Atm Prakash Rai

INTRODUCTION
 BUSINESS?

 POLICY?

 TACTICS?
What is a Strategy?
 Refers to the ideas, plans, and support that firms
employ to compete successfully against its rivals.

 Strategy is designed to help firms achieve

competitive advantage .

 How to get edge over rivals?

 Being followed from the olden days (example- King

Akbar).
Definitions of STRATEGY

 Acc to Chandler: “ Strategy is the

determinator of the basic long-term goals
of an enterprise, and the adoption of
courses of action and the allocation of
resources necessary for carrying out
these goals.”
 Acc to Mintzberg: “ Strategy is a
mediating force between the organization
and its environment: consistent patterns
in streams of organization decisions to
deal with the environment”
Characteristics of
Strategy
 The decisions are concerned with or effect the
Long term direction of an organization.
 Strategic decisions are normally about trying to
achieve some advantage for the organization.
 Matching the activities of an organization to
the environment in which it operates.
 The decision has major financial and resource
implications.
 Major impact outside the organization.
 The decision entails significant risks to the
business.
Strategy concepts
 Distinctive Competence:-The special skills,
capabilities, or resources that enable a firm to
stand out from its competitors; what a firm can
do especially well to compete or serve its
customers. Example- McDonald’s core
business is hamburger (quality food and
reasonable price).

 Terrain:- The environment in which competition

occurs. In a military sense, terrain is the type
of environment or ground on which a battle
takes place. From a business sense, terrain
refers to markets, segments, and products
used to win over customers.
Strategy vs tactics
Aspects Strategy Tactics
Scale of Objectives Grand Limited
Scope of Action Broad and General Narrowly Focused
Guidance Provided General and Ongoing Specific and
Situational
Degree of Flexibility Adaptable, but not Fluid, quick to adjust
hastily changed and adapt in minor or
major ways.
Timing in Relation to Before Action During Action
Action
Focus of Resource Deployment Employment
Utilization
Business policy and strategic management
What is strategic
management?
Definition:- “Strategic management is
a stream of decisions and actions
that lead to the development of an
effective strategy or strategies to
help achieve corporate objectives.” –
By Glueck.
Strategic management

 Where we are today (current position)?

 Where we want to go (Vision)?

 What actions should we take to go

there ( develop a plan or strategy)?

 How can we bring out these actions

( Implement strategy)?
Six Ingredients of
Strategy
Vision
Value Planning and
Creation administratio
n

Strategy

Global Stakeholder
Awareness s

Leveraging
Technology
Value Creation

 Value Proposition The products and services

that meet customer needs at a price that
generates a positive economic return.

 Customer Focus right customer + right

product/services= Economic return.

 Competitor focus Understanding the

competitors.
Planning and
Administration
 Activity Fit Do we have all resources to perform
activities?

 Corporate Fit How to make our all business units

to work together?

 Alliance Fit Are we have right partners and

whether their strategies are compatible with us?

 People Fit Are our people are trained and

skilled?

 Communication Fit Do we promote clear and

honest communication among our people?
Strategic management
model
Goal Setting

Strategy
monitoring Analysis

Strategy
Strategy
Implementatio
Formulation
n
Strategic Management
Process
 The steps by which management
converts a firm’s values, mission,
and goals/objectives into a workable
strategy.

 It consists of FOUR stages: analysis,

formulation, implementation, and
adjustment/evaluation.
Strategy Management
Process
External Environment Opportunities,
Analysis Threats
Internal Environment Strengths, Weakness

Mission Customers to be
Formulation served
Capabilities to be
developed.
Policies Goals, guidelines for
major activities.
Organization
Implementation structure, systems,
culture, etc.

Adjustment/ (Cycle to earlier

Evaluation steps)
VMGS
 VISION provides clear view of what firm is trying
to achieve for its customers. It provides a direction
of what the organization seeks to do or acquire.

 MISSION who we are and what we do.

 GOALS are high level statements that provide

overall context for what the project is trying to
achieve and should align to business goals. This is
non-measurable.

 OBJECTIVES What is to be accomplish? Time in

which to accomplish it. Quantified when possible.
Nature of Strategic
Management
 SM related to formal and organized sector, especially in
corporate sectors.

 Very comprehensive and covers all the areas of the

corporate business.

 It is not specific but a holistic in nature.

 Provides guidelines to all other functional areas.

 Focuses into long-term goals, relatively broad.

 SM is concerned to whole organization whereas

operation management is related to any specific
functional area.
Importance of SM
approach
 Asks the manager about the goals of the organization
and the strategy to fulfill it.

 Future cannot be controlled but it can be anticipated.

 Each of the external environment shall either

constrain or facilitate an organization as it seeks to
implement policy.

 Managers must be sensitive to the needs and respond

to demands of constituents over whom they have little
or no control.

 Concentrates on assuring a good fit between the

environment and the organization.
Strategy Levels In
organization
 Corporate Strategy Market definition
Diversification into new product of geographic
markets.

 Business Strategy Market Navigation

Attempts to secure competitive advantage in
existing product of geographic markets.

 Functional Strategy Support of Corporate

strategy and Business Strategy Information
systems, human resource practices and
production processes that facilitate
achievement of corporate and business
strategy.
Different types of
Strategies
Business and Corporate
strategy
 Multibusiness firm or Diversified firm General
Electric in power generation, medical
equipment, plastic, lighting, water treatment,
financial services, home appliances, and
transportation industries, etc.

 Single-business firm or undiversified firm A

firm that operates only one business in one
industry or market. Example is Domino’s Pizza
and Papa John’s International.
UNIT 2
Corporate and Strategic
Planning
Content

 PLANNING
 NATURE OF PLANNING
 SCOPE OF PLANNING
 TYPES OF PLANNING
 PROCESS OF PLANNING
 STRATEGIC PLANNING
 DECISION MAKING
Planning

♦ ACCORDING TO WILLIAM KING :

“ Planning is the process of thinking

through and making explicit the strategy,
actions and relationships necessary to
accomplish an overall objectives or purpose.”
NATURE OF PLANNING

 PLANNING IS GOAL-ORIENTED:
Planning is made to achieve the desired objectives
of the business.

 PRIMACY OF PLANNING:
Planning pervades all managerial activity,it is the
function of every manager.It facilitates
organising,staffing,directing,and controlling.

 PLANNING IS AN INTELLECTUAL PROCESS:

Planning is an intellectual process and the quality
of planning will vary according to the quality of the
mind of the managers
SCOPE OF PLANNING

 Management is basically concerned with

achieving the objectives of the business by
utilising the available resources and human
resources of the enterprise,by making optimum
utilisation of resources.Attaining maximum
results with the minimum resources and the least
wastage is the ultimate end of every business,in
order to achieve the goal of the organisation.
TYPES OF PLANNING

 STRATEGIC PLANNING: A strategic planning is a

framework for strategic thinking that he helps a school
stay competitive, live into its core value, ward off threats
and take advantage of opportunities.

 OPERATIONAL PLANNING: To operationalize the vision

and mission of the school through specific workplace that
lead to shared responsibility and accountability of specific
goal.
 FORMAL AND INFORMAL PLANNING: A planning in BLACK
and WHITE is known as formal planning. Informal planning
is only thinking about it and nothing more.

 CORPORATE PLANNING: The process of establishing

corporate objective and formulating the policies, strategies and
resource allocation that will best achieve these objectives.

 FUNCTIONAL PLANNING: FP is segmental, and it is

undertaken for each major function of the organisation like
Production, Marketing, Finance, Human resource,etc.
SHORT TERM AND LONG RANGE

 PLANNING: STP relates to a period of less than one year,

MTP covers a period of over one year but less than three year.
A planning between three to five years is known as long term
planning.

 PROACTIVE PLANNING: PP involves designing suitable

course of action in anticipation of likely changes in the relevant
environment. In India, co’s like Reliance Industries, Hindustan
lever,etc have adopted this kind of approach.

 REACTIVE PLANNING: In RP, organisations’s response come

after the environmental changes have taken place.After the
changes take place,organisations start planning.

 PROCESS OF PLANNING

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STRATEGIC PLANNING

 Is a systematic effort to produce fundamental

decisions and actions that shape and guide
what a business organization is, what it does
and why it does it. The objective of strategic
planning is to develop a chart by which to
manage an organization’s positioning.
 It requires significant amount of time and can
be quite frustrating .
 But if done properly, it can enable a firm to
recognize its most effective position within its
industry.
BENEFITS OF STRATEGIC
PLANNING
 Defines the purpose, goals,
objectives and time frame.
 Communication of goals and
objectives to their stakeholders.
 Develop a sense of ownership.
 Emphasis on the effective use of the
resources.
 Provides a base to measure the
progress.
DECISION MAKING

ACCORDING TO R.S.DAVAR..

“Decision making may be defined as the

selection based on some criteria of one behavior
alternative from two or more possible alternatives. To
decide means ‘to cut off’ or in practical content, ‘to
come’ to a conclusion.
 CHARACTERISTICS OF A DECISION
 Decision is the choice of the best course among
alternatives.

 Decision is the end process preceded by deliberation

and reasoning.

 Decision making is a mental process because the final

selection is made after thoughtful consideration.

 Decision is aimed at achieving the objectives of the

organisation.

 Decision relates the means to the end.

DIFFICULTIES IN DECISION-MAKING

INCOMPLETE INFORMATION: Lack of information in decision-

making, makes the process incomplete
.
INEFFECTIVE COMMUNICATION: IC makes implementation
difficult. The manager should therefore care to communicate all
decisions to the employees in clear, precise and simple language.

INCORRECT TIMING: If the decision is correct but the time is

inopportune, it will not serve any purpose.

UN-SUPPORTING ENVIRONMENT: If there is all round goodwill

and trust, the manager is encouraged to take decisions, On the other
hand, under the opposite circumstances he avoids decision-making.
CORPORATE STRATEGY and
ENVIRONMENTAL
UNIT 3 ANALYSIS
 In the half-century after the Second
World War, the business corporation
has brilliantly proved itself as an
economic organization, i.e. a creator
of wealth and jobs. In the next society,
the biggest challenge for the large
company – especially the multinational
– will be its social legitimacy; its
values, its mission, its vision.
—PETER DRUCKER
CONTENT
 FORMULATION OF STRATEGY
 CORPORATE STRATEGY
 FACTORS RESPONSIBLE FOR SHAPING THE
STRATEGY
 DIFFERENT TYPES OF STRATEGIES
 ENVIRONMENTAL ANALYSIS
 INTERNAL AND EXTERNAL ENVIRONMENT
 TECHNIQUES FOR ENVIRONMENTAL
ANALYSIS
 ENVIRONMENTAL THREATS AND
OPPORTUNITY PROFILE.
Formulation of Strategy
1. Evaluate current Performance Results.
Examine and Evaluate the Current :Mission,
Objectives, Strategies, Policies.
2. Review Corporate Governance
3. Scan the external environment. Analyze
External factors: opportunities and threats.
4. Scan Internal environment. Analyze Internal
factors: strengths, weakness.
5. Select strategic factors in light of current
situation. Review and revise as necessary.
6. Generate and evaluate strategic alternatives.
Select and recommend best alternatives.
Environment
 All external forces, factors, or conditions that
exert some degree of impact on the
strategies, decisions, and actions taken by
the firm.
 Types of Environment
• Macro or External environment :- The broad
collection of forces or conditions that affect
every firm or organization in every industry
(also known as general environment).
• Micro or Internal Environment:- Pricing
Competition, Demand and supply scenario.
Deals with a particular business and
Corporate Governance.
Macro Environment

 Aging Workforce
 Health Consciousness
 Changing cost of Capital or Interest
rates
 Technological Advancement
 Declining Birthrates
 Impact of Terrorism
 Foreign Competition
Types of Macro
Environment
 The Demographic Environment
 Endowment Factors
 The Political Environment
 Gujrat and China political willingness
 The Social/ Cultural Environment
 Heterogeneous Workforce Management
 Anapoorna and Sandwich Generations in US.
Types of Macro
Environment
 The Technological Environment
 3G vs 4G
 IT revolution
 IBM using ocean current to operate
Data Center.
 The Global Environment
 DuPont
 UN conventions CTBT, Nuclear
disarmament
Environmental Analysis
 External or Macro Environment Analysis
 PESTEL Analysis
 Porter’s Diamond Model for Analysis
 Industries and Sectors Analysis (Internal or
micro environment)
 Porter’s 5 forces Analysis
 Competitors and Markets analysis
 Strategic Groups
 Market Segments
 Strategic Customers
 Critical Success factors
PESTEL Analysis or STEEP
analysis
Political Economi
c Factors
Legal

The
Organizatio
n Socio-
Cultural
Factors

Ecological
Technological
 Some Important variables in
the
Economic
Societal Environment
Technological Political-Legal Sociocultural

GDP trends Govt. R&D Antitrust Lifestyle

spending regulations. changes
Interest rates Total industry Environmental Career
spending protection laws expectations

Money supply Focus of Global warming Consumer

technological legislation activism
efforts
Inflation rates Patent Immigration Rate of family
protection laws formulation
Unemployment New products Tax laws Growth rate of
levels population
Wage/price New Foreign trade Level of
control technology regulation education.
development
Porter’s Diamond Model

 Given by Michael Porter in his book

“The Competitive Advantage of
Nations”.

 Suggests that there are inherent

reasons why some nations are more
competitive than others, and why
some industries within nations are
more competitive than others.
Porter’s Diamond Model
Firm
Strategy,
Structure
and
Rivalry

Factor Demand
Conditio Conditio
ns ns
Related
and
Supportin
g
Industries
Porter’s Diamond Model

 Factor Condition:- In India there is available

endowment for BPO & KPO.
 Demand Conditions:- Global demand
available.
 Related and Supporting Industries:- Plenty
software and IT cos existing in India.
 Firm Strategy, Industry Structure and
Rivalry:- Rivalry from Infosys, TCS etc.
 Scenario:-detailed and plausible view for
future.
Corporate strategy

 Plans and actions that firms need to

formulate and implement when
managing a portfolio of businesses;
an especially critical issue when firms
seek to diversify from their initial
activities or operations into new
areas. Corporate strategy issues are
key to extending the firm’s
competitive advantage from one
business to another.
Characteristics of
Environment
 Complexity (relatively easier to
understand in parts but difficult to
grasp in its totality).

 Dynamic

 Multi-faceted

 Far-reaching Impact
Techniques to Monitor the
Environment
 Environment Scanning (Porters’
model, SWOT, etc.)

 Competitor intelligence gathering-

how the services differ, managers
visiting competitors hotels to assess
the difference in services provides to
the customer.
CORPORATE APPRAISAL
UNIT 4
CORPORATE APPRAISAL

 To Identify opportunities and to neutralize

threats in the external environment,
mangers must thoroughly evaluate their
firm’s potential capability to compete.
 We need to identify the firms capabilities
and internal analysis of strength and
weakness.
 Value Chain Analysis, Capability Drivers
analysis and financial analysis.
The Value Chain
Primary Activities

 Inbound Logistics : SCM major source to

direct cost. (warehousing, storage, and
control of raw materials).
 A reduction in inventory and storage
costs over time can have a major
positive impact on a firm’s cost position.
 Ex: Hospitals, Restaurants, etc. need
timely supply of inputs.
 Internet based software to coordinate
the supply of inputs as to reduce cost to
inventory.
Operations
 The activities and procedure that transform raw
materials, components and other inputs into finished
end products.
 Specific task activities include stamping, machining,
testing, fabrication, and assembling in manufacturing
based settings.
 In telecomm firms operations are managing network
of routers, switches, and other gear that is break
down of communication and the internet. USX’s US
steel unit and AK steel , Nucor built up a significant
competitive position in steel industry by focusing on
minimills- less cost and better quality.
Outbound Logistics

 Transfer of finished end products to the

distribution channels.
 Activities include Inventory control,
Warehouse, storage, and transport of
finished products.
 P&G has accelerated the timely delivery of
goods that the retailers have trouble
stocking- use of bar coding they balance
the flow of inventory and checks the
demand of the product.(RFID is also
advantageous.)
Marketing and Sales

 Include advertising, promotion,

product mix, pricing, specific
distribution channels, working with
wholesalers, and sales force issues.
 Example:- Coca-cola, McDonald’s,
PepsiCo have effective marketing
activities.
Service

 Value is more often defined in the eyes of the

customer rather than by what the firm thinks it
has created.
 Warranty, repair, installation, customers
support, products adjustment and modification,
and immediate response to customer needs.
 FedEx and UPS allow customers to track the
status of their package online.
 Telecos providing customer care number.
Support Activities

 Procurement: Economies of Scale,

Bargaining power over suppliers.
 Technology Development: Product and
Process Development
 HRM: Training, job satisfaction,
efficiency and quality. Hotel industry
employee are trained to be customer
sensitive.
 Firm Infrastructure: Finance ,legal,
location etc.
Capability Drivers

 The basic economic and strategic

means by which a firm builds an
underlying source of competitive
advantage.
1.First-moves Advantage
2.Economies of Scale
3.Interrelationships (Pepsi and Lays
advertisement )
First Mover Advantage
 Patents: Xerox corporation
 License: Walt Disney, McDonald’s provide for
the toy manufacturing.
 Location: New movie theatre near an
existing college.
 Channel access: Canned foods, beverages,
breakfast cereal, diapers are distributed
through supermarkets which in turn give
priorities to well known or first come brands.
 Supply Access: Kellogg, Pillsbury are large
purchaser of wheat and corn.
 Reputation : Brand Image
Economies of Scale

 Greater volume allows to take cost

advantage.
a)Specialization
b)Fixed-cost Spreading: more units,
declining per unit cost.
c)Purchase discount
d)Vertical Integration
Interrelationships

 Resource Transfer: Personnel in soft

drink and other beverages
businesses are highly skilled in
activities such as market research,
market segmentation, consumer
promotion, and TV advertising can
be used for snack food unit.
 Activity Sharing: Multiple product
with same advertisement
Strategy and Competitive
Advantage
 Low-cost leadership strategy: A competitive
strategy based on the firm’s ability to provide
products or services at lower cost than its rivals.
Example: Whirlpool in washers and dyers, Wal-Mart
in retailing, Gillette in razor blades.
Cost Drivers : An economical or technological
factors that determines the cost of performing some
activity. Cost drivers which shape low cost leadership
strategy are 1. Economies of Scale 2. Experience in
the field 3. degree of Vertical Integration 4. location
of activity performed.
Strategy and Competitive
Advantage
 Differentiation: Competitive strategy based on
providing buyers with something special or
unique that makes the firm’s product or
service distinctive. It is based on providing
buyers with something that is different or
unique, that makes the company’s product or
service distinct from that of its competitors.
 Example: BMW and Mercedes in automobiles,
Sony in Consumer electronics.
Matching Strategies

Corporate Business
Strategy Strategy

Functional Operational
Strategy Strategy
Functional Strategy

 Is an approach a functional area takes

to achieve corporate and business unit
objective or SBU objective.
 Strategic Business Unit (SBU): A
division or group of divisions
composed of independent product-
market segments that are given
primary authority for the management
of their own functions.
Functional Strategy

 Marketing Strategy
• Market Development: Capturing larger
share market through market
saturation/Penetration. Example: IDBI,
Corporation Bank, IOB looking for MOU
with TVS, L&T as to stop rural customers
from taking loan from the money
lenders.
• Line Extension
• Push and Pull Strategy
Functional Strategy

 Financial Strategy: Financial implications of

corporate and business level strategic options. It
attempts to maximize the financial value of the firm
and aims to get competitive advantage through
lower cost.
• Buyback: By Reliance Energy Ltd.(REL) in 2007 for
Rs 2000cr valued share @ Rs1600 per share.
• Leveraged Buyout
• Debt-to-Equity ratio and Reverse Stock Splits
Functional Strategy

 R&D strategy: Deals with product and

process innovation and improvement.
• Technological Leader: focuses on new
technology, options open for lower
cost. Example: NIKE spends more than
most of the company in the industry on
R&D to differentiate the performance
of its athletic shoes.
• Technological Follower: Same standard
produced but at lower cost.
Functional Strategy

 HR strategy: Whether to hire large

no. of low skilled employees who
receive low pay, perform repetitive
jobs, and most likely quit after short
time (McDonald’s restaurant
strategy).
 Satyam’s Rs 200000 bonds from the
freshers.
STRATEGY IMPLEMENTATION
UNIT 5
STRATEGY IMPLEMENTATION

 The sum total activities and choices

required for the execution of a strategic
plan.
 It is the process by which objectives,
strategies, and policies are put into
action through the development of
programs, budgets, and procedures.
 Poor implementation has been blamed
for a number of strategic failure.
STRATEGY IMPLEMENTATION

 To begin the implementation

process, strategy makers must
consider these questions:
 WHO
 WHAT
 HOW
Implementation Vs
Formulation
Strategy Formulation
Deals with locating the forces
before the action takes place
Based on Effectiveness
Intellectual Process
Requires good intuitive and
analytical skills.
Coordination among a few
individuals.
Strategy Implementation
Deals with the management of
forces during the action.
Based on Efficiency
Operational Process
Requires special motivation and
leadership skills
Coordination with many persons.
Prerequisite FOR STRATEGIC
IMPLEMENTATION
 Developing Programs, Budgets, And
Procedures
 Program: To make a strategy action
oriented. Example: Six Sigma
introduced by Motorola. One Sigma=
690000 defects per million. 6 sigma
reduces to 3.4 per million.
 Budgets
 Procedures
Organizational structure
and strategy implementation
 Structure follow strategy (Structure
Influence Strategy)
 New strategy created
 New administrative problems emerge
 Economic performance declines
 New appropriate structure is invented
 Profit returns to its previous level.
Example: In 1920 GM was restructured as
“Centralized policy determination
coupled with decentralized operation
management (max. freedom for product
development)
Stages to organizational
structure
 Simple Structure: Little formal structure; the
entrepreneur directly supervise the activities of
every employee; flexibility and dynamism are its
greatest strength. Example Co-founder Lawrence
Ellision of Oracle
 Functional Structure : Delegation of authority
required, specialized managers needed.
 Divisional structure: Corporation using diverse
product need this structure. Central Headquarters
and decentralized operating divisions. Includes
SBU. Example: GE and GM
Stages to organizational
structure
 Beyond SBUs:
 Matrix Structure: Used by Philips, Boeing
 Network Structure: Many activities are
outsourced. Nike, Reebok are example
of Network structure.
 Cellular / Modular Structure: Is
composed of cells(self-managing teams,
autonomous business units, etc.)
Strategy implementation
through staffing
 Selection and use of employees to meet the
organizational goals.
 Implementation of new strategies and policies
calls for new HRM priorities and a different use
of personnel.
 When a corporate follows a growth through
acquisition strategy, it may find that it needs to
replace several managers in the acquired
company.
 In a study of 40 mergers, 90% of the acquiring
cos in the 15 successful mergers identified key
employees and targeted them for retention
within 30 days after the announcement. In
contrast, this task was carried out in one-third of
the acquisitions.
Leading the strategy
implementation
 Implementation also involves leading
through coaching people to use their
abilities and skills most effectively to
achieve organizational objectives. Without
direction, people tend to do their work
according to their personal view of what
task should be done, how, and in what
order.
 Managing the corporate
culture(Integration, Assimilation,
Seperation, Deculturation)
Strategy implementyation
and culture
 ‘Culture is most commonly used in three
basic senses
          1) The set of shared attitudes, values
goals and practices that characterizes an
institution, Organization or group.
          2) An integrated patterns of human
knowledge, beliefs and behavious that
depends up on the capacity for Symbolic
thought and social learning.
          3) Excellence of taste in the fine arts
and humanities.
 “An ordered system of meaning and of
symbols in terms of which social interaction
take place” (Clifford Geertz 1973).
Strategy implementation and
organizational culture
 In today’s dynamic business world,
strategies are dynamic. Hence, it is
but logical that your organizational
culture has to be dynamic too.
 It needs to adapt to the demands of
business. In such cultures, all
employees have confidence in the
teams ability to meet any challenge.
Portolio Analysis
 The business portfolio is the collection of
businesses and products that make up the
company. The best business portfolio is one
that fits the company's strengths and helps
exploit the most attractive opportunities.
The company must:
(1) Analyse its current business portfolio and
decide which businesses should receive more
or less investment, and
(2) Develop growth strategies for adding new
products and businesses to the portfolio, whilst
at the same time deciding when products and
businesses should no longer be retained.
Portfolio Analysis
 The two best-known portfolio planning
methods are the 
Boston Consulting Group Portfolio Matrix and
the McKinsey / General Electric Matrix . In
both methods, the first step is to identify the
various Strategic Business Units ("SBU's") in a
company portfolio. An SBU is a unit of the
company that has a separate mission and
objectives and that can be planned
independently from the other businesses. An
SBU can be a company division, a product line
or even individual brands - it all depends on
how the company is organised.
Business Mix of ITC Ltd.
 FMCG
• Cigar ettes
• Foods
•Lifestyle Retailing
• Greeting, Gifting &Stationery
•Safety Matches
• Agar battis

 Paperboards & Packaging

•Paperboards &Specialty Papers
•Packaging
 Agri - Business
• Agri-Exports
• e- Choupal
•Leaf Tobacco
 Hotels
Group Companies
• ITC Infotech; etc.
 Vision & Mission statements
 Vision: Sustain ITC’s position as one of
India’s most valuable corporations through
world class performance, creating growing
value for the Indian economy and the
Company’s stakeholders.

 Mission: To enhance the wealth generating

capability of the enterprise in a globalizing
environment, delivering superior and
sustainable stakeholder
Cagr during 2005-2008
Category CAGR Growth Parameters

Cigarettes 10.9% Pricing Power

Hotel 22.7% Inward traffic,
Occupancy
Paper 17.2% Capacity Utilization,
Value Added Products

Agri-business 34.3% E-choupal, Choupal

sugar
FMCG 60.2% Fast track, decent
share
Market share of itc ltd.

 Outstanding market
leaderCigarettes, Hotels,
Paperboards, Packaging and Agri-
Exports.
 Gaining market share Nascent
businesses of Packaged Foods &
Confectionery, Branded Apparel and
Greeting Cards
Segment Dominance Revenue % PBIT %
Cigarettes 70% share 77.0% 87.7%
Hotels Rank no.2 4.3% 5.4%
Papers Packaging board 7.3% 10.7%
no.1 in Asia

Agri-Business 1 among the 7% 3.7%

largest
exporters in
India
FMCG Aashirvaad Atta 4.4% -7.5%
no.1 in branded
segment
BCG matrix-itc ltd.
•Hotels •FMCG
•Paper & Packaging
•Agri-Business

•Cigarettes ITC infotech

The McKinsey / General
Electric Matrix
 The McKinsey/GE Matrix overcomes a number
of the disadvantages of the BCG Box.
Firstly, market
attractiveness replaces market growth as
the dimension of industry attractiveness, and
includes a broader range of factors other than
just the market growth rate.
 Secondly, competitive strength
replaces market share as the dimension by
which the competitive position of each SBU is
assessed.
Factors that Affect Market
Attractiveness
 Whilst any assessment of market attractiveness is
necessarily subjective, there are several factors
which can help determine attractiveness. These are
listed below:
 - Market Size
- Market growth 
- Market profitability 
- Pricing trends 
- Competitive intensity / rivalry 
- Overall risk of returns in the industry 
- Opportunity to differentiate products and
services 
- Segmentation 
- Distribution structure (e.g. retail, direct, wholesale
Factors that Affect
Competitive Strength
 Factors to consider include:
 - Strength of assets and competencies
- Relative brand strength
- Market share
- Customer loyalty
- Relative cost position (cost structure
compared with competitors)
- Distribution strength
- Record of technological or other innovation
- Access to financial and other investment
resources
Strategic implications
Plot the information-
mckinsey
 Market size is represented by the
size of the circle.
 Market share is shown by using the
circle as the pie chart
 The expected future position is
portrayed by the arrow.
Strategic implications

 Grow-Strong business unit in attractive

industries, average business unit in attractive
industries, and strong business unit in average
industries.
 Hold-Average business in average industries,
strong business in weak industries and weak
business in strong industries.
 Harvest-weak business in unattractive
industries, average business in unattractive
industries, and weak business unit in average
industries.
Limitation of mckinsey
matrix
 The valuation of the realization of
various factors.
 Aggregation of the indicators is
difficult
 Core competencies are not
represented.
 Interactions between strategic
business units are not considered
.
Advantages of portfolio
analysis
 It encourages top management to evaluate each of
the corporation’s businesses individually and to set
objectives and allocate resources for each.
 It stimulates the use of externally oriented data to
supplement management’s judgment.
 It raises the issue of cash-flow availability for use in
expansion and growth.
 It graphic depiction facilitates communications.
Limitations of portfolio
analysis
 Defining product/market segments are
difficult.
 It suggests the use of standard strategies
that can miss opportunities or be
impractical.
 It provides an illusion of scientific rigor when
in reality positions are based on subjective
judgments.
 It is not always clear what makes an
industry attractive or where a product is in
its life cycle.
Business Unit strategy

 Business Unit Strategy focuses on

improving the competitive position of
a company’s or business unit’s
products or services within the
specific industry or market segment
that the company or business unit
serves.
Business strategy

 Porter’s Competitive Strategy: The firm’s

competitive advantage in an industry is
determined by its Competitive Scope- the
breadth of the business unit’s or company’s
target market. Before choosing the below 2
strategies the firm must choose the range of
product varieties it will produce.
• Lower Cost strategy
• Differentiation Strategy
Business Unit Strategy

 Cooperative Strategy: A company

can gain competitive advantage
within an industry by working with
other firms. The 2 general types of
Cooperative strategy are :
1.Collusion
2.Strategic Alliance
Collusion
 A non-competitive
agreement between rivals
that attempts to disrupt the
market's equilibrium. By
collaborating with each
other, rival firms look to alter
the price of a good to their
advantage. 
 The parties may collectively
choose to restrict the supply
of a good, and/or agree to
increase its price in order to
maximize profits. Groups
may also collude by sharing
private information, allowing
them to benefit from insider
knowledge.
Collusion…

 Indian wholesale grain market is

characterized by large numbers of
sellers and relatively small numbers
of buyers. This imbalance provide
ample opportunities for manipulation
of the otherwise transparent price
formation process.
 Collusion are of 2 types: 1.) Explicit
Collusion 2.) Tacit Collusion
Explicit collusion

 A formal, usually secret, collusion agreement

among competing firms (mostly oligopolistic firms)
in an industry designed to control the market, raise
the market price, and otherwise act like a
monopoly. Also termed overt collusion, the
distinguishing feature of explicit collusion is a
formal agreement. This should be contrasted with
implicit or tacit collusion that does not involve a
formal, explicit agreement.
 
Strategic Alliance

 One of the fastest growing trends for

business today is the increasing
number of strategic alliances.
 For small businesses, strategic
alliances are a way to work together
with others towards a common goal
while not losing their individuality.
Alliances are a way of reaping the
rewards of team effort - and the gains
from forming strategic alliances
appear to be substantial.
Strategic alliance

 Mutual Service Consortium- Fairly

weak and distance alliance- appropriate
for partners that wish to work together
but not share their core competencies.
Example: IBM established a research
alliances with sony Electronics and
Toshiba to build ‘cell’ chip, a
microprocessor running at 256 gigaflops.
There is little interaction or
communication among the partners.
Strategic Alliance
 Joint Venture: An independent business entity
is created from the separate organizations for
the strategic purpose. Example: Maruti udyog ltd
and Suzuki Motor Corporation in 1982.
 Licensing Arrangements- Yum!brands
successfully used franchising and licensing to
establish its KFC, Pizza Hut, Taco Bell, etc.
 A value-chain partnership- To improve the
quality of parts it purchases, companies in the
U.S auto industry , for example, have decided to
work more closely with fewer suppliers and to
involve them more in product design decisions.
Strategic Alternative
Unit 6
Strategic alternative
(TOWS matrix)
Strengths (S) Weakness (W)
Internal List 5-10 internal List 5-10 internal
Factors strengths here weakness here

External factors

Opportunities (o) SO strategies WO strategies

List 5-10 external Generate strategies Generate strategies
opportunities here here that use here that take
Strengths to take advantage of
advantage of Opportunities by
Opportunities. overcoming
Weakness.
Threats (T) ST strategies WT strategies
List 5-10 external Generates strategies Generate strategies
threats here here that use here that minimize
Strengths to avoid Weakness and avoid
Threats. Threats.
Stability strategy

 A corporate may choose stability over growth

by continuing its current activities without any
significant change in direction.
 They are very popular with small business
owners who have found a niche and are happy
with their success and the manageable size of
the firms.
 It can be very useful in short run, but they can
be dangerous if followed for too long,
Stability strategy
1. A pause/proceed with caution strategy- DELL
followed this strategy after achieving 285% growth in
2 years.

2. No change strategy-a choice to continue current

operations and policies in foreseeable future. The
relative stability created by the firm’s modest
competitive position in an industry facing little or no
growth encourages the company to continue on its
current course, making only small adjustments for
inflation in its sales and profits objectives.

3. The profit strategy is an attempt to artificially

support profits when a company’s sales are declining
by reducing investment and short term discretionary
expenditure.
Retrenchment startegy
 Retrenchment is a corporate-level strategy that
seeks to reduce the size or diversity of an
organization's operations. Retrenchment is also a
reduction of expenditures in order to become
financially stable.
 Retrenchment is a pullback or a withdrawal from
offering some current products or serving some
markets.
 Retrenchment is often a strategy employed prior to
or as part of a Turnaround strategy.
 The Retrenchment strategies can further be
classified into Turnaround Strategy, Captive
Company Strategy, Sell-out/Divestment
Strategy and Bankruptcy/Liquidation strategy.
Turnaround strategy

 The overall goal of turnaround strategy is to return an

underperforming or distressed company to normal in
terms of acceptable levels of profitability, solvency,
liquidity and cash flow.
 To achieve its objectives, turnaround strategy must
reverse causes of distress, resolve the financial crisis,
achieve a rapid improvement in financial performance,
regain stakeholder support, and overcome internal
constraints and unfavourable industry characteristics.
Turnaround strategy
Captive Company strategy

 Involves giving up independence in exchange for

security. A cos with a weak competitive position
may not be able to engage in a full-blown
turnaround strategy.
 Example: To become the sole suppliers of an
auto part to GM , Simpson Industries of
Birmingham, Michigan, agreed to let a special
team from GM inspect its engine parts facilities
and books and interview its employees . In
return, nearly 80% of the company production
was sold to GM through long term contracts.
Sell-out/divestment
strategy
 Sell-Out strategy- makes sense if
management can still obtain a good price for
its shareholders and the employees can keep
their jobs by selling the entire company to
another firm. Example : Marginal performance
in a troubled industry was one reason
Northwest airlines was willing to be acquired
by Delta Airlines in 2008.
 Divestment Strategy – If the corporation has
multiple business lines and it chooses to sell
off a division with low growth potential.
Example: Ford sold its Jaguar and Land Rover
units to Tata Motors in 2008 for $2b.
Bankruptcy/liquidation
strategy
 Bankruptcy involves giving up
management of the firm to the courts in
return for some settlement of the
corporation’s obligations. Example:
Lehman Brothers filed in 2008.
 Liquidation strategy seeks to convert
as many saleable assets as possible to
cash, which are distributed to the
shareholders after all obligations are paid.
DIVERSIFICATION
STRATEGIES
 According to strategist Richard Rumelt, companies
begin thinking about diversification when their
growth has plateaued and opportunities for growth
in the original business have been depleted.
 The two basic diversification strategies are:
1.Concentric (Related) diversification
2.Conglomerate(Unrelated) diversification
Concentric
diversification
 Type of diversification where a firm
 acquires or develops new products
 or services (closely related to its
core business or technology) to enter
one or more new markets.
 Example:passengers cars and sports
vehicles
Conglomerate
diversification
 Type of diversification whereby a 
firm enters (through acquisition or 
merger) an entirely different market
 that has little or no synergy with its
core business or technology.
 Example: Tata Groups
Strategic choice process
 Strategic choice is the evaluation of
alternative strategies and selection of the
best alternative.
 Key reasons for blunders:
1. Speedy actions leads to a rush to judgment.
2. They apply failure prone decision making
practices such as adopting the claim of an
influential stakeholders,
3. They make poor use of resources by
investigating only one or two options.
4. Depended on past experience while
devising strategic alternatives.
Strategic Choice
process….
 When an organization is facing a dynamic
environment, the best strategic decisions
are not arrived at through consensus.
 Two techniques help strategic managers
avoid the consensus traps, are:
1.Devil’s Advocate
2.Dialectric Inquiry- requires that two
proposals using different assumptions be
generated for each alternative strategy
under consideration. Advocates of each
position debate the merits of their
arguments, either one or compromised
alternative is selected.
Strategic Intent

 Strategic intent refers to the purposes the

organization strives for. These may be expressed in
terms of a hierarchy of strategic intent.
 The framework within which firms operate, adopt a
predetermined direction and attempt to achieve
their goal is provided by a strategic intent.
 The hierarchy of strategic intent covers the vision,
mission, business definition, business model and the
goals and objectives.
Strategic choice
What Options
are available?

Options about Options to improve Options of

products, markets resources & method on
and services capabilities how to progress

Choice Criteria Linking into available strategic options

-Assessment
-Intent Theoretical
Frameworks for
Making the Choice making
Who should be
involved in strategic choice
the Choice?

Chosen Strategy
Evaluation and control
process
 Evaluation and control information
consists of performance data and
activity reports.
 Performance is the end result of
activities and Processes.
 Evaluation and control information must
be relevant to what is being monitored.
 Performance Evaluation is the basis for
the Control.
Performance Indicators

 ROI, EPS are appropriate for evaluating a

corporation’s or a division’s ability to
achieve a profitability objective. But it can
be calculated after the profits are totaled
for a period.
 To predict the future profitability, Steering
Controls are used. Example: Airlines
calculate cost per passenger mile.
Types of CONTROL
 Input Control- emphasize resources, such as
knowledge, skills, abilities, values, and motives of
employees.
 Behavior Control- specify how something is to
be done through policies, rules, standard
operating procedures, and orders from a superior.
Example: Sales call to potential customers.
 Output Control- Specify what is to be
accomplished by focusing on the end result of the
behaviors through the use of objectives and
performance targets or milestones. Example:
Sales Quotas, profit objectives.
Activity based costing

 ABC is a recently developed

accounting method for allocating
indirect and fixed costs to individual
products or product lines based on
the value-added activities going into
that product.
Strategy in Global
environment
UNIT 7
Global strategy
 Globalization refers to growth of trade and
investment, accompanied by the growth in
international businesses, and the integration of
economies around the world.
 Managers must be conscious that markets, supplies,
investors, locations, partners, and competitors can be
anywhere in the world. Successful businesses will take
advantage of opportunities wherever they are and will
be prepared for downfalls.
 For example, Japanese electronics and automobiles
are common in Asia, Europe, and North America, while
U.S. automobiles, entertainment, and financial
services are also common in Asia, Europe, and North
America.
Global strategy
 Companies have become transnational or multinational-that is,
they are based in one country but have operations in others.

 For example, Japan-based automaker Honda operates the largest

single factory in the United States, while U.S. based Coca-Cola
operates plants in other countries including France and Belgium—
with about 80 percent of that company's profits come from
overseas sales.

 In developing appropriate global strategies, managers need to take

the benefits and drawbacks of globalization into account. A global
strategy must be in the context of events around the globe, as well
as those at home.
 Differences Between
Domestic and International
Strategy Domestic
Factors
conditions
Global conditions

Culture Homogeneous Heterogeneous

Currency Uniform Different exchange
rates
Economy Stable and uniform Variable and
unpredictable
Government Stable May be unstable
Labor Skilled workers May be hard to find
available
Language Generally single Different languages
and dialectic
Marketing Many media and few May be fewer media
restrictions and more restrictions