Strategic Management Notes CA Inter ClearIPCC PDF

CA – Intermediate
Paper 7-B
“Success is not final, failure is not fatal;

it is the courage to continue that counts”
For More Visit: www.ExpertStudyPlanner.com
Shree Ganesh
Index
Sr. Chapter
Chapter (Topic) Page No.
No. No.
1 1 Introduction to Strategic Management 1.1 – 1.13
2 2 Dynamics of Competitive Strategy 2.1 – 2.30
3 3 Strategic Management Process 3.1 – 3.11
4 4 Corporate Level Strategies 4.1 – 4.20
5 5 Business Level Strategies 5.1 – 5.13
6 6 Functional Level Strategies 6.1 – 6.23
7 7 Organization Structure And Strategic Leadership 7.1 – 7.19
8 8 Strategy Implementation And Control 8.1 – 8.23
9 List of Person’s 157
10 ICAI MCQ’s 158
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Shree Ganesh
Questions likely to be asked in exam;
1. Explain concepts (2 Marks each),
2. Correct and Incorrect, with reasons (2 Marks each),
3. Case study (4 – 5 Marks each),
4. Distinguish Between (4 – 5 Marks each),
5. Answer in brief (5 Marks each),
6. Descriptive question (6 – 8 Marks),
7. MCQ (15 Marks)
Study Plan;
Chapter’s Hours
No. Name Rev. 1 Rev. 2 Final Rev.
1 Introduction to Strategic Management 02:00 01:30 01:00
2 Dynamics of Competitive Strategy 04:30 03:00 03:00
3 Strategic Management Process 01:30 01:00 01:00
4 Corporate Level Strategies 01:45 01:00 01:00
5 Business Level Strategies 02:00 01:30 01:00
6 Functional Level Strategies 02:15 01:00 01:00
7 Organisation and Strategic Leadership 02:00 01:00 01:00
8 Strategy Implementation and Control 02:00 02:00 01:00
Total Hours 18:00 12:00 10:00
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Chapter 1: Introduction to Strategic Management
What do you mean by strategy?

A plan of action intended to complete a specific goal.
e.g. Exam, Sports, etc…
 Pathway,
 Direction,
 Planning,
 Ways and mean to achieve aim…
Strategy mean bridging the gap between means and ends.
What is Business?
As per famous management guru
‘Peter F Drucker,
“Business exist for profit”
Objectives of Business;
 Survival,
 Stability,
 Efficiency,
 Growth,
 Profitability,
 Wealth Maximisation.
pg. 1
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Relationship between organization and environment
Internal Environment (6 M’s)
1. Man (HRM)
2. Machinery (Assets)
3. Material
4. Money (FM)
5. Marketing Research (Marketing Mix)
6. Management Structure (Organization Structure)
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Business Policy;
The origin of business policy can be traced back to 1911,
When Harvard Business School introduced an integrative course in

management aimed at the creation of general management capability among
business executives.
Concept of strategy?
Strategic Management can be defined as, (ICAI MCQ’s)
The art and science of Formulating, Implementing & Evaluating Cross-

Functional decisions that enable an organization to achieve its objectives.
Strategy Consider as:

 A long term plan,
 A game plan,
 A comprehensive process,
 An analysis, planning and implementation,
 A plan adopted for survival, stability and growth of business.
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Introduction;
A typical dictionary defines the word ‘strategy’ as something that has to do with war
and ways to win over enemy.
We may define the term ‘strategy’ as a long range blueprint of an organization’s.
However, strategy is no substitute for sound, alert and responsible management.
Strategy can never be perfect, flawless and optimal.
Allowances are made for possible miscalculations and unanticipated events.
In large organisations, strategies are formulated at the corporate, divisional

(business) and functional (operational) levels.
Corporate strategies are formulated by the top managers.
Strategic Management is essential for the survival and growth of business

organizations in dynamic business environment.
Strategic management is not a bundle of tricks and magic. It is a deliberate

managerial process. (C or IC)
The term ‘strategic management’ refers to the managerial process of;
 Developing a strategic vision,
 Setting objectives,
 Crafting a strategy,
 Implementing,
 Evaluating the strategy and
 Initiating corrective adjustments where deemed appropriate.
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The overall objectives of strategic management are

twofold:
1. To create competitive advantage,
2. To guide the company successfully through all changes in the environment.
Importance (Benefits) of Strategic Management:
 The strategic management gives a direction to the company to move ahead.
 It defines the goals and mission.
 It helps management to define realistic objectives and goals which are in line
with the vision of the company.
 Strategic management helps organisations to be proactive instead of reactive in

shaping its future.
 Organisations are able to analyse and take actions instead of being mere
spectators.
 Strategic management seeks (attempt) to prepare the organisation to face the

future and act as pathfinder to various business opportunities.
 Strategic management serves as a corporate defence mechanism against

mistakes and pitfalls.
Limitations of Strategic Management;

 Strategic management is a costly process.
 Strategic management is a time-consuming process.
 Environment is highly complex and turbulent (unstable).
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 It is difficult to understand the complex environment and exactly pinpoint

how it will shape-up in future?
 It is difficult to clearly estimate the competitive responses to a firm’s

strategies.
Classification of Strategy;
“Strategy is partly proactive and partly reactive.” do you

agree?
Yes,
Strategy is partly proactive and partly reactive.
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In Proactive Strategy, organizations will analyse possible environmental scenarios

and create strategic framework after proper planning and set procedures and work
on these strategies in a predetermined manner.
However, in reality no company can forecast both internal and external environment
exactly.
Everything cannot be planned in advance.
It is not possible to anticipate moves of rival firms, consumer behaviour, evolving

technologies and so on.
There can be significant deviations between what was visualized and what actually
happens.
Strategies need to be modified in the light of possible environmental changes. There

can be significant or major strategic changes when the environment demands.
Reactive strategy is triggered by the changes in the environment and provides ways
and means to cope with the negative factors or take advantage of emerging
opportunities.
It is based on Unanticipated. Competitor’s strategies, Market changes require

changes in planned strategy is known as Reactive Strategy.
Strategic Levels in Organisations;
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Example;
Corporate Level;
This (Corporate) level of management consists of;
1. The Chief Executive Officer (CEO),
2. Other Senior Executives,
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3. The Board of Directors (BOD) and
4. Corporate Staff.
Those individuals are mainly decision making authority of the organisation.
The role of Corporate Level of management includes; (Tasks of the

strategic manager);
 To set corporate vision, mission and goals,
 Determining what business it should be in,
 Allocation of resources,
 Formulating strategies,
 Implementing strategies,
 Providing leadership to the organisation, etc…
Strategic Management in Govt. & Non Profit Organisations;

Organizations can be classified as commercial and non-commercial on the
basis of the interest (object) they have. A commercial organization has profit as
its main aim. We can find many organizations around us, which do not have any
commercial objective of making profits.
E.g. ICAI, NGO’s such as Help-Age, Child Relief and You.
Their main aim is to provide services to members, beneficiaries or public at large.
 Educational institutions;
 Medical organizations;
 Governmental agencies and departments.
* Refer ICAI, study material for descriptive answer (1.11)
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Educational institutions;
The first all-Internet law school, Concord University School of Law, possess
nearly Two Hundred (200) students who can access lectures anytime and chat at
fixed times with professors.
Online college degrees are becoming common and represent a threat to
traditional colleges and universities. E.g. Online MBA.
Medical institutions;
Hospitals are beginning to bring services to the patient as much as bringing the
patient to the hospital.
The whole strategic landscape (environment) of healthcare is changing because of
the Internet.
Intel recently began offering a new secure medical service whereby doctors and
patients can conduct sensitive business on the Internet.
Backward integration strategies that some hospitals are pursuing include acquiring
ambulance services, waste disposal services, and diagnostic services.
Millions of persons research medical ailments (disease) online, which is causing a
dramatic shift in the balance of power between doctor, patient, and hospitals.
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Governmental agencies and departments;
Central, State, Municipal Agencies, Public Sector units, departments are
responsible for formulating, implementing, and evaluating strategies that use
taxpayers’ money in the most cost-effective way to provide services and programs.
Strategic-management concepts increasingly are being used to enable some
organizations to be more effective and efficient.
Important Correct, Incorrect;

Q. Control systems run parallel with strategic levels?
Ans. Correct:
 There are three strategic levels in an organisation – corporate, business

and functional.
 Control systems are required at all the three levels, at the top level,
strategic controls are built to check whether the strategy is being
implemented as planned and the results produced by the strategy are
those intended.
 Down the hierarchy (i.e. Business & Functional) management controls

and operational controls are built in the systems.
 Operational controls are required for day-to-day management of business.
Q. Strategists in governmental organizations operate with less strategic autonomy
than their counterparts in private firms?
Ans. Correct:
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 Public enterprises generally cannot diversify into unrelated businesses or
merge with other firms.
 Governmental strategists usually enjoy little freedom in altering the
organizations’ missions or redirecting objectives.
 Legislators and politicians often have direct or indirect control over major
decisions and resources.
 Issues become politicized, resulting in fewer (less) strategic choice
alternatives.
Q. Strategic management is not needed in non-profit organisations?
Ans. Incorrect:
 Strategic management applies equally to profit as well as non - profit
organizations.
 Though non-profit organizations are not working for the profit, they have to
have purpose, vision and mission.
 They also work within the environmental forces and need to manage
strategically to stay afloat to accomplish their objectives.
 For the purpose of continuity and meeting their goals, they also need to have
and manage funds and other resources just like any other for profit
organization.
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Q. Compared to for-profit firms, non-profit and governmental organizations often
function as a monopoly?
Ans. Correct:
 Though non-profit organizations are not working for the profit, they have to
have purpose, vision and mission.
 They also work within the environmental forces and need to manage
strategically to stay afloat to accomplish their objectives.
 They produce a product or service that offers little or no measurability of
performance, and are totally dependent on outside financing.
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Chapter 2: Dynamics of Competitive Strategy
Dynamics of Competitive Strategy
Competitive Strategy
Competitive strategy of a firm evolves out of consideration of several factors

that are external to it.
The external environment affects the internal environment of the firm.
The objective of a competitive strategy are;
 Generate competitive advantage,

 (So) Increase market share, and
 (Hence) Beat competition.
A competitive strategy consists of moves (steps) to…
 Attract customers.
 Withstand competitive pressures.
 Strengthen market position.
Having a competitive advantage is necessary for a firm to compete in the market.
Competitive advantage comes from a firm’s ability to perform activities more

effectively than its rivals.
But what is more important is whether the competitive advantage is sustainable?

By knowing if it is a leader, challenger, or follower, it can adopt appropriate
competitive strategy.
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Competitive landscape;
Introduction;
Competitive landscape is a business analysis which identifies competitors,

either direct or indirect.
An in-depth investigation and analysis of a firm’s competition allows it to assess

the competitor’s strengths and weaknesses in the marketplace and helps it to
choose and implement effective strategies that will improve its competitive
advantage.
Understanding of competitive landscape requires an application of “competitive

intelligence”.
Steps to understand the Competitive Landscape;
 Identify the competitor,

 Understand the competitors,
 Determine the strengths of the competitors,
 Determine the weaknesses of the competitors,
 Put all of the information together.
STRATEGIC ANALYSIS;
Introduction;
Strategy formulation is not a task in which managers can get by with

intuition, opinions, instincts, and creative thinking.
But it is a Judgments about what strategies to pursue need to flow directly from
analysis of a firm’s external environment and its internal resources & capabilities.
The two most important situational considerations (factors) are:
 Industry and Competitive Conditions, and
 An organisation’s own competitive capabilities, resources, internal strengths,

weaknesses, and market position.
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Issues (Factors, Problems) to consider for Strategic Analysis:
 Strategy evolves over a period of time. (Long term)
 Balance of external and internal factors (Potential of the organization).
 Risk (External and Internal).
Methods of Industry and Competitive Analysis;
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Methods of Industry and Competitive Analysis;
What is Industry?
Industry is “a group of firms whose products have same and similar attributes such
that they compete for the same buyers.”
For e.g.
Telecom Industry
Identifying the Strongest/ Weakest Companies: (Strategic

Group Mapping)
A strategic group consists of those rival firms with same, similar competitive
approaches and positions in the market.
Strategic group mapping, is a useful analytical tool for comparing the market
positions of each firm separately.
The procedure for constructing a Strategic Group Mapping;
 Identify the competitive characteristics that differentiate firms in the

industry.
 Plot the firms on a two-variable map using pairs of these

differentiating characteristics.
 Assign firms that fall in about the same strategy space to the same
strategic group.
 Draw circles around each strategic group, making the circles

proportional to the size of the group’s respective share of total industry
sales revenues.
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Dominant Economic Features of the Industry;

(Key Industry Traits)
 Size and nature of market.
 The number of buyers and their relative sizes.
 Number of rivals and their relative market share.
 Market growth rate and position in the business life.
 Capital requirements and the ease of entry and exit.
 Whether industry profitability is above/below par?
 Scope of competitive rivalry.
i.e. (local, regional, national, international, or global).
Triggers of Change (Driving Forces)

Introduction;
An industry’s economic features and competitive structure revealed a lot

about its fundamental character but little about the ways in which its environment
may be changing.
The life-cycle stages are strongly linked to changes in the overall industry growth
rate.
Driving Forces;
While it is important to judge what growth stage an industry is in, there’s

more analytical value in identifying the specific factors causing fundamental
industry and competitive adjustments.
Industry and competitive conditions change because forces are in motion that
creates incentives (opportunity) or pressures (threat) for changes.
The most dominant forces are called driving forces because they have the
biggest influence on the industry’s structure and competitive environment.
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Analyzing driving forces has two steps:
1. Identifying what the driving forces are? and
2. Assessing the impact they will have on the industry.
Most common driving forces;
 Increasing globalization.
 Product innovation.
 Marketing innovation.
 Changes in cost and efficiency.
 Entry or exit of major firms.
 Changes in the long-term industry growth rate.
 The internet and e-commerce opportunities and threats it breeds in the

industry.
KEY SUCCESS FACTORS (KSF’S)

Introduction;
This are the key elements that affect the ability of a firm or industry to
prosper in the market.
For e.g. JIO Cost efficient i.e. Economical for customers.
They form the rule that figure whether a company will be financially or
competitively successful.
Some of the successful key factors are;
 Core competitions,
 Business outcome (result),
 Competitive capabilities,
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 Internal & External recourses,
 Strategy in production, marketing, etc…
How to find out or identify the KSF’s of an industry?
 On what basis do customer select between the competing brands of sellers?
 What product qualities are crucial?
 What competitive capabilities does a seller need to have to be competitively
successful?
 What does it take for seller to achieve a sustainable competitive advantage?
Core Competence;
For e.g. Core Competency of Super-markets:
 Lower prices,
 Securing low cost supplies,
 Managing in – store activities more efficiently,
 Computerized stock/ordering systems,
 Own brand labels, etc…
Introduction;
Core competencies are capabilities that serve as a source of competitive

advantage for a firm over its rivals.
C.K. Prahalad and Gary Hamel have advocated a concept of core competency.
Definition;
Competency is defined as a, “Combination of skills and techniques rather

than individual skill or separate technique.”
Therefore, core competencies cannot be built on one capability or single

technological know-how, instead, it has to be the integration of many resources.
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According to C.K. Prahalad and Gary Hamel,
Major core competencies are identified in three (3) areas;
 Competitor differentiation,
 Customer value, and
 Application to other markets (i.e. within the organisation).
Competitor Differentiation,
The company can consider having a core competence if the competence is

unique and it is difficult for competitors to imitate (i.e. Copy).
Customer Value,
When purchasing a product or service it has to deliver a fundamental benefit

for the end customer in order to be a core competence.
Application to other markets (i.e. within the organisation).
Core competence must be applicable to the whole organization; it cannot be

only one particular skill or specified area of expertise.
Examples;
Hindustan Unilever Limited (HUL)

Marketing and Sales is a core competence.
Wal-Mart
Focused on lowering its operating costs.
How to build Core Competencies;
1. Valuable,
2. Rare,
3. Costly to imitate, (copy or follow)
4. Non-Substitutable.
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1. Valuable;
A firm created value for customers by effectively using capabilities to exploit
opportunities.
2. Rare;
Core competencies are very rare capabilities and very few of the competitors
possess this.
3. Costly to imitate (copy or follow)

Costly to imitate means such capabilities that competing firms are unable to
develop easily. For e.g. Intel
4. Non-Substitutable
Capabilities that do not have strategic equivalents are called non-substitutable
capabilities. For e.g. Tata and Apple.
Value Chain Analysis
Primary Activities Support Activities

 Inbound Logistics,  Firm Infrastructure,
 Operations,  Human Resource Management,
 Outbound Logistics,  Technology Development,
 Marketing & Sales, &  Procurement.
 Service.
Introduction;
A value chain is a set of activities that a firm operating in a specific industry

performs in order to deliver a valuable product or service for the market.
Value chain analysis was originally introduced as an accounting analysis.
The two basic steps of identifying separate activities and assessing the value
added from each were linked to an analysis of an organization’s competitive
advantage by Michael Porter.
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One of the key aspects of value chain analysis is the recognition that
organizations are much more than a random collection of Man (people),
Machines, Material, and Money.
These resources are of no value unless deployed into activities and organised
into systems and routines which ensure that products or services are produced
which are valued by the final consumer/user.
Primary Activities;
Inbound logistics;
Inbound logistics is concerned with receiving, storing, distributing inputs
(e.g. Handling of raw materials, warehousing, inventory control).
Operations;
Operations - Comprise the transformation of the inputs into the final product
form (e.g. Production, assembly, and packaging).
Outbound logistics;
Outbound logistics - involve the collecting, storing, and distributing the
product to the buyers (e.g. Processing of orders, warehousing of finished goods, and
delivery).
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Marketing and Sales;

Marketing and sales - how buyers can be convinced to purchase the product
(e.g. Advertising, promotion, distribution).
Service;
Service - involves how to maintain the value of the product after it is
purchased (e.g. Installation, repair, maintenance, and training).
Support Activities;
Firm Infrastructure;
Firm Infrastructure - the activities which are not specific to any activity area
such as general management, planning, finance, and accounting are categorized
under firm infrastructure.
Infrastructure also consists of the structures and routines of the organization

which sustain its culture.
Human Resource Management;

HRM - involved in recruiting, hiring, training, development and
compensation.
Technology Development;
Technology Development - these activities are intended to improve the
product and the process, can occur in many parts of the firm.
Procurement;
Procurement - concerned with the tasks of purchasing inputs such as raw
materials, equipment, and even labour.
Competitive Advantage;
Why do some companies succeed while others fail?
How did Apple return from near obsolescence in the late 1990s and become the
world leader and a dominant technology company of today?
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Why did Hindustan Motors do so well for several decades?
In the Indian airline industry, how has Indigo Airlines managed to keep increasing
its revenues and profits through both good times and bad, while rivals struggled?
Introduction;
Competitive advantage allows a firm to gain an edge over rivals when

competing.
For most, if not all, companies, achieving superior performance relative to rivals is
the ultimate challenge. If a company’s strategies result in superior performance, it is
said to have a competitive advantage.
“If you don’t have a competitive advantage, don’t compete”
- Jack Welch
Competitive advantage is the position of a firm to maintain and sustain a

favourable market position when compared to the competitors.
Competitive advantage is ability to offer buyers something different and thereby

providing more value for the money.
It is achieved advantage over rivals when a company’s profitability is greater than

average profitability of firms in its industry. It is the result of a successful strategy.
This position gets translated into higher market share, higher profits when
compared to those that are obtained by competitors operating in the same industry.
Competitive advantage may also be in the form of low cost relationship in the
industry or being unique in the industry along dimensions that are widely valued
by the customers in particular and the society at large.
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Competitive Advantage depends upon four major characteristics of resources and

capabilities:
 Durability,
 Transferability,
 Imitability, &
 Appropriability.
What is Value Creation?
The concept of value creation was introduced primarily for providing products
and services to the customers with more worth.
Value is measured by a product’s;
 Features,
 Quality,
 Availability,
 Durability,
 Performance and
 by its Services for which customers are willing to pay.
Competitive advantage leads to superior profitability. At the most basic level, how
profitable a company becomes depends on three factors:
(1) The value customers place on the company’s products;
(2) The price that a company charges for its products; and
(3) The costs of creating those products.
The value customers place on a product reflects the utility they get from a
product—the happiness or satisfaction gained from consuming or owning the
product.
Utility must be distinguished from price.
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Utility is something that customers get from a product.
Thus, we can say that the value creation is an activity or performance by the firm to
create value that increases the worth of goods, services, business processes or even
the whole business system.
Ultimately, this concept gives business a competitive advantage in the industry

and helps them earn above average profits/returns.
Internal and External Analysis; (Portfolio Analysis)
Introduction;
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:
Analyze: It’s current business portfolio and decide which businesses should receive
more or less investment, and
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.
Strategic business unit (SBU)
Introduction;
SBU is a unit of the company that has a separate mission and objectives and
which can be planned independently from other company businesses.
The SBU can be a company division, a product line within a division, or even a
single product or brand.
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Characteristics of SBU’s;
 Single business or collection of related businesses that can be planned for

separately,
 Has its own set of competitors. E.g. Lux & Dove,
 Has a manager who is responsible for strategic planning and profit.
 Helps comparisons between divisions.
 Improving the allocation of resources.
Experience Curve;
Introduction;
Experience curve is an important concept used for applying a portfolio

approach.
The concept is akin (similar) to a learning curve which explains the efficiency
increase gained by workers through repetitive productive work.
Experience curve is based on the commonly observed phenomenon that unit costs
decline as a firm accumulates experience in terms of a cumulative volume of
production.
The implication is that larger firms in an industry would tend to have lower unit
costs as compared to those for smaller companies, thereby gaining a competitive
cost advantage.
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The concept of experience curve is relevant for a number of areas in strategic

management.
 Considered a barrier for new firms,
 Used to build market share,
 Discourage competition.
Product Life Cycle
Introduction;
Product life cycle (PLC) has to do with the life of a product in the market with
respect to business/commercial costs and sales measures;
S-shaped curve,
PLC, which exhibits (indicate) the relationship of sales with respect to time for a
product that passes through the four successive stages of product life cycle.
The different stages in a product life cycle are:
 Introduction
(Slow sales growth)
 Growth
(Rapid market acceptance)
 Maturity
(Slowdown in growth)
 Decline
(Sharp downward shift)
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Product Life Cycle
There are four categories of PLC:
1. Introduction (Embryonic) Stage;
The introduction of the product is characterized by a rapid growth market,

very little competition and (still) high sales prices.
2. Growth Stage;
The market continues to strengthen and sales increase, there are few (if any)
competitors.
3. Maturity Stage;
The market and market shares are stable, there is an established customer
base and the price is lowered because of the growing competition.
4. Decline (Ageing) Stage;
The demand for the product decreases and companies are abandoning the
market. Companies stop consolidating or leave the market.
Igor ANSOFF’S Product Market Growth Matrix;
Introduction;
The Igor Ansoff Growth matrix is a tool that helps businesses decide their
product and market growth strategy.
Ansoff’s product/market growth matrix suggests that a business’ attempts to

grow depend on whether it markets (offer) new or existing products in new or
existing markets.
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Market Penetration:
 Market penetration refers to a growth strategy where the business focuses on

selling existing products into existing markets.
 It is achieved by making more sales to present customers without changing

products in any major way.
 Penetration might require greater spending on advertising or personal selling.
 Risk involved in this strategy is less as compared to other strategies.
 For e.g.
Market Development:
 Market development refers to a growth strategy where the business seeks

(attempts) to sell its existing products into new markets.
 It is a strategy for company growth by identifying and developing new

markets for current company products.
 This strategy may be achieved through new geographical markets.
 Risk involved in this strategy is moderate as compared to other strategies.
 For e.g.
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Product Development:
 Product development refers to a growth strategy where business aims to

introduce new products into existing markets.
 It is a strategy for company growth by offering modified or new products to

current markets.
 Risk involved in this strategy is moderate as compared to other strategies.
 For e.g.
Diversification:
 Diversification refers to a growth strategy where a business markets new

products in new markets.
 It is a strategy by starting up or acquiring businesses outside the company’s

current products and markets.
 Typically the business is moving into markets in which it has little or no

experience.
 Risk involved in this strategy is high as compared to other strategies.
 For e.g.
ADL MATRIX
Introduction;
 The ADL matrix from Arthur D. Little.
 ADL is a portfolio management method that is based on product life cycle
thinking.
 ADL Matrix is a 2 dimensional matrix.
Where on ‘Y’ Axis it represent competitive position of the firm.
Where on ‘X’ Axis it represent life cycle of the firm.
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 The business strengths measure is a categorization of the corporation's SBU's
into one of five competitive positions.
Competitive Position
 Arthur D. Little formulated five categories for the competitive position within
the ADL matrix:
‘y’ Axis
1. Dominant
2. Strong
3. Favourable
4. Tenable
5. Weak
Business Life Cycle

There are four categories of BLC:
1. Introduction (Embryonic) Stage

2. Growth Stage
3. Maturity Stage
4. Decline (Ageing) Stage
‘x’ Axis
Competitive Position;
1. Dominant:
This is a comparatively rare position and in many cases is attributable either

to a monopoly or a strong and protected technological leadership.
2. Strong:
By virtue of this position, the firm has a considerable degree of freedom over
its choice of strategies and is often able to act without its market position being
unduly threatened by its competitions.
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3. Favourable:
This position, which generally comes about when the industry is fragmented
and no one competitor stand out clearly, results in the market leaders a reasonable
degree of freedom.
4. Tenable:
Although the firms within this category are able to perform satisfactorily and
can justify staying in the industry, they are generally vulnerable in the face of
increased competition from stronger and more proactive companies in the market.
5. Weak:
The performance of firms in this category is generally unsatisfactory although

the opportunities for improvement do exist.
Limitations of ADL Matrix;
 There is no standard life cycle length.
 Determining the current industry life cycle phase is difficult.
 Competitors may influence the length of the life cycle.
BCG GROWTH-SHARE MATRIX;
Introduction;
The BCG Growth-Share Matrix is a portfolio planning model developed by

Bruce Henderson of the Boston Consulting Group in the early 1970's.
Growth share matrix also known for its cow and dog metaphors is popularly used
for resource allocation in a diversified company.
Using the BCG approach, a company classifies its different businesses on a two-
dimensional growth - share matrix.
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The Vertical Axis (i.e. Y Axis) represents market growth rate and provides a
measure of market attractiveness.
The Horizontal Axis (i.e. X Axis) represents relative market share and serves as a
measure of company strength in the market.
Conventional strategic thinking suggests there are four possible strategies for each
SBU:
1. Build Share: here the company can invest to increase market share (for example
turning a "question mark" into a star)
2. Hold: here the company invests just enough to keep the SBU in its present
position (preserve market share)
3. Harvest: here the company reduces the amount of investment in order to

maximize the short-term cash flows and profits from the SBU. This may have the
effect of turning Stars into Cash Cows.
4. Divest: the company can divest the SBU by phasing it out or selling it - in order
to use the resources elsewhere (e.g. investing in the more promising "question
marks").
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Limitations;
 It neglects the effects of synergy between business units.
 Market growth is not the only indicator for attractiveness of a market.
 High market share is not the only success factor.
 A high market share does not necessarily lead to profitability all the time.
 A business with a low market share can be profitable too. e.g. BMW
 The model neglects small competitors that have fast growing market shares.
Q. An industry comprises of only two firms-Soorya Ltd. and Chandra Ltd. From the
following information relating to Soorya Ltd.,
Prepare BCG Matrix. (Past exam question)
Steps;
1. Find out product which has highest market share & market growth rate.
Will be considered as Star
2. Find out product which has lowest market share & market growth rate.
Will be considered as Dog
3. Find out product which has higher market share.
Will be considered as Cash Cow
4. Remaining product will be considered as Question Mark.
For answer refer ICAI study material, homework section, Q. 7 (page 2.53)
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General Electric Matrix [“Stop-Light” Strategy Model]

Introduction;
This model has been used by General Electric Company (developed by GE with the
assistance of the consulting firm McKinsey & Company).
This model is also known as Business Planning Matrix.
GE Nine-Cell Matrix and GE Model.
The strategic planning approach in this model has been inspired from traffic control
lights.
The lights that are used at crossings to manage traffic are:

Green Go
Yellow Caution
Red Stop
This model uses two factors while taking strategic decisions:
 The Vertical Axis (i.e. Y Axis) represents Market Attractiveness.
 The Horizontal Axis (i.e. X Axis) represents Business Strength.
The Market attractiveness is measured by a number of factors like:
 Size of the market,  Competitive intensity,

 Market growth rate,  Availability of Technology,
 Industry profitability  Pricing trends,
Etc…
The Business strength is measured by a number of factors like:

 Market share,  Distribution efficiency,
 Market share growth rate,  Brand image,
 Profit margin,  Customer loyalty
Etc…
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 Investment: Basis on market attractiveness for growth & expansion.
 Protect: No fresh investment rather it is willing to have the security of the

given investment. So that does not result in losses.
 Harvest: Situation where low priority was given.
 Divest: Finally decided to sale a business unit.
SWOT Analysis;
Relationship between organization and environment;
Introduction;
For the generation of a series of strategic alternatives or choices, it is necessary

to analyse the firm’s internal strengths and weaknesses and its external
opportunities and threats.
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The identification and analysis of strengths, weaknesses, opportunities, and threats

is normally referred to as SWOT analysis.
The major purpose of SWOT analysis is to enable the management to create a firm -
specific business model that will best align, fit, or match an organisational resources
and capabilities to the demands of the environment in which it operates.
 Strength:
Strength is an inherent capability of the organization which it can use to gain

strategic advantage over its competitors.
 Weakness:
A weakness is an inherent limitation or constraint of the organization which

creates strategic disadvantage to it.
 Opportunity:
An opportunity is a favourable condition in the organisation’s environment

which enables it to strengthen its position.
 Threat:
A threat is an unfavourable condition in the organisation’s environment

which causes a risk for, or damage to, the organisation’s position.
The significance of SWOT analysis lies in the following points:
 It provides a logical framework of analysis.
 It presents a comparative account.
 It guides the strategist in strategy identification.
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 SWOT analysis helps managers to craft a business model that will allow a
company to gain a competitive advantage in its industry.
Q. To which industries the following developments offer opportunities and threats?
“Increasing trend in India to organize IPL (Cricket) type of tournaments in other
sports also.” (Past exam question)
Ans; Explain Opportunity & Threat (Refer note)
Opportunity : Favourable condition # strengthen its position.
Threat : Unfavourable condition # causes a risk
The IPL (Cricket) tournament is highly profit and entertainment driven.

A number of entities and process are involved in this IPL type tournament.
IPL (Cricket) type of tournament would offer opportunities/threats to the following
industries:
Opportunities Threats
 Stadium  Entertainment Industry

 Sports Industry  TV serials,
 Media Industry  Theatres,
 Sports channels,  Theme Parks, etc…
 Advertisers, etc…  Tourism and Hotel Industry
 Transport  Event Management
TOWS Matrix;
Introduction:
Through SWOT analysis organisations identify their strengths, weaknesses,

opportunities and threats.
While conducting the SWOT Analysis managers are often not able to come to terms
with the strategic choices that the outcomes demand.
Heinz Weihrich developed a matrix called TOWS matrix by matching strengths and
weaknesses of an organization with the external opportunities and threats.
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The incremental benefit of the TOWS matrix lies in systematically identifying

relationships between these factors and selecting strategies on their basis.
Thus TOWS matrix has a wider scope when compared to SWOT analysis.
TOWS analysis is an action tool whereas SWOT analysis is a planning tool.
The TOWS Matrix is tool for generating strategic options. Through TOWS matrix
four distinct alternative kinds of strategic choices can be identified.
 SO (Maxi-Maxi):
SO is a position that any firm would like to achieve. The strengths can be
used to capitalize or build upon existing or emerging opportunities. Such
firms can take lead from their strengths and utilize the resources to build up
the competitive advantage.
 ST (Maxi - Mini):
ST is a position in which a firm strives to minimize existing or emerging

threats through its strengths.
 WO (Mini - Maxi):
The firm needs to overcome internal weaknesses and make attempts to

exploit opportunities to maximum.
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 WT (Mini-Mini):
WT is a position that any firm will try to avoid. A firm facing external threats
and internal weaknesses may have to struggle for its survival. WT strategy is
a strategy which is pursued to minimize or overcome weaknesses and as far
as possible, cope with existing or emerging threats.
Globalization;
Meaning;
The process by which businesses or other organizations develop international

influence or start operating on an international scale.
In simple economic terms, globalization refers to the process of integration of the

world into one huge market.
A company which has gone global is called a multinational (MNC) or a

transnational (TNC).
The global company views the world as one market, minimises the importance of
national boundaries.
To be specific, a global company has three characteristics:
 It is a conglomerate of multiple units but all linked by common ownership.
 Multiple units draw on a common pool of resources, such as money, credit,

information, patents, trade names and control systems.
 The units respond to some common strategy. Besides, its managers and
shareholders are also based in different nations.
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 Why do companies go global?
There are several reasons why companies go global. These are discussed as
follows:
 The first and foremost reason is need to grow.
 It is being realised that the domestic markets are no longer adequate and
rich.
 Companies often set up overseas plants to reduce high transportation costs.

E.g. Hyundai,
 There can be varied other reasons such as need for reliable or cheaper source
of raw-materials, cheap labour, etc…
 The rise of services to constitute the largest single sector in the world
economy;
 Globalization has made companies in different countries to form strategic

alliances and leverage their respective comparative and competitive
advantages.
Distinguish Between MNC vs. TNC;
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Chapter 3: Strategic Management Process
Strategic Planning;
 Planning means deciding what needs to done in the future and generating
blueprints for action.
 Good planning is an important constituent of good management.
 Planning involves determination of the course of action to attain the

predetermined objectives.
 It bridges the gap between where we are to where we want to go.
 Thus, planning is future oriented in nature.
Types of Planning’s;
1. Strategic Planning,
2. Operational Planning.
1. Strategic Planning;
Strategic plans are made by the senior management for the entire
organization after taking into account the organization’s strength and weaknesses in
the light of opportunities and threats in the external environment.
2. Operational Planning;
Operational plans on the other hand are made at the middle and lower level
management. They specify details on how the resources are to be utilized efficiently
for the attainment of objectives.
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A major functions (task) of planning’s;
 Dealing with uncertainty;
 Impact of uncertainty;
1. Dealing with uncertainty;
Strategic uncertainty, which has far reaching implications, is a key construct in

strategy formulation.
A typical external analysis will emerge with dozens of strategic uncertainties.
To be manageable, they need to be grouped into logical clusters or themes.
Strategic uncertainty is represented by a future trend or event that has inherent

unpredictability.
Information gathering and additional analysis will not be able to reduce the
uncertainty.
2. Impact with uncertainty;
Each element of strategic uncertainty involves potential trends or events that

could have an impact on present, proposed, and even potential businesses.
For example, a trend toward Aayurvedic Products may present opportunities for
a firm producing/ manufacturing herbal product on the basis of a strategic
uncertainty.
STRATEGIC DECISION MAKING;

Decision making is a managerial process of selecting the best course of action
out of several alternative courses for the purpose of accomplishment of the
organizational goals.
 Decisions may be operational, i.e. which relate to general day-to-day

operations.
 They may also be strategic in nature.
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The major dimensions (Characteristics) of strategic decisions are as

follows;
 Strategic decisions require top-management involvement.
 Strategic decisions involve commitment of organisational resources.
 Strategic decisions are likely to have a significant impact on the long term
prosperity of the firm.
 Strategic decisions are future oriented.
 Strategic decisions usually have major multifunctional or multi-business

consequences.
Strategic Intention (purpose)
Strategic Management is defined as a dynamic

process of;
 Formulation,
 Implementation,
 Evaluation, and
 Control of strategies
(Why) to realise the organization’s strategic intent.
Introduction:
 Strategic intent refers to purposes of what the organization strives for.
 Senior managers must define “what they want to do” and “why they want to
do”.
 “Why they want to do” represents strategic intent (purpose) of the firm.
 Clarity in strategic intent is extremely important for the future success and
growth of the enterprise, irrespective of its nature and size.
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 Strategic intent can be understood as the philosophical base of strategic

management.
Element of Strategic Intent;
Business Definition:
It try to explain the business undertaken by the firm, with respect to the
customer needs, target markets, and alternative technologies. With the help of
business definition, one can ascertain the strategic business choices.
Organisational restructuring also depends upon the business definition.
Business Model:
Business model, as the name implies is a strategy for the effective operation of
the business, ascertaining sources of income, desired customer base, and financial
details.
Rival firms, operating in the same industry rely on the different business model
due to their strategic choice.
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Vision:
A Strategic vision is,
A road map of a company’s future providing particulars about,
 Product,
 Market to be pursued,
 Customer,
 Technology to be focused,
would improve its current market position and future prospects.
 Vision implies the blueprint of the company’s future position.
 A strategic vision shows management’s aspirations for the business, providing a

view of “where we are going”.
 It describes where the organisation wants to land.
 Every sub system of the organization is required to follow its vision.
 For e.g.
To be a world class corporate constantly furthering the interest

of all its stakeholders.
The three elements of a strategic vision are:
1. “Who we are and where we are now?”
2. “Where we are going?”
3. Communicating the strategic vision in clear, exciting terms that inspire

organization wide commitment.
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Essentials of a strategic vision:
 The entrepreneurial challenge in developing a strategic vision is to think

creatively about how to prepare a company for the future.
 A well-articulated strategic vision creates enthusiasm among the members of

the organisation.
 Forming a strategic vision is an exercise in intelligent entrepreneurship.
 The best-worded vision statement clearly enhance the direction in which

organization is headed.
Mission;
Introduction;
A company’s mission statement is typically focused on its present business

scope – i.e. “who we are? And what we do?”
Mission statements broadly describe an organizations;
 Present capabilities,
 Customer focus,
 Activities, and
 Business makeup.
 Mission statement should reflect the philosophy of the organizations that is

perceived by the senior managers.
 A good mission statement should be precise, clear, feasible, distinctive and

motivating.
 Mission and business definition, as the two ideas are absolutely central to
strategic planning.
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Why an organization should have a mission?
 To ensure consensus of purpose within the organization.
 To develop a basis, or standard, for allocating organizational resources.
 To provide a basis for motivating the use of the organization’s resources.
 To establish a general tone or organizational climate.
 To serve as a focal point.
 To facilitate the translation of objective and goals into a work structure.
 To specify organizational purposes.
Points (tips) to be considered while writing mission statement;
 To establish the special identity of the business - one that typically distinct it
from other similarly positioned companies.
 Needs which business tries to satisfy, customer groups it wishes to target and
the technologies and competencies it uses and the activities it performs.
 Good mission statements should be unique to the organisation for which

they are developed.
 The mission of a company should not be to make profit. Surpluses may be

required for survival and growth, but cannot be mission of a company.
Goals & Object;
Goals are the end results, that the organization attempts to achieve.
Objectives are time-based measurable targets, which help in the accomplishment of

goals.
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However, in practice, no distinction is made between goals and objectives and

both the terms are used interchangeably.
Objectives are organization’s performance targets.
The results and outcomes it wants to achieve. They (objective) function as

yardsticks for tracking an organization’s performance and progress.
Business organization translates their vision and mission into goals and objectives.
Characteristics of Objectives:
 Objectives should define the organization’s relationship with its environment.
 Objectives should be facilitative towards achievement of mission and

purpose.
 Objectives should be measurable and controllable.
 Objectives should provide the basis for strategic decision-making.
 Objectives should provide standards for performance appraisal.
 Objectives should be concrete and specific.
 Objectives should be related to a time frame.
 Objectives should be challenging.
Long-term Objectives:
As a rule, a company’s set of financial and strategic objectives ought to

include both short-term and long-term performance targets.
Long-term objectives represent the results expected from pursuing certain strategies.
The time frame for objectives and strategies should be consistent, usually from two
to five years.
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 Profitability.  Employee Relations.

 Productivity.  Technological Leadership.
 Competitive Position.  Public Responsibility.
 Employee Development. Etc…
Strategic Management Model;
Introduction;
Identifying an organization’s vision, mission, goals and objectives, is the

starting point for strategic management process.
The strategic management process is dynamic and continuous.
A change in any one of the major components in the model can necessitate a change
in any or all of the other components.
Therefore, strategy formulation, implementation, and evaluation activities should be

performed on a continual basis, not just at the end of the year or semi-annually.
The strategic management process never really ends.
This model like any other model of management does not guarantee sure-shot
success.
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Generally, there is give-and-take among hierarchical levels of an organization.
Many organizations conduct formal meetings semi-annually to discuss and update

the firm’s vision/ mission, opportunities/ threats, strengths/ weaknesses, strategies,
objectives, policies, and performance.
Creativity from participants is encouraged in meeting.
Good communication and feedback are needed throughout the strategic

management process.
Stages in Strategic Management;
Crafting and executing strategy are the heart and soul of managing a business
enterprise.
1. Developing a strategic vision and formulation of statement of mission, goals
and objectives,
First a company must determine what directional path the company should
take and what changes in the company’s product – market – customer –
technology – focus would improve its current market position and its future
prospect.
2. Environmental and organizational analysis,
This stage is the diagnostic phase of strategic analysis. It entails two types of
analysis:
i. Environmental scanning
External environment of a firm consists of economic, social,
technological, market and other forces which affect its functioning. The
firm’s external environment is dynamic and uncertain.
ii. Organisational analysis
Organisational analysis involved a review of financial resources,
technological resources, productive capacity, marketing and distribution
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effectiveness, research and development, human resource skills and so
on.
3. Formulation of strategy,
The strategic alternatives may be designated as stability strategy, growth/
expansion strategy and retrenchment strategy. A company may also follow a
combination these alternatives called combination strategy.
4. Implementation of strategy, &
Implementation and execution is an operations-oriented, activity aimed at
shaping the performance of core business activities in a strategy-supportive
manner. It is the most demanding and time-consuming part of the strategy-
management process.
5. Strategic evaluation and control.
The final stage of strategic management process – evaluating the company’s
progress, assessing the impact of new external developments, and making
corrective adjustments – is the trigger point for deciding whether to continue or
change the company’s vision, objectives, strategy, and/or strategy-execution
methods.
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Chapter 4: Corporate Level Strategies
Business Life Cycle;

 Introduction Stage
Market Penetration Strategy
 Growth Stage
Growth/Expansion Strategy
 Maturity Stage
Stability Strategy
 Decline Stage
Retrenchment/ Turnaround Strategy
Strategies;
Competitive Strategies Collaboration Strategies

 Focus,  Joint Venture,
 Differentiation, &  Strategic Alliance,
 Cost Leadership.  Merger & Acquisition.
It may be noted that there is no water tight compartmentation between different

typologies (i.e. organisation is free to opt any strategy by matching their S&W).
TYPOLOGIES OF STRATEGIES
Introduction:
Businesses follow different types of strategies; to enter the market, to stay and grow
in the market.
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A large number of strategies with different nomenclatures have been employed by

different businesses and also suggested by different authors on strategy.
For instance, William F Glueck and Lawrence R Jauch discussed four generic
strategies including;
1. Stability,
2. Growth,
3. Retrenchment and
4. Combination.
These strategies have also been called Grand Strategies, Directional Strategies &
Corporate by many other authors.
Grand Strategies, Directional Strategies & Corporate Strategies;
Strategy Basic Feature
Stability The firm stays with its current businesses and product markets;
maintains the existing level of effort; and is satisfied with
incremental growth.
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Expansion Here, the firm seeks (attempt) significant growth-maybe within

the current businesses; maybe by entering new business that are
related to existing businesses; or by entering new businesses that
are unrelated to existing businesses.
Retrenchment The firm retrenches some of the activities in some business(es), or

drops the business as such through sell-out or liquidation.
Combination The firm combines the above (Stability, Growth & Retrenchment)
strategic alternatives in some permutation/combination so as to
suit the specific requirements of the firm.
1. Stability Strategy;
Introduction:
One of the important goals of a business enterprise is stability to safeguard its

existing interests.
The strategic decisions focus on incremental improvement of functional

performance.
Stability strategy is not a ‘do nothing’ strategy.
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It involves keeping track of new developments to ensure that the strategy continues
to make sense.
This strategy is typical for those firms whose product have reached the maturity
stage of product life cycle.
Small organizations may also follow stability strategy to consolidate their market
position and prepare for the launch of growth strategies.
Characteristics of Stability Strategy;
 A firm opting for stability strategy stays with the same business, same
product – market.
 Maintaining same level of effort as at present.
 Stability strategy does not involve a redefinition of the business of the

corporation.
 It is basically a safety-oriented, status quo (existing state of affairs) oriented

strategy.
 It does not warrant much of fresh investments.
 It involves minor improvements in the product and its packaging.
 The risk is also less.
Major Reasons for Stability Strategy;
 A product has reached the maturity stage of the product life cycle.
 It is less risky as it involves less changes and the staff feels comfortable with
things as they are.
 The environment faced is relatively stable.
 Expansion seems to be threatening.
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2. Growth/ Expansion Strategy;
Introduction;
Growth/ Expansion strategy is implemented by redefining the business by

enlarging the scope of business and substantially increasing investment in the
business.
Expansion also includes diversifying, acquiring and merging businesses.
This strategy may take the enterprise along relatively unknown and risky paths,
full of promises and pitfalls.
Characteristics of Growth/ Expansion Strategy;
 Expansion strategy involves a redefinition of the business of the

corporation.
 Expansion strategy is the opposite of stability strategy.
 Expansion strategy leads to business growth.
 Expansion strategy is a highly versatile strategy.
 A firm opting for the expansion strategy can generate many alternatives
within the strategy by altering its propositions regarding products, markets
and functions and pick the one that suits it most.
 Expansion strategy holds within its fold two major strategy routes:
 Intensification,
 Diversification.
Major Reasons for Growth/Expansion Strategy;
 When environment demands increase in pace of activity.
 Expansion may lead to greater control over the market vis-a-vis (w.r.t.)
competitors.
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 Advantages from the experience curve and scale of operations may accrue.
Types of Growth/Expansion Strategy;
2-A Expansion through Intensification
 Market Penetration:
Highly common expansion strategy is market penetration/

concentration on the current business. The firm directs its resources to the
profitable growth of its existing product in the existing market.
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 Market Development:
It consists of marketing present products, to customers in related

market areas by adding different channels of distribution or by changing the
content of advertising or the promotional media.
 Product Development:
Product development involves substantial modification of existing

products or creation of new but related items that can be marketed to
current customers through establish channels.
2-B Expansion through Diversification;
Introduction;
Diversification can be related or unrelated to existing businesses of the firm.

Based on the nature and extent of their relationship to existing businesses,
diversification have been classified into four broad categories:
 Vertically integrated diversification,
 Horizontally integrated diversification,
 Concentric diversification, &
 Conglomerate diversification.
Innovative and creative firms always look for opportunities and challenges to grow,
to venture into new areas of activity and to break new frontiers with the zeal of
entrepreneurship.
They feel that diversification offers greater prospects of growth and profitability
than expansion.
Another reason for diversification lies in its synergistic advantage.
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For e.g.
i. Vertically Integrated Diversification:
In vertically integrated diversification, firms opt to engage in businesses that are

related to the existing business of the firm. The firm remains vertically within the
same process sequence moves forward or backward in the chain and enters specific
product/process steps with the intention of making them into new businesses for the
firm.
The characteristic feature of vertically integrated diversification is that here, the firm
does not jump outside the vertically linked product-process chain.
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Forward and Backward Integration:
 BACKWARD INTEGRATION;
 It is a step towards, creation of effective supply by entering business of input

providers.
 Strategy employed to expand profits and gain greater control over production of
a product whereby a company will purchase or build a business that will
increase its own supply capability or lessen its cost of production.
 For example, a large supermarket chain considers to purchase a number of farms

that would provide it a significant amount of fresh produce.
 FORWARD INTEGRATION:
 It is moving forward in the value chain and entering business lines that use
existing products.
 Forward integration will also take place where organizations enter into
businesses of distribution channels.
 For example, a coffee bean manufacture may choose to merge with a coffee cafe.
ii. Horizontal Integrated Diversification:
Through the acquisition of one or more similar business operating at the same
stage of the production-marketing chain that is going into complementary products,
by-products or taking over competitors’ products.
For e.g., offering ‘AKG’ earphone (complementary product) with Samsung

premium device.
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Note: Example is just for reference (do not write in exam)
iii. Concentric Diversification:
Concentric diversification too amounts to related diversification. In concentric

diversification, the new business is linked to the existing businesses through process,
technology or marketing.
The new product is a spin-off from the existing facilities and products/processes.
This means that in concentric diversification too, there are benefits of synergy with
the current operations.
However, concentric diversification differs from vertically integrated

diversification in the nature of the linkage the new product has with the existing
ones. While in vertically integrated diversification, the new product falls within the
firm’s current process-product chain, in concentric diversification, there is a
departure from this vertical linkage. The new product is only connected in a loop-
like manner at one or more points in the firm’s existing process/technology/
product chain.
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iv. Conglomerate Diversification:
In conglomerate diversification, no such linkages exist; the new businesses/

products are disjointed from the existing businesses/products in every way; it is a
totally unrelated diversification.
In process/technology/function, there is no connection between the new products

and the existing ones.
Conglomerate diversification has no common thread at all with the firm’s present
position.
For example, A cement manufacturer diversifies into the manufacture of steel and
rubber products.
2-C Expansion through Mergers and Acquisitions;
Introduction;
Acquisition or merger with an existing concern is an

instant means of achieving the expansion.
Merger and acquisition in simple words are defined as a process

of combining two or more organizations together.
Organizations consider merger and acquisition proposals in a systematic manner, so

that the marriage will be mutually beneficial, a happy and lasting affair.
There is a thin line of difference between the two terms but the impact of
combination is completely different in both the cases.
Some organizations prefer to grow through,
 Mergers,
 Acquisition &
 Takeover.
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Merger is considered to be a process when two or

more companies come together to expand their business
operations.
In such a case the deal gets finalized on friendly terms
and both the organizations share profits in the newly
created entity.
For e.g. Formation of Brook Bond Lipton India Ltd. through the merger of Brook
Bond and Lipton India.
Acquisition, When one organization takes over

the other organization and controls all its business
operations, it is known as acquisitions.
In this process of acquisition, one financially
strong organization overpowers the weaker one.
For e.g. WalMart acquired Flipkart of India
Takeover, A deal in case of an acquisition is

often done in an unfriendly manner, it is more or
less a forced association where the powerful
organization either consumes the operation or a
company in a weaker position is forced to sell its
entity.
For e.g. In 2000,Tata Tea took over Tetley Tea
Expansion through M & A;
 Horizontal Merger,
 Vertical Merger,
 Co-generic Merger, &
 Conglomerate Merger.
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 Horizontal Merger;
The types of mergers are similar to types of diversification.
Horizontal merger is a combination of firms engaged in the same industry. It is

a merger with a direct competitor.
The principal objective behind this type of merger is to achieve economies of

scale in the production process by shedding duplication of installations and
functions, widening the line of products, decrease in working capital and fixed
assets investment, getting rid of competition and so on.
For example, formation of Brook Bond Lipton India Ltd. through the merger of
Lipton India and Brook Bond.
 Vertical Merger:
It is a merger of two organizations that are operating in the same industry but at
different stages of production or distribution system.
This often leads to increased synergies with the merging firms.
If an organization takes over its supplier/producers of raw material, then it leads

to backward integration.
On the other hand, forward integration happens when an organization decides

to take over its buyer organizations or distribution channels.
Vertical merger results in many operating and financial economies. Vertical

mergers help to create an advantageous position by restricting the supply of
inputs to other players, or by providing the inputs at a higher cost.
 Co-generic Merger:
In Co-generic merger two or more merging organizations are associated in some

way or the other related to the production processes, business markets, or basic
required technologies.
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Such merger include the extension of the product line or acquiring components
that are required in the daily operations.
It offers great opportunities to businesses to diversify around a common set of

resources and strategic requirements.
For example, an organization in the white goods category such as refrigerators

can diversify by merging with another organization having business in kitchen
appliances.
 Conglomerate Merger:
Conglomerate mergers are the combination of organizations that are unrelated to

each other.
There are no linkages with respect to customer groups, customer functions and
technologies being used.
There are no important common factors between the organizations in

production, marketing, research and development and technology. In practice,
however, there is some degree of overlap in one or more of these factors.
For example, Walt Disney Company and the American Broadcasting Company.
2-D Expansion through Strategic Alliance;
Introduction:
A strategic alliance is a relationship between two or

more businesses that enables each to achieve certain
strategic objectives which neither would be able to
achieve on its own.
The strategic partners maintain their status as independent and separate entities,
share the benefits and control over the partnership, and continue to make
contributions to the alliance until it is terminated.
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Strategic alliances are often formed in the global marketplace between businesses
that are based in different regions of the world.
 Advantages of Strategic Alliance;
Strategic alliance usually are only formed if they provide an advantage to all the
parties in the alliance. These advantages can be broadly categorised as follows:
1. Organizational:
Strategic alliance helps to learn necessary skills and obtain certain capabilities from
strategic partners.
Strategic partners may also help to enhance productive capacity, provide a

distribution system, or extend supply chain.
Strategic partners may provide a good or service that complements thereby creating
a synergy.
2. Economic:
There can be reduction in costs and risks by distributing them across the members of
the alliance.
Greater economies of scale can be obtained in an alliance, as production volume can

increase, causing the cost per unit to decline.
3. Strategic:
Rivals can join together to cooperate instead of compete.
Vertical integration can be created where partners are part of supply chain.
Strategic alliances may also be useful to create a competitive advantage by the

pooling of resources and skills.
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4. Political:
Sometimes strategic alliances are formed with a local foreign business to gain entry
into a foreign market either because of legal barriers to entry.
Forming strategic alliances with politically-influential partners may also help

improve your own influence and position.
 Disadvantages of Strategic Alliance;
Strategic alliances do come with some disadvantages and risks.
 The major disadvantage is sharing.
 Strategic alliances may also create a potential competitor.
1. The major disadvantage is sharing.
Strategic alliances require sharing of resources & profits and also sharing
knowledge & skills that otherwise organisations may not like to share.
Sharing knowledge and skills can be problematic if they involve trade secrets.
Agreements can be executed to protect trade secrets, but they are only as good as the
willingness of parties to abide by the agreements or the courts willingness to enforce
them.
2. Strategic alliances may also create a potential competitor.
An ally (group) may become a competitor in future when it decides to

separate out.
3. Retrenchment Strategy;
Introduction:
It is followed when an organization substantially reduces the scope of its

activity.
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This is done through an attempt to find out the problem areas and diagnose the
causes of the problems.
Next, steps are taken to solve the problems.
These steps result in different kinds of retrenchment strategies.
If the organization chooses to focus on ways and means to reverse the process of
decline, it adopts at turnaround strategy.
If it cuts off the loss - making units, divisions, or SBUs, curtails its product line, or
reduces the functions performed, it adopts a divestment strategy.
If none of these actions work, then it may choose to abandon the activities totally,
resulting in a liquidation strategy.
Retrenchment Strategy can be;
 Turnaround Strategy,
 Divestment Strategy,
 Liquidation Strategy.
i. Turnaround Strategy;
Introduction:
Retrenchment may be done either internally or externally.
For internal retrenchment to take place, emphasis is laid on improving internal

efficiency, known as turnaround strategy.
There are certain conditions or indicators which point out that a turnaround is
needed if the company has to survive.
 These danger signals are:
 Constant negative cash flow from business(es),
 Uncompetitive products or services,
 Declining market share,
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 Deterioration in physical facilities,
 Over-staffing, high turnover of employees, and low morale,
 Mismanagement, etc…
 Action Plan for Turnaround;
1. Assessment of current problems,
2. Analyze the situation and develop a strategic plan,
3. Implementing an emergency action plan,
4. Restructuring the business, &
5. Returning to normal.
 The important elements of turnaround strategy are as follows:

 Changes in the top management,
 Neutralising external pressures,
 Identifying quick payoff activities,
 Quick cost reductions,
 Revenue generation,
 Asset liquidation for generating cash,
 Better internal coordination.
ii. Divestment Strategy;
Introduction:
Divestment strategy involves the sale or liquidation of a portion of business,
or a major division, profit centre or SBU.
Divestment is usually a part of rehabilitation or restructuring plan and is adopted
when a turnaround has been attempted but has proved to be unsuccessful.
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The option of a turnaround may even be ignored if it is obvious that divestment is
the only answer.
iii. Liquidation Strategy;
Introduction:
A retrenchment strategy considered the most extreme and unattractive is
liquidation strategy, which involves closing down a firm and selling its assets.
It is considered as the last resort because it leads to serious consequences such as
loss of employment for workers and other employees, termination of opportunities,
etc…
Liquidation strategy may be unpleasant as a strategic alternative but when a “dead

business is worth more than alive”, it is a good proposition.
For instance, the real estate owned by a firm may fetch it more money than the
actual returns of doing business.
Q. Many small-scale units, proprietorship firms, and partnership ventures liquidate
frequently but medium-and large-sized companies rarely liquidate in India.
(C or IC)
Ans; The company management, government, banks and financial institutions, trade
unions, suppliers and creditors, and other agencies are extremely reluctant to take a
decision, or ask, for liquidation.
 Characteristics of Retrenchment/Turnaround Strategy:
 Obsolescence of product/process,
 Business becoming unprofitable,
 Inability to cope up with cut throat competition,
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 Industry overcapacity,
 Failure of existing strategy, etc…
 Retrenchment/Turnaround, Divestment & Liquidation Strategy;

A Retrenchment/ Turnaround, Divestment, & Liquidation strategy may be
adopted due to various reasons:
 Constant negative cash flow from business(es),
 A business that had been acquired proves to be a mismatch and cannot be
integrated within the company.
 Technological up-gradation is required if the business is to survive but
where it is not possible for the firm to invest in it, a preferable option would
be to divest.
 A better alternative may be available for investment.
4. Combination Strategy;
Introduction:
The above strategies (i.e. Stability, Growth, and Retrenchment) are not
mutually exclusive.
It is possible to adopt a mix of the above to suit particular situations.
An enterprise may seek stability in some areas of activity, expansion in some and
retrenchment in the others.
 Major Reasons for Combination Strategy;
 The organization is large and faces complex environment.
 The organization is composed of different businesses, each of which lies in a

different industry requiring a different response.
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Chapter 5: Business Level Strategies
Introduction:
Business level strategies are the courses of action adopted by an organisation for
each of its businesses separately, to serve identified customer groups and provide
value to the customers by satisfaction of their needs.
In the process, the organisation uses its competencies to gain, sustain and enhance its
strategic or competitive advantage.
Competitive rivalry has the most effect on the firm’s business level strategies than
the firm’s other strategies (i.e. Corporate, Functional level strategies) ICAI MCQ
Porter’s Five Forces Model-Competitive Analysis;

Introduction:
A powerful and widely used tool for systematically diagnosing the significant
competitive pressures in a market and assessing the strength and importance of each
is the Porter’s five-force model of competition.
This model holds that the state of competition in an industry is a composite of

competitive pressures operating in five areas of the overall market.
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1. Threat of new entrants:
 New entrants place a limit on prices and affect

the profitability of existing players.
 The new capacity and product range the new

entrants bring increases competitive pressure.
 Bigger the new entrant, the more severe the competitive effect & new entrants is
considered as a significant source of competition. ICAI MCQ
2. Threats from substitutes:
 Substitute products are a latent source of competition

in an industry.
 Substitute products offering a price advantage and/or performance improvement

to the consumer can have significant impact.
 Real estate, insurance, bonds and bank deposits for example are clear substitutes
for common stocks, because they represent alternate ways to invest funds.
3. Bargaining power of customers:
 The bargaining power of the buyers influences not only

the prices that the producer can charge but also
influence costs and investments of the producer.
 This force will become heavier depending on the possibilities of the buyers
forming groups or cartels, particularly in case of industrial products.
4. Bargaining power of suppliers:
 Often suppliers can exercise considerable bargaining

power.
 Suppliers can influence the profitability of an industry
in a number of ways.
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 The bargaining power of suppliers determines the cost of raw materials and
other inputs of the industry and, therefore, can affect industry attractiveness and
profitability.
5. Rivalry among current players:
 The rivalry among existing players is quite obvious.
 This is what is normally understood as competition.
 The impact is evident more at functional level in the prices being charged,
advertising, and pressures on costs, product and so on.
 Barriers to entry:
Threats of new entrants, common barriers to entry;
Introduction;
A firm’s profitability tends to be higher when other firms are blocked from
entering the industry.
New entrants can reduce industry profitability because they add new
production capacity leading to increase supply of the product even at a lower
price and can substantially erode (gradually destroy) existing firm’s market share
position.
Porter’s five forces model considers new entrants as a significant source of

competition.
To discourage new entrants, existing firms can try to raise barriers to entry.
Barriers (restrictions) to entry represent economic forces (or ‘hurdles’) that slow
down or delay or prevent entry by other firms. Common barriers to entry
include:
 Capital requirements,
 Economies of scale, (C or IC) Important*
 Product differentiation,
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 Switching costs,
 Brand identity,
 Access to distribution channels, &
 Possibility of aggressive re-taliation (counter-attack) by existing players.
(i) Capital Requirements:
When a large amount of capital is required to enter an industry, firms lacking

funds are effectively barred from the industry, thus enhancing the profitability of
existing firms in the industry.
This makes the entry of new companies into this sector very difficult.
(ii) Economies of Scale:
Economies of scale refer to the decline in the per-unit cost of production as

volume grows. A large firm that enjoys economies of scale can produce high
volumes of goods at successively lower costs. This tends to discourage new entrants.
This acts as a barrier for new entrants.
(iii) Product Differentiation:
Product differentiation refers to the physical or perceptual differences, or

enhancements, that make a product special or unique in the eyes of customers.
Firms in the personal care products and cosmetics industries actively engage
in product differentiation to enhance their products’ features.
Differentiation works to reinforce entry barriers because the cost of creating

genuine product differences may be too high for the new entrants.
(iv) Switching Costs:
To succeed in an industry, new entrant must be able to persuade existing

customers of other companies to switch to its products. To make a switch, buyers
may need to test a new firm’s product, negotiate new purchase contracts, and train
personnel to use the equipment, or modify facilities for product use.
Buyers often incur substantial financial costs in switching between firms.

When such switching costs are high, buyers are often reluctant to change.
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(v) Brand Identity:
The brand identity of products or services offered by existing firms can serve
as another entry barrier. New entrants often encounter significant difficulties in
building up the brand identity, because to do so they must commit substantial
resources over a long period.
For example, during the 1970s, Japanese companies such as Toyota, Nissan,
and Honda had to spend huge sums on new product development and promotional
activities to overcome the American consumer’s preference for domestic cars.
(vi) Access to Distribution Channels:
The unavailability of distribution channels for new entrants poses another

significant entry barrier. Despite the growing power of the internet, many firms may
continue to rely on their control of physical distribution channels to sustain a barrier
to entry to rivals. Often, existing firms have significant influence over the
distribution channels and can retard or impede their use by new firms.
For example, because of control over distribution channels in India by HUL, P

& G and Godrej etc., small entrepreneurs find it very difficult to sell their products
through the existing channels.
(vii) Possibility of Aggressive Retaliation (counter-attack):
Sometimes the mere threat of aggressive retaliation (counter-attack) by existing

firm can discourage entry by other firms into an existing industry.
For example, introduction of products by a new firm may lead existing firms to
reduce their product prices and increase their advertising budgets.
Business Level Strategies;
Introduction;
 An organization’s core competencies should be focused on satisfying customer

needs or wants in order to achieve above average returns. This is done through
Business-level strategies.
 Business level strategies detail actions taken to provide value to customers and
gain a competitive advantage by exploiting core competencies in specific,
individual product or service markets.
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 Business-level strategy is concerned with a firm’s position in an industry, relative

to competitors and to the five forces of competition discussed above.
 Customers are the foundation of an organization’s business-level strategies.
 Business level strategy is concerned with issues such as:
 Meeting the needs of key customers.
 Achieving advantage over competitors.
 Avoiding competitive disadvantage.
Michael Porter’s Generic Strategies;
Introduction:
According to Porter, strategies allow organizations to gain competitive

advantage from three different bases:
 Focus,
Porter called these

 Differentiation, and
base generic strategies.
 Cost leadership.
These strategies have been termed generic because they can be pursued by any type
or size of business firm and even by not-for-profit organisations.
Focus;
It means producing products and services that fulfil the needs of small
groups of consumers.
Differentiation;
It is a strategy aimed at producing products and services considered unique

industry wide and directed at consumers who are relatively price-insensitive.
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Cost leadership;
It emphasizes producing standardized products at a very low per-unit cost

for consumers who are price-sensitive.
1. Focus Strategies;
Meaning;
It means producing products and services that fulfil the needs of small
groups of consumers.
A successful focus strategy depends on an industry segment that is of sufficient size,

has good growth potential, and is not crucial to the success of other major
competitors.
Strategies such as market penetration and market development offer substantial

focusing advantages.
Focus strategies are most effective when consumers have distinctive preferences or
requirements and when rival firms are not attempting to specialize in the same
target segment.
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 Focused cost leadership;
A focused cost leadership strategy requires competing based on price to target a

narrow market. A firm that follows this strategy does not necessarily charge the
lowest prices in the industry. Instead, it charges low prices relative to other firms
that compete within the target market.
 Focused differentiation;
A focused differentiation strategy requires offering unique features that fulfil the
demands of a narrow market. As with a focused low-cost strategy, narrow markets
are defined in different ways in different settings. Some firms using a focused
differentiation strategy concentrate their efforts on a particular sales channel, such as
selling over the internet only.
For e.g. Rolls-Royce sells limited number of high-end, custom-built cars.
Achieving Focused Strategy;
To achieve focused cost leadership/differentiation, following are the measures that

could be adopted by an organization:
 Selecting specific niches (slot) which are not covered by cost leaders and
differentiators.
 Creating superior skills for catering to such niche markets.
 Generating high efficiencies for serving such niche markets.
 Developing innovative ways in managing the value chain.
Advantages of Focused Strategy;
 Premium prices can be charged by the organisations for their focused

product/ services.
 Due to the tremendous expertise about the goods and services that
organisations following focus strategy offer, rivals and new entrants may find
it difficult to compete.
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Disadvantages of Focused Strategy;

The firms lacking in distinctive competencies may not be able to pursue focus
strategy.
 Due to the limited demand of product/services, costs are high which can
cause problems.
 In long run, the niche (slot) could disappear or be taken over by larger
competitors by acquiring the same distinctive competencies.
2. Differentiation Strategy;
Meaning;
It is a strategy aimed at producing products and services considered unique

industry wide and directed at consumers who are relatively price-insensitive.
This strategy is aimed at broad mass market and involves the creation of a product
or service that is perceived by the customers as unique.
The uniqueness can be associated with product design, brand image, features,
technology, and dealer network or customer service.
Because of differentiation, the business can charge a premium for its product.
Differentiation does not guarantee competitive advantage, especially if standard

products sufficiently meet customer needs or if rapid imitation (copy) by
competitors is possible.
 Basis of Differentiation
 Product,
 Pricing, and
 Organization.
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Achieving Differentiation Strategy;
To achieve differentiation, following are the measures that could be adopted by an

organization to incorporate:
 Offer utility for the customers and match the products with their tastes and
preferences.
 Elevate the performance of the product.
 Offer the promise of high quality product/service for buyer satisfaction.
 Rapid product innovation.
 Taking steps for enhancing image and its brand value.
 Fixing product prices based on the unique features of the product and buying
capacity of the customer.
Advantages of Differentiation Strategy;
 Rivalry - Brand loyalty acts as a safeguard against competitors. It means

that customers will be less sensitive to price increases, as long as the firm can
satisfy the needs of its customers.
 Buyers – They do not negotiate for price as they get special features and
also they have fewer options in the market.
 Suppliers – Because differentiators charge a premium price, they can afford

to absorb higher costs of supplies and customers are willing to pay extra too.
 Entrants – Innovative features are an expensive offer. So, new entrants

generally avoid these features because it is tough for them to provide the
same product with special features at a comparable price.
 Substitutes – Substitute products can’t replace differentiated products

which have high brand value and enjoy customer loyalty.
Disadvantages of Differentiation Strategy;
 In long term, uniqueness is difficult to sustain.
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 Charging too high a price for differentiated features may cause the customer
to switch-off to another alternative.
 Differentiation fails to work if its basis is something that is not valued by the
customers.
3. Cost Leadership Strategy;
Meaning;
It is emphasizes producing standardized products at a very low per-unit cost

for consumers who are price-sensitive.
It is a low cost competitive strategy that aims at broad mass market.
It requires vigorous pursuit of cost reduction in the areas of procurement,

production, storage and distribution of product or service and also economies in
overhead costs.
Because of its lower costs, the cost leader is able to charge a lower price for its
products than its competitors and still make satisfactory profits.
For e.g. McDonald’s fast food restaurants have successfully followed low cost
leadership strategy.
Achieving Cost Leadership Strategy;
To achieve cost leadership, following are the actions that could be taken:
 Forecast the demand of a product or service promptly.
 Optimum utilization of the resources to get cost advantages.
 Achieving economies of scale leads to lower per unit cost of product/service.
 Standardisation of products for mass production to yield lower cost per unit.
 Invest in cost saving technologies and try using advance technology for smart
working.
 Resistance to differentiation till it becomes essential.
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Advantages of Cost Leadership Strategy;
 Rivalry - Competitors are likely to avoid a price war, since the low cost firm
will continue to earn profits after competitors compete away their profits.
 Buyers – Powerful buyers/customers would not be able to exploit the cost

leader firm and will continue to buy its product.
 Suppliers – Cost leaders are able to absorb greater price increases before it
must raise price to customers.
 Entrants – Low cost leaders create barriers to market entry through its
continuous focus on efficiency and reducing costs.
 Substitutes – Low cost leaders are more likely to lower costs to induce
customers to stay with their product, invest to develop substitutes, purchase
patents.
Disadvantages of Cost Leadership Strategy;
 Cost advantage may not be remaining for long as competitors may also
follow cost reduction technique.
 Cost leadership can succeed only if the firm can achieve higher sales
volume.
 Cost leaders tend to keep their costs low by minimizing advertising, market
research, and research and development, but this approach can prove to be
expensive in the long run.
 Technology changes are a great threat to the cost leader.
Best-Cost Provider Strategy;
Introduction:
The new model of best cost provider strategy is a further development of

three generic strategies.
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It is directed towards giving customers more value for the money by emphasizing
both low cost and upscale differences.
The objective is to keep costs and prices lower than those of other sellers of
comparable products.
Best-cost provider strategy involves providing customers more value for the money
by emphasizing low cost and better quality difference. It can be done:
 Through offering products at lower price than what is being offered by rivals
for products with comparable quality and features or
 Charging similar price as by the rivals for products with much higher quality
and better features.
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Chapter 6: Functional Level Strategies
Introduction;
Strategy of one functional area cannot be looked at in isolation.
Different functional areas of the business are interlinked together and how a
functional strategy is synergised with other functional strategies determines its
effectiveness.
Functional strategies are designed to help in the implementation of corporate and

business unit level strategies.
Functional strategies play two important roles;
 Firstly, they provide support to the overall business strategy.
 Secondly, they spell out as to how functional managers will work so as to

ensure better performance in their respective functional areas.
 Importance of Functional strategies;
 Functional strategies provide a sense of direction to the functional staff.
 Functional strategies act as basis for controlling activities in the different

functional areas of business.
 Functional strategies help in bringing harmony and coordination as they are

formulated to achieve major strategies.
 Similar situations occurring in different functional areas are handled in a

consistent manner by the functional managers.
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Marketing Strategy;
Introduction;
Marketing is a social and managerial process.
Marketing induces in moving people closer to making a decision to

purchase and facilitate a sale.
 The marketing process is the process of;
 Analysing market opportunities,
 Selecting target markets,
 Developing the marketing mix, (i.e. 4 P’s)
 Managing the marketing effort. (i.e. Strategic Marketing Techniques)
 Objectives of Marketing;
1. Delivering Value to Customers,
Marketing alone cannot produce superior value for the customers. It needs
to work in coordination with other departments to accomplish this. Marketing acts
as part of the organizational chain of activities.
2. Connecting with customers,
To succeed in today’s competitive marketplace, companies must be customer
centred. They must win customers from competitors and keep them by delivering
greater value.
 Marketing Mix;
Marketing mix forms an important part of overall competitive marketing
strategy.
The marketing mix is the set of controllable marketing variables that the
firm blends to produce the response it wants in the target market. These variables
are often referred to as the “4 P’s”.
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P’s (Seller’s Perception) C’s (Buyer’s Perception)
Product Customer Solution
Price Customer Cost
Place Convenience
Promotion Communication
1. Product;
Product stands for the combination of “goods-and-service” that the company

offers to the target market.
Strategies are needed for managing existing product over time, adding new ones
and dropping failed products.
Strategic decisions must also be made regarding branding, packaging and other
product features such as warranties.
Products are;
 Industrial or Consumer products,
 Essentials or Luxury products,
 Durables or Perishables.
2. Price;
Price stands for the amount of money customers have to pay to obtain the
product.
Necessary strategies pertain to the location of the customers, price flexibility, related
items within a product line and terms of sale.
The price of a product is its composite expression of its value and utility to the
customer, its demand, quality, reliability, safety, the competition it faces, the desired
profit and so on.
 Skimming Pricing Policy,
 Penetration Pricing Policy. (Refer bellow p.g. no. 5-6)
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3. Place;
Place stands for company activities that make the product available to target
consumers.
One of the most basic marketing decision is choosing the most appropriate
marketing channel.
Strategies applicable to the intermediaries such as wholesalers and retailers must be

designed.
The distribution policies of a company are important determinants of the functions

of marketing.
4. Promotion;
Promotion stands for activities that communicate the merits of the product and
persuade target consumers to buy it.
Strategies are needed to combine individual methods such as advertising, personal

selling, and sales promotion into a coordinated campaign.
In addition promotional strategies must be adjusted as a product move from an

earlier stage to a later stage of its life.
Modern marketing is highly promotional oriented.
 Promotion Techniques;
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 Personal selling:
Personal selling is one of the oldest forms of promotion.
It involves face-to-face interaction of sales force with the prospective customers

and provides a high degree of personal attention to them.
In personal selling, oral communication is made with potential buyers of a

product with the intention of making a sale.
It may initially focus on developing a relationship with the potential buyer, but
end up with efforts for making a sale.
Personal selling suffers from a very high costs as sales personnel are expensive.
 Advertising:
Advertising is a non-personal, highly flexible and dynamic promotional method.
A sale is a function of several variables out of which advertising is only one.
Choice of appropriate media is important for effectiveness of the message.
The magazines, hoardings, display boards, radio, television and internet.
The media for advertising includes pamphlets, brochures, and newspapers.
 Publicity:
Publicity is also a non-personal form of promotion similar to advertising.
However, no payments are made to the media as in case of advertising.
Publicity is communication of a product, brand or business by placing

information about it in the media without paying for the time or media space
directly.
Thus, it is way of reaching customers with negligible cost.
Basic tools for publicity are press releases, press conferences, reports, stories, and
internet releases.
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These releases must be of interest to the public.
 Sales promotion:
Sales promotion is an omnibus. Term that includes all activities that are
undertaken to promote the business. Activities like discounts, contests, money
refunds, instalments, exhibitions and fairs constitute sales promotion.
All these are meant to give a boost to the sales.
Sales promotion done periodically may help in getting a larger market share to
an organization.
 Pricing Policy;
1. Skimming Pricing Policy,
Prices are set at a very high level. The product is directed to those buyers who
are relatively price insensitive but sensitive to the novelty of the new product.
For example, new model of mobile is released by;

iPhone, Vivo NEX
2. Penetration Pricing Policy,
In Penetration firm keeps a temptingly low price for a new product which
itself is selling point. A very large number of the potential consumer may be
able to afford and willing to try the product.
For example, the pricing kept by Reliance Jio is penetration.
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 Expanded (Modern) Marketing Mix;
Introduction:
Typically, all organizations use a combination of 4 P’s in some form or the

other. However, the above elements of marketing mix are not fully
comprehensive.
It is relevant to discuss a few more elements that may form part of an

organizational marketing mix strategy.
They have got more currency (value) in recent years.
Growth of services has its own share for the inclusion of newer elements in
marketing. A few P’s included later are as follows:
P’s (Seller’s Perception) C’s (Buyer’s Perception)
People Caring
Process Co-ordinated
Physical evidence Comfort
People:
All human actors who play a part in delivery of the market offering and thus
influence the buyer’s perception, namely the firm’s personnel and the customer.
Process:
The actual procedures, mechanisms and flow of activities by which the

product, service is delivered.
Physical evidence:
The environment in which the market offering is delivered and where the
firm and customer interact.
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 Strategic Marketing Techniques;
 Social Marketing  Place Marketing
 Augmented Marketing  Organization Marketing
 Service Marketing  Differential Marketing
 Direct Marketing  Concentrated Marketing
 Relationship Marketing  Synchro – Marketing
 Enlightened Marketing  De-marketing
 Person Marketing
 Social Marketing;
It refers to the design, implementation, and control of programs seeking to

increase the acceptability of a social ideas, cause, or practice among a target
group.
e.g., the publicity campaign for prohibition of smoking in Delhi explained the
place where one can and can’t smoke.
 Augmented Marketing;
It is provision of additional customer services and benefits built around the

core and actual products that relate to introduction of hi-tech services like
movies on demand, online computer repair services, etc... Such innovative
offerings provide a set of benefits that promise to elevate customer service to
unprecedented levels.
 Services Marketing;
It is applying the concepts, tools, and techniques, of marketing to services.
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Services is any activity or benefit that one party can offer to another that is
essentially intangible and does not result in the banking, savings, retailing,
educational or utilities.
e.g. Hair Styling, Counselling, Hospitality, etc…
 Direct Marketing;
Marketing through various advertising media that interact directly with

consumers, generally calling for the consumer to make a direct response.
Direct marketing includes catalogue selling, e-mail, telecomputing, electronic

marketing, shopping, and TV shopping.
 Relationship Marketing;
The process of creating, maintaining, and enhancing strong, value-laden

relationships with customers and other stakeholders.
e.g., Airlines offer special lounges at major airports for frequent flyers.
Thus, providing special benefits to select customers to strengthen bonds. It will

go a long way in building relationships.
 Enlightened Marketing;
It is a marketing philosophy holding that a company’s marketing should

support the best long-run performance of the marketing system; its five principles
include;
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1. Customer-oriented Marketing,
2. Innovative Marketing,
3. Value Marketing,
4. Sense-of-mission Marketing, And
5. Societal Marketing.
 Person Marketing;
People are also marketed.
Person marketing consists of activities undertaken to create, maintain or change

attitudes and behaviour towards particular person.
e.g., politicians, sports stars, film stars, etc. i.e., market themselves to get votes, or
to promote their careers.
 Place Marketing;
Place marketing consists of activities undertaken to create, maintain or

change attitudes and behaviour towards particular places say,
 Business sites marketing,
 Tourism marketing.
 Organization Marketing;
It consists of activities undertaken to create, maintain, or change attitudes

and behaviour of target audiences towards an organization.
Both profit and non-profit organizations practice organization marketing.
e.g.,
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 Differential Marketing;
It is a market-coverage strategy in which a firm decides to target several

market segments and designs separate offer for each.
e.g., Hindustan Unilever Limited has,

Popular Segment Premium Segment
Lifebuoy Dove
Lux Pears
Rexona
 Concentrated Marketing;
It is a market-coverage strategy in which a firm goes after a large share of one

or few sub-markets.
e.g., Patanjali Ayurved,
 Synchro Marketing;
When the demand for a product is irregular due to season, some parts of the
day, or on hour basis, causing idle capacity or overworked capacities, synchro-
marketing can be used to find ways to alter the pattern of demand through
flexible pricing, promotion, and other incentives.
e.g., Products such as movie tickets can be sold at lower price over week days to
generate demand.
 De-marketing;
It includes marketing strategies to reduce demand temporarily or

permanently. The aim is not to destroy demand, but only to reduce or shift it.
This happens when there is overfull demand.

e.g., Zoological parks are over-crowded on Saturdays, Sundays and holidays.
Here demarketing can be applied to regulate demand.
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Supply Chain Management;
Meaning:
The term supply chain refers to the linkages between suppliers,

manufacturers and customers.
Supply chains involve all activities like;

 Sourcing and procurement of material,
 Conversion, and
 Logistics.
Planning and control of supply chains are important components of its

management.
Supply chain management is defined as
The process of Planning, Implementing, and Controlling the supply chain

operations.
It is a cross-functional approach to managing the movement of raw materials

into an organization and the movement of finished goods out of the organization
toward the end-consumer.
It encompasses all movement and storage of raw materials, work-in-process

inventory, and finished goods from point-of-origin to point-of- consumption.
Supply chain management is a tool of business transformation and involves

delivering the right product at the right time to the right place and at the right
price. It reduces costs of logistics of an organisations and enhances customer
service by linkages between suppliers, manufacturers and customers. Supply
chain management is an extension of logistics management.
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Logistics Management;
Introduction;
Management of logistics is a process which integrates the flow of supplies

into, through and out of an organization.
To achieve a level of service which ensures that the right materials are available;
 at the right place,
 at the right time,
 of the right quality, and
 at the right cost.
Organizations try to keep the cost of transporting materials as low as possible

consistent with safe and reliable delivery.
Logistics Management is a small portion of Supply Chain Management that

deals with management of goods in an efficient way.
Supply chain management helps in logistics and enables a company to have constant
contact with its distribution team, which could consist of;
 Trucks,
 Trains, or
 Any other mode of transportation.
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 Improvement in logistics can results in savings in cost of doing business.
These savings can also reveal in the profits of the company.

Some examples of how logistics can help a business are as follows:
• Cost savings,
• Reduced inventory,
• Improved delivery time,
• Customer satisfaction,
• Competitive advantage.
Implementing Supply Chain Management System;
A successful implementation of supply management system requires a change from

managing individual functions to integrating activities into key supply chain
processes.
It involves collaborative work between buyers and suppliers.
A key requirement for successfully implementing supply chain will be network of

information sharing and management.
 Product Development,  Outsourcing,
 Procurement,  Customer Services,
 Manufacturing,  Performance Management.
 Physical Distribution,
Distinction Between;
LOGISTICS MANAGEMENT SUPPLY CHAIN MANAGEMENT
Meaning Management of logistics is a The term supply chain refers to the

process which integrates the linkages between suppliers,
flow of supplies into, through manufacturers and customers.
and out of an organization.
Objective Customer Satisfaction Competitive Advantage
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Evolution The concept of Logistics has Supply Chain Management is a

been evolved earlier. modern concept.
One in Logistics Management is a Supply Chain Management is the

another fraction of Supply Chain new version of Logistics
Management. Management.
Incudes Logistical activities typically Naturally, management of supply

include management of chains include closely working with
inbound and outbound goods, channel partners – suppliers,
transportation, warehousing, intermediaries, other service
handling of material, fulfilment providers and customers.
of orders, inventory
management, supply/ demand
planning.
Example
Financial Strategy;
Introduction;
The financial strategies of an organization are related to several areas of

financial management considered central to strategy implementation.
These include:
 Capital Structure decision,

 Developing projected financial statements/budgets,
 Management (i.e. usage, application) of funds, &
 Evaluating the worth of a business.
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Strategists need to formulate strategies (i.e. plan) in these areas so that they are
implemented.
For e.g. of Some Financial decisions are:
 To raise capital with short-term debt, long-term debt, preferred stock, or common
stock.
 To determine an appropriate dividend pay-out ratio.
 To lease or buy fixed assets.
 To establish a certain percentage discount on accounts within a specified period
of time. (e.g. 2/10 net 30)
 To determine the amount of cash that should be kept on hand.
 To extend the time of accounts receivable.
 Evaluating the worth of a business;
Evaluating the worth of a business is central to strategy implementation because

integrative, intensive, and diversification strategies are often implemented by
acquiring other firms.
Other strategies, such as retrenchment may result in the sale of a division of a firm
itself.
Various approaches for determining a business’s worth can be grouped into three
main approaches:
 First Approach in evaluating the worth of a business is determining its net worth
or stockholders’ equity.
Particulars Amount
Share Capital XX
Add : R & S (less Goodwill) XX
Add : Under Valued Assets XX
Less : Overvalued Assets (XX)
Net Worth XX
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 Second Approach to measuring the value of a firm. A conservative rule of thumb

is to establish a business’s worth as five times the firm’s current annual profit.
Value of Firm = 5 times of Current Annual Profit
 Third Approach to determine a business’s worth. It involves three methods.
First Firm’s worth = Base on the selling price of a similar

Method company.
Second Price Earnings Ratio = MPS ÷ EPS

Method
Third Outstanding = No. of Shares x MPS

Method Shares method
Note : Do refer projected financial statements (budgets) and it’s limitation Page no. 6.13
Production (Operation) Strategy;
Introduction;
The production system is concerned with the activities directed towards

creation of products and services for customers. It covers factors such as capacity,
location, layout, design, work systems, automation, and so on.
Decisions are long terms in nature. Production system affects the followings;
 What products are offered? (i.e. Nature of product or service)
 Which market and (i.e. market to be target)
 How these markets are served. (i.e. manner in which market to be served)
Production/Operations Planning and Control;
It is an aggregate production planning; materials supply; inventory, cost, and quality

management; and maintenance of plant and equipment.
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Here, the aim of strategy implementation is to see how efficiently resources are
utilized and in what manner the day-to-day operations can be managed in the light
of long-term objectives.
Operations planning and control provides an example of an organizational activity

that is aimed at translating the objectives into reality.
Some companies use quality as a strategic tool.
Research and Development Strategy;
Introduction;
Research and development (R&D) personnel can play an integral part in strategy
implementation. These individuals are generally charged with developing new
products and improving old products in a way that will allow effective strategy
implementation.
Strategies such as product development, market penetration, and concentric

diversification require that new products be successfully developed and that old
products be significantly improved.
Technological improvements that affect consumer and industrial products and

services shorten product life cycles. R&D policies can enhance strategy
implementation efforts to:
 Emphasize product or process improvements.
 Be leaders or followers in R&D.
 Develop robotics or manual-type processes.
 Spend a high, average, or low amount of money on R&D.
 Perform R&D within the firm or to contract R&D to outside firms.
 Use university researchers or private sector researchers.
There must be effective interactions between R&D departments and other

functional departments in implementing different types of generic business
strategies.
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A critical question is whether a firm should develop research and development

expertise internally or outside to external agencies. The following guidelines can
be used to help make this decision:
Technical Market Action Other point

Progress Growth
1 Slow Moderate In-house R&D Act as significant barriers to new entrants.
2 Fast Slow Outsource R&D may be very risky.
3 Slow Fast Outsource No enough time for in-house R&D.
4 Fast Fast Outsource R&D expertise should be obtained through

acquisition of a well-established firm in the
industry.
*Refer page no. 6.20
Human Resource Strategy;
Introduction;
The human resource management helps the organization to effectively deal with the
external environmental challenges. The function has been accepted as a partner in
the formulation of organization’s strategies and in the implementation of such
strategies through human resource planning, employment, training, appraisal and
rewarding of personnel.
The human resource department must develop performance incentives that clearly
link performance and pay to strategies.
A well-designed strategic-management system can fail if insufficient attention is

given to the human resource dimension. Human resource problems that arises when
a business implements strategies can usually be traced to one of three causes:
1. Obstruction (disruption) of social and political structures,
2. Failure to match individuals’ aptitudes with implementation tasks, and
3. Inadequate top management support for implementation activities.
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Commonly used methods that match managers with strategies to be implemented

include transferring managers, developing leadership workshops, offering career
development activities, promotions, etc…
 Achieving Competitive advantage;
Introduction;
In Human Resource management (HRM), the strategist tries to achieve a

competitive advantage for his organization. The competitive advantage may be in
the form of low cost relationship in the industry or being unique in the industry
along dimensions that are widely valued by the customers in particular and the
society at large.
The role of human resources in enabling the organization to effectively deal with the
external environmental challenges, the human resource management function has
been accepted as a strategic partner in the formulation of organization’s strategies
and in the implementation of such strategies. The following points should be kept in
mind:
 Recruitment and selection:

The workforce will be more competent if a firm can successfully identify,
attract, and select the most competent applicants.
 Training:
The workforce will be more competent if employees are well trained to
perform their jobs properly.
 Appraisal of performance:
The performance appraisal is to identify any performance deficiencies
experienced by employees due to lack of competence. Such deficiencies, once
identified, can often be solved through counselling, coaching or training.
 Compensation:
A firm can usually increase the competency of its workforce by offering pay
and benefit packages that are more attractive than those of their competitors.
This practice enables organizations to attract and retain the most capable
people.
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 Strategic Human Resource Management (SHRM);
Introduction;
The human resource strategy of a business should reflect and support the
corporate strategy. An effective human resource strategy includes the way in which
the organization plans to develop its employees and provide them suitable
opportunities and better working conditions so that their optimal contribution is
ensured.
The success of an organization depends on its human resources. This means how
they are acquired, developed, motivated and retained organization play an
important role in organizational success.
The Human Resource Management practices of an organization may be an

important source of competitive advantage. For this strategic focus, should be given
on the following points:
 Pre-selection practices,
 Selection practices, &
 Post-selection practices.
 The prominent (important) areas where the human resource

manager can play strategic role are as follows:
 Providing purposeful direction:
The human resource manager must be able to lead people and the organization
towards the desired direction involving people right from the beginning.
The most important task of a HR manager is to ensure that the objectives of an

organization are internalized by each individual working in the organization.
 Building core competency:
The human resource manager has a great role to play in developing core
competency by the firm.
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A core competence is a unique strength of an organization which may not be

shared by others.
This may be in the form of human resources, marketing capability, or

technological capability.
It needs creative, courageous and dynamic leadership having faith in

organization’s human resources.
 Creating competitive advantage:
Creating and maintaining a competitive advantage in the globalized market is

the object of any organization.
There are two important ways a business can achieve a competitive advantage
over the others.
 The first is cost leadership which means the firm aims to become a low
cost leader in the industry.
 The second competitive strategy is differentiation under which the firm

seeks (aim) to be unique in the industry in terms of dimensions that are
highly valued by the customers. Putting these strategies into effect carries
a heavy premium on having a highly committed and competent
workforce.
 Facilitation of change:
The human resource manager will be more concerned with substance rather
than form, accomplishments rather than activities, and practice rather than
theory.
The HR function will be responsible for furthering the organization not just
maintaining it.
Human resource manager will have to devote more time to promote changes
than to maintain the status quo.
 Managing workforce diversity:
In modern organizations, management of diverse workforce is a great challenge.
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Workforce diversity can be observed in terms of male and female workers,

young and old workers, educated and uneducated workers, unskilled and
professional employee, etc…
Moreover, many organizations also have people of different castes, religious and
nationalities.
The workforce in future will comprise more of educated and self-conscious

workers. They will ask for higher degree of participation and avenues for
fulfilment.
Money will no longer be the sole motivating force for majority of the workers.
Non-financial incentives will also play an important role in motivating the
workforce.
 Empowerment of human resources:
Empowerment means authorizing every member of an organization to take up

his/her own destiny realizing his/her full potential.
It involves giving more power to those who, at present, have little control what
they do and little ability to influence the decisions being made around them.
 Development of works ethic and culture:
As changing work ethic requires increasing emphasis on individuals, jobs will

have to be redesigned to provide challenge.
Flexible starting and quitting times for employees may be necessary. Focus will
shift from extrinsic (external) to intrinsic motivation.
A vibrant work culture will have to be developed in the organizations to create

an atmosphere of trust among the employees and to encourage creative ideas by
them.
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Chapter 7: Organization Structure And Strategic Leadership
Organisation Structure;
Introduction:
A competitive advantage is created when there is a proper match between strategy

and structure.
Selecting the organizational structure and controls that result in effective

implementation of chosen strategies is a fundamental challenge for managers,
especially top-level managers. C or IC (ans. 7.3)
In today’s emerging business scenario, skills related to strategic, organizational and

leadership processes are necessary.
Changes in corporate strategy often require changes in the way an organization is

structured for two major reasons.
Structure largely dictates;
 How operational objectives and policies will be established to achieve the

strategic objectives?
 How resources will be allocated to achieve strategic objectives?
 According to Chandler,
Changes in strategy lead to changes in organizational structure.
Structure should be designed or redesigned to facilitate the strategic pursuit of a

firm and, therefore, structure should follow strategy.
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Chandler’s Strategy-Structure Relationship;
Every firm is influence by numerous external and internal forces. But no firm could
change its structure in response to each of these forces, because to do so would lead
to disorder (chaos).
However, when a firm changes its strategy, the existing organizational structure
may become ineffective. (Refer bellow notes Symptoms of an ineffective
organizational structure)
Changes in organisational structure can facilitate strategy-implementation efforts,

but changes in structure should not be expected to make a bad strategy  good ,
to make bad  managers good , or to make bad  products sell.
If a proposed strategy required massive structural changes it would not be an

attractive choice. In this way, structure can shape the choice of strategy. (Forward &
Backward Linkages) Chp. 8 (8.6)
But a more important concern is determining what types of structural changes are
needed to implement new strategies and how these changes can best be
accomplished.
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 Symptoms of an ineffective organizational structure include;
 Too many levels of management,
 Too large a span of control, and
 Too many unachieved objectives.
 Too many meetings attended by too many people,
 Too much attention being directed toward solving
interdepartmental conflicts,
Types of Organisation Structure;
 Simple Structure,  SBU Structure,
 Functional Structure,  Matrix Structure,
 Divisional Structure,  Network Structure,
 Multi-Divisional Structure,  Hourglass Structure,
Simple Structure;
Introduction:
Simple organizational structure is most appropriate

for companies that follow a single - business strategy
and offer a line of products in a single geographic
market.
A simple structure is an organizational form in which the owner-manager makes all

major decisions directly and monitors all activities, while the company’s staff
merely serves as an executor.
The simple structure also is appropriate for companies implementing focused cost
leadership or focused differentiation strategies.
To coordinate more complex organizational functions, companies should abandon

the simple structure in favour of the functional structure.
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The functional structure is used by larger companies and by companies with low
levels of diversification.
Functional Structure;
Introduction:
A widely used structure in business organisations is functional type because of its

simplicity and low cost.
Besides being simple and inexpensive, a functional structure also

promotes specialization of labour, encourages.
The functional structure consists of;

 CEO or MD,
 Corporate Staff &
 Functional Managers.
The functional structure enables the company to overcome the growth - related
constraints of the simple structure,(&) enabling or facilitating communication and
coordination.
However, compared to the simple structure, there also are some potential problems.
Differences in functional specialization and orientation may delay communications

and coordination.
Thus, the chief executive officer must integrate functional decision-making and
coordinate actions of the overall business across functions.
Functional specialists often may develop a narrow perspective, losing sight of the
company’s strategic vision and mission.
When this happens, this problem can be overcome by implementing the

multidivisional structure.
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Divisional Structure;
Introduction:
As a firm, grows year after year it faces difficulty in managing different products
and services in different markets.
Some form of divisional structure generally becomes necessary to motivate

employees, control operations, and compete successfully in diverse locations.
The divisional structure can be organized in one of the four ways;

 By Geographic Area,
 By Product or Service,
 By Customer, or
 By Process.
With a divisional structure, functional activities are performed both centrally and
in each division separately.
A divisional structure by geographic area is appropriate for organizations whose

strategies are formulated to fit the particular needs and characteristics of customers
in different geographic areas.
E.g. HUL.
The divisional structure by product (or services) is most effective for implementing
strategies when specific products or services need special emphasis.
E.g. General Motors, P & G (Procter & Gamble), etc…
A divisional structure by customer’s airline companies have two major customer

divisions: passengers and freight or cargo services.
Banks are often organised in divisions such as personal banking, corporate
banking, etc…
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A divisional structure by process is similar to a functional structure.

Divisional structure accountable for profits or revenues. Whereas functional
departments are not accountable for profits or revenues.
 Advantages of Divisional Structure;

 Accountability,
 Career development opportunities for managers,
 Employee morale is generally higher in a divisional structure than it is in
centralized structure.
 Limitation of Divisional Structure;

 Divisional structure is costly,
1. Each division requires functional specialists who must be paid.
2. Second, there exists some duplication of staff services, facilities, and
personnel.
3. Third, managers must be well qualified because the divisional design
forces delegation of authority better-qualified individuals requires higher
salaries.
 Difficult to maintain consistency.
Multi Divisional Structure;
Introduction:
Multidivisional (M-form) structure is composed of operating divisions where each

division represents a separate business to which the top corporate officer delegates
responsibility for day-to-day operations and business unit strategy to division
managers.
Multidivisional or M-form structure was developed in the 1920s.
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In response to coordination & control-related problems in large firms.
Because of that, Top managers became over-involved in solving short-run problems

and neglected long-term strategic issues.
 Multidivisional structure calls (needed) for:
 Creating separate divisions, each representing a distinct business,

 Each division would house its functional hierarchy,
 Division managers would be given responsibility for managing day-to-day
operations,
 A small corporate office that would determine the long-term strategic
direction of the firm and exercise overall financial control over the semi-
autonomous divisions.
Strategic Business Unit (SBU) Structure;
Introduction:
The concept is relevant to multi-product, multi-business enterprises. An SBU is a

grouping of related businesses.
It is impractical for an enterprise with a multitude (assembly) of businesses to

provide separate strategic planning treatment to each one of its products/businesses.
It has to necessarily group the products/businesses into a manageable number of

strategically related business units and then take them up for strategic planning.
A strategic business unit (SBU) structure consists of at least three levels, with a
corporate headquarters at the top, SBU groups at the second level, and divisions
grouped by relatedness within each SBU at the third level.
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Individual SBUs are treated as profit centres and controlled by corporate

headquarters.
The SBU structure is composed of operating units where each unit represents a
separate business to which the top corporate officer delegates responsibility for day-
to-day operations and business unit strategy to its managers.
 Characteristics of SBU’s;
 Single business or collection of related businesses that can be planned for
separately,
 Has its own set of competitors. E.g. Lux & Dove,
 Has a manager who is responsible for strategic planning and profit.
 Helps comparisons between divisions.
 Improving the allocation of resources.
Matrix Structure;
Introduction:
A matrix structure is the most complex of all designs

because it depends upon both vertical and horizontal
flows of authority and communication (hence the term
matrix).
In matrix structures, functional and product forms are combined simultaneously at

the same level of the organization.
Employees have two superiors,
 A product or project manager (usually temporary) and
 A functional manager.
(Home department, reasonably permanent).
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Matrix structure combines the stability of the functional structure with the
flexibility of the division by product form.
People from these functional units are often assigned temporarily to one or more
product units or projects.
The product units or project are usually temporary and act like divisions.
 Despite its complexity, the matrix structure is widely used in many

industries, including
 Construction,
 Healthcare,
 Research and defence.
Network Structure;
Introduction:
Network structure could be termed as “non-structure” by its virtual elimination of

in-house business function.
Many activities are outsourced.
A corporation organized in this manner is often called a virtual organization.
The network structure becomes most useful when the environment of a firm is
unstable and is expected to remain so.
Under such conditions, there is usually a strong need for innovation and quick
response.
Instead of having salaried employees, it may contract with people for a specific
project or length of time.
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Rather than being located in a single building or area, an organization’s business

functions are scattered worldwide.
Companies like Airtel use the network structure in their operations function by
subcontracting manufacturing to other companies in low-cost.
 Advantages of Network Structure;
 Increased flexibility and adaptability to cope with rapid technological change

and shifting patterns of competencies.
 Gathering efficiencies from other firms who are concentrating their efforts in
their areas of expertise.
 Limitation of Divisional Structure;
 The availability of numerous potential partners can be a source of trouble.
 It a particular firm overspecializes on only a few functions, it runs the risk of

choosing the wrong functions & thus becoming non-competitive.
Hourglass Structure;
Note WIPRO proposed for Hourglass Structure, yet to implement.
Introduction:
In the recent year’s information technology and communications have significantly

altered the functioning of organizations.
The role played by middle management is diminishing (reducing) as the tasks

performed by them are increasingly being replaced by the technological tools.
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The structure has a short and narrow middle-management level.
Hourglass organization structure consists of three layers with constricted middle

layer.
Information technology links the top and bottom levels in the organization taking
away many tasks that are performed by the middle level managers.
Contrary to traditional middle level managers who are often specialist, the managers
in the hourglass structure are generalists and perform wide variety of tasks.
 Advantages of Hourglass Structure;
 Reduced costs.
 Helps in enhancing responsiveness by simplifying decision making.
 Decision making authority is shifted close to the source of information so that
it is faster.
 Limitation of Hourglass Structure;
 The promotion opportunities for the lower levels diminish significantly.
 Continuity at same level may bring monotony (routine, lack of variety) and
lack of interest and it becomes difficult to keep the motivation levels high.
 Organisations try to overcome these problems by assigning challenging
tasks, transferring laterally and having a system of proper rewards for
performance.
Strategy Supportive Culture;
Introduction:
Every organisation has a unique organizational culture.
It has its own philosophy and principles, its own history, values, and rituals, its
own ways of approaching problems and making decisions, its own work climate.
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Its own ingrained (established) beliefs and thought patterns, and practices that
define its corporate culture.
Q. Corporate culture. Also, elucidate the statement “Culture is a strength that can
also be a weakness”.
Answer
The phenomenon which often distinguishes good organizations from bad ones could
be summed up as ‘corporate culture’.
Corporate culture refers to a company’s values, beliefs, business principles,

traditions, and ways of operating and internal work environment.
Every corporation has a culture that exerts powerful influences on the behaviour of
managers.
Culture affects not only the way managers behave within an organization but also
the decisions they make about the organization’s relationships with its
environment and its strategy.
“Culture is a strength that can also be a weakness”. This statement can be explained
by splitting it in to two parts.
 Culture as a strength:
As a strength, culture can facilitate communication, decision-making &

control and create cooperation & commitment.
An organization’s culture could be strong and cohesive when it conducts its

business according to a clear and explicit set of principles and values, which
the management devotes considerable time to communicating to employees
and which values are shared widely across the organization.
 Culture as a weakness:
As a weakness, culture may obstruct the smooth implementation of strategy

by creating resistance to change.
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An organization’s culture could be characterized as weak when many

subcultures exist, few values and behavioural norms are shared and
traditions are rare.
In such organizations, employees do not have a sense of commitment and

loyalty with the organisation.
Q. Write a short note on importance of corporate culture.
Q. Explain briefly the role of culture in promoting better strategy execution.
Answer; (Try to write at least 4 points)
Strong culture promotes good strategy execution when there’s fit and impels
execution when there’s negligible fit.
A culture grounded in values, practices, and behavioural norms that match what is
needed for good strategy execution helps energize people throughout the
organization to do their jobs in a strategy-supportive manner.
A culture built around such business principles as listening to customers,

encouraging employees to take pride in their work, and giving employees a high
degree of decision-making responsibility.
This is very conducive to successful execution of a strategy of delivering superior

customer service.
A strong strategy-supportive culture makes employees feel genuinely better about

their jobs and work environment and the merits of what the company is trying to
accomplish.
Employees are stimulated to take on the challenge of realizing the organizational

vision, do their jobs competently and with enthusiasm, and collaborate with others.
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Q. What steps would you suggest to change a company’s problem culture?
Answer;
Changing problem cultures is very difficult because of deeply held values and
habits. It takes concerted management action over a period of time to replace an
unhealthy culture with a healthy culture or to root out certain unwanted cultural
obstacles and instil ones that are more strategy-supportive.
The first step is to diagnose which aspect of the present culture are strategy
supportive and which are not.
Then, managers have to talk openly and directly to all concerned about those
aspects of the culture that have to be changed.
The talk has to be followed swiftly by visible, aggressive actions to modify the
culture-actions that everyone will understand are intended to establish a new culture
more in tune with the strategy.
The menu of culture-changing actions includes revising policies and procedures,

altering incentive compensation, recruiting and hiring new managers and
employees, replacing key executives, communication on need and benefit to
employees and so on.
Leadership Style;
Introduction;
Strategic leadership sets the firms direction by developing and

communicating vision of future, formulate strategies in the light of internal and
external environment, brings about changes required to implement strategies and
inspire the staff to contribute to strategy execution.
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A manager as a strategic leader has to play many leadership roles to play:
 Visionary  Policy Maker  Motivator

 Culture Builder  Crisis Manager  Spokesperson
 Resource Acquirer and Allocator, etc…
For example: N. R. Narayan Murthy, is known as a celebrated business leader

because of the values he had institutionalised over his tenure as CEO of Infosys.
Dhirubhai Ambani, pioneer of Reliance Group, was an icon in himself because of

his ability to conceptualise and create sweeping strategies, to reach corporate goals,
and proficiency in implementing his strategic vision.
 A Strategic leader has several responsibilities, including the

following:
 Making strategic decisions.
 Formulating policies and action plans to implement strategic decision.
 Ensuring effective communication in the organisation.
 Managing human capital (perhaps the most critical of the strategic leader’s
skills).
 Managing change in the organisation.
 Creating and sustaining strong corporate culture.
 Sustaining high performance over time.
Thus, the strategic leadership skills of a company’s managers represent resources
that affect company performance. And these resources must be developed for the
company’s future benefit.
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Q.9 (b) (May 2018)
Ram and Shyam are two brothers engaged in the business of spices. Both have
different approaches to management.
Ram prefers the conventional and formal approach in which authority is used for
explicit rewards and punishment.
While, on the other hand, Shyam believes in democratic participative management
approach, involving employees to give their best.
Analyse the leadership style followed by Ram and Shyam. (5 Marks)
Transformational Leadership style;
Introduction;
Such a leadership motivates followers to do more than

originally affected to do by stretching their abilities and
increasing their self-confidence, and also promote innovation
throughout the organization.
Uses charisma and enthusiasm to inspire people to exert them for the good of the
organization.
Transformational leadership style may be appropriate in turbulent environments.
In industries at the very start or end of their life-cycles.
In poorly performing organizations when there is a need to inspire a company.
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Transactional Leadership style;
Introduction;
It prefer a more formalized approach to motivation, setting

clear goals with explicit rewards or penalties for
achievement or non-achievement.
Focuses more on designing systems and controlling the organization’s activities and
are more likely to be associated with improving the current situation.
Transactional leadership style may be appropriate in static environment.
In mature industries, and in organizations that are performing well.
It is suitable for well performed organizations.
Entrepreneurship and Intrapreneurship;
Introduction;
1. Entrepreneur(s);
Meaning:
An entrepreneur is a person who searched for business opportunity and starts a

new enterprise to make use of that opportunity.
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An entrepreneur is an individual who conceives the idea of starting a new venture,

takes all types of risks, not only to put the product or service into reality but also to
make it an extremely demanding one.
 An entrepreneur is one who:
 Initiates and innovates a new concept.
 Recognises and utilises opportunity.
 Faces risks and uncertainties.
 Establishes a start-up company.
 Adds value to the product or service.
 Takes decisions to make the product or service a profitable one.
 Is responsible for the profits or losses of the company.
2. Intrapreneur(s);
Meaning:
The terms Entrepreneur and Intrapreneur are frequently used in the business world.
Many people use these terms interchangeably because they think that they both
contain the same elements.
However there is a fine line of difference in these terms;

 The former (Entrepreneur) refers to a person who starts his own business
with a new idea or concept,
 The latter (Intrapreneur) represents an employee who promotes innovation

within the limits of the organisation.
An intrapreneur is nothing but an entrepreneur who operates within the

boundaries of an organisation.
He is an employee of a large organisation, who is vested (given) with authority of

initiating creativity and innovation in the company’s products, services and
projects, redesigning the processes, workflows and systems.
The intrapreneurs believe in change and do not fear failure.
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The job of an intrapreneur is extremely challenging.
They discover new ideas, look for such opportunities that can benefit the whole
organisation and take risks, promote innovation to improve the performance and
profitability of the organisation.
They get recognition and reward for the success achieved by them.
It has now become a trend that large corporations appoint intrapreneur within the
organisation, to bring operational excellence and gain competitive edge in the
market.
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Chapter 8: Strategy Implementation And Control
Introduction;
Strategic management process does not end when the firm decides what
strategies to pursue.
There must be a translation of strategic thought into strategic action.
Strategy implementation requires introduction of change in the organisation to make

organisational member adapt to the new environment.
Strategic control is an integral part of strategic management.
It focuses on whether the strategy is being implemented as planned and the results
produced are those intended.
In addition, we will also have an overview of the emerging concepts in strategic

management, namely, strategy audit, business process reengineering and
benchmarking.
Strategy Implementation;
Strategy implementation concerns the managerial exercise of putting a freshly
chosen strategy into action.
Strategic implementation is concerned with translating a strategic decision into

action.
The allocation of resources to new courses of action will need to be undertaken,

and there may be a need for adapting the organization’s structure to handle new
activities as well as training personnel and devising appropriate systems.
 Relationships between Strategy Formulation and Implementation;
Many managers fail to distinguish between strategy formulation and strategy

implementation.
A company will be successful only when the Strategy formulation is sound and
implementation is excellent.
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Organization success is a function of good strategy and proper Implementation.
Often people, blame the strategy model for the failure of a company while the main
flaw might lie in failed implementation.
Square A is the situation where a company apparently has formulated a very

competitive strategy, but is showing difficulties in implementing it successfully.
This can be due to various factors, such as the lack of experience (e.g. for startups),
the lack of resources, missing leadership and so on.
In such a situation the company will aim at moving from square A to square B, given
they realize their implementation difficulties.
Square B is the ideal situation where a company has succeeded in designing a

sound and competitive strategy and has been successful in implementing it.
Square C is denotes for companies that haven’t succeeded in coming up with a

sound strategy formulation and in addition are bad at implementing their flawed
strategic model.
Their path to success also goes through business model redesign and
implementation/execution readjustment.
Square D is the situation where the strategy formulation is flawed (unsound), but
the company is showing excellent implementation skills.
When a company finds itself in square D the first thing they have to do is to
redesign their strategy before readjusting their implementation/execution skills.
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It needs to be emphasized that ‘strategy’ is not synonymous with ‘long-term plan’

but rather consists of an enterprise’s attempts to reach some preferred future state
by adapting its competitive position as circumstances change.
While a series of strategic moves may be planned, competitors’ actions will

mean that the actual moves will have to be modified to take account of those
actions.
 List of to be C or IC questions;
 Strategy formulation concepts and tools do not differ greatly for small, large,
for-profit, or non-profit organizations.
However, strategy implementation varies substantially among different types

and sizes of organizations.
 Even the most technically perfect strategic plan will serve little purpose if it is
not implemented effectively.
 A technically imperfect plan that is implemented well will achieve more than
the perfect plan that never gets off the paper on which it is typed.
 Successful strategy formulation does not guarantee successful strategy

implementation.
Strategy Formulation vs. Strategy Implementation;
Strategy Formulation Strategy Implementation

Strategy formulation focuses on Strategy implementation focuses on
effectiveness. efficiency.
Strategy formulation is preliminary an Strategy implementation is

intellectual process. preliminary an operational process.
Strategy formulation requires Strategy implementation requires

conceptual intuitive and analytical motivational and leadership skills.
skills.
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Strategy formulation requires co- Strategy implementation requires co-

ordination among the executives at ordination among the executives at
the top level. the middle and lower level.
Strategy formulation is primarily an Strategy implementation of strategy is

entrepreneurial activity, based on mainly an administrative task based
strategic decision-making. on strategic as well as operational
decision-making.
Linkages;
Two types of linkages exist between these two phases of strategic management.
The forward linkages deal with the impact of strategy formulation on strategy
implementation,
While the backward linkages are concerned with the impact in the opposite
direction.
Forward Linkages;
The different elements in strategy formulation starting with objective setting

through environmental and organizational appraisal, strategic alternatives
and choice to the strategic plan determine the course that an organization
adopts for itself.
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With the formulation of new strategies, or reformulation of existing strategies,

many changes have to be effected within the organization.
For instance, the organizational structure has to undergo a change in the light
of the requirements of the modified or new strategy.
The style of leadership has to be adapted to the needs of the modified or new
strategies.
In this way, the formulation of strategies has forward linkages with their
implementation.
Backward Linkages;
Organizations tend to adopt those strategies which can be implemented with

the help of the present structure of resources combined with some additional
efforts. Such incremental changes, over a period of time, take the organization
from where it is to where it wishes to be.
Issues (problems) in Strategy Implementation;
 The different issues involved in strategy implementation cover practically

everything that is included in the discipline of management studies.
 A strategist, therefore, has to bring a wide range of knowledge, skills,

attitudes, and abilities.
 The implementation tasks put to test the strategists’ abilities to allocate

resources, design organisational structure, formulate functional policies, and
to provide strategic leadership.
Given below in sequential manner the issues in strategy implementation which are
to be considered:
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 Project implementation,
 Procedural implementation,
 Resource allocation,
 Structural implementation,
 Functional implementation,
 Behavioural implementation, etc…
It should be noted that the sequence does not mean that each of the above activities
are necessarily performed one after another.
Many activities can be performed simultaneously, certain other activities may be

repeated over time; and there are activities, which are performed only once.
Thus there can be overlapping and changes in the order in which these activities are
performed.
Strategic Change;
Introduction:
The changes in the environmental forces often require businesses to make

modifications in their existing strategies and bring out new strategies.
Strategic change is a complex process that involves a corporate strategy (Chp. 4)

focused on new markets, products, services and new ways of doing business.
Q. Specify the steps that are needed to introduce strategic change in an

organization.
Answer:
1. Recognize the need for change,
2. Create a shared vision to manage the change, &
3. Institutionalize the change.
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1. Recognize the need for change,
The first step is to diagnose aspects of the corporate culture that are strategy
supportive or not.
This basically means going for environmental scanning involving appraisal of both
internal and external capabilities may be through SWOT analysis.
The idea is to determine where the gap lies and scope for change exists.
2. Create a shared vision to manage the change,
Objectives and vision of both individuals and organization should match.

There should be no conflict between them.
This is possible only if the management and the organization members follow a
shared vision.
Senior managers need to constantly and consistently communicate the vision not
only to inform but also to overcome resistance.
3. Institutionalize the change,
This is basically an action stage which requires implementation of changed

strategy. Creating and sustaining a different attitude towards change is essential to
ensure that the firm does not slip back into old ways of thinking or doing things.
All these changes should be set up as a practice to be followed by the organization

and be able to transfer from one level to another as a well settled practice.
Kurt Lewin’s Model of Change;
To make the change lasting, Kurt Lewin’s proposed three phases of the change
process for moving the organization from the present to the future. These stages are,
1. Unfreezing the situation,,
2. Changing to the new situation &
3. Refreezing.
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1. Unfreezing the situation,
Unfreezing is the process of breaking down the old attitudes and behaviours,
customs and traditions so that they start with a clean slate.
The process of unfreezing simply makes the individuals aware of the necessity for
change and prepares them for such a change.
Lewin proposes that the changes should not come as a surprise to the members of
the organization. Sudden and unannounced change would be socially destructive
and morale lowering.
2. Changing to the new situation,
Once the unfreezing process has been completed and the members of the
organization recognise the need for change and have been fully prepared to accept
such change, their behaviour patterns need to be redefined.
H.C. Kellman has proposed three methods for reassigning new patterns of
behaviour.
These are Compliance, Identification and Internalisation.
3. Refreezing,
Refreezing occurs when the new behaviour becomes a normal way of life.
The new behaviour must replace the former behaviour completely for successful and
permanent change to take place.
In order for the new behaviour to become permanent, it must be continuously

reinforced so that this new acquired behaviour does not diminish.
 H.C. Kellman has proposed three methods for reassigning new patterns of
behaviour.
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 Compliance:
It is achieved by strictly enforcing the reward and punishment

strategy for good or bad behaviour.
Fear of punishment, actual punishment or actual reward seems to change

behaviour for the better.
 Identification:
Identification occurs when members are psychologically impressed

upon to identify themselves with some given role models whose behaviour
they would like to adopt and try to become like them.
 Internalization:
Internalization involves some internal changing of the individual’s

thought processes in order to adjust to the changes introduced.
They have given freedom to learn and adopt new behaviour in order to succeed in
the new set of circumstances.
Change process is not a onetime application but a continuous process due to

dynamism and ever changing environment.
The process of unfreezing, changing and refreezing is a cyclical one and remains
continuously in action.
Strategic Control;
Introduction:
Controlling is one of the important functions of management, and is often regarded

as the core of the management process.
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It is a function intended to ensure and make possible the performance of planned

activities and to achieve the pre-determined goals and results.
Control is intended to regulate and check
 Organizational Control;
1. Operational Control,
2. Management Control &
3. Strategic Control.
 There are three types of organizational control;

 Operational Control:
The thrust of operational control is on individual tasks or transactions as

against total or more aggregative management functions.
For example, procuring specific items for inventory is a matter of operational

control, in contrast to inventory management as a whole.
Many of the control systems in organisations are operational and mechanistic in

nature.
A set of standards, plans and instructions are formulated.
 Management Control:
When compared with operational control, management control is more

inclusive and more aggregative, in the sense of adopting the integrated
activities of a complete department, division or even entire organisation.
The basic purpose of management control is the achievement of enterprise goals

– short range and long range – in a most effective and efficient manner.
The term management control is defined by Robert Anthony.
 Strategic Control:
According to Schendel and Hofer “Strategic control focuses on the dual

questions of whether:
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i. The strategy is being implemented as planned; and
ii. The results produced by the strategy are those intended.”
There is often a time gap between the stages of strategy formulation and its
implementation. A strategy might be affected on account of changes in internal and
external environments of organisation.
 There are four types of strategic control;
1. Premise Control:
A strategy is formed on the basis of certain assumptions or premises

(theories) about the environment.
Over a period of time those premises may not remain valid.
Premise control is a tool for systematic and continuous monitoring of the

environment to verify the validity and accuracy of the premises on which the
strategy has been built.
It primarily involve monitoring two types of factors:-

i. Environmental factors & ii. Industry factors.
2. Strategic Surveillance:
Strategic surveillance is unfocussed.
It involves general monitoring of various sources of information to uncover

unanticipated information having a bearing on the organizational strategy.
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It involves casual environmental browsing. Reading financial and other

newspapers, business magazines, attending meetings, conferences,
discussions and so on can help in strategic surveillance.
3. Special alert control:
At times, unexpected events may force organizations to reconsider their

strategy.
Sudden changes in government, natural calamities, unexpected

merger/acquisition by competitors, industrial disasters and other such events
may trigger an immediate and intense review of strategy.
To cope up with such eventualities, the organisations form crisis

management teams to handle the situation.
4. Implementation control:
Managers implement strategy by converting major plans into

concrete, sequential actions that form incremental steps.
Implementation control is directed towards assessing the need for changes in

the overall strategy in light of unfolding events and results.
Strategic implementation control is not a replacement to operational control.
Unlike operational control, it continuously monitors the basic direction of the

strategy. The two basic forms of implementation control are:
i. Monitoring strategic thrusts (sudden push),
ii. Milestone Reviews.
i. Monitoring strategic thrusts (sudden push),
Monitoring strategic thrusts helps managers to determine whether the

overall strategy is progressing as desired or whether there is need for
readjustments.
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ii. Milestone Reviews.
All key activities necessary to implement strategy are segregated in

terms of time, events or major resource allocation.
It normally involves a complete reassessment of the strategy.
It also assesses the need to continue or refocus the direction of an

organization.
Strategy Audit;
Introduction:
A strategy audit is an examination and evaluation of areas affected by the

operation of a strategic management process within an organization.
An assessment of the external environment shows where changes happen and where
organization’s strategic management no longer match the demands of the
marketplace.
Based on such analysis, the organization can improve business performance by

periodically conducting such an audit.
The core of Strategy Audit, for any corporate entity, lies on two important
questions:
 How well is the current strategy working?
 How well will the current strategy be working in future?
 How can this be evaluated in present and future?
 How urgent is there a need to change the strategy?
 Need of Strategy Audit:
 When the performance indicators reflect that a strategy is not working
properly or is not producing desired outcomes.
 When the goals and objectives of the strategy are not being accomplished.
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 When a major change takes place in the external environment of the
organization.
 When the top management plans:
 to fine-tune the existing strategies and introduce new strategies and
 to ensure that a strategy that has worked in the past continues to be in-
tune with subtle internal and external changes that may have occurred
since the formulation of strategies.
 Strategy Audit includes three basic activities:

 Examining the underlying bases of a firm’s strategy,
 Comparing expected results with actual results, and
 Taking corrective actions to ensure that performance conforms to plans.
 Richard Rumelt’s Criteria for Strategy Audit: (IMP)

 Consistency,
 Consonance (According to),
 Feasibility, &
 Advantage.
1. Consistency,
A strategy should not present inconsistent goals and policies.
Organizational conflict and interdepartmental bickering are often symptoms of

managerial disorder, but these problems may also be a sign of strategic
inconsistency.
2. Consonance, (According to)
Consonance refers to the need for strategists to examine sets of trends, as

well as individual trends, in auditing strategies.
A strategy must represent an adaptive response to the external environment and

to the critical changes occurring within it.
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One difficulty in matching a firm’s key internal and external factors in the
formulation of strategy is that most trends.
3. Feasibility,
A strategy must neither overtax available resources nor create unsolvable

sub-problems.
The final broad test of strategy is its feasibility; that is, can the strategy be
attempted within the physical, human, and financial resources of the enterprise.
In auditing a strategy, it is important to examine whether an organization has

demonstrated in the past that it possesses the abilities, competencies, skills, and
talents needed to carry out a given strategy.
4. Advantage,
A strategy must provide for the creation, maintenance of a competitive

advantage in a selected area of activity.
Competitive advantages normally are the result of superiority in one of three

areas:
 Resources,
 Skills, or
 Position.
 Reasons why strategy evaluation is more difficult today include the

following trends:
 A dramatic increase in the environment’s complexity.
 The increasing difficulty of predicting the future with accuracy.
 The increasing number of variables in the environment.
 The rapid rate of obsolescence of even the best plans.
 The increase in the number of both domestic and world events affecting
organizations.
 The decreasing time span for which planning can be done with any degree
of certainty.
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Business Process Reengineering;
Introduction:
Definition,
BPR refers to the analysis and redesign of workflows and processes both
within and between the organisation.
The orientation of the redesign effort is radical (complete), i.e., it is a total

deconstruction and rethinking of a business process in its entirety (whole)
unconstrained by its existing structure and pattern.
Its objective is to obtain quantum gains in the performance of the process in

terms of time, cost, output, quality, and responsiveness to customers. Through the
use of IT systems.
“Business process reengineering means starting all over, starting from scratch.”
Reengineering is about business reinvention & not business enhancement,

business modification or business improvement.
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 What is a Business Process?
A process is a set of logically related tasks or activities oriented towards

achieving a specified outcome.
A business process involves a number of steps performed by different people

in different departments.
For e.g. Order, is one of the common process found almost in every organization.
A set of interconnected processes comprise a business system.
Some processes turn out to be extremely critical for the success and survival of
the enterprise and they are known as ‘Core Business Processes’.
BPR focuses on such critical business processes out of the many processes that go
on in any company.
A core business process creates value by the capabilities it provides to the

competitiveness.
 Reasons for BPR;
 The operational excellence of a company is a major basis for its

competitiveness.
 Continuous improvement is lacking in the organisation. The company is far

behind the industry standards, and needs rapid quantum leaps in
performance.
 Dramatic improvement in performance is the prerequisite for overcoming

competition.
 How to compete is more important than deciding about where to compete?
 Factors have accelerated the needs to improve business process;

i.e. Rationale (Ground, Logic) of BPR;
1. Technology,
2. Opening up of Indian Economy, &
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3. Need for better product & service by customer.
 Steps in BPR are as follows;
1. Determining objectives,
2. Identify customers and determine their needs,
3. Study the existing processes,
4. Formulate a redesign process plan, &
5. Implement the redesigned process.
1. Determining objectives,
Objectives are the desired end results of the redesign process which the
management and organization attempts to realise.
They will provide the required focus, direction, and motivation for the redesign
process and help in building a comprehensive foundation for the reengineering
process.
2. Identify customers and determine their needs,
The process designers have to understand customers - their profile, their

steps in acquiring, using and disposing a product.
The purpose is to redesign business process that clearly provides value addition to
the customer.
3. Study the existing processes,
The study of existing processes will provide an important base for the
process designers.
The purpose is to gain an understanding of the ‘what’, and ‘why’ of the targeted
process.
4. Formulate a redesign process plan,
Formulation of redesign plan is the real crux of the reengineering efforts.

Customer focused redesign concepts are identified and formulated.
In this step alternative processes are considered and the best is selected.
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5. Implement the redesigned process,
Implementation of the redesigned process and application of other

knowledge gained from the previous steps is key to achieve dramatic
improvements.
It is the joint responsibility of the designers and management to operationalise

(implement) the new process.
 Role of Information Technology in BPR;
The accelerating pace at which information technology has developed during

the past few years had a very large impact in the transformation of business
processes.
 Impact of IT-systems are identified as:

 Compression of time
 Overcoming restrictions of geography and/or distance
 Restructuring of relationships.
 IT-initiatives, thus, provide business values in three distinct areas:
 Efficiency – by way of increased productivity,
 Effectiveness – by way of better management,
 Innovation – by way of improved products and services.
All these can bring about a radical (complete) change in the quality of products and
services, thereby improving the competitiveness and customer satisfaction.
IT is a critical factor in the success of bringing this change.
 Central Thrust of BPR:
BPR is a multi-dimensional approach in improving the business performance

its thrust area may be identified as “the reduction of the total cycle time of a
business process.”
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Total cycle may be explained in terms of;
1. Customer need.
2. Time to manufacture product or provide service.
3. Customer satisfaction.
 Problems in BPR:
 It disturbs established hierarchies and functional structures.
 Involves resistance among the work-force.
 Reengineering involves time and expenditure, at least in the short run, that
many companies are reluctant to go through the exercise.
 Even there can be loss in revenue during the transition period.
 Setting of targets is tricky and difficult.
Benchmarking;
Introduction:
Benchmarking is an approach of setting goals and measuring productivity based on
best industry practices.
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It gives information against which performances can be measured.
Benchmarking helps in improving performance by learning from best practices
and the processes by which they are achieved.
Benchmarking is a process of continuous improvement in search for competitive
advantage.
It measures a company’s products, services and practices against those of its
competitors or other acknowledged leaders in their field.
 For e.g.
Xerox pioneered this process in late 70’s by benchmarking its manufacturing
costs against those of domestic and Japanese competitors and got dramatic
improvement in the manufacturing cost.
 Firms can use benchmarking process to achieve improvement in diverse range
of management functions like:
 Maintenance operations,
 Assessment of total manufacturing costs,
 Product development,
 Product distribution,
 Customer services,
 Plant utilization levels,
 Human resource management, etc…
 Steps in Benchmarking are as follows;
1. Identifying the need for benchmarking.
2. Clearly understanding existing business processes.
3. Identify best processes.
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4. Compare own processes and performance with that of others.
5. Prepare a report and Implement the steps necessary to close the performance
gap.
6. Evaluation.
1. Identifying the need for benchmarking,
This step will define the objectives of the benchmarking exercise. It will also
involve selecting the type of benchmarking.
Organizations identify realistic opportunities for improvements.
2. Clearly understanding existing business processes,
This step will involve compiling information and data on performance.
Information and data is collected by different methods such as interviews, visits

and filling of questionnaires.
3. Identify best processes.
Within the selected framework, best processes are identified.
These may be within the same organization or external to it.
4. Compare own processes and performance with that of others.
Benchmarking process also involves comparison of performance of the

organization with the performers of other organization.
Any gap between the two analyzed to make further improvement.
5. Prepare a report and Implement the steps necessary to close the performance
gap.
A report on the Benchmarking initiatives containing recommendations is

prepared.
Such a report includes the action plan(s) for implementation.
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6. Evaluation.
A business organization must evaluate the results of the benchmarking

process in terms of improvements vis-à-vis (w.r.t.) objectives and other criteria set
for the purpose.
It also periodically evaluate and reset the benchmarks in the light of changes in the
conditions that impact its performance.
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List of author(s)
Sr. No. Name For
1 William F. Glueck Define Strategy
2 C.K. Prahalad and Gary Hamel Core Competence
3 Igor Ansoff Ansoff Growth Matrix (1957)
4 Arthur D. Little ADL Matrix (1980)
5 Bruce Henderson BCG Matrix (1970) Boston Consulting Group
6 General Electric Company G. E. Matrix (McKinsey & Company)
7 Heinz Weihrich TOWS Matrix
8 William & Lawrence Grand, Directional & Corporate Strategies
9 Michael Porter Generic (3) Strategy

MP – G3 – FDC Porter’s 5 Forces, Value Chain Analysis
10 Chandler Chandler’s Strategy-Structure Relationship

Changes in strategy lead to changes in organizational structure. Therefore,
structure should follow strategy.
11 Kurt Lewin’s Model of Change (U, C & R)
12 H.C. Kellman 3 Methods for Reassigning.

Proposed three methods for reassigning new patterns of behaviour.
These are Compliance, Identification and Internalisation
13 Richard Rumelt Rumelt’s Criteria for Strategy Audit

Consistency, Consonance (According to), Feasibility & Advantage (ICAI MCQ)
14 Robert Anthony Defined the term Management control
15 Schendel and Hofer Defined the term Strategic control
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Paper 7B Strategic Management (New Course)
1. Which of these basic questions should a vision statement answer?

(a) What is our business?
(b) Who are our competitors?
(c) Where we are to go?
(d) Why do we exist?
2. According to Porter, what is usually the most powerful of the five competitive forces?
(a) Rivalry among existing firms
(b) Potential development of substitute products
(c) Bargaining power of buyers and suppliers
(d) Potential entry of new competitors
3. An organization that has a low relative market share position and competes in a slow-
growth industry is referred to as a .
(a) Dog
(b) Question Mark
(c) Star
(d) Cash Cows
4. What type of organizational structure do most small businesses follow?

(a) Divisional structure
(b) Functional structure
(c) Hour Glass structure
(d) Matrix structure
5. Which section of the SWOT TOWS Matrix involves matching internal strengths with
external opportunities?
(a) The WT cell
(b) The SW cell
(c) The SO cell
(d) The ST cell
6. In evaluating strategies, which one of Rumelt’s criteria for evaluating strategies, refers to
the need for strategists to examine sets of trends?
(a) Consistency
(b) Consonance
(c) Feasibility
(d) Advantage
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© The Institute of Chartered Accountants of India
7. What can be defined as the art and science of formulating, implementing and evaluating
cross-functional decisions that enable an organization to achieve its objectives?
(a) Strategy formulation
(b) Strategy evaluation
(c) Strategy implementation
(d) Strategic management
8 An important activity in is taking corrective action.

(a) Strategy evaluation
(b) Strategy implementation
(c) Strategy formulation
(d) Strategy leadership
9. Which of the following is not a limitation of SWOT (Strengths, Weaknesses, Opportunity,

Threats) analysis?
(a) Organizational strengths may not lead to competitive advantage
(b) SWOT gives a one-shot view of a moving target
(c) SWOT's focus on the external environment is too broad and integrative
(d) SWOT overemphasizes a single dimension of strategy
10. The competencies or skills that a firm employs to transform inputs into outputs are:
(a) Tangible resources
(b) Intangible resources
(c) Organizational capabilities
(d) Reputational resources
11. The emphasis on product design is very high, the intensity of competition is low, and the
market growth rate is low in the stage of the industry life cycle.
(a) Maturity
(b) Introduction
(c) Growth
(d) Decline
10. A narrow market focus is to a differentiation-based strategy as a

(a) Broadly-defined target market is to a cost leadership strategy
(b) Growth market is to a cost-based strategy
(c) Technological innovation is to a cost-based strategy
(d) Growth market is to a differentiation-based strategy
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11. The most probable time to pursue a harvest strategy is in a situation of

(a) High growth
(b) Decline in the market life cycle
(c) Strong competitive advantage
(d) Mergers and acquisitions
12. Vertical integration may be beneficial when

(a) Lower transaction costs and improved coordination are vital and achievable through
vertical integration.
(b) Flexibility is reduced, providing a more stationary position in the competitive
environment.
(c) Various segregated specializations will be combined.
(d) The minimum efficient scales of two corporations are different.
13. One of the primary advantages of diversification is sharing core competencies. In

order for diversification to be most successful, it is important that
(a) The target market is the same, even if the products are very different.
(b) The products use similar distribution channels.
(c) The methods of production are the same.
(d) The similarity required for sharing core competencies must be in the value
chain, not in the product.
14. Individual investors are reliant on upon the organisation's managers to

(a) Maximize short-term returns in the form of dividends.
(b) Add value to their investments in a way that the stockholders could not accomplish
on their own.
(c) Achieve risk reduction at a lower cost than stockholders could obtain on their own.
(d) Diversify the stockholder's investments in order to reduce risk.
17. Horizontal integration is concerned with

(a) Production
(b) Quality
(c) Product planning
(d) All of the above
18. Change in company’s ----------------- gives rise to problems necessitating a new ------------
---- to be made.
(a) Structure, Strategy
(b) Strategy, Structure
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(c) Structure, Structure

(d) Strategy, Strategy
19. The reasons for acquisition are

(a) Increased market power
(b) Increased diversification
(c) Increased speed to market
(d) All of the these
20. Competitive rivalry has the most effect on the firm's strategies than the firm's other
strategies.
(a) Business level
(b) Corporate level
(c) Functional level
(d) All of these
21. A firm successfully implementing a differentiation strategy would expect:

(a) Customers to be sensitive to price increases.
(b) To charge premium prices.
(c) Customers to perceive the product as standard.
(d) To automatically have high levels of power over suppliers.
22. Conglomerate diversification is another name for which of the following?

(a) Related diversification
(b) Unrelated diversification
(c) Portfolio diversification
(d) Acquisition diversification
23. When to two organisations combine to increase their strength and financial gains
along with breaking the trade barriers is called-----------
(a) Hostile takeover
(b) Liquidation
(c) Merger
(d) Acquisition
24. Internal are activities in an organization that are performed especially well.
(a) Opportunities
(b) Competencies
(c) Strengths
(d) Management
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25. Financial objectives involve all of the following except:

(a) Growth in revenues
(b) Larger market share
(c) Higher dividends
(d) Greater return on investment
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CA – Intermediate

“Success is not final, failure is not fatal;

1 1 Introduction to Strategic Management 1.1 – 1.13

2 2 Dynamics of Competitive Strategy 2.1 – 2.30

3 3 Strategic Management Process 3.1 – 3.11

4 4 Corporate Level Strategies 4.1 – 4.20

5 5 Business Level Strategies 5.1 – 5.13

6 6 Functional Level Strategies 6.1 – 6.23

7 7 Organization Structure And Strategic Leadership 7.1 – 7.19

8 8 Strategy Implementation And Control 8.1 – 8.23

9 List of Person’s 157

10 ICAI MCQ’s 158

Questions likely to be asked in exam;

1. Explain concepts (2 Marks each),

2. Correct and Incorrect, with reasons (2 Marks each),

3. Case study (4 – 5 Marks each),

4. Distinguish Between (4 – 5 Marks each),

5. Answer in brief (5 Marks each),

6. Descriptive question (6 – 8 Marks),

7. MCQ (15 Marks)

1 Introduction to Strategic Management 02:00 01:30 01:00

2 Dynamics of Competitive Strategy 04:30 03:00 03:00

3 Strategic Management Process 01:30 01:00 01:00

4 Corporate Level Strategies 01:45 01:00 01:00

5 Business Level Strategies 02:00 01:30 01:00

6 Functional Level Strategies 02:15 01:00 01:00

7 Organisation and Strategic Leadership 02:00 01:00 01:00

8 Strategy Implementation and Control 02:00 02:00 01:00

Total Hours 18:00 12:00 10:00

Chapter 1: Introduction to Strategic Management

What do you mean by strategy?

Strategy mean bridging the gap between means and ends.

As per famous management guru

Chapter 1: Introduction to Strategic Management

Relationship between organization and environment

Internal Environment (6 M’s)

Chapter 1: Introduction to Strategic Management

The origin of business policy can be traced back to 1911,

When Harvard Business School introduced an integrative course in

Strategic Management can be defined as, (ICAI MCQ’s)

The art and science of Formulating, Implementing & Evaluating Cross-

Strategy Consider as:

 An analysis, planning and implementation,

 A plan adopted for survival, stability and growth of business.

Chapter 1: Introduction to Strategic Management

We may define the term ‘strategy’ as a long range blueprint of an organization’s.

However, strategy is no substitute for sound, alert and responsible management.

Strategy can never be perfect, flawless and optimal.

Allowances are made for possible miscalculations and unanticipated events.

In large organisations, strategies are formulated at the corporate, divisional

Corporate strategies are formulated by the top managers.

Strategic Management is essential for the survival and growth of business

Strategic management is not a bundle of tricks and magic. It is a deliberate

The term ‘strategic management’ refers to the managerial process of;

 Developing a strategic vision,

 Evaluating the strategy and

 Initiating corrective adjustments where deemed appropriate.

Chapter 1: Introduction to Strategic Management

The overall objectives of strategic management are

1. To create competitive advantage,

2. To guide the company successfully through all changes in the environment.

Importance (Benefits) of Strategic Management:

 The strategic management gives a direction to the company to move ahead.