CA Intermediate

Group- 2

Paper-6: Financial Management and

Strategic Management

Section B: Strategic Management

Applicable from Sept 2024

Jatin Dembla
 Table of Contents
Chapter 1: Introduction to Strategic Management 1

Multiple choice Questions 15

Chapter 2: Strategic Analysis: External Environment 22

Multiple choice Questions 52

Chapter 3: Strategic Analysis: Internal Environment 58

Multiple choice Questions 81

Chapter 4: Strategic Choices 90

Multiple choice Questions 114

Chapter 5: Strategy Implementation and Evaluation 122

Multiple choice Questions 162

Case Study MCQs 169

 Kinshuk Institute Strategic Management

Chapter 1
Introduction to Strategic Management

I. Meaning and Nature of Strategic Management

The term 'management' is used in two senses such as:
A key group in an organisation in-charge of its affairs.
• In-charge of organisational affairs. Making organisation a purposeful
and productive entity. Brings together/integrates the resources.
• The survival and success of an organisation depends to a large extent
on the competence and character of its management

Management as set of functions

• The functions include Planning, Organising, Directing, Staffing &
Control. Determine goals & activities Helps in allocation of tasks and
resources

Management is an influence process to make things happen, to gain command over phenomena,
to induce and direct events and people in a particular manner.

II. Concept of Strategy

Strategy definition in context of business:

• 'Strategy' relates to the ways the business decides to respond to dynamic
and often hostile external forces while pursuing their vision, mission and
ultimate objectives.

Strategy is the game plan;

• the management of a business uses to take market position, conduct its
operations, attract and satisfy customers, compete successfully, and
achieve organizational objectives.

A long-range blueprint
• an organization's desired image, direction and destination, i.e., what it
wants to be, what it wants to do, how it wants to do things, and where it
wants to go.

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Strategy definition given by Authors:

Igor H. Ansoff: The common thread among the organization’s activities and product-
markets that defines the essential nature of business that the organization has or planned to
be in future.

William F. Glueck: A unified, comprehensive and integrated plan designed to assure that
the basic objectives of the enterprise are achieved.

Integrated framework for the top management:

• the top management to search for, evaluate and exploit beneficial
opportunities, to perceive and meet potential threats and crisis, to make
full use of resources and strengths, and to offset corporate weaknesses.

Strategy is no substitute;
• A sound strategy is flexible, pragmatic, and adaptable, allowing for potential
miscalculations and unanticipated events, ensuring a smooth transition and
avoiding failures and frustrations.

Strategies are formulated

Corporate Level Divisional Level Functional Level

III. Strategy is Partly Proactive and Partly Reactive

A company's strategy is typically a blend of:
Proactive actions on the part
of managers to improve the
company's market position and
financial performance.

Reactions to unanticipated
developments and fresh market
conditions in the dynamic
business environment.

A company uses both proactive and reactive strategies to cope up the uncertain
business environment. Proactive strategy is planned strategy whereas reactive
strategy is adaptive reaction to changing circumstances.

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Proactive ►A company's current strategy is a combination of successful business

Actions approaches and new managerial decisions that enhance its overall position and
performance.

►Strategy is a deliberate and proactive approach developed by management

through analysis and strategic thinking to position the company in the
marketplace and compete for buyer patronage.
Reactive ►Proactive planning and management design are crucial for strategic decisions,
Actions but unexpected market changes or strategy challenges necessitate strategic
adjustments.

►A company's strategy is partly developed as a response to unforeseen changes

in the business environment and internal situations.
Strategy helps unravel complexity and reduce uncertainty caused by changes in the
environment. It also means to identify existing problems and solving them by executing
revolutionary ideas. It would be pertinent to mention one such example in the recent times,
that is UPI, Unified Payments Interface.

IV. Strategic Management

▲Strategic management refers to the managerial process of developing a strategic vision,
setting objectives, crafting a strategy, implementing and evaluating the strategy, and finally
initiating corrective adjustments were deemed appropriate.

▲The process does not end, it keeps going on in a cyclic manner.

▲The overall objectives of strategic management are two fold:

To create competitive advantage (something unique and valued by the customer), so that
the company can outperform the competitors in all aspects of organisational performance.

To guide the company successfully through all changes in the environment. That is to react
in the right manner.

▲Strategic management involves developing the company's vision, environmental scanning

(both external and internal), strategy formulation, strategy implementation and evaluation and
control.

▲Originally called, business policy, strategic management emphasizes the monitoring and
evaluation of external opportunities and threats in the light of a company’s strengths and
weaknesses and designing strategies for the survival and growth of the company.

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V. Importance of Strategic Management

▲Author Charles Darwin: 'Survival of the fittest ', the only principle of survival for all
organizations, where 'fittest' are not the 'largest' or ‘strongest’ organizations but those who
can change and adapt successfully to the changes in business environment.

▲Each organization has to build its competitive advantage over the competitors in the
business warfare in order to win. This can be done only by following the process of strategic
management

strategic implementa control of

formulation evaluation
analysis tion strategies

▲The major benefits of strategic management are:

Provides direction: The strategic management gives a direction to the company to move
ahead. It defines the goals and mission. It helps management to define realistic objectives
and goals which are in line with the vision of the company.
Organisations to be proactive instead of reactive: Organisations are able to analyse and
take actions instead of being mere spectators. It helps organisations to be proactive instead
of reactive in shaping its future. It helps them in working within vagaries of environment
and shaping it, instead of getting carried away by its turbulence or uncertainties.
Provides frameworks for all major decisions: Frameworks for all major decisions of an
enterprise such as decisions on businesses, products, markets, manufacturing facilities,
investments and organisational structure.
Pathfinder: Strategic management is concerned with ensuring a good future for the firm.
It seeks to prepare the corporation to face the future and act as pathfinder to various
business opportunities. Organisations are able to identify the available opportunities and
identify ways and means as how to reach them.
Act as a corporate defence: Strategic management serves as a corporate defence
mechanism against mistakes and pitfalls. It helps organisations to avoid costly mistakes in
product market choices or investments.
Develop certain core competencies: It helps the organisation to develop certain core
competencies and competitive advantages that would facilitate assist in its fight for survival
and growth.
Enhance the longevity of the business: It helps to enhance the longevity of the business.
With the state of competition and dynamic environment it may be challenging for

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organisations to survive in the long run. Actions over expectations is what strategic
management ensures.

VI. Limitations of Strategic Management

The presence of strategic management cannot counter all hindrances and always achieve
success. There are limitations attached to strategic management:

•It is difficult to •Organisations •Strategic management adds

Environment is highly complex and turbulent

Strategic management is a time-consuming

understand the a lot of expenses to an

Strategic management is a costly process

spend a lot of
complex environment time in organization. Expert
and exactly pinpoint preparing, strategic planners need to
how it will shape- up in communicating be engaged, efforts are
future. The the strategies made for analysis of
organisational that may impede external and internal
estimate about its daily operations environments devise
future shape may strategies and properly
process

and negatively
awfully go wrong and impact the implement.
jeopardise all routine business. •These can be really costly
strategic plans. •Planning and for organisations with
•Thus, relying on a strategizing are limited resources
business strategy important but particularly when small and
blindly could go putting them in medium organisation create
absolutely wrong if action is where strategies to compete.
the environment is the actual
turbulent. success lies.

•In a competitive scenario, where all organisations are trying to move

Difficult to strategically, it is difficult to clearly estimate the competitive
predict responses to a firm's strategies.
competitive •It is quite difficult to gauge the strategic planning of competitors
responses because most of these decisions are taken within closed doors by the
top management.

Strategic Management is a time consuming and costly process, yet all organization's
want to do indulge into it? Why?
Because even though it has its limitations, its importance outweighs its shortcomings. A
business cannot operate and succeed without proper strategic management.

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VII. Strategic Intent (Vision, Mission, Goals, Objectives & Values)

▲Strategic Management is defined as a dynamic process of formulation, implementation,
evaluation, and control of strategies to realise the organisation's strategic intent.

▲Strategic intent refers to purposes of what the organisation strives for senior managers
must define "what they want to do" and "why they want to do".

▲Strategic intent provides the framework within which the firm would
adopt a predetermined direction and would operate to achieve strategic
objectives.

▲Strategic intent could be in the form of vision and mission statements for the organisation
at the corporate level. It could be expressed as the business definition and business model at
the business level of the organisation.

▲Strategic intent is generally stated in broad terms but when stated in precise terms it is an
expression of aims to be achieved operationally, i.e., goals and objectives.

VIII. Elements Of Strategic Intent

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

It describes where the organisation wants to land.
Vision It depicts the organisation's aspirations and provides a
glimpse of what the organization would like to become in
future. Every sub system of the organization is required to
follow its vision.

Mission delineates the firm's business, its goals and ways

to reach the goals. It explains the reason for the existence
of the firm in the society. It is designed to help potential
shareholders and investors understand the purpose of the Mission
company. A mission statement helps to identify, 'what
business the company undertakes.' It defines the present
capabilities, activities, customer focus and role in society.

These are the base of measurement. Goals are the end

Goals results, that the organization attempts to achieve. On the
& other hand, objectives are time-based measurable targets,
which help in the accomplishment of goals. These are the end
Objectives
results which are to be attained with the help of an overall
plan, over the particular period.

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However, in practice, no distinction is made between goals and objectives and both the
terms are used interchangeably.
The vision, mission, business definition, and business model explain the philosophy of the
organization but the goals and objectives represent the results to be achieved in multiple
areas of business.

Values are the deep-rooted principles which guide an

organisation's decisions and actions. Collins and Porras succinctly
define core values as being inherent and sacrosanct; they can
Vales/
never be compromised, either for convenience or short-term
economic gain. Value System
Values often reflect the values of the company's founders-
Hewlett-Packard's celebrated "HP Way" is an example. They are
the source of a company's distinctiveness and must be maintained
at all costs.

IX. Vision
Very early in the strategy making process; Top management's views about the company's
direction and the product customer-market-technology focus constitute the strategic
vision for the company.;

• Strategic vision thus points out a particular direction, charts a strategic path to be
followed in future, and moulding organisational identity.; A clearly articulated strategic
vision communicates management's aspirations to stakeholders and helps steer the
energies of company personnel in a common direction.;

Examples: HDFC Bank Ltd., one of the largest banks in India has clearly defined its Vision
of being a world class Indian bank. This vision helps them keep in mind, "where we want to
go", as the central thought of their strategic decision making.
Apple Inc.'s CEO Tim Cook defined the vision of the company as - "We believe that we are
on the face of the earth to make great products, and that's not changing."

Essentials of a strategic vision

The entrepreneurial challenge in developing a strategic vision is to think creatively about how
to prepare a company for the future.
Forming a strategic vision is an exercise in intelligent entrepreneurship.

A well-articulated strategic vision creates enthusiasm among the members of the

organisation.
The best-worded vision statement clearly illuminates the direction in which organisation is
headed.

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X. Mission
A mission is an answer to the basic question 'what business are we in and what we do'.
A company's mission statement is typically focused on its present business scope - "who we
are and what we do". Mission statements broadly describe an organizations present
capability, customer focus, activities, and business makeup.
Firms working to manage their organisation strategically cannot be lax in the matter of
mission and business definition, as the two ideas are absolutely central to strategic planning.

Why should an organisation have a mission?

✓ To ensure unanimity of purpose within the organisation.
✓ To develop a basis, or standard, for allocating organisational resources.
✓ To provide a basis for motivating the use of the organisation's resources.
✓ To establish a general tone or organisational climate, to suggest a businesslike operation.
✓ To serve as a focal point for those who can identify with the organisation's purpose and
direction.
✓ To facilitate the translation of objective and goals into a work structure involving the
assignment of tasks to responsible elements within the organisation.
✓ To specify organisational purposes and the translation of these purposes into goals in such
a way that cost, time, and performance parameters can be assessed and controlled.

Examples: HDCF Bank has two-fold mission: first, to be the preferred provider of banking
services for target retail and wholesale customer segments. The second is to achieve healthy
growth in profitability, consistent with the bank's risk appetite.
Apple's mission has been defined as - "to bring the best user experience to its customers
through innovative hardware, software, and services."

Following points are useful while writing a mission of a company:

One of the roles of a mission statement is to give the organisation its own special identity,
business emphasis and path for development – one that typically sets it apart from other
similarly positioned companies.
A company’s business is defined by what needs it is trying to satisfy, which customer groups
it is targeting and the technologies and competencies it uses and the activities it performs.
Good mission statements are – unique to the organisation for which they are developed.

▲What is our mission? And what business are we in?

1) The well-known management experts, Peter Drucker and Theodore Levitt were among
the first to agitate this issue through their writings.
2) They emphasized that as the first step in the business planning endeavour, every business
firm must clarify the corporate mission and define accurately the business the firm is
engaged in.

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3) They also explained that towards facilitating this task, the firm should raise and answer
certain basic questions concerning its business, such as:
• What is our mission?
• What is our ultimate purpose?
• What do we want to become?
• What kind of growth do we seek?
• What business are we in?
• Do we understand our business correctly and define it accurately in its broadest
• connotation?
• Whom do we intend to serve?
• What human need do we intend to serve through our offer?
• What brings us to this particular business?
• What would be the nature of this business in the future?
• In what business would we like to be in, in the future?
4) The corporate mission is an expression of the growth ambition of the firm. It is, in fact,
the firm's future visualised. It provides a dramatic picture of what the company wants to
become.
5) It is the corporation's dream crystallized. It is a colourful sketch of how the firm wants
its future to look, irrespective of the current position. In other words, the mission is a grand
design of the firm's future.
6) Mission amplifies what brings the firm to this business or why it is there, what existence
it seeks and what purpose it seeks to achieve as a business firm. In other words, the mission
serves as a justification for the firm's very presence and existence; it legitimises the firm's
presence
7) According to Peter Drucker, every organisation must ask an important question "What
business are we in?" and get the correct and meaningful answer. The answer should have
marketing or external perspective and should not be restated to the production or generic
activities of business. The table given below will clarify and highlight the importance of
external perspective.

XI. Mission
Objectives are organizations performance targets - the results and outcomes it wants to
achieve. They function as yardstick for tracking an organizations performance and progress.

Business organization translates their vision and mission into objectives. As such the term
objectives are synonymous with goals, however, some authors make an attempt to distinguish
the two.
Goals are open-ended attributes that denote the future states or outcomes. Objectives are
close-ended attributes which are precise and expressed in specific terms.

Thus, the objectives are more specific and translate the goals to both long-term short-term
perspectives. (We use Objectives and goals interchangeably)

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▲Objectives, to be meaningful to serve the intended role, must possess the following
characteristics:
a) Objectives should define the organization's relationship with its environment.
b) They should be facilitative towards achievement of mission and purpose.
c) They should provide the basis for strategic decision-making.
d) They should provide standards for performance appraisal.
e) Objectives should be concrete and specific
f) Objectives should be related to a time frame
g) Objectives should be measurable and controllable
h) Objectives should be challenging
i) Different objectives should correlate with each other
j) Objectives should be set within constraints of organizational resources and external
environment.

▲Long-term objectives: To achieve long-term prosperity, strategic planners commonly

establish long-term objectives in seven areas.
• ✓ Profitability
• ✓ Productivity
• ✓ Competitive Position
• ✓ Employee Development
• ✓ Employee Relations
• ✓ Technological Leadership
• ✓ Public Responsibility

▲Long-term objectives represent the results expected from pursuing certain strategies.
Strategies represent the actions to be taken to accomplish long-term objectives. The time
frame for objectives and strategies should be consistent, usually from two to five years.

▲Short-range objectives can be identical to long-range objectives if an organisation is already

performing at the targeted long-term level. For instance, if a company has an ongoing objective
of 15 percent profit growth every year and is currently achieving this objective, then the
company's long-range and shortrange objectives for increasing profits coincide.
▲The most important situation in which short-range objectives differ from long-range
objectives occurs when managers are trying to elevate organisational performance and cannot
reach the long-range target in just one year. Short-range objectives then serve as steps
toward achieving long term objective.

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XI. Values
A few common examples of values are - Integrity, Trust, Accountability, Humility, Innovation,
and Diversity.

A company's value sets the tone for how the people of think and behave, especially in
situations of dilemma. It creates a sense of shared purpose to build a strong foundation and
focus on longevity of the company's success.
Employees prefer to work with employers whose values resonate with them - the ones they
can relate to in their daily work and personal life.

Interestingly, majority of consumers say that they would prefer to buy products and
services from companies that have a purpose that reflects their own value and belief system.
Hence, values have both internal as well as external implications.
The graphic represents the interconnection of Intent, Vision, Mission, Goals and Values;
Values remain the center/core of Vision, Mission, Goals and putting all them to action. Vision
is followed by Mission, followed by Goals and finally executing via real actions.
Intent vs Values
as Values and Intent are two different concepts. Intent is the purpose of doing business while
values are the principles that guide decision making of business. They both go hand in hand,
while the intent is sometimes driven by values. So, values more or so are wider than Intent.

XII. Strategic Levels in Organisations

A typical large organization is a multi-divisional organisation that competes in several
different businesses. It has separate self-contained divisions to manage each of these
businesses.
Example: Patanjali has healthcare, FMCG, Organic Foods, Medicinal Oils and Herbs, and
various different businesses.

In such large organizations, strategies are formulated at three levels - corporate, business,
& functional level.
General managers are found at the first two of these levels, but their strategic roles differ
depending on their sphere of responsibility
CORPORATE LEVEL
CEO, other senior executives, Head office
Board of directors, and
Corporate staff

BUSINESS LEVEL
Division A Division B Division C
Divisional managers & staff

FUNCTIONAL LEVEL
Business Business Business
Functional managers Function Function Function
(marketing, finance, etc....)

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▲An organization is divided into a number of segments that work together to bring a particular
product or service to the market.

▲The general managers of these divisions then become responsible for their particular
product line. The overriding concern of the divisional managers is healthy growth of their
divisions.

They are responsible for deciding how to create a competitive advantage and achieve higher
profitability with the resources and capital they have at their disposal. Such divisions are
called Strategic Business Units (SBUs).

XIII. Corporate Level Managers

▲It consists of the chief executive officer (CEO), other senior executives, the board of
directors, and corporate staff. They occupy the apex of strategic decision making within the
organization.

▲Besides overseeing resource allocation and managing the divestment

and acquisition processes, corporate-level managers provide a link
between the people who oversee the strategic development of a firm
and those who own it (the shareholders).

▲Corporate level managers provide an organisation level view of strategy and what they want
to achieve, but it is on the business level managers to ensure that or their particular business,
the one they are responsible for.

▲The role of a corporate manager includes:

To oversee the development of strategies for the whole organization.

Defining the mission and goals of the organization.

Determining what businesses, it should be in.

Allocating resources among the different businesses.'

Formulating and Implementing strategies that span individual businesses.

Providing leadership for the organization.

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XIV. Business level Managers

▲Strategic Business Units (SBUs) is self-contained Division with its own business functions
like Finance, Human Resource, Sale & Marketing, Research & Development etc.

▲A Principle General Manager or Business level manager is

head of a division. They are responsible for working of Division
and overseeing all functions of the Division. They are responsible
to translate general statements of direction of Corporate Level
into concrete business plans.

▲Thus, whereas corporate-level managers are concerned with strategies that span individual
businesses, business- level managers are concerned with strategies that are specific to a
particular business.

XV. Functional level Managers

▲Functional level managers are responsible for specific business functions in a division or
company like marketing, Research & Development, Human Resource, Finance etc. Thus, a
functional manager’s sphere of responsibility is generally confined to one organizational
activity.

▲Functional managers are also responsible for

a) developing functional strategies in their area to fulfil strategic objectives set by
corporate and business level managers; and

b) implementing/ executing strategies of corporate level and business level managers.

▲They are closer to customers and provide most of information that enable corporate level
and business level managers to formulate realistic and attainable strategies.

▲An equally great responsibility for managers at the operational level is strategy
implementation: the execution of corporate and business-level plans.

▲Which is better - Top-Down Approach or Bottom-Up Approach?

A top-down approach to decision making is when decisions are made solely by leadership at the
top i.e. corporate level of management, while the bottom-up approach gives all teams across
the levels a voice in decision making.

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XVI. Network of relationship between the three levels

There are 3 major types of networks of relationship between the levels and also amongst the
same levels of a business;
Functional and Divisional Relationships

It is an independent relationship, where each function or a division is run independently

headed by the function/division head, who is a business level manager, reporting directly
to the business head, who is a corporate level manager.

Functions maybe like Finance, Human Resources, Marketing, etc. while Divisions may
depend on the products like for a toys manufacturer - kids toys, teenager toys, etc. could
be divisions

Horizontal Relationships

All positions, from top management to staff-level employees, are in the same hierarchical
position. It is a flat structure where everyone is considered at same level. This leads to
openness and transparency in work culture and focused more on idea sharing and
innovation.

This type of relationship between levels is more suitable for startups where the need to
share ideas with speed is more desirable.

Matrix Relationship

It features a grid-like structure of levels in an organisation, with teams formed with

people from various departments that are built for temporary task-based projects. This
relationship helps manage huge conglomerates with ease where it is nearly impossible to
track and manage every single team independently.

In Matrix relationship - there are more than one business level managers for each
functional level teams. It is complex for smaller organisations, but extremely useful for
large organisations.

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Multiple Choice Questions

Study Material Study Material, Mtp May 2020/Mtp1

1 Strategy is a game plan used for which May 2021
of the following? 2 Which of the following is correct?
(a) To take market position (a) Strategy is always pragmatic and not
(b) To attract and satisfy customers flexible
(c) To respond to dynamic and hostile (b) Strategy is not always perfect, flawless
environment and optimal
(d) All of the above (c) Strategy is always perfect, flawless and
optimal
(d) Strategy is always flexible but not
pragmatic
Study Material, Rtp May 2020 Study Material
3. Strategy is- 4. Reactive strategy can also be termed
(a) Proactive in action as-
(b) Reactive in action (a) Planned strategy
(c) A blend of proactive and reactive actions (b) Adaptive strategy
(d) None of the above (c) Sound strategy
(d) Dynamic strategy
Study Material Study Material/ Mtp Nov 2019
5. Formulation of strategies and their 6. Which of the following are responsible
implementation in a strategic management for formulating and developing realistic and
process is undertaken by- attainable strategies?
(a) Top level executives (a) Corporate level and business level
(b) Middle level executives managers
(c) Lower-level executives (b) Corporate level and functional level
(d) All of the above managers
(c) Functional managers and business level
managers
(d) Corporate level managers, business level
managers and functional level managers

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Study Material Study Material

7. Which of the following managers’ role is 8. Which statement should be created
to translate the general statements/ first and foremost?
strategies into concrete strategies of their (a) Strategy
individual businesses- (b) Vision
(a) Supervisor (c) Objectives
(b) Functional Manager (d) Mission
(c) CEO of the company
(d) All of the above
Study Material Study Material
9. Strategic management enables an 10. Read the following three statements:
organization to __________, instead of (i) Strategies have short-range
companies just responding to threats in implications.
their business environment. (ii) Strategies are action oriented.
(a) be proactive (iii) Strategies are rigidly defined.
(b) determine when the threat will subside From the combinations given below select
(c) avoid the threats an alternative that represents statements
(d) defeat their competitors that are true:
(a) (i) and (ii)
(b) (i) and (iii)
(c) (ii) and (iii)
(d) (i), (ii) and (iii)
Study Material/ Mtp1 May 2019 Study Material, Mtp1 May 2022
11. What involves formulating, 12 Strategic management allows an
implementing, and evaluating cross- organization to be more
functional decisions that enable an (a) Authoritative
organization to achieve its objectives? (b) Participative
(a) Strategy formulation (c) Commanding
(b) Strategy evaluation (d) Proactive
(c) Strategy implementation
(d) Strategic management
Mtp Nov 2019 Mtp2 May 2019
13 Strategic management can be 14 Strategy helps in:
effectively used by NGOs to: (a) Unravelling complexity
(a) Use resource effectively (b) Reduce uncertainty

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(b) Raise funds (c) Relate the goals with the resources.
(c) Achieve goals (d) All of Above.
(d) All the above
Mtp2 May 2019 Rtp Nov 2019
15 Which of the following statement is not 16. Which of the following statements
true: correctly explain strategic management?
(a) Strategic environment is complex (i) Strategic management provides a
(b) Strategic environment is turbulent. framework for major decisions.
(c) High cost of strategy makes them useless (ii) Strategic management helps to enhance
for charitable organizations. the longevity of the business.
(d) Public sector units should implement (iii) Strategic management is an
business strategy inexpensive process.
(iv) Strategic management helps
organizations to be more reactive than
proactive.
(a) (i) and (ii)
(b) (i), (ii) and (iii)
(c) (i), (ii) and (iv)
(d) (i), (iii) and (iv)
Rtp May 2019 Mtp May 2020
17. Which of the following statements is 18. Gennex industries are analyzing the
not true with regards to strategy? technological forces for the firm which
(a) Strategy reduces uncertainty. may provide it opportunities and threats
(b) Strategy is a long-range blueprint of for which of the following stage/s of the
desired position. strategic management process?
(c) Strategy relates organizations to the (a) Strategy formulation
external environment. (b) Strategy implementation
(d) Strategy is perfect and flawless. (c) Strategy evaluation
(d) All of the above
Rtp Nov 2021 Mtp2 May 2022
19. An organization during its strategy 20. BBL Bank had strategically decided to
planning envisaged entire scenarios and set up a separate office in Mumbai back in
created a strategy framework. But in the 2016, specifically to invest in crypto
meantime after implementation, it realized currencies and in development of robust
that its framework is not effective in blockchain facilities. Which importance of

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certain unique scenarios. What is the strategic management did BBL Bank make
reason for the same? use of?
(a) Strategy is "partly proactive and Partly (a) Gives direction to the management of the
reactive" company
(b) Lack of analysis and proper planning. (b) Helps to be proactive instead of being
(c) Strategy is highly reactive and highly reactive
proactive. (c) Provides a framework for all major future
(d) Improper creation of strategic decisions
framework (d) Supports development of new SBUs like
in this case separate office for Blockchain
Mtp2 Nov 2022 Mtp2 May 2023
21. After an earnest attempt to bring in 22 Which one of the following, focuses on
a strategic change in your organization, present business scope- ‘who we are and
you the operational head of XYZ ltd, what we do’?
succeeded but still your organization (a) Mission Statement
couldn’t achieve the desired competitive (b) Vision Statement
position in the market. Out of the following (c) Goals and objectives
what could be the reason? (d) Purpose
(a) Strategy Formulation
(b) Strategy Model
(c) Strategy Implementation
(d) Strategy Decision
Mtp1 Nov 2023 Mtp2 Nov 2023
23 Imagine you are part of a strategic 24 Mr. Prakash and Mr. Pal are partners
planning team for a company. As you work in a thriving business venture. Recently,
on defining the company's identity and its they have become aware of their
current business scope, which of the employees' dissatisfaction with their
following elements primarily concentrates working conditions. Mr. Prakash believes
on answering the question, "Who we are that the situation should be dealt with
and what we do?" before the employees explode. Mr. Pal, on
(a) Mission statement the other hand, believes that if the
(b) Vision statement employees have an outburst, then they will
(c) Goals and Objectives handle it. Mr. Prakash and Mr. Pal
(d) Purpose business philosophy is:
(a) Reactive, Proactive

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(b) Reactive, Reactive

(c) Proactive, Proactive
(d) Proactive, Reactive
25. Functional level managers are 26. Kanchan is the finance head for
concerned with ---------. marketing strategies of a company. Which
a) Strategies that are responsible for the level of management is she working at?
operations of specific business a) Corporate Level
b) Strategies that span multiple businesses b) Functional Level
c) Strategies that are specific to particular c) Shopfloor Level
country d) Consultant Level
d) Strategies that encourage a favourable
attitude toward change
27. The philosophical base of strategic 28. Which one of the following cannot be
management falls within the concept of considered as a part of proactive approach
a) Strategic Intent in strategy?
b) Portfolio Analysis a) Planned strategy
c) Globalisation b) Deliberate management design
d) Vision Statement’ c) Forecast about future market condition
d) Adaptive reactions to changing
circumstances.
29. What is one of the key purposes of 30. Shreya, the owner of Kalakaari
having an organizational mission? boutiques, delegated tasks as per
a) Ensuring unanimity of purpose within the competencies of her team. What is she
organization.M covering here?M
b) Setting short-term operational goals. a) Risk
c) Providing a basis for marketing b) Work Culture
strategies. c) Employee friendly vision
d) Specifying financial forecasts. d) Proper use of mission statement.
31. An organisation during its strategy 32. Velvet Limited is a full-service airline.
planning envisaged entire situation and The company is making the following
created a strategy framework. But in decisions:
mean time after implementation, it i. Should a 'no-frills', 'low-fare'
realised that its framework is not subsidiary be set-up?
effective in certain unique unplanned ii. If it is set-up, how should the cabin
staff be recruited?

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situations. What could be the reason for Which of the above decisions will be taken
such ineffectiveness? by corporate level managers?
a) Strategy is partly proactive and partly a) Only (i)
reactive. b) Only (ii)
b) Lack of analysis and proper planning. c) (i) & (ii)
c) Strategy is highly reactive and highly d) Neither (i) nor (ii)
proactive.
d) Improper creation of strategic
framework.
33. Drishti Care is a not-for profit eye 34. A Ltd. has recently decided to install
hospital and research centre. Which one a new IT system to improve the efficiency
of the following statements is likely to of its payroll function. A Itd. believes this
relate to Drishti Care's vision, will reduce the cost of
rather than its mission statement? running the payroll system by 20%. Which
a) Drishti Care places patient care before one of the following levels of strategy is
all else the above IT system most closely linked
b) Drishti Care will be the global leader in to?
cutting edge eye surgery a) Corporate level
c) Drishti Care offers the highest level of b) Functional level
patient care throughout country c) Business level
d) Drishti Care consultants strive to d) Strategic level
continually improve surgical techniques
35. Mr. Parek sharing with his friend in an
informal discussion that he has to move
very cautiously in his organization as the
decisions taken by him have organisation
wide impact and involve large commitments
of resources. He also said that his
decisions decide the future of his
organisation. Where will you place Mr.
Parek in the organizational hierarchy?
a) Middle Level
b) Low Level
c) Top Level
None of the above

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Suggested Answer
Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10
d b c b d d b b a a
Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18 Q19 Q20
d d d d c a d d a b
Q21 Q22 Q23 Q24 Q25 Q26 Q27 Q28 Q29 Q30
c a a d a b a d a d
Q31 Q32 Q33 Q34 Q35
a a b b c

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Chapter 2
Strategic Analysis: External Environment

I. Introduction
▲Organisations, ranging from small local businesses to multinational corporations, are
distinguished by size, product type, markets, geographical coverage, legal status, and more
due to their vast organizational diversity.

▲Organizations operate in a dynamic environment, constantly reacting to

external factors, known as the organizational or business environment,
regardless of their size or other distinguishing features.

▲Strategic analysis is the initial step in formulating strategic objectives and activities,
involving a comprehensive understanding of both internal and external environments.

II. Strategic Analysis

▲Strategy formulation is not a task in which managers can get by with intuition, opinions,
instincts, and creative thinking. Judgments about what strategies to pursue need to flow
directly from analysis of a firm’s external environment and its internal resources and
capabilities.

▲A systematic approach to environmental assessment is essential for

managing risk and uncertainty.

▲The strategic analysis is a component of business planning that has a methodical approach,
makes the right resource investments, and may assist business in achieving its objective. It
forces to think about the rivals and aids in the evaluation of business plans to stay ahead of
the competition.

▲The two important situational considerations are:

(1) industry and competitive conditions, and

(2) an organisation’s own capabilities, resources, internal strengths, weaknesses, and

market position.

▲Accurate diagnosis of the business situation is necessary for managerial preparation to

deciding on a sound long-term direction, setting appropriate objectives, and crafting a winning
strategy.

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▲Without perceptive understanding of the strategic aspects of a company's external and

internal environments, the chances are greatly increased that managers will finalize a
strategic game plan that doesn't fit the situation well, that holds little prospect for building
competitive advantage, and that is unlikely to boost company performance.

▲The strategic analysis is a continuous process which is not without limitations. There are
two major limitations of strategic analysis that we need to be aware of.

1 2
it can be time-consuming at times,
it gives a lot of innovative options hurting overall organisational
but doesn't tell which one to pick. functioning and also strain ather
The options can be overlapping, efficient innovations such as
confusing or difficult to implement. developing a new product or a
service.
Evaluation Current Vision
Mission Goals Strategies

External Analysis Identify Opportunity, Threats

Analysis

Internal Analysis Identify Strength, Weakness

Issues to consider for Strategic Analysis

1. Strategy evolves over a period of time:

Strategic decisions must balance various factors, with daily outcomes being a key
element of strategic analysis. Current strategies are the result of multiple choices
over time. Management rapidly changes strategy to accelerate organizational growth,
influenced by experience and evolving with time as results become clear.

2. Balance of external and internal factors:

Strategic analysis requires balancing conflicting challenges, considering opportunities,
influences, and constraints, and considering factors like market entry to make
informed decisions. Limitations, like large opponents, impact the type, degree, volume,
and significance of the impact, with some aspects under control and others beyond
capabilities.

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3. Risk:

The complexity and intermingling of variables in the environment reduce the strategic
balance in the organisation. An important aspect of strategic analysis is to identify
potential imbalances or risks and assess them consequences. A broad classification of
the strategic risk that requires consideration in strategic analysis is given below:

Time
Short time Long time
Strategic Risks

Errors in interpreting the Changes in the environment lead

External environment cause strategic to obsolescence of strategy.
failure
Organizational capacity is unable Inconsistencies with the
Internal to cope up with strategic strategy are developed on
demands. account of changes in internal
capacities and preferences

External risk is on account of inconsistencies between strategies and the forces

in the environment. Internal risk occurs on account of forces that are either
within the organization or are directly interacting with the organization on a
routine basis.

Framework of Strategic Analysis

Strategic Analysis

External Analysis Internal Analysis

Customer Analysis: Segments, motivations, Performance Analysis: Profitability, sales,
unmet needs. customer satisfaction, product qualify,
Competitor Analysis: Strategic groups, relative cost, new products, human resources.
performance, objectives, strategies, culture,
cost structure. Determinants Analysis: Past and current
Market Analysis: Size, growth, profitability, strategies, strategic problems, organizational
entry barriers. Capabilities and constraints, financial
Environmental Analysis: Technological, resources, strengths, and weaknesses.
government, economic, cultural, demographic.

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Opportunities, threats, trends, and Strategic strengths, weaknesses, problems,

Strategic uncertainties constraints, and uncertainties

Strategy Identification & Selection

> Identify strategic alternatives
> Select strategy
> Implement the operating plan
> Review strategies

▲An industry's economic traits and competitive conditions, and how they are expected to
change, determine whether its profit prospects are poor, average, or excellent. Industry and
competitive conditions differ so much that leading companies in unattractive industries can
find it hard to earn respectable profits, while even weak companies in attractive industries
can achieve in good performances.

III. Strategy & Business Environment

▲To accomplish the goals and objectives of a business, business strategist creates strategies
and formulate policies considering both internal and external factors.

▲The business environment is highly dynamic and continuously evolving. Strategists provide
an interface between the organizational abilities and the opportunities and challenges it must
deal within the larger environment.

▲The term "business environment" refers to all external factors,

influences, or situations that in some way affect business decisions,
plans, and operations. Organisational success is determined by its
business environment, and even more from its relationship with it.

▲Strategic management is involved with choosing a long-term direction in relation to these

resources and opportunities. There is a close and continuous interaction between a business
and its environment. This interaction helps in strengthening the business firm and using its
resources more effectively.

It helps the business in the following ways:

Determine The interaction between the business and its environment would explain
opportunities opportunities and threats to the business. It helps to find new needs
and threats: and wants of the consumers, changes in laws, changes in social
behaviours, and tells what new products the competitors are bringing in
the market to attract consumers.
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Give direction The interaction with the environment enables the business to identify
for growth: the areas for growth and expansion of their activities. Once the
business is aware and understands the changes happening around, it can
plan and strategise to have successful business.
Continuous The managers are motivated to continuously update their knowledge,
Learning: understanding and skills to meet the predicted changes in the realm of
business.
Image Building: Environmental understanding helps the business organizations to
improve their image by showing their sensitivity to the environment in
which they operate.
Understanding the needs of the environment help to showcase that the
business is aware and responsive to the needs. It creates a positive
image and helps it to prosper and win over the competitors.
Meeting It helps the businesses to analyse the competitors' strategies and
Competition formulate their own strategies accordingly. The idea is to flourish and
beat competition for its products and services..

▲Business strategies relate organisational resources to challenges and opportunities in the

larger environment. The changes happening in the external environment challenge
organisations to find novel and unique strategies to remain in business and succeed.

▲Strategic analysis covering internal and external environment is highly

relevant and important for the strategists in organisations in
order to achieve competitive advantage, as well as ensure high
performance for survival and growth.

▲Strategic decisions are significant aspects of business management

and are essential for the success and continued existence. Two crucial aspects for the success
include are the function
of top management and the method of formulating strategic decisions.

▲Improvement of strategic decisions is constant endeavour for strategist. Due to the

contemporary environment's changes and the challenges that managers must overcome when
making decisions, there is interest in enhancing strategic decision-making. The environment is
far more dynamic and unpredictable than it used to be.

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IV. Micro and Macro Environment

▲The environment in which an organization exists can be described in terms of the
opportunities and threats operating in the external environment apart from the strengths and
weaknesses existing in the internal environment.

▲Business strategists should always be adequately informed on

developments occurring in them company, its industry, and within
micro and macro environment of business.

▲For making any strategic decision, they should be able to comprehend the facts available
and challenge the underlying assumptions. The external environment can be categorised in two
major types as follows:

Micro Macro
environment environment

Micro-environment
▲Micro-environment is related to small area or immediate periphery of an organization. It
influences an organization regularly and directly.

▲Micro environment consists of suppliers, consumers, marketing

intermediaries, competitors, etc. These are specific to the said business
or firm and affect its working on a direct and regular basis.

▲Within the micro or the immediate environment in which a firm operates we need to address
the following issues:

The employees of the firm, their characteristics and how they are organised.
The existing customer base on which the firm relies for business.
The ways in which the firm can raise its finance.
Who are the firm suppliers and how are the links between the two being developed?
The local community within which the firm operates.
The direct competition and their comparative performance.

▲The factors in micro environment often relate an organization to the macro issues
influencing the way a firm reacts in the market place.

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V. Elements of Macro Environment

▲Macro environment is the portion of the outside world that significantly affects how an
organisation operates but is typically much beyond its direct control and influence.

▲Macro environment has broader dimensions as it consists of economic, sociocultural,

technological, political and legal factors.

▲The classification of the relevant environment into components or

sectors help an organization to cope with its complexity, comprehend
the different influences operating, and relating the environmental
changes to its strategic management process.

According to Gluek and Jauch "The environment includes factors outside the firm which can
lead to opportunities for, or threats to the firm. Although, there are many factors, the most
important of the factors are socio-economic, technological, supplier, competitors, and
government.’’
Demographic Demographical analysis considers factors such as race, age, income
Environment education, possession of assets, house ownership, job position, region, and
the degree of education. Data about these qualities across homes and within
a demographic variable are of importance to both businesses and economists.

Considering demographics is of immense importance for any business.

Business Organizations need to study different demographic factors.

Particularly, they need to address following issues:

What demographic trends will affect the market size of the industry?

What demographic trends represent opportunities or threats?

Identifying the implications of changing demographic characteristics or

population components for a future strategic competitiveness is often a
challenge for strategists.
Socio- It represents a complex group of factors such as social traditions, values
Cultural and beliefs, level and standards of literacy, the ethical standards and state
Environment of society, the extent of social stratification, conflict, cohesiveness and so
forth.

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It differs from demographics in the sense that it is not the characteristics

of the population, but it is the behaviour and the belief system of that
population.

Socio-cultural environment consists of factors related

to human relationships and the impact of social
attitudes and cultural values which has bearing on the
operations of the organization.

Businesses have to adjust to social norms and beliefs to operate successfully.

The social environment primarily affects the strategic management process
within the organization in the areas of mission and objective setting, and
decisions related to products and markets.
Economic The economic environment refers to the overall economic situation around
Environment the business and include conditions at the regional, national and global levels.

Income distribution pattern determine the

business possibilities. The important point to
consider is to find out the effect of economic
prospect, growth and inflation on the operations
of the business.

Higher interest rates are detrimental for the businesses with high debt. In
the real estate market, they reduce the capability of the prospective buyers
to avail loan and pay instalments, thus lower the demand.
Political- Business is highly guided and controlled by government policies. Hence the
Legal type of government running a country is a powerful influence on business. A
Environment business has to consider the changes in the regulatory framework and their
impact on the business.
Taxes and duties are other critical areas that may be levied and affect the
business.

Businesses prefer to operate in a country where there is a sound legal

system. Businesses must understand the relevant laws relating to companies,
competition, intellectual property, foreign exchange, labour and so on.
Technological Technology has changed the way people communicate and do things.
Environment Technology has also changed the ways of how businesses operate now.

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Technology and business are linked and are interdependent on one another.

Changes in technology have an effect on how a business runs its operations.

The technological advancements might require a business to drastically alter
its operational, production and marketing strategies.

Technology can act as opportunity, when a business effectively adopts

technological innovations to their strategic advantage. However, at the same
time technology can act as a threat too.

Artificial intelligence, machine learning, robotic process automation is some

of the new technological tools that businesses are adopting and can act as
both opportunity and threat to a business.

VI. PESTLE- A tool to Analyse Macro Environment

The term PESTLE is often used to describe a framework for analysis of macro
environmental factors. PESTEL analysis is frequently used to assess the business
environment in which a firm operates.

Political, economic, social, and technological (PEST) analysis was the name given to the
framework in the past; however, later, the framework has been expanded to include
environmental and legal factors as well.

PESTLE analysis involves identifying the political, economic, socio-cultural, technological,

legal and environmental influences on an organization and providing a way of scanning the
environmental influences that have affected or are likely to affect an organization or its
policy.
PESTLE analysis is an increasingly used and recognized analytical tool, and it is an acronym
for:

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The PESTLE analysis is simple to understand and quick to implement. The advantage of this
tool is that it encourages management into proactive and structured thinking in its decision
making.

The Key Factors

Political factors:
• Political factors are how and to what extent the government
intervenes in the economy and the activities of business firms.
• Political factors may also influence goods and services which the
government wants to provide or be provided and those that the
government does not want to be provided.
• Furthermore, governments have great influence on the health,
education and infrastructure of a nation.

Economic factors:
• Economic factors have major impacts on how businesses operate and
take decisions.
• Example, interest rates affect a firm's cost of capital and therefore
to what extent a business grows and expands. Exchange rates affect
the costs of exporting goods and the supply and price of imported
goods in an economy. The money supply, inflation, credit flow, per
capita income, growth rates have a bearing on the business decisions.

Social factors:
• Social factors affect the demand for a company's products and how
that company operates.

Technological factors:
• Technological factors can determine barriers to entry, minimum
efficient production level and influence outsourcing decisions.
Furthermore, technological shifts can affect costs, quality and lead to
innovation..

Legal factors:
• Legal factors affect how a company operates, its costs, and the
demand for its products, ease of business.

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Environmental factors:
• Environmental factors affect industries such as tourism, farming, and
insurance. Growing awareness to climate change is affecting how
companies operate and the products they offer it is both creating new
markets and diminishing or destroying existing ones.

Summarize

VII. Internationalization of Business

▲Internationalization has emerged as the dominant commercial trend over the last couple of
decades. It enables a business to enter new markets in search of greater earnings and less
expensive resources. Additionally, expanding internationally enable a business to achieve
greater economies of scale and extend the lifespan of its products.

▲A business can approach internationalisation systemically with the

aid of international strategy planning. One method for an
organization to identify opportunities and threats in global
markets are by scanning the external environment.

▲The development of effective strategies and the formulation of global strategic objectives
are made feasible by internationalisation.

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A global company has three characteristics

It is a conglomerate of multiple units (located in different parts of the globe) but all linked
by common ownership.

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

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

Developing internationally
▲International development is expensive and challenging. Moving on in a thorough and
structured manner is thus the ideal approach to adopt.

▲The steps in international strategic planning are as follows:

Evaluate global opportunities and threats and rate them with the internal capabilities.

Describe the scope of the firm's global commercial operations.

Create the firm's global business objectives.

Develop distinct corporate strategies for the global business and whole organisation.

Why do businesses go global?

▲Technological developments and evolving political views are two important factors in the
rapid rise of multinational organisations.

▲Worldwide communication makes it easier to define and implement

global strategy by linking corporate headquarters with their abroad
operations. There are several reasons why companies go global.

▲These are explained as follows:

The first and foremost reason is the need to grow. Often finding opportunities in the other
parts of the globe, organisations extend their businesses and globalise their operations.
There is rapid shrinking of time and distance across the globe, because of faster
communication, speedier transportation, growing financial flow of funds and rapid
technological changes.
It is being realised that the domestic markets are no longer adequate. The competition
present domestically may not exist in some of the international markets.

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There can be varied other reasons such as need for reliable or cheaper source of raw-
materials, cheap labour, etc.
Companies often set up overseas plants to reduce high transportation costs. It may be
cheaper to produce near the market to reduce the time and costs involved in transportation.
When exporting organisations find foreign markets to open up or grow big, they may
naturally look at overseas manufacturing plants and sales branches to generate higher sales
and better cash flow.
The rise of services to constitute the largest single sector in the world economy; and
regional economic integration, which has involved both the world's largest economies as well
as certain developing economies.
The apparent and real collapse of international trade barriers redefines the roles of state
and industry. The trend is towards increased privatization of manufacturing and services
sectors, less government interference in business decisions and more dependence on the
value-added sector to gain marketplace competitiveness. The trade tariffs and custom
barriers are getting lowered, resulting in increased flow of business.
Globalization has made companies in different countries to form strategic alliances to ward
off economic and technological threats and leverage their respective comparative and
competitive advantages.

VIII. International Environment

▲An assessment of the external environment is the first step toward internationalisation.
Analysing international environment is important since it allows organisation to discover
opportunities in the global market and evaluate feasibilities of capitalising on these
opportunities.

▲Assessments of the international environment can be done at three levels: multinational,

regional, and country.
• Multinational environmental analysis involves identifying,
anticipating, and monitoring significant components of the
Multinational
global environment on a large scale. Understanding global
environmental
developments covering economic and other macro elements
analysis
is important. These characteristics are evaluated based on
their present and expected future impact.

• Regional environmental analysis is a more in depth evaluation

Regional
of the critical factors in a specific geographical area. The
environmental
emphasis would be on discovering market opportunities for a
analysis
goods, services, or innovations in the chosen location.

• Country environmental analysis has to take a deeper look at

Country
the important environmental factors. The analysis must be
environmental
customised for each of the countries to develop effective
analysis
market entrance strategies.

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▲International environment has become an inherent part of strategic management for

businesses of all sizes with global interests. It becomes more important for the people at the
decision-making levels to focus on factors comprising the international environment.

IX. Understanding Product And Industry

Business products have certain characteristics as follows:
Products are either tangible or intangible. A tangible product can be handled, seen, and
physically felt. Alternatively, an intangible product is not a physical good, such as telecom
services, banking, insurance, or repair services.
Product has a price. The dynamics of supply and demand influence the market price of an
item or service. The market price is the price at which quantity provided equals quantity
desired. The price that may be paid is determined by the market, the quality, the marketing,
and the targeted group.
In the present competitive world price is often given by the market and businesses have to
work on costs to maintain profitability. On account of competition, businesses are not able
to fix market price by adding profit margin on the costs. Rather, they work on reducing the
costs given the prevailing market price.
Products have certain features that deliver satisfaction. Products should be able to provide
value satisfaction to the customers for whom they are meant. Features of the product will
distinguish it in terms of its function, design, quality and experience.
A customer's cumulative experience with a product from its purchase to the end of its
useful life is an important component of a product feature.
Product is pivotal for business. The product is at the centre of business around which all
strategic activities revolve. Product is the driving force behind business activities.
A product has a useful life. Every product has a usable life after which it must be replaced,
as well as a life cycle after which it is to be reinvented or may cease to exist.

X. Product Life Cycle

▲PLC is an S-shaped curve which exhibits the relationship of sales with respect of time for a
product that passes through the four successive stages of introduction (slow sales growth),
growth (rapid market acceptance) maturity (slowdown in growth rate) and decline (sharp
downward drift). If businesses are substituted for product, the concept of PLC could work
just as well.
1 PLC is the introduction stage with slow sales growth, in which competition is almost
negligible, prices are relatively high, and markets are limited. The growth in sales
is at a lower rate because of lack of awareness on the part of customers.

PLC is growth stage with rapid market acceptance. In the growth stage, the
2 demand expands rapidly, prices fall, competition increases, and market
expands. The customer has knowledge about the product and shows interest in
purchasing it.
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3 PLC is maturity stage where there is slowdown in growth rate. In this stage, the
competition gets tough, and market gets stabilized. Profit comes down because of
stiff competition. At this stage, organisations have to work for maintaining
stability.
PLC is declines with sharp downward drift in sales. The sales and profits fall
4 down sharply due to some new product replaces the existing product. So, a
combination of strategies can be implemented to stay in the market either by
diversification or retrenchment.

Advantages of PLC
The main advantage of PLC is that it can be used to diagnose a portfolio of products (or
businesses) in order to establish the stage at which each of them exists.
Particular attention is to be paid on the businesses that are in the declining stage. Depending
on the diagnosis, appropriate strategic choice can be made.
Expansion may be a feasible alternative for businesses in the introductory and growth
stages. Mature businesses may be used as sources of cash for investment in other
businesses which need resources.
A combination of strategies like selective harvesting, retrenchment, etc. may be adopted
for declining businesses. In this way, a balanced portfolio of businesses may be built up by
exercising a strategic choice based on the PLC concept.

XI. Value Chain Analysis

▲Value chain analysis is a method used by strategists to break down each process that their
business employs. This analysis could be used to improve the sequence of operations, enhancing
efficiency and creating a competitive advantage.

▲Value chain analysis is a method of examining each activity in value

chain of a business in orderto identify areas for improvements.

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▲When you do a value chain analysis, you must analyse how each stage in the process adds or
subtracts value from the end product or service.

▲Value chain analysis was originally introduced as an accounting analysis to shed light on the
value added' of separate steps in complex manufacturing processes, in order to determine
where cost improvements could be made and/or value creation improved.

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

▲One of the key aspects of value chain analysis is the recognition that organizations, are much
more than a random collection of machines, money and people. These resources are of no value
unless deployed into activities and organized into routines and systems which ensure that
products or services are produced which are valued by the final consumer/user.

▲Porter argued that an understanding of strategic capability must start with an identification
of these separate value activities.

The primary activities of the organization are grouped into five main areas:
• are the activities concerned with receiving, storing and distributing the inputs
to the product/service. This includes materials handling, stock control,
Inbound transport etc.
logistics

• transform these various inputs into the final product or service: machining,
packaging, assembly, testing etc.
Operations

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• Collect, store and distribute the product to customers. For tangible products
this would be warehousing, materials handling, transport, etc. In the case of
Outbound services, it may be more concerned with arrangements for bringing
logistics customers to the service, if it is a fixed location (e.g. sports events).

• Provide the means whereby consumers/users are made aware of the

product/service and are able to purchase it. This would include sales
administration, advertising, selling and so on. In public services,
Marketing communication networks which help users' access a particular service are
and sales often important.

• all those activities, which enhance or maintain the value of a product/service,

such as installation, repair, training and spares.
Service

▲Each of these groups of primary activities are linked to support activities. These can be
divided into four areas;
• This refers to the processes for acquiring the various
resource inputs to the primary activities (not to the
Procurement
resources themselves). As such, it occurs in many parts of
the organization.

• All value activities have a 'technology', even if it is simply

know-how. The key technologies may be concerned directly
Technology
with the product (e.g. R&D product design) or with
development processes (e.g. process development) or with a particular
resource (e.g. raw materials improvements).

• This is a particularly important area which transcends all

Human resource primary activities. It is concerned with those activities
management involved in recruiting, managing, training, developing and
rewarding people within the organization.

• The systems of planning, finance, quality control,

information management, etc. are crucially important to an
Infrastructure organization's performance in its primary activities.
Infrastructure also consists of the structures and routines
of the organization which sustain its culture.

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XII. Industry Environment Analysis

▲Industry analysis enable strategic understanding about the entire state of any industry and
make decisions about whether the industry is a lucrative or not.

▲The goal of the industry environment analysis, which is typically an

important step of strategic analysis, is to estimate the amount
of competitive pressures the business is presently facing and is
expected to face in the near future.

▲The analysis entails seeing the firm in the context of a bigger framework. The purpose of
industrial analysis is to get insight into a wide range of elements within and outside the
business. Analysing these elements enhances knowledge of surrounding and serves as the
foundation for aligning strategy with changing industry circumstances and realities.

XIII. Porter's Five Forces Model

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

▲Michael Porter believes that the basic unit of analysis for

understanding is a group of competitors producing goods or
services that compete directly with each other. It is the industry
where competitive advantage is ultimately won or lost. It is through
competitive strategy that the organisation attempts to adopt an approach to compete in the
industry.

▲This model holds that the state of competition in an industry is a composite of competitive
pressures operating in five areas of the overall market:
Competitive pressures associated with the market manoeuvring and jockeying for buyer patronage
that goes on among rival sellers in the industry.
Competitive pressures associated with the threat of new entrants into the market.

Competitive pressures coming from the attempts of companies in other industries to win buyers over
to their own substitute products.
Competitive pressures stemming from supplier bargaining power and supplier- seller collaboration.

Competitive pressures stemming from buyer bargaining power and seller-buyer Collaboration.

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▲The strategists can use the five-forces model to determine what competition is like in a
given industry by undertaking the following steps:
Step 1 Step 2 Step 3
•Identify the specific •Evaluate how strong the Determine whether the
competitive pressures pressures comprising each of collective strength of the
associated with each of the the five forces are (fierce, five competitive forces is
five forces. strong, moderate to normal, conducive to earning
or weak). attractive profits.

▲Porter's five forces model is one of the most effective and enduring conceptual frameworks
used to assess the nature of competitive environment and to under- stand an industry's
structure.
▲By applying Porter's five forces model of industry attractiveness to their own industry,
management can gauge their firm's strengths, weaknesses, probable threats and future
opportunities.

The Threat of New Entrants

▲New entrants can reduce an industry's profitability, because they add new production
capacity, leading to increase in supply of the product, sometimes even at a lower price and can
substantially erode existing firm's market share position.

▲New entrants are always a powerful source of competition. The new

capacity and product range they bring in throws up a new competitive
pressure. The bigger the new entrant, the more severe the competitive

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effect. New entrants also place a limit on prices and affect the profitability of existing
players, which is known as Price War.
Example, Reliance Jio offered cheap services when it entered the telecom industry in 2016,
thus limiting the prices for existing players like Airtel, Vodafone, Idea, etc.

▲A firm's profitability tends to be higher when new firms are blocked from entering the
industry. To discourage new entrants, existing firms can try to raise barriers to entry.
"Barriers to entry" represent economic forces (or 'hurdles') that slow down or impede entry
of new firms. These are explained as follows:
Capital When a large amount of capital is required to enter an industry, firms
Requirements lacking funds are effectively barred from the industry, thus enhancing the
profitability of existing firms in the industry.
Economies of Economies of scale refer to the decline in the per-unit cost of production
Scale (or other activity) as volume grows. A large firm that enjoys economies of
scale can produce high volumes of goods at successively lower costs. This
tends to discourage new entrants.
Product Product differentiation refers to the physical or perceptual differences,
Differentiation or enhancements, that make a product special or unique in the eyes of
customers.
Switching To make a switch, buyers may need to test a new firm's product, negotiate
Costs new purchase contracts, and train personnel to use the equipment, or
modify facilities for product use. Buyers often incur substantial financial
(and psychological) costs in switching between firms. When such switching
costs are high, buyers are often reluctant to change.
Brand Identity Brand identity is particularly important for infrequently purchased
products that carry a high unit cost to the buyer. New entrants often
encounter significant difficulties in building up the brand identity, because
to do so they must commit substantial resources over a long period.
Access to Despite the growing power of the internet, many firms may continue to
Distribution rely on their control of physical distribution channels to sustain a barrier
Channels to entry to rivals.
Possibility of Sometimes the mere threat of aggressive retaliation by incumbents can
Aggressive deter entry by other firms into an existing industry. Example:
Retaliation introduction of products by a new firm may lead incumbents’ firms to
reduce their product prices and increase their advertising budgets.

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Bargaining Power of Buyers

▲This is another force that influences the competitive condition of an industry. This force
becomes heavier depending on the possibility of buyers forming groups or cartels.

▲The bargaining power of the buyers influences not only the prices that
the producer can charge but also influences costs and investments of
the producer.

▲This is because powerful buyers usually bargain for better services

which involves more investment on the part of the producer.

▲Buyers of an industry's products or services can sometimes exert considerable pressure on

existing firms to secure lower prices or better services. This leverage is particularly evident
when:

Buyers have full knowledge of the sources of products and their substitutes.

They spend a lot of money on the industry's products i.e., they are big buyers.

The industry's product is not perceived as critical to the buyer's needs and buyers are
more concentrated than firms supplying the product. They can easily switch to the
substitutes available.

Bargaining Power of Suppliers

▲The more specialised the offering from the supplier, greater may be its clout. Further,
when the suppliers are limited in number, they may openly exhibit their bargaining power.

▲The bargaining power of suppliers determines the cost of raw

materials and other inputs of the industry, and therefore, an
industry's attractiveness and profitability.

▲Suppliers can influence the profitability of an industry in a number of ways. Suppliers can
command bargaining power over a firm when:
a) Their products are crucial to the buyer and substitutes are not available.
b) They can erect high switching costs.
c) They are more concentrated than their buyers. Less suppliers, more buyers.

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The Nature of Rivalry in the Industry

▲The intensity of rivalry in an industry is a significant determinant of industry attractiveness
and profitability.

▲The intensity of rivalry can influence the costs of suppliers,

distribution, and of attracting customers and thus directly affect
the profitability. The more intensive the rivalry, the less attractive is the industry.

▲Rivalry among competitors tends to be cutthroat and industry profitability low under various
conditions explained as follows:
Industry A strong industry leader can discourage price wars by disciplining
Leader initiators of such activity. Because of its greater financial resources, a
leader can generally outlast smaller rivals in a price war.
Number of Even when an industry leader exists, the leader's ability to exert pricing
Competitors discipline diminishes with the increased number of rivals in the industry
as communicating expectations to players becomes more difficult.
Fixed Costs When rivals operate with high fixed costs, they feel strong motivation to
utilize their capacity and therefore are inclined to cut prices when they
have excess capacity.
Exit Barriers Rivalry among competitors declines if some competitors leave an industry.
Exit barriers come in many forms. Assets of a firm considering exit may
be highly specialized and therefore of little value to any other firm. Such
a firm can thus find no buyer for its assets. This discourages exit. When
barriers to exit are powerful, competitors desiring exit may refrain from
leaving. Their continued presence in an industry exerts downward pressure
on the profitability of all competitors.
Product Firms can sometimes insulate themselves from price wars by
Differentiation differentiating their products from those of rivals. As a consequence,
profitability tends to be higher in industries that offer opportunity for
differentiation. Profitability tends to be lower in industries involving
undifferentiated commodities. Example: memory chips, natural resources,
processed metals and railroads.
Slow Growth Industries whose growth is slowing down tend to face more intense rivalry.
As industry growth slows, rivals must often fight harder to grow or even
to keep their existing market share. The resulting intensive rivalry tends
to reduce profitability for all.

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Threat of Substitutes
▲Substitute products are a latent source of competition in an industry.

▲Substitute products offering a price advantage and/or performance improvement to the

consumer can drastically alter the competitive character of an industry. And they can bring it
about all of a sudden. Example: coir suffered at the hands of synthetic fibre.

▲A final force that can influence industry profitability is the availability of

substitutes for an industry's product. Example: Real estate, insurance,
bonds and bank deposits for example are clear substitutes for common
stocks, because they represent alternate ways to invest funds.

▲The five forces together determine industry attractiveness/ profitability. Example:

elements such as cost and investment needed for being a player in the industry decide industry
profitability, and all such elements are governed by these forces. The collective strength of
these five competitive forces determines the scope to earn attractive profits. The strength
of the forces may vary from industry to industry.

XIV. Attractiveness of Industry

▲The industry analysis culminates into identification of various issues and draw conclusions
about the relative attractiveness or unattractiveness of the industry, both near-term and
long-term.

▲Strategists assess the industry outlook carefully, deciding whether industry

and competitive conditions present an attractive business opportunity for
the organisation or whether its growth and profit prospects are gloomy.

▲The final step of industry and competitive analysis is to use the results of analysis of
previous six issues to draw conclusions about the relative attractiveness or unattractiveness
of the industry, both near-term and long-term.

▲The important factors on which to base such conclusions include:

✓ The industry's growth potential, is it futuristically viable?
✓ Whether competition currently permits adequate profitability and whether competitive
forces will become stronger or weaker?
✓ Whether industry profitability will be favourably or unfavourably affected by the prevailing
driving forces?
✓ The competitive position of an organisation in the industry and whether its

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✓ position is likely to grow stronger or weaker. (Being a well-entrenched leader

✓ or strongly positioned contender in an otherwise lacklustre industry can still
✓ produce good profitability; however, having to fight an uphill battle against
✓ much stronger rivals can make an otherwise attractive industry unattractive).
✓ The potential to capitalize on the vulnerabilities of weaker rivals (perhaps converting an
unattractive industry situation into a potentially rewarding company opportunity).
✓ Whether the company is able to defend against or counteract the factors that make the
industry unattractive?
✓ The degrees of risk and uncertainty in the industry's future.
✓ The severity of problems confronting the industry as a whole.
✓ Whether continued participation in this industry adds importantly to the firm's ability to
be successful in other industries in which it may have business interests?

XV. Experience Curve

▲Experience curve is an important concept used for applying a portfolio approach. The
concept is akin to a learning curve which explains the efficiency increase gained by workers
through repetitive productive work.

▲Experience curve is based on the commonly observed

phenomenon that units' costs decline as a firm accumulates
experience in terms of a cumulative volume of production.
It is based on the concept, "we learn as we grow". The
implication is that larger firms in an industry would tend to
have lower unit costs as compared to those for smaller companies, thereby gaining a
competitive cost advantage.

▲Experience curve results from a variety of factors such as learning effects, economies of
scale, product redesign and technological improvements in production.

▲Experience Curve has following features:

a) As business organisation grow, they gain experience.
b) Experience may provide an advantage over the competition. Experience is a key barrier
to entry.
c) Large and successful organisation possess stronger "experience effect".

▲The concept of experience curve is relevant for a number of areas in strategic management.
For instance, experience curve is considered a barrier for new firms contemplating entry in

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an industry. It is also used to build market share and discourage competition.

XVI. Value Creation

▲The concept of value creation was introduced primarily for providing products and services
to the customers with more worth. The concept took more space in the business and
organizations started discussing about the value creation for stakeholders.

▲The value creation is an activity or performance by the firm to create value

that increases the worth of goods, services, business processes or even the
whole business system. This concept gives business a competitive
advantage in the industry and helps them earn above average profits/returns.

▲Competitive advantage leads to superior profitability. Profitable a

company becomes depends on three factors:
a) the value customers place on the company's products;
b) the price that a company charges for its products; and
c) the costs of creating those products.

▲The value customers place on a product reflects the utility they get from a product.
Companies are ultimately aiming to achieve sustainable competitive advantage, which enables
them to succeed in the long run.

▲Michael Porter argues that a company can generate competitive advantage in two different
ways, either through differentiation or cost advantage.
According to Porter's differentiation means the capability to provide customers superior
and special value in the form of product's special features and quality or in the form of
aftersales customer service.

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As a result of differentiation, a company can demand higher price for its products or
services. A company will earn higher profits due to differentiation in case the expenses stay
comparable to the costs of competitors.
The differentiation and cost advantage will affect a company's ability to achieve
competitive advantage but there are many different organizational functions that will
influence whether a company can achieve cost advantage or differentiation advantage.
▲Value chain analysis provides an excellent tool to examine the origin of competitive
advantage. It divides the organisations into two different strategically important group of
activities, namely, primary activities and supporting activities, which can help to comprehend
the potential sources for differentiation and to understand an organisation's costs behaviour.

XVII. Market And Customer

▲A market is a place for interested parties, buyers and sellers, where items and services can
be exchanged for a price. The market might be physical, such as a departmental store where
people engage in person.

▲They may also be virtual, such as an online market where

buyers and sellers do not meet in person but tools of
technology to strike a deal. Example: it might be used to
describe the stock exchange, where securities are traded.

▲The term "marketing" encompasses a wide range of operations, including research, designing,
pricing, promotion, transportation, and distribution. Often market activities are categorised
and explained in terms of four Ps of marketing - product, place, pricing, and promotion.

XVIII. Customer
▲A customer is a person or business that buys products or services from another organisation.
The terms customer and consumer are practically synonymous and are frequently
used interchangeably. There is, a thin distinction.

▲Individuals or businesses that consume or utilise products and services are

referred to as consumers. Customers are the purchasers of products and
services in the economy, and they might exist as consumers or only as customers.

XIX. Customer Analysis

▲Customer analysis is an essential marketing component of any strategic business plan. It
identifies target clients, determines their wants, and then defines how the product meets

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those needs. Thus, it involves the examination and evaluation of consumer needs, desires, and
wants.

▲Customer analysis includes

a) The administration of customer surveys,
b) The study of consumer data,
c) The evaluation of market positioning strategies,
d) Development of customer profiles, and
e) The selection of the best market segmentation techniques.

▲Using the facts generated by customer analysis, an effective profiling of customers may be
established. Customer profiles can reveal demographic information about customers. A number
of parties, including buyers, sellers, distributors, salespeople, managers, wholesalers,
retailers, suppliers, and creditors, can assist in gathering information to effectively assess
the needs and desires of consumers. Successful businesses constantly monitor the behaviour
of existing and prospective customers.

XX. Customer Behaviour

▲Customer behaviour moves beyond the identification of customers to explain how they
purchase products. Understanding the behaviours of customers enables businesses to
establish effective marketing and advertising campaigns, provide products and services that
meet their needs, and retain customers for repeat sales.

▲Consumer behaviour may be influenced by a number of things. These elements can be

categorised into the following three conceptual domains:
External Influences External influences, like advertisement, peer recommendations or
social norms. The focus of external effects is on the numerous
elements that have an impact on customers as they choose which
needs to satisfy and which products to use to do so. These aspects
are divided into two groups - the company's marketing - efforts and
the numerous environmental elements.
Internal Influences Internal processes are psychological factors internal to customer and
affect consumer decision making. Consumer behaviour is influenced
by a combination of internal and external influences, including
motivation and attitudes.

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Decision Making A rational consumer, as decision maker would seek information about
potential decisions and carefully integrate this with the existing
knowledge about the product. The stages of decision-making process
can be described as:
✓ Problem recognition, i.e., identify an existing need or desire that is
unfulfilled
✓ Search for desirable alternative and list them
✓ Seeking information on available alternatives and weighing their
pros and cons.
✓ Make a final choice.
This behaviour of making decisions happens very frequently.
Post-decision After making a decision and purchasing a product, the final phase in
Processes the decision-making process is evaluating the outcome. The
consumer's reaction may vary depending upon the satisfaction.

XXI. Competitive Strategy

▲Competition is a fundamental attribute of economic systems and business, and it is
frequently connected with small and large organisations. The competitive strategy of a
business is concerned with how to compete in the business areas in which the organization
operates.

▲The competitive strategy of a firm within a certain business field is

analysed using two criteria: the creation of competitive advantage
and the protection of competitive advantage.

▲An important component of industry and competitive analysis involves delving into the
industry's competitive process to discover what the main sources of competitive pressure are
and how strong each competitive force is.

▲This analytical step is essential because managers cannot devise a successful strategy
without in-depth understanding of the industry's competitive character. Even though
competitive pressures in various industries are never precisely the same, the competitive
process works similarly enough to use a common analytical framework in gauging the nature
and intensity of competitive forces.

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XXII. Competitive Landscape

▲Competitive landscape is a business analysis which identifies competitors, either direct or
indirect. Competitive landscape is about identifying and understanding the competitors and at
the same time, it permits the comprehension of their vision, mission, core values, niche market,
strengths and weaknesses.

▲Understanding of competitive landscape requires an

application of "competitive intelligence". Thus, understanding
the competitive landscape is important to build upon a competitive advantage.

Steps to understand the Competitive Landscape:

Identify the competitor

• The firm's industry and have actual data about their respective market share.
• This answers the question: Who are the competitors and how big are they?

Understand the competitors

• The strategist can use market research report, internet, newspapers, social media,
industry reports, and various other sources to understand the products and services
offered by them in different markets.
• This answers the question: What are their product and services?

Determine the strengths of the competitors

• This answers the questions: What are their financial positions?

• What gives them cost and price advantage ?; What are they likely to do next?
• How strong is their distribution network?
• What are their human resource strengths?

Determine the weaknesses of the competitors

• .Identify the areas where the competitor is lacking or is weak. Weaknesses (and
strengths) can be identified by going through consumer reports and reviews
appearing in various media. Financial strength and weakness can always be learnt
from annual reports.
Put all of the information together
• the strategist should put together all information about competitors and draw
inference about what they are not offering and what the firm can do to fill in the
gaps. The strategist can also know the areas which need to be strengthen by the
firm.

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XXIII. Key Factors For Competitive Success

▲An industry's Key Success Factors (KSFs) are those things that most affect industry
members' ability to prosper in the marketplace - the particular strategy elements, product
attributes, resources, competencies, competitive capabilities, and business outcomes that
spell the difference between profit and loss and, ultimately, between competitive success or
failure.

▲Key success factors are the prerequisites for industry success or, to put it another way,
KSFs are the factors that shape whether a company will be financially and competitively
successful.

▲The answers to three questions help identify an industry's key success factors:
On what basis do customers choose between the competing brands of sellers? What product
attributes are crucial to sales?
What resources and competitive capabilities does a seller need to have to be competitively
successful, better human capital, quality of product or quantity of product, cost of service,
etc?
What does it take for sellers to achieve a sustainable competitive advantage, something
that can be sustained for long term?
Example: In apparel manufacturing, the KSFs are appealing designs and colour combinations
(to create buyer interest) and low-cost manufacturing efficiency (to permit
attractive retail pricing and ample profit margins).

▲Key success factors vary from industry to industry and even from time to
time within the same industry as driving forces and competitive conditions
change. Only rarely does an industry have more than three or four key success factors at any
one time. The purpose of identifying KSFs is to make judgments about what things are more
important to competitive success and what things are less important.

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Multiple Choice Questions

Study Material Study Material, Mtp Nov 2019

1. KSFs stand for: 2. Competitive landscape requires the
(a) Key strategic factors application of-
(b) Key supervisory factors (a) Competitive advantage
(c) Key success factors (b) Competitive strategy
(d) Key sufficient factors (c) Competitive acumen
(d) Competitive intelligence
Study Material Study Material
3. The term PESTLE analysis is used to 4. 'Attractiveness of firms' while
describe a framework for analysing: conducting industry analysis should be seen
(a) Macro Environment in-
(b) Micro Environment (a) Relative terms
(c) Both Macro and Micro Environment (b) Absolute terms
(d) None of above (c) Comparative terms
(d) All of the above

Study Material Study Material

5. What is not one of Michael Porter's five 6. Which of the following constitute
competitive forces? Demographic Environment?
(a) New entrants (a) Nature of economy i.e. capitalism,
(b) Rivalry among existing firms socialism, Mixed
(c) Bargaining power of unions (b) Size, composition, distribution of
(d) Bargaining power of suppliers population, sex ratio
(c) Foreign trade policy of Government
(d) Economic policy i.e. fiscal and monetary
policy of Government

Study Material Study Material

7. All are elements of Macro environment 8. The emphasis on product design is very
except: high, the intensity of competition is low,
(a) Society and the market growth rate is low in the
(b) Government ______ stage of the industry life cycle.

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(c) Competitors (a) Maturity

(d) Technology (b) Introduction
(c) Growth
(d) Decline
Mtp2 May 2019 Mtp2 Nov 2021
[Link] of the following statements is not [Link] which stage of the Product Life
true: Cycle will marketing strategies need to
a. Strategic environment is complex concentrate on differentiating a product
b. Strategic environment is turbulent. from competing products, building brand
c. High cost of strategy makes them useless loyalty and offering incentives to attract
for charitable organisations. competitor’s customers to switch?
d. public sector units should implement (a) Decline
business strategy (b) Growth
(c) Maturity
(d) Introduction

Rtp May 2019 Rtp Nov 2021

[Link] to Porter, which of the [Link] is a marketing consultancy
following is important to achieve business. ABC’s most recent corporate
competitive advantage? analysis has identified that three new
(a) Differentiation and cost advantage. businesses have recently entered its
(b) Outsourcing activities. market and started aggressively targeting
(c) Having strong relationships with buyers ABC’s key client. As part of ABC’s
and sellers. corporate analysis, these three new
(d) Focus on most competitive businesses businesses would be a
(a) Strength
(b) Opportunity
(c) Weakness
(d) Threat

Mtp2 May 2019 Mtp2 May 2019

[Link] of the following is not part of [Link] purpose of logistics management is
external analysis: a. Provide customer satisfaction
a. Customer segments. b. Create automation
b. Organisational constraints. c. Procure better quality raw material
c. Entry barriers. d. Manage inward and outward movement of
d. Competitors goods

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15. Which is not the characteristic of 16. Value chain analysis was originally
globalization? introduced as an to shed light on the value-
a) Conglomerate of multiple units added task of separate activities.
b) Common Pool of resources a) Accounting Analysis
c) Common Strategy b) Portfolio Analysis
d) High Transpersonal Cost c) Controls Analysis
d) System Analysis

17. Which concepts exhibits the 18. ____________ can be done using a
relationship of sales with respect of time set of concepts & techniques to get a clear
for a product that passes through the four picture on key industry traits.
successive stages? a) Strategy analysis
a) BCG b) Industry & Competitive Analysis
b) PLC c) Value Chain Analysis
c) SWOT d) Portfolio Analysis
d) ADL

19. Competitive strategy of a firm evolves 20 Which will not be considered as a

out of consideration of several factor that supporting activity?
are_______ to it. a) Firm Infrastructure
a) Unrelated b) HR Management
b) Managerial c) Inbound Logistic
c) Internal d) Technology Development
d) External

21. In which stage of product life cycle 22 A for a firm is whatever it does Best.
the competition is negligible? a) Core Competency
a) Introduction b) Driving Forces
b) Growth c) Key Success Factors
c) Maturity d) Concurrent Filters
d) Decline

23. __________ of a firm evolves out of 24 The objective competitive strategy is

consideration of several factors that are to generate
external to it. a) Generate Competitive Advantage
a) Competitive Landscape b) Increase Market Share
b) Strategic Analysis c) Beat Competition
c) Core Competence d) All the above

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d) Competitive Strategy

25 Which of these will not be considered

as primary activity? 26 Which of these are those things that
a) Inbound Logistic most affect industry member’s ability to
b) Marketing & Sales prosper in marketplace?
c) Procurement a) Key Success Factors
d) Service & Operation b) Driving Forces
c) Core Identity Forces
d) Concurrent Filters
27 Capabilities that are valuable, rare, 28 Competitive strategy consist of moves
costly to imitate, & non-substitutable are to .
___________ . a) Attract Customer
a) Core Competency b) Withstand Competitive pressure
b) Driving Forces c) Strengthen market position
c) Key Success Factors d) All the above
a) d) Concurrent Filters
a)
29. Companies often set to reduce high 30 Which of these are the rules that
transformational cost in globalization. shape whether a company will be financially
a) Bearer Plant & competitively successful?
b) Overseas plant a) Core Identity Forces
c) Domestic Plant b) Driving Forces
d) All the above c) Key Success Factors
a) d) Concurrent Filters
a)
31 Which of the following is based on
commonly observed phenomenon that unit 32 ___________ comes from a firm’s
costs decline as a firm accumulates ability to perform activities more
experience in terms of a cumulative volume effectively that its rivals.
of production? a) Competitive Landscape
a) Experience Curve b) Competitive Advantage
b) Product Life Cycle c) Core Competence
c) SWOT Analysis d) Strategic Change
d) Growth Share Matrix a)

34 In which stage of product life cycle the

33 Most dominant forces are called sales & profit falls down sharply due to
because they have biggest influence.

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a) Driving Forces some new product replaces the existing

b) Dominant economic feature product?
c) Strategic Moves a) Introduction
d) Competitive Landscape b) Growth
c) Maturity
d) Decline

35 Which approaches has an advantage 36 __________ is a business analysis

that it can be used to diagnose a portfolio which identifies competitors, either direct
of products in order to establish stage at or indirect.
which each of them exists? a) Competitive Landscape
a) Experience Curve b) Strategic Analysis
b) Product Life Cycle c) Core Competence
c) SWOT Analysis d) Competitive Strategy
d) Growth Share Matrix

37 Which of these refers to process of 38 Which of these is a widely used means

integration of world economy into one huge of describing activities within & around an
market. organization & relating them to an
a) Globalization assessment of competitive strength of an
b) Privatization organization
c) Stratification a) Accounting Analysis
d) None Of these b) Portfolio Analysis
c) Controls Analysis
d) System Analysis

39 Which concept is also known as ‚S- 40 Which area of value chain transform
Shaped’ Curve? various inputs into the final product or
a) PLC service?
b) BCG a) Marketing & Sales
c) ADL b) Procurement
d) SWOT c) Infrastructure
d) Operation

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Suggested Answer
Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10
c d a a c b c b c c
Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18 Q19 Q20
a d b d d a b b d c
Q21 Q22 Q23 Q24 Q25 Q26 Q27 Q28 Q29 Q30
a c d d c a a d b c
Q31 Q32 Q33 Q34 Q35 Q36 Q37 Q38 Q39 Q40
a b a d a a a a a d

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Chapter 3
Strategic Analysis: Internal Environment

I. Introduction
1) Strategic Analysis is equally important when it comes to internal environment assessment.
2) Internal environment refers to the sum total of People - individuals and groups,
stakeholders, Processes- input-throughput-output, Physical infrastructure- space, equipment
and physical conditions of work, administrative apparatus- lines of authority & power,
responsibility, Accountability and organizational culture intangible aspects of working-
relationships, Philosophy, values, ethics- that shape an organization's identity.
3) In other words, the internal environment is specific to each organisation. It is based on its
structure and business model and includes all stakeholders like top management, investors,
employees, board of directors, investors, etc.
4) Internal environment also involves understanding of the ethics, principles, work environment
employee friendliness, confidence of investors and other philosophical and cultural aspects of
business, which aim for the success of the organisation.
5) Thus, it is even more important to understand the internal environment from a strategic
analysis perspective.

II. Understanding Key Stakeholders

Who are Stakeholders and how do we identify them?
 A firm may be viewed as a coalition of stakeholders-all those individuals
and entities that have a stake in its success and can impact it as well.
 Thus, it may be reiterated that the stakeholders can be defined
as any person/group of individuals, internal or external, that has
an interest in, or impact on the business or corporate strategy
of the organisation.
 They have the power to influence the strategy or performance
of that organisation.
 It is important to identify the key stakeholders. Each stakeholder exerts a different level
of influence and can have differing levels of interest in the organisation.
 Example: an organisation involved in healthcare innovation needs to have a long- term
perspective about its return on investment (ROI) as there may be a long time between
investment into research timelines and a commercial outcome.

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 The expectations of key stakeholders can influence the organisation’s strategy; a clash of
objectives may have unfavourable consequences for the organisation.
Example of Key Stakeholders and their requirements for an OTT Platform
Stakeholders Requirements
Shareholders ♦ Innovation and continuous creative content
♦ Total shareholder return (RoI)
♦ Corporate social responsibility
♦ Top rankings of the organisation
♦ Highest market share
CEO and Board of Directors ♦ Prestige
♦ Market share
♦ Revenue and profit growth
♦ Market rankings
Major Vendors (Production Houses) ♦ Growth
♦ Stability of ordering
♦ Stable margins
Consumers (Viewers) ♦ New content – Innovation
♦ Better deals - Pricing Benefits
♦ Value for money
♦ Continuous supply
Employees ♦ Wages and benefits
♦ Stability of employment
♦ Pride of working for a reputed organisation

III. Mendelow's Matrix

The Mendelow Stakeholder matrix, also known as the Stakeholder Analysis matrix and Power-
Interest matrix, is a straightforward tool for effectively managing key stakeholders.

Project management involves managing stakeholders' competing interests, which can be

complex. Mendelow's Matrix can help manage stakeholders and ensure project success.

Mendelow suggests analysing stakeholder groups based on Power and Interest, recognizing
that some stakeholders hold more power and interest than others, affecting the
organization's strategy and resources.

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Developing a Grid of Stakeholders

Mendelow's Matrix, based on Power and Interest, identifies crucial stakeholders with high
power and interest, requiring close management and significant time and resource investment.
The CEO, with significant power and interest in the success of the work, should be kept
informed daily.
Research institutes seeking organizational data should be monitored with minimal effort and
time, as they have low power and interest.

Keep Satisfied Key Player

High

Consult often Manage Closely

Increase their interest Involve in decision making
Can be hindrance to new Engage regularly and build
ideas or strategic choices strong relationship
Power / Influence

Low Priority Keep Informed

Monitor only, no engagement Utilise the high interest by
General occasional engaging in decisions Consult in
communication their areas of expertise and
interest

Low Interest in the Organisation High

In the above figure, we see categorisation of stakeholders into four groups by

Mendelow's;
Keep Satisfied High power, less interested people - Organisation should
Stakeholders put in enough work with these people to keep them satisfied with their
intended information on a regular basis. For example, banks, government,
customers, etc.
Key Players High power, highly interested people - Organisation's aim should be to
Stakeholders fully engage this group of stakeholders, making the greatest efforts to
satisfy them, take their advice, build actions and keep them informed with
all information on a regular basis. For example, Shareholders, CEO, Board
of Directors, etc.
Low Priority Low power, less interested people - Organisation should only monitor
Stakeholders them with no actions to satisfy their expectations. Strategically, minimal

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efforts should be spent on this group of stakeholders while keeping an eye

to check if their levels of interest or power change.
For example, business magazines, media houses, etc.
Keep Informed Low power, highly interested people - Organisation should adequately
Stakeholders inform this group of people and communicate with them to ensure that no
major issues arise. This audiences can also help with real time feedbacks
and areas of improvement for an organisation.
For example, employees, vendors, suppliers, legal experts, etc.
An important thing that strategists should be aware of, is the importance to remember that
environment is highly dynamic and certain things might happen that can cause stakeholders to
suddenly move between quadrants.

IV. Strategic Drivers

Internal analysis is crucial for evaluating a business's current
performance, with strategic drivers focusing on what sets
an organization apart from its competitors.
The analysis of key markets, customers, products/services,
delivery channels, and competitive advantage of
an organization involves interlinked components such
as markets, products/services, and key customers.
Assessing a business's performance is subjective and influenced by management metrics and
business methods. Key strategic drivers include profit, purpose, and other metrics.
 industry and markets
 customers
 products/services
 channels

Industry And Markets

In terms of the internal environment, it is very important for an organisation to understand
it's relative position in the industry and in the market in which it operates.

There are many ways to do this but require analysis and

understanding of the environment. Similar companies are
grouped together into industries.

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Example, Maruti, Mahindra, Tata Motors, TVS, Bajaj Auto, are all selling automotives as their
primary product and thus categorised into Automotive Industry.

Is market the same for all businesses?

Market refers to all the buyers and sellers of a particular product/service and so it would be
incorrect to say that market is the same for all businesses. Each business has its own set of
customers i.e., market and more so, each product within a business has its own market.
Example, for a FMCG brand selling Shampoos, Dairy Products, Flours, Washing Powder, etc.
each product line will have a separate market to cater to and therefore build strategies
specific to the market of concern.

Analysing Industry and Markets

1) Industry and market analysis is extremely important to
identify one's position as compared to the competitors, who
can be of equal size and value, or bigger in size and value or
even smaller and newer. A tool used for this is called –
Strategic Group Mapping.

2) A strategic group consists of those rival firms which have similar competitive approaches
and positions in the market.

3) Companies in the same strategic group can resemble one another in any of the several ways:
a) They may have comparable product-line breadth,
b) Sell in the same price/quality range,
c) Emphasize the same distribution channels,
d) Use essentially the same product attributes to appeal to similar types of buyers,
Depend on
identical technological approaches, or
e) Offer buyers similar services and technical assistance.

4) An industry contains only one strategic group when all sellers pursue essentially identical
strategies and have comparable market positions.

5) At the other extreme, there are as many strategic groups as there are competitors when
each rival pursues a distinctively different competitive approach and occupies a substantially
different competitive position in the marketplace.

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The procedure for constructing a strategic group map and deciding which firms belong in
which strategic group is straightforward:
 Identify the competitive characteristics that differentiate firms in the industry typical
variables are price/quality range (high, medium, low); geographic coverage (local, regional,
national, global); degree of vertical integration (none, partial, full); product-line breadth
(wide, narrow); use of distribution channels (one, some, all); and degree of service offered
(no- frills, limited, full)
 Plot the firms on a two-variable map using pairs of these differentiating characteristics.
 Assign firms that fall in about the same strategy space to the same strategic group.
 Draw circles around each strategic group making the circles proportional to the size of the
group’s respective share of total industry sales revenues.

Strategic Group Mapping

ABC
GHI
Reputation amongst

DEF
PQR

XYZ

Few Ranges of products Many

Customers
Different customers may have different needs and require different
sales models or distribution channels.

As customers are often responsible for the generation of profits obtained

by an organisation, it is important to be able to collect and display data in
order to show customer trends and profitability. Issues with customers can be
identified, and target areas for growth can be pursued based on the findings.

Another interesting concept is the difference between Customer and

Consumer - while a customer is the one buys a product/service, the consumer
is the one who finally uses/consumes the bought product or service.

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Example: A parent buying stationery products for their kids might be the customers, but
consumers of stationery are the kids who would actually use it.

Thus, understanding both is important for the marketers. From a pricing perspective - the
customer is of more importance and from value creation and design/usability, consumer needs
to be the kept at the centre of decision making.

Customer versus Consumer

A simple bifurcation yet extremely important for strategy build up. Consumers are the ones
who finally use a product/service, while customers are the buyers of that product. A customer
can be a consumer and vice versa. But for strategy teams especially marketing teams it is
important to understand the customer and consumer separately. For example, baby diapers
are bought by parents (customers) who are willing to pay higher price for higher quality, while
the real consumers are the babies, who are more concerned about the comfort and easiness
of the diaper. If babies do not accept the product i.e., if consumers aren't satisfied, it is
difficult to retain the buyer i.e., customers as well.

Product/Services
Products and services are closely linked and interrelated
with the markets that the organisation wants to serve.
It attempts to answer the general question: What business
are we in and what should be done to win over competition in each product/service we serve.
Product stands for the combination of "goods-and -services" that the company offers to the
target market.
Strategies are needed for managing existing product over time, adding new ones and
dropping failed products. Strategic decisions must also be made regarding branding,
packaging and other product features such as warranties.
For a new product, pricing strategies for entering a market need to be designed and for
that matter at least three objectives must be kept in mind:
 Have customer-centric approach while making a product.
 Produce sufficient returns through a reasonable margin over cost.
 Increasing market share.
Products and services need heavy investment in reaching out to customers. Over the years,
a number of marketing strategies have been evolved, which are given to handle marketing
strategically and fight the competition in the market.

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Social It refers to the design, implementation, and control of programs seeking to

Marketing increase the acceptability of a social ideas, cause, or practice among a target
group to bring in a social change.
Augmented This type of marketing includes additional customer services and benefits
Marketing that a product can offer besides the core and actual product that is being
offered.
Direct Marketing through various advertising media that interact directly with
Marketing consumers, generally calling for the consumer to make a direct response.
Direct marketing includes catalogue selling, e-mail, telecomputing. electronic
marketing, shopping, and TV shopping.
Relationship The process of creating, maintaining, and enhancing strong, value- laden
Marketing relationships with customers and other stakeholders.
Example: Airlines offer special lounges at major airports for frequent
flyers. Thus, providing special benefits to select customers to strengthen
bonds. It can go a long way in building relationships.
Services It is applying the concepts, tools, and techniques, of marketing to services.
Marketing Services is any activity or benefit that one party can offer to another that
is essentially intangible. This marketing requires different marketing
strategies since it has peculiar characteristics of its own such as
inseparability, variability etc.
Person People can also be marketed. Person marketing consists of activities
Marketing undertaken to create, maintain or change attitudes and behaviour towards
particular person. For example, politicians, sports stars, film stars, etc. Le.,
market themselves to get votes, or to promote their careers.
Organization It consists of activities undertaken to create, maintain, or change attitudes
Marketing and behaviour of target audiences towards an organization. Both profit and
non-profit organizations practice organization marketing.
Place Place marketing involves activities undertaken to create, maintain, or change
Marketing attitudes and behaviour towards particular places say, marketing of business
sites, tourism marketing.
Enlightened It is a marketing philosophy holding that a company's marketing should
Marketing support the best long-run performance of the marketing system that is
beyond the prevailing mindset, its five principles include customer-oriented
marketing, innovative marketing, value marketing, sense-of-mission
marketing, and societal marketing.

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Differential It is a market-coverage strategy in which a firm decides to target several

Marketing market segments and designs separate offer for each. For example,
Hindustan Unilever Limited has Lifebuoy, Lux and Rexona in popular segment
and Dove and Pears in premium segment.
Synchro- When the demand for a product is irregular due to season, some parts of
marketing the day, or on hour basis, causing idle capacity or overworked capacities,
synchro-marketing can be used to find ways to alter the pattern of demand
through flexible pricing, promotion, and other incentives.
Example: products such as movie tickets can be sold at lower price over
weekdays to generate demand.
Concentrated It is a market-coverage strategy in which a firm goes after a large share of
Marketing one or few sub-markets. It can also take the form of Niche marketing.
Demarketing It includes marketing strategies to reduce demand temporarily or
permanently. The aim is not to destroy demand, but only to reduce or shift
it. This happens when there is overfull demand.
Example, buses are overloaded in the morning and evening, roads are busy
for most of times, zoological parks are over-crowded on Saturdays, Sundays
and holidays. Here demarketing can be applied to regulate demand.

Channels
Channels are the distribution systems used by organizations to distribute their products or
services, as illustrated by the examples provided by various companies.
 Lakme - sells its products via retail stores, intermediary stores (like Nykaa, Westside,
Reliance Trends), as well as online mode like amazon, flipkart, nykaa online and its own
website.
 Boat Headphones - only online via e-commerce platforms like flipkart and amazon
 Coca Cola - retail shops across the nation, in each district, each town as well as online
mode via dunzo, blinkit, etc.
The sales channel These are the intermediaries involved in selling the product through
each channel and ultimately to the end user. The key question is:
Who needs to sell to whom for your product to be sold to your end
user?
The product channel The product channel focuses on the series of intermediaries who
physically handle the product on its path from its producer to the end
user. This is true of Australia Post, who delivers and distributes many

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online purchases between the seller and purchaser when using eBay
and other online stores.
The service channel The service channel refers to the entities that provide necessary
services to support the product, as it moves through the sales channel
and after purchase by the end user. The service channel is an
important consideration for products that are complex in terms of
installation or customer assistance.
Channel analysis is crucial for businesses expanding beyond current markets and geographies,
as it helps develop or leverage existing channels to reach new customers and products.
For example: Healthcare brands should focus on offline business to reach elderly customers,
as most are not active on smartphones.
New drink brands must strategically place their products across various channels, including
stores, online campaigns, and social media, to attract customers and align with internal
strategic alignment.

V. Role Of Resources and Capabilities

Building Core Competency
 C.K. Prahalad and Gary Hamel: have advocated a concept of core
competency, which is a widely used concept in management theories.
 They defined core competency as the collective learning in the
organization, especially coordinating diverse production skills and
integrating multiple streams of technologies.
 Competency is defined as a combination of skills and techniques
rather than individual skill or separate technique.
 It is characteristic to have a combination of skills and techniques,
which makes the whole organization utilize these several separate individual capabilities.
 Core competencies cannot be built on one capability or single technological know-how,
instead, it has to be the integration of many resources.
 According to C.K. Prahalad and Gary Hamel, major core competencies are identified in three
areas –
 Competitor differentiation,
 Customer value, and
 Application to other markets
Competitor ►The company can consider having a core competence if the
Differentiation competence is unique and it is difficult for competitors to imitate.
►Provide a company an edge compared to competitors.

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►Company has to keep on improving these skills in order to sustain

its competitive position.
►Competence does not necessarily have to exist within one company
in order to define as core competence.
►Example, it is quite difficult to imitate patented innovation, like
Tesla has been winning over competition in electric vehicles.
Customer value ►When purchasing a product or service it has to deliver a
fundamental benefit for the end customer in order to be a core
competence.
►The essence is that the consumer should value the differentiation
offered. Without it, the core competency does not make sense.
Application to other ►Core competence must be applicable to the whole organization; it
markets cannot be only one particular skill or specified area of expertise.
►Although some special capability would be essential or crucial for
the success of business activity, it will not be considered as core
competence if it is not fundamental from the whole organization's
point
of view.
 If the three above-mentioned conditions are met, then the company can regard it
competence as core competency.
 Core competencies are often visible in the form of organizational functions.
 A core competency for a firm is whatever it does best.
 Core competencies are created by superior integration of technological, physical and
human resources.
 Core Competence-based diversification reduces risk and investment and increases the
opportunities for transferring learning and best practice across business units.

Criteria For Building a Core Competencies (CC)?

Four specific criteria of sustainable competitive advantage that firms can use to determine
those capabilities that are core competencies.

Costly to Non-
Valuable Rare
imitate substitutable

Valuable Valuable Capabilities in Finance

• Allow firms to exploit opportunities or avert threats.

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• Firms create value for customers by effectively using capabilities.

• Finance companies build valuable competence in financial services.
• Successful financial services require right people in right jobs.
• Human capital is crucial for customer value creation.
Rare Core Competencies and Competitive Advantage
• Rare, valuable capabilities of firms.
• Competitors' capabilities unlikely to provide competitive advantage.
• Competitive advantage arises from unique capabilities.
Costly to imitate Intel's First-Mover Advantage
• Rare fast R&D cycle time capability.
• Developed SRAM and DRAM integrated circuit technology and
microprocessors ahead of competitors.
• Product imitation was possible, but R&D cycle time capability was more
challenging.
Non- Non-Substitutable Capabilities Overview
Substitutable • Capabilities without strategic equivalents.
• Source of competitive advantage if no strategically equivalent
resources are rare or imitable.
Example:
Tata's Low-Cost Strategy: A Competitive Advantage
• Firms struggle to replicate Tata's low-cost strategy
due to unique culture and top talent.
• Culture and human capital work together for strategic advantage.
• Strategic value of capabilities increases as they become harder to
substitute.
Apple's Successful iOS Model
• Competitors aware of Apple's success.
• No competitor can imitate Apple's capabilities.
• Apple's capabilities protected by copyrights.
Core competencies are valuable, rare, costly to imitate, and non-
substitutable capabilities that provide a firm a competitive advantage
by allowing it to exploit external opportunities.

Zero Customer Complaints!

Airtel has its marketing campaign that talks about - Zero Customer Complaints. This is about
creating a core competency of great customer service.

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VI. Combining External and Internal Analysis (SWOT Analysis)

►SWOT analysis is the analysis of a business's strengths, weaknesses, opportunities and
threats.
►The primary objective of a SWOT analysis is to help organizations develop a full awareness
of all the factors (external as well as internal), involved in making a business decision.
►SWOT analysis shall be implemented before all company actions, whether it is exploring new
initiatives, revamping internal policies, considering opportunities to grow or alter a plan midway.
One shall also us SWOT analysis to discover recommendations and strategies, with a
focus on leveraging strengths and opportunities to overcome weaknesses and threats.
►Since its creation, SWOT has been the most widely used tools for business owners to grow
their companies. Sometimes it's wise to perform SWOT analysis just to check on the current
landscape of your business to improve business operations as needed. The analysis can show
areas where an organization is performing well, as well as areas that need improvement.

SWOT Analysis

SWOT Analysis Example

Let us understand with an example of a law firm - what could its SWOT analysis help
understand about its business.
STRENGTH WEAKNESS
a) Multiple Partners with varied expertise a) Run by old methods
b) Long Term contractual service b) No automation of work and documentation
agreements c) Not very employee friendly culture

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c) 70 years of brand value

d) Services spread across 20 states of India
e) 400+ employee strength to deliver work
OPPORTUNITY THREAT
a) Automation driven advancement. a) Online players entering market.
b) Startups can be supported with b) AI based solutions and applications.
experienced partners. c) Price point of online being very
c) Investment in technology can multiply competitive
returns. d) Speed of work becoming faster by the
day.

Benefits of SWOT
a) The benefit of this analysis is that it identifies the complex issues for an organisation and
puts them into a simple framework.
b) While on the other hand, one of the major criticisms of this tool is that it does not generally
provide for evaluation of strengths, weaknesses, opportunities and threats in the competitive
context.
c) Therefore, an organisation while using this tool, SWOT analysis, should consider relative
competitors, and external factors affecting the organisation. Although a simple tool, it is a
useful starting point for analysis.

SWOT Analysis for Internal or External Environment?

SWOT stands for Strengths, Weaknesses, Opportunities and Threats. Internal analysis is
more focused on understanding the existing structure and competencies of the business, thus
highlighting the Strengths and Weaknesses, while External Analysis is about identifying and
preparing for uncontrollable which can either be Opportunities or threats. Therefore, SWOT
Analysis is a tool which is used for both Internal and External Analysis.

VI. Competitive Michael Porter's Generic Strategies

Why do some companies succeed while others fail?

Why did Hindustan Motors do so well for several decades?

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

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

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 Strategic management focuses on developing competencies for improved performance and

a competitive advantage, leveraging unique features and products perceived as superior by
the target market.

Jack Welch: "If you don't have a competitive advantage, don't compete’’
A competitive advantage is achieved when a company's profitability
surpasses industry averages, and its value creation strategy is successful, preventing other
firms from attempting to replicate or imitate it.

VII. Sustainability of Competitive Advantage

The sustainability of competitive advantage and a firm's ability to earn profits from its
competitive advantage depends upon four major characteristics of resources and capabilities:
Durability A competitive advantage's duration depends on a firm's resource and
capability deterioration rate, with fast product innovation potentially
making patents obsolete, while consumer brand names have durable
appeal.
Transferability Competitive advantage is eroded by rivals, requiring access to necessary
resources and capabilities. The easier transfer of resources, the less
sustainable the advantage.
Imitability Imitability is determined by how easily competitors can build resources
and capabilities, such as in financial services, which can be easily copied
due to the complexity of organizational routines.
Appropriability Appropriability refers to a firm's owners' ability to appropriate returns
on its resources, ensuring sustainable advantage without remuneration to
invested capital.

VIII. Michael Porter's Generic Strategies

►According to Porter, strategies allow organizations to gain competitive advantage from
three different bases cost leadership, differentiation, and focus. Porter called these base
generic strategies.
►These strategies have been termed generic, because they can be pursued by any type or
size of business firm and even by not-for-profit organisations.
Differentiation is a strategy
Cost leadership emphasizes aimed at producing products Focus means producing
on producing standardized and services considered products and services
products at a very low per- unique industry-wide and that fulfil the needs of
unit cost for consumers who directed at consumers who small groups of consumers
are price-sensitive are relatively price- with very specific taste.
insensitive.

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Broad Target

Competitive Scope
Cost
Differentiation
Leadership

Focussed
Focussed
Cost
Differentiation
Leadership
Narrow Target

Low-Cost Differentiated
products/services products/ services
Competitive Advantage

►Porter stresses the need for strategists to perform cost-benefit analysis to evaluate
“sharing opportunities” among the firm’s existing and potential business units.
►In addition to prompting sharing, Porter stresses the need for firms to “transfer” skills and
expertise among autonomous business units effectively in order to gain competitive advantage.

IX. Cost Leadership Strategy

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

It requires vigorous pursuit of cost reduction in the areas of

 Procurement,
 Production,
 Storage & distribution of product or service and
 Also, economies in overhead costs.
Because of its lower costs, the cost leader is able to charge a lower price for its products
than most of its competitors and still earn satisfactory profits.

Example, McDonald’s fast-food restaurants have successfully followed low-cost leadership

strategy. Decathlon Group’s mega sports stores have been following low-cost leadership
strategy to gain international recognition and also beat competition.

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A primary reason for pursuing forward, backward, and horizontal integration strategies is
to gain cost leadership benefits.
Generally, cost leadership must be pursued in conjunction with differentiation.
Internal strategy of sharing resources to build a competitive advantage is called synergy
benefit.
Striving to be a low-cost producer in an industry can especially be effective,
• when the market is composed of many price-sensitive buyers and
• when there are few ways to achieve product differentiation.
When buyers do not care much about differences from brand to brand, or when there are
a large number of buyers with significant bargaining power.
Some risks of pursuing cost leadership are;

that technological
breakthroughs in the industry
that competitors may imitate may make the strategy
the strategy, therefore driving ineffective; or that buyer
overall industry profits down; interests may swing to other
differentiating features besides
price.

Achieving Cost Leadership Strategy

2. Optimum 3. Achieving
1. Prompt
utilization of the economies of scale;
forecasting of
resources to thus, lower per unit
demand of a
achieve cost cost of
product or service.
advantages. product/service.

4. Standardisation
5. Invest in cost
6. Resistance to of products for
saving technologies
differentiation mass production to
and using advance
till it becomes yield lower cost per
technology for smart
essential. unit. (Example of
efficient working.
McDonald’s)

Advantages & Disadvantages of Cost Leadership Strategy

Advantages- A cost leadership strategy may Disadvantages
help to remain profitable even with: rivalry,

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new entrants suppliers' power, substitute

products, and buyers' power.
a) Rivalry - Competitors are likely to avoid a a) Cost advantage may not be remaining for
price war, since the low-cost firm will long as competitors may also follow cost
continue to earn profits after competitors reduction technique.
compete away their profits. b) Cost leadership can succeed only if the
b) Buyers - Powerful buyers/customers firm can achieve higher sales volume.
would not be able to exploit the cost leader c) Cost leaders tend to keep their costs low
firm and will continue to buy its product. by minimizing advertising, market research,
c) Suppliers - Cost leaders are able to and research and development, but this
absorb greater price increases before it approach can prove to be expensive in the
must raise price to customers. long run.
d) Entrants - Low-cost leaders create d) Technology advancement is a great threat
barriers to market entry through its to the cost leader.
continuous focus
on efficiency and reducing costs.
e) Substitutes - Low-cost leaders are more
likely to lower costs to induce customers to
stay with their product, invest to develop
substitutes, purchase patents.

Differentiation Strategy
1) This "strategy is aimed at broad mass market and involves the creation of a product or
service that is perceived by the customers as unique. The uniqueness
can be associated with product design, brand image, features,
technology, dealer network or. customer service. Because of
differentiation, the business can charge a premium for its product.
For example, Domino's Pizza has been offering home delivery
within 30 minutes or the order is free, is a unique selling point
that differentiates if from its rivals.

2) A successful differentiation strategy allows a firm to charge a higher price for its product
and to gain customer loyalty because consumers may become strongly attached to the
differentiation features.

3) Special features that differentiate one's product can include superior service, spare parts

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availability, engineering de- sign, product performance, useful life, gas mileage, or ease of
use.

4) A differentiation strategy should be pursued only after a careful study of buyers' needs
and preferences to determine the feasibility of incorporating one or more differentiating
features into a unique product that features the desired attributes.

5) Differentiation does not guarantee competitive advantage, especially if standard products

sufficiently meet customer needs or if rapid imitation by competitors is possible.

6) Durable products protected by barriers to quick imitation by competitors are better.

Successful differentiation can mean greater product flexibility, greater compatibility, lower
costs, improved service, less maintenance, greater convenience, or more features.

7) Product development is an example of a strategy that offers the advantages of

differentiation.
8) Risks:
a) Unique product may not be valued highly enough by customers to justify the higher price.
In this case, a cost leadership strategy can easily defeat a differentiation strategy.
b) Competitors may develop ways to copy the differentiating features quickly. Firms must find
durable sources of uniqueness that cannot be imitated quickly or cheaply by rival firms.
For Example, Amazon Prime offers deliver within two hours. This is quite difficult to imitate
by its rivals, and thus this differentiating factor helps it to lead the market.

Basis of Differentiation:
There are several bases of differentiation: Product, Pricing and Organization.
a) Product: Innovative products that meet customer needs can be an area where a
company has an advantage over competitors. The pursuit of new product
offerings can be costly – research and development, as well as production
and marketing costs can all add to the cost of production and distribution.
The payoff, however, can be great as customer's flock to be among the
first to have the new product.
For example, Apple iPhone, has invested huge amounts of money in R&D,
and the customers' value that. They want to be among the first ones to
try the new offerings from the company.

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b) Pricing: It can fluctuate based on its supply and demand, and also be influence by
the customer's ideal value for the product. Companies that differentiate
based on product price can either determine to offer the lowest price or
can attempt to establish superiority through higher prices.
For example, Apple iPhone dominates the smart phone segment by
charging higher prices for its products.
c) Organisation: Organisational differentiation is yet another form of differentiation.
Maximizing the power of a brand or using the specific advantages that an
organization possesses can be instrumental to a company's success.
Location advantage, name recognition and customer loyalty can all provide
additional ways for a company differentiate itself from the competition.
For example, Apple has been building customer loyalty since years and
has a fanbase of consumers that are called "Apple Fanboys/Fangirls"

Achieving Differentiation Strategy:

To achieve differentiation, following strategies could be adopted by an organization to
incorporate:
a) Offer utility for the customers and match the products with their tastes
and preferences.

b) Elevate/Improve the performance of the product.

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

d) Rapid product innovation.

e) Taking steps for enhancing image and its brand value.

f) Fixing product prices based on the unique features of the product and buying
capacity of the customer.

Advantages of Differentiation Strategy:

A differentiation strategy may help to remain profitable even with: rivalry, new entrants,
suppliers' power, substitute products, and buyers' power.

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a) Rivalry - Brand loyalty acts as a safeguard against competitors. It means that customers
will be less sensitive to price increases, as long as the firm can satisfy the needs of its
customers.
b) Buyers - They do not negotiate for price as they get special features and also they have
fewer options in the market.
c) Suppliers - Because differentiators charge a premium price, they can afford to absorb
higher costs of supplies and customers are willing to pay extra too.
d) Entrants - Innovative features are an expensive offer. So, new entrants generally avoid
these features because it is tough for them to provide the same product with special features
at a comparable price.
e) Substitutes - Substitute products can't replace differentiated products which have high
brand value and enjoy customer loyalty.

Disadvantages of Differentiation Strategy:

a) In long term, uniqueness is difficult to sustain.
b) Charging too high a price for differentiated features may cause the customer to switch-
off to another alternative. As we see a shift of iPhone users to other android flagship smart
phones.
c) Differentiation fails to work if its basis is something that is not valued by the customers.
Home
delivery of packed snacks in 30 minutes would not even be a differentiator as the consumer
wouldn't value such an offer.

X. Focus Strategies
 A successful focus strategy depends on an industry segment that is
of sufficient size, has good growth potential, and is not crucial to the
success of other major competitors.
 Focus strategies are most effective when consumers have
distinctive preferences or requirements, and when the rival firms are
not attempting to specialize in the same target segment.
 Risks of pursuing a focus strategy include the possibility of numerous
competitors recognizing the successful focus strategy and imitating it or
that consumer preferences may drift towards the product attributes desired by the market
as a whole.
 An organization using a focus strategy may concentrate on a particular group of customers,
geographic markets, or on particular product-line segments in order to serve a well-defined

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but narrow market better than competitors who serve a broader market. Example, Ferrari
sports cars.
Focused cost leadership Focused differentiation
a) A focused cost leadership strategy a) A focused differentiation strategy
requires competing based on price to target requires offering unique features that fulfill
a narrow the demands of a narrow market.
market.
b) A firm that follows this strategy does not b) As with a focused low-cost strategy,
necessarily charge the lowest prices in the narrow markets are defined in different
industry. ways in different
settings.
c) Instead, it charges low prices relative to c) Some firms using a focused
other firms that compete within the target differentiation strategy concentrate their
market. efforts on a particular sales channel, such as
selling over the internet only.
d) Firms that compete based on price and d) Others target particular demographic
target a narrow market are following a groups.
focused cost leadership strategy.
e) Firms that compete based on uniqueness
and target a narrow market are following a
focused differentiations strategy.
For example, Rolls-Royce sells limited
number of high-end, custom-built cars.

Achieving Focused Strategy

Advantages Disadvantages
a) Premium prices can be charged by the a) The firms lacking in distinctive
organisations for their focused product/ competencies may not be able to pursue
services. focus strategy.
b) Due to the tremendous expertise about the b) Due to the limited demand of product /
goods and services that organisations services, costs are high which can cause
following focus strategy offer, rivals and new problems.
entrants may find it difficult to compete. c) In long run, the niche could disappear or
be taken over by larger competitors by

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acquiring the same distinctive

competencies.

XI. Best-Cost Provider Strategy

1) The new model of best cost provider strategy is a further
development of above three generic strategies. It is directed
towards giving customers more value for the money by emphasizing
both low cost and upscale differences.
2) The objective is to keep costs and prices lower than those of
other sellers of comparable products.
3) Best-cost provider strategy involves providing customers more
value for the money by emphasizing low cost and better-quality difference.
It can be done:
a) Through offering products at lower price than what is being offered by rivals for products
with comparable quality and features or
b) Charging similar price as by the rivals for products with much higher quality and better
features.
For example, android flagship phones from OnePlus, Xiaomi, Oppo, Vivo, etc., are all rooting
for giving better quality at lowest prices to the customers. They are following the best-cost
provider strategy to penetrate market.

Lower Cost Differentiation

Broad
A Broad Cross- Overall Low Cost Differentiation
Section of Buyers Leadership Strategy Strategy Market Target

Best-Cost Provider
Strategy

A Narrower Buyer Focused Low cost Focused

Segment (or Strategy Differentiation
Strategy Company’s
Market Niche)

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Multiple Choice Questions

Study Material Study Material

[Link] goal of SWOT analysis is to [Link] analysis is an evaluation of the
________ the organization's opportunities organization's ________ strengths and
and strengths while ________ its threats weaknesses and its ________
and ________ its weaknesses. opportunities and threats.
(a) avoid; neutralizing; correcting (a) external; internal
(b) exploit; neutralizing; correcting (b) internal; internal
(c) avoid; capitalizing; neutralizing (c) external; external
(d) exploit; avoiding; ignoring (d) internal; external
Study Material Study Material
[Link] opportunities and threats are 4. The sustainability of competitive
usually: advantage and a firm’s ability to earn
(a) the minor cause of organizational demise profits from its competitive advantage
or success depends upon:
(b) least important for CEOs and the board (a) Durability, reliability, transferability,
of directors approximately
(c) not as important as internal strengths (b) Appropriability, durability,
and weaknesses transferability, imitability
(d) largely uncontrollable activities outside (c) Transferability, imitability, reliability,
the organization approximately
(d) Imitability, durability, reliability,
appropriability
Study Material Study Material/ Mtp Nov 2020/Rtp May
5. Internal __________ are activities in 2020
an organization that are performed 6. ‘Strategic group mapping’ helps in-
especially well. (a) Identifying the strongest rival companies
(a) Opportunities (b) Identifying weakest rival companies
(b) Competencies (c) Identifying weakest and strongest rival
(c) Strengths companies
(d) Management (d) None of the above
Study Material, Mtp Nov 2019 Study Material, Rtp May 2020

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7. In Michael Porter’s generic strategy 8. Differentiation Strategy can be

_____________ emphasizes producing achieved by following measures:
standardized products at a very low per 1. Match products with tastes and
unit-cost for consumers who are price preferences of customers.
sensitive. 2. Elevate the performance of the
(a) Cheap leadership product.
(b) Inferior product leadership 3. Rapid product innovation
(c) Cost leadership Which of the above is true:
(d) Cost benefit (a) (1) and (2)
(b) (1) and (3)
(c) (2) and (3)
(d) (1), (2) and (3)
Study Material Study Material, Mtp2 May 2021
9. What are the three different bases 10. A firm successfully implementing a
given by Michael Porter’s Generic differentiation strategy would expect:
Strategies to gain competitive advantage? (a) Customers to be sensitive to price
(a) differentiation, integration and increases.
compensation (b) To charge premium prices.
(b) integration, focus and differentiation (c) Customers to perceive the product as
(c) compensation, integration and focus standard.
(d) cost leadership, differentiation and focus (d) To automatically have high levels of power
over suppliers
Mtp2 May 2019 Mtp Nov 2019
11.A core competence is all except? [Link] that a firm does especially
a. Valuable well compared to rival firms is referred to
b. Rare as _____.
c. Impossible to imitate (a) Competitive advantage
d. non-substitutable (b) Comparative advantage
(c) Opportunity cost
(d) Sustainable advantage
Mtp2 Nov 2021 Mtp2 May 2022
[Link] and Sales of Hindustan [Link], an organic farming expert,
Unilever Limited and lowering of operating was consulting a group of farmers to build
cost by Walmart are examples of what? a sustainable brand of their corn produce.
(a) Competitive Advantage He suggested following the strategy of the

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(b) Core Competency biggest player in this business. Which of

(c) Strategic Planning the
(d) Key Performance Indicators (KPIs) following can be used to identify such a
player?
(a) BCG Matrix
(b) ADL Matrix
(c) Dominant Force Analysis of the Industry
(d) Strategic Group Mapping
Rtp May 2019 Rtp May 2019
15.A __________ consists of those rival [Link] to C.K. Prahalad and Gary
firms which have similar competitive Hamel, major core competencies are
approaches and positions in the market. identified in three areas -____, _____,
(a) BCG Matrix. and application to other markets.
(b) Strategic group. (a) Competitor differentiation, customer
(c) Strategy Map. value.
(d) Industry (b) Competitor differentiation, focus.
(c) Cost leadership, differentiation.
(d) Profits, growth.
Rtp Nov 2019 Rtp Nov 2022
[Link] of the following is not true for [Link] Mart an online marketplace
core competency: where people from all over Rajasthan come
a. It distinguishes a company competitively. and sell their goods is charging zero
b. It is a source of competitive advantage. commission for listing goods but they take
c. It is an individual skill and separate 1% of the sales per month from the seller.
technique. It is
d. It is often visible in the form of defined as?
organisational function (a) Business Intent
(b) Business Idea
(c) Business Definition
(d) Business Model
Mtp2 May 2019 Mtp May 2020
19. Michael Porter Generic strategies to [Link], a manufacturer of private
gain competitive advantage include all helicopters, offers unique features that
except: fulfill the demands of a narrow market. It
a. Cost leadership competes in the market based on its

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b. Differentiation uniqueness and custom-oriented private

c. Focus helicopters. Perscopter provides a limited
d. Revenue generation number of high-end helicopters with
ultimate features. Which business
strategy is being followed by Perscopter?
(a) Differentiation
(b) Focused differentiation
(c) Cost leadership
(d) Focused cost leadership
Mtp1 Nov 2021 Mtp1 May 2022
21. DMart sells fast moving consumer 22. Best Cost provider strategies
goods at wholesale prices to retail (a) Seek to attract buyers on the basis of
customers, is this a strategy of? charging low price for low quality
(a) Market Penetration (b) Aim at giving customers less value for
(b) Cost Differentiation more money
(c) Cost Leadership (c) Seek to attract buyers on the basis of
(d) Market Development charging high price for high quality
(d) Aim to giving customers low cost and
better-quality
Rtp Nov 2019 Rtp Nov 2019
23. Best-cost provider strategy is related 24. Porter’ cost leadership is a
to providing customers more value for ____________ strategy
money by: A. Functional level
A. Highlighting low cost and low-quality B. Business level
difference. C. Corporate level
B. Emphasizing low cost and better-quality D. Implementation
difference.
C. Producing high cost and low-quality
differences.
D. Managing high cost and low-quality
difference
Rtp May 2020 Rtp May 2021
25. Competitive rivalry has the most 26. Sanjivni Pharmaceuticals Limited
effect on the firm's ____ strategies than manufactures a cough syrup Zenus. It has
the firm's other strategies. modified Zenus syrup, claiming that the

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(a) Business level Zenus cough syrup is sugar-free, and the

(b) Corporate level consumer will not feel drowsiness after
(c) Functional level consuming this cough syrup. Consumers
(d) All of these found this product to be unique. The sales
of Zenus cough syrup have increased as
expected. The price of this sugar-free
syrup is higher by 20% than the earlier
syrup. Identify the strategy adopted by
Sanjivni Pharmaceuticals Limited.
(a) Focus strategy
(b) Best cost provider strategy
(c) Differentiation strategy
(d) Cost leadership strategy
Rtp Nov 2021 Rtp May 2022
27. Trekking Poles is a small company 28. Maadhyam, a hearing aid manufacturer
based in the Himalayan ranges in India. It recently introduced an AI based
is known in the region for its hill walking management tool that has the capabilities
sticks. Trekking Poles sell specialist walking of managing teams across functions. What
equipment in their small shop at the foot could be their new organizational structure
of the mountains. They do not have a post this implementation?
website yet are able to sell their products (a) Divisional Structure
at premium prices. Which of the following (b) Matrix Structure
one of Porter’s generic strategies best fits (c) Hourglass Structure
Trekking Poles? (d) Network Structure
(a) Cost leadership
(b) Differentiation
(c) Focused cost leadership
(d) Focused differentiation
Mtp Nov 2019 Mtp May 2020
29. A campaign advocating the message of 30. The process of creating, maintaining,
‘save water’ is: and enhancing strong, value-laden
(a) Services Marketing relationships with customers and other
(b) Holistic marketing stakeholder is:
(c) Social Marketing (a) Social marketing
(d) Direct Marketing (b) Augmented marketing

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(c) Direct marketing

(d) Relationship marketing
Rtp May 2020 Rtp May 2022
31. The marketing strategy which is used 32. Airlines providing special lounge access
to reduce or shift the demand is: to loyal customers is a type of marketing?
(a) Enlightened Marketing (a) Augmented Marketing
(b) Synchro-Marketing (b) Direct Marketing
(c) Place Marketing (c) Relationship Marketing
(d) Demarketing (d) Services Marketing
33. Which of these refers to period over 34. How many strategic groups does an
which competitive advantage is sustained & industry contains when all sellers pursue
which depends on rate at which firm’s essentially identical strategies & have
resources? comparable market position?
a) Durability a) More than 2
b) Transferability b) Less than 10
c) Imitability c) Only One
d) Appropriability d) None of these
35. Which area of core competencies 36. Which strategies has its objective to
provide a company an edge compared to increase market share, even by foregoing
competitors & allows company to provide short-term earnings?
better to market with no fear that a) Build
competitor can imitate? b) Hold
a) Competitor differentiation c) Harvest
b) Customer Value d) Divest
c) Profitability of industry
d) Application to other market
37. Types of distribution channels used to 38. Which of these is meant that ability
access _____ . of rivals to attack position of competitive
a) System advantage relies on their gaining access to
b) Control necessary resources & capabilities?
c) Customer a) Durability
d) Process b) Transferability
c) Imitability
d) Appropriability

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39. Determine the flow of creating the 40 Which is not the characteristic of
competitive advantage. SWOT analysis?
i) Assign the firms, a) Provides Logical framework
ii) Plot firms on a two-variable map, b) Helps in crafting strategy
iii) Identify competitive characteristic, c) Present a cooperative account
(iv) Draw circle around each strategic d) Guides in strategy identification
group
a) (i),(iii),(ii),(iv)
b) (ii),(i),(iv),(iii)
c) (iii),(ii),(i),(iv)
d) (iv),(i),(ii),(iii)
41. Which criteria of core competency is 42. If you don’t have a competitive
related with the capabilities that allows advantage, don’t compete’, it is said by
firm to exploit opportunity or avert ___________ .
threats in its external environment? a) Igor H. Ansoff
a) Valuable b) Willium F. Gluek
b) Rare c) Jack Welch
c) Costly to Imitate d) Arthur D. Little
d) Non-substitutable
43. Which of these is a measurement 44. Which of the following is not the
through which value can be measured? characteristic of competitive advantage?
a) Price a) appropriability
b) Willing to pay b) Transferability
c) Cost c) Imitability
d) All the above d) Tractability
45. The concept of the core competency 46. __________ are capabilities that
was developed by __________ . serves as a source of competitive
a) H.N. Prashad & F.W. Taylor advantage for a firm over its rivals.
b) R.K. Narayan & Arthur D. Little a) Concurrent Filters
c) C.K. Prahalad & Gary Hamel b) Core competencies
d) Ansoff & Willium F. Gluek c) Driving Forces
d) Core Identity Forces
47. Capabilities that do not have strategic 48. Which of these is a unique feature of
equivalents are known as Capabilities. a company & its products that are
a) Non-Substitutable

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b) Valuable perceived by the target market as

c) Rare significant & superior to the competition?
d) Non-Imitable a) Strategic Leadership
b) Competitive Advantage
c) Strategic Intent
d) Competitive Landscape
49. Which of the following is unique 50. Resources are foundation of
feature of company & its products that are __________ & unique bundle of
perceived by target market? _________ generate competitive
a) Strategic Leadership advantage leading to wealth creation.
b) Competitive Advantage a) Resource, Plan
c) Strategic Intent b) Strategy, Resource
d) Globalization c) Policies, Procedure
d) Resources, Capabilities
51. ________ is defined as a combination 52. Firm is successful in achieving
of skills & techniques rather than individual __________ only after other firm’s effort
skill or separate technique. to duplicate or imitate it are failed.
a) Competency a) Strategic Leadership
b) Driving Force b) Competitive Advantage
c) Core Identity Force c) Strategic Intent
d) Concurrent Filter d) Competitive Landscape
53. Determine the flow of creating the 54. In industries where rate of
competitive advantage. _________ is fast, _______ are quite
i) Resources, ii) Competitive advantage, iii) likely to became obsolete.
capabilities a) Product Innovation, Product Patents
a) (i),(iii),(ii) b) Market Innovation, Firm’s Name
b) (ii),(i),(iii) c) Product Innovation, Firm’s Name
c) (iii),(ii),(i) d) Market Innovation, Product Patents
d) (i),(ii),(iii)
55. Which of these is useful analytical tool 56. Which is not the area identified in
for comparing market position of each firm major core competencies?
separately when an industry has so many a) Competitor differentiation
competitors that it is not practical to b) Customer Value
examine each of them? c) Profitability of industry
a) Strategic Group Mapping d) Application to other market

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b) Scenario Analysis
c) Strategic Core Analysis
d) PESTEL Analysis
[Link] strategy is not suggested by 58. Which strategies are the course of
Michael Porter? action adopted by organization to serve
a) Cost Leadership Strategy identified customer group & provide value
b) Focused Strategy to customer by satisfaction of their needs?
c) Differentiation Strategy a) Corporate Level Strategy
d) None of these b) Business Level Strategy
c) Functional Level Strategy
d) None of these
59. Which strategy aimed at producing 60. Which is not the risk of pursuing cost
products & services considered unique leadership strategy?
industrywide & directed at consumers who a) Competitors may imitate the strategy
are relatively price incentive? b) Technological breakthrough in industry
a) Cost Leadership c) Buyers interest may swing to
b) Differentiation differentiating feature
c) Focused strategy d) Higher prize may lead to less demand of
d) None of these product

Suggested Answer
Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10
b d d b c c c d d b
Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18 Q19 Q20
c a b d b a c d d b
Q21 Q22 Q23 Q24 Q25 Q26 Q27 Q28 Q29 Q30
c d b b a c d b c d
Q31 Q32 Q33 Q34 Q35 Q36 Q37 Q38 Q39 Q40
b c a c a a c b c b
Q41 Q42 Q43 Q44 Q45 Q46 Q47 Q48 Q49 Q50
a C b d c b a b b b
Q51 Q52 Q53 Q54 Q55 Q56 Q57 Q58 Q59 Q60
a b a a a c d b b d

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Chapter 4
Strategic Choices

I. Introduction
Strategies are formulated at different levels of an organization - corporate, business and
functional.

Strategy formulation involves well thought of decision making and

cover actions dealing with the objective of the firm, shareholders and
allocation of resources and coordination of strategies of various
business units for optimal performance.

Top management of the organization makes strategic decisions, which pan down for delegation
at middle management level and finally the functional level managers execute the same with
their teams.

II. Strategic Choices

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

William F Glueck and Lawrence R. Jauch discussed four generic

strategies including stability, growth, retrenchment and combination.

These strategies have also been called Grand Strategies / Directional Strategies by many
other authors.
Michael E. Porter suggested competitive strategies including Cost Leadership,
Differentiation, Focus Cost Leadership and Focus Differentiation which could be used by the
corporates for their different business units.

Functional Strategies are meant for strategic management of distinct functions such as
Marketing, Financial, Human Resource, Logistics, Production etc.
Business conglomerates having multiple product folios formulate strategies at different
levels, viz.,

Corporate Business Unit Functional

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The corporate strategies a firm can adopt may be classified into four broad categories:
Stability The firm stays with its current businesses and product markets; maintains
the existing level of effort; and is satisfied with incremental growth.
Expansion Here, the firm seeks significant growth-maybe within the current
businesses; maybe by entering new business that are related to existing
businesses; or by entering new businesses that are unrelated to existing
businesses.
Retrenchment The firm retrenches some of the activities in some business (es), or) or
drops the business as such through sell-out or liquidation
Combination The firm combines the above strategic alternatives in some
permutation/combination so as to suit the specific requirements of the
firm.

III. Stability Strategy

One of the important goals of a business enterprise is stability i.e.:

To safeguard its existing interests and strengths,

To pursue well established and tested objectives,
To continue in the chosen business path,
To maintain operational efficiency on a sustained basis,
To consolidate the commanding position already reached, and
To optimise returns on the resources committed in the business.

A stability strategy is pursued by a firm when:

It continues to serve in the same or similar markets and deals in same products and
services.

This strategy is typical for those firms whose product have reached the maturity stage of
product life cycle or those who have a sufficient market share but need to retain that.

They have to remain updated and have to pace with the dynamic and volatile business world
to preserve their market share. Hence, stability strategy should not be confused with 'do
nothing' strategy.

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

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Characteristics of Stability Strategy

A firm opting for stability strategy stays with the same business, same product-market posture
and functions, maintaining same level of effort as at present.

The endeavour is to enhance functional efficiencies in an incremental way. through better

deployment and utilization of resources. The assessment of the firm is that the desired income
and profits would be forthcoming through such incremental improvements in functional
efficiencies.

Stability strategy does not involve a redefinition of the business of the corporation

It is a safe strategy that maintains status quo.

It does not warrant much of fresh investments.

While opting for this strategy, the organization can concentrate on its resources and existing
businesses/products and markets, thus leading to building of core competencies.

The firms with modest growth objective choose this strategy.

Major Reasons for Stability Strategy

A product has reached the maturity stage of the product life cycle.
The staff feels comfortable with the status quo as it involves less changes and less risks.
It is opted when the environment in which an organisation is operating is relatively stable.
Where it is not advisable to expand as it may be perceived as thneatening.
After rapid expansion, a firm might want to stabilize and consolidate itself.

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Why don't Startups aim for stability?

A startup is an entrepreneurial venture in the early stages of ideation and development,
generally created for solving real-life problems through technology. For it, the most important
factors are speed and agility, because of it being in a nascent stage of operations. Stability
on the other hand is more meaningful strategy when the size of operations is expanded to full
capacity and business is at a mature stage. Thereby, we rarely see startups aiming for
stability.

IV. Growth/Expansion Strategy

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

It is a strategy that can be equated with dynamism, vigour, promise and

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

Characteristics of Growth/Expansion Strategy

Expansion strategy involves a redefinition of the business of the corporation.

Expansion strategy is the opposite of stability strategy. While in stability strategy, rewards are
limited, in expansion strategy they are very high. In the matter of risks, too, the two are the
opposites of each other.

Expansion strategy leads to business growth. A firm with a mammoth growth ambition can meet
its objective only through the expansion strategy.

\The process of renewal of the firm through fresh investments and new
businesses/products/markets is facilitated only by expansion strategy.

Expansion strategy is a highly versatile strategy: it offers several permutations and combinations
for growth..

Expansion strategy holds within its fold two major strategy routes: Intensification
Diversification. Both of them are growth strategies; the difference lies in the way in which the
firm actually pursues the growth.
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Major Reasons for Growth / Expansion Strategy

It may become imperative when environment demands increase in pace of activity.

Strategists may feel more satisfied with the prospects of growth from expansion; chief
executives may take pride in presiding over organizations perceived to be growth oriented.
Expansion may lead to greater control over the market vis-a-vis competitors.

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

Expansion also includes intensifying, diversifying, acquiring and merging businesses.

Types of Growth/ Expansion Strategy

The growth strategies can be classified into two main types:

External growth Internal growth

strategies strategies

V. Internal Growth Strategies

Internal growth strategies can be further divided into:
Expansion or growth through Intensification
Expansion or growth through intensification means that the organisation tries to grow
internally by intensifying its operations either by market. penetration or market development
or by product development. It tries to cash on its internal capabilities and internal resources.

The firm can intensify by adopting any of the following strategies:

Market Penetration Market Development Product Development

•Highly common expansion •It consists of marketing •Product development

strategy is market present products, to involves substantial
penetration/ concentration customers in related modification of existing
on the current business. market areas by adding products or creation of
The firm directs its different channels of new but related items that
resources to the profitable distribution or by changing can be marketed to current
growth of its existing the content of advertising customers through
product in the existing or the promotional media. establish channels.
market.

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Igor. H. Ansoff gave a framework as shown in figure below which describes the
intensification options available to a firm.
Market Penetration
Product Development
a) Increase market share
a) Add product features, product
b) Increase product usage
refinement
c) Increase the frequency used
b) Develop a new-generation product
d) Increase the quantity used
c) Develop new product for the same
e) Find new application for current
market
users

Market Development Diversification involving new products

Expand geographically target new and new markets
segments Related / Unrelated

Expansion or Growth through Diversification

When a firm tries to grow and expand by diversifying into various products or
fields, it is called growth by diversification. This is also an internal growth
strategy. Diversification is defined as an entry into new products or
product lines, new services or new markets, involving substantially different
skills, technology and knowledge.

When an established firm introduces a new product, which has little or no affinity with its
present product line and which is meant for a new class of customers different from the
firm's existing customer groups, the process is known as conglomerate diversification.

Based on the nature and extent of their relationship to existing businesses, diversification
can be classified into two broad categories:

Concentric Diversification Conglomerate Diversification

Concentric Diversification
Concentric diversification takes place when the products are related. In this diversification,
the new business that is it diversifies into is linked to the existing businesses through process,

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technology or marketing.
The new product is a spin-off from the existing facilities and products/processes. The new
product is only connected in a loop-like manner at one or more points in the firm's existing
process/technology/product chain. Example, a company producing clothes ventures into the
manufacturing of shoes.

Concentric diversification is generally understood in two directions, vertical and horizontal

integration;
Vertically Firms opt to engage in businesses that are related to the existing business
Integrated of the firm. The characteristic feature of vertically integrated
Diversification diversification is that the firm remains in the vertically linked product-
process chain. A firm can either opt for forward or backward integration
or horizontal integration.

Forward and backward integration forms part of vertically integrated

diversification.
Backward integration Forward integration
Backward integration is concerned This is moving forward in the value
with creation of effective supply chain and entering business lines
by entering business of input that use existing products.
providers.
Forward integration will also take
Strategy employed to expand place where organizations enter
profits and gain greater control into businesses of distribution
over production/supply of a channels.
product whereby a company will
Example, A coffee bean
purchase or build a business that
manufacture may choose to merge
will increase its own supply
with a coffee cafe.
capability or lessen its cost of
production.

Example, A large supermarket

chain considers purchasing a
number of farms that would
provide it a significant amount of
fresh produce.

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Horizontal A firm gets horizontally diversified by integrating through acquisition of

Integrated one or more similar businesses operating at the same stage of the
Diversification production-marketing chain. They can also integrate with the firms
producing complementary products or by-products or by taking over
competitors’ products.

Conglomerate Diversification
In conglomerate diversification, no linkages related to product, market or technology exist;
the new businesses/products are disjointed from the existing businesses/products in every
way; it is a totally unrelated diversification.

In process/technology/function, there is no connection between the new

products and the existing ones. Conglomerate diversification has no
common thread at all with the firm's present position.

Example, A cement manufacturer diversifies into the manufacture of steel and rubber
Products.

Related vs. Unrelated Diversification

Related Diversification Unrelated Diversification
Exchange or share assets or competencies by Investment in new product
exploiting.

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Brand name. portfolios.

Marketing skills. Employment of new technologies.
Sales and distribution capacity Focus on multiple products.
Manufacturing skills.
Reduce risk by operating in multiple
R&D and new product capability.
product markets.
Economies of scale.
Defend against takeover bids.
Provide executive interest.

Is it really worth expanding so much to diversify a business into unrelated products?

Despite of its complexity, conglomerate diversification (diversification into unrelated
business) financially makes a lot of sense. It creates access a new pool of customers thereby
expanding its customer base. It allows access to markets and cross-selling new products,
leading to increased revenues. Further, it eases the management of losses in a business;
profits in one business can be used to keep the loss-making business afloat within the same
organisation.

Innovation
Innovation drives upgradation of existing product lines or processes, leading
to increased market share, revenues, profitability and most important,
customer satisfaction.
Some may argue that innovation leads to unnecessary expenses that do not give as much
returns, but on the contrary, for a business to grow long term, innovation offers the following;
•A business strives to find opportunities in existing problems of
the society, and it does so though planned innovation in areas of
expertise.
Help to solve •Example, the pressing problem of environmental damage is being
complex problems tackled heads on by shifting to renewable sources of energy like
solar, wind, sea waves, etc.
•It might be costly in introductory stages but in the long run it will
only have economic and environmental sustainability.

•Innovation leads to simplification and in most cases automation of

existing tasks. Productivity is defined as a measure of final output
from a task or a process, and companies are willing to spend
millions on increasing their productivity.
Increases •Example, MS Excel, every finance professional uses this software
Productivity to simplify and automate their manual tasks.
•Improved productivity, creates opportunities to further develop
processes and products within and outside the organization. Thus,
innovation creates a ripple effect that has a far and wide impact
across industries.

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•An interesting concept about innovation is- the faster a business

innovates, the farther it goes from its competitor's reach.
•Innovative products need less marketing as they aim to provide
Gives Competitive
added satisfaction to consumers, thus, creating a competitive
Advantage advantage.
•Innovation not only helps retain the existing customers but helps
acquire new ones with ease.

VI. External Growth Strategies

When the organization instead of growing internally thinks of diversifying by making alliances
with external organisations, it is called external growth diversification. It can be classified in
two ways:

Expansion through Mergers and

Expansion through Strategic Alliance
Acquisitions

Expansion through Mergers and Acquisitions

Acquisition or merger with an existing concern is an instant means of achieving the expansion.
It is an attractive and tempting proposition in the sense that it circumvents the time, risks
and skills involved in screening internal growth opportunities, seizing them and building up the
necessary resource base required to materialise growth.

Synergy may result from such bases as physical facilities, technical and managerial skills,
distribution channels, general administration, research and development and so on. Positive
synergistic effects are relevant in this connection which denotes that the positive effects of
the merged resources are greater than the effects of the individual resources before merger
or acquisition.

There is a thin line of difference between the two terms but the impact
of combination is completely different in both the cases. Some
organizations prefer to grow through mergers, Merger is a process
when two or more companies come together to expand their business
operations.

A merger two organizations combine to increase their strength and financial gains along with
breaking of the trade barriers. When one organization takes over the other organization and
controls all its business operations, it is known as acquisition.

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In acquisition, one financially strong organization overpowers the weaker one. Acquisitions
often happen during recession in economy or during declining profit margins. The stronger one
overpowers the weaker one.

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

Types of Mergers
Horizontal Merger Vertical Merger Co-generic Merger Conglomerate
Merger
Horizontal merger is It is a merger of two In Co-generic merger Conglomerate
a combination of organizations that two or more merging mergers are the
firms engaged in the are operating in the organizations are combination of
same industry. same industry but at associated in some organizations that
different stages of way or the other are unrelated to each
It is a merger with a
production or related to the other.
direct competitor.
distribution system. production
There are no linkages
processes, business
The principal
This often leads to with respect to
markets, or basic
objective behind this
increased synergies customer groups,
required
type of merger is to
with the merging customer functions
technologies.
achieve economies of
firms. and technologies
scale in the
Such merger includes being used.
production process If an organization
the extension of the
by shedding takes over its There are no
product line or
duplication of supplier/producers important common
acquiring components
installations and of raw material, then factors between the
that are required in
functions, widening it leads to backward organizations in
the daily operations.
the line of products, integration. production,
decrease in working It offers great marketing, research
On the other hand,
capital and fixed opportunities to and development and
forward integration
assets investment, businesses to technology.
happens when an
getting rid of diversify around a
organization decides
competition and so common set of In practice, however,
to take over its buyer
on. resources and there is some degree
of overlap in one or

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Example, formation organizations or strategic more of these

of Brook Bond Lipton distribution channels. requirements. factors
India Ltd. through Vertical merger
Example, an
the merger of Lipton results in many
organization in the
India and Brook operating and
white goods category
Bond. financial economies.
such as refrigerators
Vertical mergers
can diversify by
help to create an
merging with another
advantageous
organization having
position by
business in kitchen
restricting the
appliances.
supply of inputs to
other players, or by
providing the inputs
at a higher cost.

Example, backward
integration and
forward integration.

Expansion through Strategic Alliance

A strategic alliance is a relationship between two or more businesses that
enables each to achieve certain strategic objectives which neither would
be able to achieve on its own. The strategic partners maintain their status
as independent and separate entities, share the benefits and control
over the partnership, and continue to make contributions to the alliance until it is terminated.

Advantages of Strategic Alliance

Strategic alliance usually is only formed if they provide an advantage to all the parties in the
alliance.
Organizational Strategic alliance helps to learn necessary skills and obtain certain
capabilities from strategic partners. Strategic partners may also help to
enhance productive capacity, provide a distribution system, or extend
supply chain. Strategic partners may provide a good or service that
complements thereby creating a synergy.

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Having a strategic partner who is well-known and respected also helps add
legitimacy and creditability to a new venture.
Economic There can be reduction in costs and risks by distributing them across the
members of the alliance. Greater economies of scale can be obtained in an
alliance, as production volume can increase, causing the cost per unit to
decline.
Finally, partners can take advantage of specialization, creating additional
value, such as when a leading computer manufacturer bundles its desktop
with a leading monitor manufacturer's monitor.
Strategic Rivals can join together to cooperate instead of competing with each other.
Vertical integration can be created where partners are part of supply chain.
Strategic alliances may also be useful to create a competitive advantage by
the pooling of resources and skills.
This may also help with future business opportunities and the development
of new products and technologies. Strategic alliances may also be used to
get access to new technologies or to pursue joint research and development.
Political Sometimes strategic alliances are formed with a local foreign business to
gain entry into a foreign market either because of local prejudices or legal
barriers to entry. Forming strategic alliances with politically influential
partners may also help improve your own influence and position

Disadvantages of Strategic Alliance

Strategic alliances do come with some disadvantages and risks.

The major disadvantage is sharing.

Strategic alliances require sharing of resources and profits, and also sharing knowledge and
skills that otherwise organisations may not like to share.
Sharing knowledge and skills can be problematic if they involve trade secrets.

Agreements can be executed to protect trade secrets, but they are only as good as the
willingness of parties to abide by the agreements or the courts willingness to enforce them.
Strategic alliances may also create potential competition when an ally becomes an opponent in
future when it decides to separate out.

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VII. Strategic Exits

Strategic Exits are followed when an organization substantially reduces the scope of its
activity. This is done through an attempt to find out the problem areas and diagnose the causes
of the problems. Next, steps are taken to solve the problems.

These steps result in different kinds of retrenchment strategies.

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

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

If none of these actions work, then it may choose to abandon the activities totally,
resulting in a liquidation strategy. We deal with each of these strategies below.

Turnaround Strategy
Retrenchment may be done either internally or externally. For internal retrenchment to take
place, emphasis is laid on improving internal efficiency, known as turnaround strategy. There
are certain conditions or indicators which point out that a turnaround is needed if the company
has to survive.

These danger signals are:

Persistent negative Uncompetitive

Declining market
cash flow from products or
share
business(es) services

Over-staffing, high
Deterioration in turnover of
Mismanagement
physical facilities employees, and low
morale

Action Plan for Turnaround

For turnaround strategies to be successful, it is imperative to focus on the short and long-
term financing needs as well as on strategic issues. A workable action plan for turnaround
would involve the following stages:

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Stage One - The first step is to assess the current problems and get to the root causes
Assessment and the extent of damage the problem has caused. Once the problems are
of current identified, the resources should be focused toward those areas essential
problems to efficiently work on correcting and repairing any immediate issues
Stage Two - Before you make any major changes, determine the chances of the
Analyze the business's survival. Identify appropriate strategies and develop a
situation and preliminary action plan.
develop a For this one should look for the viable core businesses, adequate bridge
strategic plan financing and available organizational resources. Analyze the strengths and
weaknesses in the areas of competitive position. Once major problems and
opportunities are identified, develop a strategic plan with specific goals and
detailed functional actions.
Stage Three If the organization is in a critical stage, an appropriate action plan must be
Implementing developed to stop the bleeding and enable the organization to survive. The
an emergency plan typically includes human resource, financial, marketing and operations
action plan actions to restructure debts, improve working capital, reduce costs,
improve budgeting practices, prune product lines and accelerate high
potential products.
A positive operating cash flow must be established as quickly as possible
and enough funds to implement the turnaround strategies must be raised.
Stage Four The financial state of the organization's core business is particularly
Restructuring important. The core business is irreparably damaged, then the outlook for
the business the entire organization may be bleak.
Prepare cash forecasts, analyse assets and debts, review profits and
analyze other key financial functions to position the organization for rapid
improvement. During the turnaround, the "product mix" may be changed,
requiring the organization to do some repositioning.
Core products neglected over time may require immediate attention to
remain competitive. Morale building is another important ingredient in the
organization's competitive effectiveness. Reward and compensation
systems that encourage dedication and creativity amongst employees to
think about profits and return on investments.
Stage Five - In the final stage of turnaround strategy process, the organization should
Returning to begin to show signs of profitability, return on investments and enhancing
normal economic value-added.

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Emphasis is placed on a number of strategic efforts such as carefully adding

new products and improving customer service, creating alliances with other
organizations, increasing the market share, etc.

The important elements of turnaround strategy are as follows:

Changes in the top management.
Initial credibility-building actions
Neutralising external pressures
Identifying quick payoff activities
Quick cost reductions
Revenue generation
Asset liquidation for generating cash
Better internal coordination

Divestment Strategy
Divestment strategy involves the sale or liquidation of a portion of business, or a major
division, profit centre or SBU. Divestment is usually a part of rehabilitation or restructuring
plan and is adopted when a turnaround has been attempted but has proved to be unsuccessful.

A divestment strategy may be adopted due to various reasons:

A business that had been acquired proves to be a mismatch and cannot be integrated within
the company.

Persistent negative cash flows from a particular business create financial problems for the
whole company, creating the need for divestment of that business.

Severity of competition and the inability of a firm to cope with it may cause it to divest.

It is not possible for the business to do Technological upgradation that is required for the
business to survive, a preferable option would be to divest.

A better alternative may be available for investment, causing a firm to divest a part of its
unprofitable business.

Characteristics of Divestment Strategy

This strategy involves divestment of some of the activities in a given business of the firm
or sell-out of some of the businesses as such.

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Divestment is to be viewed as an integral part of corporate strategy without any stigma

attached.

Major Reasons for Retrenchment/Turnaround Strategy

The management no longer wishes to remain in business either partly or wholly due to
continuous losses and unviability.

The management feels that business could be made viable by divesting some of the
activities or liquidation of unprofitable activities.

A business that had been acquired proves to be a mismatch and cannot be integrated
within the company.

Persistent negative cash flows from a particular business create financial problems for
the whole company, creating the need for divestment of that business.

Severity of competition and the inability of a firm to cope with it may cause it to divest.

Technological upgradation is required if the business is to survive but where it is not

possible for the firm to invest in it, a preferable option would be to divest.

A better alternative may be available for investment, causing a firm to divest a part of its
unprofitable businesses.

Is Turnaround strategy only relevant to loss making businesses?

Interestingly, turnaround strategy is relevant when a company is experiencing a period of poor
performance. Poor performance does not always mean losses, it may also mean lower than
expected growth, no future clarity, or even lesser than target profits.

VIII. Strategic Options

Strategic options need to be carved out from existing products and innovations that are
happening in the industry. Primarily used for competitive analysis and corporate strategic
planning in multiproduct and multi business firms.

They may also be used in less diversified firms, if these consist of a main
business and other minor complementary interests. A diversified company
may decide to divert resources from its cash rich businesses to more

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prospective ones that hold promise of a faster growth so that the company achieves its
corporate level objectives efficiently.
IX. Ansoff’s Product Market Growth Matrix
The Ansoff’s product market growth matrix (proposed by Igor Ansoff) is a useful tool that
helps businesses decide their product and market growth strategy. With the use of this matrix
a business can get a fair idea about how its growth depends upon it markets in new or existing
products in both new and existing markets.

Companies should always be looking to the future. One useful device for identifying growth
opportunities for the future is the product/market expansion grid. The product/market
growth matrix is a portfolio-planning tool for identifying growth opportunities for the
company.

Market Penetration Market penetration refers to a growth strategy was the business
focuses on selling existing products into existing markets. It is
achieved by making more sales to present customers without changing
products in any major way.
Penetration might require greater spending on advertising or personal
selling. Penetration is also done by effort on increasing usage by
existing customers.
Example, Gucci, a luxury clothing brand, selling its luxury clothing in
European markets with new designs, is market penetration.
Market Market development refers to a growth strategy where the business
Development seeks to sell its existing products into new markets. It is a strategy
for company growth by identifying and developing new markets for
current company products.

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Example, Gucci, a luxury clothing brand, selling its luxury clothing in

Chinese markets, is market development.
Product Product development refers to a growth strategy was business aims
Development to introduce new products into existing markets. It is a strategy for
company growth by offering modified or new products to current
markets.
This strategy may require the development of new competencies and
requires the business to develop modified products which can appeal
to existing markets.
Example, Gucci, a luxury clothing brand, selling casual clothing in
European markets, is product development.
Diversification Diversification refers to a growth strategy where a business market
new product in new markets. It is a strategy by starting up or
acquiring businesses outside the company's current products and
markets.
This strategy is risky because it does not rely on either the
company's successful product or its position in established markets.
Typically, the business is moving into markets in which it has little or
no experience.
Example, Gucci, a luxury clothing brand, selling casual clothing in
Chinese markets, is diversification. As market conditions change
overtime, a company may shift product-market growth strategies.
For example, when its present market is fully saturated a company
may have no choice other than to pursue new market.

X. ADL Matrix
The ADL matrix has derived its name from Arthur D. Little is a portfolio analysis method that
is based on product life cycle. The approach forms a two-dimensional matrix based on stage of
industry maturity and the firm’s competitive position, environmental assessment and business
strength assessment.
Stage of industry maturity is an environmental measure that represents a position in industry's
life cycle.
Competitive position is a measure of business strengths that helps in categorization of
products or SBU's into one of five competitive positions:

Dominant, Strong, Favourable, Tenable and Weak.

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The competitive position of a firm is based on an assessment of the following criteria:

Dominant This is a comparatively rare position and in many cases is attributable either to
a monopoly or a strong and protected technological leadership.
Strong By virtue of this position, the firm has a considerable degree of freedom over
its choice of strategies and is often able to act without its market position
being unduly threatened by its competitions.
Favourable This position, which generally comes about when the industry is fragmented
and no one competitor stand out clearly, results in the market leaders a
reasonable degree of freedom.
Tenable Although the firms within this category are able to perform satisfactorily and
can justify staying in the industry, they are generally vulnerable in the face of
increased competition from stronger and more proactive companies in the
market.
Weak The performance of firms in this category is generally unsatisfactory although
the opportunities for improvement do exist.

It is four by five matrix as follows:

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XI. Boston Consulting Group (BCG) Growth-Share Matrix

The BCG growth-share matrix is the simplest way to portray a corporation's portfolio of
investments. Growth share matrix also known for its cow and dog metaphors is popularly used
for resource allocation in a diversified company.

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

The vertical axis represents market growth rate and provides a measure of market
attractiveness.

The horizontal axis represents relative market share and serves as a measure of
company strength in the market.

Using the matrix, organisations can identify four different types of products or SBU as
follows:

Stars Are products or SBUs that are growing rapidly. They also need heavy
investment to maintain their position and finance their rapid growth potential.
They represent best opportunities for expansion.
Cash Cows Are low-growth, high market share businesses or products. They generate cash
and have low costs. They are established, successful, and need less investment
to maintain their market share. In long run when the growth rate slows down,
stars become cash cows.
Question Sometimes called problem children or wildcats, are low market share business
Marks in high-growth markets. They require a lot of cash to hold their share. They
need heavy investments with low potential to generate cash.
Question marks if left unattended are capable of becoming cash traps. Since
growth rate is high, increasing it should be relatively easier. It is for business

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organisations to turn them stars and then to cash cows when the growth rate
reduces.
Dogs Are low-growth, low-share businesses and products. They may generate enough
cash to maintain themselves, but do not have much future. Sometimes they may
need cash to survive. Dogs should be minimised by means of divestment or
liquidation.

BCG Matrix: Post Identification Strategies

After a firm, has classified its products or SBUs, it must determine what role each will play
in the future. The four strategies that can be pursued are:
a) Build: Here the objective is to increase market share, even by forgoing short-term earnings
in favour of building a strong future with large market share.

b) Hold: Here the objective is to preserve market share.

c) Harvest: Here the objective is to increase short-term cash flow regardless of long-term
effect.

d) Divest: Here the objective is to sell or liquidate the business because resources can be
better used elsewhere.

Limitations of BCG Matrix

BCG matrix can be difficult, time-consuming, and costly to implement.

Management may find it difficult to define SBUs and measure market share and growth.

It also focuses on classifying current businesses but provide little advice for future planning.

They can lead the company to placing too much emphasis on market-share growth or growth
through entry into attractive new markets.
This can cause unwise expansion into hot, new, risky ventures or giving up on established
units too quickly.

Is BCG Matrix really helpful?

The growth-share matrix has done much to help strategic planning; however, there are some
problems and limitations with the technique. BCG matrix can be difficult, time-consuming, and
costly to implement. Management may find it difficult to define SBUS and measure market
share and growth. It also focuses on classifying current businesses but provide little advice

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for future planning. They can lead the company to placing too much emphasis on market-share
growth or growth through entry into attractive new markets. This can cause unwise expansion
into hot, new, risky ventures or divesting established units too quickly.

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

This model has been used by General Electric Company (developed by GE with the assistance
of the consulting firm McKinsey and Company). This model is also known as Business Planning
Matrix, GE Nine-Cell Matrix and GE Model. The strategic planning approach in this model has
been inspired from traffic control lights.

The lights that are used at crossings to manage traffic are: green for go, amber or yellow for
caution, and red for stop. This model uses two factors while taking strategic decisions:
Business Strength and Market Attractiveness.

Understanding the GE Matrix

The vertical axis indicates market attractiveness, and the horizontal axis shows the business
strength in the industry. The market attractiveness is measured by a number of factors like:
Size of the market.
Market growth rate.
Industry profitability.
Competitive intensity.
Availability of Technology.
Pricing trends.
Overall risk of returns in the industry.
Opportunity for differentiation of products and services.
Demand variability ✓ Segmentation.
Distribution structure (e.g., direct marketing, retail, wholesale) etc.

Business strength is measured by considering the typical drivers like:

Market share.
Market share growth rate.
Profit margin.
Distribution efficiency.
Brand image.
Ability to compete on price and quality.
Customer loyalty.

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Production capacity.
Technological capability.
Relative cost position.
Management calibre, etc.

If a product falls in the green section, the business is at advantageous position. To reap the
benefits, the strategic decision can be to expand, to invest and grow. If a product is in the
amber or yellow zone, it needs caution and managerial discretion is called for making the
strategic choices. If a product is in the red zone, it will eventually lead to losses that would
make things difficult for organisations.

In such cases, the appropriate strategy should be retrenchment, divestment or liquidation.

This model is similar to the BCG growth-share matrix. However, there are differences.
Firstly, market attractiveness replaces market growth as the dimension of industry
attractiveness and includes a broader range of factors other than just the market growth
rate.
Secondly, competitive strength replaces market share as the dimension by which the
competitive position of each SBU is assessed.

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Multiple Choice Questions

Study Material, Mtp Nov 2019, Mtp2 Study Material/ Rtp May 2020
May 2021 2. Retrenchment strategy in the
[Link] strategy is implemented after the organization can be explained as
failure of turnaround strategy? (a) Reducing trenches (gaps) created
(a) Expansion strategy between individuals.
(b) Diversification strategy (b) Divesting a major product line or market.
(c) Divestment strategy (c) Removal of employees from job through
(d) Growth strategy the process of reorganization.
(d) Removal of employees from job in one
business to relocate them in other business
Study Material Study Material
3. An organisation diversifies in backward 4. Corporate strategy includes:
sequence in the product chain and enters (i) expansion and growth, diversification,
specific product/process to be used in takeovers and mergers
existing products. It is: (ii) Vertical and horizontal integration, new
(a) Forward diversification. investment and divestment areas
(b) Vertical diversification. (iii) determination of the business lines
(c) Horizontal diversification. From the combinations given below select a
(d) Reactive diversification. correct alternative:
(a) (i), and (ii)
(b) (i) and (iii)
(c) (ii) and (iii)
(d) (i) (ii) and (iii)
Study Material, Rtp May 2020 Study Material
5. Vertical integration may be beneficial 6. ‘Stability strategy is a ____________
when strategy.
(a) Lower transaction costs and improved (a) SBU level
coordination are vital and achievable through (b) Corporate level
vertical integration. (c) Business level
(b) Flexibility is reduced, providing a more (d) Functional level
stationary position in the competitive
environment.

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(c) Various segregated specializations will be

combined.
(d) The minimum efficient scales of two
corporations are different.
Study Material, Mtp2 Nov 2022 Study Material
7. Conglomerate diversification is another 8. Diversification primarily helps to:
name for which of the following? (a) Reduce competition
(a) Related diversification (b) Reduce risk
(b) Unrelated diversification (c) Reduce taxes
(c) Portfolio diversification (d) Reduce costs
(d) Acquisition diversification
Study Material/ Mtp Nov 2019/ Rtp May Mtp1 May 2021
2021 [Link] Specialist Clothing Company (SCC)
9. If suppliers are unreliable or too costly, is a manufacturer of a wide range of
which of these strategies may be clothing. Fashion is one of the five divisions
appropriate? of SCC. Fashion is operating in a market
(a) Horizontal integration with high growth and is a market leader.
(b) Backward integration By next year, it is predicted to have 10%
(c) Market penetration of the market share in a growing market.
(d) Forward integration Fashion should be classified as either of
the following according to the BCG matrix.
(a) Star
(b) Dog
(c) Cash cow
(d) Question Mark
Mtp2 May 2021 Mtp1 Nov 2021
11.A beverage company has more than 500 [Link] Pvt Ltd has seventeen factories,
soft drink brands, but none of them is nine of which they recently gave to other
anywhere close to its premium brand One producers on lease. This has increased
Sip in awareness, revenue and profits. As their cash inflows to a great extent, and
per BCG's Matrix, One Sip brand for the they are enjoying this surplus by investing
beverage company is? the same in financial assets. Such a
(a) Star strategy can be termed as which of the
(b) Dog following?
(c) Cash cow (a) Divest

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(d) Question mark (b) Harvest

(c) Hold
(d) Build
Mtp2 Nov 2021 Mtp2 Nov 2021/ Mtp2 May 2022/ Mtp2
[Link] context to the BCG matrix, which of Nov 2022
the following statements is not correct? [Link] there is impact of strategy
(a) The BCG assumes that all products will implementation on strategy formulation it
grow and mature. can be referred as?
(b) The BCG can be used to examine a (a) Backward Linkages
company’s current product portfolio (b) Forward Linkages
(c) A company with only cash cows and dogs (c) Vertical Linkages
has limited long-term prospects. (d) Horizontal Linkages
(d) All of the above
Mtp1 May 2022 Mtp1 Nov 2022
[Link] was heading the Global Biscuits [Link] in BCG Matrix be minimised
SBU for Jonky’s Ltd. and he got an email through?
congratulating him for being promoted as (a) Converting to Cash Cows
the head of the entire business of Jonky’s (b) Liquidating or Divesting
in India. Which of the following statements (c) Foreign Direct Investment Opportunity
is true about Greg’s position? (d) Bad Debt Writing off
(a) Greg was a business level manager but now
he is a corporate level manager
(b) Greg was a functional level manager but
now he is a corporate level manager
(c) Greg was a business level manager and now
also he is a business level manager
(d) Greg was a corporate level manager and
now also he is a corporate level manager
Rtp May 2019 Rtp May 2019
[Link] of the following is not a type of [Link] BCG an SBU with products having
diversification strategy? little market share but in an attractive
(a) Vertical diversification. industry is referred to as:
(b) Concentric diversification. (a) Cash cow.
(c) Conglomerate diversification. (b) Star
(d) Co-generic diversification (c) Dog.

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(d) Question mark

Rtp May 2019 Rtp May 2019
[Link] will happen in case many new [Link] organisation acquiring its supplier is
businesses enter a market? an example of:
(a) Barriers to entry will rise. (a) Horizontal integrated diversification.
(b) Competitive rivalry will intensify. (b) Forward integrated diversification.
(c) Capacity of industry will fall. (c) Backward integrated diversification.
(d) Industry will become more lucrative (d) Conglomerate diversification
Rtp Nov 2019 Rtp Nov 2019
[Link] of the following is not true for [Link] of another organisation that
SBUs was using your product in their
A. It is relevant for multi-product, multi- manufacturing is:
business enterprises. a. Horizontal integrated diversification
B. It provides for more control at enterprise b. Forward integrated diversification
level with centralised strategic planning. c. Backward integrated diversification
C. A SBU has its own set of competitors. d. conglomerate diversification
D. SBUs can be created for units at distant
geographical locations.
Rtp May 2020/Rtp May 2021 Rtp May 2021
23.A tool by which management identifies [Link] Ltd. has identified that all three
and evaluates the various businesses that of its main products are at the maturity
make up a company is termed as: phase of the product life cycle. Which of
(a) Value Chain Analysis the following is ABC Ltd. likely to be
(b) Portfolio Analysis experiencing due to this?
(c) Competition Analysis (a) High, but declining sales
(d) Strategic Analysis (b) Growing numbers of competitors
(c) Product diversification and
differentiation strategies
(d) Adoption of price skimming strategies
Rtp May 2022 Rtp May 2019
[Link]-Nom is a fast-food brand and has [Link] evaluation is difficult on
been facing a lot of competition from account of following trends, except:
American brands and has decided to NOT a. there is a dramatic increase in the
go very aggressive but to just preserve environment’s complexity.
b. it is difficult to predict the future

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market share? Which of the strategies c. firms have unlimited resources.

Nom-Nom is following? d. obsolescence is rapid.
(a) Build
(b) Hold
(c) Harvest
(d) Divest
Mtp2 May 2019 Mtp2 May 2019
[Link] of a company producing [Link] of the following can be used in a
readymade garments by a company retrenchment strategy?
manufacturing yarn is a. Reducing assets.
a. Horizontal integration b. Operational improvement.
b. Horizontal Diversification c. Cutting cost.
c. Forward integration d. All of the above.
d. Backward integration
Mtp2 May 2019 Mtp Nov 2020
[Link] diversification can also be [Link] two organizations combine to
explained as: increase their strength and financial gains
a. Merger along with reducing competition is called--
b. Combination strategy ---------.
c. Related diversification (a) Hostile takeover
d. Unrelated diversification (b) Liquidation
(c) Merger
(d) Acquisition
Mtp1 May 2021 Mtp1 Nov 2021
[Link] Company, a car manufacturer is [Link] was having a tough time with its
buying up a supplier so that it gets a operations and wanted to restructure itself
dedicated supplier with both guaranteed from scratch. For this, they consult a
quality and price. The material could be veteran in business strategy, Mrs. Sunita
manufactured when required by Beta K, who post analysis of their business said,
Company leading to lower inventory levels. “your dead business is worth more than
Which strategy has Beta Company alive”. What did Mrs. Sunita hint at?
adopted? (a) Restructuring Business
(a) Backward integration (b) Liquidation
(b) Forward integration (c) Business Process Re-engineering
(c) Conglomerate diversification (d) Divestment

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(d) Horizontal integrated diversification

Mtp2 Nov 2021 Mtp1 Nov 2022
33.A rubber manufacturer starts making [Link] business news anchor said that
shoe soles and gum can be termed as? “chillflix’s dead business is worth more
(a) Conglomerate Diversification than alive”. What did she hint at?
(b) Concentric Diversification (a) Restructuring Business
(c) Horizontal Integration (b) Liquidation
(d) Vertical Integration (c) Business Process Re-engineering
(d) Divestment
Rtp Nov 2019 Rtp Nov 2019, Mtp Nov 2020/ Rtp May
[Link] divestment, liquidation, 2020
stability and turnaround strategies in order [Link] chain refers to the linkages
of preference for adoption by a typical between:
organization. a. suppliers
a. turnaround, stability, liquidation and b. logistics
divestment. c. customers
b. divestment, liquidation, stability and d. all the above
turnaround.
c. stability, turnaround, liquidation and
divestment.
d. stability, turnaround, divestment and
liquidation
Rtp Nov 2020 Rtp May 2022
[Link] Limited is a full-service airline. 38.A tea farm owners plan to open tea
The company is making the following cafes in tourist spots and to sell their own
decisions: premium tea to build a brand. Which of
i. Should a ‘no-frills’, ‘low-fare’ subsidiary the following can this be termed as?
be set-up? (a) Backward Integration
ii. If it is set-up, how should the cabin (b) Forward Integration
staff be recruited? (c) Diversification
Which of the above decisions will be taken (d) Horizontal Integration
by corporate level managers?
(a) Only (i)
(b) Only (ii)
(c) (i) & (ii)

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(d) Neither (i) nor (ii)

Rtp Nov 2022 Mtp Nov 2020
[Link], a honey brand, decided to start [Link] cost, differentiation and focus
a new brand for making honey ginger are:
candies to meet the rising demand. (a) SBU level strategies
Identify their growth strategy? (b) Corporate level strategies
(a) Conglomerate Diversification (c) Business level strategies
(b) Concentric Diversification (d) Functional level strategies
(c) Vertical Integration
(d) Horizontal Integration
41.____________is a to by which [Link] of these are low-growth, high
management identifies & evaluates the market share businesses/product,
various businesses that make up the generate cash & have low costs?
company. a) Star
a) Strategic Analysis b) Cash-Cow
b) Portfolio Analysis c) Question-Mark
c) Market Analysis d) Dog
d) System Analysis
43. Which of the following is the most 44. Which integration attempts to improve
risky strategy of Ansoff market product performance through ownership of more
growth matrix? parts of the value system, making linkages
a) Market Penetration internal to organization?
b) Market Development a) Vertical
c) Product Development b) Horizontal
d) Diversification c) Co-Centric
d) Stratified
45. Which can be defined as a technique [Link] strategy has its objective of
that helps strategists in taking strategic preserve market share?
decisions with regard to individual products a) Build
or businesses in a firm’s portfolio? b) Hold
a) Strategic Analysis c) Harvest
b) Portfolio Analysis d) Divest
c) Market Analysis
d) System Analysis

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47. Which of these is a portfolio analysis 48. If a company’s strategies result in

technique that is based on the product life superior performance it is said to have.
cycle? a) Core Competency
a) BCG Growth Matrix b) Strategic Analysis
b) Ansoff Growth Matrix c) Competitive Advantage
c) Arthur D. Little Matrix d) Value Creation
d) General Electric Matrix
49. Which strategy has its objective to 50. Which position of ADL matrix is
increase short term cash flows regardless comparatively rare position & in many cases
of long-term earning? is attributable to a monopoly?
a) Build a) Dominant
b) Hold b) Tenable
c) Harvest c) Favourable
d) Divest d) Strong

Suggested Answer
Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10
c b b d a b b b b a
Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18 Q19 Q20
c b a a a b d d b c
Q21 Q22 Q23 Q24 Q25 Q26 Q27 Q28 Q29 Q30
b b b c b c c d d c
Q31 Q32 Q33 Q34 Q35 Q36 Q37 Q38 Q39 Q40
a b b b d d a b b b
Q41 Q42 Q43 Q44 Q45 Q46 Q47 Q48 Q49 Q50
b b d a b b c c c a

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Chapter 5
Strategy Implementation And Evaluation

I. Introduction
➢ Strategy implementation and evaluation are critical phases of the process of
strategic management in an organization.
➢ Implementation involves putting the plans and initiatives developed as part of
the strategy into action, while evaluation refers to the process of measuring and
assessing the effectiveness of these actions.

II. Strategic Management Process

An organisation's strategy is developed methodically, involving
a clear vision, mission, values, goals, themes, implementation
plan, and key performance measures to measure strategy success.
The strategic management process is dynamic and
continuous, requiring changes in major components due to
changes in economic shifts, policy failures, or competitor strategies.
The strategic management process should be continuously conducted, including strategy
formulation, implementation, and evaluation, as it never truly ends.
The Strategic Management Model by Fred R David provides a comprehensive approach to
studying and applying the strategic management process, illustrating relationships among key
components.
Strategic management is an iterative process involving back-and-forth considerations across
stages, with informal meetings and good communication fostering creativity and feedback
among hierarchical levels.

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III. Stages in Strategic Management

→Crafting and executing strategy are the heart and soul of managing a business enterprise.
→But exactly what is involved in developing a strategy and executing it proficiently?
→And who besides top management has strategy - formulation – executing responsibility?
Strategic management involves the following stages:

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

and objectives.

Environmental and organisational analysis.

Formulation of strategy.

Implementation of strategy.

Strategic evaluation and control.

Stage 1: Strategic Vision, Mission and Objectives

❖ First, Co. should develop a Vision i.e., future blueprint.
❖ It answers the question ‘where it wants to land’.
❖ Top management’s views and conclusions about company’s direction and product,
customer, market, technology focus constitute strategic vision of company.
❖ Mission statements define what we are and what we do. Hence, the focus is on the role
played by organizational in society and overall direction and not any SBU specific
direction.
❖ Objectives & goals of an Org flows from V & M.
❖ They provide a means of performance measurement at each level of management.

Stage 2: Environmental and Organisational Analysis

This stage is the diagnostic phase of strategic analysis. It entails two types of analysis:
1. Environmental scanning
[Link] analysis
[Link] Analysis – It consists of economic, social, technical& market analysis. It is
dynamic and uncertain & helps in determining opportunities and threats.

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[Link] Analysis – It consists of analysis of Co. resources, tech resources,

Productive capacity, distribution channel, R&D, HR, etc. It reveals strength and weakness of
Organisation.
This stage helps in SWOT analysis.

Stage 3: Formulating Strategy

• First stage in strategy formulation is developing strategic alternatives in line with SWOT
of organization.
• Second stage involves choosing appropriate alternative which will serve as strategy of Firm.
Examples of strategic alternatives:
a) Should company continue in same business on same level of operation?
b) If it should continue in same business, should it grow by expanding same unit; establishing
new units; or acquiring other units in same Industry?
c) If it should diversify, should it diversify into related or unrelated areas?
d) Should it get out of existing business fully or partially?
e) Combination of any of the above strategies

Stage 4: Implementation of Strategy

➢ It is operation- oriented activity.
➢ Most demanding & time-consuming stage.
Strategy execution process includes following aspects:
a) Developing budget to allocate ample resource for strategy implementation
b) Staffing Org. with needed skills & expertise
c) Motivating people to pursue target energetically
d) Creating a Co. culture & work climate that support successful strategy execution
e) Ensuring policies, procedures and internal operations facilitate effective execution
f) Exerting Leadership needed for strategic execution & continuous improvement.
Good strategy execution creates strong fits between
a) Strategy & Org’s capability
b) Strategy & reward structure
c) Strategy & Org work culture
d) Strategy & internal system

Stage 5: Strategic Evaluation and Control

Final stage of SM process involves
➢ evaluating Co.’s strategy implementation &

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➢ assessing impact of new external Developments and make corrective adjustments to V,

M, Objectives & strategy.
Successful strategy execution requires searching for:
a) Ways to continuously improve and
b) Corrective adjustments whenever external & and internal environment demands.
It may be in form of –
➢ Simple fine-tuning strategy if strategy is working well; or
➢ Modifying strategy when strategy is not yielding desired result or there is changes in
environment.

IV. Strategy Formulation Corporate Strategy

≫Planning entails choosing what has to be done in the future (today, next week, next month,
next year, over the next couple of years, etc.) and creating action plans.
An essential element of effective management is adequate planning.
≫Choosing a path of action to achieve defined goals is a part of
planning.
≫The game plan that really directs the company towards success
is called "corporate strategy". Planning may be operational or strategic.
≫Senior management develops strategic plans for the entire organisation
after evaluating the organization's strengths and weaknesses in light of potential
possibilities and dangers in the outside world.

Corporate Strategy

Strategic planning Operational planning

Characteristics of Strategic planning

Shapes the organisation and its Characteristics of Operational planning
resources. Assesses the impact of Deals with current deployment of resources.
environmental variables. Takes a holistic Develops tactics rather than strategy.
view of the organisation. Develops Projects current operations into the future.
overall objectives and strategies. Is Makes modifications to the business
concerned with the long- term success functions but not fundamental changes. Is
of the organisation. Is a senior the responsibility of functional managers.
management responsibility.

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Strategic Planning: The game plan that really directs the company towards success is called
“corporate strategy”. The success of the company depends on how well this game plan works.
Because of this, the core of the process of strategic planning is the formation of corporate
strategy. The formation of corporate strategy is the result of a process known as strategic
planning.
→Strategic planning is the process of determining the objectives of the firm, resources
required to attain these objectives and formulation of policies to govern the acquisition, use
and disposition of resources.
→Strategic planning involves a fact of interactive and overlapping decisions leading to the
development of an effective strategy for the firm.
→Strategic planning determines where an organisation is going over the next year or more and
the ways for going there.
→The process is organisation-wide or focused on a major function such as a division or other
major function.

V. Strategic uncertainty and how to deal with it?

➢ Strategic uncertainty refers to the unpredictability and unpredictability
of future events and circumstances that can impact an organization's strategy
and goals.
➢ It can be driven by factors such as changes in the market, technology,
competition, regulation, and other external factors.
➢ Dealing with strategic uncertainty can be challenging and organizations need to have the
flexibility, resilience, and agility to quickly respond to changes in the environment and
minimize its impact.
➢ To be manageable, they need to be grouped into logical clusters or themes.
➢ It is then useful to assess the importance of each cluster in order to set priorities with
respect to Information gathering and analysis.
Flexibility Organizations can build flexibility into their strategies to quickly
adapt to changes in the environment.
Diversification Diversifying the organization's product portfolio, markets, and
customer base can reduce the impact of strategic uncertainty.
Monitoring and Organizations can regularly monitor key indicators of change and
Scenario Planning conduct scenario planning to understand how different future
scenarios might impact their strategies.
Building Resilience Organizations can invest in building internal resilience, such as

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strengthening their operational processes, increasing their

financial flexibility, and improving their risk management
capabilities.
Collaboration And Collaborating with other organizations, suppliers, customers, and
Partnerships partners can help organizations pool resources, share risk, and gain
access to new markets and technologies.
Impact of uncertainty Each element of strategic uncertainty involves potential trends or
events that could have an impact on present, proposed, and even
potential businesses., a trend toward natural foods may present
opportunities for juices for a firm producing aerated drinks on the
basis of a strategic uncertainty. The impact of a strategic
uncertainty will depend on the importance of the impacted SBU to
a firm. The importance of established SBUs may be indicated by
their associated sales, profits, or costs. However, such measures
might need to be supplemented for potential growth as present
sales, profits, or costs may not reflect the true value.

VI. Strategy Implementation

➢ Strategy implementation concerns the managerial exercise Of
putting a freshly chosen strategy into action.
Deals with the managerial exercise of supervising the ongoing
pursuit of strategy, making it works, improving the competence
with which it is executed and showing measurable progress in achieving the targeted results.
➢ Strategic implementation is concerned with translating a strategic
decision into action, which presupposes that the decision itself (i.e., the strategic choice) was
made with some thought being given to feasibility and acceptability.

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VII. Relationship with strategy formulation

A
B
≫ Square A represents a situation
where strategy formulation is sound ≫ Square B represents a situation
and strategy implementation is weak. where strategy formulation is sound
Sound

and strategy implementation is

≫It may be due to lack of resources,
Strategy Formulation

excellent.
experience, leadership etc.
≫ Ideal situation which every Firm
≫Company should try to move from wants to achieve.
square A to B.

D
C
≫ Square D represents a situation
≫ Square C represents a situation
Flawed

where strategy formulation is flawed

where strategy formulation is flawed
and strategy implementation is
and strategy implementation is weak.
excellent.
≫ In this case, company needs to
≫ In this case, company needs to
redesign their strategy and read just
redesign their strategy before
their implementation skills.
readjusting them implementation skills.

Weak Excellent

Strategic Formulation
Effective Ineffective

Effective

Operational Management
A situation where strategy formulation
A situation where strategy formulation
is effective and operational
management is efficient. Such company is ineffective and operational
is well placed and thrives as it is management is efficient. Such company
achieving what it wants to achieve with is doomed to fail unless there is
efficient input-output ratio. change in strategic direction.

Ineffective

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A situation where strategy formulation is a situation where strategy formulation

effective and operational management is is ineffective and operational
inefficient. Such company will survive as management is inefficient. Such
strategic direction to ensure company is doomed to fail unless there
effectiveness is there even if too much is change in strategic direction.
input is used to generate output.

VIII. Difference between Strategy Formulation and Implementation

Summarized are the key distinctions between strategy formulation and strategy
implementation:
Strategy Formulation Strategy Implementation
Strategy Formulation includes planning and Strategy Implementation involves all those
decision-making involved in developing means related to executing the strategic
organization’s strategic goals and plans plans.
In short, Strategy Formulation is placing the In short, Strategy Implementation is
Forces before the action. managing forces during the action.
An Entrepreneurial Activity based on An Administrative Task based on strategic
strategic decision-making. and operational decisions
Emphasizes on effectiveness. Emphasizes on efficiency.
Primarily an intellectual and rational process. Primarily an operational process.
Requires co-ordination among few individuals Requires co-ordination among many
at the top level. individuals at the middle and lower levels.
Requires a great deal of initiative, logical Requires specific motivational and
skills, conceptual intuitive and analytical skills. leadership traits.
Strategic Formulation precedes Strategy Strategy Implementation follows Strategy
Implementation. Formulation.
➢ Strategy formulation concepts and tools do not differ greatly for small, large, for - profit,
or non-profit organizations. However, strategy implementation varies substantially among
different types and sizes of organizations.
➢ These types of activities obviously differ greatly among manufacturing, service, and
governmental organizations.
➢ Two types of linkages exist between these two phases of strategic management.
The forward linkages deal with the impact of strategy formulation on strategy implementation
while the backward linkages are concerned with the impact in the opposite direction.

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IX. Linkages and Issues in Strategy Implementation Linkages

Noteworthy is the fact that while strategy formulation is primarily an
entrepreneurial activity, based on strategic decision-making, the
implementation of strategy is mainly an administrative task based on
strategic as well as operational decision-making.

Forward Linkages ►The different elements in strategy formulation starting with

objective setting through environmental and organizational
appraisal, strategic alternatives and choice to the strategic plan
determine the course that an organization adopts for itself.
►With the formulation of new strategies, or reformulation of
existing strategies, many changes have to be affected within the
organization.
►The organizational structure has to undergo a change in the light
of the requirements of the modified or new strategy.
►The style of leadership has to be adapted to the needs of the
modified or new strategies.
Backward Linkages ►Just as implementation is determined by the formulation of
strategies, the formulation process is also affected by factors
related with implementation.
►While dealing with strategic choice, remember that past strategic
actions also determine the choice of strategy.
►Organizations tend to adopt those strategies which can be
implemented with the help of the present structure of resources
combined with some additional efforts. Such incremental changes,
over a period of time, take the organization from where it is to
where it wishes to be.

X. Issues in Strategy Implementation

A strategist, therefore, has to bring a wide range of knowledge, skills, attitudes, and abilities.
The implementation tasks put to
test the strategists' abilities to allocate resources, design
organisational structure, formulate functional policies,and to
provide strategic leadership.

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The strategic plan devised by the organization proposes the manner in which the strategies could
be put into action. Strategies, by themselves, do not lead to action. They are, in a sense, a
statement of intent. Implementation tasks are meant to realise the intent. Strategies, therefore,
have to be activated through implementation.

Strategies should lead to formulation of different kinds of programmes. A programme is a broad

term, which includes goals, policies, procedures, rules, and steps to be taken in putting a plan into
action. Programmes are usually supported by funds allocated for plan implementation.

Programmes lead to the formulation of projects. A project is a highly specific programme for
which the time schedule and costs are predetermined. It requires allocation of funds based on
capital budgeting by organizations. Thus, research and development programme may consist of
several projects, each of which is intended to achieve a specific and limited objective, requires
separate allocation of funds, and is to be completed within a set time schedule.

Implementation of strategies is not limited to formulation of plans, programmes, and projects.

Projects would also require resources. After resources have been provided, it would be
essential to see that a proper organizational structure is designed, systems are installed,
functional policies are devised, and various behavioural inputs are provided so that plans may
work.
Given below in sequential manner the issues in strategy implementation which are to be
considered:

Project Procedural Resource

implementation implementation allocation

Structural Functional Behavioural

implementation implementation implementation

►The above activities need not be performed one after other. They can be done
simultaneously as well.
►Strategy implementation requires shift in responsibility from Strategist to divisional and
functional managers/ employees.

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►This shift in responsibility may create implementation problem if new strategy comes as
surprise to them. Hence, divisional & functional managers should be involved as much as
possible in strategy formulation process.

►Similarly, strategists should also be involved in strategy implementation process.

►Strategist’s genuine personal commitment to implementation is necessary and Powerful

motivation for managers and employees.

►Major competitors' accomplishments, products, plans, actions, and performance should be

apparent to all organizational members. Major external opportunities and threats should be
clear, and managers and employees' questions should be answered satisfactorily.

►Top-down flow of communication is essential for developing bottom-up support.

►Firms need to develop a competitor focus on all hierarchical levels by gathering and widely
distributing competitive intelligence; every employee should be able to benchmark her or his
efforts against best-in-class competitors so that the challenge becomes personal. This is a
challenge for strategists of the firm. Firms should provide training for both managers and
employees to ensure that they have and maintain the skills necessary to be world-class
performers.

Strategic Change Through Digital Transformation

»Organizations are being pushed harder than ever to shift digitally in order to stay
competitive.
»Digital transformation, however, may be a difficult and complicated process. To guarantee
that projects for digital transformation are effective, change management is crucial.

XI. Strategic Change

The changes in the environmental forces often require businesses
to make modifications in their existing strategies and bring out
new strategies. Strategic change is a complex process that
involves a corporate strategy focused on new markets, products,
services and new ways of doing business.

Steps to initiate strategic change: For initiating strategic change, three steps can be
identified as under:

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Recognize the need for ►The first step is to diagnose which facets of the present
change corporate culture are strategy supportive and which are not.
►This basically means going for environmental scanning involving
appraisal of both internal and external capabilities may be
through SWOT analysis and then determining where the lacuna
lies and scope for change exists.
Create a shared vision ►Objective of both organization and individual should coincide
to manage change and there should not be any conflict.
►This needs creation of shared vision between organization and
management which needs to be communicated.
Institutionalise ►It is action stage that requires implementation of change
the change strategy.
►Change process should be monitored and in case of any
deviation, corrective action should be taken.

Kurt Lewin's Model of Change: To make the

change lasting, Kurt Lewin proposed three phases
of the change process for moving the organization
from the present to the future. These stages are
unfreezing, changing and refreezing.

Unfreezing ►Lewin proposed that change should not come as surprise to organization
the members as it lowers their morale.
situation ►Process of unfreezing makes individual aware of necessity for change &
help prepare for such change.
►It involves breaking down old attitude & behaviour, custom & tradition so
that they start clean slate and are willing to change.
►This can be achieved by making announcements and holding meetings
throughout the organization.
Changing to Once the unfreezing process has been completed and the members of the
the new organization recognise the need for change and have been fully prepared to
situation accept such change, their behaviour patterns need to be redefined H.C.
Kellman has proposed three methods for reassigning new patterns of
behaviour. These are compliance, identification and internalization.

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►Compliance: It is achieved by strictly enforcing the reward and

punishment strategy for good or bad behaviour. Fear of punishment, actual
punishment or actual reward seems to change behaviour for the better.
►Identification: Identification occurs when members are psychologically
impressed upon to identify themselves with some given role models whose
behaviour they would like to adopt and try to become like them.
►Internalization: Internalization involves some internal changing of the
individual’s thought processes in order to adjust to the changes introduced.
They have given freedom to learn and adopt new behaviour in order to
succeed in the new set of circumstances.
Refreezing ►It occurs when new behavior pattern becomes way of life.
►New behavior must replace former behavior completely & permanently.
►Change process is not one time process but a continuous one due to
dynamism and ever- changing environment.

How does digital transformation work?

The use of digital technologies to develop fresh, improved, or entirely new company
procedures, goods, or services is known as "digital transformation." It's a fundamental
adjustment that can be challenging to identify and even more challenging to implement.
Change management in the digital transition consists of four essential elements:
1. Defining the goals and objectives of the transformation
2 Assessing the current state of the organization and identifying gaps
3. Creating a roadmap for change that outlines the steps needed to reach the desired state
4. Implementing and managing the change at every level of the organization

How does change management work?

The role of change management in digital transformation, Digital transformation is a process
of organizational change that enables an organization to use technology to create new value
for customers, employees, and other stakeholders.
A good change management strategy is necessary for a successful digital transformation.
Change management is the process of planning, implementing, and monitoring changes in an
organization. It provides organizations in achieving their objectives while reducing risks and
disruptions. For any organisation undergoing a digital transition, change management is crucial.
A properly implemented change management strategy can help an organization to:
›Specify the parameters and goals of the digital transformation
›Determine which procedures and tools need to be modified.

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›Make a plan for implementing the improvements.

›Involve staff members and parties involved in the transformation process.
›Track progress and make required course corrections

A crucial component of any digital transition is changing management.

XII. Change Management Strategies for Digital Transformation

One of the most important areas of focus for guaranteeing a
successful transformation is changing management. In essence,
modern firms must be able to manage change. They must modify
their management techniques in order to achieve this.
The five best practices for managing change in small and
medium-sized businesses are:

The five best practices for managing change in small and medium-sized businesses are:
Begin at the ►A focused, invested, united leadership that is on the same page about
top the company's future is reflected in change that begins at the top.
►The culture that will motivate the rest of the organisation to accept
change can only be generated and promoted in this way.
Ensure that ►The fact that decision-makers are unaware of how to properly handle
the change is a digital transformation and the effects it will have on their firm is one
both necessary of the main causes of this.
and desired ►If a corporation doesn't have a sound strategy in place introducing too
much too fast can frequently become a major issue down the road.
Reduce ►Employee perceptions of what is required or desirable change can
disruption differ by department, rank, or performance history.
►It's crucial to lessen how changes affect staff.
►The introduction of new tactics or technologies intended to improve
management and corporate operations cause employee concern about
change.
It is possible to reduce workplace disruption by:
a. Getting the word out early and preparing for some interruption.
b. Giving staff members the knowledge and tools, they need to adjust
to change.
c. Creating an environment that encourages transformation or change

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d. Empowering change agents to provide context and clarity for changes,

such as project managers or team leaders.
e. Ensuring that IT department is informed of changes in technology or
infrastructure and is prepared to support them.
Encourage ►Create channels so that workers may contact you with queries or
communication complaints.
►Encourage departmental collaboration to propagate ideas and
innovations as new procedures take root.
►Communication promotes efficiency and has the power to influence
culture, just like your vision.
►The people who will be affected the most by these changes are
reassured that they are not in danger through effective communication,
which keeps everyone on the same page.
Recognize that ►Change readiness may be defined as "the ability to continuously initiate
change is the and respond to change in ways that create advantage, minimize risk, and
norm, not the sustain performance."
exception ►In order to keep up with the customers, businesses must also adapt
their operations.
►They must prepare for change in advance and expect them.
►It may run into difficulties because change is not a project but rather
an ongoing process.

How to manage change during transformation?

Any organisation may find the work of digital transformation challenging and overwhelming. To
ensure that a digital transition is effective, change management is essential. Here are some
pointers for navigating change during the digital transformation:

1. Specify the
2. Always,
digital 3. Be ready for
always, always
transformation's resistance
communicate
aims and objectives

5. Offer 4. Implement
assistance and changes
training gradually

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XIII. Organizational Framework

The McKinsey 7S Model refers to a tool that analyses
a company’s “organizational design.”
»›The McKinsey 7s Model focuses on how the
"Soft Ss" and "Hard Ss" elements are interrelated,
Suggesting that modifying one aspect might have a ripple effect on
the other elements in order to maintain an effective balance.
Hard elements are:
Strategy: What steps does the
company intend to take to address
current and futures challenges?
Structure: How is work divided, how do
different departments work and
collaborate?
Systems: Which formal and informal
processes is the company’s structure
based on?
Soft elements are:
Shared Values: What is the idea the
organization subscribes to? Is this idea
communicated credibly to others?
Staff: This element refers to
employee’s development and relevant
processes, performances and feedback
programs etc.
Skill: What is the company’s base of
skills and competencies?
Style: This depicts the leadership style
and how it influences the strategic
decisions of the organization.

The Hard elements are directly controlled by the management. The following elements are the
hard elements in an organization.
Strategy The direction of the organization, a blueprint to build on a core competency and
achieve competitive advantage to drive margins and lead the industry

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Structure Depending on the availability of resources and the degree of centralisation or

decentralization that the management desires, its choses from the available
alternatives of organizational structures.
Systems The development of daily tasks, operations and teams to execute the goals and
objectives in the most efficient and effective manner.
The Soft elements are difficult to define as they are more governed by the
culture. But these soft elements are equally important in determining an
organization's success as well as growth in the industry. The following are the
soft elements in this model;
Shared The core values which get reflected within the organizational culture or
Values influence the code of ethics of the management.
Style This depicts the leadership style and how it influences the strategic decisions
of the organisation. It also revolves around people motivation and organizational
delivery of goals.
Staff The talent pool of the organisation.
Skills The core competencies or the key skills of the employees play a vital role in
defining the organizational success.
But like any other strategic model, this model has its limitations as well;
✓ It ignores the importance of the external environment and depicts only the
most crucial elements within the organization.
✓ The model does not clearly explain the concept of organizational
effectiveness or performance.
✓ The model is considered to be more static and less flexible for decision
making.
✓ It is generally criticized for missing out the real’s gaps in conceptualization
and execution of strategy.

XIV. Organization Structure

Edson Spencer - The ideal organizational structure is a place where ideas filter up as well
as down, where the merit of ideas carries more weight than their source, and where
participation and shared objectives are valued more than executive order.
Changes in corporate strategy often require changes in the way an organization is structured
for two major reasons.

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FIRST SECOND
• Structure largely dictates how operational • Structure dictates how resources will
objectives and policies will be established be allocated to achieve strategic
to achieve the strategic objectives. objectives.
• Objectives and policies are stated largely • If an organization's structure is based
in terms of products in an organization on customer groups, then resources will
whose structure is based on product be allocated in that manner.
groups. • Similarly, if an organization's structure
• The structural format for developing is set up along functional business lines,
objectives and policies can significantly then resources are allocated by
impact all other strategy-implementation functional areas.
activities.

Chandler, changes in strategy lead to changes in organizational structure. Chandler found a

particular structure sequence to be often repeated as organizations grow and change strategy
over time. There is no one optimal organizational design or structure for a given strategy.
►Small firms tend to be functionally structured (centralized).
►Medium-size firms tend to be divisionally structured (decentralized).
►Large firms tend to use an SBU (strategic business unit) or matrix structure.

New strategy
is formed

Organizational New
performance administrative
improves problems emerge

A new Organizational
organizational
performance
structure is
established declines

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➢ Every firm is influenced by numerous external and internal forces. But no firm can change
its structure in response to each of these forces, because to do so would lead to chaos.
However, when a firm changes its strategy, the existing organizational structure may
become ineffective.
➢ Structure can also influence strategy.
➢ The following basic types of organizational structure: functional, divisional by geographic
area, divisional by product, divisional by customer, divisional process, strategic business
unit (SBU), and matrix.

Types of Organization Structure

• Organizational structure is the company's formal configuration of its intended roles,
procedures, governance mechanisms, authority, and decision-making processes.
• The most important issue is that the company's structure must be congruent with or fit
with the company's strategy.

Simple Functional Divisional Multi Divisional

structure Structure Structure Structure

Strategic
Hourglass Network Matrix Business Unit
structure Structure Structure (SBU)
Structure

A. Simple structure
Simple organizational structure is most appropriate for companies that follow a single-
business strategy and offer a line of products in a single geographic market.
Appropriate for companies implementing focused cost leadership or focused differentiation
strategies.
A simple organizational structure may result in competitive advantages for some small
companies relative to their larger counterparts. These potential competitive advantages
include a broad-based openness to innovation, greater structural flexibility, and an ability to
respond more rapidly to environmental changes.
However, if they are successful, small companies grow larger. Generally, there are significant
increases in the amount of competitively relevant information that requires processing. More

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extensive and complicated information-processing requirements place significant pressures on

owner- managers (often due to a lack of organizational skills or experience or simply due to
lack of time).
Thus, it is incumbent on the company’s managers to recognise the inadequacies or
inefficiencies of the simple structure and change it to one that is more consistent with
company’s strategy.

B. Functional Structure
A widely used structure in business organisations is functional type because of its simplicity
and low cost.
A functional structure also promotes specialization of labour, encourages efficiency, minimizes
the need for an elaborate control system, and allows rapid decision making

Chief Executive Officer

Corporate Corporate Strategic Corporate Corporate

R&D Finance Planning Marketing Human

Finance Production Engineering Accounting Sales & Human

Marketing Resource

The functional structure consists of a chief executive officer or a managing director and
supported by corporate staff with functional line managers in dominant functions such as
production, financial accounting, marketing, R&D, engineering, and human resources.
The functional structure enables the company to overcome the growth-related constraints of
the simple structure, enabling or facilitating communication and coordination.
However, compared to the simple structure, there also are some potential problems.
Differences in functional specialization and orientation may impede communications and
coordination.

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Functional specialists often may develop a myopic (or narrow) perspective, losing sight of the
company’s strategic vision and mission. When this happens, this problem can be overcome by
implementing the multidivisional structure.

C. Divisional Structure
The divisional structure can be organized in one of the four ways: by geographic area, by
product or service, by customer, or by process.

A divisional structure has some clear advantages.

• Accountability is clear. That is, divisional managers can be held

responsible for sales and profit levels. Employee morale is
First
generally higher in a divisional structure than it is in centralized
structure.

• the divisional design are that it creates career development

opportunities for managers, allows local control of local
Second
situations, leads to a competitive climate within an organization,
and allows new businesses and products in be added easily.

The divisional design is not without some limitations.

Perhaps the most important limitation is that a divisional structure is costly, for a number of
reasons.

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•Each division requires functional specialists who must be paid.

1

•There exists some duplication of staff services, facilities, and personnel; for
instance, functional specialists are also needed centrally (at headquarters) to
2 coordinate divisional activities.

•Managers must be well qualified because the divisional design forces delegation of
authority better-qualified individuals requires higher salaries.
• A divisional structure can also be costly because it requires an elaborate,
3 headquarters-driven control system.

• Certain regions, products, or customers may sometimes receive special

treatment, and it may be difficult to maintain consistent, companywide
4 practices.

A divisional structure by geographic area allows local participation in decision making and
improved coordination within a region.
The divisional structure by product (or services) is most effective for implementing strategies
when specific products or services need special emphasis. The divisional structure allows strict
control over and attention to product lines, but it may also require a more skilled management
force and reduced top management control.

Example, General Motors, DuPont, and Procter & Gamble use a divisional structure by product
to implement strategies. This structure allows an organization to cater effectively to the
requirements of clearly defined customer groups.

Example, book-publishing companies often organize their activities around customer groups
such as colleges, secondary schools, and private commercial schools. Some airline companies
have two major customer divisions: passengers and freight or cargo services. Bulks are often
organised in divisions such as personal banking corporate banking, etc.
A divisional structure by process is similar to a functional structure, because activities are
organized according to the way work is actually performed.

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However, a key difference between these two designs is that functional departments are not
accountable for profits or revenues, whereas divisional process departments are evaluated on
these criteria.

D. Multi Divisional Structure

Multidivisional (M-form) structure is composed of operating divisions where each division
represents a separate business to which the top corporate officer delegates responsibility
for day-to-day operations and business unit strategy to division managers.
The corporate office is responsible for formulating and implementing overall corporate
strategy and manages divisions through strategic and financial controls.
Multidivisional or M-form structure was developed in the 1920s, in response to coordination
and control-related problems in large firms. Costs were not allocated to individual products,
so it was not possible to assess an individual product's profit contribution.
Loss of control meant that optimal allocation of firm resources between products was difficult
(if not impossible). Top managers became over- involved in solving short-run problems (such as
coordination, communications, conflict resolution) and neglected long-term strategic issues.
Multidivisional structure calls for:
✓ Creating separate divisions, each representing a distinct business
✓ Each division would house its functional hierarchy,
✓ Division managers would be given responsibility for managing day-to-day operations;
✓ A small corporate office that would determine the long-term strategic direction of the
firm and exercise overall financial control over the semi- autonomous divisions.
Strategic control refers to the operational understanding by corporate officers of the
strategies being implemented within the firm's separate business units.
An increase in diversification strains corporate officers' abilities to understand the
operations of all of its business units and divisions are then managed by financial controls,
which enable corporate officers to manage the cash flow of the divisions through budgets and
an emphasis on profits from distinct businesses.

E. Strategic Business Unit (SBU) Structure

SBU concept is relevant for multiproduct, multi –business enterprise. It is a scientific grouping
of related businesses/ divisions which can be planned independently. A strategic business unit
(SBU) structure consists of at least three levels, with a
a) corporate headquarters at the top,
b) SBU groups at the second level, and
c) divisions grouped by relatedness within each SBU at the third level.

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When number of products become huge, it is not practical to provide separate strategic
treatment to each product.
It is necessary to group product/businesses into manageable number of strategically related
businesses.

The three most important characteristics of a SBU are:

▪ It is a single business or a collection of related businesses which offer scope for independent
planning and which might feasibly standalone from the rest of the organization.
▪ It has its own set of competitors.
▪ It has a manager who has responsibility for strategic planning and profit performance, and
who has control of profit-influencing factors.

When strategic planning was carried out treating territories as the units for planning, it gave
rise to two kinds of difficulties:
(i) since a number of territorial units handled the same product, the same product was getting
varied strategic planning treatments; and
(ii) since a given territorial planning unit carried different and unrelated products, products
with dissimilar characteristics were getting identical strategic planning treatment.
The SBU structure groups similar products into strategic business units and delegates
authority and responsibility for each unit to a senior executive who reports directly to the
chief executive officer. This change in structure can facilitate strategy implementation by
improving coordination between similar divisions and channelling accountability to distinct
business units.

A strategic business unit (SBU) structure consists of at least three levels, with a corporate
headquarters at the top, SBU groups at the second level, and divisions grouped by relatedness

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within each SBU at the third level. Within each SBU, divisions are related to each other, as
also that SBU groups are unrelated to each other. Within each SBU, divisions producing similar
products and/or using similar technologies can be organised to achieve synergy.

Example, Sony has been restructuring to match the SBU structure with its ten internal
companies as organised into four strategic business units. Because it has been pushing the
company to make better use of software products and content (e.g., Sony’s music, films and
games) in its televisions and audio gear to increase Sony's profitability. By its strategy, Sony
is one of the few companies that have the opportunity to integrate software and content
across a broad range of consumer electronics products.

The principle underlying the grouping is that all related products-related from the standpoint
of "function"-should fall under one SBU. The concept provides the right direction to strategic
planning by removing the vagueness and confusion often experienced in such multi-business
enterprises in the matter of grouping of the businesses.

F. Matrix Structure
Matrix structure is an O.S. where functional and projects/ products are combined
simultaneously. It aims at combining advantages of vertical and horizontal flow of authority
and communication.
In matrix structure, there are functional departments with permanent employees who are
assigned to work in different projects.

So, employees have two superiors i.e., a product/ project manager and functional manager. The
“home” department - that is, engineering, manufacturing, or marketing - is usually functional
& is reasonably permanent. People from these functional units are assigned temporarily to one
or more product units or projects.

Matrix structure is the most complex structure since there is both vertical & horizontal flow
of authority. It is appropriate when management concludes that other forms of Organisation
Structure is not right for implementation of strategy.

It is often found in an organization or within an SBU when the following three conditions exist:
i) ideas need to be cross fertilized across projects or products,
ii) resources are scarce, and
iii) abilities to process information and to make decision needs to be improved.

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It is widely used in many industries, including construction, healthcare, research and defence.

The matrix structure is often found in an organization or within an SBU when the following
three conditions exists:
1) Ideas need to be cross-fertilised across projects or products,
2) Resources are scarce and
3) Abilities to process information and to make decisions need to be improved.

For development of matrix structure Davis and Lawrence, have proposed three distinct
phases:
1. Cross-functional task forces: Temporary cross-functional task forces are initially used
when a new product line is being introduced. A project manager is in charge as the key
horizontal link.
2. Product/brand management: If the cross-functional task forces become more permanent,
the project manager becomes a product or brand manager and a second phase begins. In this
arrangement, function is still the primary organizational structure, but product or brand
managers act as the integrators of semi-permanent products or brands.
3. Mature matrix: The third and final phase of matrix development involves a true dual-
authority structure. Both the functional and product structures are permanent. All employees
are connected to both a vertical functional superior and a horizontal product manager.

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Functional and product managers have equal authority and must work well together to resolve
disagreements over resources and priorities.
However, the matrix structure is not very popular because of difficulties in implementation
and trouble in managing.

G. Network Structure

►A corporation organized in this manner is often called a virtual organization because it is

composed of a series of project groups or collaborations linked by constantly changing non-
hierarchical, cobweblike networks.
►The network structure becomes most useful when the environment of a firm is unstable and
is expected to remain so.
►The organization is, in effect, only a shell, with a small headquarters acting as a “broker”,
electronically connected to some completely owned divisions, partially owned subsidiaries, and
other independent organisation. In its ultimate form, the network organization is a series of
independent firms or business units linked together by a common system that designs,
produces, and markets a product or service.

Advantages Disadvantages
►Allows a company to concentrate on its own ►Availability of numerous partners can be a
competencies & outsourcing of other source of trouble.
functions to experts in their field. ►Outsourcing of functions may keep the
►It provides more flexibility and Firm away from discovering any synergies.
adaptability to meet/face rapid change in ►If a Firm overspecializes in only few
technology, taste and preferences. functions, there is a risk of choosing the

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►Most useful when environment of a Firm is wrong function and thus becoming non-
unstable. competitive.
►Low employee morale.

H. Hourglass Structure
►The role played by middle management is diminishing as the tasks performed by them are
increasingly being replaced by the technological tools. Hourglass organization structure
consists of three layers with constricted middle layer. The structure has a short and narrow
middle-management level.
►Information technology links the top and bottom levels in the organization taking away many
tasks that are performed by the middle level managers. A shrunken middle layer coordinates
diverse lower-level activities. Contrary to traditional middle level managers who are often
specialist, the managers in the hourglass structure are generalists and perform wide variety
of tasks.

Advantages Disadvantages
►Reduced cost due to reduction of middle ►Since size of middle management is
level management posts. reduced, promotion opportunity for lower-
►Enhanced responsiveness by simplifying level managers is also reduced.
decision making. ►Lower employee morale at lower level due
►Decision making authority is close to to monotony.
source of information, so it’s faster.

XV. Organization Culture

Every organisation has a unique organizational culture. It has its
own philosophy and principles, its own history, values, and rituals,
its own ways of approaching problems and making decisions, its
own work climate. Corporate culture refers to a company’s values,
beliefs, business principles, traditions, ways of operating, and

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internal work environment.

Where Does Corporate Culture Come From?

It is reflected or manifested comes from

Official policies and practices

Ethical standards

Management practices

Dealing with stakeholders i.e, relationship with employees, shareholders, vendors, trade union,
Government etc.

Employee’s attitude and behaviour

Legends people repeat about in organization

Peer pressure that exists in organization.

All the above sociological factors combine to form corporate culture.

Culture: ally or obstacle to strategy execution?

An organization's culture is either an important contributor or an obstacle to successful
strategy execution. The beliefs, vision, objectives, and business approaches and practices
underpinning a company's strategy may or may not be compatible with its culture.

XVI. Role of culture in strategy execution

►Strong culture promotes good strategy execution when there's fit and impedes execution
when there's negligible fit.
►Every company has a culture that has powerful influence on behaviour of managers. Culture
dictates not only the way managers behave within the organization but also decisions they
take.

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►Example, a culture where frugality and thrift are values strongly shared by organizational
members is very conducive to successful execution of a low-cost leadership strategy.
✓ A culture built around such business principles as
✓ listening to customers,
✓ encouraging employees to take pride in their work, and
✓ giving employees a high degree of decision-making authority is very conducive
✓ to successful execution of a strategy of delivering superior customer value.
►A strong strategy-supportive culture nurtures and motivates people to do their jobs in ways
conducive to effective strategy execution; it provides structure, standards, and a value
system in which to operate; and it promotes strong employee identification with the company's
vision, performance targets, and strategy.
►Employees are motivated to take challenging work to realize company’s vision & do their work
competently.
Perils of Strategy-Culture Conflict Creating a strong fit between strategy and
culture
≫The culture has to be changed as rapidly as ≫The strategy maker's responsibility to
can be managed this, of course, presumes select a strategy compatible with the
that it is one or more aspects of the culture "sacred" or unchangeable parts of prevailing
that are out of whack rather than the corporate culture.
strategy. ≫Strategy implementer's task, once
≫Correcting a strategy- culture conflict can strategy is chosen, to change whatever
occasionally mean revamping strategy to facets of the corporate culture hinder
produce cultural fit, more usually it means effective execution.
revamping the mismatched cultural features
to produce strategy fit.
≫A sizable and prolonged strategy-culture
conflict weakens and may even defeat
managerial efforts to make the strategy
work.
Changing a problem culture:
Changing a problem culture is very difficult because of the heavy anchor of deeply held values
and habits-people cling emotionally to the old and familiar.
It takes combined management efforts over a point of time to replace unhealthy culture with
healthy culture or remove unwanted aspects of problem culture and in still those which are
more supportive.

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Diagnose which facets Managers have to talk The talk has to be

First Step

Third Step
Second Step
of the present culture openly and forthrightly followed swiftly by
are strategy supportive to all concerned about visible aggressive action
and which are not. those aspects of the to identify and modify
culture that have to be the culture to create
changed. right strategy-culture
fit.

►The culture-changing actions includes

✓ Revising policies and procedures;
✓ Altering incentive compensation (to reward the desired cultural behaviour);
✓ Visibly praising and recognizing people who display the new cultural traits,
Recruiting and hiring new managers and employees;
✓ Replacing key executives who are strongly associated with the old culture, &
✓ Communicate the need and benefits to employees.

XVII. Strategic Leadership

Lao Tzu -A leader is best when people barely know he exists, when his work is done, his aim
fulfilled, they will say: we did it ourselves.
Strategic leadership sets the firms direction by
✓ developing and communicating vision of future,
✓ formulate strategies in the light of internal and external environment,
✓ brings about changes required to implement strategies and
✓ inspire the staff to contribute to strategy execution.
Leadership roles to play:

chief resource
Chief Culture
Visionary entrepreneur acquirer and
administrator builder
and strategist allocator

capabilities process crisis

spokesperson negotiator
builder integrator manager

policy head
motivator Arbitrator, policy maker
enforcer cheerleader

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A strategic leader is a change agent to initiates strategic changes in the organisations and
ensure that the changes successfully implemented.
Five leadership roles to play in pushing for good strategy execution:
Strategic leader is a change agent who ensure that the changes are successfully implemented.
Staying on top of what is happening, closely monitoring progress, solving out issues, and
learning what obstacles lie in the path of good execution.

Promoting a culture of esprit de corps that mobilizes and energizes organizational

members to execute strategy in a competent fashion and perform at a high level.

Keeping the Organization responsive to changing situation.

Exercising ethical leadership and insisting that the company conduct its affairs like a
model corporate citizen.

Pushing corrective actions to improve strategy execution and performance.

Leadership role in implementation: The strategic leaders must be able to use the strategic
management process effectively by guiding the company in ways that result in the formation
of strategic intent and strategic mission, facilitating the development and implementation of
appropriate strategic plans and providing guidance to the employees for achieving strategic
goals.

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Strategic leadership entails the ability to anticipate, envision, maintain flexibility, and
empower others to create strategic change as necessitated by external environment.

Competitive landscape, strategic leaders are challenged to adapt their frames of reference
so that they can deal with rapid, complex changes.

A manager’s frame of reference is the foundation on which a manager’s mindset is built. The
importance of a manager’s frame of reference can be seen if we perceive those competitive
battles are not between companies or products but between mindsets or managerial frames.
Effective strategic leaders must be able to deal with the diverse and cognitively complex
competitive situations that are characteristic of today’s competitive landscape.

A Strategic leader has several responsibilities, including the following:

Making strategic decisions. Formulating policies and action plans to
implement strategic decision.
Ensuring effective communication in the Managing human capital (perhaps the most
organisation. critical of the strategic leader's skills).
Managing change in the organisation. Creating and sustaining strong corporate
Sustaining high performance over time culture,

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The strategic leadership skills of a company's managers represent resources that affect
company performance.

Strategic leadership sets the firm's direction by developing and communicating a vision of
future and inspire organization members to move in that direction.

Two basic approaches to leadership

Transformational leadership style Transactional leadership style
It uses charisma and enthusiasm to inspire It uses the authority of its office to
people to work for good of Organization. exchange rewards such as pay, status
It is appropriate symbols etc.
►in turbulent/ unsafe environment or It is more appropriate
►in industries at start or end of PLC or ►in static environment, or
►In poorly performing organization. ►in mature industry; or
These leaders inspire employees by offering ►in organizations that are performing well.
excitement, vision, intellectual stimulation They prefer a more formalized approach to
and personal satisfaction. motivation, setting clear goals with explicit
They involve followers in mission and give rewards or penalties for achievement and
them vision of higher purpose so as to get non-achievement.
more dramatic changes in organization. These leaders try to build on existing culture
and enhance current practices.

XVIII. Strategic Control

Controlling is one of the important functions of management and is often regarded as the core
of the management process.
It involves monitoring the activity, measuring results against predefined standards, analysing
& correcting deviation as necessary & adapting the system.
It is a function intended to regulate & check and ensure that performance of planned activities
achieve pre-determined goals.

The process of control has the following elements:

(a) Objectives of the business system which could be operationalized into measurable and
controllable standards.
(b) A mechanism for monitoring and measuring the performance of the system.
(c) A mechanism,
(i) for comparing the actual results with reference to the standards

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(ii) for detecting deviations from standards and

(iii) for learning new insights on standards, themselves.
(d) A mechanism for feeding back information for taking corrective actions in order to ensure
the strategy is relevant & goals are achieved.
Primarily there are three types of organizational control, viz., operational control, management
control and strategic control.

Operational Control Management Control Strategic Control

Operational It is concerned with individual task or transaction as against total

Control management functions.
One of the ways to identify operational control area is there should be clear
cut & measurable relationship between input & output.
It ensures that processes are regulated within certain ‘tolerances’ limit.
Examples: Stock control (maintaining stocks between set limits), Production
control (manufacturing to set programmes), Quality control (keeping
product quality between agreed limits), Cost control (maintaining
expenditure as per standards), Budgetary control (keeping performance to
budget)
Management It is concerned with integrated activities of a complete department,
Control division or even organization. It is more aggregative & inclusive than
operational control.
It is a process by which management ensure that resources obtained are
used effectively and efficiently to achieve objectives.
Example: Inventory management
Strategic According to Schendel and Hofer "Strategic control focuses on the dual
Control questions of whether:
(1) the strategy is being implemented as planned; and
(2) the results produced by the strategy are those intended."
It is directed towards identifying problems and changes in premises and
making necessary adjustments.

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Types of Strategic Control:

Premise control Strategies are based on certain assumptions & premises with related to
environment in which they operate. Such premises may not remain valid
over a period of time.
Premise control is a tool for systematic and continuous monitoring of the
environment to verify the validity and accuracy of the premises on which
the strategy has been built
It primarily involves monitoring two types of factors:
(i) Environmental factors such as economic (inflation, liquidity, interest
rates), technology, social and legal-regulatory.
(ii) Industry factors such as competitors, suppliers, substitutes. verify
the validity & accuracy of the premise based on which strategy was
formed. It is neither feasible nor desirable to control all types of
premises in same manner.
Strategic It is unfocussed and involves general monitoring of environment & various
surveillance sources of information like financial newspaper business magazines etc.
to uncover unanticipated information which may affect the strategy.
Known as loose form of strategic control.
Strategic surveillance may be loose form of strategic control but is
capable of uncovering information relevant to the strategy.
Special alert Unexpected events like natural calamity, terrorist attack, change in
control government & other such events may force an organization to review &
reconsider their strategy.
To cope up with such crisis, organizations form a crisis team to handle
the situation.
Implementation It assesses need for change in overall strategy as per unfolding events &
control results of strategy It is not replacement of operational controls.
Strategic implementation control is not a replacement to operational
control. Unlike operational control, it continuously monitors the basic
direction of the strategy.
The two basic forms of implementation control are:
(i) Monitoring strategic thrusts: Monitoring strategic thrusts helps
managers to determine whether the overall strategy is progressing as
desired or whether there is need for readjustments.

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(ii) Milestone Reviews: All key activities necessary to implement

strategy are segregated in terms of time, events or major resource
allocation. It normally involves a complete reassessment of the strategy.
It also assesses the need to continue or refocus the direction of an
organization.

XIX. Strategic Performance Measures

SPM is a method that increases line executives' understanding of an organization's strategic
goals and offers a continuous system for tracking progress towards these objectives using
clear-cut performance measurements.
SPM helps to eliminate silos by establishing a common language among all divisions of the
organisation so they may communicate openly and productively. Strategic performance
measures are key indicators that organizations use to track the effectiveness of their
strategies and make informed decisions about resource allocation.
Key performance measures and indicators must be created, selected, combined into reports
and acted upon so that strategy implementation can have tangible outcomes.

Secondly
Firstly
• KPIs need to be carefully chosen
• There needs to be a clear cause
because they will influence the
and effect relationship between the
behaviour of people within the
indicators and strategic outcomes.
organisation.

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However, managers should be aware of paralysis by over analysis.

Managing the political aspects of implementing a strategy
People involved in the planning process for the implementation of a strategy may be affected
by two sets of forces.

Other hand, there could be

The "rational" forces of political forces concerned with
openness, communication, preserving empires and
fostering internal rivalry that
and self-analysis can exist urge knowledge retention,
on the one hand. selective communication, and
caution.

When these two techniques conflict, the politically acceptable aspects may end up in the
explicit strategy while the sensitive elements may form an unspoken plan that contains the
implicit strategy.
Types of Strategic Performance Measures
There are various types of strategic performance measures, including:
Financial Financial measures, such as revenue growth, return on investment
Measures (ROI), and profit margins, provide an understanding of the
organization's financial performance and its ability to generate profit.
Customer Customer measures, such as customer satisfaction, customer
Satisfaction retention, and customer loyalty, provide insight into the organization's
Measures ability to meet customer needs and provide high- quality products and
services.
Market Market measures, such as market share, customer acquisition, and
Measures customer referrals, provide information about the organization's
competitiveness in the marketplace and its ability to attract and retain
customers.
Employee Employee measures, such as employee satisfaction, turnover rate, and
Measures employee engagement, provide insight into the organization's ability to
attract and retain talented employees and create a positive work
environment.
Innovation Innovation measures, such as research and development (R&D)
Measures spending, patent applications, and new product launches, provide

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insight into the organization's ability to innovate and create new

products and services that meet customer needs.
Environmental Environmental measures, such as energy consumption, waste reduction,
Measures and carbon emissions, provide insight into the organization's impact on
the environment and its efforts to operate in a sustainable manner.

XX. Toward More Holistic Measures of Strategic Performance

Development of management thought and practice has persistently pushed the frontier of
strategic performance beyond financial metrics. Thus, the Triple Bottom Line framework
(TBL) emphasises People and Planetary Concerns besides profitability or Economic Prosperity
alone. The Quadruple Bottomline adds the 4th P to add a spiritual dimension named 'Purpose’.

The Importance of Strategic Performance Measures Strategic performance measures are

essential for organizations for several reasons:
Goal Alignment Strategic performance measures help organizations align their
strategies with their goals and objectives, ensuring that they are on
track to achieve their desired outcomes.
Resource Strategic performance measures provide organizations with the
Allocation information they need to make informed decisions about resource
allocation, enabling them to prioritize their efforts and allocate
resources to the areas that will have the greatest impact on their
performance.
Continuous Strategic performance measures provide organizations with a framework
Improvement for continuous improvement, enabling them to track their progress and
make adjustments to improve their performance over time.

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External Strategic performance measures help organizations demonstrate

Accountability accountability to stakeholders, including shareholders, customers, and
regulatory bodies, by providing a clear and transparent picture of their
performance.

Choosing the Right Strategic Performance Measures

Organizations should choose strategic performance measures that are aligned with their goals
and objectives and that provide relevant and actionable information. In selecting the right
measures, organizations should consider the following factors:
Relevance The measure should be relevant to the organization's goals and objectives
and provide information that is actionable and meaningful.
Data The measure should be based on data that is readily available and can be
Availability collected and analysed in a timely manner.
Data The measure should be based on high-quality data that is accurate and
Quality reliable.
Data The measure should be based on data that is current and up-to-date, enabling
Timeliness organizations to make informed decisions in a timely manner. These measures
provide a way for organizations to assess the success of their strategies,
identify areas for improvement, and make informed decisions about how to
allocate resources and adjust their strategies to achieve their desired
outcomes.

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Multiple Choice Questions

Study Material Study Material

1.______________leadership style may 2. An organizational structure with
be appropriate in turbulent environment. constricted middle level is:
(a) Transactional (a) Divisional structure
(b) Transformational (b) Network structure
(c) Autocratic (c) Hour Glass structure
(d) None of these (d) Matrix structure
Study Material Study Material, Mtp Nov 2020
3. You are the head of operations of a 4. Which of the following would be chosen
company. When you focus on total or by the core strategist to implement
aggregate management functions in the operational control: -
sense of embracing the integrated (a) Premise Control
activities of a complete department et al, (b Special Alert Control
you are practicing: - (c) Implementation Control
(a) Strategic Control (d) Budgetary Control
(b) Management control
(c) Administrative Control
(d) Operations Control
Study Material Study Material
5. Compliance, Identification and 6. Which one is NOT a type of strategic
Internalization are the three processes control?
involved in: (a) Operational control
(a) Refreezing (b) Strategic surveillance
(b) Defreezing (c) Special alert control
(c) Changing behaviour patterns (d) Premise control
(d) Breaking down old attitudes
Mtp1 Nov 2021,Mtp2 May 2022 Rtp Nov 2019
7. The philosophical base of strategic [Link] that is typically focused on
management falls within the concept of- present business scope and broadly
(a) Strategic Intent describes an organisation's present
(b) Portfolio Analysis capabilities, customer focus, activities,
(c) Globalisation and business makeup is:

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(d) Vision Statement a. vision

b. mission
c. strategy
d. goals
Rtp Nov 2020 Mtp2 May 2019/Rtp May 2019
[Link] Co. operates a network of [Link]
accounting training centres throughout a. is an internally-focused definition of the
Europe, the US and Australia. The organisation's societal goals
business intends to enter developing b. is a statement of a firm's unique purpose
markets in order to drive growth and has and scope of operations
now decided to enter India which is 7,500 c. does not limit the firm by specifying the
kilometres from the Training Co.'s UK industry in which the firm intends to
headquarters. The Board has suggested compete
that it will require externally focused d. is developed by a firm before the firm
management information to move into develops its strategic intent.
India. Which of the following is an
external factor(s) that the Board should
consider while implementing its strategy?
(a) Key local rivals and their strengths and
weaknesses
(b) Courses are suitable for this market
(c) Timing of the courses (Public holidays,
religious festivals, etc to be avoided)
(d) All of the above
Mtp2 May 2019 Mtp Nov 2019/Rtp May 2020
11. Objectives should be: [Link] one is not the element of
(i) Concrete and specific. strategic intent?
(ii) Related to time frame. (a) Business model
(iii) Standards for performance (b) Vision
appraisal. (c) Business definition
Which of the above statements are true: (d) Business standard
a. (i) & (ii).
b. (ii) & (iii).
c. (i) & (iii).
d. (i), (ii) and (iii)

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Mtp May 2020 Mtp Nov 2020

[Link] industries are analysing the [Link] of Infinite Care, an NGO,
technological forces for the firm which have met and determined that they need
may provide it opportunities and threats to formulate a philosophical basis for their
for which of the following stage/s of the activities. Thereby they have come up with
strategic management process? a statement: - “Provide children till age
(a) Strategy formulation 12, living in homeless or low-income
(b) Strategy implementation situations, with the essential items they
(c) Strategy evaluation need to thrive – at home, at school and at
(d) All of the above play '' Identify the area of strategic
intent, which the members have stated?
(a) Vision
(b) Business Definition
(c) Goal and Objective
(d) Mission
Mtp1 May 2021 Mtp1 Nov 2022
[Link] vision and mission, [Link], the owner of Kalakaar
identifying an organisation’s external boutiques, delegated tasks as per the
opportunities and threats, and determining competencies of her team. What is she
internal strengths and weaknesses are: covering here?
(a) SBU planning (a) Risk
(b) Strategy formulation (b) Work Culture
(c) Strategy implementation (c) Employee friendly vision
(d) Business process reengineering (d) Proper use of mission statement
Mtp2 Nov 2022 Rtp May 2019
[Link] an earnest attempt to bring in a [Link] strategic management process is:
strategic change in your organisation, you, (a) a solution that guarantees prevention of
the operational head of XYZ ltd, organisational failure.
succeeded but still your organisation (b) concerned with resources, capabilities,
couldn’t achieve the desired competitive and competencies, but not the conditions in
position in the market. Out of the following its external environment.
what could be the reason? (c) not to be used in not-for-profit
(a) Strategy Formulation organisations.
(b) Strategy Model (d) full set of commitments, decisions, and
(c) Strategy Implementation actions related to the firm

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(d) Strategy Decision

Rtp May 2019 Mtp2 May 2019
[Link] of the following statements is [Link] is a transformational leader?
not true about strategic decisions? a. Someone who is involved in organizational
(a) They need top-management involvement. change.
(b) Involve commitment of organisational b. A leader, who provides new ways of
resources. carrying out management.
(c) They are based on external environment c. A leader who inspires the workers to new
(d) They have insignificant impact on the levels by offering them a vision of a better
long-term prosperity future.
d. A leader who tries to transform their
staff by giving them rewards for what they
do.
Rtp May 2019 Mtp Nov 2019
[Link] of the following situations will 22.______________leadership style may
most likely suit a transformational leader? be appropriate in a turbulent environment.
(a) An organization that is in trouble. (a) Transactional
(b) A growing organization. (b) Transformational
(c) An organization in a stable environment. (c) Autocratic
(d) An organization at the maturity stage of (d) None of these
the product life cycle.
Mtp Nov 2019/Rtp Nov 2020 Mtp May 2020/Rtp Nov 2022
23.A person who searched for business [Link] of the following is more radical
opportunity and starts a new enterprise to organization design and is also called as
make use of that opportunity is called non-structure which virtually eliminates in-
(a) Employee house business functions and outsources
(b) Entrepreneur many of them?
(c) Intrapreneur (a) Network structure
(d) Investor (b) Strategic business unit
(c) Hourglass structure
(d) Simple structure
Rtp May 2020 Rtp May 2020
[Link] entrepreneur is one who: [Link] strategic management, there are
(a) Initiates and innovates a new concept. two main styles of leadership. These are
transformational and:

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(b) Does not recognize and utilizes (a) Transparent

opportunities. (b) Transitional
(c) Does not want to face risks and (c) Translational
uncertainties. (d) Transactional
(d) None of these.
Mtp1 May 2021 Mtp2 May 2021
27.A corporation organized in network [Link] and Lawrence have proposed
structure is often called three distinct phases for development of
(a) Virtual organization matrix structure.
(b) Hierarchical organization These phases are
(c) Structured organization (1) Cross-functional task forces
(d) Simple organization (2) Product/brand management and
(3)______.
(a) Market/external management
(b) Functional matrix
(c) Mature matrix
(d) Internal management
Mtp1 Nov 2021 Mtp1 May 2022
[Link], the owner of Kalakaar 30.J&P, a western wear brand has
boutiques, wanted to reduce uncertainty of contracted Pee Kaw marketing firm from
their business strategy for which she Singapore, product design team working as
gathered a lot of information from peers, an outsource company from Mexico and
groups, industry reports and experts. But Humans branding company taking care of
it did not give her comfort to take up new its people’s operations. What kind of
strategies. What tool can help her in this structure is this?
regard? (a) Hourglass Structure
(a) Risk Analysis (b) Outsourcing
(b) BCG Analysis (c) Network Structure
(c) ADL Matrix (d) Tree Branch Structure
(d) Scenario Analysis
Mtp2 May 2022 Mtp1 Nov 2022
31.A strategic business unit is a grouping [Link], a social media marketing
of ________ businesses. firm introduced an AI based management
(a) unrelated tool that has the capabilities of managing
(b) differentiated teams across functions all while being

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(c) related creative. What is the most likely

(d) None of these organizational structure post this
implementation?
(a) Divisional
(b) Matrix
(c) Hourglass
(d) Network
Mtp2 Nov 2022/Rtp May 2022 Mtp2 Nov 2022
[Link], a hearing aid manufacturer [Link] culture refers to:
recently introduced an AI based (a) Company’s values and beliefs
management tool that has the capabilities (b) Company’s business principles
of managing teams across functions. What (c) Internal work environment
could be their new organizational structure (d) All the above
post this implementation?
(a) Divisional Structure
(b) Matrix Structure
(c) Hourglass Structure
(d) Network Structure
Mtp2 May 2019/Rtp May 2019 Rtp May 2020
[Link] of the following is not a phase in [Link] an earnest attempt to bring in a
Kurt Lewin’s Model of Change? strategic change in your organization, you,
a. Changing the operational head of XYZ ltd,
b. Deep freezing succeeded but still your organization
c. Refreezing couldn’t achieve the desired competitive
d. Unfreezing position in the market. Out of the following
what could be the reason?
(a) Strategy Formulation
(b) Strategy Model
(c) Strategy Implementation
(d) Strategy Decision
Rtp Nov 2020 38. Generally, result of strategic
[Link] Limited is a health implementation are seen on which basis?
provider and has only large, edge of town a) Short-term
hospitals. It is considering setting-up b) long term
additional small city center clinics capable c) Both (a) & (b)

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of treating less-serious day cases. Which d) None of these

of the following will fall under “Strategy
Implementation”?
(1) Acquiring and fitting out clinics
(2) Hiring and/or transferring staff
(3) Publicity, so that patients know where
and when to go
(4) Liaison with general practitioners and
the main hospitals
(a) Only (d)
(b) (b) & (d)
(c) (a), (b) & (d)
(d) (a), (b), (c) & (d)
39. Which of these implies blueprint of the 40. Which is the end result that
company’s future position & despite organization want to achieve ?
organization’s aspirations? a) Goals
a) Vision b) Objectives
b) Mission c) Vision
c) Goals & Objectives d) Mission
d) Business Model

Suggested Answer
Q1 Q2 Q3 Q4 Q5 Q6 Q7 Q8 Q9 Q10
b c b d c a a b d a
Q11 Q12 Q13 Q14 Q15 Q16 Q17 Q18 Q19 Q20
d d d d b d c d d c
Q21 Q22 Q23 Q24 Q25 Q26 Q27 Q28 Q29 Q30
a b b a a d a c d c
Q31 Q32 Q33 Q34 Q35 Q36 Q37 Q38 Q39 Q40
c c c d c c d b a a

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Case Study Multiple Choice Questions

Case 1
Connect Innovations Pvt. Ltd., a Mumbai-based technology company, is entering the
competitive landscape of the Indian smartphone market under its brand name "Poppy." The
company is well aware of the influx of Chinese manufacturers dominating the smartphone
industry. Given the recent global sentiment shift due to the COVID-19 pandemic, Connect
Innovations plans to position Poppy as a patriotic choice, proudly promoting it as the "Desi"
smartphone of India.

The company's strategic arm conducted a thorough industry analysis, revealing that Chinese
brands had completely captured the budget phone segment. However, there was still an
untapped opportunity in the lower segment of smartphones. To address this, Connect
Innovations is introducing two models: Poppy A and Poppy B, priced at ₹4,499 and ₹5,499,
respectively.

Recognizing the risk of imitation by competitors, Connect Innovations has assembled a team
of marketing professionals to devise a strategy. Their proposed solution is to capitalize on the
first-mover advantage by investing significant sums in advertising and promotions.

Additionally, to safeguard their business from potential disruption, Connect Innovations

decided to expand their product line to include "desi" themed smartphone covers and
accessories alongside Poppy smartphones. They made substantial investments in the
manufacturing of these accessories. The company's investors set a target of achieving annual
sales volumes of 15,000 handsets and 70,000 pieces of accessories.

While the accessory sales exceeded expectations, Poppy A and Poppy B did not receive the
anticipated response. As a result, the leadership has decided to shift their focus, scaling back
on smartphone production and concentrating primarily on the accessories business.

With this new direction, the "Desi" tag remains vital for success. Connect Innovations aims to
establish strong barriers to entry for other domestic players. They plan to ramp up production
significantly, driving down unit costs and enabling cost leadership through volume.

Questions
1. Connect Innovations Pvt. Ltd. entered a 2. In which stage of strategic management
saturated market of smartphones, after a are annual sales volume objectives
due market study of understanding the especially important in this case?
competitive landscape. Put the below steps Answer 1: Formulation

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in correct sequence of understanding the Answer 2: Control

competitive landscape. Answer 3: Evaluation
I. Understand the competitors Answer 4: Implementation
II. Determining strengths and weaknesses
of the competitors
III. Identify the competitors
IV. Put all information gathered together
Answer-1: (I), (III), (II), (IV)
Answer-2: (III), (I), (II), (IV)
Answer-3: (II), (III), (IV), (I)
Answer-4: (I), (III), (II), (IV)
3. The decision of Connect Innovations to 4. Considering the results from the
shift to a new core business with a focus market, which category of BCG's growth
on more profitable ventures falls under share matrix does the accessories business
which category of business strategy? of Connect Innovations fall into?
Answer-1: Retrenchment strategy Answer 1: Star
Answer-2: Strategic alliance Answer-2: Question mark
Answer-3: Diversification strategy Answer-3: Cash cow
Answer-4: Market development Answer - 4: Dog
5. In phase two of shifting the business
focus to peripheral accessories production,
Connect Innovations has planned to
implement which barrier to discourage
potential competitors?
Answer-1: Capital requirement
Answer-2: Product differentiation
Answer-3: Access to distribution channels
Answer 4: Economies of scale

Suggested Answer
Q1 Q2 Q3 Q4 Q5
d a c c d

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Case 2
KingLike WLL, a renowned Dubai-based construction company, has carved a niche for itself in
the real estate market by specializing in residential complexes. It's now poised to introduce
a groundbreaking concept called "Vilartment" a unique blend of private villas and - apartments
tailored to meet the growing demand of married couples seeking to cohabit with their parents,
offering spacious living within a single residential unit.

The company's impressive competitive advantage lies in its substantial land purchasing power,
setting it apart from its rivals. Furthermore, KingLike engages top-tier Italian designers,
whose exceptional work is safeguarded by patents, making the replication of KingLike's
properties a formidable challenge.

Recognizing the potential of this innovative concept, KingLike positions the Vilartment project
as a distinct business unit within its operations. A talented workforce, strategically placed at
various levels, is dedicated to overseeing the unit's functions. The ambitious plan aims to
construct approximately 15,000 Vilartments over the next three years, with 50% of them
immediately ready for occupancy upon completion.

The marketing team has taken an ingenious approach, enlisting major Bollywood and Hollywood
celebrities to grace the foundation stone ceremony of the Vilartment, scheduled for next
month. This event will receive extensive coverage from global media outlets, including print
and social media platforms, a move aimed at attracting potential buyers worldwide.

With meticulous planning and efficient teams prepared for execution, the management exudes
confidence in the project's success. The Vilartment initiative aspires to solidify KingLike
WLL's position as a leading global real estate company.

Questions
Igor Ansoff gave a framework which Core competency is built on multiple know-
describes the intensification options hows and is an integration of many
available to a firm. Which of them did resources. As per C.K. Prahalad and Gary
KingLike use for its intensification Hamel. KingLike has expert teams and huge
strategy? buying capacity. Which amongst the
Answer-1: Market penetration following is not an area where core
Answer-2: Product development competency is identified?
Answer-3: Market development Answer-1: Customer value

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Answer-4: Diversification into new products Answer-2: Application of competencies

Answer-3: Market development
Answer-4: Competitor differentiation
3. Different personnel have been deployed 4. _________ is the answer to the basic
at respective levels in the project working question "what business we are and what
as a business unit. Answer, Divisional we do". Many businesses fail to
managers and staff are a part of which of conceptualize this, and it requires clarity.
the following strategic levels in the The company, however, has clarity on the
organization? same. Fill in the blank with the correct
Answer-1: Corporate level option.
Answer-2: Functional level Answer 1: Vision
Answer-3: Business level Answer-2: Mission
Answer-4: Consultant level Answer-3: Strategy
Answer-4: Planning
5. Vilartment shall function as a strategic
business unit (SBU), being one of the key
businesses of the company. Which of the
following is not a characteristic of a
strategic business unit?
Answer-1: It is a combination of two or more
independent businesses.
Answer-2: The planning for the business is
done separately.
Answer-3: It has its own set of competitors.
Answer 4: It has its own manager responsible
for strategy and profits.

Suggested Answer
Q1 Q2 Q3 Q4 Q5
d c c b a

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Case 3
Hareeyali Pvt. Ltd. is a pioneering company dedicated to transforming corporate spaces into
greener environments through innovative infrastructural designs and products. Established
recently, it boasts six visionary founders. While the company's middle management team
consists of just four individuals, over fifty dedicated professionals operate on the ground,
specializing in client relationship management and delivery coordination.

In this emerging industry, GreenZone Pvt. Ltd. is currently at the forefront. With an
impressive portfolio of 800 designs catering to fifty clients, GreenZone's production facility
churns out an astounding 3000 units per day. While GreenZone has enjoyed a monopoly for
some years, the industry anticipates significant growth as more corporations adopt eco-
friendly initiatives.

Hareeyali has made commendable strides in its operations but faces a challenge in securing a
suitable production facility. The key to unlocking its potential lies in formulating a strategic
approach that addresses industry gaps and explores untapped opportunities. The founders are
resolutely committed to making their mark in every corporate entity across India.

The expansion plan is divided into three phases, beginning with the targeted markets of Delhi
NCR and Mumbai. Recognizing the unique needs of the working class in these cities, the
strategy team has identified a crucial aspect-personalization. This insight has led Hareeyali
to focus on tailor-made designs for companies, setting them apart from standardized
offerings provided by competitors.

Additionally, Hareeyali has introduced the Green Card Points System, an innovative initiative
where employees who choose to incorporate their products into their workspaces accumulate
points. These points can be redeemed for purchases of herbal and organic products from
leading online platforms.

The company has experienced robust growth in the past year and now aims to expand its reach
through both online and offline channels. This multifaceted approach positions Hareeyali for
even greater success in the coming years.

Questions
1. GreenZone has been the leader in the 2. Hareeyali's Green points system falls
industry and has deployed some barriers to under which strategic marketing technique?
entry on new players wanting to tap into Answer-1: Service marketing
this new growing industry. Apparently, Answer-2: Person marketing
Hareeyali has been struggling on the very Answer 3: Direct marketing
same front and thus, the barrier's Answer-4: Augmented marketing
magnitude increases. Which of the

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following is a barrier to entry used by

GreenZone?
Answer-1: Product differentiation
Answer-2: Switching costs
Answer 3: Economies of scale
Answer - 4: Brand identity

3. What demonstrates the strategic intent 4. The management structure of Hareeyali

of Hareeyali's founders in their is apparently like any other company with
commitment to make their mark in every a lot of founders/top management, as the
corporate entity across India? middle office work is undertaken by

Answer-1: Setting specific financial goals business automation. It does reduce costs,
but the lower management has fewer
Answer-2: Focusing on tailored designs for
opportunities to grow. Based on that, which
companies
of the following is the organizational
Answer-3: Formulating a strategic approach
structure of Hareeyali?
to address industry gaps
Answer-1: Network structure
Answer 4: The vision to reach every
Answer-2: Matrix structure
corporate entity
Answer-3: Divisional structure
Answer-4: Hourglass structure
5. Intensity of rivalry determines the
attractiveness and profitability of an
Industry. The rivalry between the two
companies is furious and the profitability
shall be low because of all the below
factors, except:
Answer-1: Variable costs of business
Answer-2: GreenZone is currently the
industry leader
Answer 3: The industrys growth is slow
Answer-4: Companies are planning product
differentiation
Suggested Answer
Q1 Q2 Q3 Q4 Q5
c d d d a

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