MODULE II

Strategic intent is the term used to describe the

aspirational plans, overarching purpose or intended
direction of travel needed to reach an organisational
vision. (Direction, Discovery, Destiny)
 Stretch, Leverage & Fit (Hamel &
Prahalad)
✔ The Strategic fit is the conventional way of perceiving a
strategy. It is a compromise between the opportunities
present in the external environment and organisation's
internal capabilities. (Nokia)

✔ Stretch refers to setting ambitious goals or targets that are

beyond one’s current capability or comfort zone. (Samsung)

✔ Leverage is to maximize the efficiency and effectiveness of

available resources in the most advantageous way.
Leverage is the act of concentrating, complementing,
safeguarding and recovering the scarce resources of an
organisation in such a manner that the organisation can
stretch those resources so as to attain the ultimate goal.
 Vision
“Vision animates, inspires, transforms purpose into
action.” – Warren Bennis

Proctor and Gamble: Be, and be recognized as, the

best consumer products and services company in
the world.
Google: To provide access to the world’s
information in one click.
Kraft Heinz Foods: To be the best food company,
growing a better world.
 Mission
• A mission outlines the reasons for the
organization’s existence and explains what
role it plays in society.
Starbucks: To inspire and nurture the human
spirit – one person, one cup, and one
neighborhood at a time.
Walmart: To save people money so they can live
better.
 Strategic Planning Stages
1. Environmental appraisal : Both internal and external
analysis of the firm is performed during the exercise. A
forecast is also built for future trends.
2. Generation of Strategic Alternatives: The firm seeks a
number of strategic alternatives in the light of the firm’s
business, industry and competition.
3. Assessment of Strategic Alternatives: At this stage, the
firm evaluates various strategies on the basis of
cost-benefits.
1. Will it improve the firm’s position or market share?
2. Will it increase existing strengths?
3. Will it bring new opportunities?
4. Will it maximize shareholder’s wealth?
4. Selection of Strategy: The optimum strategy is selected
at this stage, among various alternative strategies.
Environmental Analysis/Appraisal

Refers to a collection of methods that managers use to

analyze an organization's internal and external
environment to understand the organization's
capabilities, customers, and business environment.

Internal environment: Factors within the organisation

that impact strengths or cause weaknesses of a
strategic nature.
External environment: Factors outside the
organisation which provide opportunities or pose
threats to the organisations.
 Environmental Scanning
• Documentation / secondary sources of data
• Mass media
• Internal sources (files & documents)
• External sources (agencies)
• Formal studies (sponsored research)
• Spying & surveillance (Industrial espionage)
COMPETITIVE ADVANTAGE
 Core competence
Fundamental skills/abilities
(capabilities)

Competitive Advantage
 • Competitive advantage refers to factors that allow a company to produce
goods or services better or more cheaply than its rivals. These factors
allow the productive entity to generate more sales or superior margins
compared to its market rivals. Competitive advantages are attributed to a
variety of factors including cost structure, branding, the quality of product
offerings, the distribution network, intellectual property, and customer
service.
• Competitive advantage is what makes an entity's products or services
more desirable to customers than that of any other rival.
• Competitive advantages can be broken down into comparative advantages
and differential advantages.
✔ Comparative advantage is a company's ability to produce something more
efficiently than a rival, which leads to greater profit margins.
✔ A differential advantage is when a company's products are seen as both
unique and of higher quality, relative to those of a competitor.
3 Areas to check core competencies:

✔ Competitor differentiation (unique/inimitable)

✔ Customer Value (fundamental benefit - impact –
value – beyond expectation)
✔ Application of competencies to other markets
(leveraged)

• HUL
• Zepto
• Amazon
• IKEA
• Apple
• HUL – Marketing & Sales
• Zepto – Ultra-fast delivery, a strategically
located network of dark stores, and the
use of advanced technology (AI).
• Amazon – Distribution & Logistics
• IKEA – Innovative customer home
solutions
• Apple – Integrated software & hardware &
research…for exclusivity
INTERNAL FACTORS ANALYSIS
SUMMARY (IFAS)

(1) SWOT ANALYSIS

 SWOT analysis
Albert Humphrey (1960s and 1970s)
Strength : Weakness:
✔An inherent capacity which an ▪An inherent limitation or constraint
organisation can use to gain strategic which creates strategic
advantage. disadvantages
✔Superior to competition & relevant to
customer ▪Inferior to competitors & causing
dissatisfaction to customers

Opportunity: Threat:
✔ Favourable condition that Unfavourable condition that
helps the organisation creates a risk or can cause
consolidate and strengthen damage to the organisation
its position
 Assign the following environmental factors into
the correct SWOT matrix
1. New Technology 8. Gaps in capabilities
2. Loss of key staff 9. Unfulfilled needs
3. Good reputation among (customers) in the
customers market
4. Financial deadlines 10. Overdependence on
5. Unexpected shifts in single product line
customers tastes 11. Unfavourable legislation
6. Loosening of regulations 12. New competitors
7. Experienced & 13. Low morale
knowledgeable staff 14. Adequate resources
15. Good vendor
relationships
 SWOT analysis (planning)
Weakness:
Strength :
Loss of key staff
Good reputation among customers Financial deadlines
Experienced & Knowledgeable staff Gaps in capabilities
Adequate resources Overdependence on single product line
Good vendor relationships Low morale

Opportunity: Threat:

New Technology
New Technology
Unexpected shift in customer tastes
Loosening of regulations
Unfavourable legislation
Unfulfilled customer needs New competitors
INTERNAL FACTORS ANALYSIS
SUMMARY (IFAS)

(2) TOWS MATRIX

TOWS matrix (action)
Heinz Weirich (1982)
• Internal Strengths and External Opportunities (S-O) – how can
they use the strengths to benefit from existing external
opportunities?

• Internal Strengths and External Threats (S-T) – how can they

benefit from their strengths to avoid or lessen (potential) external
threats?

• Internal Weaknesses and External Opportunities (W-O) – how can

they use opportunities to overcome the organisation’s internal
weaknesses?

• Internal Weaknesses and External Threats (W-T) – how can they

minimise weaknesses and thus avoid potential threats?
INTERNAL FACTORS ANALYSIS
SUMMARY (IFAS)

(3) VALUE CHAIN ANALYSIS

 Value Chain Analysis
(Michael S. Porter – 1985)
Value chain analysis is a means of evaluating each of the activities
in a company’s value chain to understand where opportunities for
improvement lie.
Conducting a value chain analysis prompts you to consider how
each step adds or subtracts value from your final product or
service. This, in turn, can help you realize some form of
competitive advantage, such as:

✔ Cost reduction, by making each activity in the value chain more

efficient and, therefore, less expensive

✔ Product differentiation, by investing more time and resources

into activities like research and development, design, or marketing
that can help your product stand out
 To recap…
Value Chain = Primary activities + Support activities

Evaluate every activity to consider how much value

it is adding to the customer. Those that add value
should be retained….those that do not add value
have to be pruned/discarded.

Margin = Value to customer – Cost of Production

(Greater the value….greater the margin
Lesser the cost……greater the margin)
EXTERNAL FACTORS ANALYSIS
SUMMARY (EFAS)

(1) PESTEL ANALYSIS

PEST Analysis
EXTERNAL FACTORS ANALYSIS
SUMMARY (EFAS)

(2) Portfolio Analysis

 Portfolio analysis
Corporate entity – portfolio of businesses under a
corporate umbrella

Portfolio analysis – a set of techniques that help:

• Strategic decision making for products &
businesses in a firm’s portfolio
• Competitive analysis between the products/SBUs
for purpose of resource allocation

BCG & GE Nine cell matrix most popular

 BCG (Growth-Share) matrix
(Bruce Henderson - 1968)
SBUs are classified into 4 categories based on
combinations of market growth & market
share relative to the largest competitor.

Market share = cash generation

Market growth = cash usage
 The 4 Quadrants
• Dogs ( Low MG - Low MS)

• Question marks ( High MG -

- Low MS)

• Stars ( High MG - High MS)

• Cash cows (Low MG - High

MS)
• [Link]
pple-inc/
 GE/McKinsey Nine cell matrix
(stoplight strategy matrix) 1970
Industry attractiveness: Business Strength/Competitive
1. Market size and growth position:
rate 1. Relative market share
2. Industry profit margin 2. Profit margins
3. Competitive intensity 3. Competitive ability (price
4. Seasonality quality)
5. Cyclicality 4. Competitive strengths &
6. Economies of scale weaknesses
7. PEST factors 5. Technological capability
8. Entry/exit barriers 6. Calibre of management
7. Brand equity
PORTER’s 5 FORCES MODEL
Porter’s 5 forces model (1979)