Module 1

Introducing strategy- What is strategy; Strategic

management; Strategic management in different
contexts; challenges
What is strategy and why is it important?
 The history of strategy

The first treatises that discuss strategy are from the Chinese during the period of 400 – 200 B.C.
Sun Tzu’s The Art of War, written in 400 B.C. has received critical acclaim as the best work on military strategy,
including those that have followed it centuries later.
 Strategy?

Our strategy is to be the low cost service provider. We are pursuing a Global strategy.
Strategy?

The Company’s strategy is to integrate a set of Our strategy is to provide unrivalled customer service
Regional acquisitions.
Strategy?

Our strategic intent is to always be the first mover. Our strategy is to move from Defense to Industrial applications
Strategy?

Our strategy is to Internationalize Our strategy is to consolidate our Industry

Strategy?

Our strategy is to ramp up our R&D Budget Our strategy is to outsource more of our production
Strategy Break in IPL

Strategic Timeout
A new signal to indicate the strategic Like previous seasons of the IPL, the strategic timeout consists
timeout session was necessitated since of two and a half minutes for each team in the innings. The
the earlier signal of showing ‘T’ with bowling side can ask for a timeout between the sixth and the
both hands clashes with the decision ninth over of the innings whereas the batting side can ask for a
review system. timeout between overs 13 and 16. Hence, there are four
timeouts in an IPL match.
What Do We Mean By “Strategy”?

• Consists of competitive moves and business

approaches used by managers to run the company
• Management’s “action plan” to
 Grow the business
 Attract and please customers
 Compete successfully
 Conduct operations
 Achieve target levels of
organizational performance
The How's That Define a Firm's Strategy

• How to grow the business

• How to please customers
• How to outcompete rivals
• How to manage each functional
piece of the business (R&D, production,
marketing, HR, finance, and so on)
• How to respond to changing market conditions
• How to achieve targeted levels of performance
Choosing the “How's” of Strategy

• Strategic choices about “how” are based on

 Trial-and-error organizational learning about
what has worked and what
has not worked
 Management’s appetite for taking risks
 Managerial analysis and strategic thinking about
how best to proceed,
given market conditions and
the company’s circumstances
In choosing a strategy, management is in effect saying:
“Among all the many different business approaches and ways of
competing we could have chosen, we have decided to employ this
particular combination of competitive and operating approaches in moving
the company in the intended direction, strengthening its market position,
and competitiveness, and boosting performance.”
Key Elements of a Successful Strategy

 Developing a successful strategy hinges on

making competitive moves aimed at
 Appealing to buyers in ways to set the
enterprise apart from rivals and
 Carving out its own market position
 Involves developing a distinctive “aha”
element to
 Attract customers and
 Produce a competitive edge

Copying competitive moves of other successful companies rarely works!

Strategy and the Quest for Competitive Advantage

• The heart and soul of any strategy are the actions and moves in
the marketplace that a company makes to strengthen its
competitive position and gain a competitive advantage over rivals
• A creative distinctive strategy that sets a company apart from
rivals and yields a competitive advantage is a company’s most
reliable ticket to above average profitability
• Competing with a competitive advantage is more profitable
than competing with no advantage
• Competing with a competitive disadvantage nearly always
results in below-average profitability
A Powerful Strategy Leads to Sustainable
Competitive Advantage

 A company achieves sustainable competitive advantage when an

attractive number of buyers prefer its products/services over those of
rivals and when the basis for this preference can be maintained over time
 Its nice when a strategy produces a temporary competitive edge but
a durable edge over rivals greatly enhances a company’s prospects
for winning in the marketplace and realizing above-average profits

What separates a powerful strategy from an ordinary

strategy is management’s ability to forge a series of
moves, both in the marketplace and internally, that
produces sustainable competitive advantage!
 Building
Four “Best” Strategic Approaches to
Sustainable Competitive Advantage
 Being the industry’s low-cost provider (a cost-based
competitive advantage)
 Incorporate differentiating features (a “superior
product” type of competitive advantage keyed to higher
quality, better performance, wider selection, value-
added services, or some other attribute)
 Focusing on a narrow market niche (winning a
competitive edge by doing a better job than rivals
of serving the needs and preferences of
buyers comprising the niche)
 Developing expertise and resource
strengths not easily imitated or matched by rivals
(a capabilities-based competitive advantage)
 Competitive Advantage Examples
 Strive to be the industry’s low-cost provider
 Big Bazaar
 Indigo Airlines
 Outcompete rivals on a key differentiating feature
 Johnson & Johnson – Reliability in baby products (?)
 Harley-Davidson – King-of-the-road styling
 Rolex – Top-of-the-line prestige
 Mercedes-Benz – Engineering design and performance
 Maruti Cars – Good value
 [Link] – Wide selection and convenience
Competitive Advantage Examples (contd.)
• Focus on a narrow market niche
• Natural Ice Cream of Juhu Beach – Natural & non-
synthetic
• Kayani’s Shrewsberry Biscuits of Pune – Special
cookies
• Dr. Scholl’s – Special Needs footwear
• Develop expertise, resource strengths, and
capabilities not easily imitated by rivals
• FedEx – Next-day delivery of small packages
• Dabbawalas of Mumbai – Reliable, inexpensive and
error-free (virtually six-sigma)
 Definitions of strategy

Sources: A.D. Chandler, Strategy and Structure: Chapters in the History of American Enterprise, MIT Press, 1963, p. 13; M.E. Porter, ‘What is strategy?’,
Harvard Business Review, November–December 1996, p. 60; P.F. Drucker, ‘The theory of business’, Harvard Business Review, September–October
1994, pp. 95–106; H. Mintzberg, Tracking Strategies: Towards a General Theory, Oxford University Press, 2007, p. 3.
The 5 P’s of Strategy model was developed by the Canadian management
scientist Henry Mintzberg with an objective to develop five distinguished
strategic visions for the organizations.

The Five strategic visions are:

Plan, Pattern, Position, Perspective, and Ploy.

All the five components allow the organizations to implement the strategy in a
more effective manner.
Strategy as a Plan • Planning is an essential part of the strategy formulation
process, so take time to Brainstorm new opportunities.
Tools like PEST Analysis, SWOT Analysis and practical
business planning can help you to formulate an effective
strategy.
• A plan is probably the way in which most people use the
word strategy.
• Some business strategies follow this model. ‘Planners’
tend to produce internal documents that detail what the
company will do for a period of time in the future (say five
years).
• It might include a schedule for new product launches,
acquisitions, financing (i.e. raising money), human
resource changes, etc.
 • Mintzberg says that getting the better of
Strategy as a Ploy competitors, by plotting to disrupt, dissuade,
discourage, or otherwise influence them, can be
part of a strategy. This is where strategy can be a
ploy, as well as a plan.
• For example, a grocery chain might threaten to
expand a store so that a competitor doesn't move
into the same area; or a telecommunications
company might buy up patents that a competitor
could potentially use to launch a rival product.
• A ploy is generally taken to mean a short-term
strategy.
• It tends to have very limited objectives and it may
be subject to change at very short notice.
Strategy as a Ploy • Mintzberg describes a ploy as ‘‘a manoeuvre
intended to outwit an opponent or competitor’’.
• He points out that some companies may use ploy
strategies as threats.
• For example, they may threaten to decrease the
price of their products simply to destabilize
competitors.
• A boss may threaten to sack an employee if a
certain performance standard is not met – not
because the boss intends to carry out the threat,
but because he wants to effect a change in the
subordinate’s attitude.
Strategy as a pattern

• Strategic plans and ploys are both deliberate

exercises. Sometimes, however, strategy
emerges from past organizational behavior.
Rather than being an intentional choice, a
consistent and successful way of doing
business can develop into a strategy.
• A ‘pattern of behavior’ strategy is one in which progress is made by adopting a consistent form of
behavior.
• Unlike plans and ploys, patterns ‘just happen’ as a result of the consistent behavior.
• On a simple level, small businesses such as scrap dealers follow pattern strategies.
• They are unlikely to produce elaborate plans – they simply buy as much scrap metal as they can.
• If there is a batch of old scaffolding, then they buy it up without thinking about it.
• However, they would not buy old plastics because that would be outside their pattern of
business behavior.
• Eventually, following this consistent behavior makes the scrap dealer a wealthy person – a
successful strategy.
• Such patterns of behavior are sometimes unconscious, meaning that they do not even realize
that they actually following a consistent pattern.
• Nevertheless, if it proves successful, it is said that the consistent behavior has emerged into a
success.
• This is in direct contrast to planning behavior.
Strategy as a Position
• "Position" is another way to define strategy – that
is, how you decide to position yourself in the
marketplace. In this way, strategy helps you
explore the fit between your organization and your
environment, and it helps you develop a
sustainable competitive advantage.
• For example, your strategy might include
developing a niche product to avoid competition,
or choosing to position yourself amongst a variety
of competitors, while looking for ways to
differentiate your services.
• When you think about your strategic position, it
helps to understand your organization's "bigger
picture" in relation to external factors.
• A position strategy is appropriate when the most important thing to
an organization is how it relates to, or is positioned with respect to,
its competitors or its markets (i.e. its customers).
• In other words, the organization wishes to achieve or defend a
certain position.
• In business, companies tend to seek such things as market share,
profitability, superior research, reputation, etc.
Strategy as a perspective
• Perspective strategies are about changing the
culture (the beliefs and the ‘feel’, the way of
looking at the world) of a certain group of
people – usually the members of the
organization itself.
• Some companies want to make their
employees think in a certain way, believing
this to be an important way of achieving
success.
• They may, for example, try to get all
employees to think and act courteously,
professionally or helpfully.
• For example - an organization which encourages risk-taking and
entrepreneurship may find itself leading the way in the market due to its
production of far more innovative products than its competitors.

• Whereas an organization that operates are more rigid, uniform structure,

based around systems and processes, may get a lot of business due to the
quality by which it performs necessary services or through the
manufacture of high quality, reliable products.
Chandler’s definition

Strategy is the determination of the basic

long-term goals and objectives
of an enterprise, and the adoption of
courses of action and the allocation of
resources necessary for carrying out these
goals. (Chandler, 1962;
emphasis added)
3 components of strategy – 1st

• The determination of the basic long-term goals concerns

the conceptualization of coherent and attainable strategic
objectives.
• Without objectives, nothing else can happen.
• If you do not know where you want to go, how can you act
in such a way as to get there?
2nd and 3rd

• The adoption of courses of action refers to the actions taken

to arrive at the objectives that have been previously set.

• The allocation of resources refers to the fact that there is

likely to be a cost associated with the actions required to
achieve the objectives.
• If the course of action is not supported with adequate levels
of resource, then the objective will not be accomplished.
Resources • Resource inputs are the inputs that are essential
to the normal functioning of the organizational
process.
• Financial resources – money for capital
investment and working capital; sources include
shareholders, banks, bondholders.
• Human resources – appropriately skilled
employees to add value in operations and to
support those that add value
• (e.g. supporting employees in marketing,
accounting, personnel, etc.);
• Sources include the labor markets for the
appropriate skill levels required by the
organization;
Resources • Physical (tangible) resources – land, buildings
(offices, warehouses, etc.), plant, equipment,
stock for production, etc.;
• Sources include estate agents, builders, trade
suppliers, etc.;
• Intellectual (intangible) resources – inputs that
cannot be seen or felt but which are essential for
continuing business success, such as ‘know-how’,
legally defensible patents and licenses, brand
names, registered designs, logos, ‘secret’
formulations and recipes, business contact
networks, databases.
Theoretical perspectives of strategy: Five distinct but often interrelated strands to strategy theory can be
identified:

Planned strategy (also called deliberate or prescriptive);

Competitive positioning strategy;
Core competence-based strategy (or resource-based or distinctive capability);
Emergent strategy (or learning);
Knowledge-based strategy.

Although the literature of strategic management sometimes presents these approaches as discrete and
even as in conflict with each other, it is more useful to view them as interdependent and, in many ways,
complementary and mutually enriching.

Each approach represents a different perspective and provides analytical frameworks through which
managers can gain greater understanding of the strategic capabilities of their organizations.

It is useful at this stage to consider each approach and its contribution to strategic thinking.
 • The prescriptive, deliberate or planned approach is
Planning approach based on long-term planning which seeks to achieve a
‘fit’ between organizational strategy and the
environment in which it operates.
• This approach views strategic management as a highly
systematized and deterministic process.
• The prescriptive paradigm of strategic management has
been criticized as being unrealistic, particularly in times
of rapid and turbulent change.
• Nevertheless, the need to set long-term objectives and
to formulate broad plans and policies is necessary for
the survival and progression of any organization.
• Detailed and inflexible long-term planning is, on the
other hand, unnecessary and often counterproductive.
• Competitive advantage can be gained by being
opportunistic and taking advantage of unforeseen
opportunities.
Competitive positioning approach

• The competitive positioning paradigm, drawing

largely on the work of Porter (1980, 1985),
dominated strategic management in the 1980s.
• It emphasized the idea of ‘strategic fit’ between
the organization and its environment so as to
achieve competitive advantage, referring to this as
‘competitive positioning’.
• The approach is often described as ‘outside-in’ as
the initial emphasis is on analysis of the
environment before determining how to achieve
a strategically desirable position.
The emergent or learning approach
• This is based upon the view that the modern dynamic
and hypercompetitive business environment will
inevitably mean that there will be a gap between
‘planned’ and ‘realized’ or actual strategies.
• A rapidly changing environment means that
organizations must incrementally change and adapt
strategy on the basis of organizational learning.
• This does not preclude ‘deliberate’ strategic planning
completely but implies that strategic plans must be
flexible, guiding the overall direction of the
organization, but adapted when changing
circumstances dictate.
Core competence approach
• In the 1990s, a strong movement developed which
suggested that competitive advantage arises from
an organization’s internally developed core
competences or distinctive capabilities rather than
from its environment.
• This approach suggests that the core competence
of the organization is of far greater importance.
• The approach is ‘inside-out’, suggesting that
businesses seeking competitive advantage must
first examine and develop their own distinctive
resources, capabilities and competences before
exploiting them in their environment.
Learning and knowledge-based
• What is required is an holistic view of strategy that
embraces all facets of the organization (resources,
capabilities, core competences and activities) and
its interactions with the environment (customers,
suppliers, competitors, government, legislation,
technology, etc.).
• This holistic approach is embraced by the learning
or knowledge-based approach to strategic
management which has developed in recent years.
• This approach suggests that competitive
advantage depends upon the development of new
and superior knowledge through the processes of
organizational learning.
It is useful at this stage to understand what characterizes strategic decisions.

Management decisions within any organization can be classified into three

broad (and sometimes overlapping) categories:

strategic, tactical and operational.

These can be illustrated as a hierarchy in which higher-level decisions tend to

shape those at subordinate levels
 • Strategic decisions are concerned with the
Strategic level acquisition of sustainable competitive advantage,
which involves the setting of long-term corporate
objectives and the formulation, evaluation,
selection and monitoring of strategies designed to
achieve those objectives.
• Strategic decisions are made by senior managers
(usually directors), they affect the whole
organization, are long-term in nature, are complex
and are based upon uncertain information.
• Managers at the strategic level require multi
conceptual skills – the ability to consider the
effects of multiple internal and external influences
on the business and the possible ways in which
strategy can be adjusted to account for such
influences.
Tactical level

• Tactical decisions are concerned with how corporate objectives are to

be met and how strategies are implemented.
• They are dependent upon overall strategy and involve its fine-tuning
and adjustment.
• They are made at head of business unit, department or functional area
level and affect only parts of the organization.
• They are medium-term in timescale, semi-complex and usually involve
some uncertainty, but not as much as at the strategic level.
Operational level

• Operational decisions are concerned with the shorter-term

objectives of the business and with its day-to-day management.
• They are dependent upon strategy and tactics.
• These decisions are made at junior managerial or supervisory
level, are based on a high degree of certainty and are not
complex.
• The procedures in a sales office are typical operational activities
– processing orders that have a tactical purpose in pursuit of the
overall strategy.
Comparison of strategic, tactical and operational decisions
 Why Do Strategies Evolve?

 A company’s strategy is a work in progress

 Changes may be necessary to react to
 Shifting market conditions
 Technological breakthroughs
 Fresh moves of competitors
 Evolving customer preferences
 Emerging market opportunities
 New ideas to improve strategy
 Crisis situations
A Company’s Strategy Is
Partly Proactive and Partly Reactive
Business strategy
• A business strategy is an outline of the actions and
decisions a company plans to take to reach its
goals and objectives.
• A business strategy defines what the company
needs to do to reach its goals, which can help
guide the decision-making process for hiring as
well as resource allocation.
• A business strategy helps different departments
work together, ensuring departmental decisions
support the overall direction of the company.
Why is a business strategy important?
• Planning: A business strategy helps you identify the key steps to take to reach your business
goals.
• Strengths and weaknesses: The process of creating a business strategy allows you to
identify and evaluate your company's strengths and weaknesses so you can create a
strategy that optimizes your strengths and compensates for or eliminates your weaknesses.
• Efficiency: A business strategy allows you to effectively allocate resources for your business
activities, which automatically makes you more efficient. It also helps you plan ahead for
deadlines, allocate job roles and stay on track for your project goals.
• Control: Creating a business strategy gives you more control over choosing the kinds of
activities that will directly help you reach your goals, as well as allows you to easily assess
whether your activities are getting you closer to your goals.
• Competitive advantage: By identifying a clear plan for how you will reach your goals, you
can focus on capitalizing on your strengths, using them as a competitive advantage that
makes your company unique in the marketplace.
Business strategy example- cross-sell more
products
• Some organizations focus on selling additional
products to the same customer.
• Cross-selling works well for office supply
companies and banks, as well as online retailers.
• By increasing the amount of product sold per
customer, you can increase the average cart size.
• Even a small increase in cart size can have a
significant impact on profitability, without having
to spend money to acquire more new customers.
Business strategy example-most innovative
product/service
• Many companies, particularly in the
technology or automotive space, are
distinguishing themselves by creating the
most cutting-edge products.

• In order to use this as your business strategy,

you will need to define what "innovative" will
mean for your organization or how you're
innovative.
Few more….
Grow sales from new products
• Some companies like to invest in research and development in order to
constantly innovate, even with their most successful products. This type of
strategy involves introducing new products into the market and updated
products that are able to keep up with trends.

Improve customer service

• This can be a good business strategy if your business has had a problem
delivering quality customer service. Some companies have even built a
strong reputation for having exceptional customer service. Usually,
companies have a problem in one specific area, so a business strategy that's
focused on improving customer service will usually have objectives that
center around things like online support or a more effective call center.
Few more….
Cornering a young market
• Some large companies are buying out or merging competitors to corner a young
market. This is a common strategy used by Fortune 500 companies to gain an
advantage in a new or rapidly growing market. Acquiring a new company allows
a larger company to compete in a market where it didn't previously have a
strong presence while retaining the users of the product or service.

Product differentiation
• Product differentiation is a common business strategy, especially for business-
to-consumer (B2C) businesses. They can differentiate their products by
highlighting the fact that they have superior technology, features, pricing or
styling.
Few more….
Pricing strategies
• When it comes to pricing, businesses can either keep their prices low to attract more
customers or give their products aspirational value by pricing them beyond what most ordinary
customers could afford. If companies plan to keep their prices low, they will need to sell a much
higher volume of products, as the profit margins are usually very low. For companies who
choose to price their products beyond the reach of ordinary customers, they are able to
maintain the exclusivity of their product while retaining a large profit margin per product.

Technological advantage
• Obtaining a technological advantage, you can often achieve better sales, improved productivity
or even market domination. This can mean investing in research and development, acquiring a
smaller company to gain access to their technology or even acquiring employees with unique
skills that will give the company a technological advantage.
Few more….
Improve customer retention
• It's generally far easier to retain a customer than spend money to attract a new
one, which is why this is a great strategy if you see opportunities for
improvement in customer retention. This strategy requires you to identify key
tactics and projects to retain your customers.

Sustainability
• You could launch an entire business strategy aimed at increasing the
sustainability of your business. For example, the objective could be to reduce
energy costs or decrease the company's footprint by implementing a recycling
program.
Corporate strategy • A corporate strategy is a plan that helps an organization
decide what markets it wants to enter and how. Businesses
often use corporate strategies when they are trying to
diversify, or enter a new market. This strategy guides a
company's growth. A corporate strategy typically includes:

 What market the organization wants to compete in

 How different business units can add more value to the
organization
 How entering a new market can make the company more
competitive
 The timing and pace of the company's growth
• Business stakeholders and upper-level management use
corporate strategies to decide what industries they should be
involved with and how to acquire business units that can
help it be successful.
Examples of corporate strategy- Growth
• Rahul’s car dealership is a successful company, and
he wants to further expand his company through
the growth strategy.
• First, he implements vertical integration, which
means he controls the supply chain for his
company's production.
• To do this, Rahul purchases a plant that produces car
parts and a plant that produces car accessories.
• Next, Rahul diversifies his car dealership by
producing other vehicles, like buses and
motorcycles. By implementing these steps, Rahul
grows his company through ownership and
increased sales.
Example of corporate strategy - Stability

• Sheetal works for a cellphone business that is

currently thriving.
• Sales are growing steadily, and the cost of
production is low.
• Due to this success, Sheetal wants to incorporate
the stability strategy.
• She plans to follow the same process she has
employed without diversifying or changing the
business.
• Instead, Sheetal wants to invest in the business
process model to continue to expand the
organization at a consistent pace.
Example of corporate strategy - Retrenchment
• Deepak recently took over his brother's bakery. His
brother was a risky owner, and he took a few
actions that decreased business instead of
increasing it.
• To reduce future risk, Deepak implements the
retrenchment strategy.
• He starts by removing the unnecessary costs for
the bakery, such as the unused equipment.
• He then tries to alter the course of the bakery by
revising the marketing strategy and advertising to a
new target audience who is more likely to buy
baked goods.
Differences between business strategy vs.
corporate strategy
• Business and corporate-level strategies differ primarily in their objectives.
• A business strategy focuses on competing in the marketplace, while a corporate
strategy focuses on business growth and profits.
• Corporate strategies function at a higher level than business strategies.
• Managers should develop business strategies, however, with the overall
corporate strategy in mind because their decisions affect the entire business
plan and reflect the organization's shared goals.
Objectives
• Mid-level managers, such as • Small businesses sometimes create
department heads, use business corporate strategies to guide their
strategies to achieve objectives and growth and accomplish their goals until
goals within their departments or they are big enough to need business
divisions. strategies.
• This strategy is useful for a variety of • Large-scale companies need business
company units. strategies to help its various units and
• Upper-level managers, such as chief departments achieve their specific
executive officers, use corporate goals.
strategies to help their companies • This is because each department might
grow according to their vision. have different objectives and,
• This strategy applies to the entire therefore, require a different strategy
organization. for its products or services.
Duration
• Business strategies are generally short term, while corporate strategies are long term.
• Managers create business strategies to solve current or routine operations issues and reach
measurable objectives, such as gaining a certain amount of new customers or revenue.
• These strategies are valuable for helping teams achieve temporary and continually changing
goals that allow them to compete in a certain section of the market.

• Company leaders design corporate strategies to reach competitive in market

• Long-term goals, such as profit maximization, and solve comprehensive issues affecting the
entire organization, like growth and diversification.
• A corporate strategy is usually long-lasting and based on a permanent company vision. The
CEO or stakeholders might measure this strategy's success over many years.
Focus
• A business strategy focuses on:
• Creating value for the consumer
• Being competitive in the market by offering customers a product or service that's unique to their
competitors' products
• Cost leadership, or having the best prices in the industry

• A corporate strategy focuses on:

• Creating more value for the company
• Growing the organization through diversification or expansion
• Maximizing profits
• Downsizing or reducing spending as needed
• Basically, a business strategy focuses on how a company plans to compete in a market, while a
corporate strategy focuses on the markets it wants to enter and the businesses it wants to compete
with.
 Uses
• Managers can use business strategies to:

• Create a clear business plan for employees and department leaders to follow
• Assess their products, target audience and competition so they can identify their
competitive advantage
• Gain a better understanding of their current business model and its strengths,
opportunities and areas for improvement
• Determine the resources and steps required to be more competitive in the market
• Solve common department-level problems
• Motivate and inspire their employees through achievable goals
• Attract new investors
• Demonstrate their success and credibility through measurable results
 Uses
• Company leaders can use corporate strategies to:

• Clearly define the space the company wants to occupy within an industry
• Give managers guidance for reaching long-term goals
• Establish and meet stakeholder and investor expectations
• Improve efficiency by combining departments, sharing resources or buying or selling
business units
• Determine the direction, speed, timing and extent of the company's growth
• Investigate new business opportunities
• Decide what companies to compete with and how to enter and win markets
Benefits

• The benefits of creating a business strategy include:

• Having clear direction

• Making better business decisions
• Gaining a competitive advantage in the market
• Improving a product or service's performance
• Satisfying customers
• Satisfying and retaining employees
Benefits

• The benefits of creating a corporate strategy include:

• Ensuring efficient operations

• Providing long-term sustainability
• Ensuring the company follows its vision and mission statement
• Maximizing profits
• Minimizing risk
• Improving management
Strategic planning
• Strategic planning is the art of creating specific
business strategies, implementing them, and
evaluating the results of executing the plan, in
regard to a company’s overall long-term goals or
desires.

• It is a concept that focuses on integrating various

departments (such as accounting and finance,
marketing, and human resources) within a
company to accomplish its strategic goals.
Strategic planning process

• The development and execution of

strategic planning are typically viewed as
consisting of being performed in three
critical steps:

1. Strategy formulation
2. Strategy implementation
3. Strategy evaluation
Strategy formulation
• In the process of formulating a strategy, a company
will first assess its current situation by performing
an internal and external audit.
• The purpose of this is to help identify the
organization’s strengths and weaknesses, as well
as opportunities and threats (SWOT Analysis).
• As a result of the analysis, managers decide on
which plans or markets they should focus on or
abandon, how to best allocate the company’s
resources, and whether to take actions such as
expanding operations through a joint venture or
merger.
Strategy implementation
• After a strategy is formulated, the company needs
to establish specific targets or goals related to
putting the strategy into action, and allocate
resources for the strategy’s execution.

• The success of the implementation stage is often

determined by how good a job upper management
does in regard to clearly communicating the
chosen strategy throughout the company and
getting all of its employees to “buy into” the desire
to put the strategy into action.
Strategy evaluation • Any savvy business person knows that success today
does not guarantee success tomorrow. As such, it is
important for managers to evaluate the performance of
a chosen strategy after the implementation phase.
• Strategy evaluation involves three crucial activities:
reviewing the internal and external factors affecting the
implementation of the strategy, measuring
performance, and taking corrective steps to make the
strategy more effective.
• For example, after implementing a strategy to improve
customer service, a company may discover that it needs
to adopt a new customer relationship management
(CRM) software program in order to attain the desired
improvements in customer relations.
Strategic management

• By the term strategic management we mean, the

process that helps the organization to assess their
internal and external business environment forms
strategic vision sets objectives, establish direction,
formulate and implement strategies that are
aligned towards the achievement of the goals of
the organization.

• The figure provided explains the strategic process,

in the sequence of various stages.
Comparison chart
Basis for Strategic planning Strategic management
comparision
Meaning Strategic Planning is a future oriented Strategic Management implies a bundle of decisions
activity which tends to determine the or moves taken in relation to the formulation and
organizational strategy and used to set execution of strategies to achieve organizational
priorities. goals.

Stresses on stresses on making optimal strategic stresses on producing strategic results, new markets,
decisions. new products, new technologies etc.
Management Strategic planning is a management by Strategic management is a management by results.
plans.
Process Analytical process Action-oriented process

Function Identifying actions to be taken. Identifying actions to be taken, the individuals who
will perform the actions, the right time to perform
the action, the way to perform the action.
The Five Generic Competitive Strategies

Where to Play?

How to Win?
 Low-Cost Provider Strategies
Keys to Success

• Make achievement of meaningful lower costs

than rivals the theme of firm’s strategy

• Include features and services in product

offering that buyers consider essential

• Find approaches to achieve a cost advantage

in ways difficult for rivals to copy or match

Low-cost leadership means low overall costs, not just low

manufacturing or production costs!
Examples of Low-Cost Providers
Indian examples
Translating a Low-Cost Advantage
into Higher Profits: Two Options

Option 1: Use lower-cost edge to

under-price competitors and attract
price-sensitive buyers in enough
numbers to increase total profits

Option 2: Maintain present price, be

content with present market share,
and use lower-cost edge to earn a
higher profit margin on each unit sold,
thereby increasing total profits
When Does a Low-Cost Strategy Work Best?

• Price competition is vigorous

• Product is standardized or readily available
from many suppliers
• There are few ways to achieve
differentiation that have value to buyers
• Most buyers use product in same ways
• Buyers incur low switching costs
• Buyers are large and have
significant bargaining power
• Industry newcomers use introductory low prices to attract buyers and build
customer base
 Pitfalls of Low-Cost Strategies
 Being overly aggressive in cutting price
 Low cost methods are easily imitated by rivals
 Becoming too fixated on reducing costs
and ignoring
 Buyer interest in additional features
 Declining buyer sensitivity to price
 Changes in how the product is used
 Technological breakthroughs open up cost reductions
for rivals
 Differentiation Strategies
Objective

• Incorporate differentiating features that cause buyers to prefer

firm’s product or service over brands of rivals

Keys to Success
• Find ways to differentiate that create value for buyers and are not
easily matched or cheaply copied by rivals
• Not spending more to achieve differentiation
than the price premium that can be charged
 Benefits of Successful Differentiation

A product / service with unique, appealing

attributes allows a firm to
 Command a premium price and/or
 Increase unit sales and/or
 Build brand loyalty

= Competitive Advantage
 Types of Differentiation Themes
 A Celebration wear brand – Manyavar / Mohey. Caters to various occasions
- from weddings to festivals, Rakhi to Roka.
 Unique ethnic style – Fab India
 Multiple features – Microsoft Windows and Office
 Wide selection and one-stop shopping – [Link]
 Superior service -- Taj Hotels, FedEx
 Engineering design and performance – Mercedes, BMW
 Prestige – Rolex
 Quality manufacture – Toyota
 Top-of-line image – Tanishq
Successful Indian Examples of Differentiation Themes
Sustaining Differentiation: Keys to Competitive
Advantage 
Most appealing approaches to differentiation
 Those hardest for rivals to match or imitate
 Those buyers will find most appealing
 Best choices to gain a longer-lasting, more profitable
competitive edge
 New product innovation
 Technical superiority
 Product quality and reliability
 Comprehensive customer service
 Unique competitive capabilities
How to Achieve a
Differentiation-Based Advantage
Approach 1
Incorporate product features/attributes that
lower buyer’s overall costs of using product
Approach 2
Incorporate features/attributes that raise the
performance a buyer gets out of the product
Approach 3
Incorporate features/attributes that enhance buyer satisfaction
in non-economic or intangible ways
Approach 4
Compete on the basis of superior capabilities
 When Does a Differentiation Strategy Work
Best?
• There are many ways to differentiate
a product that have value and please
customers

• Buyer needs and uses are diverse

• Few rivals are following a similar

differentiation approach

• Technological change and

product innovation are fast-paced
Pitfalls of Differentiation Strategies

 Appealing product features are easily copied by rivals

 Buyers see little value in unique attributes of product
 Overspending on efforts to differentiate the product
offering, thus eroding profitability
 Over-differentiating such that product
features exceed buyers’ needs
 Charging a price premium
buyers perceive is too high
 Not striving to open up meaningful gaps in quality,
service, or performance features vis-à-vis rivals’ products
 Best-Cost Provider Strategies
Objectives
• Combine a strategic emphasis on low-cost with a strategic
emphasis on differentiation
• Make an upscale product at a lower cost
• Give customers more value for the money

• Deliver superior value by meeting or exceeding buyer

expectations on product attributes and beating their
price expectations
• Be the low-cost provider of a product with good-to-
excellent product attributes, then use cost advantage to
underprice comparable brands
 Competitive Strength of a Best-Cost
Provider Strategy
• A best-cost provider’s competitive advantage is based on its capability to
include upscale attributes at a lower cost than rivals’ comparable products
• To achieve competitive advantage,
a company must be able to
• Incorporate attractive features at a lower cost than rivals
• Manufacture a good-to-excellent quality product at a lower cost than rivals
• Develop a product that delivers good-to-excellent performance at a lower cost than
rivals
• Provide attractive customer
service at a lower cost than rivals
 Examples of Best-Cost Strategy
Although Toyota Motor Company is known for its low-cost strategy, it applied
the best-cost strategy when it manufactured its luxury-car Lexus models.

To compete against such luxury-car makers as BMW and Mercedes-Benz, Toyota

management started making Lexus, a car with premium-quality at costs below
those of competitors.

Toyota’s best-cost strategy was so successful that the Lexus model was ranked
among the top 10 models and the second best-selling luxury brand in the US
market.

Another example is Microsoft Corporation.

Microsoft is widely recognized as the committed user of the best-cost strategy in
software. This world-famous IT-giant is continually improving the quality of its
software and at the same time continually reducing the costs of its software
 When Does a Best-Cost Provider
Strategy Work Best?

• Where buyer diversity makes

product differentiation the norm
and

• Where many buyers are also

sensitive to price and value
 Risk of a Best-Cost Provider Strategy

• A best-cost provider may get squeezed between

strategies of firms using low-cost and
differentiation strategies

• Low-cost leaders may be able to siphon

customers away with a lower price

• High-end differentiators may be able to

steal customers away with better product attributes
 Focus / Niche Strategies

Objective
• Involve concentrated attention on a
narrow piece of the total
market
• Serve niche buyers better than rivals
Keys to Success

• Choose a market niche where buyers

have distinctive preferences, special
requirements, or unique needs
• Develop unique capabilities to serve
Approaches to Defining a Market Niche

• Geographic uniqueness

• Specialized requirements in
using product/service

• Special product attributes

appealing only to niche buyers
 Examples of Focus Strategies
International

• Animal Planet and History Channel

• Cable TV
• Google
• Internet search engines
• Porsche
• Sports cars
• Cannondale
• Top-of-the line mountain bikes
• Enterprise Rent-a-Car
• Provides rental cars to repair garage customers
Focus / Niche Strategies and Competitive
Advantage

Approach 1
• Achieve lower costs than rivals in
serving a well-defined buyer segment –
• Focused low-cost strategy

Approach 2
• Offer a product appealing to unique
preferences of a well-defined buyer segment –
• Focused differentiation strategy
 Focus / Niche Strategies
Based on Cost

Generics Packs for Dispensing

Private Labels for Retail Chains Bulk Packs for Dispensing doctors and Chemists
doctors and nursing homes

6 lakhs litres per day

Price Rs 12 to 15
7 bottling plants + 11 more now
 Focus / Niche Strategies
Based on Differentiation

“A left-handed pen cost Rs 1,500 and

a sharpener was Rs 600 on Amazon,”

Mothercare plc is a British retailer which specialises in products for

expectant mothers and in general merchandise for children up to
8 years old
aLL - the plus size store
 A French sporting goods retailer.
With over 1,500 stores in 49 countries, it is
the largest sporting goods retailer in the world.
US$ 13 bio.
Dr Scholl special needs footwear
Dr. Scholl's is a footwear and
orthopedic foot care brand owned
by (Bayer’s)
Scholl's Wellness Company in the
North and Latin American
markets, and by

Aurelius AG in its remaining

markets worldwide. The brand in
the North and Latin American
markets was owned by
Merck & Co. through its
predecessor Schering-Plough until
they sold it to Bayer on October 1,
2014.

Aurelius AG bought the brand for

all other markets from
Reckitt Benckiser on July 21, 2014.
 What Makes a Niche
Attractive for Focusing?
 Big enough to be profitable and offers good growth potential
 Not crucial to success of industry leaders
 Costly or difficult for multi-segment competitors
to meet specialized needs of niche members
 Focuser has resources and capabilities
to effectively serve an attractive niche
 Few other rivals are specializing in same niche
 Focuser can defend against challengers via superior ability to
serve niche members
Risks of a Focus Strategy

• Competitors find effective ways to match

a focuser’s capabilities in serving niche

• Niche buyers’ preferences shift towards product attributes

desired by majority of buyers – niche becomes part of overall
market

• Segment becomes so attractive it becomes crowded with rivals,

causing segment profits to be splintered
 Deciding Which Generic
Competitive Strategy to Use
 Each positions a company differently in its market and competitive
environment
 Each establishes a central theme for how a company will endeavor to
outcompete rivals
 Each creates some boundaries for maneuvering as market
circumstances unfold
 Each points to different ways of experimenting with the basics of the
strategy
 Each entails differences in product line, production emphasis,
marketing emphasis, and means to sustain the strategy
The big risk – Selecting a “stuck in the middle” strategy!
This rarely produces a sustainable competitive
advantage or a distinctive competitive position!
 Five Generic Competitive Strategies
Summary

The differences between the classic five generic competitive strategies is somewhat subtle
to the untrained eye. Admittedly, there is some degree of overlap.
However, they are significant in strategic planning as they relate to the ability of the
organization to gain a competitive advantage.

They offer product and brand distinction in terms of price, value, quality, and performance,
which not only positions the product uniquely, but the brand itself.

Thus, the competitive strategy may indeed set the tone for the mission of the organization,
because the entire organization must function jointly to provide the level of quality and
performance in the market place, that is consistent with the organization’s overall business
level strategy.
Mission statement

• Your mission statement is a single sentence (or

partial sentence) that briefly states why your
company exists, and how it aims to make an impact
on the world. When drafting your company mission
statement, ask yourself:

• "What is important to my company?"

• "Why is my company here?"
• A mission statement should be as simple as possible, while still being
compelling, (somewhat) measurable and evergreen. Using stilted language -
or worse, legalese - has no place in your mission statement, and may be
confusing to the layperson. You want your mission statement to be clear to
every person who reads it, both internally and externally.

• A perfect example of an effective mission statement that covers all of the

bases listed above belongs to Nike:

• "To Bring Inspiration and Innovation to Every Athlete in the World."

 What is mission statement?
• It is a short statement of why organisation exists, it’s overall goal,
identifying the goal of it’s operations, product it provides, it’s primary
customers or market, and geographical region of operation.

• An effective mission statement is a clear, concise declaration about the

business strategy. Every entrepreneur should write a mission statement
early and must not underestimate because it provides an effective
framework and purpose.
Vision statement
• If your company's mission statement is the
"why", then your vision statement is most
certainly the "how". In your vision statement,
go into (slightly) more detail about how your
company plans to accomplish its mission.
• It is important to have a vision statement for
your company, but, unlike your mission
statement, you may choose to save your
vision statement for your employees eyes
only.
 What is vision statement?

• It is a document that states the current and future objectives of an

organisation. Intended as a guide to help organisation make decisions
that align with it’s philosophy and declared set of goals.
• A good vision statement outlines what organisations would like to
ultimately achieve and gives purpose to their existence.
• A good vision statement should be short, simple, specific to the business,
leave nothing open to interpretation. It should also have some ambition.
Values statement
• Your values statement lays out all of the core
values that your company abides by, and expects
its management and employees to abide by as
well.
• In a way, your values statement may be the
"who." Meaning, if your company were a person,
who would it be? A well-thought out values
statement can be a guiding light to inform
relations between your company, its employees,
and its customers.
 What is value statement?
• Conveys the values and priorities of the company, organisation or team it represents.
Let customers and staff know what is important to your business and kind of culture
it has. Also serves as a reference point for community members outside the
organisation.
• Provide basic information about how organisation operates and it’s perspectives on
ethical issues.
• Examples: Inclusiveness: We respect people, value diversity and are committed to
equality.
• Participation: We value and recognise the contribution of volunteers within
organisations and communities.
• Quality: We strive for excellence through continuous improvement.
1
 Integrity

Definitio Key
n Words
We conduct ourselves with • Ethical
uncompromising integrity and • Truthful
honesty and insist on the
highest ethical standards and • Transparent
transparency from our • Confidentiality
employees in all interactions. • Honest
Everything we do must stand
• Trustworthy
public scrutiny.
 Passion for Excellence

Definition Key Words

We relentlessly pursue • Innovation
excellence through • Perseverance
innovation and continuous • Stretch
improvement in all our
• Benchmarks
projects, processes and
products. To set our • Quality
standards, we benchmark • Improvement
with the best in class in the
World.
 Teamwork

Definition Key Words

We align efforts and energies • Consensus
of our people across all levels • Coordination
and geographies to deliver • Support
outstanding results to our
stakeholders. We encourage • Collaboration
diverse opinions and yet • Recognition
work together in a • Encouragement
coordinated and mutually
supportive way.
 Entrepreneurial Spirit

Definition Key Words

We encourage our • Ownership
employees to build • Responsibility
ownership in all endeavors by • Conviction
assuming responsibility with
passion and conviction. We • Empowerment
empower them to generate • Analysis
new ideas, explore avenues • Innovation
and deliver solutions that
add exceptional value.
 Respect and Care

Definition Key Words

We are compassionate and • Compassion
sensitive towards all our • Sensitivity
stakeholders and treat them
the way we would be • Fairness
expected to be treated. We • Equality
provide equal and fair • Dignity
opportunity for employment,
• Harmony
learning and career
development.
 Customer Focus

Definition Key Words

We strive to understand and • Delivery
meet customer needs in a • Responsiveness
professional and responsive • Investment
manner. We go the extra mile
to delight customers and • Professionalism
invest in building long term • Commitment
partnerships for mutual • Delight
benefit.
The combination of strong mission, vision and value statements can clearly and
concisely illustrate your brand to all of your audiences, both internal and external.

As a part of your employee handbook, these statements will very often be a

person's introduction to your organization.

So, it is important to craft statements that will reflect your company's guiding
principles for years to come.
Purpose statement

A purpose statement can give a company focus and help keep employees
motivated to reach company objectives.

No matter which role an employee is in, the purpose statement might

help drive their work and unify the workforce.

Any business can benefit from having a purpose statement that they
operate from, so employees operate under the same principles and work
toward shared goals.
What is a purpose statement?
• A purpose statement, sometimes called a "position
statement," is a sentence that describes a
company's focus as it pertains to its audience,
whether that be clients, customers, patients,
parents or any other group or demographic.
• A purpose statement describes the overarching
reason that the company exists, how it conducts
itself, and the impact it has on who it is serving.
• Companies use purpose statements to help
establish and support the mission and company
goals.
Policies
Policies are "principles, rules, and guidelines formulated or adopted by an organization to
reach its long-term goals“.
Policies are guiding principles about how business should be conducted, and they
generally outline standards of conduct, conformity with legal responsibilities and
guidelines, and consistent ways of handling situations. Policies should reflect the
organization's mission and values.

Should:
Be written in clear and simple language
Include a clear statement of the reason for the policy
Be approved by the Board of Directors, and include the date of approval on each policy
Conform with all applicable laws (some policies may need legal review)
Procedures
Procedures are "the specific methods employed to express policies in action in day-
to-day operations of the organization". It is extremely important that policies and
procedures are consistent with each other.

Should:
Contain enough information so that a staff person knows what to do
Be clearly written
Conform to the requirements of any applicable policies and all relevant laws
Plans
A plan differs from a set of procedures in that it is generally more specific as to who
will do each task, and when it is to be done. Unlike a set of procedures, a plan may
"name names" by identifying the people responsible for each item, and it should
ordinarily include target dates and documentation of progress made.

Should:
Include specific objectives and the tasks necessary to accomplish those objectives
Name the individuals or groups responsible for each task
Provide dates by which tasks will be completed
Specify how success will be measured or gauged, if appropriate
Indicate progress toward objectives
Inspiring Mission and Vision Statements Explained
 • Mission statement: To create the most compelling car company

Tesla of the 21st century by driving the world’s transition to electric

vehicles.
• Their mission statement clearly defines their core goal: “To
create the most compelling car company of the 21st century.”
Then it tells you how they intend to accomplish that goal: “By
driving the world’s transition to electric vehicles.”

• Vision statement: To accelerate the world’s transition to

sustainable energy.
• The car company’s clever use of the world “accelerate” helps to
enliven their lofty aspiration. This vision statement also
showcases their drive (pun intended) for sustainable energy and
how it steers (pun intended) the business.
• It also allows them room to explore and develop their other set
of energy solutions, Powerwall, Powerpack and Solar Roof.

• All in all, Tesla’s vision for sustainable energy is one that

resonates with countless people around the world.
 • Mission statement: Create groundbreaking sports innovations, make our
products sustainably, build a creative and diverse global team, and make
Nike a positive impact in communities where we live and work.
• Vision statement: Bring inspiration and innovation to every athlete* in
the world.
• *If you have a body, you are an athlete.

• Nike’s mission statement might sound run-of-the-mill, but it effectively

sums up what they aim to do and how they aim to do it.

• Take note of the words that declare Nike’s underlying company values:
Innovation, sustainability, diversity, and community.

• However, it’s Nike’s vision statement that has captured the hearts of
millions.
• “To bring inspiration and innovation to every athlete in the world”
sounds a little vague at first. It’s Nike co-founder Bill Bowerman’s
addition that hits you right in the feels: “If you have a body, you are an
athlete.”

• Bowerman’s statement staunchly stands up against body-shaming and is

a powerful call for inclusion. And it’s not hard to see this shape Nike’s
philosophy and marketing:
 • Mission statement: Offer a wide range of well-designed,
functional home furnishing products at prices so low that
IKEA as many people as possible will be able to afford them.
• Vision statement: To create a better everyday life for the
many people.

• IKEA’s mission statement is clear and to the point.

• Note the use of the words, “wide range,” “well-designed,”

“functional,” and “prices so low.” If you’ve ever been to
IKEA you’ll know how well they’ve managed to embody
these attributes.

• IKEA’s vision statement focuses their mission statement

into one singular purpose: “To create a better everyday life
for the many people.”
 • Mission statement: Spread ideas.
• Vision statement: We believe passionately in the power of ideas to
TED change attitudes, lives and, ultimately, the world.
• TED, which stands for “technology, education, and design,” managed to
boil down their entire mission into two simple, yet powerful words:
“Spread ideas.”

• With such a simple, highly focused mission, it’s easy to see how the
TED brand has become a global phenomenon in recent years.
• It’s a truly great mission statement that focuses all of their efforts.

• “Everything we do – from our Conferences to our TED Talks to the

projects sparked by The Audacious Project, from the global TEDx
community to the TED-Ed lesson series – is driven by this goal: How can
we best spread great ideas?”
• In what could be considered their vision statement, TED goes on to
explain that they “believe passionately in the power of ideas to change
attitudes, lives and, ultimately, the world.”
 • Mission statement: We strive to offer our customers the
lowest possible prices, the best available selection, and the
Amazon utmost convenience.

• Vision statement: To be Earth’s most customer-centric

company, where customers can find and discover anything
they might want to buy online.

• Amazon’s mission statement sums up the three things that

have made them loved by millions: low prices, a huge
selection, and incredible convenience.

• Like all great mission statements, it shines a light on the

values that bring success.

• Amazon’s vision statement brings these elements together

into one unified goal: “To be Earth’s most customer-centric
company.”
 • Mission statement: To inspire and nurture the human spirit—
Starbucks one person, one cup, and one neighborhood at a time.

• Another short and sweet mission statement that tells a lot

about the company.

• Starbucks doesn’t use big sentences or fancy words to

communicate its goals. It uses clear, simple, and direct
language to express what the company wants to be and for
whom.

• They aspire to be known for more than just coffee by creating

a culture of warmth and exclusivity.

• In other words, Starbucks wants to ensure that anyone who

comes through its doors feels welcomed and at home.