Strategic Management Module 3
Formulating Corporate-Level Strategy: Balanced Score Card: A Balanced Approach
Grand Strategies: Strategic Alternatives, Growth/Expansion Strategy, Diversification Strategy,
Stability Strategy, Retrenchment Strategy, Turnaround Strategies, Combination Strategies.
Formulating Business Level Strategy: Porter’s Competitive Strategies, 12 Competitive
Advantage, Competitive Advantage Factors, How to Build or Acquire Competitive Advantage?
Acquiring Core Competence, Low-Cost Strategies, Differentiation Strategies, Focus Strategies.
1) GRAND STRATEGIES
Grand Strategies (also known as Corporate Strategies) are the overall, long-term plans that
guide an organization’s major actions and decisions to achieve its mission and objectives. They
provide a directional path for growth, stability, or retrenchment at the corporate level.
“Grand strategies are the master plans through which an organization aims to achieve its long-
term objectives.”
— Pearce and Robinson
1. Strategic Alternatives (Definition)
These are the broad choices available to a firm to move toward its goals. They help
management decide how to compete, where to grow, and how to allocate resources
effectively.
The major strategic alternatives include:
• Growth/Expansion Strategy
• Diversification Strategy
• Stability Strategy
• Retrenchment Strategy
• Turnaround Strategy
• Combination Strategy
2. Growth / Expansion Strategy
A strategy pursued when the firm aims to increase its overall business size, sales, profit, or
market share.
The company expands its operations either internally (through product development or market
penetration) or externally (through mergers, acquisitions, or strategic alliances).
Types of Growth:
• Internal Growth: Through innovation, new product launches, or entering new markets.
• External Growth: Through mergers, acquisitions, or joint ventures.
Example:
• Reliance Industries expanding into the telecom sector through Jio and later into retail
and green energy.
• Amazon expanding into cloud computing (AWS).
3. Diversification Strategy
A strategy where a company enters into new markets with new products, often to reduce risk
or capitalize on new opportunities.
It helps in spreading business risk by reducing dependency on a single product or market.
Types of Diversification:
• Concentric Diversification: Related to existing business (e.g., Samsung making
smartphones and TVs).
• Conglomerate Diversification: Unrelated to existing business (e.g., Tata Group in steel,
hotels, and IT).
• Horizontal Diversification: Adding related products at the same production level (e.g.,
Coca-Cola introducing new beverages).
Example:
• ITC Ltd. diversifying from tobacco into FMCG, hotels, and paperboards.
4. Stability Strategy
A strategy where the firm decides to maintain its current position and focus on improving
efficiency rather than expanding.
It is used when the firm is performing well, the environment is stable, or the management
wants to consolidate gains before the next growth phase.
Example:
• Hindustan Unilever (HUL) maintaining its strong position in FMCG by focusing on brand
loyalty rather than entering new markets.
5. Retrenchment Strategy
A defensive strategy adopted when the firm faces declining performance, losses, or changing
market conditions, requiring reduction in operations.
Types of Retrenchment:
1. Turnaround Strategy: Reviving the business through cost-cutting and reorganization.
2. Divestment Strategy: Selling off unprofitable units.
3. Liquidation Strategy: Closing down operations entirely.
Example:
• Air India before privatization reduced unprofitable routes (divestment).
• Nokia adopted a turnaround strategy by partnering with Microsoft.
6. Turnaround Strategy
A revival plan to restore profitability and competitiveness after a period of decline.
The firm takes corrective actions like reducing costs, restructuring management, improving
product quality, or introducing innovation.
Example:
• Apple Inc. under Steve Jobs in 1997 successfully turned around by launching innovative
products like the iMac and iPod.
• IBM restructured its business model to focus on software and IT services.
7. Combination Strategy
A strategy where the firm adopts a mix of several strategies simultaneously for different
divisions or time periods.
Common for large diversified firms managing multiple business units under varying market
conditions.
Example:
• Tata Group: Expanding in EVs (growth), maintaining leadership in IT (stability), and
exiting low-profit ventures (retrenchment).
• General Electric (GE): Used growth and divestment strategies across different sectors.
Balanced Scorecard: A Balanced Approach
The Balanced Scorecard (BSC) is a strategic management tool developed by Robert Kaplan and
David Norton (1992).
It provides a comprehensive framework that measures an organization’s performance not only
from a financial perspective, but also through non-financial aspects such as customers, internal
processes, and learning & growth.
The Balanced Scorecard translates an organization’s vision and strategy into a comprehensive
set of performance measures that provides the framework for a strategic measurement and
management system.”
— Kaplan and Norton
Traditional performance systems focused mainly on financial measures (profits, ROI, etc.).
However, the Balanced Scorecard includes four perspectives, creating a balanced approach
between financial and non-financial indicators, between lagging and leading indicators, and
between internal and external performance.
Balanced Approach Explained
The Balanced Scorecard ensures balance in several ways:
1. Balance between Financial and Non-Financial Goals – Profitability with customer
satisfaction.
2. Balance between Short-Term and Long-Term Goals – Quarterly profits with long-term
innovation.
3. Balance between Internal and External Factors – Internal efficiency with market
competitiveness.
4. Balance between Lag Indicators and Lead Indicators – Past performance with future
capabilities.
Example
Example: Apple Inc.
• Financial: Revenue growth from new product lines.
• Customer: High satisfaction through user-friendly design.
• Internal Processes: Streamlined supply chain.
• Learning & Growth: Employee innovation and R&D culture.
Advantages
• Aligns business activities with vision and strategy.
• Improves organizational communication and focus.
• Encourages continuous improvement.
• Measures both tangible and intangible assets.