Notes for “Master of Science”

Students
Level: [Link]. (Administrative Sciences)
Semester: (3rd) spring 2021
University: Allama Iqbal Open University, Islamabad
(AIOU)
Study Notes Course: (5015) Business policy & strategy
Prepared By: Sardar Umer Chaudhary
Department: Dept. Of Business Administration,
Islamabad main campus of AIOU.
STRATEGIC MANAGEMENT: MEANING AND SCOPE
Strategic management is a broader term than corporate
strategy. Strategic Management consists of Corporate
Strategy (Portfolio Strategy) and Business Strategy
(Competitive Strategy). Corporate Strategy is a master plan
for the entire organization, it decides the scope of the
business or the business/businesses the company wants to
be in. Business strategy is about how to succeed in the
chosen businesses.
Def. strategic management:
Strategic management is defined as “that set of decisions
and actions which leads to the development of an effective
strategy or strategies to help achieve corporate objectives.”
Strategic management:
Corporate Strategy (Portfolio Strategy)
What Business(es)? S
Business Strategy (Competitive Strategy)
How to Succeed in the Business?
A strategy is not just a plan strategy is plan that is unified.
Strategic Planning and Tactical Planning
Strategic planning is defined as “an orderly process by
which top management determines organizational objectives,
strategies needed to reach these objectives, and short-range,
top-level actions necessary to implement the strategy
properly”. Strategic planning, which is also sometimes called
corporate planning, is essentially top-level long-range
planning. Tactical planning is a type of planning that involves
breaking down a long-term strategic plan into smaller and
more distinct short-term plans.
Formal Planning and Informal Planning
Formal planning is planning which is organisationally
formalised and is often systematic. In large organisations,
there may be planning departments/cells manned by people
with knowledge and experience in different aspects and
dimensions of planning. Clearly spelt out, organisational
objectives form the basis for planning. A formal planning
system will have a set of procedures and it is explicit, i.e.,
people know what is being done. Formal plans will be
documented.
Informal planning, which is common with small enterprises,
and sometimes with one man dominated not so small
enterprises, is often done in a casual way. A small
entrepreneur may have clear objectives and perceptions and
plans but he may not put them down on paper. Informal
planning many a time is intuitive, anticipatory planning which
is the work of primarily one person. It may be based on past
experience, the gut feeling, the judgement, the reflective
thinking and perspective vision of the person.
Policy “
A policy is a broad, general guide to action which constrains
or directs goal attainment.
Strategic Business unit (SBU):
A strategic business unit, popularly known as SBU, is a fully-
functional unit of a business that has its own vision and
direction. Typically, a strategic business unit operates as a
separate unit, but it is also an important part of the company.
It reports to the headquarters about its operational status.
Detail:
A strategic business unit or SBU operates as an independent
entity, but it has to report directly to the headquarters of the
organisation about the status of its operation. It operates
independently and is focused on a target market. It is big
enough to have its own support functions such as HR, training
departments etc. There are several benefits of having an
SBU. This principle works best for organisations which have
multiple product structure. The best example of SBU are
companies like Proctor and Gamble, LG etc. These
companies have different product categories under one roof.
For example, LG as a company makes consumer durables.

It makes refrigerators, washing machines, air-conditioners as

well as televisions. These small units are formed as separate
SBUs so that revenues, costs as well as profits can be
tracked independently. Once a unit is given an SBU status, it
can make its own decisions, investments, budgets etc. It will
be quick to react when the product market takes a shift or
changes start happening before the shift happens.
What Are Core Competencies?
Core competencies are the resources and capabilities that
comprise the strategic advantages of a business. A modern
management theory argues that a business must define,
cultivate, and exploit its core competencies in order to
succeed against the competition.

A variation of the principle that has emerged in recent years

recommends that job seekers focus on their personal core
competencies in order to stand out from the crowd. These
positive characteristics may be developed and listed on
a resume. Some personal core competencies include
analytical abilities, creative thinking, and problem resolution
skills.

LEVELS OF STRATEGY

In a multi-business enterprise, having several SBUs, there

would be four levels of strategy, viz., corporate strategy, SBU
strategy, functional strategy and operational strategy. In
enterprises which do not have SBUs, there will be only three
levels of strategy, i.e., corporate strategy, functional strategy
and operational strategy.

Corporate Strategy

Corporate strategy is the long-term strategy encompassing

the entire organization. Corporate strategy addresses
fundamental questions such as what is the purpose of the
enterprise, what business/businesses it wants to be in
(portfolio strategy) and how to expand/get into such
business/businesses (for example, by establishing greenfield
enterprises or by M&As). Corporate strategy is formulated by
the top level corporate management (board of directors, CEO,
and chiefs of functional areas).

SBU Strategy
SBU-level strategy, sometimes called Business Strategy or
Competitive Strategy, is concerned with decisions pertaining
to the product mix, market segments and maneuvering
competitive advantages for the SBU. While corporate strategy
decides the business portfolio (i.e., the types of business), the
competitive strategy decides the strategy/strategies to
succeed in the chosen business/businesses. The
responsibility for SBU strategy is with the top executives of
the SBU who are normally second-tier executives in the
corporate hierarchy.
Functional Strategies
Functional-level strategies are strategies for different
functional areas like production, finance, personnel, marketing
etc. In other words, “functional-level strategic management is
the management of relatively narrow areas of activity, which
are of vital, pervasive, or continuing importance to the total
organisation.”55 Functional-level strategy is the responsibility
of functional area heads.
Operational Strategies
The implementation of the functional strategies require
detailed operational strategies.
Strategists who take decisions:
 Board of Directors
 General manger (GM)
 Strategic management consultant
 Corporate Planners
Large organizations may establish a corporate planning
division or cell. It is a staff function and these staff
personnel are known as corporate planners.
Approaches to strategy making:
There are broadly two approaches, viz., Prescriptive
Approach and Emergent Approach.
In prescriptive approach three steps: Strategic analysis,
strategy development & strategy implementation. This is long
term strategy it is determination or determined.
In Emergent approach three steps: Strategic analysis,
strategy development & strategy implementation. This is long
term strategy it is not predetermined.
Mintzberg’s Proposition
According to Henry Mintzberg, there are three distinct modes
or approaches to making strategy, viz., entrepreneurial mode,
adaptive mode and planning mode.
Entrepreneurial Mode: In the entrepreneurial mode, which
is the least formal of the three, although there is active search
for new opportunities, strategy making is dominated by the
perceptions, thinking and gut feeling of a single person who
may be the entrepreneur or the chief executive in whose
 hands power is centralised. This mode may lend itself to
organisations which are small and/or young. Growth is the
dominant goal and strategy making is characterised by
dramatic leaps forward in the face of uncertainty.
Adaptive Mode: The adaptive mode is characterised by a
reactive approach rather than a proactive approach. In other
words, strategy is formulated to solve existing problems rather
than to seize new opportunities. Under this mode, obviously,
clear long-term goals do not exist. Strategy making is
characterised by incremental, serial and often disjoined
decisions made by members of a complex group. This may be
found in large organisations with many controlling groups
holding each other in check.
Planning Mode: This is the most formal of all the three
approaches. It is common with large and forward looking
organisations, particularly in competitive environment. The
approach to strategy making is very systematic and there is
proper integration of decisions and strategies. The approach
is proactive.
Steps of Strategic Management Process
There are five strategic management process steps that must
be followed in their chronological order.

[Link] setting

This is essentially clarifying the organization’s vision. The vision

will include short-term and long-term objectives, the processes
by which they can be accomplished, and the persons
responsible for implementing each task that culminates in the set
goals.

[Link]
 Analysis involves gathering the data and information that is
relevant to accomplishing the set goals. It also covers
understanding the needs of the business in the market and
examining any internal and external data that may affect the
organization’s goals.

[Link] Formulation

A business will only succeed if it has the resources required to

reach the goals set in the first step. The process of formulating a
strategy to achieve this may involve identifying which external
resources the business needs to succeed, and which goals must
be prioritized.

[Link] Implementation

Since the purpose of strategic management process is to propel

an organization to its objectives, an implementation plan must be
put in place before the process is considered viable. Everyone in
the organization must understand the process and know what
their duties and responsibilities are in order to fit in with the
organization’s overall goal.

[Link] and Control

The evaluation and control actions for the strategic

management process include performance appraisal as well
constant review of both internal and external issues. Where
necessary, the management of the organization can implement
corrective actions to ensure success of the SMP.
INTERNATIONAL STRATEGIC MANAGEMENT:
International Strategic Management (ISM) is an ongoing
management planning process aimed at developing strategies to
allow an organization to expand abroad and compete
internationally.
: VISION & MISSION:
A Mission Statement defines the company's business, its
objectives and its approach to reach those objectives. Mission
define the overall purpose of the organization.
A Vision Statement describes the desired future position of the
company. Elements of Mission and Vision Statements are often
combined to provide a statement of the company's purposes, goals
and values. Vision define the goal of company.
Detail:
A mission statement is a concise explanation of the
organization's reason for existence. It describes the organization's
purpose and its overall intention. The mission statement supports
the vision and serves to communicate purpose and direction to
employees, customers, vendors and other stakeholders. See
SHRM's Company Mission Statement Examples for a variety of
samples. Questions to consider when drafting mission statements
could include:

 What is our organization's purpose?

 Why does our organization exist?

A vision statement looks forward and creates a mental image of

the ideal state that the organization wishes to achieve. It is
inspirational and aspirational and should challenge employees.
Questions to consider when drafting vision statements might
include:

 What problem are we seeking to solve?

 Where are we headed?
 If we achieved all strategic goals, what would we look like 10
years from now?
Mission statement must be accurate, be realistic, be unique.

How to Write a Mission Statement

Here is a step-by-step process on how to get started writing a

mission statement:

1. Write a sentence that explains what your company does, in

basic terms.
2. List some of your core values.
3. Keeping those core values in mind, write a sentence that
explains how your company does what it does.
4. Write a sentence that explains why your company does what
it does.
5. Take a look at the three sentences you’ve written, and then
try to combine and condense those ideas so your mission
statement is as straight-to-the-point as possible.

The Concept/Philosophy of TBL:

The term Triple Bottom Line (TBL) has become very popular
recently. In essence, it is not significantly different from CSR and
social audit. The concept of TBL, consisting of the triple Ps –
people, planet, profit – holds that a company’s responsibility lies
with the stakeholders, i.e., to those who are influenced, either
directly or indirectly, by the actions of the firm, not merely with
the shareholders.

What Is Corporate Social Responsibility (CSR)?

Corporate social responsibility (CSR) is a self-regulating
business model that helps a company be socially accountable—
to itself, its stakeholders, and the public.

Companies can be conscious of the kind of impact they are

having on all aspects of society, including economic, social, and
environmental.
Corporate Governance
The great significance of corporate governance is highlighted by
James D. Wolfensohn, President of World Bank, as follows: “The
governance of the corporation is now as important to the world
economy as the government of countries”.
Corporate Governance Def.:
“Corporate governance is the system by which businesses are
directed and controlled.”
In its narrowest sense, the term may describe the formal system of
accountability of senior management to the shareholders.
There is no single model of corporate governance best applicable to
all countries because of the differences in the business
environmental factors, such the legal system, characteristics of the
corporate sector, political system and government, social norms
and cultural factors etc.
CORPORATE GOVERNANCE DETERMINANTS
There are some pre-requisites for good corporate governance.
They are:
• A proper system consisting of clearly defined and adequate
structure of roles, authority and responsibility.
• Vision, principles and norms which indicate the development path,
normative considerations, and guidelines for performance.
• A proper system for guiding, monitoring, reporting and control.
External Determinants

They should focus on:

• Fairness: protecting shareholder rights and ensuring the
enforceability of contracts with resource providers.

• Transparency: requiring timely disclosure of adequate

information on corporate financial performance.

• Accountability: clarifying governance roles and responsibilities

and supporting voluntary efforts to ensure the alignment of
managerial and shareholder interests, as monitored by a board of
directors—or in certain nations, a board of auditors—with some
independent members.

• Responsibility: ensuring corporate compliance with the other

laws and regulations that reflect society’s values, including a broad
sensitivity to the objectives of the society in which corporations
operate.

Internal Determinants

The corporate governance culture and practice of an organization

are shaped by factors such as its legacy, vision, mission, policies,
norms, governance structure, powers and responsibilities of the
key constituents, persons holding key positions in the organization
etc. Board of Directors, Shareholders & Management are all
accountable.

The areas covered by the six principles are:

• Ensuring the basis for an effective corporate governance

framework.

• The rights of shareholders and key ownership functions.

Corporate Governance

• The equitable treatment of shareholders.

• The role of stakeholders.

• Disclosure and transparency.

• The responsibilities of the board.

Business Environment:

Environmental analysis is defined as “the process by which

strategists monitor the economic, governmental/legal,
market/competitive, supplier/technological, geographic, and social
settings to determine opportunities and threats to their firms.”

Although the business environment consists of both the internal

and external environments, the term business environment is
generally used to refer to the external environment.

The internal factors are generally regarded as controllable factors

because the company, generally, has control over these factors; it
can alter or modify such factors as its personnel, physical facilities,
organization and functional means, such as the marketing mix, to
suit the environment. The external factors, on the other hand, are,
by and large, beyond the control of a company.

The external or environmental factors such as the economic

factors, socio-cultural factors, government and legal factors,
demographic factors, geo-physical factors etc. are, therefore,
generally regarded as uncontrollable factors.

Micro & Macro environment must include in this topic.

Globalization:

The process by which businesses or other organizations develop

international influence or start operating on an international scale.

A profound impact of the sweeping political changes across many

parts of the globe since the late 1970s is the boost to globalization
i.e., the cross-border flow of goods, services, labor, technology
finance and ideas. Proper planning and environmental factors and
laws must need to address before entering to the international
market.

Environmental Forecasting and Analysis:

In short, “when executives develop corporate strategy, they nearly

always begin by analyzing the industry or environmental conditions
in which they operate.

TECHNIQUES FOR ENVIRONMENTAL ANALYSIS

Techniques for environmental analysis refer to the methods of

gathering the relevant information for appraising the environment.
William Gluck mentions four techniques for environmental
analysis: Verbal and Written Information; Search and scanning;
Spying; and Forecasting and Formal Studies.

STEPS IN/APPROACHES TO ENVIRONMENTAL

FORECASTING

 Identification of Relevant Environmental Variables

 Collection of Information
 Selection of Forecasting Technique
 Monitoring.

TYPES OF FORECASTING

Economic, Social, Political, Technological.

SWOT Analysis and Strategy Formulation

SWOT means, Strength, Weaknesses, Opportunities & Threats.

Another term is PESTEL (Political, Economic, Social and
Technological, Legal, Environmental) analysis.
Strategy formulation involves relating organizational strengths and
weaknesses to environmental threats and opportunities.

WT, SO, ST, WO is a Tows strategy formulation matrix.

Strategy Implementation

Implementation of the strategy is as important as the formulation of

the strategy. A good strategy by itself does not ensure success.
The success depends, to a very large extent, on how it is
implemented. Many strategies fail to produce the expected results
because of the failure in properly implementing the strategy.

DIFFERENCES BETWEEN STRATEGY FORMULATION AND

STRATEGY IMPLEMENTATION:

There are several fundamental differences between strategy

formulation and strategy implementation. As Fred David succinctly
puts it:

• Strategy formulation is largely an intellectual process, whereas

strategy implementation is more operational in character.

• Strategy formulation requires good conceptual, integrative and

analytical skills but strategy implementation requires special skills
in motivating and managing others.

• Strategy formulation occurs primarily at the corporate level of an

organisation, while strategy implementation permeates all
hierarchical levels. Strategy formulation requires coordination
among a few individuals, but strategy implementation requires
coordination among many.

• In all but the smallest organizations, the transition from strategy

formulation to strategy implementation requires a shift in
responsibility from strategists to divisional and functional
managers. Implementation problems can arise because of this shift
in responsibility.

COMPONENTS OF STRATEGY IMPLEMENTATION

Some writers break the strategy implementation phase into three

components, viz.

1. Institutionalizing the strategy (organizational structuring and

leadership implementation).

2. Operationalizing the strategy (communicating strategy, setting

annual objectives, developing divisional strategies and policies,
and resource allocation).

3. Evaluation and control of the strategy.

STEPS IN STRATEGY IMPLEMENTATION

 Leadership implementation
 Communicating the Strategy
 Formulation of SBU Strategy
 Annual Objectives
 Functional Strategies
 Resource Allocation
 Development of strategies
 Organizational Implementation
 Evaluation & Control
 Reward system.

APPROACHES TO STRATEGY IMPLEMENTATION

 Commander Approach (Strategy make by top leadership)

 Organizational Change Approach
 Collaborative Approach
 Cultural Approach
 Crescive Approach
The Coercive approach addresses strategy formulation and
strategy implementation simultaneously. (Crescive means
increasing or growing.)

Strategy and Structure

TYPES OF DEPARTMENTALISATION/ORGANISATIONAL
STRUCTURE:

There are different structure according to size of business or

organization.

Simple Organizational Structure

The widely prevailing organizational structure found in respect of

very small enterprises is a simple one. All the authority and
decision-making is concentrated in the owner manager who often
directly supervises all the activities.

Functional Structure

Under the functional structure, the organization is designed on the

basis of the basic functions, namely, production, finance and
accounting, marketing and personnel.

Depart mentation by Product

The depart mentation by product places all the responsibility and

authority under one manager to get the product (or service)
produced and marketed.

Territorial Depart mentation

Depart mentation by territory is commonly found among

enterprises having business spread over a vast geographical area.

Matrix Structure
The different organizational structures described above have their
own advantages and disadvantages.

Strategy Evaluation and Control

STRATEGIC CONTROL Pearce and Robinson point out that there

are four basic types of strategic control, viz., premise control,
implementation control, strategic surveillance and special alert
control.

Strategic surveillance is the observation of events and situations

that may affect a company's bottom line.

Special alert control is Sudden and unexpected developments

like alliance between competitors, takeover/mergers, a political
coup, a major competitive move by competitor etc. could have
serious impact on a firm’s strategy.

Performance Gap Analysis Performance gap is the difference

between the actual performance of a given organisational unit and
the planned performance of that unit.

PERT/CPM METHOD;

PERT (Performance evaluation review technique) Activity perform

CPM (Critical path method).

Two types of graphs are used in PERT/CPM.

They are:

• Activity on the Arrow (AOA) system.

• Activity on Node (AON) system.

There are three thing in PERT.

Optimistic time estimate (to)

Most likely time estimate (TM)

Pessimistic time estimate (TP)

CPM is used to predict total project duration. It is network

diagramming.

Portfolio Strategy:

BUSINESS PORTFOLIO ANALYSIS

Portfolio analysis is the analysis of a company as a portfolio or

collection of different businesses with a view to identifying the
status and potentials of the various businesses with regard to
resource use and resource generation.

BCG MATRIX The Boston Consulting Group (BCG) model,

popularly known as the BCG Matrix and Growth Share Matrix, is
based on two variables, viz., the rate of growth of the product
market and the market share in that market held by the firm relative
to its competitors.

Competitive Analysis and Strategies

Michael E. Porter, the renowned author of Competitive Strategy,
Competitive Advantage and Competitive Advantage of Nations,
has provided a structural analysis of industries. The state of
competition in an industry depends on five basic competitive
forces, viz.

1. Rivalry among existing firms

2. Threat of new entrants

3. Threat of substitutes

4. Bargaining power of suppliers

5. Bargaining power of buyers.

Solution:

Government Policy

Economies of scale

Monopoly element

Product differentiation etc.

Corporate Level Generic Strategies

There are four alternative strategies, viz., stability, expansion,

defense and a combination. Several examples of the various
strategies are given in several places in this book, particularly in
the chapters on Portfolio Strategy, Mergers and Acquisitions and
Globalization.

STABILITY STRATEGY
 If the answer to the question whether the company should continue
in the existing business is affirmative and if the company is doing
reasonably well in that business but no scope for significant
growth, the strategy to be adopted is stability. (The stability
strategy is sometimes referred to as neutral strategy). As Jauch
and Glueck observe,1 a stability strategy is a strategy that a firm
pursues when:

. It continues to serve the customers in the same product or

service, market, and functional sectors as defined in its business
definition, or in very similar sectors.

2. Its main strategic decisions focus on incremental improvement of

functional performance.

GROWTH STRATEGY

If the answer to the question ‘Should the company increase the

level of activities in the current business and/or enter new
business(es)?’ is affirmative, a growth (expansion) strategy is
called for. The growth strategy amounts to redefining the business
by adding new products/services or new markets or by
substantially increasing the current business. In other words, a
company pursues a growth strategy when:

1. It enters new business (including functions) or market.

2. Effects major increase in its current business.

RETRENCHMENT STRATEGIES Retrenchment strategy, also

known as defensive strategy, involves contraction of the scope or
level of business or function. In some cases, it amounts to a
redefinition of the business. A firm pursues a retrenchment strategy
when:

1. It drops product line(s), market(s), market segment(s) or

function(s).
2. . Focuses on functional improvements or reversing certain
deteriorating trends.

DEFENSIVE STRATEGIES Defensive strategies include divestiture,

liquidation, becoming a captive and turnaround.

Divestiture A divestiture strategy is pursued when a company sells

or divests itself of a business or part of a business. It may be because
of loss, less than target rate of return, urgency to mobilise funds,
managerial problems, or redefinition of the business of the company.
Corporate Level Generic Strategies 265

Liquidation Liquidation occurs when an entire company is sold or

dissolved. The reasons for divestiture mentioned above could also be
reasons for liquidation. When there are no buyers for a company that
wants to be sold, its assets may be sold and company may be wound
up.

Becoming a Captive A firm becomes a captive of another firm when

it subjects itself to the decision of the other firm in return for a
guarantee that a certain amount of the captive’s product will be
purchased by the other firm.

Turnaround Strategy A turnaround strategy involves management

measures designed to reverse certain negative trends and to bring
the firm back to normal health and profitability. For details, see the
chapter on Restructuring and Turnaround.

COMBINATION STRATEGY A company pursues a combination

strategy when it adopts more than one grand strategy (i.e., stability,
growth, and retrenchment) simultaneously or sequentially. Merger,
Acquisition, Takeover.

Business Growth
WHY AND HOW BUSINESS GROW? A business may grow by:

• Increasing its existing line(s) of business in the existing market(s).

• Adding new line(s) of business, including entirely different

businesses.

• Entering new market(s)

INDICATORS OF GROWTH There are a number of indicators of

growth. The important indicators are:

1. Increase in net worth

2. Increase in total assets

3. Increase in the number of employees

4. Increase in the total volume of business

5. Increase in the market share

6. Increase in the number of products and markets

7. Increase in profits.

GROWTH STRATEGIES There are a number of strategies for

growth. Kotler has grouped these strategies under three heads, viz.,
1. Intensive growth strategy.

2. Integrative growth strategy.

3. Diversification growth strategy

Intensive Growth Strategies Intensive growth strategies aim at

achieving further growth for existing products and/or in existing
markets. There are three important intensive growth strategies, viz.,
market penetration, market development and product development.
INTEGRATIVE GROWTH STRATEGIES One of the common growth
strategies is the integrative growth strategy. A major contributor to the
growth of Reliance Industries in the early stages was backward and
forward integration. It is today the most fully integrated company in
the world (from petroleum exploration to textiles retailing). There are
broadly two types of integrative growth:

1. Integration at the same level or stage of business in the same

industry (horizontal integration), or

2. Integration of different levels/stages of business in the same

industry (vertical integration).

DIVERSIFICATION STRATEGYIES: Diversification means adding

new lines of business. The new lines of business may be related to
the current business or may be quite unrelated. If the new lines added
make use of the firm’s existing technology, production facilities or
distribution channels or it amounts to backward or forward integration
it may be regarded as related diversification. (Example: the
diversification of Videocon). Some companies expand the business
into unrelated industries (Example: Wipro which is in the business of
several FMCG,.

External growth startegies:

 Merger & Acquisition

 Foreign Collaborations/Joint Ventures.

Mergers and Acquisitions:

Mergers or amalgamation refers to the merging of one company into
another or two companies getting merged into one another to form a
new corporate entity. In this method, there is a change in the
ownership. Acquisition or takeover denotes a company acquiring
controlling stake in another so that the acquirer can have
management control over the other firm. In this case, both the
 companies continue as separate legal entities. On the basis of the
nature of relationship between the businesses of the companies
involved in the M&A, broadly there are three types of M&As.

Types:

Horizontal (same co) / Vertical (Different co) M&A

Hostile & Friendly takeover in acquisition.

Turnaround Management and Corporate Restructuring

Measures of turnaround management and restructuring are designed
to improve the performance and soundness of the organization. This
chapter takes a look at first the common symptoms of decline and
then the important measures for improving the health and
performance.

DANGER SIGNALS:
Performance Indicators Deterioration of certain performance
indicators are very serious danger signals of the ensuing crisis. These
indicators are the following:

(i) Decreasing Market Share: A falling trend in the market share is

often a reflection of a company’s declining competitiveness.
(ii) (ii) Decreasing Constant Rupees Sales: Another important danger
signal is the falling sales at constant prices (i.e., the sales figure after
adjusting for the inflation).
(iii) (iii) Decreasing Profitability: Falling profits and profitability
measured by such ratios as profits to sales, return on investment etc.
could be dangerous situations.

Deteriorating Financing Problems This may be reflected in the adverse

trends in the capital structure and dividend policies.

(i) Increasing Reliance on Debt: A substantial rise in the amount of debt,

a lopsided debtequity ratio, and a lowered credit rating may cause banks
 and other lenders to apply restrictions which would further compound the
financial problems.
(ii) Restrictive Dividend Policy: Restriction of dividends to conserve cash
or satisfy debt convenants is a danger signal.

3. Investment Policies Inadequate reinvestment or lopsided investment

could land companies in serious trouble.

(i) Inadequate Reinvestment in Business: Adequate reinvestment in

plant, equipment and maintenance is necessary for a company to stay
competitive. A company which fails to do so would be preparing the
groundwork for failure.

(ii) Proliferation of New Ventures at the Expense of the Priority

Business: Harris observes that a common policy in troubled companies is
to ignore the basic business and rely on new, “easier” tasks like new
ventures.

4. Lack of Planning Lack of proper planning, particularly when the

environment is very competitive and dynamic, could result in the company
landing itself in trouble.

5. Problems at the Top Management Levels

In many companies, there are several problems at the top management

levels which adversely affect the effective functioning or proper
development of the company’s business or lead the company in wrong
direction. Following are the important such problems.

(i) Lack of Receptiveness of CEO: Some chief executive officers resist

new ideas other than their own.
 Management Succession Problem
 Ineffective directors
 Ineffective management team
TURNAROUND MANAGEMENT Turnaround management refers to the
management measures which reverse the negative trends in the
performance indicators of the company. In other words, turnaround
management refers to the management measures which turn a sick
company back to a healthy one.

Turnaround Management Factors

Management Factor

HRM factor

Finance factor

Production factor

Marketing strategy etc...

Forms of corporate restructuring

Expansion:

An acquisition may be friendly & hostile.

Joint ventures:

All joint ventures do not represent restructuring.

Sell off

Divestitures

Spin-off (Refer to creating a new legal entity of parent company).

Financial restructuring:

Rescheduling of loan & debt

 Conversion of loan & debt.

Business process Reengineering (BPR)

BPR mean restructuring, redesigning, rethinking of business.

Globalization:

Globalization is a very powerful driving force that makes strategic

management immensely significant. It is also a very important factor that
influences the shaping of the corporate strategy. Companies are
becoming more globalized in their operations, financing, marketing and
other functions. Indeed, globalization means a borderless business world.
Globalization of business
Globalization is the increase in the flow of goods, services, capital,
people, and ideas across international boundaries, according to the online
course Global Business.

Stages:
 Domestic Company.
 International Company.
 Multinational Company.
 Global.
 Transnational Company.

Globalizations vs GLocalization:

Globalization/Standardization mean sell product in international scale for

all segments.

Glocalization mean sell product in international especially target local

market of the country e.g., Think global act local.

Functional Strategies (18):

Functional strategies are an important component of strategic
management. Functional-level strategies are strategies for different
functional areas like Operations, Finance (sources of finance, capital
structure, and dividend policy), HR, and Marketing.

OPERATIONS MANAGEMENT STRATEGIES:

Production management, rather the broader operations management,

involves a number of strategic decisions such as make or buy?; if buy,
from where to buy?; to go for partnering or not?;

4 Cs of Manufacturing:

The success of a manufacturing strategy depends on four key factors:

compatibility, configuration, coordination, and control.

Knowledge Management:
As indicated earlier, the term knowledge management is very
comprehensive and encompasses different components from
identification of knowledge to making available the right knowledge at right
time to the right users.

Definition:

Knowledge management may be defined as the system that identifies

the knowledge requirements and their sources; generates the required
information; processes, analyses and suitably presents the information;
stores and makes available the knowledge to the right people at right time
in the right format.

Or

Knowledge management (KM) is the interdisciplinary process of

creating, using, sharing, and maintaining an organization's information
and knowledge.
STEPS IN KNOWLEDGE MANAGEMENT PROCESS:

The knowledge management system of an organization typically has the

following components/stages/processes.

Identification of knowledge needs: The important first step in

knowledge management is the identification of the knowledge
requirements of the organization. The knowledge requirements may vary
from organization to organization, depending on factors like the nature
and scope of its business, competitive and other businesses
environments, future plans etc.

Identification of data sources: Once the data needs are identified, the
next step is identification of sources of data for generating the required
knowledge. Data/knowledge may be readily available somewhere. If they
are not readily available, primary data will have to be gathered and the
sources of such primary data have to be identified.

Acquisition/generation of knowledge: The next stage is

acquisition/generation of knowledge. It may include acquisition of books
and other publications or other available materials, sourcing from internet
etc. Collection of primary data or generation of entirely new knowledge
may be done in-house or may be outsourced. Outsourcing even R&D is
common today.

Processing, analysing, presenting and codifying: The

data/information/knowledge acquired/generated need to be properly
processed, analysed, interpreted and presented meaningfully and
usefully. They should also be systematically classified for easy
identification for accessing any time.

Storing: There must be a proper system for storing the knowledge so that
they are available at the right time to the right people.

Management of Change:
 According to Hennery Mintzberg’s, there are four types of change, viz.,
incremental, piecemeal, transformational and flux.

The most frequent types of change are incremental which are gradual
changes and piecemeal changes when some strategies change and
others remain unchanged. When strategies change without any clear
direction, it is regarded as a period of flux. Transformational change,
which is infrequent, marks a major, discontinuous, change.

”The End”
Notes, of outline of MBA (8505)
Attributes of strategic management

The four key attributes of Strategic Management are:

1) It is directed toward overall organizational goals and objectives;
2) It includes multiple stakeholders in decision making;
3) It requires incorporating both short-term and long-term perspectives;
4) It involves the recognition of trade-offs between effectiveness and
efficiency.

Evolution of Strategic MGT:

The evolution of strategic management as a subject started as early as

1911, when ‘Business Policy’ as a capstone course for the business
administration program me was introduced in Harvard Business School. In
fact the course focused on integrating the functional areas of business
administration like accounting, management, marketing, human resource,
finance and production. And then strategic mgmt. used in strategic
business planning.
Characteristics of Strategic Decisions:
 Concerned with Scope of an Organization's activity. ...
 Matching of activities with environment. ...
 Matching of activities with resource base. ...
 Affects operational decisions. ...

 Affects nature and magnitude of strategies. ...

 Affects long-term direction of company.

Strategy hierarchy
The hierarchy of strategies describes a layout and relations of corporate
strategy and sub-strategies of the organization.
The three levels of strategy are:
 Corporate level strategy: This level answers the foundational question of
what you want to achieve. ...
 Business unit level strategy: This level focuses on how you're going to
compete. ...
 Market level strategy: This strategy level focuses on how you're going to
grow.
Strategy triggering events
A triggering event is a tangible or intangible barrier or occurrence which,
once breached or met, causes another event to occur. Triggering events
include job loss, retirement, or death, and are typical for many types of
contracts.
Organizational objectives and the strategic choices

Strategic choice refers to the decision which determines the future

strategy of a firm. It addresses the question “Where shall we go”. ...
Strategic choice is therefore, the decision to select from among the grand
strategies considered, the strategy which will best meet the enterprise
objectives.

Public-sector organizations

The public sector references all government organizations, including the

federal government, states, and localities. Public-sector organizations
focus on services to the public as a whole, including education, welfare,
the legal system, employment, natural resources, and health services. In
 general terms, the public sector consists of governments and all publicly
controlled or publicly funded agencies, enterprises, and other entities that
deliver public programs, goods, or services. It is not, however, always
clear whether any particular organization should be included under that
umbrella. Gov. Collect tax from public and spend into the public. Public
sector organizations are owned by the government. They provide goods
and services for the benefit of the community. They are run by the
government. They operate with money raised from taxes.

Voluntary and not-for- profit organizations

The non-profit distributing characteristic means that – contrary to the

common belief – nonprofits can generate profit but they cannot
distribute it to owners or directors. Not-for-profit organizations are
types of organizations that do not earn profits for its owners. All of the
money earned by or donated to a not-for-profit organization is used in
pursuing the organization's objectives and keeping it running. 1 Typically,
organizations in the nonprofit sector are tax-exempt charities or other
types of public service organizations, and as such, they are not required
to pay most taxes. Red Cross/Red Crescent. They not work for profit they
receive donation & charities and spend to the needy peoples and social
benefits.
What are the challenges of strategic management?
The five most common challenges in executing a strategic plan are:
1. Poor goal setting. ...
2. Lack of alignment. ...
3. Inability to track progress. ...
4. People not connected to the strategy. ...
5. No measurements or leading indicator.
General environment is also called Macro environment (PESTAL) is
included in this topics.
Structural Driver change is often sparked by technological innovation,
new economic developments, global shifts in the pools of capital and labor,
changes in resource availability, changes in supply and demand of
resources, and changes in the political landscape.
The environment can influence peoples' behavior and motivation to
act. .. The environment can influence mood. For example, the results of
several research studies reveal that rooms with bright light, both natural
and artificial, can improve health outcomes such as depression, agitation,
and sleep.
Dynamic & Hyper competition:
Dynamic competition tell you adopt innovation & hyper need to adopt
quickly in a hypercompetitive industry.

Strategic groups can be defined as a group of companies within a

particular industry that follows a similar strategy or similar business model.
The companies that are part of the same strategic group have more
competition with the members of the strategic groups than the competitors
outside the strategic group.

An organizational field is a group of organizations with a similar set of

products, suppliers, customers, and resources.

Understanding what customer’s value:

Creating customer value increases customer satisfaction and the

customer experience.

Value Chain Analysis:

Value chain analysis (VCA) is a process where a firm identifies
its primary and support activities that add value to its final
product and then analyze these activities to reduce costs or
increase differentiation.

Value chain represents the internal activities a firm engages in

when transforming inputs into outputs. Porter VCA Model

Strategic Gap;

Difference between current & desired performance of the organization.

RBV (Resource based view of the firm):

The Resource Based View (RBV) of the firm starts from the concept that a
firm's performance is determined by the resources it has at its disposal.
The technique used in RBV is SWOT Analysis.
Unit 3 Strategic Resources and Capabilities Analysis
The roots of strategic capabilities
Strategic capability refers to all the company's strengths – it's people,
resources, skills and capacities – that give it a competitive advantage.

An organisation's knowledge capabilities determine its effectiveness at

creating value through those processes. ... Effective real-time
development and implementation of strategy—which is essential for
organisational success—depends completely on the organisation's
knowledge capabilities.

Human and social capital

Social capital and human capital are two types of resources. The key
difference between human capital and social capital is that human capital
refers to skills, knowledge, experience, etc. possessed by different
individuals whereas social capital refers to the resources we gain from
being a social network.

Use of technology to leverage human capital and knowledge

Technology play important role to leverage human knowledge & capital.

Critical success factors

3.5.1 Available resources
Threshold resources:
Those which are needed to meet customers' minimum requirements and
therefore to continue to exist. Merely achieves parity with competitors.
e.g financial resources, administration infrastructure.
Unique resources:
Unique resources are those resources that create competitive
advantage and that others cannot imitate or obtain. Examples of
unique resources are: ... Competitors have to cover depreciation costs.
Competencies are the knowledge, skills, abilities, and behaviors that
contribute to individual and organizational performance. Knowledge is
 information developed or learned through experience, study or
investigation. Skill is the result of repeatedly applying knowledge or
ability.
What is delivering value for money?
This means looking at all aspects to make sure that everything is fit for
purpose and good value for money, for example: fixed costs – e.g.
machinery and equipment.
Sources of cost efficiency
 Economies of scale
 Supply cost
 Product & process
 Experience
 Value Proposition.
Product features
Specific types of functionality or Benefit.
Benchmarking
Simply, comparision of product & services to another competitors
companies.
Steps:
Planning
Analysis
Integration
Action.
Causal ambiguity is a state of uncertainty that entails incomplete
understanding and knowledge.
Robustness
3.9.1 Rarity
3.9.2 Complexity
3.9.3 Causal ambiguity
3.9.4 Culture
3.9.5 Knowledge creation and integration.
Strategy as design the strategy lenses
This lens views Strategy development as a process of logical
determinism. Through careful evaluation of the firm's industry,
environment and available resources, the optimal strategy and clear
direction can be determined.
Strategy as experience
Employee involvement in decision making and top mgmt. meet and
bargaining with low level.
Strategic planning systems
A strategic planning system has two major functions: to develop an
integrated, coordinated, and consistent long-term plan of action, and to
facilitate adaptation of the corporation to environmental change. When
introducing and developing such a system, companies commonly
concentrate on its integrative aspects.
Types:
Corporate
Business
Functional all discuss in above topics.
Strategic leadership is a leader's ability to visualize, plan, lead, and
make the best out of the resources they have to execute strategies
efficiently and successfully.
Organizational politics is referred to the self-interest and agenda of an
individual in an organization without any concern about its impact on the
objective of the company to achieve its goals.
Logical incrementalism
Normative approach to strategic planning in an organization.
Strategy development process:
Next to that the model integrates four business development levels:
PSTO

1. Policy (Raison d'être process)

2. Strategy (Targeting & strategy process)
3. Tactics (arrange processes)
4. Operationalization (transformation) KPI, CI.

Product development:

Corporate Level Strategy

Growth through related diversification

Diversification is a growth strategy that involves entering into a new

market or industry - one that your business doesn't currently operate in -
while also creating a new product for that new market.
Types
Horizontal
Concentric

Conglomerate - Diversification
Vertical.
Leveraging Your Core Competencies to Create a Competitive
Advantage with Examples. ... In addition, unlike a core value, which is
something you should discover (not aspire to have), you can develop
strategies to add new core competencies that you can leverage in order
to create a sustainable competitive advantage.
Vertical integration
Vertical integration refers to the process of acquiring business
operations within the same production vertical. A company that opts for
vertical integration takes complete control over one or more stages in the
production or distribution of a product.
What is unrelated diversification growth strategy?
Unrelated diversification: When a firm enters an industry that lacks any
important similarities with the firm's existing industry or industries.
Financial synergies and corporate parenting
Financial Synergy occurs when the joining of two companies improves
financial activities to a level greater than when the companies were
operating as separate entities…...... Achieving a lower cost of capital as
a result of a merger or acquisition is an example of Financial Synergy.
Corporate parenting refers to the shared responsibility across the
council to ensure that children and young people in our care or leaving
care are supported to thrive. ... A good corporate parent should have the
same aspirations for a child in care or care leaver, as a good parent
would have for their child.
Portfolio Management:
 Portfolio management is the selection, prioritization and control of an
organization’s programs and projects, in line with its strategic objectives
and capacity to deliver.

Synergy managers: enhance value by sharing resources and activity.

Parental developers: use their own central competences to add value
to the businesses by applying specific skills required by business units
for a particular purpose, such as financial management or research and
development.
A joint venture (JV) is a business arrangement in which two or more
parties agree to pool their resources for the purpose of accomplishing a
specific task.
The Directional Policy Matrix (DPM) is a framework which can be used
to classify and categorize an organization’s business activities in terms
of its strengths, capabilities or market position, and the way it perceives
markets to be attractive.
The parent acts as an intermediary between the businesses and outside
investors. ... Parenting Fit Matrix composes of 2 dimensions. Positive &
Negative.
Trend in portfolio mgt:
 Trend 1: Scaling Agile into the Portfolio.
 Trend 2: Rethinking How to Deliver Value.
 Trend 3: Resource Demand Management.
 Trend 4: Data Visualization

Entry modes of international expansion

Exporting Fast entry, low risk Low control, low local knowledge, potential negative
 environmental impact of transportation

Fast entry, low cost, low Less control, licensee may become a competitor, legal and
Licensing and Franchising
risk regulatory environment (IP and contract law) must be sound

Shared costs reduce

investment needed, Higher cost than exporting, licensing, or franchising; integration
Partnering and Strategic Alliance
reduced risk, seen as local problems between two corporate cultures
entity
Fast entry; known,
Acquisition High cost, integration issues with home office
established operations
Gain local market
Greenfield Venture (Launch of a knowledge; can be seen as High cost, high risk due to unknowns, slow entry due to setup
new, wholly owned subsidiary) insider who employs time.
locals; maximum control

Types of business strategy

Price base strategy
Differentiation strategy
Hybrid strategy
Focus strategy etc.
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Cost, leadership, Differentiation & focus are the bases of competitive

advantage.
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The hybrid strategy facilitates the sale of product at lower prices than the
competitor.

Sustainable competitive advantages are company assets, attributes,

or abilities that are difficult to duplicate or exceed; and provide a superior
or favorable long term position over competitors.

Game theory
 In game theory, a simultaneous game or static game is a game where
each player chooses their action without knowledge of the actions chosen
by other players.

In game theory, a sequential game is a game where one player chooses

their action before the others choose theirs.

Repeated games allow for the study of the interaction between

immediate gains and long-term incentives.

Digital business strategy

Digital business strategy focuses on using technology to improve

business performance, whether that means creating new products or
reimagining current processes.

Elements of organizational structure

Departmentalization

Departmentalization refers to how the organizational structure groups the

company's functions, offices and teams.

Chain of Command

Most organizations, from businesses to nonprofits to the military, utilize

chain of command.

Span of Control

An organization’s span of control defines how many employees each

manager is responsible for within the company.

Centralization and Decentralization

Centralization means concentration of authority at the top level of the
administrative system. Decentralization, on the other hand, means
dispersal of authority among the lower levels of the administrative
system. ... They are given authority to take decisions without reference to
the headquarters

Work Specialization

In any business, employees at all levels typically are given a description of

their duties and the expectations that come with their positions.

Work specialization ensures that all employees have specific duties that
they are expected to perform based on each employee's work experience,
education and skills.

Formalization

Finally, organizational structures implement some degree of formalization.

This element outlines inter-organizational relationships. Formalization is
the element that determines the company’s procedures, rules and
guidelines as adopted by management.

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