 Itis a systematic attempt to look ahead in

future to foresee opportunities;

 by forecasting the likely possibilities and
scenarios at different times and
 then devising means and actions to be taken
to take advantage from them.

A primary functional managerial activity that

involves:
 Defining the organization’s goals
 Establishing an overall strategy for achieving those goals
 Developing a comprehensive set of plans to integrate and
coordinate organizational work.
 Planning is an exercise that determines in
advance:
a. The ends (What is to be done or achieved?)
b. The means (How it is to be done?)
c. The timing (When to do what?)
d. The responsibility (Who should do what?)
e. The reason (Why it should be done?)

Planning can be done for the entire organization

(Corporate planning)or a business unit(business
planning) or for a division(divisional planning) or for
employees(Personal planning)

Thus planning provides a blue print or road map for

future actions in a systematic way
 Koontz O ’Donnel
 “Planning is deciding in advance what to do, how to
do and who is to do it. Planning bridges the gap
between where we are to, where we want to go. It
makes possible things to occur which would not
otherwise occur”.

 Peter F Druker
 Planning is a continuous process of making present
entrepreneurial decisions systematically and with
best possible knowledge of their future, organizing
systematically the efforts needed to carry out these
decisions against the expectations through an
organized systematic feedback
 primary function of management
 it is an intellectual process
 It is goal oriented
 It is future oriented and involves
forecasting
 It needs to be dynamic in nature (flexible)
 It involves choosing from among
alternatives
 Planning and control are inseparable
 Purpose
 Philosophy
 Promise
 Policies
 Plans(action statements)
 Priorities
 Direction Setting
 Provides a Holistic Picture
 Planning Avoids Haphazard Actions
 Planning brings Economy in Operations
 Planning can minimize risk and uncertainties
 Estimation of the needed resources
 Better Decision-making
 Facilitates Teamwork
 Planning Provides basis for Control
 Planning provides direction
 The objectives should be specific, measurable,
agreed upon, realistic and time bound.
 Review of past performance and corresponding
feedback is very crucial input
 Identification of main issues
 Budgetary requirements and other constraints
should be taken into consideration before hand
 Timelines and milestones should be developed
 Bottlenecks and areas of concern should be
determined in advance
 Periodic reviews should be done in time
 Lack of Accurate Information
 Time Consuming Process
 Expensive
 Inflexibility
 Environmental Constraints
 False Sense of Security
 Capital Invested in Fixed Assets limits Planning
 Principle of contribution to objectives
 Every plan has to contribute positively toward the
accomplishment of enterprise objectives.

 Principle of efficiency of plans

 Efficiency is measured by the contribution of the
plan to objectives of the enterprise minus the costs
of consequences in formulating and implementing
the plan.

 Principle of primacy of planning

 Planning is the primary prerequisite for all other
functions of management. Every action of the
manager follows a planning step.
 Principle of planning premises
 Plans are based upon assumptions
 If more people in an organization use common and
consistent planning premises, the enterprise planning will
be more coordinated.

 Principle of policy framework

 If more policies, appropriate to the organization, are
expressed in clear terms and form and if manages
understand them, the plans of the enterprise will be more
consistent.

 Principle of timing
 If plans are structured to provide a network of derivatives
plans in sequence, there will be more effectiveness in
attainment of enterprise objectives.
 Principle of alternatives
 Select the plan which is the most effective and the most
efficient to the attainment of a desired goal.

 Principle of limiting factor

 Consider limiting factor in generating alternatives and
selection from alternatives.

 The commitment Principle

 Planning should cover a period which can be forecasted.
 This principle helps to determine the length of planning
period.
 Taking into the account future risk and commitments.
 The flexibility Principle
 Building flexibility in planning is beneficial, but cost
of building flexibility needs to be evaluated against
the benefits.

 The Principle of navigational change

 Manager needs to periodically check events of the
plan and redraw plans to maintain the move toward a
desired goal

 Principle of competitive strategies

 In a competitive arena, it is important to choose
plans in the light of what competitor will or will not
do and navigate based on what competitors are doing
or not doing.
 Organizing
 Staffing
 Directing
 controlling
 Objectives
 Specify future conditions
 Action
 Specified, preferred means
 Resources
 Constraints
 Implementation
 Ways and means to get intended actions
 Top down approach:
 Applicable in family managed organizations.
 This approach is based upon the assumption that
managers at higher level are professionally qualified
and well experienced
 Authority and responsibility is centralized at the top
 Lower level managers have little say in planning, they
are only involved in implementation

 Bottom up approach:
 This is based upon the assumption that planning
,thinking and doing function are closely related and
can be performed by the same manager
 High degree of flexibility in planning is there in this
approach
  A tentative plan is made at the lower level and is
communicated to higher level for review & final
approval
 This is participative approach because top level
coordinates the various sub plans originated at lower
level

 Composite approach:
 This a combination of tops down n bottom up
approach
 In this the top executives provide guidelines,
parameters and limitations under which middle and
lower level mangers are expected to formulate
tentative plans which are communicated for review
and approval upwards
 Team approach
 In this the job of initiating plans is assigned to a team
of mangers from concerned areas
 They prepare plans, initiate planning, identify need
&importance of plans, examine both internal &
external environmnet,collect information & device
alternative course of action.
 Then they submit their proposal to the chief executive
under whose command they are working.
 The ultimate authority lies with the chief executive.
 Formal planning
 Strategic planning
 Informal planning
Formal planning
structure step by step process

 Environmental Scanning
 Determining Objectives
 Constructing the Planning Premise
 Search Alternative Courses of Action
 Evaluation of Alternatives
 Selecting an Alternative
 Formulation of Derivative Plans
 Review
 Environmental scanning:
 Spotting new ideas
 Performing a SWOT analysis
 Responding to competitors pressure

 Establishment of objectives

 Planning starts with the setting of goals and objectives to be

achieved.
 Objectives provide a rationale for undertaking various
activities as well as indicate direction of efforts.
 These objectives focus the attention of managers on the end
results to be achieved.
 objectives provide nucleus to the planning process.
Therefore, objectives should be stated in a clear, precise and
unambiguous language. Otherwise the activities undertaken
are bound to be ineffective.
 objectives should be stated in quantitative terms. For
example, Number of men working, wages given, units
produced, etc.
 Hence objectives should be practical, acceptable, workable
and achievable.
 Establishment of Planning Premises
 Planning premises are the assumptions, facts n
information about the environment on the basis of
which plans are made
 Establishment of planning premises is concerned to
take such steps that avoids these obstacles to a
great extent.
 Internal premises are controllable whereas
external are non- controllable.
Internal premises External premises
Strength n weakness of firm Business conditions
Values of mgt Economic conditions
Financial position Price levels
Human resource available Technological factors
Production capacity Political environment
strategies Social factors
Policies and procedures Competitors plan
 Choice of alternative course of action
 When forecast are available and premises are
established, a number of alternative course of
actions have to be considered.
 For this purpose, each and every alternative will
be evaluated by weighing its pros and cons in the
light of resources available and requirements of
the organization.
 The merits, demerits as well as the consequences
of each alternative must be examined before the
choice is being made.
 Evaluation of alternatives
 Evaluation is done on the basis of its
advantages,disadvantages,expected results
 Common factors taken into consideration are
 Risk
 Capital requirement
 Compatibility with long term objectives
 Certain quantitative techniques are used such as
 Operational research
 Decision tree
 Software
 Computer aided simulation tools

 Selection of best alternative

 Keeping in view the vision ,mission goals of the
organization
 Formulation of derivative plans
 Derivative plans are the sub plans or secondary
plans which help in the achievement of main
plan.
 Secondary plans will flow from the basic plan.
These are meant to support and expediate the
achievement of basic plans.
 These detail plans include policies, procedures,
rules, programmes, budgets, schedules, etc. For
example, if profit maximization is the main aim
of the enterprise, derivative plans will include
sales maximization, production maximization,
and cost minimization.
 Derivative plans indicate time schedule and
sequence of accomplishing various tasks.
 Follow up/Appraisal of plans
 After choosing a particular course of action, it is
put into action.
 After the selected plan is implemented, it is
important to appraise its effectiveness.
 This is done on the basis of feedback or
information received from departments or
persons concerned.
 This enables the management to correct
deviations or modify the plan.
 This step establishes a link between planning and
controlling function.
 The follow up must go side by side the
implementation of plans so that in the light of
observations made, future plans can be made
more realistic.
 strategic planning determines where an
organization is going in the next year or
more, how it's going to get there and how it'll
know if it got there or not.
 The focus of a strategic plan is usually on the
entire organization.
 It involves the analysis and development of
the organization’s vision, mission ,overall
goals, general strategies and allocation of
resources.
 Top management is involved in strategic
planning
 SP helps to answer the following questions:
 What is the purpose of the organization
 What the organization has to do to remain competitive in
future?
 What strategies should an organization adopt to achieve
its plans?
 How much resources are needed to be allocated to
different business units to enable them to achieve their
objectives
 Earlierit was done on annual basis but now
companies are moving to a system of continuous
planning to permit quicker responses to changing
conditions and take advantage of opportunities.
 Key inputs are
 Information about external environment
 Reports about finances and operations of organization
 Step I: Environmental, Industry and Organization
Analysis
 Step II: Defining the Vision
 Step III: Defining the Mission
 Step IV: Conduct a SWOT Analysis:
 Step V: Set Key Goals and Objectives
 Step VI: Development of Strategy
 Step VII: Development of Tactics
 Step VIII: Development of Contingency Plan
 Step IX: Implementation
 Step X: Monitor the Plan
 Environmental, Industry and Organization
Analysis
 The information need would be current and likely PEST
environment in industry
 Nature and intensity of competition In industry
 SWOT analysis and current competitive position of the
organization

 Defining the vision:

 It represents what the co. intends to be in long run
 It channelize the energies of top mgt and all
employees
 E.g.: To be the world's largest exporter of Rice”
 McDonald's vision is to be the world's best quick
service restaurant experience. Being the best means
providing outstanding quality, service, cleanliness,
and value, so that we make every customer in every
restaurant smile."
 Defining the Mission
 It states the purpose of the organization and
describes why & for what it exists
 Google's mission is to organize the world's information
and make it universally accessible and useful

 Conduct a SWOT analysis:

 It clears the picture regarding both internal and external
environment
 It helps to identify the companies USP
 Determines the relative weak areas of organization that
could be exploited by competitors

 Set key goals and objectives:

 Keeping in view vision and mission of organization
 Development of strategy:
 Strategy is a coordinated course of action and overall
approach that would be adopted by an organization to
achieve its vision,mission,goals and objectives
 They are made by top mgt and communicated to lower level

 Development of Tactics:
 For implementation, strategies are further broken
down into tactics ,they are called operational plans
 Development of contingency plans:

 Implementation

 Monitor the plan

 Done by individuals
 Informal groups
 Small business houses

 In this steps of planning ,are not followed in

a proper sequence
 It depends upon the wishes and convenience
of the individual
4 fundamental elements of plans are:
 Objectives:
 They specify future conditions

 Action:
 They are specified and preferred means of to achieve
the objectives

 Resources'

 Implementation
 Goals represents the destination, whereas
the plan is the path chosen to reach there.
 They are the outcome of planning process
 They define the framework within which the
managerial efforts operate in order to
achieve the desired goals.
 They define the schedules for different
activities along with timeline and resource
allocation
 Serves as a fundamental document for
seeking support
 Helps management clarify, focus and
research prospects of their business
 Provide agreed upon and logical framework
within the organization to pursue business
strategies.
 Offers standards against actual performance
 Helps individuals avoid mistakes and hidden
opportunities
tactical
Tactical Medium term
 Classification according to breadth:
1. Strategic plans:
 They apply to the entire organization
 These plans establish companies vision, mission,
goals and objectives
 They cover long time frame and broader aspect of
the organization
2. Tactical plans
 These plans indicate the actions that major
departments and subunits of the organization should
take to achieve the short term goals of the
organization
 These plans are concerned with getting things done
rather than what to be done
 They are developed by middle level mangers in
accordance with strategic plans
 3. Operational plans:
 They are made for a particular operational area of
the organization
 They are guide to departmental mangers for day to
day operations
 They tend to cover short time frames
 They are also called standing plans
 Types
1. Policies:
 They are general statements that provide guidelines
for thinking and decision making in an organization
for recurring situations
 E.g. marketing policy ,HR policy

2. Procedures:
 They provide sequence of steps which must be
followed for carrying regularly occurring activities
 3. Methods:
 It describes in detail how each step needs to be
handled and executed
E.g. setting up of ATM machine

4. Rules:
 It tells what need to be done and what needs to be
avoided
 EG rules for coming late

Classification according to Time frame

1. Long term plans(beyond 5 yrs)

2. Medium term plans(between 3 to 5 yrs)
3. Short term plans(1 yr or less)
 Classification according to specialty

1. Directional plans
 They provide focus but do not lock managers
into specific course of action
 They are Flexible plans that set out general
guidelines, provide focus, yet allow discretion
in implementation.

2. Specific plans
1. They are clearly defined and have no room for
interpretation
 Standing plans:
 They are operational plans that provide
guidelines for the activities performed
repeatedly.
 E.g. request for a new mobile connection

 Single use plans:

 They are one time plans
 Specially designed to meet the need of a unique
situation
 Types:
 Programmes:
 They coordinate a complex set of activities to achieve an
important non recurring goal.
 They clearly spell out goals,policies,procedures,rules,tasks
assignments ,steps to betaken and resources to be employed
to carry out a given course of action
 They are supported by budgets.
 E.g. one yr programs to improve customer service quality

 Projects:
 It is similar to programmes but smaller in scale and less
complex.
 They help in precise allocation of duties and effective control
and easy implementation
 E.g. improvement in productivity
 Budgets:
 It is statement of expected results and corresponding
investment /expenditure expressed in numeric terms for a
given period of time
 They may be developed in financial terms or man hours or
machine hours or units/day.

 Classification of budgets
1. According to Time
Long term budget
Short term budget

2.Classification of Financial Budgets

Revenue budget
Expenditure budget
Profit budget
Cash budget
Master budget

3.Classification on the basis of flexibility

Fixed budget
Flexible budget
 Classification of budgets according to
Time

 Long term budgets:

 Shoe long term planning of business
 Made by top level management
 Usually for 5 to 10 yrs
 They guide the implementation of strategic plans

 Short term budgets:

 Usually for 1 to 2 yrs
 Guide implementation of operational plans
 FMCG companies employ STB
 Classification of budgets according to
flexibility
 Fixed budgets:
 They prepared under static conditions where
revenue, expenditure are fully predictable for a
given level of activity and for a given period

 Flexible budgets:
 Due to uncertainties in business environment 2 or
more scenarios are predicted and subsequent
plans are made for each of the scenarios
 Classification of budgets according to Time
 Revenue budget:
 Expected revenue from different products produced by the
organization
 Expenditure budget:
 Determine likely expenditure to be incurred on different
activities
 Profit budget:
 Combination of both revenue and expenditure budget to
know overall contribution to profits
 Cash budget;
 Determines the likely cash flow in near future to meet the
expenses
 Master budget:
 It is the integration of several separate financial budgets
 Made by top level management
 Mission

Objectives

Policies

Strategies

Rules

Procedures

Programmers

budgets
 Itis a general statement which is formulated
by an organization for the guidance of its
personnel.

 Objectivesare first framed and then policies

are made to achieve them.

 They provide rules for action for achieving

organization’s specific objectives

A rigid policy becomes a rule.

 According to Koontz & O'Donnell
 Policies were identified as guides to thinking in
decision making. They assume that when
decisions are made, these will fall within certain
boundaries”

 According to George Terry

 Policy is a verbal, written or implied overall
guide setting up boundaries that supply the
general limits and direction in which managerial
actions will take place
 It is standing plan which provides an answer to
the recurring problem of a similar nature. They
tell what manger should do rather than what he
is doing

 It limits the area within which the decision is to

be made

 They are framed by all the mangers in an

organization
 Should be comprehensive
 Should ensure good understanding and harmony between
different departments
 Should be based upon facts and sound judgment
 Should be uniform in its application
 Should reflect its intended objective
 Should be clear, definite and positive
 Should be well communicated and clearly understood
 Should be in writing
 Should be reasonable ,permanent and stable
 Should be periodically reviewed to check its effectiveness
 Should incorporated all possible contingencies
 Should never be conceived in haste
 No universal solution
 Suitable under certain circumstances
 Answer-constantly evaluate the policies

 No instant solution
 They only provide guidelines

 Dampen human initiative

 Mangers are used to follow the policies
 Major/basic policy
 They give a unified direction to an enterprise and imply a
commitment to the resources
 They are formulated by Top management
 E.g. development of new product

 Supportive policy
 They help in the implementation of major policy
 E.g. research to find out the needs of consumer

 Minor policies
 They relate to routine matters of less importance
 E.g. hire casual workers in case of emergency
 It refers to the determination of the purpose
and basic long term objectives of an
enterprise
 and the adoption of different courses of
action, with proper allocation of resources in
order to achieve the aims.
 It serves a master plan of the company.
where competitors' plan acts a background of
its plans
 Where the company is now?
 Where does it want to go in future?
 What should be done to take it there?
 The strategy of Royal Dutch/ Shell is as
follows:
 "Our aim is to be world leaders in energy and
petrochemicals. We will grow the value of Shell
by delivering robust profitability and leveraging
our competitive edge. Our success will ensure
highly competitive returns to shareholders and
give us the financial flexibility to take advantage
of new commercial opportunities. Profits are also
a vital part of our ability to contribute to society
and meet the economic, environmental and
social requirements of sustainable development."
 Strategy is a means to achieve an
organization's missions and objectives.
 Corporate level strategy
 Formulated at the top-level, corporate strategy addresses the
overall business objectives.
 This strategy is ideal for those organizations having more than
one business unit.
 Two approaches are:
 values based approach and
 corporate portfolio approach

• Value-based approach:
 Value-based approach takes into account the individual's beliefs
and values, and thereafter sets the organization's objectives.
 These objectives not only act as a guide to the firm to conduct
its business, but also enables them to do business ethically.
• Corporate portfolio approach:
 The top management evaluates business units (on the basis of
marketplace and organizational structure), and an appropriate
strategy is suggested for each unit, to improve its overall
performance within the organization
 Business level strategy:
 Unlike the Corporate strategy (deciding what
business to be in), Business strategy focuses on a
firm's competitiveness in the marketplace.
 Developed by the heads of respective departments,
and approved by the top management; these
strategies are designed in response to the changing
environment and competitive conditions.

 Functional level strategy:

 They are designed to emphasize functional
competencies (research and development,
manufacturing, finance etc.), so that firms can gain
the competitive advantage.
 These strategies are designed and developed by the
functional heads, and are approved by the top
management.
 Stability strategy
 No change strategy
 Profit strategy
 Proceed with caution strategy
 Growth strategy
 Growth through concentration
 Growth through integration
 Growth through diversification
 Growth through co-operation
 Growth through internationalization
 Retrenchment or retreat strategy
 Turnaround strategy
 Disinvestment strategy
 Liquidation strategy
 Combination strategy
  This strategy is adopted when the company is
satisfied
 with its present position.
 Same set of products
 Serving the same consumer group
 And maintaining the same market group

 The main reasons for an organization, to adopt

this strategy are when it wants to take low risk,
choose stability and anticipate the changes, to
recover in the business.
 Kellogg'sis the classic example for stability
strategy. Its emphasis on breakfast food, has
given it a unique niche to explore. The
company's management has little or no
interest to diversify into other areas.
 No change strategy:
 Co adopts this type of strategy when the external
environment is predictable(no major opportunities
and threats) and organizational environment is stable.
 Under such conditions it is prudent for the co to
continue with the present set of strategies

 Profit strategy:
 Sometimes due to unfavorable external environment
its is very difficult to sustain the profitability.
 The cos. Assume that this situation is temporary and
the old situation will soon return
 Now the firms try to sustain the profitability by
controlling the expenses, controlling cost etc
 This strategy is helpful only for short term.
 Proceed with caution strategy:
 This strategy is employed by the firms that wish
to trust the grounds before moving ahead with
full fledged grand strategy
 or by those firms which had a rapid pace of
expansion and now wish to rest for a while
before moving ahead
 The major objective of a pause is to let the
strategic changes seep down the organizational
level, allow structural changes to take place and
let the system adopt the new strategies
 Growth strategies enable the organization to
expand, either through merger, acquisitions,
expansion and diversification of its operations
 Here the management is not satisfied with its
present status, the environment is changing,
favorable opportunities are available
 This could be done with the help of product
development market development,
diversification, vertical integration or merger
 Growth through concentration:
 Concentration focuses on growth through single
product or a small number of closely related
products.
 Concentration usually takes place through
 market development (gaining a larger share of current
market or expanding new ones),
 product development (improving a basic product or
service
 or expanding into closely related product or service)

 or horizontal integration(adding one or more

businesses).
 This strategy applies when industry possesses
high growth potential and the firm should be
strong enough to sustain the growth
 Growth through integration:
 In this the firm continue to serve the same customers
but increase the scope of its business.
 This is done either through forward or backward
integration
 In backward integration the firm produces its own
inputs
 In forward integration firm disposes its own outputs.
 E.g. Ford popularized the concept of vertical integration
(backward).here it manufacture everything from nuts and
bolts to car framework to enjoy a competitive advantage.
 The automaker (Maruti) sells their cars through the
company's own distribution outlets, and follows forward
integration.
 While adopting this strategy the firm must take into
account the alternative cost of make or buy
 Growth through diversification:
 Diversification involves entering into a new business, that is
distinct from the current business.
 Diversification can also take place, to reduce the risk
associated with one's business and spreading over several
businesses
 If an organization diversifies into an unrelated business, it
is then known as conglomerated diversification. But if an
organization diversifies into a related, but distinct business,
concentric diversification occurs.
 E.g. GE is the classic example for conglomerated
diversification. It diversified into 12 areas, such as Aircraft
engineering, appliances, information systems and NBC,
which are not related to each other.
 Britannia Industries Limited (BIL) has adopted a
diversification strategy to become the market leader in the
food industry. It diversified into related businesses such as
cheese, dairy products and additional bakery products.
 Growth though co-operation:
 This strategy takes into account the possibility of
Mutual cooperation with competitors .
 This could be in the form of mergers, acquisitions or
joint ventures

 Growth through internationalization:

 To take the advantage of the markets beyond national
boundaries ,the firm start exporting its products or
services to foreign countries
 This strategy focuses on the desire or need to
reduce organizational operations, usually
through cost reductions (cutting on non-
essential expenditure) and asset reduction
(disposing off equipment, selling land etc.).
 This strategy is adopted during
 the period of recession,
 tough competition
 Scarcity of resources
 Re-organization of company
 Harvest strategy:
 Harvest strategy entails minimum amount of
investment with maximum short-term profits.
 Turnaround strategy:
 Turnaround strategy is designed to reverse the process
of decline.
 Disinvestment strategy:
 If the company is not doing well, it can sells its loss
making units, curtail product lines or divest its
business.
 Bankruptcy:
 A situation where the company is unable to pay its
debts, and seeks legal support. After it regains its
financial position, it can repay its debts.
 This represents the combination of the 3
strategy
 In it the companies adopt different strategies
in different areas depending upon there
present state .
 Competitive Advantage
 An organization’s distinctive competitive edge.
 Quality as a Competitive Advantage
 Differentiates the firm from its competitors.
 Can create a sustainable competitive advantage.
 Represents the company’s focus on quality
management to achieve continuous improvement and
meet customers’ demand for quality.
 Sustainable Competitive Advantage
 Continuing over time to effectively exploit resources
and develop core competencies that enable an
organization to keep its edge over its industry
competitors.
Strategies Policies
They are intensive course of They are general statements
action designed to tackle that provide guidelines to
specific situations decision makers
They relate to SWOT of It exhibits the attitude and
organization approach of the organization on
important matters and issues
They provide move or counter They provide guidance and
move to the changing direction
environment
They are single use plans to They are repetitive in nature
tackle a specific situation
 When organization’s corporate strategy has
number of businesses Managers manage portfolio
(or collection) of businesses using a tool called
corporate portfolio matrix such as the BCG
Matrix.
 This matrix provide a framework for
understanding diverse businesses and help
mangers establish priorities for allocating
resources
•This is the first portfolio matrix developed by Boston
Consultancy Group.
•It introduced the idea that an organization’s various
businesses could be evaluated using this matrix.
•This matrix helps to identify which business units are
offering high potential and which are draining
organizational resources
•This tool takes into consideration market share and
industry growth rate
•The business unit is evaluated using SWOT analysis and
then placed in one of the 4 categories
 It is a widely used portfolio management method for
evaluating the performance of business units.
 There are four quadrants in a BCG matrix:
 question marks,
 stars,
 cash cows and
 dogs.
 On the X axis, market growth is measured, which
indicates the level of market attractiveness On the Y
axis, market share is measured, that serves as a
measure of the company's strength in the market
 Question marks:
 Question marks, are low-market share business units, in a
high-growth market. They require a lot of cash, for
maintaining the market share.
 Any business has to think between building a question
mark into stars or whether they have to be phased out.
 Stars:
 Stars are high-growth, high-market share businesses.
 they need heavy investment for financing their rapid market
growth and to maintain their market share.
 Eventually, they turn into cash cows, when their markets
mature and sales growth slows down

 Cash cows:
 Cash cows are low-growth and high-share businesses
 Such established and successful SBU's, require less
investment to maintain their market share.
 Mangers should milk cash cows as much as they can.
 They generate a lot of surplus that a company can use to
invest in other businesses.(stars n question marks)

 Dogs:
 Dogs are low-growth and low- market share businesses. They
may generate enough surplus to maintain themselves, but do
not hold out the promise to be a large source of cash.
 So they should be sold off or liquidated
 This model helps managers to create a sustainable
competitive edge
 An industry analysis is one using 5 force model
 Threat of New Entrants
 The ease or difficulty with which new competitors can
enter an industry.
 Threat of Substitutes
 The extent to which switching costs and brand loyalty
affect the likelihood of customers adopting substitutes
products and services.
 Bargaining Power of Buyers
 The degree to which buyers have the market strength
to hold sway over and influence competitors in an
industry.
 Bargaining Power of Suppliers
 The relative number of buyers to suppliers and
threats from substitutes and new entrants affect
the buyer-supplier relationship.
 Current Rivalry/r
 Intensity among rivals increases when industry
growth rates slow, demand falls, and product
prices descend.
 Porterin his book Competitive Advantage in
1985, argues that businesses must focus on
areas of capability
 where they have a distinct advantage relative to
their competitors in their target markets.
 They need to concentrate on one type of
competitive advantage to achieve a distinct
position in that market
 These strategies are also called 4 generic
strategies
 Strategies Wide Narrow
Cost leadership Yes
Differentiation Yes
Cost focus Yes
Focused differentiation yes

1.Cost leadership strategy:

•Keeping cost and price low in comparison to competitors for a wide
market
•Cost Leadership requires a company to develop economies right
across the organization, to consistently reduce costs across their
entire produce line.
•For this mangers put pressure on R &D to develop products cheaply,
production mangers to reduce cost n marketing managers to reach
the wide customers as inexpensively as possible.

2.Differentaition strategy:
•Offering unique and superior products to wide market
•This strategy is pursued by the companies trying to create brands to
differentiate themselves from the competitors
  As products are unique and expensive the managers have to
spend more on R&D ,marketing and customer service.
 E.g horlics ,complain
 Cost focus strategy:
 Keeping both costs and prices low for a narrow market
 This strategy is executed with low end products sold in
discounted stores
 E.g. low cost apparels

 Focus differentiation strategy:

 Offering unique and superior value products to a narrow
market
 The product differs from competitive offerings in various
ways, and better meets the needs of certain customers in
the target segment, emphasizing qualities along dimensions
 E.g.rolls-royce,BMW
 It is model that graphs the stages of product or
service during the life of its marketability
 Each product may have a different life cycle
 PLC determines revenue earned
 Contributes to strategic marketing planning
 May help the firm to identify when
a product needs support, redesign,
reinvigorating, withdrawal, etc.
 May help in new product development planning
 May help in forecasting and managing cash
flow
 Sales Low sales

Costs High cost per customer

Profits Negative
Create product awareness
Marketing Objectives and trial

Product Offer a basic product

Price Use cost-plus

Distribution Build selective distribution

Advertising Build product awareness among early

adopters and dealers

Cost focus or focused differentiation strategy should be followed

 Growth Stage of the PLC
This is the most profitable stage
Sales Rapidly rising sales

Costs Average cost per customer

Profits Rising profits

Marketing Objectives Maximize market share

Offer product extensions, service,
Product warranty
Price Price to penetrate market

Distribution Build intensive distribution

Advertising Build awareness and interest in the

mass market

Cost focus or focused differentiation strategy should be followed

 Maturity Stage of the PLC

Sales Peak sales

Costs Low cost per customer

Profits High profits

Marketing Objectives Maximize profit while defending

market share
Product Diversify brand and models

Price Price to match or best competitors

Distribution Build more intensive distribution

Advertising Stress brand differences and benefits

 Decline Stage of the PLC

Sales Declining sales

Costs Low cost per customer

Profits Declining profits

Marketing Objectives Reduce expenditure and milk the brand

Product Phase out weak items

Price Cut price

Go selective: phase out unprofitable
Distribution outlets
Advertising Reduce to level needed to retain
hard-core loyal customers
 Strategic
Flexibility
 New Directions in Organizational Strategies
 e-business
 customer service
 innovation
• Know what’s happening with strategies currently
being used by monitoring and measuring results.
• Encourage employees to be open about disclosing and
sharing negative information.
• Get new ideas and perspectives from outside the
organization.
• Have multiple alternatives when making strategic
decisions.
• Learn from mistakes.
 The Internet allows businesses to:
 Create knowledge bases that employees can tap
into anytime, anywhere.
 Turn customers into collaborative partners who
help design, test, and launch new products.
 Become virtually paperless in specific tasks such
as purchasing and filing expense reports.
 Manage logistics in real time
 Change the nature of work tasks throughout the
organization.
 Cost Leadership
 On-line activities: bidding, order processing, inventory
control, recruitment and hiring
 Differentiation
 Internet-based knowledge systems, on-line ordering and
customer support
 Focus
 Chat rooms and discussion boards, targeted web sites
 Giving the customers what they want.
 Communicating effectively with them.
 Providing employees with customer service
training.
 Possible Events
 Radical breakthroughs in products.
 Application of existing technology to new uses.
 Strategic Decisions about Innovation
 Basic research
 Product development
 Process innovation
 First Mover
 An organization that brings a product innovation
to market or use a new process innovations
• Advantages • Disadvantages
 Reputation for being  Uncertainty over exact
innovative and industry direction technology and
leader market will go
 Cost and learning benefits  Risk of competitors
 Control over scarce imitating innovations
resources and keeping  Financial and strategic risks
competitors from having  High development costs
access to them
 Opportunity to begin
building customer
relationships and customer
loyalty