Corporate Level strategy

• Strategy can be formulated at different level

and strategic alternative also exists at three
levels.
• There are three important function of
corporate strategy.
• Strategic alternatives revolve around the
fundamental question ? Continue or change
• Four types of strategic alternatives are
available.
 Strategic Alternatives
• Expansion strategy
• Stability Strategy
• Retrenchment strategy
• Combination strategy
 Expansion strategy
• Expansion strategy can be executed through
• Expansion through concentration
• Expansion through integration
• Expansion through internationalization
• Expansion through cooperation
• Expansion through digitalization
• Expansion through diversification.
 Expansion Strategy
• Strategic alliance/ joint venture ( Expansion
through cooperation)
• Integration Strategy: Company use integration
strategy to increase scope of the business.
• Transaction cost economics explains the
reason behind integration strategy.
 Integration Strategy
• Integration strategy offers the following
benefits.
• Economies of scale
• Increased product differentiation
• Better control over the supplier
• Reduction in competitive rivalry
• Integration strategy can be classified into two
category: Horizontal and Vertical integration.
 Horizontal Integration Strategy
• In this kind of strategy, the company serve the
same industry.
• Eg: Animal feed industry
• Eg: IDBI acquired united western bank
 Vertical Integration Strategy
• This can be classified into forward and Vertical
integration.
• Market penetration/market
development/product development strategy is
part of expansion through concentration.
 Diversification Strategy
• It can be classified into concentric and
conglomerate diversification.
• In conglomerate diversification, strategist
works like portfolio manager.
• Reason for Diversification:
• Risk minimization
• To remove the negative perception associated
with company. Eg. ITC
 Risk of diversification
• Complex strategy, requires different kinds of
skill set.
• Diversion of attention
• Increases the administrative cost.
 Retrenchment Strategy
• Retrenchment strategy includes
• Turn around strategy
• Divestment Strategy
• Liquidation Strategy
Turn Around Strategy of
Spice jet

In the year 2014 , the

economic value of Spice jet
was just 650 crore.
The price of share reached
to 15 paisa per share.
Today economic value of
Spice jet is 7400 crore, the
economic value of rival Jet
airways is 6400 crore
although it has double
fleet than spice jet.
The price of the share is
125 rupees per share.
 Background of the case
• On 15th Dec-2014, Spice Jet called to ministry
of civil aviation that they are not able to fly
due to liquidity crises.
• Ministry of civil aviation stopped the booking
of ticket beyond 31st Dec-2014
• Oil company was not willing to give oil unless
all the dues are paid.
• AAI was not giving permission to airlines to fly
due to unpaid dues.
 Turn Around
• Minister of civil aviation Mr. Raju asked oil
company and AAI to give credit facility to Spice
jet.
• Govt also ask Indian bank to lend Rs 600 crore.
• The fuel price reduced from 75 rupees per liter to
45 rupees per liter. This saved 1018 crore.
• Mr. Ajay singh took over the airlines and he has
taken various initiative. Instant decision was
taken. He fired unproductive employees and
retained loyal employees.
 Turn Around Strategy
• New uniform was given to employees.
• Spice jet retail store was opened at airport to
increase the revenue.
• The Spice jet is planning to purchase 100 fuel
efficient Boeing Plane.
• Mr. Ajay singh holds 60% share in the airlines
which is account for Rs 4000 crore.
 Divestment Strategy
• The company may decide to withdraw
partially or completely from the weaker
segment.
• Divestment strategy involves downsizing of
the business.
 Liquidation Strategy
• Liquidation strategy means closing the
company and selling the asset.
 Business Level Strategy
• Business level strategy exploit core
competencies to gain sustainable competitive
advantage.
• In order to gain differential advantage, Firm is
having two options.
• Business level strategy depends on industry
structure and positioning.
• There are two kinds of competitive advantage,
cost advantage and differentiation advantage.
 Business Level Strategy
• Competitive scope can be classified into broad
and narrow scope.
• When competitive advantage is combined with
competitive scope, Generic strategy is emerged.
• Business level strategy is known as Generic
Strategy.
• Cost Leadership
• Differentiation
• Focus Strategy
 Cost Leadership Strategy
• In Cost leadership Strategy , firm try to acquire
the leadership in offering the goods at
minimum price.
• Cost leadership strategy is used when market
segment is large.Ex- Amul, Reliance Jio,
Chinese Company.
• In order to implement cost leadership
Strategy, the cost of entire value chain should
be minimum.
Condition for Cost leadership Strategy
• Cost leadership strategy can be used when
customers are price sensitive not brand loyal
and they look forward to standardized
product.
• Cost leadership strategy is preferred when
switching cost is low and customers primarily
take the decision based on the price
 Benefits
• It increases the market share, profitability and
works like entry barrier for potential entrant.
• Risk associated with Cost leadership Strategy :
• It is not sustainable strategy as it initiate price
war in the market place.
• Competitor can copy this strategy
• There might be customers who give
preference to other factors such as quality,
services etc.
 Differentiation Strategy
• Differentiation strategy is used when market is
diversified and it is not possible to cater the
need through standardized product.
• It is used when it is possible to generate brand
loyalty.
• Benefits
• Differentiation Strategy offers competitive
edge.
 Benefits
• Company can charge higher price
• Develops the brand loyalty
• Work like a entry barrier.
• Risk Factor :
• Differentiator organization serve limited no of
customers.
• Customers value the differentiated product when
company offers tangible benefits but greater the
tangible benefits associated with the product, more
would be chances to copy the strategy by competitors.
 Focus strategy
• In focus strategy company serve the niche
market and apply either cost leadership or
differentiation strategy.
• Ex: Escort , Arvind Eye hospital , Zara store
• Benefits
• Focused organization is protected from the
competitors .
• The competencies of focused organization
works like a entry barrier.
 Focus strategy
• It is difficult to develop distinctive
competencies.
• The cost of focused organization is high as
volume of sale is limited.
 Offensive and Defensive Strategy

• Followings firms operate in the market place

• Market leader
• Market Challenger
• Market follower
• Market Nicher
• Market leader firm must take the action on
three front.
 Offensive and Defensive Strategy
• Expanding the market Share
• Defending the market
• Firm tries to increase the market share even if
market size is constant.
• Defending the market Share:
• Preemptive Defense
• Counteroffensive defense
• Mobile Defense
• Contraction Defense
 Market Challenger Strategy
• Market Challenger : Must decide strategic
objectives to decide whom to attack. Three
options are available to market challenger firm.
• Attack Strategy
• Frontal attack
• Flank Attack
• Encirclement Attack
• Bypass Attack
• Guerilla Attack
 Market Follower
• Counterfeiter
• Cloner
• Imitator
• Adapter
 Strategic Evaluation and Control
• Functional strategy is carried out through
functional and operational implementation.
• Functional and operational implementation is
done in the five functional area
• Marketing
• Finance
• Operation
• Personnel
• Information Management
 Functional Strategy, plan and Policies
• Functional strategy is derived from Business
unit strategy. It is defined in terms of
functional plan and policy.
• Each functional area is divided into several sub
functional area.
• These functional area must be integrated for
better performance.
 Consideration for Integration
• Following five factors must be considered while
integrating different functional area. These are
• Internal consistency
• Relevance to development of organizational
capability
• Making trade off decision
• Determination of intensity of the linkage within
the organization
• Timing of implementation of functional plan and
policies.
 Operational Plan

• Operational plan can be categorized into three

category.
• Production System
• Operation planning and control
• Research and Development
 Strategic Evaluation and Control
• Strategic evaluation and control test the
effectiveness of strategy. It keeps the
organization on track.
• It addresses two set of questions.
• Is there any need to change the strategy.
• How is organization performing.
• Strategic control works like a early warning
system.
 Types of Strategic Control
• Premise control
• Implementation control.
• Strategic surveillance
• Special alert control
 Strategic evaluation Technique
• Two types of strategic evaluation technique
are available.
• Strategic momentum control: it is used when
organization operates is stable environment
• Strategic leap Control: it is used when
organization operates in turbulent
environment.
 Strategic Evaluation Technique
• To achieve the objectives of strategic
momentum control, three techniques are
used.
• Responsibility control centre: it is core of the
management control and it includes revenue,
expenses, profit and investment
• Underlying success Factor
• Generic Strategy
 Strategic Evaluation Technique
• In order to exercise strategic leap control, four
techniques are used.
• Strategic issue management
• Strategic field Analysis
• System Modeling
• Scenario.
 Operational Control Technique
• For exercising operational control , three kinds
of techniques are used.
• Internal Analysis : it includes value chain
analysis, quantitative and qualitative analysis
• Comparative Analysis: it includes historical
analysis, and Benchmarking.
• Comprehensive Analysis: It includes Key factor
rating, Business Intelligence system and
balanced Scorecard.
Merger , Acquisition and Joint Venture
• Merger Vs Acquisition
• Demerger
• Joint Venture : Joint venture is contractual
agreement between two or more than two
parties . The participating firms undertake
mutually beneficial activities, exercise the
control and jointly share profit and loss of the
business entity.
•
 Types of Joint Venture
• Between two Indian companies related to same
business.
• Between two Indian companies belonging to different
business
• Between Indian company and Foreign company in
India.
• Between Indian company and foreign company in
foreign country
• Between Indian company and foreign company in third
country
• Between GOVT company and private company in the
form of PPP.
Benefits and drawback of joint Venture
.
• Minimize the risk,
• Increases the market share
• Increases access to foreign market
• Facilitate transfer of technology.
• Produce synergistic effect.
• The drawback of joint venture is lack of
coordination/ conflict, cultural differences,
differences in orientation of the organizations etc.
 Acquisition
• Acquisition is the process of acquiring asset
and liability of another firm.
• When both firms dissolve their identity to
create new organization, it is known as
consolidation.
 Types of Acquisition
• Horizontal Acquisition
• Vertical Acquisition
• Concentric acquisition
• Conglomerate Acquisition
• Issues in Merger and Acquisition
• Strategic issues
• Financial issues
• Managerial issues
• Legal issues
Questions ?