WHY STRATEGIC THINKING?

 Companies are operating in age of discontinuing change - an age of creative &

constructive destruction.
 Business, technology and product life is shrinking.
 Demographic shift in terms of consumer preference and requirements.
 A direct promotion from Agricultural economy to service or Hi-tech economy in
the new growth economy.
 A concept from liberalization, privatization & Globalization (LPG) to
regionalization.
 Shift from controlled economy to market driven economy.
 Rich countries adopt deindustrialization.
 Emergence of new Global Socio – economic system and world orders.
 Knowledge is replacing Infrastructure
 Self-leadership is in, command and control out
 Networks are replacing hierarchies
 Wanted - employees with Emotional Intelligence.
 Current Trends –
 Increasing environmental awareness
 Growing health consciousness
 Expanding seniors market
 Impact of the Generation Y boom let
 Declining mass market
 Changing pace and location of life
 Changing household composition
 Increasing diversity of workforce & market

1
 WHAT IS BUSINESS?

PRODUCT

MARKET FUNCTION

What Business the Firm is in?

Why the Firm is in the Business?
What should be Firm’s Business?

2
Strategic Management

Creating &
Why?
To ensure Growth Sustaining
with Profits in
the long-run!
Competitive
Advantages,
Globally
3
 BASIC CONCEPTS
 STRATEGY: It is Unified, Comprehensive, and
Integrated long term plan that relates to the strategic
advantages of the firm to the challenges of the
environment.
 STRATEGIC MANAGEMENT: It is a stream of
decisions and actions which leads to the development
of an effective strategy to help achieve the corporate
objective. It is a continuous, iterative, & Cross
functional process of matching firm with its
environment.
 COMPETITIVE ADVANTAGE: is delivering superior
value advantage to your target customers relative to
your competitors. Or delivering equivalent customer
value to your target customers relative to your
competitors , but at a lower cost.
4
 MISSION & GOALS OF A
COMPANY
 VISION: It is a vividly descriptive image of what
you what to be or what you want to be known
for. Vision is an art for seeing invisibles.
 MISSION : It a statement of intent of “what a firm
wants to create and through which line of
Business”. It is a process of legitimization of
corporate existence of business. It defines the
culture, philosophy and grand design of the firm. To
pursue the Creation of Value to all Stakeholders in
the Business. It is an answer to question – “What
business are we in?”
 GOALS / OBJECTIVES : End to be achieved. It is
 To make Profit for today and forever
 To satisfy Customers today and forever 5
 Three Big Strategic
Questions
 Where Are We
Now?

 Where Do we Want
to Go?

 How Will We Get

There?

6
 The Five Task of Strategic
Planning
 Developing a Vision and a Mission
 Setting Objectives
 Crafting a Strategy
 Implementing and Executing Strategy
 Evaluating Performance, Reviewing
the Situation and Initiating Corrective
Action

7
 An organization’s MISSION
 reflects management’s vision of what the
organization seeks to do and to become
 sets forth a meaningful direction for the
organization
 indicates an intent to stake out a
particular business position
 outline “Who we are, What we do, and
Where we are headed”.

8
 Setting Objectives
 The purpose is to
convert the mission
into Specific
Performance Targets
 Serve as yardsticks for
tacking company
progress and
performance.
 Should be set at levels
that require stretch
and disciplined effort.

9
Two Types of Objectives
are Needed
 FINANCIAL
OBJECTIVES

 STRATEGIC
OBJECTIVES
 Short-Run
 Long-Run

10
 Crafting a Strategy
 HOW to out compete rivals and win a
competitive advantage.
 HOW to respond to changing industry
and competitive conditions
 HOW to defend against threats to the
company’s well-being
 HOW to pursue attractive
opportunities
11
 Crafting Strategy is an
Exercise in
Entrepreneurship
 Risk-taking and
venture someone's
 Innovation and
business creativity·
 A keen eye for
spotting emerging
market
opportunities·
 Choosing among
alternatives
12
 Strategic Management Basic
Options on
model
Learning
Competitive
points from
Positioning
deviations
Four Basic Elements

trategic management is the process of moving where you ar

to where you want to be in future – through
sustainable competitive advantages
13
 VISION GAP
VALUE
STRATEGIC
IMPLEMEMTATION
BASIC
MISSION FIRM STRATEGIES
GOAL ORGANISATION
DESIGN
MACRO ENVIRO STRATEGIC
APPRAISAL ALTERNATIVES
FUNCTIONALLEVEL
STRATEGIES &
RESOURCES
MICRO ENVIRO ALLOCATION
APPRAISAL OF BUSINESS LEVEL
INDUSTRIES STRATEGIES
DEVELOPMENT
OF
MICRO ENVIRO CONTROL
APPRAISAL OF STRATEGIC
FIRM SELECTION
Is
Strategy
Working?

STRATEGIC PLANNING DESIGN AND IMPLEMENTATION PROCESS 14

 Characteristic of the
Strategic Management
Process
 An ongoing exercise
 Boundaries among the tasks are blurry rather than
clear-cut
 Doing the 5 task is not isolated from other
managerial responsibilities and activities.
 The time required to do the tasks of strategic
management comes in lumps and spurts rather
than being constant and regular.
 Involves pushing to get the best strategy
supportive performance from each employee,
perfecting the current strategy.
15
 ENVIRONMENTAL APPRAISAL

ENVIRONMENTAL ENVIRONMENTA
ANALYSIS L DIAGNOSIS
O S

T W
ETOP
SAP
OFPP

EVALUATION PROCESS OF SWOT ANALYSIS

16
 Impact Of Environment Business

ENVIRONMENTAL FACTORS
GOVERNMENTAL INTERNATIONAL
ECONOMICAL

POLITICAL
TECHNOLOGICAL

FIRM/BUSINESS
LEGAL
SOCIETAL

CULTURAL

17
18
19
Industry Analysis

20
Threat of Substitute Products or Services

Bargaining Power of Buyers

Bargaining Power of Suppliers

Relative Power of Other Stakeholders

21
Threat of New Entrants –
Economies of scale

Product differentiation

Capital requirements

Switching costs

Access to distribution channels

Cost disadvantages

Government policy

22
Rivalry Among Existing Firms –

Number of competitors
Rate of industry growth

Product or service characteristics

Amount of fixed costs

Capacity

Height of exit barriers

Diversity of rivals

23
 SWOT analysis of strengths,
weaknesses, opportunities,and threats.

24
TOWS Matrix

25
CREATING STRATEGIC
MIND SET

26
 Corporate Strategy

Three Key Issues:

 Firm’s directional (CORPORATE)
strategy
 Firm’s portfolio (BUSINESS LEVEL)
strategy
 Firm’s parenting (FUNCTIONAL
LEVEL) strategy

27
 Initiation of Strategy

•New CEO

•External intervention Stimulus

for change
Triggering •Threat of change in
ownership
in
event
strategy
•Performance gap

•Strategic inflection point

28
Corporate Directional
Strategies

COMBINATION STRATEGIES

DERIVED STRATEGIES
29
 IGOR ANSOFF’S BUSINESS GROWTH MODEL
New products /New Markets
CO Unrelated
NEW CUSTOMERS BU RP
FOR EXISTING LINES SIN ORA Businesses
MARKETS / CUSTOMERS

ES T
NEW

OF PRODUCTS SD EP
Related EV LAN
E
MARKET DEVELOPMENT Businesses – LOP NING
ME
NT

EXISTING PRODUCTS NEW PRODUCTS FOR

IN EXISTING MARKETS EXISTING CUSTOMERS
EXISTING

Increase
Market Share NEW PRODUCT
Existing
DEVELOPMENT, UPGRADES
Share of Business SALES
MGMT.
EXISTING NEW
Products
PRODUCTS 30
Porter’s Generic Competitive
Strategies

31
PORTFOLIO
ANALYSIS

32
Stages of the Industry Life Cycle

33
 PRODUCT LIFE CYCLE
 Most product sales observed over long periods can be
portrayed as bell shaped curves – Product life cycle curves
which can be typically divided into four stages: Introduction,
Growth, Maturity and Decline.
 Product Life Cycle asserts four things.
 1. Products have limited life.
 2. Product Sales pass through distinct stages, each posing
different challenges, opportunities and problems to the
seller.
 3. Profits rise and fall through different stages of the life
cycle.
 4. Products require different marketing, financial,
manufacturing, purchasing and H.R. strategies in each life
cycle stage.
 Growth-Slump-Maturity pattern (small kitchen appliances)
 Cycle Recycle Pattern
 Scalloped Pattern (succession of PLC’s; eg: Nylon) 34
 INTRODUCTION - STRATEGIES
•Sales growth tends to be slow - Delays in production capacity
expansion /technical problems; Distribution/retail chains being put up;
sales expensive as conversion rates are lower (innovators).
•Promotion at the highest ratio to sales – inform customers, induce
trial and secure distribution in retail outlets.
•Prices tend to be high as costs are higher.

Hi
SLOW RAPID
SKIMMING SKIMMING
PRICE

SLOW RAPID
PENETRATION PENETRATION
Lo Hi
PROMOTION 35
 PLC - GROWTH STAGE
 Introduction is followed by a stage marked by rapid climb in
sales. Companies starts to eye for market share.
 Growth is a period of rapid market acceptance & substantial
profit improvement.
 Innovators, early adaptors like the product and continue to
buy the product while middle majority starts trying.
 New competition as sales and profits are growing. The stage
where we see entry of competition in large numbers.
 Prices remain where they are or fall slightly to allow better
penetration or for entry into other segments.
 Time noted for the introduction of variants/ brand extensions.
 Companies maintain promotion at same or higher level.
Profits increase even with higher promotion costs as it gets
spread over higher sales volume.
3636
 PLC - GROWTH STAGE
 MARKETING STRATEGIES
 Firm improves product quality and adds new features and
models.
 Enters new market segments.
 Enters new distribution channel.
 Advertising focus shifts from awareness / knowledge to
Interest/desire/conviction.
 Prices should be reduced (or low priced variants launched)
at the right time to attract the next level of price sensitive
customers.
 Faces tradeoff between high market share to high current
profit.
 Firm that pursues market expansion strategy will improve its
competitive position.
37
37
 PLC - MATURITY STAGE
 Many products which we see around us are in the maturity
stage of PLC.
 A stage characterized by the slow down in the growth rate.
 Most of practical Marketing management deals with a
mature product. Hence the most important phase in PLC.
 Three Phases
 1. Growth Maturity: Sales growth starts to fall due to
distribution saturation. Growth predominantly due to trial by
laggards.
 2. Stable Maturity: Most potential customers have tried the
product. Future sales governed by population growth and
replacement demand.
 3. Decaying Maturity: Absolute level of sales decline.
 Slow down in sales growth causes over-capacity -----
Intensified competition ----- price wars ---- profit Erosion----
weak exit. 38
 MATURITY STAGE STRATEGIES
 R&D spends are increased to find better versions.
 Increased advertising spends.
 More Consumer / Dealer cuts.
 Three types of interventions are taken up by Marketers.
 1. Market Modification:
 Company should not try to conserve but should try &
expand market for its Brand.
 Sales vol. = No. of users X usage rate.
 Try expand the no. of Brand Users by:
 Convert non users: Attempts to convert non coffee drinkers
to try coffee.
 Enter new market segments: Johnson & Johnson baby
shampoo for adults, Cerelac adapted for the senile.
 Win competitors customers: Pepsi/Coke, NIIT/Apple.
39
 MATURITY STAGE STRATEGIES
 Volume can also be increased by focusing on the Current
Users – convincing them to use more.
 More frequent use: Biscuits an all time snack, Coke instead
of coffee/tea, clinic shampoo, variety of SKU, vending
machines.
 More usage per Occasion: Shampoo giving better results in
two rinsing, more SKU’s.
 New more varied uses: Recipe route tried out by microwave
oven manufacturers, Sachets by shampoo manufacturers
for travelers, Arm & Hammer Baking soda as a refrigerator
deodorant.
 2. PRODUCT MODIFICATION
 Stimulate sales by modifying the product’s characteristics
by improvements in quality, feature and style.
40
 STRATEGIES FOR MATURE STAGE
 2. PRODUCT MODIFICATION
 Quality Improvement:
 Functional performance improved- for cars, TV, white
goods - New Improved eg: Santro Xing, Indica V2.
 Plus launch - from FMCG manufacturers --------- stronger,
bigger, better,– Lifebuoy Plus.
 Aimed at triggering Brand switching
 Style Improvement:
 Aimed at increasing aesthetic appeal.
 Periodic intro of color variants by auto manufacturers.
 Consumer/packaged food bringing packaging /color
variants.
 Advantages: Unique identity / can secure loyal customers.
 Major disadvantage arises from the fact that it is difficult to
judge customer preferences --- risk of losing those who
liked earlier version
41
 STRATEGIES FOR MATURE STAGE (contd.)
 Advantages of feature improvements
 Build progressive and leadership image for co. (Maruti)
 New features can be made optional (adapted or dropped
easily).
 Helps to win loyalty of some segments.
 Cost effective publicity.
 Can generate enthusiasm for sales force and dealers.
 Main disadvantage is that many of these can be easily
imitated.
 3. Marketing Mix Modifications:
 Product Manager should also try to stimulate sales by
modifying Mktg. Mix.
 Price: Decision whether a price cut will attract new
customers.
 Trying price specials, early bird discounts, easier credit
terms to retain loyal customers..
42
 MATURITY STAGE STRATEGIES
 3. Marketing Mix Modifications:
 Advertising: Change message- copy, media- vehicle mix,
timing/frequency, to target new audience.
 Build new brand identity / image.
 Direct comparison Ads about competition.
 Sales Promotion: Step up trade discount
 Price offs, Rebates, warranties, festival offers, gifts etc.
 Personal selling: should the quality of sales people or their
area of specialization need to be changed.
 Questions on territory revisions; incentive plans; planning of
sales call etc.
 Services: can the company speed up delivery. Extending
technical services.
 Disadvantages: can be easily copied. Mass distribution and
penetration efforts may not help – can lead to profit erosion.
43
 STRATEGIES FOR DECLINE STAGE
 Sales of most products/brands eventually decline –.
 1. Technological advancements in the product category.
 2. Consumer shifts in taste & perception.
 3. Increased domestic & foreign competition------
 price cutting/ over capacity/ profit erosion.

 Sales may plunge to zero or gradually fall for a long period.

 As sales decline, profits fall. Some of the weaker firms
withdraw.
 Those remaining drop smaller market segments & marginal
trade channels to conserve profits.
 They may cut their promotion budgets and may reduce
prices further.
 Unless strong reasons for retention exist, carrying a weak
product is very costly to the firm.
 It can delay aggressive search for alternatives/replacement.
44
 STRATEGIES FOR DECLINE STAGE
 MARKETING STRATEGIES:
 1. Increase firms investment (Dominate the market or to
strengthen its competitive position)
 2. Hold investment level until uncertainties about the
industry are resolved.
 3. Decreasing investment selectively. (Unprofitable target
groups/ markets/ products will have to be identified and
instead look for strong niche’s.)
 4. Harvesting: milking to recover cash quickly (Brands with
high loyalty can continue longer without any investments).
 5. Divest the business quickly by disposing off its assets
as advantageously as possible.
 Drop Decision:
 Sell/transfer to someone
 Should drop slowly or fast.
 Inventory/service level to be maintained.
45
 P.L.C WEAKNESSES
 No Uniform Shape:
 An ‘S’ shaped curve describes only shape of PLC while most
of them vary or are unique.
 Unpredictable Turning Points:
 While most products do peak and then fall there is no
specific turning point.
 Difficult to Decide the Stages:
 A dormant sales (flat) pattern may denote the product has
reached maturity while it may be just that the product has
touched a plateau before another growth period.
 Tendency to drop a product due to such readings can turn
out to be fatal due to the risks involved in new product
development.
46
 P.L.C WEAKNESSES
 Unclear Implications: Growth
phase may or may not be associated with high profit
margin.
 Rapid growth can be associated with low profits and
decline can be very profitable.

 Product Oriented:
 Fails to understand the changes in the requirement
of customers / strategies of competitors,
attractiveness of new market to competitors/
Emergence of technologies etc.
 Technologies, needs/ demands, product categories
have different driving forces.
47
 P.L.C WEAKNESSES
 No Uniform Shape: An s shaped curve describes only shape
of PLC while most of them vary or are unique.
 Unpredictable Turning Points: While most products do peak
and then fall there is no specific turning point.
 Difficult to Decide the Stages: A dormant sales (flat)
pattern may denote the product has reached maturity while it
may be just that the product has touched a plateau before
another growth period. Tendency to drop a product due to
such readings can turn out to be fatal due to the risks
involved in new product development
 Unclear Implications: Growth phase may or may not be
associated with high profit margin. Say rapid growth can be
associated with low profits and decline can be very profitable.
 Product Oriented: Fails to understand the changing
requirement of customers / strategies of competitors,
attractiveness of new market to competitor-ors / Emergence
of technologies etc.
 Technologies, needs/ demands, product categories have
different driving forces.

48
 BCG Portfolio Matrix
MARKET SHARE DOMINANCE
HIGH LOW
MARKET GROWTH RATE

High growth High growth

HIGH

Market leaders Low market share

Require cash Need cash
Large profits Poor profit margins

$$
LOW

Low growth Low growth

High market share Low market share
High cash flow Minimal cash flow

49
 BCG Matrix
Relative Market Share Position
High Medium Low
1.0
High
Industry Sales Growth Rate

Stars Question Marks

IV III

Med

Cash Cows Dogs

I II
Low

50
BCG Matrix

51
 BCG Portfolio Matrix
Example
MARKET SHARE DOMINANCE

HIGH LOW

Sub-Notebooks Integrated
MARKET GROWTH RATE

and Hand-Held phone/Palm

Computer devices
HIGH

PROBLEM
STAR CHILD

Laptop and Mainframe

Personal Computer
Computers
LOW

CASH
COW DOG

52
 Boston Consulting Group
(BCG) Matrix
 When a firm’s divisions compete in
different industries, a separate strategy
often must be developed for each
business.
 To enhance and formulate strategies.
 To manage its portfolio of businesses
 Focuses on relative market share
position and the industry growth rate.

53
 BCG Matrix
 Pie Chart corresponds to corporate
revenue generated by that business unit.
 The pie slice indicates the proportion of
division’s profit.
 Divisions located
 Quadrant I is called Cash Cows,
 Quadrant II is called Dogs.
 Quadrant III is called Question Marks,
 Quadrant IV is called Stars,
54
 Cash Cows
 High relative market share but compete in
a low-growth industry
 Generate cash in excess of their needs
 Milked i.e. cash for other purposes
 Manages to maintain strong position as
long as possible
 Product development
 Concentric diversification
 Retrenchment or divestiture if the division
becomes weak

55
 Dogs
 Low relative market share and
compete in a slow- or no-growth
industry
 Weak internal and external position
 Liquidation
 Divestiture
 Retrenchment

56
 Question Marks
 Low relative market share—compete
in a high growth industry
 Cash needs are high
 Cash generation is low
 Decision: strengthen by pursuing an
intensive strategy, e.g. to sell them.

57
 Stars
 High relative market share and a
high industry growth rate
 Represent the organization’s best
long-run opportunities for growth
and profitability.
 Substantial investment to maintain
or strengthen their dominant
position.
 Integration strategies
 Intensive strategies
 Joint ventures 58
 BCG Matrix & Benefit
 Setting the path for growth
 Knowing dead investments
 Draws attention to the cash flow,
 Investment characteristics
 Needs of an organization’s various
divisions.
 To achieve a portfolio of divisions
that are Stars.
59
 BCG Matrix Limitations
 Viewing every business as a star, cash cow,
dog, or question mark is overly simplistic.
 Middle of the BCG matrix is not easily
classified.
 The BCG matrix does not reflect whether or not
various divisions or their industries are growing
over time.
 Other variables besides relative market share
position and industry growth rate in sales are
important in making strategic decisions about
various divisions.

60
G.E Strategic Planning Model
Business Strength
Strong Average Weak

Industry Attractiveness
High

Medium

Low

Business Strength Index Industry Attractiveness Index

* Market Share * Market size
* Price Competitiveness * Market Growth
* Product Quality * Industry Profit Margin
* Customer Knowledge * Amount of Competition
* Sales Force and Effectiveness * Seasonality
* Geographic Advantage * Cost Structure
61
* Others * Etc.
 Strategies for Resource
Allocation
Provide financial resources if SBU (Problem
Build
Build Child) has potential to be a Star.

Preserve market share if SBU is a successful

Hold
Hold Cash Cow. Use cash flow for other SBUs.

Increase short-term cash return. Appropriate

Harvest for all SBUs except Stars.
Harvest

Get rid of SBUs with low shares in

Divest
Divest low-growth markets.

62
 McKinsey’s 7 S Model

Strategy

Structure Systems
Super
Ordinate
Goals-
Shared
Values
Style Skills

Staff 63
Implementation of a
strategy

64
Strategy Implementation
 Sum total of the activities
and choices required for
the execution of a
strategic plan.
 Process by which
strategies and policies
are put into action
through programs,
budgets, and procedures.
 The toughest phase in
Strategy Management 65
 Strategy Implementation

•More time than planned

•Unanticipated problems
•Activities ineffectively coordinated
•Crises deferred attention away
Problems in
•Employees w/o capabilities
Implementing
•Inadequate employee training
Strategic plans
•Uncontrollable external factors
•Inadequate leadership
•Poorly defined tasks
•Inadequate information systems

66
 DESIGN OF OBJECTIVES
IS STRATEGY & COMMUNICATE TO
CONCERNED
FUNCTIONAL?

TASK BREAK DOWN

EVALUATION OF
OUT COME STRATEGIC ORGANISATION DESIGN
IMPLEMENTATION & DEVELOPMENT
TRAINING & &
DEVELOPMENT OF CONTROL
MANAGERS PROCESS DELEGATION OF TASK &
AUTHORITIES &
RESPOSIBILITIES
DESIGN OF SIS /MIS
RESOURCES
MOBILISATION &
DESIGN OF ALLOCATION
PERFORMANCE
STANDARD
67
 Stages of the Industry Life
Cycle
Stag
e Introduction Growth Maturity Decline
Facto
r
Generic Differentiation Differentiation
strategies Differentiation Overall cost
Overall cost leadership
leadership Focus
Market Low Very large Low to Negative
growth moderate
rate
Number Very few Some Many Few
of
segments
Intensity Low Increasing Very intense Changing
of
competiti
Emphasis
on Very high High Low to Low
on moderate
product
design

68
Stages of the Industry Life Cycle
Stag
e Introduction Growth Maturity Decline
Facto
r
Emphasis Low Low to High Low
on moderate
process
design
Major Research and Sales and Production General
functional Development marketing
area(s) of management
concern and finance

Overall Increase Create Defend

objective Consolidate,
market share consumer market share
maintain,
awareness demand and extend harvest, or
product life exit
cycles

69
Evaluation and Control

Return on
Investment
(ROI)

Earnings per
Traditional
Share
Financial (EPS)
Measures
Return on
Equity
(ROE)

70