Strategic Management .

VI sem BBA

MODULE 1

INTRODUCTION TO STRATEGIC MANAGEMENT

According to Glueck “Strategy is the unified ,comprehensive and integrated plan designed to
ensure that the basic objectives of the enterprise are achieved”.

Nature and scope of strategy

 Top level management involvement

 Long term impact
 Implication for multiple products ,consumers and services
 Consideration of environment
 Future oriented
 It is a process

Importance of strategy

 Strategy helps an organization to take decisions on long range forcasts

 It allow the firm to deal with new trend and meet competition.
 The management becomes flexible to meet unanticipated changes
 Strategy focus in terms of organizational objectives.
 It providing satisfaction to the personnel.
 It provides motivation to employees
 It improve corporate communication , coordination and allocation of resources.

ATTRIBUTE OF A GOOD STRATEGY

1. Strategy links to its environment

2. Strategy combines factors
3. Strategy is relative combination of actions
4. Strategy is highly undependable
5. Strategy is forward looking

LEVELS OF STRATEGY

1. Corporate Level Strategy

2. Business Level Strategy
3. Functional Level strategy

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STRATEGIC MANAGEMENT

Glueck defines strategic management as ”a stream of decision and actions which lead to the
development of an effective strategy or strategies help to achieve corporate objectives “.

Nature / Features of strategic management

 A process
 Dynamic rather than static
 External focus
 Open systems approach
 Top management function
 Iterative process
 Futuristic
 Continuous
 Analytical

NEED AND IMPORTANCE OF STRATEGIC MANAGEMENT

1. Attention of Objectives.
2. Minimizing Uncertainties
3. Better Utilization of Resources.
4. Better co-ordination
5. Knowledge about External environment
6. Knowledge about internal Environment
7. Successful operation of the enterprises

FUNCTIONS OF STRATEGIC MANAGEMENT

 It provides dual approach to problem solving.

 It focuses attention upon changes in the organization set up .
 It offers a technique to manage changes.
 It furnishes the management ,give equal importance to present and future
opportunities
 It provides the management with a mechanism to cope with highly complex diversity of
cultural ,social, political and competitive forces

BENEFITS OF STRATEGIC MANAGEMENT

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1. Ensuring success
2. Encourages Innovation and creativity
3. Increasing organizational Effectiveness
4. Minimizing resistance to change
5. Financial Benefits
6. Offsetting Uncertainty
7. Improved Quality of strategic management
8. Competitive advantage

Limitations Of Strategic Management

1. Resistance to change
2. Complex and Dynamic Environment
3. Expensive
4. Not suitable for small scale organization
5. Lack of Flexibility.
6. Lack of commitment

STRATEGIC MANAGEMENT PROCESS:- Strategic management process can be defined as

“combination of managerial decisions and actions that determines the long –run performance
of a corporation .

 Establishing strategic intent

Organizations’ are deliberate creations , they have some specific intent ,that is
what they will achieve in future and why they will achieve it .strategic intent
consist of three major elements
 Vision :-Vision is the starting point of expressing an organizations strategic intent. Vision
means a mental image or articulation of its future.
 Mission and Goal:- The mission tells clearly why the organization exists and what it
would be doing .
 Setting of objectives :- Objectives are defined as ends which the organization seeks to
achieve .Objectives may be internal or external.
 Environmental Analysis : -The second important aspects of the model of strategic
management process is the environmental analysis
 Identifying changes in the environment
 Identifying the present and future threats and opportunities
 Assess critically its own strength and weaknesses

 External analysis :- In this stage examination of three environments in which the

organization operates, the national and the macro environment forces such as social,

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 economical, governmental, and legal, international and technological factors which
affect the organization.
 Internal analysis :- Identifying strength and weakness of the organization involves
identification of quantity and quality of resources and distinctive competencies that
help in building competitive advantage to achieve superior efficiency, quality,
innovation and customer loyalty.

 Identification of strategic alternatives :- Interaction of organization with its environment

in the light of its strength and weaknesses will result in various strategic alternatives
 Choice of strategy:- The identification of various strategic alternative leads to the level
where managers can consider some alternatives seriously and may choose one of the
most acceptable.
 Strategy Implementation :- The fifth step of strategic management process is the
implementation of strategy. The logically developed strategy is to be put into action .
 Strategic Control :-Strategic control also called as strategy and evaluation ,may be
treated as the last stage of strategic management process.
 Feedback :-Periodic feedback reveals whether objectives are attainable or
implementation is poor or not.

Strategic Business Units (SBU)

A strategic business unit (SBU) is a basic organizational unit for which it is meaningful to
formulate a separate competitive strategy. The SBU is a business unit of the firm that is
autonomous, an entity responsible for developing its own strategy.

STRATEGIC DECISION MAKING

According to Peter F Ducker, Strategic decision is multidimensional decision, which will have an
impact on the future of the enterprise.

Features /Elements of Strategic Decisions

 Top management involvement

 Future orientation
 Value orientation
 Means to End
 Resource commitment
 Strategic Fit
 Competitive orientation
 Complexity
 External environment Considerations

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  Uncertainty

THE MCKINSEY 7 –S FRAMEWORK

The McKinsey 7sframework Developed in early 1970sby Tom Peters and Robert Waterman,
two consultants working at the McKinsey &Company to assist managers to do away the
difficulties in implementation of strategies that are associated with change in the organization .

HARD ELEMENTS SOFT ELEMENTS

STRATEGY SHARED VALUES
STRUCTURE SKILLS
SYSTEM STYLE
STAFF

SHARED
VALUES

1 STRATEGY :- Accordingly, strategy should be formulated in consultation with others,

especially those who are going to implement the strategy and those who are going to be
affected by it .

2 .STRUCTURE: -Structure describe the way the organization is structured and who reports to
whom. A structure describes the hierarchy of authority and accountability in an organization.

[Link] : -This category involves all the formal and informal system that allows the
organization to function .These including budgeting systems, accounting systems, training
systems as on ..

[Link] VALUES :- Called super ordinate goals. Shared values are an interconnecting centre
of the 7s model. Values are the identity by which a company is known throughout business
areas .

5. STYLES: - Style refers to the leadership style adopted by top management ..

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6. STAFF : -Management must pay special attention to training and developing a highly skilled
workforce. Each worker is assigned to a job that best suit his / her skills.

[Link] : -Skills refers to those activities which organizations do best and for which they are
known .skills build the reputation and brand loyalty.

CORPORATE POLICY

Corporate policy has been defined “management’s expressed or implied intent to govern
actions pursuit of the company objectives “.corporate policy helps the managers in
identification of the problems and solutions. It provides the framework in which to take tha
decision .

DETERMINANTS OF CORPORATE POLICY

Internal Determinants External Determinants

Corporate Mission Industry Structure

Corporate Objectives Social
Environment

Resources Political Environment

Management Values Economic Environment
Technology

Corporate mission : -the policy makers should be very clear for which the company exist and
operate and accordingly formulate the policies and guild lines for managerial and other
activities so that corporate mission accomplished .

Corporate objectives :- the organization objectives are designed ,framed and operationalised
to work for achieved them. corporate policy should take in to account the economic ,financial,
other objectives of the company.

Resources :- the activities of organization depends upon the size of plant ,capital
structure ,competitive position etc … these factors and resources are considered in formulating
the corporate policy .

Management values :- the corporate policy is influenced by the values of the person
responsible for formulating it.

Industry structure :-structure of the firm depends up on its size, barriers of the entry into the
market ,strategies and policies of the competitors etc… all these factors are kept in formulating
corporate policy .

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social environment:-the social ,religious ,cultural and ethnic factors of the managers running
the business also influence the making of the policies of the organization .

political environment :-the firm has to carry out its activities in accordance with the
government’s regulations and policies .the various policies like monitory policy ,fiscal policy and
credit policy of the firm.

Economic environment :-economic environment includes demand ,supply ,prices, trends ,the
national income etc …influence the policies of the firm.

Technology : -Organization to sustain and remain in the market has to cope up with
technological changes

CORPORATE PLANNING :- Corporate planning is a tool of system of planning which involves the
determination of the objectives for the company as whole and for each department of the
it ;formulation of strategies for the attainment of these objectives; conversion of strategies into
tactical plans ;implementation of tactical plans and a review of the progress of tactical plans
against the corporate planning objectives.

Features
 Corporate planning is a total system of planning.
 Strategies are translated into tactical plans.
 Corporate planning has a long term perspective

Process of corporate planning

1. Environmental analysis and diagnosis:- The first step involved in corporate planning is
environmental analysis and diagnosis.
2. Determination of objectives :- After environmental analysis, the planners determine
objectives for the company as a whole and for each department of it, which become the
beginning point of corporate planning.
3. Strategy formulation :-Strategy formulation is the core aspect of corporate
planning .strategy is, in fact ,the weapon of the planner devised for attaining objectives
of corporate planning. Strategy facilitates the attainment of objectives.
4. Development of tactical plans :- Strategies are translated into action plans called
tactical plan or operational plans. Tactical plans are necessary for implementation of
strategies leading to the attainment of corporate planning objectives.
5. Implementation of tactical plans.:- For implementation purpose, necessary
communications are made to the operating staffing who are also provided with
necessary facilities to implement the tactical plans.

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 6. Follow –up – Action::- After the tactical plans have been put into practices; are review
of progress is done .feedback action is necessary, for the betterment of the corporate
planning process.

MODULE- 2

ENVIRONMENTAL SCANNING

Business environment is the sum total of all things external to firm and individuals , which affect
their organization and operations .

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 Concept of business environment

Internal environment external environment

Value system

Mission and objectives micro environment macro environment

Organizational components customer economic environment

Human resources competitors technological

Marketing components suppliers political and legal

Production components marketing - socio- cultural

Financial components intermediaries demographic

Public natural

Global or international

Economic environment :- the economic environment consist of macro level factors related
to the means of production an distribution of wealth that have an important on the
business of an organization .
Technological environment :- Those factors related to knowledge applied and the material
and machines used in the organization .
Political and legal environment :- Those factors related to management of public affairs and
their impact on the business of an organization .
Socio –cultural environment ;- the buying and consumption habit of the people ,language
beliefs and values ,taste and preference ,education are all factors that affect business .
Demographic environment :- demographic features deal with population such as , birth
rate , growth rate ,age composition ,family size etc..
Natural environment :- natural environment includes geographical and ecological factors
also influence the location of industries .
Global and international environment : - import , export etc..

Environmental scanning :- Environmental scanning is the process of monitoring the events and
evaluating trends in the external environment to identify both present and future
opportunities and threats that may influence the firm’s ability to reach its goals .

Approaches –

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 Systematic approach :- information for environmental scanning is collected
systematically .Information related to market and customers, government policy
pertaining the organization’s business and industry ,etc could be collected continuously
to monitor changes and take the relevant factors into account .
Ad hoc approach :- an organization may conduct special survey and studies to deal with
specific environmental issues from time to time.
Processed form approach :- The organization uses information ina processed form ,
available from different sources in both inside and outside the organization .

Need and importance

 Helpful in framing policies

 Optimum utilization of resources
 To analyses competitors strategies and formulate sound measures
 Keep business dynamic and innovative

Limitation

 It is very difficult to judge what is the relevant environment .

 It may create an overload of data that timely action is not taken

Techniques of environmental scanning

1. ETOP :- It is a useful technique of structuring the result of environmental analysis .It is a

summary of the environmental factors and their impact on the organization .
2. QUEST :- Quick environment scanning technique is a tool designed to identify emerging
issues and events that indicates potential threats and opportunities to organization and to
facilitate the development of the appropriate organizational strategies .
3. PEST :-PEST stands for political ,economic, social and technological analysis and describes a
framework for macro environmental factors used in environmental scanning.
4. SWOT :- SWOT stands for strength , weakness, opportunities and threats.
a) Strength :-are the qualities that enable us to accomplish the organization’s
mission .
 Financially very good
 Good product and product mix
 Good infrastructure
 Technology rich and with expertise.
b) Weakness :- A weakness is something a company lacks or does poorly .
 High debt burden
 Poor product mix

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  Technology gap
 Competition war
 Global threats etc..
c) Opportunities: - opportunities are presented by the environment within which
our organization operates.
 Introduction of new technology
 Export quality
 Merger/ acquisition opportunities
 Diversification opportunities.
d) Threats: - Is a unfavorable situation in a firm’s environment .
 Globalization
 Competition
 Free export
 Political instability
 Increase in financial cost.

Advantages / Role of SWOT analysis

 Formulation of strategies
 Comparing organizational standing
 Overcoming weakness
 Negating effort of new entrants

Limitation

 It gives static perspective

 It focus on the external environment is too narrow
 It emphasis a single dimension of strategy .

IFAS:- Internal Factor Analysis Summary is a sun component of SWOT analysis that assist in
defining a company’s internal strength and weakness .

EFAS: External Factor Analysis Summary , that assist in defining a company’s external
opportunities and threats.

INDUSTRY ANALYSIS - An organization must thoroughly understand the specific industry in

which operates because the factors relating to that industry directly affect its working.

Importance of industry analysis.

 Industry related factors have a more direct impact on the firm than the general
environment..

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  Industry analysis reveals industry attractiveness and its prospects for growth.
 It helps the firm to identify such aspects :-
1. Current size of the industry
2. Product offering
3. Relative volumes
4. Performance of the industry in recent years
5. It focuses attention on the firm’s competitions
6. It helps to determine key success factors .

FRAME WORK FOR INDUSTRY ANALYSIS

I. Industry setting: - The pattern of their stages of evaluation ,stage of maturation and
geographical dimension from the setting of an industry . on the basis of these characteristics
,porter has classified industries into following categories :-
 Fragmented industry :- it consist of a large number of small or medium –sized
companies ,none of which is in a position to determine industry price .
 Emerging industry: - are those in the introductory and growth phases of their life
cycle.
 Mature industries: - are those reached the maturity stage of their life cycle .
 Declining industries: - are those in the transition stage from maturity to decline .
 Global industries: - are those with manufacturing bases and marketing operations in
several countries.
II. Industry structure :- The economic and technical force operating in an industry is called
industry structure .there are five industry structures:-
 Pure monopoly: - In this structure there is one seller in the market .There is no
need for product differentiation.
Eg:- Indian Railway , Electricity board
 Pure oligopoly :- there are few sellers which have product differentiation .there for
any price change by on seller affect the other seller .
Eg: Tata motors, Ashok Leyland etc..
 Pure competition:-pure or perfect competition ,there is large number of sellers
with no product differentiation .
 Differentiation oligopoly: - there are few sellers with differentiated
product .differentiation based on price, quality, design, delivery after sale services
etc..
 Monopolistic competition: - there is large number of sellers with differentiated
product.

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III. Industry attractiveness :- Industry attractiveness refers to the profitability position of the
industry .An industry is considered attractive when there is enough scope for earning
profit .It depends on the following factors:-
 Profit potential
 Growth potential
 Competition
 Industry barriers etc..
IV. Industry performance :- An industry performance is measured in terms of the following
factors :-
 Production
 Sales
 Profitability
 Technical advancement

VALUE CHAIN ANALYSIS :-The concept of value chain analysis was introduced by Michael porter
in 1985. Every organization consist of a chain of activities that link together to develop the value
of the business .According to Porter , value chain activities are divided into Two broad
categories ;

1. Primary activities
2. Secondary activities
Primary activities are the foremost and direct sequential activities that create value
for the customers ,they consist of the following ;
 Inbound logistics :-inbound logistics include material
handling ,warehousing ,inventory control vehicle scheduling ,and return of faulty
material to suppliers.
 Operations :- processing of of materials and components into finished product. The
process includes all such activities as production ,assembling ,packaging ,inspection,
quality ,control and so on .
 Outbound logistics:-these activities associated with physical distribution of the
finished product to buyers and customers . They includes finished
goods ,warehousing ,material handling etc
 Marketing and sales ;- this function includes all activities that an organization uses to
market and sell its products to customers .
 Sales :-All activities that are associated with providing service to enhance the value of
the product . service includes installation of appliances ,repair and maintenance ,
technical assistance and so on .

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Support activities are there to ensure that the primary activities are carried out efficiently and
effectively.

 Procurement: - This value chain activities deals with the process of purchasing resource
inputs to support any of the primary activities .
 Technology development: - this activity covers an organizations know-how its procedures
and any use of its technology that has an impact upon product ,process and resource
developments .
 Human resource management: - these activities include selection ,
recruitment ,training ,development and remuneration of employees. There for HRM
activities can be controlled and managed across the entire chain .
 Firm infrastructure: - It consist of number of activities which usually support the entire
value chain such as general management, planning, finance ,public relation and government
.
Cost drivers
 Economies of scale
 Pattern of capacity utilization
 Linkage between activities
 Interrelationship
 Geographical location
 Policy choice

Value drivers :- Value drivers are similar to cost drivers, but they relate to other features valued
by buyers .

 Policy choice
 Linkage between activities

Limitations of value chain

 The technique is simple but difficult to apply

 The concept of value chain is vague and difficult to measure
 Data from varied sources has to be collected for the analysis .Due to globalization; old
value creating activities have become less useful.
Module - 3

STATEGY FORMULATION

Strategy formulation is the process of determining appropriate courses of action for achieving
organizational objectives and thereby accomplishing organizational purpose .strategy
formulation is vital to the well being of the company.

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steps of strategy formulation

1. Establishing objectives: - objectives of the firm act as a foundation of on the strategy is

based, objective should be properly defined.
2. Analysis of external environment: - Is the process of analyzing the external environment
for assessing the opportunities and threats to the enterprises .
3. Analysis of internal environment: - internal environment involves identifying the
business strength and weakness, by analyzing its competencies.
4. Fixing quantitative target:- At this stage , the purpose is not to set target for comparison
with future outcome, but to set global target for the firm as a whole
5. Relating target to divisional plans:-These operating plans should be based upon the
analysis of macroeconomic trends and the competitive environment specific to the sub
unit.
6. Gap Analysis: - GAP Analysis is the identification and analysis of a gap between planned or
desired performance.
7. Choice of strategy :- The best course of action is actually chosen after considering
organizational goals ,organizational strengths ,potential and limitations as well as the
external opportunities .

STRATEGIC ALTERNATIVES

Corporate level strategy Business level strategy Functional level

strategy

Growth strategy cost leadership operations

Stability strategy Differentiation marketing

Defensive strategy focus finance

Human resources
Research
&development

STRATEGIC ALTERNATVES :-

I. CORPORATE LEVEL STRATEGY / GRAND STRATEGY

The comprehensive general plan of major actions through which a firm intends to
achieve its long term objectives in a dynamic environment is called the grand strategy or
corporate strategy .

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Strategies at the corporate level may be broadly classified into three .They are :-

A. Growth or expansion strategy: - Growth strategy is adopted to accelerate the rate of

growth of sales, profits and market share faster by entering new markets , acquiring new
resources ,developing new technologies and creating new managerial capabilities.
Growth strategies can be divided into three broad categories:-
a. Intensive strategies: - Without moving outside the organizations current range of product
or services, it may be possible to attract customers by intensive advertising.
There are three important intensive strategies:-
 Market penetration or concentration strategy.- To increase market
share for exiting product in the existing market through greater
marketing effort .
 Market development strategy: - It is try to achieve growth by
introducing existing products on new market.
 Product development strategy: - expansion through product
development involves development of new or improved product for its
current markets.
b. Integration strategies :- means combining activities relating to the present activity of a firm
.A combination can be done on the basis of the industry value chain.
There are many forms of integration, but the two major ones are ;
 Vertical integration: - refers to the integration of firms involved in different stages of
the supply chain .
Vertical integration may be
 Backward integration: - involves gaining ownership or increased control of a firm’s
suppliers.
 Forward integration :- involves gaining ownership or increased control over
distributors or retailers
 Horizontal integration: - Horizontal growth can be achieved by internal expansion or
by external expansion through mergers and acquisitions of firms offering similar
products and services.
c. Diversification strategy: - Diversification is the process of adding new businesses to the
existing business of the company.
There are two types of diversification
 Concentric diversification:- Adding new ,but related business is called
concentric diversification .
It maybe of three types:
 Marketing –related diversification
 Technology related diversification
 Marketing and technology related diversification.

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  Conglomerate or unrelated diversification: - adding a new, but unrelated
business is called conglomerate diversification .
B. STABILITY OR STATUS QUO STRATEGIES
A strategy wherein firm chooses to keep its business definition unaltered is said to be a
stability strategy .Some of the popular stability strategies are :
a) Pause strategy: - pause strategy is breathing spell strategy. under this strategy to
make the factors of production more productive to assure future rapid growth .
b) No change strategy :- Is a decision to do nothing new i.e, continue current
operations and policies for the foreseeable future .
c) Profit strategy :- Is an attempt to artificially maintain profit by reducing investment
and short term expenditures .
C. Defensive strategy / retrenchment strategies
Defensive strategies is an attempt to eliminate the weakness that are dragging the
company down, management may follow one or more of the following retrenchment
strategies :
 Turnaround strategy: - Means reversing a negative trend or converting an
unprofitable or sick business into profitable or sick business into profitable one .
 Divestment: - Selling a part of an organization is called divestiture when a firm
fails to turnaround ,it resorts to divestiture as next step.
 Bankruptcy: - It allows organization to file a petition in the court for legal
protection to the firm ,in case the firm is not in a position to pay its debt .
 Liquidation strategy: when an entire company is dissolved and its assets are
sold .
II. BUSINESS LEVEL STRATEGY /GENETIC STRATEGY
The three basic strategies open to any business are;
a) Cost leadership :- A firm aims to deliver its product or services at a price lower
than that of competitors .
b) Differentiation strategy: Is an attempt to gain a competitive advantage by
producing a product or making available a service that gives additional benefits to
customers .
c) Focus strategy :- this strategy involves the selection of a market segment or group
of segment in the industry and meeting the needs of that preferred segment better
than the other market competitors .
III. FUNCTIONAL LEVEL STRATEGY
The approach taken by a functional area to achieve corporate and business unit
objectives and strategies by maximizing resource productivity .Functional level strategy
is associated with strategies in the area of

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a) Operations :- operations management cover all manufacturing processes in an
organization and includes raw material sourcing ,purchasing ,distribution and logistics .
b) Marketing strategy :-
 Product :-basic marketing mix tool is product which stands for the firm’s tangible offer
to the market .
Product mix:- A group of product manufactured by the firm to strengthen
its presence in the market .
 Price:- The amount of money that customers have to pay for the product.
Price mix
 Place:- It stands for various activities the company undertake to make the product
easily available and accessible to target customers .
Place mix :- The combination of all decision related with the flow of
goods from the place of manufactures to the place of customers .
 Promotion:- The various activities the company undertakes to communicate its
product merits and to persuade target customers to buy them .
 People:- All human actors who play a part in delivery of the market offering and thus
influence the buyers perception .
 Physical evidence: - The environment in which the market offering is delivered and
where the firm and customer interact.
 Process :- The actual procedure ,mechanism and flow of activities by which the
product /service is delivered.
c) Financial strategy - :-
 Financing decision
 Investment decision
 Dividend decision
 Working capita
d) Human resource management
Recruitment and selection
Training
Appraisal of performance,.
Compensation
e) Research and development

STRATEGIC CHOICE :- Strategic choice involves the selection of one or more strategies that an
organization will use to achieve its objectives.

According to Glueck and Jauch “ strategic choice is the decision to select from among the
alternative grand strategies considered ,the strategy which will best meet the enterprise
objectives .

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Steps in the strategic choice

 Focusing on strategic alternatives

 Evaluating strategic alternatives
 Considering decision factors
 Choosing from among the strategic Alternatives

Factors influencing strategic choice

1. Objective factors ;- every organization attempt to choose strategies that will help it in
achieving its strategic intent.
2. Subjective factors :- under circumstances several factors influence the strategic choice
decisions:-
 Role of past strategy :- A review of past strategy is the point at which the process
of strategic choice begins.
 Degree of the firm’s external dependence
 Attitude toward risk
 Internal political considerations
 Timing
 Competitive reaction

CONTINGENCY STRATEGY

Strategic choice is made on the basis of certain conditions assumptions and premises.
Contingency strategies are formulated in advance to deal with uncertainty that are a natural
part of the business.

Module -4

Strategy implementation

Strategy implementation is the process of putting organization’s various strategies in to action

by setting annual or short term objectives ,allocating resources , developing
programmers ,policies , structure , functional strategies etc.. even the best strategic plan will be
unless it is implemented properly ..

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Steps in strategy formulation

1. Institutionalization of strategy :- This is the first step involved in activating the

strategy .It involves two aspects :-
a) Communication of strategy :- the strategy is formulated, it must be communicated
to those people who implement it .communication is the processof transferring the
strategy information from the formulators the implementers.
b) Securing acceptance of strategy : -To communicate the strategy to the members of
the organization , is equally important to secure their acceptance of the strategy .
2. Formulation of action plans and programmes :-
 Action plans :-The management has to frame action plans in respect of several activities
required to implement a strategy .
 Programmes:- A programme is a single use plan designed to accomplish a specific
objectives ..
3. Translating general objectives into specific objectives :- The top management
frames the general objectives , in order to make these objective operative functional
managers must set specific objectives within the frame work of the general objectives .
4. Resource allocation :- for successful implementation of strategy there must proper
allocation to various units and activities . The resources can be broadly classified into 3
groups ;-
 Financial resources
 Physical resources
 Human resources .
5. Procedural requirements :-An organization must follow various procedural
requirements to implement the strategy . ,includes
 Licensing requirements
 Import and export requirements
 Foreign exchange management Act 2000 etc..
6. The structure implementation :- It involves designing of the organization structure and
interlinking various units and sub units of the organization .
7. Functional implementation :- It deals with the development of policies and plans in
different areas of functions which an organization undertakes . eg:- production , marketing ,
finance , personnel.
8. Behavioral implementation :- It deals with those aspects of strategy implementation. That
have impact on behavior of people in the organizations .
9. Monitoring and control :- Monitoring and evaluating the strategy implementation process
as a whole is essential ensure that the implemented strategy is working properly .

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 Barriers to strategy implementation
 Vague and poor strategy
 Lack of commitment
 Ineffective management.
 Resistance to change.
 Poor communication
 Poor resources.
 Other threats.

Organizational structure:- Organizational structure refers to established pattern of relationship

among the components or parts of an organization .

Benefits of good organizational structure

 A good organizational structure facilitates attainment of objectives through proper co-

ordination of all activities .
 The conflicts between individuals are kept to a minimum.
 It eliminates overlapping and duplication of work
 It facilitates promotion of personnel
 Communication is easier at all levels of hierarchy.

TYPES OF ORGANISATIONAL STRUTURE

1. simple organizational structure

2. Functional organizational structure
3. Divisional organizational structure
4. SBU structure
5. Matrix structure
6. Network structure
7. Virtual stricture
1. Simple organizational structure :- The owner –manager controls all activities and makes all
the decisions .this structure may be appropriate small and young organizations .

Advantages-

 There is only one decision maker , the decisions are taken faster
 Quick and timely on the spot decisions are taken on the environmental changes and
competition
 Simple in nature

Demerits

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 Operations usually fall due to lack of supervision

Future expansion only depends on the owner’s ability to invest money

The owners has to do nearly everything including taking decision his time can be

demanded by almost everyone .
2. FUNCTIONAL ORGANISATIONAL STUTURE :- The organizational structure is functional type
dividend into various departments such as finance ,marketing personnel and production.

Advantages :

 Owner executive can concentrate on strategic business decisions

 Efficient distribution of work

Limitations

Co-ordination between different departments is difficult


Line and staff departments usually conflict

3. DIVISIONAL STRUTURE: - Divisions are formed on the basis of products , markets ,distribution
channel areas . Each divisions have its own functional personnel organized into departments
.
Merits :-
 Structure encourage the grouping of various functions .
 Top management can concentrate on strategic business policies policies and decisions .
 This structure generates quick response to environmental changes .

Demerits :-

 Company overheads increase duplication of work in each unit is also there .

 Policy inconsistencies between the different division .
4. SBU ORGANISATIONAL STRUTURE:- Under this structure , divisions that have some
commonality between them in term of products or markets or manufacturing or selling are
placed in one group called strategic business units .

Merits :-

 Establishes co-ordination between divisions having common strategic interests .

 Facilitates strategic management and control of large
 Fixes accountability at very distinct business units .

Demerits :-

 Difficulty in assigning responsibility at very distinct business units .

 There are too many different SBU to handle affectively in a large diverse organization.

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5. Matrix organizational structure :- Matrix organization provides for dual channels of
authority , performance responsibility ,evaluation and control.
6. Merits:-
 Individual specialists are assigned where their talent is needed most .
 Fosters creativity
 Provide good exposure to specialists in general management .

Demerits :-

 Dual accountability creates confusion.

 This system is costly and conflictual
 Require high level of vertical and horizontal co-ordination .
7. Network structure :-A network organization outsources or subcontracts many of its
major functions to separate companies and co-ordinate their activities from a small
headquarters .

Merits:-

 Network structure truly global.

 It has work force flexibility and challenge .
 Reduced administration overhead.

Demerits :-

 No hands on control.
 Employee loyalty can waken
8. Virtual structure :- It consist of a network of independent companies –
suppliers ,customers, or even competitors –linked together to share
kills ,costs ,markets ,and rewards.

Merits :-

 It can draw on expertise worldwide .

 It is highly flexible and responsive.
 It reduces overhead costs .

Demerits :-

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  Lack of control
 It poses communication difficulties, and managers may lose motivation .

CORPORATE CULTURE :- According to Charles O Reilly “ organizational culture is the set of

assumptions ,beliefs ,values and norms that are shared by an organizations members “.

Types of cultures :-

1. Strong and weak culture:- strong culture companies have a well defined corporate
character , values and behavioral norms which are so deeply rooted in them that it is hard
to change them .
Weak culture companies are fragmented in the sense that no one set of values is
consistently preached or widely shares .
2. Unhealthy vs Adaptive culture :- unhealthy culture characterized by self-serving politics,
resistance to change and inward focus.
Adaptive cultures work climate is receptive to new ideas , experimentation , innovation ,
new strategies and practices .
3. Dominant vs subculture :- A culture that express the core values that are shared by a
majority of the organization’s members .Sub culture or mini culture within an organization
typically defined by department designation and geographical separation .

Cultural barriers to strategy implementation

 Low- performing culture

 Cultural diversity

MERGERS AND ACQUISITION

 MERGER:- A merger means an amalgamation or integration of two or more firms . The

combing firms lose their separate identities and form a new and bigger firm .

Different forms of mergers:-

1. Horizontal merger :-merger of two or more companies that are in direct competition in the
same product categories and markets .
2. Vertical merger :- merger of two companies which are in the different stage of supply chain
.
3. Market extension merger :- merger of two companies that sell the same product in
different market .

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4. Product extension merger:- merger of two companies selleing different but related
products in the same market .
5. Conglomeration:- it is the merger forms that are involved in totally unrelated business
activities .
 Acquisition :- An acquisition is a purchase of one organization by another .when a
company take over another to become the new owner of the target company , the
purchase is called an acquisition.

Kinds of acquisition :-
1. Amalgamation :- the intending companies will volundarily go into liquidation form a new
company that will take over agreed assets and liabilities of the both at an agreed purchase
consideration .
2. Takeovers:- where one company acquires another company’s total or controlling
interest .here no firm dies but will be under the control of acquiring company .
3. Sale of assets:-A company can sell its assets to another company and ceases to exist .
4. Holding company acquisition:- it is a quasi form of merger .it involves the acquisition of
either the total or the majority of the firm’s share capital.

REASON FOR MERGER AND ACQUISITION

 Reduce competition
 Cost efficiency
 Avoid being a takeover target
 Improve earnings and reduce sales variability
 Market and product line issues.
 Acquire resources
 Synergy
 Tax savings
 Cashing out

REASON FOR FAILURE OF MERGER AND ACQUISITION

1. Integration difficulty
2. Faulty assumptions
3. Failure to carry out effective due diligence
4. Inordinate increase in debt
5. Too much diversification
6. Problems in marketing M&A work

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TURNAROUND STRATEGY :- Turnaround means reversing a negative tend or conveting an
unprofitable or sick business into profitable one.

Reason for turnaround strategy

1. Continuous loss .
2. Negative cash flows.
3. Declining market share .
4. Deterioration of physical facilities.
5. High employee turnover .

PORTFOLIO STRATEGY :- Portfolio analysis is an analytical tool which view a corporation as a

basket or portfolio of products or business units to be managed for the best possible returns.

Advantages:-
 Top management to evaluate the firm’s businesses individually
 It raises the issues of cash flow availability for use in expansion and growth .
 The graphic aids helps in better understanding and communication .

Limitations :-
 It is not easy to define product/market segment
 It is not always clear about what makes an industry attractive or where a product is in its life
cycle.
 It may reduce profit if they are used inappropriately .

Tools and models of portfolio analysis

I. Boston Consultancy Group Model
II. McKinney Portfolio Model ( G.E . Nine Cell Model )
III. Profit Impact Market Strategy Model
IV. Hofer’s Product Or Market Evolution Matrix
V. Arthur D Little Company Model
 Boston Consulting Group (BCG) Matrix
Is a four celled matrix (a 2 * 2 matrix) developed by BCG, USA. It is the most renowned
corporate portfolio analysis tool. It provides a graphic representation for an organization to
examine different businesses in it’s portfolio on the basis of their related market share and
industry growth rates.

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According to this matrix, business could be classified as high or low according to their industry growth
rate and relative market share.

Relative Market Share = SBU Sales this year leading competitors sales this year.

Market Growth Rate = Industry sales this year - Industry Sales last year.

 Stars- Stars represent business units having large market share in a fast growing industry. M
 Cash Cows- Cash Cows represents business units having a large market share in a mature,
slow growing industry.
 Question Marks- Question marks represent business units having low relative market share
and located in a high growth industry.
 Dogs- Dogs represent businesses having weak market shares in low-growth markets.
 GE Nine(9) Cell Matrix : GE nine-box matrix is a strategy tool that offers a systematic
approach for the multi business enterprises to prioritize their investments among the
various business units. It is a framework that evaluates business portfolio and provides
further strategic implications.

Each business is appraised in terms of two major dimensions –

 Market Attractiveness
 Business Strength.

The vertical axis denotes: :- Industry attractiveness indicates how hard or easy it will be for a
company to compete in the market and earn profits. The more profitable the industry is the
more attractive it becomes.
Horizontal axis represent: :- Along the X axis, the matrix measures how strong, in terms of
competition, a particular business unit is against its rivals.
.Advantages :-
 It is more comprehensive
 It is more flexible

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 It is more relevant

Demerits:-

 It is more subjective
 It ignores future
 It ignore he stages of development
 PROFIT IMPACT MARKET STRATEGY :The PIMS programme analysis data provided by
member companies to discover general laws which determine the business strategy in
different competitive environment producing different profit results’.
 Hofer’s Product-Market Evolution Matrix:

According to this model, a firm’s business is positioned in a 15-cell matrix based on two
major variables viz., stage of production-market development and the competitive position.
Charles W. Hoffer has suggested a further refinement of GE/Mckinsey portfolio matrix by
identifying companies, particularly new businesses, that are about to accelerate their
growth. This matrix is also called ‘life-cycle portfolio matrix.
Circles represent the industry and the pie wedges represent the market share of the business
unit.

 SBU A with average competitive position and in development stage holds out prospects
for future development deserves expansion and desired financial resources to be allotted to
exploit the opportunities
 .SBU B with strong competitive position and in growth stage requires to adopt growth
strategies to make it a future winner.
 SBU C with weak competitive position which is in growth stage of the industry should give
lot of attention and requires a careful formulation of marketing strategies to make it more
competitive in the industry.
 SBU D with moderately strong position is in the shake-out stage can be probable with close
attention and careful marketing strategy formulation. This may also requires adoption of
growth strategies.

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 SBU E with average competitive position and in maturity stage of the industry needs to
adopt stability strategies.

 SBU F with moderately strong competitive position and is in the maturity stage of the
industry life cycle, needs the stability, harvest and retrenchment strategies need to be
adopted. No further funds to be invested in this SBU. The market strategies require to hold
the market position without fall.
 SBU G with moderately weak competitive position and is in the decline state of the industry
life cycle need to be divested immediately to arrest any cash loss since it is in a position of
loosing.
 ARTHUR D LITTLE COMPANY MATRIX :- The Arthur D Little (ADL) Strategic
Condition Matrix offers a different perspective on strategy formulation. ADL has two main
dimensions – competitive position and industry maturity.
Competitive position is driven by the sectors or segments in which a Strategic Business Unit
(SBU) operates.
Industry maturity is very similar to the Product Life Cycle (PLC) and could almost be
renamed an ‘industry life cycle.’ Of course not only industries could be considered here but
also segments

1. Dominant – This is a particularly extraordinary position. Often this is associate with some
form of monopoly position or customer lock-in e.g. Microsoft Windows being the dominant
global operating system.
2. Strong – Here companies have a lot of freedom since position in an industry is comparatively
powerful e.g. Apple’s iPod products.
3. Favorable – Companies with a favorable position tend to have competitive strengths in
segments of a fragmented market place. No single global player controls all segments. Here
product strengths and geographical advantages come into play.
4. Tenable – Here companies may face erosion by stronger competitors that have a favorable,
strong or competitive position. It is difficult for them to compete since they do not have a
sustainable competitive advantage.

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5. Weak – As the term suggests companies in this undesirable space are in an unenviable
position. Of course there are opportunities to change and improve, and therefore to take an
organization to a more favorable, strong or even dominant position.

Module 5

Strategic evaluation and control

Strategy evaluation and control as the process of determining the effectiveness of the chosen
strategy in achieving the organizations objectives and taking corrective actions.

Benefits

It gives feed back

It alert potential problem
It helps refine and improve strategy
It fixes responsibility

Barriers

The limit control

Measurement difficulties
Focus on short term

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Types of control

1. Premise control:- premise control checks systematically and continuously whether the
assumptions which the strategy is based are still valid .
2. Strategic surveillance :- It is designed to monitor a broad range of events inside and outside
the company that threaten the course of the firm ‘s strategy .
3. Special alert control :- special alert control can be exercised the formulation contingency
strategies and assigning the responsibility of handling unforeseen events to crisis
management teams .
4. Implementation control :- it is aimed at assessing whether the plans , programmes and
policies are actually guiding the organization towards the predetermined objectives or no

Technique Of Strategic Evaluation And Control .

1. management information system :- management will came to know the latest performance
in key area and take corrective measures.
2. Benchmarking :- it is a comparative method where a firm finds the best practices in an
area in the line with the best practices .
3. Balanced score card :- this method is a balanced approach to performance measurement as
a range of financial and non financial parameters are taken into account for evaluation .
4. Key factor rating :- This is quite a comprehensive method as it take as it takes a holistic view
of the performance area in an organization .
5. Responsibility centre :- responsibility centre are used to isolate a unit that it can be
evaluated separately from the rest of the corporation .
There are five major types of responsibility centers:-
Cost centre
Revenue centre
Expense centre
Profit centre
Investment centre.
6. Network technique :- PERT and CPM
7. Management by objectives (MBO):- It is a system which is based on a regular evaluation of
performance against objectives which are decided upon mutually by the superior and
subordinates
8. Value chain analysis :- it focuses on a set of inter related activities performed in a value
chain analysis .

STANDARDS:- Standards are the basic evaluation of performance and are related to the goal of
an enterprise.

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 Time standard
Cost standard
Production standard
Quality standard .

Benchmarking :- Is the process of measuring a firm’s ability performance against that of the
top performers in the industry .

Strategic benchmarking
Functional bench marking
Process benchmarking .
Competitive bench marking etc..
Financial benchmarking .

Strategic management in small business :- A small business is established bya single person or a
small group of close friends / family members.

Strategic issues in small business:-

 Nature of business
 Scale of operation
 Source of fund
 Marketing method
 Process of learning .
 Succession planning

Strategic management in non profit organization

Strategic Issues

 Strategy piggybacking
 Inter organizational linkage
 Linkage with profit making organization
 Mission driven work culture .
 Managing multiple stakeholders
 Mobilization of Resources
 Generating institutional advantage
 Overcoming institutional disadvantages

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