UNIT -1

STRATEGY

Strategy has been studied for years by business leaders and by business theorists.
Yet, there is no definitive answer about what strategy really is.One reason for this
is that people think about strategy in different ways.
For instance, some people believe that you must analyze the present carefully,
anticipate changes in your market or industry, and, from this, plan how you'll
succeed in the future. Meanwhile, others think that the future is just too difficult to
predict, and they prefer to evolve their strategies organically.
Gerry Johnson and Kevan Scholes, authors of "Exploring Corporate Strategy," say
that strategy determines the direction and scope of an organization over the long
term, and they say that it should determine how resources should be configured to
meet the needs of markets and stakeholders.
Strategy is important because the resources available to achieve these goals are usually limited. Strategy
generally involves setting goals, determining actions to achieve the goals, and mobilizing resources to
execute the actions. A strategy describes how the ends (goals) will be achieved by the means (resources).
This is generally tasked with determining strategy. Strategy can be intended or can emerge as a pattern of
activity as the organization adapts to its environment or competes. It involves activities such as strategic
planning and strategic thinking.
Strategy typically involves two major processes: formulation and implementation. Formulation involves
analyzing the environment or situation, making a diagnosis, and developing guiding policies. It includes
such activities as strategic planning and strategic thinking. Implementation refers to the action plans taken
to achieve the goals established by the guiding policy.
Bruce Henderson wrote in 1981 that: "Strategy depends upon the ability to foresee future consequences of
present initiatives." He wrote that the basic requirements for strategy development include, among other
factors: 1) extensive knowledge about the environment, market and competitors; 2) ability to examine this
knowledge as an interactive dynamic system; and 3) the imagination and logic to choose between specific
alternatives. Henderson wrote that strategy was valuable because of: "finite resources, uncertainty about
an adversary's capability and intentions; the irreversible commitment of resources; necessity of
coordinating action over time and distance; uncertainty about control of the initiative; and the nature of
adversaries' mutual perceptions of each other."

Chandler(1962)Strategy is the determinator of the basic long-term goals of an

enterprise, and the adoption of courses of action and the allocation of resources
necessary for carrying out these goals;
Corporate strategy:
CORPORATE STRATEGY is the direction an organization takes with the objective of achieving business
success in the long term. Recent approaches have focused on the need for companies to adapt to and
anticipate changes in the business environment, i.e. a flexible strategy. The development of a corporate
strategy involves establishing the purpose and scope of the organization's activities and the nature of the
business it is in, taking the environment in which it operates, its position in the marketplace, and the
competition it faces into consideration; most times analyzed through a SWOT analysis.
Benefits

1.Universal Strategy: It refers to a complex web of thoughts, ideas, insights, experiences, goals,
expertise, memories, perceptions, and expectations that provides general guidance for specific
actions in pursuit of particular ends. Nations have, in the management of their national policies,
found it necessary to evolve strategies that adjust and correlate political, economic,
technological, and psychological factors, along with military elements. Be it management of
national polices, international relations, or even of a game on the playfield, it provides us with
the preferred path that we should take for the journey that we actually make.
2. Keeping pace with changing environment :The present day environment is so dynamic and
fast changing thus making it very difficult for any modern business enterprise to operate.
Because of uncertainties, threats and constraints, the business corporation are under great
pressure and are trying to find out the ways and means for their healthy survival. Under such
circumstances, the only last resort is to make the best use of strategic management which can
help the corporate management to explore the possible opportunities and at the same time to
achieve an optimum level of efficiency by minimizing the expected threats.
3. Minimizes competitive disadvantage: It minimizes competitive disadvantage and adds up to
competitive advantage. For example, a company like Hindustan Lever Ltd., realized that merely
by merging with companies like Lakme, Milk food, Ponds, Brooke bond, Lipton etc which make
fast moving consumer goods alone will not make it market leader but venturing into retailing
will help it reap heavy profits. Then emerged its retail giant Margin Free which is the market
leader in states like Kerala.
4. Clear sense of strategic vision and sharper focus on goals and objectives Every firm competing
in an industry has a strategy, because strategy refers to how a given objective will be achieved.
Strategy defines what it is we want to achieve and charts our course in the market place; it is
the basis for the establishment of a business firm; and it is a basic requirement for a firm to

survive and to sustain itself in todays changing environment by providing vision and
encouraging to define mission.
5.Motivating employees: One should note that the labor efficiency and loyalty towards
management can be expected only in an organization that operates under strategic management.
Every guidance as to what to do, when and how to do and by whom etc, is given to every
employee. This makes them more confident and free to perform their tasks without any
hesitation. Labor efficiency and their loyalty which results into industrial peace and good returns
are the results of broad-based policies adopted by the strategic management
6. Strengthening Decision-Making: Under strategic management, the first step to be taken is to
identify the objectives of the business concern. Hence a corporation organized under the basic
principles of strategic management will find a smooth sailing due to effective decision-making.
This points out the need for strategic management.
Levels of strategy: A typical business firm should consider three types of strategies. They are as
follows
Corporate strategy Which describes a companys overall direction towards growth by
managing business and product lines? These include stability, growth and retrenchment. For
example, Coco cola, Inc., has followed the growth strategy by acquisition. It has acquired local
bottling units to emerge as the market leader.
Business strategy - Usually occurs at business unit or product level emphasizing the
improvement of competitive position of a firms products or services in an industry or market
segment served by that business unit. Business strategy falls in the in the realm of corporate
strategy. For example, Apple Computers uses a differentiation competitive strategy that
emphasizes innovative product with creative design. In contrast, ANZ Grindlays merged with
Standard Chartered Bank to emerge competitively.
Functional strategy It is the approach taken by a functional area to achieve corporate and
business unit objectives and strategies by maximizing resource productivity. It is concerned with
developing and nurturing a distinctive competence to provide the firm with a competitive
advantage. For example, Procter and Gamble spends huge amounts on advertising to create
customer demand.
Operating strategy - These are concerned with how the component parts of an organization
deliver effectively the corporate, business and functional -level strategies in terms of resources,
processes and people. They are at departmental level and set periodic short-term targets for
accomplishment.
(diagram)
TYPES OF CORPORATE STRATEGY:

CORPORATE LEVEL STRATEGY BY VALUE: Corporate level strategy is concerned with the
strategic decisions a business makes that affect the entire organization. Financial performance, mergers
and acquisitions, human resource management and the allocation of resources are considered part of
corporate level strategy. There are three types of corporate level strategy that a business can employ.

1. Value-Creating Strategy
A value-creating strategy is one in which the business seeks to edge out its competitors by
gaining more market share. These strategies seek to add real and perceived value to the business'
products and services by exploiting economies of scope -- the resources and capabilities of the
business that can be shared across the entire organization to reduce costs and increase efficiency.
A key idea behind value-creating strategy is diversification: offering more products to more
consumers within the market in an attempt to dominate all of part of the overall market share.

2. Value-Neutral Strategy
A business can employ a value-neutral strategy when the organization isn't so much concerned
with allocating resources and manpower as it is with securing its current place within the market.
In essence, value-neutral strategy helps shore up the business' operations plan. Initiating
regulatory oversight, creating synergy between departments, working to reduce risk and securing
a steady cash flow are value-neutral approaches.

3. Value-Reducing Strategy
Businesses also sometimes engage in value-reducing strategies. This happens on an organizationwide level when the stakeholders or customers perceive that the business is getting too big for its
britches or that only the top-level executives are benefiting from diversification. In this case,
value-reducing strategy refocuses the business' market, helps it define a target demographic and
puts mechanisms in place to prevent unnecessary or harmful growth.

Deciding on a Strategy
While it sometimes is evident which type of corporate level strategy an organization should
adopt, it is less clear at other times, particularly when the market is unsteady or the business
cannot afford to waste resources trying new products and services that may not be profitable.
Asking yourself a few strategy-level questions can help in the decision: Does my company feel
threatened by competitors? If so, value-creating strategy is the right direction. Does my business
need to tighten its resources and monitor its finances more closely? Focus on value-neutral
strategy. Are just a select few people benefiting from the organization's success? Consider valuereducing strategy.
EXPANSION STRATEGY:
RETRENCHMENT STRATEGY:

A strategy used by corporations to reduce the diversity or the overall size of the operations of the company. This strategy is often used in order to
cut expenses with the goal of becoming a more financial stable business. Typically the strategy involves withdrawing from certain markets or the
discontinuation of selling certain products or service in order to make a beneficial turnaround.

The Retrenchment Strategy is adopted when an organization aims at reducing its one or more
business operations with the view to cut expenses and reach to a more stable financial position.
In other words, the strategy followed, when a firm decides to eliminate its activities through a
considerable reduction in its business operations, in the perspective of customer groups,
customer functions and technology alternatives, either individually or collectively is called as
Retrenchment Strategy.
The firm can either restructure its business operations or discontinue with it, so as to revitalize its
financial position. There are three types of Retrenchment Strategies:

1.

Turnaround

2.

Divestment

3.

Liquidation

To further comprehend the meaning of Retrenchment Strategy, go through the

following examples in terms of customer groups, customer functions and
technology alternatives.
1.

The book publication house may pull out of the customer sales through market
intermediaries and may focus on the direct institutional sales. This may be done to slash the sales
force and increase the marketing efficiency.

2.

The hotel may focus on the room facilities which is more profitable and may shut down
the less profitable services given in the banquet halls during occasions.

1. Turnaround Strategies
Turnaround strategy means backing out, withdrawing or retreating from
a decision wrongly taken earlier in order to reverse the process of
decline.

There are certain conditions or indicators which point out that a

turnaround is needed if the organization has to survive. These danger
signs are as follows:
a) Persistent negative cash flow
b) Continuous losses
c) Declining market share
d) Deterioration in physical facilities
e) Over-manpower, high turnover of employees, and low morale
f) Uncompetitive products or services
g) Mismanagement
2. Divestment Strategies
Divestment strategy involves the sale or liquidation of a portion of
business, or a major division, profit centre or SBU. Divestment is
usually a restructuring plan and is adopted when a turnaround has been
attempted but has proved to be unsuccessful or it was ignored. A
divestment strategy may be adopted due to the following reasons:
a) A business cannot be integrated within the company.
b) Persistent negative cash flows from a particular business create
financial problems for the whole company.
c) Firm is unable to face competition

d) Technological up gradation is required if the business is to survive

which company cannot afford.
e) A better alternative may be available for investment
3. Liquidation Strategies
Liquidation strategy means closing down the entire firm and selling its
assets. It is considered the most extreme and the last resort because it
leads to serious consequences such as loss of employment for
employees, termination of opportunities where a firm could pursue any
future activities, and the stigma of failure.
Generally it is seen that small-scale units, proprietorship firms, and
partnership, liquidate frequently but companies rarely liquidate. The
company management, government, banks and financial institutions,
trade unions, suppliers and creditors, and other agencies do not generally
prefer liquidation.
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.Liquidation
strategy may be difficult as buyers for the business may be difficult to
find. Moreover, the firm cannot expect adequate compensation as most
assets, being unusable, are considered as scrap.
Reasons for Liquidation include:
(i) Business becoming unprofitable

(ii) Obsolescence of product/process

(iii) High competition
(iv) Industry overcapacity
(v) Failure of strategy
COMBINATION STRATEGY: The Combination Strategy means making the use of
other grand strategies (stability, expansion or retrenchment) simultaneously. Simply, the
combination of any grand strategy used by an organization in different businesses at the same
time or in the same business at different times with an aim to improve its efficiency is called as a
combination strategy. Such strategy is followed when an organization is large and complex and
consists of several businesses that lie in different industries, serving different purposes. The
strategist has to be very careful while selecting the combination strategy because it includes the
scrutiny of the environment and the challenges each business operation faces. The Combination
strategy can be followed either simultaneously or in the sequence.

Liquidation Strategy
Definition: The Liquidation Strategy is the most unpleasant strategy
adopted by the organization that includes selling off its assets and the
final closure or winding up of the business operations. It is the most crucial and
the last resort to retrenchment since it involves serious consequences such as a sense of failure,
loss of future opportunities, spoiled market image, loss of employment for employees, etc.
The firm adopting the liquidation strategy may find it difficult to sell its assets because of the
non-availability of buyers and also may not get adequate compensation for most of its assets. The
following are the indicators that necessitate a firm to follow this strategy:

Failure of corporate strategy

Continuous losses

Obsolete technology

Outdated products/processes

Business becoming unprofitable

Poor management

Lack of integration between the divisions

Generally, small sized firms, proprietorship firms and the partnership firms follow the liquidation
strategy more often than a company. The liquidation strategy is unpleasant, but closing a venture
that is in losses is an optimum decision rather than continuing with its operations and suffering
heaps of losses.

CORPORATE RESTRUCTURING:
The term corporate restructuring is a wide & varied term. It has no legal definition as the term has not
been defined in any legal legislation. Hence, neither it has clear and precise meaning nor can it be defined
with precision.
Etymologically the term Restructuring means giving new structure or rebuild or rearrange. In this
perspective, Corporate Restructuring is defined as a process of rearranging the organizational or
business structure of the company for increased efficiency and profitable growth.
Simply stated, Corporate Restructuring is a comprehensive process by which a company can consolidate
or rearrange its organizational set up or business operations and strengthen its position so as to achieve
its short-term or /and long term objectives and establish itself as a synergetic , dynamic , continuing as
well as successful independent corporate entity in the competitive environment.
In the words of honble Justice D.Y. Chandrachud Corporate Restructuring is the means that can be
employed to meet challenges which confronts businesses.
To conclude, it is a process undertaken by a business / corporate/ any other such entity whether
proprietorship or partnership for the purpose of bringing about changes for better and to make the
business competitive.
NEED AND SCOPE OF CORPORATE RESTRUCTURING Today, corporate restructuring has become
common to the corporate sector in order to grow and survive in the present ongoing corporate
environment for increased efficiency and profitable growth. It is mainly concerned with reorganizing or
restructuring or rearranging the organizational or business activities of the company as a whole in the
form of Merger, Amalgamation or Takeover or Joint Venture etc, so as to achieve certain predetermined
objectives at corporate level. Some of such corporate objectives are as follows: Orderly redirection of the firms activities
Deploying the firms surplus funds from one business to another for profitable growth. Exploiting
the inter dependence among the present and perspective business within corporate Portfolio.
Risk reduction and

 Development of core competencies.

Therefore, when the corporate enterprises consider the scheme of restructuring their business activities
they have to take a wholesome view of the business activities so as to introduce a scheme of restructuring
at all level in a phase manner. It also aims at improving the competitive position of an individual
business, maximizing its contribution to the corporate level objectives and exploiting the strategic assets
accumulated by a business to enhance the competitive advantage. Thus, restructuring would help bringing
an edge over competitors.
NEEDS OF CORPORATE RESTRUCTURING
The various needs of undertaking the scheme of corporate restructuring in this modern competitive
business / corporate world are discussed briefly as follows: To focus on core strengths, operational synergy , and efficient allocation of managerial
capabilities and infrastructure
Consolidation and economies of scale by expansion and diversion to exploit the extended
domestic and international markets
Revival and rehabilitation of sick unit by adjusting the losses of such sick units with profits of
healthy company
Acquiring the constant supply of raw materials and access to scientific research and technological
development
Capital restructuring by appropriate mix up of loans and equity capital to reduce cost of servicing
and to increase return on capital employed

Improve the corporate performances to bring it at par with competitors.

Steps in restructuring

acquisitions and mergers:

Most acquisitions and mergers usually result in a restructure and redundancies
often occur.
Those who are fortunate enough to retain their employment will inevitably see their roles and the
organisation change.

changing market place and products (and a need to adapt the skills of the current
workforce to meet these changing demands):
Organisations need to constantly review their products and services to ensure that they meet
public demand and are competitive with the rest of the market place. This could mean that

employees may need to acquire different skills or that job roles change in order to meet this
demand and remain competitive.

economic/financial considerations:
This may not necessarily be a downturn in business; equally it could be an upturn which could
result in a major review of business operations and staffing considerations. However, if the
restructuring results in potential redundancies , it is important to consider the process that
needs to be followed.

changing technology:
Technological advances have resulted in the greater use of robotics and the electronic operation of
assembly lines, resulting in the loss of jobs for low-skilled workers and a skill shortage in the
more highly technical positions. In order for organisations to manage these changes they need to
be constantly reviewing their operations and staffing to ensure that they are not left behind.

Our guide takes you through the main stages of a restructuring exercise and will help you to ensure that:

the process is carried out fairly and to optimum advantage to the organisation

you are able to retain key employees.

OUTSOURCING STRATEGY:
Outsourcing occurs when a company retains another business to perform some of its work activities.
These companies are usually located in foreign countries with lower labor costs and a less strict
regulatory environment.
Advantages of outsourcing include:

Lower labor costs. Companies typically outsource to businesses in developing countries

where the cost of labor is significantly cheaper. Lower labor costs will improve the
company's bottom line.

Less regulations. Developing countries often have a low level of regulatory restrictions,
which can also reduce the cost of operations and increase productivity. For example, there
may not be limits on overtime or on work, health, and safety issues.

Focus on core competencies. Companies that outsource lower-level work, or work the
business is not optimized to perform, can then focus on the work activities at which they
excel. This will increase productivity, efficiency, and effectiveness. For example, a tech
company in Silicon Valley may be better off outsourcing its manufacturing operations to a
company in China so it can focus on research and development.

Fexibility:

UNIT III
ORGANIZATIONAL LIFE CYCLE (ASSIGNMENT)
STRATEGIC LEADERSHIP(ASSIGNMENT)
RESOURCE ALLOCATION: Resource allocation is a process and strategy involving a company
deciding where scarce resources should be used in the production of goods or services. A resource
can be considered any factor of production, which is something used to produce goods or services.
Resources include such things as labor, real estate, machinery, tools and equipment, technology, and

Resource allocation is
the process of assigning and managing assets in a manner that supports an
organization's strategic goals.
natural resources, as well as financial resources, such as money. Thus,

Method of Resource Allocation

In an economist's perfect world, which doesn't exist, of course, resources are optimally allocated
when they are used to produce goods and services that match consumers' needs and wants at the
lowest possible cost of production. Efficiency of production means fewer resources are expended in
producing goods and services, which allows resources to be used for other economic activities, such
as further production, savings, and investment. This basically boils down to creating what customers
want as cheaply and efficiently as possible.

TYPES OF RESOURCE ALLOCATION: We can begin by defining resource

allocation. In a broad sense, it can be defined as how things can be distributed. This
may include credit, blame, responsibility, money, time, and the like. In the science
and engineering this translates to: money, consumables, time, space, and services.
Naturally there needs to be a "fair" way to distribute these resources. This section
outlines way to distribute these resources.
Allocation by Merit
This can be seen as a rewards system of sorts. This view suggests that
rewards should be distributed according to productivity, effort, or
demonstrated ability.
o In the work place, this can be seen as salary increases, promotions,
and even layoffs.

o In the college environment, this can be seen as the distribution of

grades. As not everyone can receive an A for classes, the grades need
to be distributed reflecting a students understanding of the subject.
In aspects where a necessity is involved, such as food, shelter, and water,
this system breaks down. In impoverished countries, for example, few would
argue for denying children food because they are not as productive as adults.
Allocation by Social Worth
Allocation by social worth tends to take a practical view toward resources,
directing them toward those who appear most likely to contribute to the
common good. This view suggests that resources should move in directions
that ultimately do the greatest good for the largest number of people. Criteria
for social worth can include age, seniority, rank, and expertise.
o In the work place, this can be seen as layoffs. Generally speaking, a
senior worker will not be fired over a new worker.
o In the college environment, this can be seen as the distribution of
money to labs. Labs for graduate students and upperclassmen tend to
be better than freshman labs.
Allocation by social worth breaks down when the criteria for worth ignores
basic human rights. For example, wealth is sometimes used to measure
social worth, especially in countries with market economies. This attitude
can cause food, energy, education, medical attention, and social influence to
"flow uphill," thereby making severe imbalances in essential resources even
worse.
Allocation by Need
Allocation by need tends to view resources in terms of basic human rights.
This view suggests that every person has the same right to some minimal
level of a given resource. Obvious examples include food, shelter, and
clothes.

o In the work place, this can be seen when a company diverts funds to a
division in that company who's equipment is outdated.
o In the college environment, this can be seen as scholarships given to
students who otherwise would not be able to attend college.
Allocation by need breaks down when this criterion is applied so strictly that
it removes the incentive to produce. It's usually true that people work hardest
when they believe they will enjoy the fruits of their labors. This is also the
same reason why socialism doesn't work.
Allocation by Equal or Random Assignment
Allocation by equal or random assignment takes the view that no rational,
unbiased way can be found to distribute resources. This is the default
allocation method when no other allocation method works.
o The most obvious example of this is a lottery. When there is no
obvious way to distribute resources, a simple lottery can prove to be
the "fairest" way.
Allocation by random assignment breaks down when each portion of a
resource is simply to small to do any good. For example, dividing antibiotics
into small doses during an epidemic could make each dose so small that no
one benefits.
No simple rules for allocation can guarantee fairness under all circumstances. The
ultimate decision depends heavily on exactly what needs to be distributed and on
the specific details of each situation. The Candy case study is a perfect example of
resource allocation.
ResourceAllocationProcess TheResourceAllocationProcessisdesignedtoenable
executivestomakeinformed decisions,quickly,withoutmajorinvestmentintime,
moneyorresources.This processwillhelptoquicklydeliverbenefitsinashorttimeframe
drivenbylimited budgets. TheResourceAllocationProcessalignstheavailable
resourceswiththe organizationsmissioncriticalprocesses.Intimesofshrinking

budgetsbutsteady orincreasingdemands,somethinghastogive.TheProcesshelpsyou
decidethe areasthatcangive.TheProcessinvolvesfoursteps:
1. DefineYourMission(ifyouhaventalready),
2. InventoryYourResources,
3. InventoryYourProjects: Aquicksurveyofcurrentprojectsprovidesinsightintothe
healthoftheprojects.A surveyshouldincludeinformationsuchas:
Purpose/Goals
Budgetandstatus(Within,Over,Under)
Resources
Duration
Scheduleandstatus(OnSchedule,Late,Early)
Status(Planned,InProgress,OnHold);ifInProgresspercentcomplete IftheProject
Managercannotprovidethisinformation,quickactionmaybe requiredasthelackof
informationistellinginitself.Ifresourceinformationis unavailableforaproject,even
withyourhelpinacquiringit,considerthisprojectat thetopofthelistwhenreallocating
resources.
4. ReallocateResourcesusingaResourceAllocationMatrixdesignedtohelp you
analyzeofyourprojectsintermsofcriticalityandproductivity