasdev el
opedin1970sbyt heGener
alEl
ect
ri
cCompanywi t
ht heassi
stance
oftheconsult
ingfir
m,McKi nsey&Co,[Link] sisal
socalledGEmul ti
factorpor
tfol
io
matri
x.
TheGEmat r
ixhasbeendev el
opedt oover
cometheobviouslimi
tat
ionsofBCGmat rix.
Thi
smat r
ixconsi
stsofninecell
s(3X3)basedontwokeyvari
ables:
i
) businessst
rength
i
i) industr
yatt
racti
veness

Thehorizontalaxi
srepresent
sbusi
nessstr
engthandtheverti
calaxi
srepr
esenti
ndust
ry
at
tract
iveness
Thebusinessstrengt
hismeasuredbyconsi
der
ingsuchfact
orsas:
 r
elat
ivemar
ketshar
e
 pr
ofi
tmar
gins
 abi
l
ityt
ocompet
eonpr
iceandqual
i
ty
 knowl
edgeofcust
omerandmar
ket
 compet
it
ivest
rengt
hsandweaknesses
 t
echnol
ogi
cal
capaci
ty
 cal
i
berofmanagement
I
ndust
ryat
tract
ivenessi
smeasur
edconsi
der
ingsuchf
act
orsas:
 mar
ketsi
zeandgr
owt
hrat
e
 i
ndust
rypr
ofi
tmar
gin
 compet
it
ivei
ntensi
ty
 economi
esofscal
e
 t
echnol
ogy
 soci
al,
env
ironment
al,
legal
andhumanaspect
s

Thei ndustryproduct-l
inesorbusi nessunitsareplottedascircl
[Link] rcl
e
i
spr opor t
[Link] ewit
hintheci rcl
esr
epresent
sthemar ketshareof
thepr oductli
neorbusi nessuni t
.
Theni necel l
soft heGEmat ri
xr epresentvar
iousdegr eesofindust
ryatt
ract
iveness(high,
medium orl ow)andbusi nessst rength(str
ong,av erageandweak) .Aft
erplotti
ngeach
productl i
neorbusi nessunitont heni necel
lmatrix,
st rat
egi
cchoicesaremadedependi ng
onthei rposit
ioninthemat ri
x.

87
SpotlightSt r
at egy
GEmat ri
xi sal socal l
ed“ St oplight ”strategymat rixbecauset het hreezonesar elikegr een,
yell
owandr edoft rafficl ight s.
1)Gr eeni ndicatesi nv est /expand–i ft hepr oductf all
si ngr eenzone,t hebusi ness
strengt hi sst r ongandi ndust r
yisatl eastmedi um i nat tracti
v eness,thest r
ategic
deci sionshoul dbet oexpand, t
oi nv estandt ogr ow.
2)Yel lowi ndicat essel ect /ear n–i fthepr oductf allsiny ellowzone, the
business st r
engt hi sl ow buti ndustry at tractiveness i s high,i tneeds caut i
on and
manager ial discretionf ormaki ngt hest r
at egi cchoi ce
3)Redi ndi cateshar v est /
div est– ift hepr oductf all
si nt her edzone,t hebusi ness
strengt hi s av erage orweak and at tractiveness i s al so low ormedi um,t he
appr opr iatest rategyshoul dbedi v est ment .
Advant ages–
1)I tused9cel l
si nst eadof4cel lsofBCG
2)I tconsi der smanyv ariablesanddoesnotl eadt osi mpl i
sticconcl usi
ons
3)Hi gh/ medi um/ lowandst rong/aver age/ lowcl assi fi
cationenabl esaf i
nerdisti
nct i
on
amongbusi nesspor tfoli
o
4)I tusesmul tiplef act orst oassessi ndust ryat tractivenessandbusi nessst r
engt h,
whi chal l
owuser st osel ectcr it
eri
aappr opr i
atet ot heirsituat i
on
Limitations–
1)I tcangetqui t
ecompl i
cat edandcumber somewi ththei ncreasei nbusinesses
2)Thoughi ndust ryat tr
act i
v enessandbusi nessst rengt happeart obeobj ecti
ve,they
arei nr ealitysubj ect i
v ejudgement st hatmayv aryf rom oneper sont oanother
3)I tcannotef fect i
vel ydepi ctt heposi tionofnewbusi nessuni tsindev elopingindust r
y
4)I tonl ypr ov i
desbr oadst rategicpr escr i
ptionsr athert hanspeci f
icsofbusi ness
policy

ComparisionGEver
susBCG-
Thuspr oductsorbusi
nessuni
tsinthegr
eenzonearealmostequi
val
enttostar
sor
cashcows, y
ell
owzonearel
i
kequest
ionmar
ksandr
edzonearesi
mil
artodogsi
ntheBCG
matri
x.

Di
ff
erencebet
weenBCGandGEmat
ri
ces–
BCGMat
ri
x GEMat
ri
x

88
[Link]
ri
xconsi
stsoff
ourcel
l
s [Link]
ri
xconsi
stsofni
necel
l
s
[Link]
edagainst [Link] nessuni ti
srat
ed agai
nst
rel
ati
ve market shar
e and i
ndustry business st rengt
h and i ndust
ry
growthr
ate att
racti
veness
[Link] r
ixusessi
nglemeasur
eto [Link] r
ixusedmul t
ipl
emeasur
es
assessgr
owthandmarketshar
e to assess business str
engt
h and
i
ndust
ryatt
ract
iveness
[Link] mat r
ix uses t
wo t y
pes of [Link] mat ri
x uses three t
ypes of
cl
assi
fi
cat
ioni.
ehighandlow cl
assi
fi
cat
ioni .
ehigh/medium/
low and
st
rong/
average/weak
[Link]
i
mit
ati
ons [Link]
ercomesmanyli
mit
ati
onsofBCG
andi
sanimprov
ementov
erit

BALANCEDSCORECARD
BalancedScor eCar dhasbeenpr oposedandpopul ar
[Link] i
d.
[Link] ton.I ti saper formancet oolwhich“Prov i
desexecutiv
eswi thacompr ehensi
ve
fr
amewor kt hatt ranslates a company’s st
rategi
c object
ives i
nto a coherentsetof
perfor
mancemeasur es”.
Thescor ecar dconsi stsof4di f
ferentper
specti
vessuchas:
 Fi nanci al
 Cust omer
 Int ernal busi ness
 Innov ationandLear ni
ng
()Fi
i nancialPer spect ive
 Ret ur n-on- capitalemployed
 Cashf low
 Pr oj ectpr ofitabil
it
y
 Pr of itf orecastr eli
abil
it
y
 Sal esbackl og

89
()Cust
i
i omerper spective
 Pricingi ndex
 Cust omerr ankingsur vey
 Cust omersat i
sf actionindex
 Mar ketshar e
(i
i
i)I
nter
nalBusi nessPer spective
 Hour swi t
hcust omer sont endersuccessr
ate
 Rewor k
 Saf et yi
ncidentindex
 Proj ectper f
ormancei ndex
 Proj ectcloseoutcy cle
(i
v)I
nnovat ion&Lear ningPer spective
 %r ev enuef rom newser vices
 Rat eofi mpr ovementi ndex
 Staf fAt t
it
udesur vey
90
  Employ
eesuggest
ions
 Rev
enueperemployee.

Dist
inctive Competiti
veness Meani ng:Di stinctive Compet ence i s a setof uni que
capabil
iti
es thatcertai
nf i
rms possess al lowi ng t hem to make i nroads int
o desired
marketsandt ogainadv antageov erthecompet iti
on;gener al
ly,i
tisanact i
vit
ythataf i
rm
perf
orms bet terthan its compet it
[Link] def i
ne a f i
rm‟s di sti
nctiv
e compet ence,
managementmustcompl etean assessmentofbot hinternaland ext ernalcorporate
envi
ronment [Link] i
ndsani nternal strengthandbot hmeet smarketneeds
andgi v
est hefi
rm acompar ati
veadv antageint hemar ketplace,thatst r
engthisthefi
rm‟ s
dist
incti
ve [Link] i
ning and Building Di stincti
ve Compet ence:To def i
ne a
company ‟sdisti
nct
ivecompet ence,manager sof tenf oll
owapar t
icularprocess.
[Link]
ifythestrengthsandweaknessesi nthegivenmar ketpl
ace.
[Link] fi
cmar ketneedsandl ookf orcompar ati
veadv ant
agest hat
theyhaveoverthecompet i
ti
on.

GapAnal
ysi
s

91
Gap anal y
sisi sav eryusefult oolf orhelpi
ng marketi
ng manager sto deci
de upon
marketingstrategiesandt act
[Link] n,t
hesimpletoolsarethemostef f
ect
[Link]
e'sa
str
aightfor
war dstructuretofoll
[Link] ir
ststepistodecideuponhowy ouaregoingto
j
udget hegapov [Link] e,bymar ketshar
e,byprofi
t,bysalesandsoon.
Thiswillhelpyout owr i
teSMARTobj ecti
[Link] ousimplyaskt woquestions-where
arewenow?andwher edowewantt obe?Thedi ff
erencebet weent het
woi stheGAP-
thi
sishowy ouar egoi ngtogett [Link] ookatthediagram [Link]
neis
wherey ou'
llbeifyoudonot hi
[Link] ineiswhereyouwantt obe.

SWOTANALYSI
S
92
A scanoft hei nternalandext ernalenvironmenti sani mpor tantpar tofthest rategic
[Link] i
ronment alfactorsinternaltothefir
m usual l
ycanbecl assifi
edas
strengths(S)orweaknesses( W) ,andt hoseext er
naltot hef i
rm canbecl assifi
edas
oppor t
unit
ies( O)ort hreats(T).Suchananal y
sisofthestrategicenv i
ronmentisr eferred
toasaSWOTanal ysis.
TheSWOTanal y
sispr ovidesinformationt hatishelpfuli
nmat chingthef i
rm'sresour ces
and capabi l
it
iest ot he compet i
tiv
e environmenti n which itoper [Link],i ti s
i
nst r
ument alinstrategyf ormulationandsel ecti
[Link] agram showshow a
SWOTanal ysi
sf i
tsintoanenv i
ronment alscan:

Str
engths
Af i
rm'sstrengthsar eit
sresourcesandcapabi l
i
tiesthatcanbeusedasabasi
sfor
devel
opingacompet i
ti
veadv
[Link] esofsuchstrengt
hsi
ncl
ude:
 patents
 strongbr andnames
 goodr eputati
onamongcust omers
 costadv antagesfr
om pr
oprietar
yknow- how
 exclusiv
eaccesst ohi
ghgradenat uralr
esources
 favorableaccesstodi
str
ibutionnetworks

93
Weaknesses
Theabsenceofcer tainst r
engt hsmaybev [Link] e,
eachoft he
fol
lowingmaybeconsi deredweaknesses:
 l ackofpat entpr otecti
on
 awe akbr andname
 p oorr eputationamongcust omers
 h i
ghcostst r
ucture
 l ackofaccesst ot hebestnat uralresources
 l ackofaccesst okeydi str
ibut
ionchannel s
Insomecases,aweaknessmaybet hef l
[Link] nwhicha
fi
rm hasal argeamountofmanuf acturi
ngcapaci t
[Link]
ethi
scapacitymaybeconsi der
ed
ast r
engt ht hatcompet itorsdonotshar e,italsomaybeaconsi der
edaweaknessi fthe
l
argei nv estmenti nmanuf act ur
ingcapaci typrevent
sthef i
rmf rom react
ingquickl
yt o
changesi nthest rategi
cenv i
ronment .

Opport
uniti
es
Theexternalenv i
ronment alanaly
sismayr evealcer
tai
nnew oppor
tuni
ti
esf
orpr
ofi
tand
growt
[Link] esofsuchopportunit
iesincl
ude:
 a nunfulf
il
ledcust omerneed
 a r
ri
valofnewt echnologi
es
 looseningofr egulat
ions
 remov alofinternati
onaltr
adebarr
ier
s

Threat
s
Changes int he exter
nalenv i
ronmentalalso maypr
esentthr
eat
stot
he f
ir
[Link]
examplesofsucht hreat
sinclude:
 s hi
ftsinconsumertastesawayf rom t
hefi
rm'
spr
oduct
s
 e mergenceofsubstitut
epr oduct
s
 n ewr egul
ati
ons
 increasedtradebarr
iers

TheSWOTMat r
ix
Afi
rm shoul
dnotnecessari
l
ypur
suet
hemorelucrat
iveoppor
tuni
ti
[Link]
her,i
tmayhave
abett
erchanceatdevelopi
ngacompet
it
iveadvant
agebyi dent
if
yingafitbet
weenthe

94
fi
rm'
sst r
engthsandupcomi ngopport
uniti
[Link],thef ir
m canov ercomea
weaknessinordert
oprepar
ei t
sel
ftopursueacompell
i
ngoppor t
unity.
Todevelopstrat
egi
esthattakeint
oaccountt heSWOTprofi
le,amat rixofthesefact
ors
canbeconstruct
[Link] ri
x(alsoknownasaTOWSMat r
ix)isshownbelow:
SWOT/TOWSMat ri
x

I
NTERNAL
ENVI
RONMENTALFACTORS 
St
rengt
hs Weaknesses

Oppor
tuni
ti
es S-
Ost
rat
egi
es W-
Ost
rat
egi
es
EXTERNAL

Thr
eat
s S-
Tst
rat
egi
es W-
Tst
rat
egi
es

 S-
Ost
rat
egi
espur
sueoppor
tuni
ti
est
hatar
eagoodf
itt
othecompany
'sst
rengt
hs.
 W-
Ost
rat
egi
esov
ercomeweaknessest
opur
sueoppor
tuni
ti
es.
 S-
T st
rat
egi
esi
dent
if
yway
sthatt
hef
ir
m canusei
tsst
rengt
hst
oreducei
ts
vul
nerabi
li
tytoexternalthr
eat
s.
 W-Tst r
ategiesestabli
shadef ensi
vepl
ant opr
eventt
hef
ir
m'sweaknessesf
rom
makingithighl
ysusceptibl
etoexter
nalt
hreat
s.

95
UNIT–I V
The i
mplementation pr
ocess,Resource all
ocat
ion,Desi
gning or
gani
sationalstr
uct
ure-
Desi
gning Str
ategic Contr
olSy stems-Mat chi
ng str
uctur
e and controlt o st
rat
egy-
Impl
ement i
ng Strat
egic change-Pol
it
ics-
Power and Confl
ict
-Techni
ques of strat
egic
eval
uat
ion&cont r
ol-
casestudy.

96
STRATEGYI
MPLEMENTATI
ON

Thei mpl
ementationoforgani
zati
onstrategyinvol
vestheappli
cati
onofthemanagement
process t
o obtainthe desir
ed resul
[Link] t
icul
arl
y,str
ategyimplement
ati
on i
ncl
udes
designi
ngtheor gani
zat
ion'
sst r
uctur
e,allocat
ingresour
ces,devel
opingst
rat
egi
ccontr
ol
systems.

Str
at egyi mplement ati
onis" thepr
ocessofall
ocati
ngresour
cestosuppor tthechosen
str
ategi es".Thi
spr ocessincl
udesthevar
iousmanagementact
ivi
ti
esthatarenecessar
yto
putst rategyinmot i
on,insti
tutest
rat
egi
ccontr
olsthatmonit
orprogress,andulti
matel
y
achieveor ganizat
ionalgoals.

TheRel
ati
onbet
weenSt
rat
egyFor
mul
ati
onandSt
rat
egyI
mpl
ement
ati
on

Successf
ulst
rat
egyf ormul
ati
ondoesnotguaranteesuccessfulst
rat
egyimpl
ementat
ion.
Str
ategyimpl
ementationisfundament
all
ydiff
erentfrom str
ategyformul
ati
[Link]
rat
egy
for
mulati
onandimplementati
oncanbecontr
astedinthefol
lowingways:

STRATEGYFORMULATI
ON STRATEGYI
MPLEMENTATI
ON

Str
ategy f
ormulat
ion is posi
ti
oni
ng St
rat
egy i
mplement
ati
on i
s
for
cesbeforet
heaction. managi
ngf
orcesduri
ngt
heacti
on.

97
St
rategy formul
ati
on f
ocuses on St
rat
egyi mpl
ement
ati
onf
ocuseson
ef
fecti
veness. ef
fi
ciency
.

St
rat
egyformulati
onispr
imar
il
yan St
rat
egyimplementat
ioni
spr
imar
il
y
i
ntel
l
ect
ualprocess. anoper
ati
onalpr
ocess.

St
rat
egyf or
mulati
on requir
es good Str
ategy i
mplement
ati
on requires
i
ntui
ti
veandanaly
tical
skil
ls. speci
almotiv
ati
on and l
eadership
ski
ll
s

Str
ategy for
mul
ati
on r
equir
es Str
ategy impl
ement
ati
on r
equi
res
coordi
nati
onamongafewi
ndi
vidual
s combinat
ion among many
i
ndivi
dual
s.

PLANS, PROGRAMMES, ANDPROJECTS

The st rategic pl an dev ised byt he or gani zation proposes t he manneri n whi ch t he
strategi
escoul dbeputi nt oact i
[Link] r
at egies,byt hemsel ves,donotl eadt [Link]
are, i
nasense, ast atementofi ntent:impl ement at i
ont asksar emeantt oreal i
zethei ntent.
Strategies,ther efore,hav etobeact i
vatedt hroughi mpl ement ation.
Strategiesshoul dl eadt opl [Link] nstance,i fst abil
itystrategieshav ebeenf ormul ated,
theymayl eadt ot heformul ationofv ariouspl [Link] ancoul dbeamoder nizat i
on
[Link] esul tindifferentki ndsofpr [Link] ogrammei sabr oadt er
m,whi ch
i
ncl udesgoal s,pol ici
es,pr ocedur es,rules,andst epst obet akeni nput tingapl ani nto
[Link] ogrammesar eusual lysuppor tedbyf undsal locat edforpl animpl ement [Link]
exampl eofapr ogrammei sar esearchanddev elopmentpr ogrammef orthedev elopment
ofanewpr oduct .
Progr ammesl eadt ot hef ormul ati
onofpr [Link] ojectisahi ghlyspecificprogr amme

98
forwhi cht heti
meschedul eandcost sar epr [Link] equiresallocationoff unds
based on capi t
al budget ing by or ganizat i
ons. Thus,r esear ch and dev el
opment
programmesmayconsi stofsev eralprojects,eachofwhi chi si ntendedt oachi ev ea
specifi
c and l i
mi t
ed obj ective,requir
es separ ate allocati
on off unds,and i sto be
compl etedwi t
hinasett i
meschedul e.
Implement ati
onofst rategiesi snotl i
mi tedt oformul ati
onofpl ans,pr ogrammes,and
proj
ect [Link]
ectswoul dalsor equireresour [Link] ovided, i
twoul dbeessent i
al
toseet hataproperor ganizationalstr
uctur eisdesi gned,syst emsar einstall
ed,functional
poli
ciesar edevised,andv ariousbehav i
oural inputsar eprovidedsot hatplansmaywor k.

St
rat
egi
cImpl
ement
ati
onPr
ocess

S.
Cer
[Link]
erpr
oposedaf
ive-
stagemodel
oft
hest
rat
egyi
mpl
ement
ati
onpr
ocess:

a)Determini
nghowmucht heor ganizationwi l
lhavetochangei nordert
oimpl
ementt
he
str
ategyunderconsi
derati
on,underconsi derat
ion.
b)Analyzi
ngtheformalandinformal structuresoftheorgani
zati
on.
c)Analyzi
ngthe"cul
tur
e"oftheor ganizat i
on.
d)Selecti
nganappropr
iateapproacht oi mplement i
ngthestr
ategy.
e)Implementi
ngthestrat
egyandev aluatingtheresult
s.

Galbrait
hsuggest sthatsev er
almaj orinternalaspect softheor ganizationmayneedt obe
synchronizedt oputachosenst r
ategyi ntoact i
[Link] orfact or saret echnology,human
resources,r eward sy stems,deci si
on pr ocessand st r
uctur [Link] sf actorst end to be
i
nterconnect ed,soachangei nonemaynecessi t
atechangei noneormor eot hers.
Hambr i
ckandCannel ladescribedf i
vestepsf oreffecti
vestrategyi mplement ati
on:
a)I nputf r
om awi der angeofsour cesisr equir
edi nthest rat egyformul at
ionst age( i
.e.
,
themi ssion,env i
ronment ,
resources,andst rategicopti
onscomponent ).
b)Theobst acl
est oi mplement at
ion,botht hosei nt
ernalandext er
nalt otheor ganizat
ion,
shoul dbecar eful
lyassessed.
c)St rategi
st sshouldbeusei mplement ati
onl eversormanagementt askst oinit
iatethis
componentoft hestrategi
cmanagementpr [Link] ev ersmaycomef r
om t heway

99
 resour ces ar e commi tted,t he appr oach used t o structuret he or
ganizat
ion,the
selectionofmanager s, andthemet hodofr ewar dingempl oyees.
d)Thenextst epistosel ltheimpl ement [Link]
ngupwar dent ai
lsconvi
ncingboardsof
directorsandseni orsmanagementoft hemer i
tsandv iabili
tyofthestrategy
.Sell
ing
downwar di nvolves conv i
ncing lowerl evelmanagementand empl oyees oft he
appr opriatenessoft hest [Link] l
i
ngacr ossinv ol
v escoor di
natingimplementat
ion
across t he v ar
ious uni t
s of an or ganizati
on, whi l
e sel l
ing outward entail
s
communi cati
ngt hest rategytoext ernalstakeholder s.
e)Thepr ocessi son- goingandacont inuousf inet uning,adj ust
ing,andrespondingis
neededasci rcumst ancechange.

RESOURCEALLOCATI ON
Ther esour
cesmaybeexi st i
ngwithacompanyormanybeacqui redthroughcapit
al
al
locati
[Link]
ces incl
ude physi
cal,
financialand human r
esources essent
ialf
or
i
mpl ementi
ngpl
[Link]
ebroadl
yoff ourcat
egori
es.

i
)Money
i
i
)Faci
lit
iesandequipment
s
i
i
i)Materi
als,
suppl
iesandser
vices
i
v)Per
sonnel

Decisi
ons i nvolv
ed i n allocati
on of r esources havev italsignifi
cance in strat
egy
i
mpl ement ati
[Link] oductf
irmsi tmayi nvol
veassessmentoft heresourceneeds
ofdi fferentfuncti
onaldepar [Link] he multidivi
sionalor ganizat
ion itimpli
es
assessingt heresourceneedsofdi ffer
entSBUsorpr oductdi v
isionsRedepl oymentor
real
locationofresourcesbecomesnecessar ywhenchangest [Link] edepl
oyment
ofresour cesisquit
ecr it
icalwhent herearemaj orchangesandshi ftsi
nst r
ategicpost
ure
ofcompany .Redepl
oy mentofr esourcesmayar i
seduetostrategi
esofacompanyt ogrow
i
ncer tainareasandwi thdrawf r
om theother.

Met
hodsofResour
ceal
locat
ion

100
(i
)Basedonper centages:
Usuall
y,companieshav ebeenfol
lowingsy stem ofall
ocationofresour
cesbypercentages.
Itmaynotser vemuchpur posetheseday [Link] ponlyinmakingsome
compar i
[Link] l
ocati
onofr esourcesshoul dnotbebasedont hei
ravail
abi
li
tyor
scarci
tyasitmaypr ovetobecount erpr
oduct i
[Link] esourceall
ocat
ionshouldbemade
withregardtostr
ategiesofacompanyf oritsfutur
ecompet i
ti
veposit
[Link]
decisi
onsofr esourceallocat
ionar eal so cl
oselyconnect edwi ththeobjecti
vesofa
company .

(i
i)Basedonmoder nmet hods
Othermet hodsi ncl
ude- Portfol
iomodel s,pr oductlife-cy
clecharts,balancesheet s,profi
t
andl ossstatementsi ncomest atement [Link] etr
enchmentort ur
naroundst rategi
esar e
i
mpl ement edzero-basedbudget i
ngi [Link] i
ngmer gers,acqui
sit
ionsandexpansi on,
capitalbudgetingtechniquesar esuggest [Link] ceallocati
onisnotpur el
yar at
ional
techniquebuti sbased onsev eralbehav i
oraland pol i
ti
calconsider at
[Link] her
analyti
calconceptual modelsusedf orstrat egi
cchoi cearegr owthsharemat ri
x,‘stopli
ght’
,
and Di r
ectionalPolicyMat r
ix used in mul t
idi v
isionalfirms.A mor e compr ehensive
approacht omanagementdeci sionsonr esour ceallocati
oni sprovi
dedbyt hebudget ing
system carefull
ygearedt othechosenst rat egy.

Problemsi nresour ceal locati

on
Ther e are sev eraldi ff
iculti
es inresource al l
ocat i
[Link] f oll
owing ar e some oft he
i
dent i
fi
edpr oblems.
i
)Scar cityofr esources.
Financial,phy sical,and human r esources ar e har dt of i
[Link] rms wi llusuallyface
diff
icul
tiesi n pr ocuring [Link] en i
ff iancé i sav ai
lable,t he costofcapi t
alisa
[Link] ir
mst hatenjoyi
nv est
orconf idenceandhi ghcr editwor t
hinesspossess
acompet i
tiveadv antageasi tincreasest heirr esource-gener ati
oncapabi l
it
[Link]
resources woul d consi stofasset s,such as,l ard machi nery,and equi [Link]
developingcount ryl i
keI ndia,manycapi t
algoodshav etobei mpor [Link] ernment
maynol ongeri mposemanycondi tionsbuti tdoespl aceabur denont hefirm’sfi
nances
andt hispl acesar estricti
ononf i
rmswi shingt opr ocurephy si
calr [Link]
resourcesar eseemi nglyi nabundancei nI ndiabutt hepr oblem ar isesduet othenon-

101
av ail
abili
tyofski llst hatar especi all
yr [Link] mati
ont echnologyand comput er
prof essionals,advert
isingper sonnel,andt el
ecom, powerandi nsuranceexper tsarescar ce
i
nI [Link] ererestr
ict
ionsonf ir
mswi shingt oatt
ractandr [Link]
sum, theav ail
abil
i
tyresour cesar eav eryrealpr obl
em.
i
i)Rest r
icti
onsongener atingresources
Int heusualbudget i
ngpr ocessthesear esev eralrestricti
onsforgeneratingr esourcesdue
tot heSBUconceptespeci all
yfornewdi visionsanddepar tments.
i
ii)Ov erstatementofneeds
Ov erst atementofneedsi sanotherfrequentpr oblem inabot tom-upappr oacht oresour ce
allocat i
on.
Thebudget ingandcor porat
epl anningdepar tmentsmayhav et ofacet hei r
eoft hose
execut i
veswho do notgetr esourcesaccor dingt ot heirexpectati
[Link] ive
react i
onsmayhampert hepr ocessofst rategicplanningi t
self
.

DESI
GNI
NGORGANI
ZATI
ONSTRUCTURE

Anor gani
zati
onalstr
uctur
eist hepatt
ernorar rangementofjobsandgr oupsofjobs
wit
hinanor gani
zati
[Link]
zati
onalDesign i
st heprocessofcr eat
ingorreshapi
ng
an 
organi
zati
onalst
ruct
ure 
opti
mizedtosupportstrat
egi
cdecisi
ons. 

Theel
ementsoforganizati
onstr
uct
ureanddesi
gnar
e
a)Divi
sionofl
abor
b)Department
alization
c)Delegati
onofaut hori
ty
d)Spanofcontrol

A)DIVI
SIONOFLABOR:
I
tistheprocessofdi
vi
dingwor
kint
orel
ati
vel
yspeci
ali
zedj
obst
oachi
eveadv
ant
ages
ofspeci
ali
zati
on

102
 Di
vi
sionofLaborOccur
sinThr
eeDi
ff
erentWay
s:

i
) Per
sonalspeci alt
ies
e.g.
,account ants,soft
war eengi
neers,
gr aphi
cdesigner
s,scienti
sts,et
c.
i
i
)Naturalsequenceofwor k
e.g.
,di v
iding wor ki n a manufact
uring planti
ntof abri
cating and assembl
y
(hor
izont alspecial
izat
ion)
i
i
i)Ver
ti
calplane
e.g.
,hierarchyofaut hori
tyfr
om lowest-l
evelmanagertohighest-
levelmanager

B)DEPARTMENTALI
ZATI
ON:

Depart
mentali
zat
ion i
st he pr
ocess ofgroupi
ng ofwor k act
ivi
ti
es into departments,
di
visi
ons,and ot her homogenous [Link] akes place inv arious patterns li
ke
depar
tmental
izat
ionbyf unct
ions,pr
oduct
s,cust
omer s,geographi
cl ocati
on,process,and
i
tscombinati
ons.

i
)Funct
ionalDepar
tment
ali
zat
ion

103
Functi
onalDepar t
ment al
i
zati
on ist he process of gr oupi
ng act
ivi
ti
es by functi
ons
perf
[Link]
iti
escanbegr oupedaccordi
ngt ofunction(workbei
ngdone)t opur sue
economies ofscal e by pl
acing employees with shared skil
l
s and knowledge into
depart
ment sf
orexampl ehumanr esour
ces,fi
nance,producti
on,andmarket
[Link]
ional
Depart
ment al
i
zati
oncanbeusedi nallt
ypesoforganizati
ons.
Advantages:
 Adv
ant
ageofspeci
ali
zat
ion
 Easycont
rol
overf
unct
ions
 Pi
npoi
nti
ngt
rai
ningneedsofmanager
 I
tisv
erysi
mpl
epr
ocessofgr
oupi
ngact
ivi
ti
es.
Di
sadv
ant
ages:
 Lackofr
esponsi
bil
i
tyf
ort
heendr
esul
t
 Ov
erspeci
ali
zat
ionorl
ackofgener
almanagement
 I
tleadst
oincr
easeconf
li
ctsandcoor
dinat
ionpr
obl
emsamongdepar
tment
s.

i
i)Pr
oductDepar
tment
ali
zat
ion

104
 ProductDepar t
ment al
i
zationist heprocessofgr oupingactivi
ti
esbypr oductline.
Taskscanal sobegr oupedaccor di
ngt oaspeci fi
cpr oductorser vi
ce,t huspl aci
ngal l
acti
vit
iesr elatedt othepr oductort heserv i
ceunderonemanager .Eachmaj orproduct
areaint hecor porati
onisundert heaut hori
tyofaseni ormanagerwhoi sspeci ali
stin,and
i
sr esponsi blefor,every
thingr el
atedt othepr oductli
[Link] ndiaLimitedist heIndia’s
l
argestAy urvedicmedi cinemanuf acturerisanexampl eofcompanyt hatusespr oduct
Department al
izat
[Link]
sst ructur
ei sbasedoni t
sv ar
iedpr oductli
neswhi chincludeHome
care,Healthcar e,Personal careandFoods.

Adv
ant
ages
 I
tensur
esbet
tercust
omerser
vice
 Unpr
ofi
tabl
epr
oduct
smaybeeasi
l
ydet
ermi
ned
 I
tassi
stsi
ndev
elopmentofal
lar
oundmanager
ial
tal
ent
 Makescont
rol
eff
ect
ive
 I
tisf
lexi
bleandnewpr
oductl
i
necanbeaddedeasi
l
y.
Di
sadv
ant
ages
 I
tis expensi
ve as dupl
i
cat
ion ofser
vice f
unct
ions occur
sinv
ari
ous pr
oduct
di
vi
sions
 Cust
omer
sand deal
ershav
eto dealwi
thdi
ff
erentper
sonsf
orcompl
aintand
i
nfor
mat
ionofdi
ff
erentpr
oduct
s.

105
i
ii
)Cust
omerDepar
tment
ali
zat
ion

CustomerDepartmentali
zati
oni stheprocessofgr oupingact i
vi
ti
esonthebasi sof
commoncust omersortypesofcustomer [Link] oupedaccor dingt
ot hetypeof
customerser ved by the organi
[Link] assumpt i
on ist hatcustomersi n each
departmenthav e a common setofpr oblems and needs t hatcan bestbe metby
special
ist
[Link] ist heoneoft hel argestcommer cialbanksofI ndi
aisanexampl eof
companyt hatusescust omerDepar t
mentali
zati
on.I t
sst ructureis based on vari
ous
servi
ceswhi chi
ncludesHomel oans,Businessloans,Vehicl
eloansandEducat i
onalloans.
Advantages
 I
tfocusedoncust
omer
swhoar
eul
ti
mat
esuppl
i
ersofmoney
 Bet
terser
vicet
ocust
omerhav
ingdi
ff
erentneedsandt
ast
es
 Dev
elopmenti
ngener
almanager
ial
ski
l
ls
Di
sadv
ant
ages
 Sal
esbei
ngt
heexcl
usi
vef
iel
dofi
tsappl
i
cat
ion,co-
ordi
nat
ionmayappeardi
ff
icul
t
bet
weensal
esf
unct
ionandot
herent
erpr
isef
unct
ions.
 Speci
ali
zedsal
esst
affmaybecomei
dlewi
tht
hedownwar
dmov
ementofsal
est
o
anyspeci
fi
edgr
oupofcust
omer
s.
106
i
v)Geogr
aphi
cDepar
tment
ali
zat
ion

GeographicDepart
ment al
izati
onisthepr ocessofgr oupingactivi
ti
esonthebasis
ofterr
it
ory.I
fanor gani
zati
on'
scust omer saregeographical
lydispersed,i
tcangroupjobs
based on [Link] e,the organi
zati
on structur
e ofCoca- Cola Lt
d has
ref
lect
edt hecompany ’
soper ati
oni nv ari
ousgeogr aphicareassuchasCent r
alNorth
Amer i
can group,Western North Amer i
can group,Eastern Nor t
h Amer i
can gr
oup and
Europeangroup
Advantages
 Hel
ptocat
ert
otheneedsofl
ocal
peopl
emor
esat
isf
act
ori
l
y.
 I
tfaci
l
itat
esef
fect
ivecont
rol
 Assi
stsi
ndev
elopmentofal
l
-roundmanager
ial
ski
l
ls
Di
sadv
ant
ages
 Communi
cat
ionpr
obl
em bet
weenheadof
fi
ceandr
egi
onalof
fi
ceduet
olackof

107
 meansofcommuni
cat
ionatsomel
ocat
ion
 Coor
dinat
ionbet
weenv
ari
ousdi
vi
sionsmaybecomedi
ff
icul
t.
 Di
stancebet
weenpol
i
cyf
ramer
sandexecut
ors
 I
tleadst
odupl
i
cat
ionofact
ivi
ti
eswhi
chmaycosthi
gher
.

v
)Pr
ocessDepar
tment
ali
zat
ion

Geographi
cDepar t
ment ali
zat
ionistheprocessofgr oupi
ngact i
v i
ti
esont hebasis
ofproductorser vi
ceorcust omerf [Link] ocessrequiresdi f
fer
entski
ll
s,
processDepartmental
izat
ionallowshomogenousact i
vit
iestobecategor i
[Link],
Bowat erThunderBay,aCanadi ancompanyt hatharv
estst r
eesandpr ocesseswoodi nt
o
newspr i
[Link] hr
eedivi
sionsnamelyt r
eecutt
ing,chemi calpr
ocessi
ng,

108
andf
ini
shi
ng(
whi
chmakesnewspr
int
).

Advant
ages
•Orientedtowar dsendr esul t.
•Professionalidenti
ficationismai nt
ained.
•Pi
npoi ntsproduct -
profitresponsibi
li
ty.
Di
sadvantage
•Conf l
i
ctinor ganizationaut hori
tyexi
sts.
•Possibil
ityofdisunityofcommand.
•Requiresmanager sef f
ect i
veinhumanr el
ati
on

v
i)Mat
ri
xDepar
tment
ali
zat
ion

109
Inactualpr acti
ce,nosi ngl epat t
ernofgr oupingact ivit
iesi sappl iedi nt heorgani zati
on
str
uctur ewi thall i
[Link] eusedi ndi fferentsegment soft heent erprise.
Composi teorhy bri
dmet hodf or mst hecommonbasi sf orclassifyingact i
v i
ti
esrat herthan
onepar ticularmet hod,.Oneoft hemi xedf ormsofor gani zationisr eferredt oasmat ri
xor
gri
dor gani zati
on’ sAccor dingtot hesituat i
ons, thepatt ernsofOr ganizingv ari
esfrom case
to [Link] f orm ofst ructur e mustr efl
ectt he tasks,goal sand t echnologyi ft he
ori
ginationst het ypeofpeopl eempl oy edandt heenv i
ronment alcondi tionst hatitfaces.I t
i
snotunusualt oseef ir
mst hatut il
i
zet hef unctionandpr ojectorgani zationcombi nation.
Thesamei struef orpr ocessandpr ojectaswel lasot hercombi nat i
[Link] nst ance,a
l
arge hospi talcoul d hav e an account ing depar t
ment ,sur gerydepar tment ,mar keti
ng
department ,andasat ell
it
ecent erprojectt eam t hatmakeupi tsorganizat ionalstructure.
Advant ages
 Ef
fi
cient
lymanagel
arge,
compl
ext
asks
 Ef
fect
ivel
ycar
ryoutl
arge,
compl
ext
asks
110
Di
sadv
ant
ages
 Requi
reshi
ghl
evel
sofcoor
dinat
ion
 Conf
li
ctbet
weenbosses
 Requi
reshi
ghl
evel
sofmanagementski
l
ls

C)DELEGATI ONOFAUTHORI TY
Delegat
ionofauthorit
ycanbedef i
nedassubdi vi
sionandsub-
all
ocationofpowerst
othe
subordi
natesinordertoachieveeffect
iveresult
s.
Central
i
zationandDecent ral
izat
ionaret woopposi t
eway stodelegateauthor
it
yandto
changetheorgani
zationalstr
uctureoforganizati
onsaccordi
ngl
y.

i
)Central
izati
on:
Iti
stheprocessoftransferr
ingandassigningdeci
sion-
maki
ngauthor
it
yt ohigherlevel
sof
anorgani
zat i
onalhi
[Link] roloftopmanager
sisrelati
velybroad,and
ther
earerelati
vel
ymanyt iersi
ntheorganizati
on.
Advant
ages
 Pr
ovi
dePowerandpr
est
igef
ormanager
 Pr
omot
euni
for
mit
yofpol
i
cies,
pract
icesanddeci
sions
 Mi
nimal
ext
ensi
vecont
rol
l
ingpr
ocedur
esandpr
act
ices
 Mi
nimi
zedupl
i
cat
ionoff
unct
ion
Di
sadv
ant
ages
 Negl
ect
edf
unct
ionsf
ormi
[Link]
el,
andl
essmot
ivat
edbesi
deper
sonnel
.
 Nur
singsuper
visorf
unct
ionsasal
i
nkof
fi
cerbet
weennur
singdi
rect
orandf
ir
st-
li
ne
management
.

i
i)Decent
rali
zation:
Iti
stheprocessoft ransfer
ri
ngandassigningdecisi
on-maki
ngauthor
it
ytolowerlev
elsof
anorgani
zationalhi
er ar
[Link] roloftopmanagersisrel
ati
velysmall
,and
ther
earerelati
velyfew tearsi
ntheorganizati
on,becausether
eismor eautonomyinthe
l
owerranks.

Adv
ant
ages
 Rai
semor
aleandpr
omot
eint
erper
sonal
rel
ati
onshi
ps
111
  Rel
i
evef
rom t
hedai
l
yadmi
nist
rat
ion
 Br
ingdeci
sion-
maki
ngcl
oset
oact
ion
 Dev
elopSecond-
li
nemanager
s
 Pr
omot
eempl
oyee’
sent
husi
asm andcoor
dinat
ion
 Faci
l
itat
eact
ionsbyl
ower
-l
evel
manager
s

Di
sadv
ant
ages
 Top-
lev
eladmi
nist
rat
ionmayf
eel
itwoul
ddecr
easet
hei
rst
atus
 Manager
smaynotper
mitf
ull
andmaxi
mum ut
il
izat
ionofhi
ghl
yqual
i
fiedper
sonnel
I
ncr
easedcost
s.I
trequi
resmor
emanager
sandl
argest
aff
I
tmayl
eadt
oov
erl
appi
nganddupl
i
cat
ionofef
for
t

 
Theremustbeagoodbalancebetweencentr
ali
zati
onanddecent
ral
izat
ionofaut
hor
it
y
andpower
.Ext
remecent
ral
i
zati
onanddecent
ral
izat
ionmustbeavoi
ded.

D)SPANOFCONTROL
SpanofControlmeansthenumberofsubor di
natesthatcanbemanagedeff
ici
ent
lyand
eff
ecti
vel
ybyasuper i
orinanor gani
zat
[Link] t
her
elat
ionsar
edesigned
betweenasuperi
orandasubor
dinatei
nanor gani
zati
on.

Factor
sAf fect ingSpanofManagement :
a)Capaci tyofSuper i
or :
Differentabi l
i
tyandcapaci t
yofl eader ship,communi cat
ionaff
ectmanagementof
subor dinates.
b)Capaci tyofSubor dinates:
Efficientandt rainedsubor di
natesaf fectst hedegreeofspanofmanagement.
c)Nat ureofWor k:
Differentt ypesofwor krequi
r edi
fferentpat ter
nsofmanagement .
d)Degr eeofCent rali
zationorDecent rali
zation:
Degr eeofcent ral
izati
onordecent rali
zat i
onaf f
ectst hespanofmanagementby
affect ingthedegr eeofi nvol
vementoft hesuper i
orindecisi
onmaking.
e)Degr eeofPl anni ng:
Planswhi chcanpr oviderules,procedur esi ndoi
ngt hewor khi
gherwoul
dbet he
degr eeofspanofmanagement .
112
 f) Communi cati
onTechni ques:
Patter
nofcommuni cati
on,i
tsmeans,andmedi aaffectthet i
mer equirementin
managingsubor dinatesandconsequent l
yspanofmanagement .
g)UseofSt affAssist ance:
UseofSt affassi stanceinreducingthewor kloadofmanager senabl esthem to
managemor enumberofsubor dinat
es.
h)Super vi
sionofot hers:
Ifsubordi
nat erecei vessupervi
sionfor
m severalotherpersonnelbesideshisdir
ect
supervi
sor .I
nsuchacase,t hewor kloadofdirectsuperi
ori sreducedandhecan
supervi
semor enumberofper sons.

Spanofcontr
oli
softwot ypes:
i
)Narrowspanofcont r
ol:Narr
owSpanofcont
rolmeansasinglemanagerorsuper
visor
over
seesfewsubor
[Link]
sgi
vesr
iset
oatallor
gani
zat
ional
str
uctur
e.

Advant
ages:
• Cl osesupervi
sion
• Cl osecontr
olofsubordi
nat
es
• Fastcommuni cat
ion
Di
sadvantages:
• Toomuchcont rol
• Manyl evel
sofmanagement
• Highcost s
• Excessiv
edi st
ancebet
weenl
owestl
evel
andhi
ghestl
evel

113
i
i)Widespanofcontrol
:Widespanofcont rolmeansasi
nglemanagerorsuper
visor
over
seesal
argenumberofsubor
dinat
[Link]
sgivesr
iset
oaf
lator
gani
zat
ional
str
uct
ure.

Advant
ages:
• Mor eDelegati
onofAuthori
ty
• Dev el
opmentofManager s
• Cl earpoli
cies
Di
sadvantages:
• Ov erl
oadedsupervi
sor
s
• Dangerofsuper i
orsl
ossofcont
rol
• Requi rementofhighl
ytrai
nedmanager
ial
per
sonnel
• Bl ockindecisi
onmaking

DESI
GNI
NGSTRATEGI
CCONTROLSYSTEMS

St
rategi
ccont
rolsystemsprovi
demanager
swi t
hr equi
redinf
ormati
ontofi
ndoutwhet
her
st
rat
egyandstructur
emov einthesamedirect
[Link]
ncludestar
getset
ti
ng,moni
tor
ing,
ev
aluati
onandfeedbacksyst
em.

Thei
mpor
tanceofst
rat
egi
ccont
rol
 Achi
evi
ngoper
ati
onal
eff
ici
ency
 Mai
ntai
ningf
ocusonqual
i
ty
 Fost
eri
ngi
nnov
ati
on
114
  I
nsur
ingr
esponsi
venesst
ocust
omer
s

St
rat
egi
ccont
rolpr
ocess

Thebasi
ccont
rol
processi
nvol
vesmai
nlyt
hesest
epsasshowni
nFi
gur
e

115
a)TheEstabl
ishmentofStandards:
Becauseplansar ethest andar
dsagainstwhi ch control
smustber ev
ised,i
tfol
lows
l
ogical
lyt
hatthefir
ststepinthecontr
olprocesswoul dbetoaccompl
i
[Link]
anscan
beconsider
edast hecri
teri
onort hestandardsagai nstwhi
chwecompar etheactual
perf
ormanceinordertofi
gureoutthedevi
ations.

Exampl
esf
ort
hest
andar
ds
 Pr
ofi
tabi
l
ityst
andar
ds:I
ngener
al,
thesest
andar
dsi
ndi
cat
ehowmucht
hecompany
wouldli
ke t
o make as pr
ofi
tov
era gi
ven t
ime per
iod-t
hati
s,i
tsr
etur
n on
i
nvest
ment.
 Mar
ketposi
ti
onst
andar
ds:Thesest
andar
dsi
ndi
cat
etheshar
eoft
otalsal
esi
na
par
ti
cul
armar
kett
hatt
hecompanywoul
dli
ket
ohav
erel
ati
vet
oit
scompet
it
ors.
 Pr
oduct
ivi
tyst
andar
ds:How much t
hatv
ari
ous segment
s oft
he or
gani
zat
ion
shoul
dpr
oducei
sthef
ocusoft
hesest
andar
ds.
 Pr
oductl
eader
shi
pst
andar
ds:Thesei
ndi
cat
ewhatmustbedonet
oat
tai
nsucha
posi
ti
on.
 Empl
oyeeat
ti
tudest
andar
ds:Thesest
andar
dsi
ndi
cat
ewhatt
ypesofat
ti
tudest
he
companymanager
sshoul
dst
ri
vet
oindi
cat
eint
hecompany
’sempl
oyees.
 Soci
alr
esponsi
bil
i
tyst
andar
ds:
Suchasmaki
ngcont
ri
but
iont
othesoci
ety
.
 St
andar
dsr
efl
ect
ingt
her
elat
ivebal
ancebet
weenshor
tandl
ongr
angegoal
s.

b)MeasurementofPer formance:
Themeasur ementofperformanceagainstst
andardsshouldbeonaf orwardlooki
ngbasis
sothatdev iat
ionsmaybedet ect
edi nadvancebyappr opr
iat
[Link] eeof
di
ff
icul
tyin measur ing vari
ous types oforganizat
ionalperfor
mance,ofcour se,is
det
erminedpr i
maril
ybyt heacti
vi
[Link],i
tisfarmorediff
icul
tto
measuret he performance of highway maintenance worker t
han t o measuret he
per
formanceofast udentenrol
ledinacoll
egelevelmanagementcourse.

c)Compari
ngMeasuredPerfor
mancetoStatedSt andar
ds:
Whenmanagershavetakenameasur eoforganizati
onalper
for
mance,t hei
rnextstepin
contr
oll
i
ngist
ocompar ethismeasur
eagainstsomest andar
[Link] andardisthelev
elof
acti
vi
tyest
abl
i
shedtoserv easamodelf oreval
uat i
ngorgani
zati
[Link]
116
per
formanceeval
uatedcanbef ortheorganizati
onasawhol eorforsomeindi
vi
dual
s
worki
ngwithi
ntheorganizati
[Link],standardsaretheyar
dst
ickst
hatdet
ermi
ne
whetheror
gani
zat
ionalperf
ormanceisadequateori nadequat
e.

d)Taki ngCor rectiveAct ions:

Afteract ualper f
or mancehasbeenmeasur edcompar edwi t
hest abli
shedper f
ormance
standards, t
henextst epinthecont rolli
ngpr ocessistot akecor rectiveacti
on, i
fnecessar y
.
Correctiv
eact ioni smanager ialacti
v it
yaimedatbr ingingor ganizationalperformanceupt o
thelevelofper formancest andar [Link] herwords,cor r
ectiveact i
onf ocusesoncor rect
ing
organizationalmi stakes t hathi nderor ganizat
ionalper [Link] oret aki
ng any
correcti
veact ion,howev er,manager sshoul dmakesur ethatt hest andardst heyar eusing
wer eproper l
yest ablishedandt hatt heirmeasurement sofor ganizationalperformancear e
vali
dandr eli
[Link] irstglance,itseemsaf ai
rl
ysimpl epr opositi
ont hatmanager sshould
takecor recti
veact i
ont oeliminatepr oblems-t hef actorswi thi
nanor gani
zat i
ont hatare
barri
erst oor gani zationalgoalat tainment .Inpractice,howev er,iti softendi ffi
cultto
pinpointthepr oblem causi ngsomeundesi r
ableorganizationalef f
ect.

Lev
elsofst
rat
egi
ccont
rol

117
Thev
ari
ousl
evel
sofst
rat
egi
ccont
rol
are

a)Cor
poratelevel
control
:
Thecorporat
elevelcontroli
sdonebythetopl
evelmanagement
.Theysetcont
rol
s
whi
chpr ov
idecontextforthedi
vi
sional
lev
elmanager
s.

b)Divi
sionallevel
control
:
Thedi vi
sionallevelcont
rolisdonebythemanagersofthedi
vi
[Link]
contr
olswhi chprovi
decontextf
ort
hef
uncti
onal
manager
s.

c)Funct
ional
lev
elcont
rol
:
118
 Thefunct
ionall
evelcont
rolisdonebythemanager
sofeachdepar
tment
.Theyset
cont
rol
swhi chpr
ovidecontextf
orthef
ir
stl
evel
manager
s.

d)Fi
rstlevel
contr
ol:
Thef ir
stlev
elcontr
oli
sdonebyt
hef
ir
stl
i
nemanager
[Link]
rol
swhi
ch
pr
ov i
decontextf
orthewor
ker
s.

Ty
pesofcont
rolsy
stems

Thev
ar i
oust y
pesoft hecont r
olsyst
emsar e
a)Fi nanci
alControls
Sinceoneoft hepr i
marypur posesofever
ybusinessf i
rm i
st oearnaprofi
t,
manager sneedf inanci
alcontrol
[Link]
fi
cfi
nancialcont
rol
sincl
udebudget
s
andf i
nanci
alratioanalysi
s.

i
) Budget
sactasapl anningtoolandcont
roltool
saswel
[Link]
ide
managerswi t
hquant i
tati
vestandar
dsagainstwhi
chto measur
eand
compareresourceconsumpti
on.

i
i
)Financi
alrat
iosarecalcul
atedbytaki
ngnumber
sf r
om t
heorganizat
ion'
s
pr
imaryfi
nanci
alstat
ementst hei
ncomestat
ementandt
hebalancesheet.

b)OperationsCont r
ols
Oper ations contr
olt echni
ques are designed to assess how ef fi
cient
ly and
effectiv el
yanorgani
zat i
on'
str
ansformati
onpr ocessesarewor ki
[Link] hese
techni queswerecover edinChapter19aswedi scussedoperati
onsmanagement .
Howev er,t
wooperat
ionscontrolt
oolsdeserveelaborat
ion:TQM cont
rolchartsand
EOQmodel .

i
) Cont
rolchar
tsshowr esul
tsofmeasurementsoveraperiodoftimewit
h
st
ati
sti
cal
lydeter
mi nedupperandl owerl i
mit
[Link] ov
ideav i
sual
means ofdetermining whethera speci
fi
c process i
s stayi
ng wi
thi
n
pr
edefi
nedli
mits

119
 i
i
)TheEOQmodelhel psmanagersknowhowmuchinventoryt
oorderand
how often t
o or
[Link] EOQ modelseeks t
o balance f
ourcosts
associ
atedwit
hor
deringandcar
ryi
ngi
nvent
ory
.

c)Behavi
oralControl
s
Managers accompl i
sh organizati
onalgoals bywor ki
ng with ot
herpeople.I t
's
i
mpor t
antf ormanager st o ensurethatempl oyees are perf
orming as they
're
[Link]'ll
bel ookingatthreeexpl
i
citway sthatmanagerscontr
ol employ
ee
behavi
or:di
rectsupervisi
on,perfor
manceappraisals,anddi
scipl
ine.

i
) Dir
ect super
visi
on i
s t he dai
l
y ov er
seei
ng of employees' wor
k
perf
ormanceandcorr
ect
ingprobl
emsast heyoccur
.Iti
sal
soknownas
MBWA( managementbywalki
ngaround)
.

i
i
)Perfor
mance appr
aisal i
st he eval
uati
on of an indiv
idual
'
s wor
k
per
for
mancei
nordertoarr
iveatobj
ect
iveper
sonnel
decisi
ons.

i
i
i)Disci
pli
ne i ncl
udes act i
ons taken by a manager t o enf
orce the
organi
zation'sstandardsandr egul
ati
[Link] ypesof
di
scipl
inepr obl
emsi nv
olveat
tendance,on-
the-
jobbehav
ior
s,di
shonesty
,
andoutsideactivi
ties.

I
MPLEMENTI
NGSTRATEGI
CCHANGE

Level
sofchange
Changeoccur satt hr
eel
evel
s
i
)Indiv
iduallev el
i
i)Grouplevel and
i
ii
)Organizationlevel

120
Att hei ndiv
iduall evelchangei sr ef l
ectedi nsuchdev el
opment saschangesi naj ob
assignment ,physicalmov et oadi f
f er
entl ocat i
on,orthechangei nmat urityofaper son
whichoccur sov erti
me.I tissai dt hatchangesatt heindividuall ev elwillseldom hav e
signif
icantimplicationsfort het otalorgani [Link] ganizat ionalchangeshav et heir
maj oref f
ectsatt hegr oupl ev
[Link] si sbecausemostact ivitiesi norgani zati
onsar e
organizedonagr oupbasi [Link] oupscoul dbedepar t
ment s,ori nformalwor kgr oups.
Changesatt hegr ouplevelcanaf fectwor kf l
ows, j
obdesign, soci alor ganization,i
nfluence
andst at
ussy stems,andcommuni cationspat [Link] heor gani zat
ionl evel
i
nv olv
emaj orpr ogrammest hataf fectbot hi ndivi
dualsandgr [Link] sionsr egar ding
thesechangesar egener all
ymadebyseni ormanagementandar esel dom impl ement edby
onlyasi nglemanager .Fr equent ly
,t heyoccurov erlongper iodsoft imeandr equire
considerable planni ng for i mplement [Link] e of t hese changes woul d be
reorganizati
onoft heorganizat i
onalst ructureandr esponsibi
liti
es, r
ev ampi ngofempl oyee
remuner ati
onsy stem, ormaj orshif t
si nanor ganizati
on’sobject i
ves.

Organizati
onst hatseekt ocreateandsust ai
ncompet i
ti
veadv antageshoul dber eadyt o
changeandi mpl ementthepr [Link] orforcesf orchangear e:t
echnical
obsolescence and t echnicali mprovement s;polit
ical,economi c,and soci alevents;
globali
zati
on;i ncrease in organizati
onalsi ze,compl exit
y,and speci al
izati
on;gr eater
strat
egicawar enessandski l
l
sofmanager sandempl oyees;andcompet i
tiv
edy namics.
Thel evelofchangecoul dbeatv alues,cultur
e,orst yl
esofmanagement ;objecti
ves,
corporate str
at egy,oror ganizat
ion st r
ucture;compet it
ive strategies,sy stems,and
managementr oles;andf uncti
onalstrategi
esoror ganizati
onoft [Link]
ify
thelevelofchangeandt ackleneedsandpr oblemsappr opri
ately
.

Themaj
ort
ypesofst
rat
egi
cchangear
ere-
engi
neer
ing,
rest
ruct
uri
ng,
andi
nnov
ati
on.

121
 a)Re-engineeri
ng:I ti s al
so known as Busi ness Process Reengineeri
[Link] s
fundament alr et
hinki
ng and radi
calr edesi
gn ofbusi ness process t
o achieve
dramat i
cimpr ovementsincri
ti
cal,cont
empor ar
ymeasur esofperformancesuchas
cost,quality
,ser vi
[Link] r
ategi
stmustcompl etel
yt hi
nkhow t he
organizati
ongoesabouti t
[Link]
eadoff ocusi
ngoncompany ’sfunct
ions
strat
egicmanager smakebusi nessprocessthefocusofat t
ent
ion.

b)Restr
uctur
ing:Iti
sthesecondform ofchangetoi mprovethefir
m’ sperf
ormance.
Therearetwobasi cstepst
orest
ructuri
[Link]
rst
,anor gani
zati
onr educesreduces
i
tslevelofdiff
erent
iat
ionandi
ntegrati
onbyeliminat
ingdivisi
ons,depart
ment sor

122
 l
evel
sinthehier
[Link],anorgani
zat
iondownsi
zesbyr
educi
ngt
henumber
ofi
tsemploy
eestor educeoperat
ingcost
.

c)Innovati
on:I
tistheprocessbywhichorganizat
ionsusethei
rski
l
lsandresour
cesto
createnew technologi
esorgoodsandser vi
cessot heycanchangeandbet t
er
respondt otheneedsoft hei
[Link]
oncanbedonewi ththehelpof
researchanddevelopmentdepar
tment.

St
agesi
ntheChangePr
ocess

STAGESI
NTHESTRATEGI
CCHANGEPROCESS

i
) Det
erminetheneedforchange:
Inthi
s step the st
rat
egic managers mustrecogni
ze a gap bet
ween actual
per
for
mance and desired perf
ormance,use a SWOT analysi
st o def
ine t
he
company’
spresentst
ateandthendeter
mineit
sdesir
edfut
urestat
e.

i
i
) Determinetheobst aclestochange:
Obstaclesmaypr ev entacompanyf rom r
eachi
ngit
sdesi
redfut
urestat
[Link]
ictis
alsomaj orset
backt ochangeandmanager smustseekwaystoresol
vetheconfl
ict
toimplementstrategi cchangesuccessf
ull
y.

i
i
i) I
mpl ementchange:
Strat
egi
cmanager spl
ayorgani
zat
ionalpol
i
ticstoover
comeobstacl
estochange,
resol
veconfl
ict
sandbri
ngaboutst
rategi
cchange,r
esol
veconf
li
ctsandbr
ingabout
123
 st
rat
egi
[Link]
aypol
i
tics,
manager
smusthav
epower
.

i
v) Eval
uatechange:
Str
ategi
cmanager sneedt oev aluat
etheresul
tsofeachchangeprocessanduse
thi
sanalysi
stodefinetheorganizati
on’
spr
esentcondi
ti
onsothatt
heycanstartt
he
nextchangeprocess.

POWERPOLI
TICSANDCONFLI
CT

POWER
Powerist
hecapaci
tytoi
nfl
uencethebehaviorofother
[Link]
fer
entsour
cesof
power
.Theyar
ebroadl
ydi
vi
dedint
o( a)i
nter
personal
sourcesand(b)st
ruct
ural
sour
ces.

(
a)Int
erpersonalsour cesofpower
i) Rewar dpower :Itisindividual ’
sabili
tytoinfl
uenceot hers’behav i
orsbyr ewar di
ng
thei
rdesi r
ablebehav iors.
i
i) Coer cive power :Itis an i ndivi
dual’
s abil
i
tyt oi nf
luence ot hers’behaviors by
punishi
ngt heirundesi r
ablebehav ior
s.
ii
i) Legi ti
mat ePower :I
tispowerwhi chcomesf rom theposi t
ionintheor gani
zation.
iv) Exper tpower :I tisani ndividual’sabil
it
ytoinf l
uenceot hers’behav i
orsbecauseof
recognizedcompet encies,talents,orspeci
ali
zedknowl edge.
v) Ref erentPower :Iti
sani ndi vidual’
sabil
it
ytoi nfl
uenceot hers’behavior
sasar esult
ofbeingr espected,admi red, orli
ked.

(b)Structur
alsourcesofpower
Structur
alsourcesofpowerar erelatedt
othedivisi
onoflaborandpositi
onindiff
erent
teamsanddepar t
mentswor kassi
gnments,l
ocat
[Link]
ti
onsi
nhierarchy
naturall
yresul
tinav ari
etyofsit
uationsi
nwhichtherei
sunequalaccesst oi
nfor
mat i
on,

124
r
esour
ces,anddeci sionmaki [Link] hesit
uat ionalf actorscouldbeasour ceofpower
i
nanorganizat i
on,whichincludeknowl edge,r
esour ces, decisi
on-makingandnet works.
i) Knowl edgepower–Thi spoweri sfrom knowl edge- i
nformati
onandknow- howt hat
existsi nanorganizati
on.
i
i) Resour cespower– Or ganizati
onsneedav arietyofr esources,includi
nghuman
resour ces,money ,equipment ,mater
ial
s, suppl i
es, andcustomer s,t
osur vi
ve.
ii
i) Deci sion-makingpower–Deci si
onsinor gani zat i
onsof t
enar emadesequent iall
y,
withi ndivi
dual
s, gr
oups, orteamspar ti
cipat i
ng.
iv) Net wor kpower–Manager sanddepar t
ment st hathav econnect i
nglinkswi t
hot her
individualsanddepar tment si ntheorgani zationwi llbemor epower fult
hant hose
whodon’ t
.

POLI TICS
Poli
ti
csi stheartofacqui
ri
ngandenhanci
ngpower
.Employ
eeshaveacer
tai
nrol
etoplay.
Therefore,thei
rexerci
seofpowerisl i
mitedt
oal ar
geextentbyther
oleobl
igat
ions.
Poli
ti
cal behavi
orisoftwotypes.

Legi
ti
mat
e-I
tincl
udesnor
mal
ever
yday
’spol
i
tics.I
tincl
udes:
 Compl
aini
ngt
oone’
ssuper
ior
s
 Bypassi
ngt
hechai
nofcommand
 For
mingcoal
i
tions
 Obst
ruct
ingor
gani
zat
ional
pol
i
ciest
hroughexcessi
veadher
encet
orul
es
 Dev
elopi
ngcont
act
sout
sidet
hroughpr
ofessi
onal
act
ivi
ti
es

Il
legi
ti
mate–I ti
ncl
udesinfl
uencest
hatar
eext
remeandv
iol
atet
hei
mpl
i
ed“
rul
esoft
he
game.”Suchacti
vi
ti
esincl
ude
 di
srupt
ion,
 Whi
stl
ebl
owi
ng,
 Sy
mbol
i
cpr
otestsuchaswear
ingunor
thodoxdr
essand
 Gr
oupsofempl
oyeescumul
ati
vel
ycal
l
ingi
nsi
ck.

I
tmaybest at
edthatt
hevastmajori
tyofpol
i
ticalacti
onsar
eofthel
egiti
matevari
[Link]
reasonsarepragmati
c–t heextr
emeandi l
legiti
matefor
msofpolit
icalbehav
iorposea
veryrealr
iskoflossoforgani
zat
ionalmember shi
p,orext
remesancti
onsagainstthose
125
whouset
hem andt
henf
all
shor
tinhav
ingenoughpowert
oinsur
ethatt
heywor
k.

Factor
scausingpolit
icalbehavi
or
Researchhasindicat
edanumberoff act
ors,whi
chcancont r
ibut
etopolit
icalbehavi
or.
Some oft hese fact
ors areindiv
idualand deri
ved f
rom the uni
que quali
ti
es ofthe
employeesint heorganizat
ionandot her
sar ederi
vedfrom theorgani
zati
on’sint
ernal
cul
tureorenvi
ronment .

a)Indi
vidualf act ors
Afewpr omi nenti ndividual factor sar eexami nedher e.
i
) Needf orpowerandhi ghexpect ati
onsofsuccess-Somemanager swhoar est atus
andegodr iv
enof t
enr esor tt opol i
ti
cst ogainaccesst opowercor r
idor [Link]
thepowerf ort heirper sonalgr owthandpl [Link] s,whoar ein-
char geoft eamsoruni ts,mayal soengagei npol i
ti
cst osaf eguardt hei rposi tions
andhav emor ebenef i
tsf ort hei runits.
ii
) Machi av ell
ianism -Machi av el l
iansar epeopl ewhousedi shonest yandoppor tunism
ini nter per sonalr elati
ons and mani pulate othersf ort heirown pur [Link]
Machi av ell
istsal sohav easkept i
calv i
ewoft henatureofot herpeopl eanddonot
caref orconv ent i
onal mor ali
ty .
i
ii
) Locusofcont rol-Locusofcont r
olr eferstot heextentt owhi chindiv i
dual sbel i
eve
thatt heycancont rolevent st hataf fectt hem.I ndivi
dual swithahi ghi nter nallocus
ofcont rolbel iev et hatev ent sr esultpr i
mar il
yf r
om thei rownbehav i
orandact ions.
Thosewi thahi ghext ernall ocusofcont rolbelievet hatpower f
ulot her s,fat e,or
chancepr i
mar ilydet ermi neev ent [Link] t
hahi ghi nternall ocusofcont rolhav e
bet t
ercont roloft heirbehav i
or ,tendt oexhi bi
tmor epol i
ticalbehav i
or s,andar e
mor el ikel ytoat temptt oi nfluenceot herpeopl ethant hosewi thahi ghext ernal(or
low i nter nalr espect i
vely)l ocusofcont r
[Link] t
hahi ghi nternall ocusof
cont rolar emor el i
kelyt oassumet hatt heireffort
swi llbesuccessf [Link] e
mor eact ivei nseeki nginf ormat ionandknowl edgeconcer ni
ngt hei
rsituat i
on.

(b)Organizat
ionalfact
ors
Organizat
ionalfact
orsalsoi
nfl
uencet
hepol
i
ticki
ngi
nor
gani
zat
[Link]
easf
oll
ows.

126
i) Reallocati
on ofr esources – when or ganizat i
ons downsize t
he changes many
sti
mul ateconflictandpoliticki
ngt ohaveadv antageinall
ocati
on.
i
i) Adv ancementor pr omot ion – peopl er esor tto poli
ti
cs for quickl
y get
ting
advancement
i
i
i) orpr omotionint hei
rcareer s
i
v) Lowt r
ust–Al owt r
ustwi thintheorganizati
oncani ncr
easepolit
ical
behavior
,which
canbecomei ll
egi t
imateal so.
v) Roleambi guity–Whent herei sconfusioni nt hescopeandf uncti
ons,employees
resorttopolit
ickingtohav eaf av or
ablesituat i
on.

CONFLI CT
Confli
ctisdef
inedasasituati
onwhenthegoaldir
ectedbehavi
orofonegr oupblockst
he
goal-
dir
ectedbehavi
orofanot her
.Conf
li
cti
snecessar yfororgani
zat
ionalchangeasi t
str
ikesatther
ootofthesourcesofor
gani
zat
ioninert
ia.

SourcesofOr ganizat i
onal Conf l
i
ct
Thesour cesofconf l
ictare:
a)Diff
erent i
ation
-
Di f
ferencesi nsubuni torient
ati
ons
b)Taskr elati
onshi ps
-Ov erl
appi ngaut hority
-Taski nt
erdependenci es
-Incompat ibleevaluationsystems
c)Scarci
t yofr esour ces
-Distributi
ngsour ces

St
agesi
ntheConf
li
ctPr
ocess

127
Thesour
cesofconf li
ctareinher
entoft
heor
gani
zat
ion’
smodeofoper
ati
[Link]
ages
i
ntheconfl
i
ctprocessar e:
 Latentconfli
ct
 Perceivedconfli
ct
 Feltconfl
ict
 Mani f
estconfli
ct
 Confli
ctafter
mat h

Conf
li
cti
sady
nami
cpr
ocesst
hatdoesnotusual
l
yappearsuddenl
y.I
nfact
,conf
li
ct
128
generall
ypassest hroughsev er alstages:
[Link] entconf l
ict-Att hisst age,t hebasi ccondi t
ionsf orconf l
ictexi
stbuthav enot
beenr ecogni zedbyt hei nvol
v edpar ti
es.
[Link] cei
v edconf li
ct-Thebasi ccondi t
ionsf orconf li
ctar er ecognizedbyoneorbot h
oft hepar t
ies.
[Link] tconf l
ict-Int ernaltensionsbegi nt obuildi nthei nvolvedpar ti
es,butt
heconf l
ict
isst i
llnotouti nt heopen.
[Link] festconf li
ct-Theconf lictisouti ntheopenandt heexi stenceoftheconf l
ict
becomesobv i
oust ootherpar tieswhoar enoti nv olved.
[Link] li
ctaf t
ermat h-Theconf l
ictisst oppedbysomemet [Link] theconf li
cti s
stoppedest ablishednew condi t
ionst hatl eadei thert oanew conf li
ctort omor e
effectivecooper at i
onbet weent hei nvolvedpar ti
es.
A parti
cularconf l
ictsi tuati
ondoesnotnecessar il
ypasst hroughal loft hest ages.I n
additi
on,thepar t
ieswhoar ei nvolvedi ntheconf lictmaynotbeatt hesamest ageatt he
samet [Link] e,itisent ir
el ypossi bleforonepar tytobeatt hemanifestst age,
whileonepar tyi
satt heper ceivedst age.

CONFLI CTRESOLUTI ONSTRATEGI ES

Usingaut hor
it
ywhent hefuncti
on,whichhasequalpowerandauthori
ty,cannotsol
vet
he
confl
ictthemselv
es,theCEOorcor porateoffi
ceinter
fer
esandi
mposesasoluti
on.
 Changingcontrols
 Changingtaskrelati
onship
 I
mpl ementi
ngst rat
egicchange
 Changingthestrategy[successfult
urnaround]

TECHNI
QUESOFSTRATEGI
CEVALUATI
ONANDCONTROL

Theimpor t
anceofst r
ategi
cev al
uat i
onl iesinitsabili
tyt
ocoor di
nat et het asks
perf
ormedbyi ndivi
dualmanagers,andalsogr oups,div
isi
onorSBUs,throught hecont r
ol
[Link] heabsenceofcoor dinati
ngandcont rol
li
ngmechanisms,i ndiv
idual
manager smaypur suegoal
s,whichar ei nconsistentwit
ht heoveral
lobjecti
v esoft he
depart
ment,divisi
on,SBUort hewholeor [Link] l
lnow di
scussev aluationand
contr
ol i
ndetai
ledway .

129
Str
ategi cevaluati
onandcont r
olprocess
Thepr ocessofev aluat
ionbasicall
ydeal swithfourst
eps:
[Link] f
ormance- Standardsref
ertoperformanceexpectati
ons.
[Link] ementofper formance-Measur ementofact ualperf
ormanceorr esult
sr equi
res
appraisalbasedonst andards.
[Link] yzi
ngvariances-Thecompar isonbet weenstandardsandresult
sgivesv ar
iances.
[Link] recti
veaction-Theidentif
icati
onsofundesi r
ablevar
iancespromptmanager s
tothinkaboutway sofcorrecti
vethem.

TECHNIQUES
Thedi
ff
erentt
ypesofst
rat
egi
ccont
rol
sar
edi
scussedi
nbr
iefher
e.

a)Premisecont rolA companymaybasei t

sst rategyon i mportantassumpt i
ons
rel
atedt oenv i
ronment alfactor
s( e.g.,governmentpol i
cies),i
ndustri
alf act
ors(e.g.
nature ofcompet i
tion),and or ganizati
onalf actors([Link] i n R&D).
Premisecont rolcontinuall
yveri
fieswhet hersuchassumpt ionsarerightorwr [Link]
theyarenotv al
idcor recti
veact i
oni sinit
iat
edandst r
ategyismader i
[Link]
responsibil
it
yf orpremi secontrolcanbeassi gnedt ot hecorporatepl anningstaff
whocani denti
fyforassumpt ionsandkeepar egularcheckont hei
rv al
idity.

b)Implement ation controlImplementati

on controlcan be done usi ng mi l
estone
revi
[Link] si ssimilartotheidenti
fi
cati
on-al
beitonasmal lerscale-
ofeventsand
acti
vit
ies in PERT/ CPM net [Link] t
er the identif
ication of mi l
estones,a
compr ehensiv ereview ofi mplementati
on i
s made t or eassess it
s continued
rel
evancet ot heachievementofobjecti
ves.
c)Str
ategicSur v ei
lanceThi
l sisaimedatamor egener al
izedandov erar
chingcontrol
.
Str
ategicsur veil
l
ancecanbedonet hroughabr oadbased,gener almonitori
ngont he
basisofsel ectedinformati
onsourcestouncov ereventst hatarelikel
ytoaffectthe
str
ategyofanor ganizati
on.

d)Speci
alAler
tControlThi
sisbasedonat r
iggermechani sm f
orrapi
dr esponseand
i
mmedi at
ereassessmentofst
rategyinthelightofsuddenandunexpect edev ent
s.
Speci
alaler
tcont r
olcan beexercised t
hrough thef ormulat
ion ofcontingency

130
 str
ategiesandassigni
ngtheresponsibil
it
yofhandl ingunf
oreseenevent
st ocri
sis
managementt [Link] ofsuch ev ents can be t
he sudden fal
lofa
governmentatthecentr
alorst
atelevel,
instantchangeinacompetit
or’
sposture,
an
unfort
unateindust
ri
aldi
sast
er,oranaturalcatastr
ophe.

e)Str
ategicmomentum contr
olThesety
pesofeval
uat
iontechniquesar
eaimedat
fi
ndingoutwhatneedst
obedonei nor
dert
oall
owtheorganizati
ontomai
ntai
nit
s
exi
stingst
rat
egi
cmoment um.

) St
f rat
egicleapcontrolWheretheenvir
onmentisrel
ati
vel
yunst able,or
gani
zat
ions
arerequi
redtomakest rat
egicl
eapsinordert
omakesignif
[Link]
rat
egic
l
eapcont rolcanassistsuchorgani
zat
ionsbyhel
pingtodef i
net henew st
rat
egic
requi
rementsandtocopewi themergi
ngenvir
onmental
real
iti
es.

131