Strategic Management MMS Semester III University Paper

Commonly Asked Questions (7 to 10 marks):

1. GE matrix with suitable examples from service industry.
2. Importance of criteria weightages in application of GE matrix analysis?
3. Limitations need to be considered while applying GE matrix analysis.

4. Porter’s 5 forces model with example.

5. Use of Porter’s 5 forces model in strategic mgmt. describe its analysis in mobile phone industry.
6. State criteria for defining Bargaining Power.

7. If company has many cash cows and less stars than what should be companies strategic focus address.
8. Examples and Limitations of BCG matrix
9. Explain BCG matrix

10. Blue ocean strategy with respect to hospitality industry. Give suitable example.
11. Differentiate blue ocean and red ocean strategy
12. Purple ocean strategy with suitable example

13. McKinsey’s 7S model with example

14. Conditions in applying McKinsey’s 7S model
15. Limitations in applying McKinsey’s 7S model

16. Ansoff Matrix

17. Advantages of M & A.

Strategic Management (SM) - Introduction

Meaning and Concept :

The term ‘strategic management’ is used to denote a branch of management that is concerned with the
development of strategic vision, setting out objectives, formulating and implementing strategies and
introducing corrective measures for the deviations (if any) to reach the organization’s strategic intent. 

It means to develop and implement an organization’s competitive strategy to meet the uncertainties.
Although the concept of ‘strategy’ was originally developed in military, it became very popular in the
business world. Strategic mgmt is identifying and describing strategies that managers can carry to achieve
better performance and a competitive advantage for their organization. An organization has competitive
advantage if its profitability is higher than others in its industry.

It is applicable to all types of organizations: Business, NGO, public or private, religious or social,
educational institutions, sports, hotels and restaurants, retail shops, service organizations like banking and
insurance or service providers, hospitals and clinics and organized institutions. It also helps an organization
to gain competitive advantage and improve market share. Managers conduct SWOT analysis (Strengths,
Weaknesses, Opportunities, and Threats). They utilize strengths, minimize organizational weaknesses, make
use of arising opportunities from the business environment and understand threats. It is more about
specifying organization’s vision, mission and objectives, environment scanning, crafting strategies,
evaluation and control.

SM Process:
Strategic management is the process through which managers undertake efforts to ensure long-term
adaptation of their organization to its environment. It involves developing and implementing an
organization’s competitive strategy. It evaluates and controls the business, industries in which an
organization is involved; evaluates its competitors, sets goals and strategies to meet all existing and potential
competitors. By determining a strategy, organizations can make logical decisions and develop new goals
quickly to keep pace with the changing business environment.

It typically involves:
 Analyzing internal and external strengths and weaknesses.
 Formulating action plans.
 Executing action plans.
 Evaluating if any action plans have been successful or not and make changes when desired results are not
being produced.

The process has following 4 steps:

1. Environmental Scanning- It refers to a process of collecting, scrutinizing and providing information for
strategic purposes. It helps in analyzing the internal and external factors influencing an organization.
After executing the environmental analysis process, management should evaluate it on a continuous basis
and focus to improve it.
2. Strategy Formulation- It is the process of deciding best course of action for achieving organizational
objectives and purpose. Here, managers formulate corporate, business and functional strategies.
3. Strategy Implementation- This implies making the strategy work by putting the organization’s chosen
strategy into action. It includes designing the organization’s structure, distributing resources, developing
decision making process, and managing human resources.
4. Strategy Evaluation- It is the final step. The key strategy evaluation activities are: appraising internal
and external factors that are the root of present strategies, measuring performance, and taking corrective
actions. Evaluation makes sure that the organizational strategy meets the objectives.

Importance of SM
 It guides the company to move in a specific direction.
 It defines organization’s goals and fixes realistic objectives, which are in alignment with the company’s
vision.
 It assists the firm in becoming proactive
 It makes a company analyze the actions of the competitors and take necessary steps to compete in the
market.
 It acts as a foundation for all key decisions of the firm.
 It attempts to prepare the organization for future challenges and play the role of pioneer in exploring
opportunities and also helps in identifying ways to reach those opportunities.
 It ensures the long-term survival of the firm while coping with competition and surviving the dynamic
environment.
 It assists in the development of core competencies and competitive advantage that helps in the business
survival and growth.

Short notes on:

SWOT MATRIX

SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats. 

Internal factors: Strengths (S) and Weaknesses (W) in which a manager has some measure of control.
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External factors: Opportunities (O) and Threats (T) in which a manger has no control.
It is the most renowned tool for audit and analysis of the overall strategic position of the business and its
environment.

SWOT analysis provide information that helps in synchronizing the firm’s resources and capabilities with
the competitive environment in which the firm operates.

Strengths- These are the beneficial aspects of the organization or the capabilities of an organization, which
includes human competencies, process capabilities, financial resources, products and services, customer
goodwill and brand loyalty. Examples: Huge financial resources, broad product line, no debt, committed
employees, etc.

Weaknesses – These are the qualities that prevent organization from accomplishing their mission and
achieving our full potential. These deteriorate influences on the organizational success and growth.

Opportunities - Opportunities are presented by the environment within which our organization operates.
These arise when an organization can take benefit of conditions in its environment to plan and execute
strategies that enable it to become more profitable. Organizations can gain competitive advantage by making
use of opportunities.

Threats - Threats arise when conditions in external environment affect the profitability of the organization’s
business. Examples of threats: Unrest among employees; ever changing technology; increasing competition
leading to excess capacity, price wars and reducing industry profits; etc.

Advantages of SWOT Analysis:

a. It is a source of information for strategic planning.
b. Builds organization’s strengths.
c. Reverse its weaknesses.
d. Maximize its response to opportunities.
e. Overcome organization’s threats.
f. It helps in identifying core competencies of the firm.
g. It helps in setting of objectives for strategic planning.
h. It helps in knowing past, present and future so that by using past and current data, future plans can be
chalked out.

Limitations of SWOT Analysis

a. Price increase;
b. Inputs/raw materials;
c. Government legislation;
d. Economic environment;
e. Searching a new market for the product which is not having overseas market due to import restrictions;
etc.
Internal limitations may include -
a. Insufficient research and development facilities;
b. Faulty products due to poor quality control;
c. Poor industrial relations;
 d. Lack of skilled and efficient labor; etc

SWOT Analysis of Google:

Strengths Weaknesses
 Market Leader in Search Engines  Excessive Reliance on Secrecy
 Ability to Generate User Traffic  Falling Ad Rates
 Revenue from Advertising and Display  Overdependence on Advertising
 Introduction of Android and Mobile Technologies.  Lack of Compatibility with next generation
devices.
Opportunities Threats
 Android Operating System  Competition from Facebook
 Diversification into non-Ad Business Models  Mobile Computing
 Google Glasses and Google Play
 Cloud Computing

VUCA (Volatility, Uncertainty, Complexity. Ambiguity)

VUCA stands for volatility, uncertainty, complexity, and ambiguity. It discusses systemic failures and

behavioural failures, which are characteristic of organisational failure.

 V = Volatility. The nature and dynamics of change, and the nature and speed of change forces and
change catalysts.
It refers to the speed of change in an industry, market or the world in general. It is associated with
fluctuations in demand, turbulence and short time to markets and it is well-documented in the literature on
industry dynamism. The more volatile the world is, the more and faster things change.

 U = Uncertainty. The lack of predictability, the prospects for surprise, and the sense of awareness and
understanding of issues and events.
It refers to the extent to which we can confidently predict the future. Uncertain environments are those that
don’t allow any prediction, also not on a statistical basis. The more uncertain the world is, the harder it is to
predict.

 C = Complexity. The multiplex of forces, the confounding of issues, no cause-and-effect chain and
confusion that surrounds organization.
It refers to the number of factors that we need to take into account, their variety and the relationships
between them. The more factors, the greater their variety and the more they are interconnected, the more
complex an environment is. Under high complexity, it is impossible to fully analyze the environment and
come to rational conclusions. The more complex the world is, the harder it is to analyze.

 A = Ambiguity. The haziness of reality, the potential for misreads, and the mixed meanings of
conditions; cause and effect confusion.
It refers to a lack of clarity about how to interpret something. A situation is ambiguous, when information is
incomplete, contradicting or too inaccurate to draw clear conclusions. It refers to vagueness in ideas and
terminology. The more ambiguous the world is, the harder it is to interpret

It helps an organization to:

1. Anticipate the issues that shape
2. Understand the consequences of issues and actions
3. Appreciate the interdependence of variables
4. Prepare for alternative realities and challenges
5. Interpret and address relevant opportunities
 PLC (Product Life Cycle)

A new product progresses through a sequence of stages from Introduction, Growth, and Maturity to Decline.
This is called the Product Life Cycle Model.

The product life cycle has 4 very clearly defined stages, each with its own characteristics that mean different
things for business that are trying to manage the life cycle of their particular products.

Introduction Stage – This stage of the cycle could be the most expensive for a company launching a new
product. The size of the market for the product is small, which means sales are low, although they will be
increasing. On the other hand, the cost of things like research and development, consumer testing, and the
marketing needed to launch the product can be very high, especially if it’s a competitive sector.

Growth Stage – It is typically characterized by a strong growth in sales and profits, and because the
company can start to benefit from economies of scale in production, the profit margins, as well as the overall
amount of profit, will increase. Thus, businesses can invest more money in the promotional activity to
maximize the potential of this growth stage.

Maturity Stage – Here, the product is established and the aim for the manufacturer is now to maintain the
market share they have built up. This is the most competitive time for most products and businesses need to
invest wisely in any marketing they undertake. They also need to consider any product modifications or
improvements to the production process which might give them a competitive advantage.

Decline Stage – Eventually, the market for a product will start to shrink, and this is what’s known as the
decline stage. This shrinkage could be due to the market becoming saturated or because the consumers are
switching to a different type of product. The decline is inevitable; still, companies can make some profit by
switching to less-expensive production methods and cheaper markets.

For example – If Samsung launches a new mobile phone, it knows that the mobile will grow for 1 or 2
months, it will then reach maturity for 3 to 6 months and then the model will start declining because
consumers start searching for new models. On an average, a single product in the portfolio of Samsung
Smartphone survives for 2 – 3 years at the max, even though product series like Galaxy or Note might
survive longer.

Benefits of PLC
 Strategies – It helps in defining the strategies which can be used based on the life cycle stage. So if a
product is in growth stage, thus a lot of advertising and investments are needed to keep the product in the
growth stage. Thus, strategizing becomes easier with the Product life cycle.
 Decision making: Product life cycle helps managers with decision making because it has the sales data
as well performance over time data. The combination of these 2 can help managers take decisions faster.
 Forecasting sales becomes easier: It is easier to forecast how a product will move through the product
life cycle and therefore, what levels of sales will it achieve.
 Competitive advantage – A marketing manager can also run the product life cycle of
competitor’s products besides running their own. This gives a good insight into the preparations the
competitors must be going through. Accordingly, the firm doing this analysis has a competitive
advantage as it can take one step ahead of the competitor.
Example– Competitors product is in the introductory stage whereas the company’s product is in the maturity
stage. The mature product starts advertising and pulling customers so that the newer product never takes off.
Or alternatively, the company can themselves introduce a new product which competes with the competitor’s
product.
 Saying Goodbye – It’s always hard to say goodbye to a product. PLC is the perfect measure of when to
say goodbye to a product and it can help marketing managers with the decision to eliminate a product
from their portfolio when the sales has declined far below the market average.

Limitations of the Product Life Cycle

 Fluctuations in sales data – In PLC, the graph is completely dependent on sales data. Thus if there are
fluctuations in the sales data, then the graph is useless and cannot be used to predict precisely the
movement of products or the overall product rise and decline. Such fluctuations can arise due to
production issues, seasonal sales of the product or due to any other reason.
 Delay in sales data – There is delay in collecting and analyzing the sales data. Sales are generally
recorded after the movement of goods and besides this, the actual movement of one product from one life
cycle to another might be recorded months down the line. This is due to delay in analytics.
 Varying market conditions – There may be a variance in the sales data due to varying market
conditions. Thus, products which are hit in one place might not be hit in other regions due to the
differences in consumption patterns of those regions.
 Effect of other elements – The other elements like Price, Place, Promotions, People and Packaging also
affect PLC. Overall marketing, logistics, price has an effect on the sales of the product and hence the
stages.
 Not applicable to brands or services – PLC is generally applicable to products only and not applicable
to brands or services. Example: Microsoft has so many products which have come and gone but this
does not mean that the brand, Microsoft is in Maturity stage or decline stage.

BCG (Boston Consulting Group) Matrix

Boston Consulting Group (BCG) Matrix is a 4 celled matrix (a 2 * 2 matrix) developed by BCG, USA. It
is the most renowned corporate portfolio analysis tool. It provides a graphic representation for an
organization to examine different businesses in it’s portfolio on the basis of their related market share and
industry growth rates.
It is a 2 dimensional analysis on management of SBU’s (Strategic Business Units). It is a comparative
analysis of business potential and the evaluation of environment. It is a corporate planning tool, which is
used to portray firm’s brand portfolio or SBUs on a quadrant along relative market share axis (horizontal
axis) and speed of market growth (vertical axis) axis.
It is also called as growth-share matrix which is a business tool, which uses relative market share and
industry growth rate factors to evaluate the potential of business brand portfolio and suggest further
investment strategies.

BCG matrix has 4 cells, with the horizontal axis representing relative market share and the vertical axis
denoting market growth rate. The mid-point of relative market share is set at 1.0. If all the SBU’s are in same
industry, the average growth rate of the industry is used. While, if all the SBU’s are located in different
industries, then the mid-point is set at the growth rate for the economy.
Resources are allocated to the business units according to their situation on the grid. The 4 cells of this
matrix have been called as stars, cash cows, question marks and dogs. Each of these cells represents a
particular type of business.

1. Stars- Stars represent business units having large market share in a fast growing industry. They may
generate cash but because of fast growing market, stars require huge investments to maintain their lead.
Net cash flow is usually modest. SBU’s located in this cell are attractive as they are located in a robust
industry and these business units are highly competitive in the industry. If successful, a star will become
a cash cow when the industry matures.

2. Cash Cows- It represents business units having a large market share in a mature, slow growing industry.
It requires little investment and generates cash that can be utilized for investment in other business units.
These SBU’s are the corporation’s key source of cash, and are specifically the core business. They are
the base of an organization. These businesses usually follow stability strategies.

3. Question Marks- This represents business units having low relative market share and located in a high
growth industry. They require huge amount of cash to maintain or gain market share. They require
attention to determine if the venture can be viable. Question marks are generally new goods and services
which have a good commercial prospective. There is no specific strategy which can be adopted. If the
firm thinks it has dominant market share, then it can adopt expansion strategy, else retrenchment strategy
can be adopted. Most businesses start as question marks as the company tries to enter a high growth
market in which there is already a market-share.

4. Dogs- Dogs represent businesses having weak market shares in low-growth markets. They neither
generate cash nor require huge amount of cash. Due to low market share, these business units face cost
disadvantages. Generally retrenchment strategies are adopted because these firms can gain market share
only at the expense of competitor’s/rival firms. These business firms have weak market share because of
high costs, poor quality, ineffective marketing, etc. Number of dogs should be avoided and minimized in
an organization.

Benefits of the matrix:

 Easy to perform;
 Helps to understand the strategic positions of business portfolio;
 It’s a good starting point for further more thorough analysis.

Limitations of BCG Matrix

 BCG matrix classifies businesses as low and high. Thus, the true nature of business may not be reflected.
 Market is not clearly defined in this model.
 High market share does not always leads to high profits.
 There are high costs also involved with high market share.
 Growth rate and relative market share are not the only indicators of profitability.
 This model ignores and overlooks other indicators of profitability.
 At times, dogs may help other businesses in gaining competitive advantage.
 This 4-celled approach is considered as to be too simplistic.

BCG MATRIX OF AMUL 

1. Cash Cows: There are 3 products of Amul under cash cow category: Amul Milk, Amul Butter and
Amul Cheese. The products hold high. Amul has also introduced a number of new product variations for
different customer segments so as to maintain its market leadership.
For Ex: Apart from its basic version of Butter and Milk, Amul also launched, Amul Butter Lite, Amul Tazza
Milk and Amul Gold Milk to target customers who are more health conscious.

2. Stars: Amul Ice cream and Amul Ghee are two products that can be considered as Stars of the
company. These are the product which have a high market share and holds a good potential to grow in
the future as well.

3. Question Mark: Amul Lassi has been marketed with the aim to increase the market share and compete
with the other beverages available to the market. Considering the increasing interest and demand for
healthy products and beverages, the healthy milk from Amul poses a great potential to grow in the near
future with a condition that it is marketed well.

4. DOGS: Dogs are those products that have low growth or market share and have a very limited chance of
growing into a profitable business unit for the company. Amul Chocolates, Amul Cookies, and Amul
Pizza are considered as Dogs for Amul. Due to the heavy competition and limited innovation that these
product categories face, it’s becoming difficult for Amul to gain market share for these products and
make them a viable revenue generator.

McKinsey’s 7S model with examples.

McKinsey 7S model was developed by Robert Waterman and Tom Peters during early 1980s by the 2
consultants of McKinsey Consulting organization. It is a powerful tool for assessing and analyzing the
changes in the internal situation of an organization. It is based on 7 key elements, which determine the
organization’s success, which should be interdependent and aligned for producing synergistic outcomes.

The model can be used widely in situations where alignment is required:

 For improving organizational performance.
 Analyzing and evaluating the effects of futuristic changes on the organization.
 Can be a useful framework during the situation of merger and acquisition involving striking an alignment
between the key processes of an organization.
 Providing a framework for implementing a strategic plan of action.

The 7-S model is used in a variety of situations and help organisations to:
 Improve the performance of a company.
 Examine the likely effects of future changes within a company.
 Align departments and processes during a merger or acquisition.
 Determine how best to implement a proposed strategy.

The McKinsey 7-S model involves 7 interdependent factors, categorized as either "hard" or "soft" elements:
 Hard Elements Soft Elements
These are Shared Values, Skills, Style and
These are Strategy, Structure, System
Staff
Easier to define or identify More difficult to describe
These are strategy statements.
Are less tangible and more influenced by
Eg: organization charts, reporting lines; formal
culture.
processes and IT systems.
Eg: Organisational culture

 Strategy: The plan devised to maintain and build competitive advantage over the competition.
EG:
 Structure: The way the organization is structured and who reports to whom.
 Systems: The daily activities and procedures that staff members engage in to get the job done.
 Shared Values: Called "super ordinate goals" when the model was first developed, these are the core
values of the company that are evidenced in the corporate culture and the general work ethic.
 Style: The style of leadership adopted.
 Staff: The employees and their general capabilities.
 Skills: The actual skills and competencies of the employees working for the company.

7-S Checklist Questions

Strategy:
 What is our strategy?
 How do we intend to achieve our objectives?
 How do we deal with competitive pressure?
 How are changes in customer demands dealt with?
 How is strategy adjusted for environmental issues?

Structure:
 How is the company/team divided?
 What is the hierarchy?
 How do the various departments coordinate activities?
 How do the team members organize and align themselves?
 Is decision making and controlling centralized or decentralized? Is this as it should be, given what we're
doing?
 Where are the lines of communication? Explicit and implicit?
Systems:
 What are the main systems that run the organization? Consider financial and HR systems as well as
communications and document storage.
 Where are the controls and how are they monitored and evaluated?
 What internal rules and processes does the team use to keep on track?

Shared Values:
 What are the core values?
 What is the corporate/team culture?
 How strong are the values?
 What are the fundamental values that the company/team was built on?

Style:
 How participative is the management/leadership style?
 How effective is that leadership?
 Do employees/team members tend to be competitive or cooperative?
 Are there real teams functioning within the organization or are they just nominal groups?

Staff:
 What positions or specializations are represented within the team?
 What positions need to be filled?
 Are there gaps in required competencies?

Skills:
 What are the strongest skills represented within the company/team?
 Are there any skills gaps?
 What is the company/team known for doing well?
 Do the current employees/team members have the ability to do the job?
 How are skills monitored and assessed?

Mc Kinsey’s Example

Conditions in applying McKinsey’s 7S model

Limitations in applying McKinsey’s 7S model

 It ignores the importance of the external environment.

 It depicts only the most crucial elements in this model for explaining the interdependence of the key
processes and factors within the organization.
 The model does not explain the concept of organizational effectiveness or performance explicitly.
 The model has been criticized for lacking enough empirical evidences to support their explanation.
 The model is considered to be more of a static kind of model.
 It is rather difficult to assess the degree of fit with accuracy successfully.
 Criticized for missing out the intricate or finer areas in which the actual gaps in conceptualization and
execution of strategy may arise.

Porter’s 5 forces model with example.

Porter's 5 Forces is a model that identifies and analyzes 5 competitive forces that shape every industry, and
helps determine an industry's weaknesses and strengths. Frequently used to identify an industry's structure to
determine corporate strategy, Porter's model can be applied to any segment of the economy to search for
profitability and attractiveness. The model is named after Michael E. Porter who developed it in 1979.

It is a simple framework for assessing and evaluating the competitive strength and position of a business
organization. It is a framework for analyzing a company's competitive environment. The number and power
of a company's competitive rivals, potential new market entrants, suppliers, customers, and substitute
products influence a company's profitability. Analyzing these elements can be used to guide business
strategy to increase competitive advantage.

Understanding Porter's 5 Forces

There are 5 forces that determine the competitive intensity and attractiveness of a market. It help to identify
where power lies in a business situation. This is useful both in understanding the strength of an
organisation’s current competitive position, and the strength of a position that an organisation may look to
move into.

The 5 forces are :

1. Supplier power - An assessment of how easy it is for suppliers to drive up prices. This is driven by the:
number of suppliers of each essential input; uniqueness of their product or service; relative size and strength
of the supplier; and cost of switching from one supplier to another.
2. Buyer power - An assessment of how easy it is for buyers to drive prices down. This is driven by the:
number of buyers in the market; importance of each individual buyer to the organisation; and cost to the
buyer of switching from one supplier to another. If a business has just a few powerful buyers, they are often
able to dictate terms.
3. Competitive rivalry - The main driver is the number and capability of competitors in the market. Many
competitors, offering undifferentiated products and services, will reduce market attractiveness.
4. Threat of substitution - Where close substitute products exist in a market, it increases the likelihood of
customers switching to alternatives in response to price increases. This reduces both the power of suppliers
and the attractiveness of the market.
5. Threat of new entry - Profitable markets attract new entrants, which erodes profitability. Unless
incumbents have strong and durable barriers to entry, for example, patents, economies of scale, capital
requirements or government policies, then profitability will decline to a competitive rate. Arguably,
regulation, taxation and trade policies make government a sixth force for many industries.
The following is a 5 Forces analysis of the Coca-Cola company in relationship to its Coca-Cola brand.

Threat of new entrants / potential competitors: Medium Pressure

 Entry barriers are relatively low for the beverage industry: there is no consumer switching cost and zero
capital requirements. There is an increasing amount of new brands appearing in the market with similar
prices than Coke products
 Coca-Cola is seen not only as a beverage but also as a brand. It has held a very significant market share
for a long time and loyal customers are not very likely to try a new brand.
Threat of substitute products: Medium to High pressure
 There are many kinds of energy drink s/soda/juice products in the market. Coca-cola doesn’t really have
an entirely unique flavor. In a blind taste test, people can’t tell the difference between Coca-Cola and
Pepsi.
The bargaining power of buyers: Low pressure
 The individual buyer no pressure on Coca-Cola
 Large retailers, like Wal-Mart, have bargaining power because of the large order quantity, but the
bargaining power is lessened because of the end consumer brand loyalty.
The bargaining power of suppliers: Low pressure
 The main ingredients for soft drink include carbonated water, phosphoric acid, sweetener, and caffeine.
The suppliers are not concentrated or differentiated.
 Coca-Cola is likely a large, or the largest customer of any of these suppliers.
Rivalry among existing firms:  High Pressure
 Currently, the main competitor is Pepsi which also has a wide range of beverage products under its
brand. Both Coca-Cola and Pepsi are the predominant carbonated beverages and committed heavily to
sponsoring outdoor events and activities.
 There are other soda brands in the market that become popular, like Dr. Pepper, because of their unique
flavors. These other brands have failed to reach the success that Pepsi or Coke has enjoyed.

Use of Porter’s 5 forces model in strategic mgmt. Describe its analysis in Mobile Phone Industry.

Porter’s 5 forces analysis is done to understand the industry attractiveness of the smart phone industry. The
analysis is as below:

1) Threat of new entrants – Low : The mobile phone industry is already a well established market and the
threat of a new entrant is quite low because
 Capital requirement is very high to compete in the market like huge manufacturing costs, high research
and development costs etc.
 Barriers like patents make it difficult for new competitors, because the best methods are patented.
 Costumer’s loyalty towards existing brands.
 Advanced technologies make it difficult for new competitors to enter the market because they have to
develop those technologies before effectively competing.
 All leading companies are fighting a fierce battle to gain more market share, so there will be heavy
retaliation towards any new entry.
 There is a constant push to innovate and launch new products.
 There are always possible threats of new entrants in the Phone industry, not necessarily a threat of a new
phone company but of new products from established companies.
 So the company has less danger of further new entrants but it has to be focused on the existing enemies.

2) Threat of substitute products or services – Moderate: Presence and availability of substituted products
is a great threat for the successful survival of the organization since it can enforce the organization to cut the
price of its product.
 The power of substitute products is moderate and it depends on the impact of the substitute products.
 Smart phones have 2 primary functions:
 To keep people connected through communication.
 The ability to access and distribute information instantaneously.
 The substitutes that can perform one or more of these functions include social networking, landlines,
newspapers, magazines, e-mails, internet services etc.
 Many of the smart phones that are available on the market today are already available with a variety of
substitutes like social networking, e-mail, internet etc.
 Smart phones do wide variety of functions so any product that specializes in one of those individual
functions can be termed as a substitute.
 There are many substitutes if the buyer focuses on one of the functions, e.g. digital camera can take better
photos then smart phones, notebooks can surf the web just as effectively and PDAs can plan a day the
same way a smart phone can.
 Regarding of, major threat is from substitutes like apple’s iphone and other android devices.
 When the economy is low the substitute for the smart phone is what we call the dumb phone which is
very cheap and can only be used for calling and messaging.
 In conclusion, the threat of a substitute product is moderate due to the fact a smart phone is no longer just
for making calls but for all the other function as well are expected on all smart phones.
 So, the only real substitute is to buy all the functions of a mobile phone in the individual products which
would not be plausible to carry all around on a person at the same time.

3) Bargaining power of customers (buyers) –High: Thus, product differentiation is an ideal way to add
value to the buyer.
 The power that customers have is rising because of the increasing number of choices in the mobile
telecommunication industry and very little differentiation of products.
 Less asymmetric information which means buyers has all the required information so they can bargain
effectively.
 With a lot of the blackberry competitors all offering similar packages the industry is very price sensitive
with customers seeking out the best value for money.
 Low switching costs make it easy for customers to change the products they normally purchase.
 Demand is highly sensitive to economy; buyers can delay buying new models until the prices come down
favorable to them.
 As Blackberry do not have a direct store to sell to their consumers, intermediate stores also have other
handsets readily available for the consumers, which makes it difficult for Blackberry to have a direct
impact on the selling of their handsets.
 As a result this has created a very price sensitive market because consumers will always be on the
lookout for the best deals.
 In conclusion, the buyers have a high amount of power because of the other handsets they can purchase
instead of blackberry

4) Bargaining power of suppliers – Moderate: There are 2 main suppliers in this industry: the hard ware
manufacturers and the software developers
 Although blackberry rely on its suppliers to supply equipment for their advanced mobile phones there are
actually a number of large equipment makers, which blackberry could switch to.
 As the leading mobile phone company in the industry they are in a very strong position when bargaining
with their suppliers.
 Blackberry is in the position where they can bargain and negotiate with any mobile phone hardware
maker because there are a high number of equipment suppliers that are readily available to them.
 Blackberry’s main argument would be the fact that they are a global organization that has the good
market share in the industry, so the suppliers would not want to lose such an illustrious organization.
 Regarding software suppliers there are so many open source mobile operating system providers, options
are plenty and hence the bargaining power of software provider is low.
 The other important factor is low bargaining power of supplier is that there is intense competition among
supplier’s acts to reduce prices to producers

5) Intensity of Existing Rivalry – High: Competition is intense among existing companies. Although there
is no much difference in their products, companies try to differentiate their products in terms of applications
and services offered.
 The competitive environment of the Blackberry is intense due to the launch of new products from already
well-known and established brands.
 For ex. Samsung galaxy S4, Nokia Lumia 720.
 BB competes well with its feature of BlackBerry messenger, which no other smart phone has. Its other
important feature is its QWERTY keypad because of which it became famous for.
 The primary competitors of blackberry are smart phones running on Android and the Apple phone.
 Despite market share loss, on a global basis, the number of active BlackBerry users has increased
substantially through the years.
 Competitors like Samsung and Nokia have smart phones price starts from as low as 5k where as
blackberry’s initial price starts from 13k so the common people show interest towards them than
blackberry making the competition more intense.
 When it comes to applications, blackberry is facing a huge competition majorly from android market
where unlimited apps can be downloaded.
 When the Apple iphone was first released RIM reported that they had 10.5 million BlackBerry
subscribers.
 At the end of 2008, when Google Android was released RIM subscribers had increased to 21 million.
By the end of 2012 its users increased to 80 million.
In conclusion, competitive rivalry is very high and Blackberry must be aware of the threat that competitors
have on their business especially with the growing popularity of the Apple iphone and Samsung galaxy.

SUMMARY of mobile phone industry

If we look at the mobile phone industry worldwide, the five forces could be rated as follows.
 The threat of new entrants: Low, because the technology investment needed to compete in this fast
moving industry is high.
 The threat of substitutes: Low, due to the added functionality that smart phones and mobile phones have
over single featured technology products such as digital cameras.
 The bargaining power of buyers: Medium, with a wide variety of mobile phones available.
Customers have major brand choices and don’t mind paying higher prices, for the latest smart phones and
mobile phones.
 The bargaining power of suppliers: Medium, because mobile phone manufacturers rely on their key
suppliers for quality component parts at competitive prices and the operating system such as android is
open source.
 Competitive rivalry: Very high, for mobile phones, with major brand competitors such as Samsung,
Apple, Nokia and Sony competing and dominating the industry.
New entrants could find it very hard to compete and gain economies of scale and market share against
major brand players in this industry.

State criteria for defining Bargaining Power

The Bargaining Power of Suppliers is one of the forces in Porter’s 5 Forces Industry Analysis Framework.
It is the mirror image of the bargaining power of buyers and refers to the pressure suppliers can put on
companies by raising their prices, lowering their quality, or reducing the availability of their products. This
framework is a standard part of business strategy.
The bargaining power of the supplier in an industry affects the competitive environment and profit
potential of the buyers. The buyers are the companies and the suppliers are those who supply the companies.
It is one of the forces that shape the competitive landscape of an industry and helps determine the
attractiveness of an industry. The other forces include competitive rivalry, bargaining power of buyers, the
threat of substitutes, and the threat of new entrants.

Types of Suppliers: Depending on the industry, there are various types of suppliers. A list of suppliers
includes:
 Manufacturers and Vendors: Sells products to distributors, wholesalers, and retailers.
 Distributors and Wholesalers: Purchases goods in medium/high quantity for sale to retailers or local
distributors.
 Independent Suppliers / Independent Craftspeople: Sells unique products directly to retailers or agents.
 Importers and Exporters: Purchase products from manufacturers in one country and export to a
distributor in a different country.
 Drop shippers: Suppliers of products for different kinds of companies.

Determining Factors: Bargaining Power of Suppliers

There are 5 major factors when determining the bargaining power of suppliers:
1. Number of suppliers relative to buyers
2. Dependence of a supplier’s sale on a particular buyer
3. Switching cost (switching costs of supplier)
4. Availability of suppliers for immediate purchase
5. Possibility of forward integration by suppliers
 
When is Bargaining Power of Suppliers High/Strong?
 Switching costs of buyers are high
 Threat of forward integration is high
 Small number of suppliers relative to buyers
 Low dependence of a supplier’s sale on a particular buyer
 Switching costs of suppliers are low
 Substitutes are unavailable
 Buyer relies heavily on sales from suppliers

When Bargaining Power of Suppliers is Low/Weak?

 Switching costs of buyers are low
 Threat of forward integration is low
 Large number of suppliers relative to buyers
 High dependence of a supplier’s sale on a particular buyer
 Switching costs of suppliers are high
 Substitutes are available
 Buyer does not rely heavily on sales from suppliers

Purpose of Bargaining Power of Suppliers Analysis: When doing an analysis of supplier power in an
industry, low supplier power creates a more attractive industry and increases profit potential as buyers are
not constrained by suppliers. High supplier power creates a less attractive industry and decreases profit
potential as buyers rely more heavily on suppliers.

ANSOFF Matrix

The Ansoff matrix was invented by Igor Ansoff in 1965 and is used to develop strategic options for
businesses. It is one of the most commonly used tools for this type of analysis due to its simplicity and ease
of use. As the diagram demonstrates, the matrix will give managers 4 possible scenarios, or strategies for
future product and market activities.
“The Ansoff growth matrix assists organizations to map strategic product market growth”
The Ansoff Matrix has 4 alternatives of marketing strategies; Market Penetration, product development,
market development and diversification.

1. Market Penetration - This strategy focuses on increasing the volume of sales of existing products to the
organisation’s existing market.

Questions asked: How can we defend our market share? OR How can we grow our market?

Here the company markets their existing products to their existing customers. This means increasing the
revenue by, for example, promoting the product, repositioning the brand, and so on. However, the product is
not altered and we do not seek any new customers.

Market Penetration seeks to achieve 4 main objectives:

 Maintain or increase the market share of current products – this can be achieved by a combination of
competitive pricing strategies, advertising, sales promotion and perhaps more resources dedicated to
personal selling
 Secure dominance of growth markets
 Restructure a mature market by driving out competitors; this would require a much more aggressive
promotional campaign, supported by a pricing strategy designed to make the market unattractive for
competitors
 Increase usage by existing customers. For example by introducing loyalty schemes.

2. Product Development (existing markets, new products): This strategy focuses on reaching the existing
market with new products. This is a new product to be marketed to our existing customers. Here a company
develop and innovate new product offerings to replace existing ones. These products are then marketed to the
existing customers. This often happens with the auto markets where existing models are updated or replaced
and then marketed to existing customers.

Questions asked:
 How can we expand our product portfolio by modifying or creating products?

3. Market Development (new markets, existing products): This strategy focuses on reaching new markets
with existing products in the portfolio. i.e. It is the name given to a growth strategy where the business seeks
to sell its existing products into new markets.

Questions asked:
 How can we extend our market? OR Through new market sectors? OR Through new geographical areas?
Here the company markets their existing product range in a new market. This means that the product remains
the same, but it is marketed to a new audience. Examples: Exporting the product, or marketing it in a new
region.

There are many possible ways of approaching this strategy, including:

 New geographical markets; for example exporting the product to a new country
 New product dimensions or packaging: for example
o New distribution channels
o Different pricing policies to attract different customers or create new market segments

4. Diversification (new markets, new products): This strategy focuses on reaching new markets with new
products. i.e. marketing completely new products to new customers. There are 2 types of diversification,
namely related and unrelated diversification.ted.
 Related Diversification: The organisation stays within a market they have familiarity with.
 Unrelated Diversification: The organisation moves into a market or industry they have no experience
with. This is considered a high risk strategy.
Related diversification means that we remain in a market or industry with which we are familiar.

The diversification can be divided again into horizontal, vertical and lateral diversification.
 The horizontal diversification is the extension of the production programme.
 The vertical diversification is the sales stage stored by products pre order.
 The lateral diversification is the sales of completely new products, which within the range of the
technology and marketing in no connection.

Advantage of M&A.

The major advantages are

1. Economies of Scale
2. Tax benefits
3. Financial Resources
4. Entry in global markets
5. Growth and Expansion
6. Helps to face competition
7. Increase in market share
8. Increases good will
9. Research and Development
To become bigger Most of the companies enter into M&A agreements to increase their size and to eliminate
their rivals from the market. In the normal circumstances, it can take many years for a company to double its
size, but the same can be achieved much more rapidly through mergers or acquisitions.

To eliminate competition M&A deals are usually done so as to allow the acquirer company to eliminate the
future competition by gaining a larger market share in its product’s market. However, there is a con attached
to it, which is that a large premium is usually required to convince the shareholder of the target company to
accept the offer. In such cases, the shareholders of the acquiring companies get disappointed by the fact that
their company is issuing huge premiums to another companies shareholder’s, and thus the shareholders of
the acquiring company sell their shares which further results in decreasing their value.

Synergies and economies of scale This is usually one of the primary motivating factors for small companies
as they have limited resources and usually deal with financial constraints. Companies merge to take
advantage of synergies and economies of scale. Synergies occur when two companies who deal with the
similar type of business combine with each other, as they can then consolidate or eliminate duplicate
 resources like a branch and regional offices, manufacturing facilities, research projects etc. Every amount of
money which is saved goes straight to the bottom line, boosting earnings per share and making the M&A
transaction an “accretive” one.

Tax purposes Companies also enter M&A agreements for tax purposes, although this may be an implied
rather than an overt motive. For instance, countries like U.S., have a huge corporate tax rate, so to avoid
payment of these taxes, some American companies have resorted to corporate “inversions”. This involves a
U.S. company buying a smaller foreign competitor and moving the merged entity’s tax home overseas to a
lower-tax jurisdiction, in order to substantially reduce its tax bill.

There are many advantages of growing your business through an acquisition or merger. These include:
 Obtaining quality staff or additional skills, knowledge of your industry or sector and other business
intelligence. For instance, a business with good management and process systems will be useful to a buyer
who wants to improve their own. Ideally, the business you choose should have systems that complement
your own and that will adapt to running a larger business.
 Accessing funds or valuable assets for new development. Better production or distribution facilities are
often less expensive to buy than to build. Look for target businesses that are only marginally profitable and
have large unused capacity.
 Your business underperforming. For example, if you are struggling with regional or national growth it
may well be less expensive to buy an existing business than to expand internally.
 Accessing a wider customer base and increasing your market share. Your target business may have
distribution channels and systems you can use for your own offers.
 Diversification of the products, services and long-term prospects of your business. A target business
may be able to offer you products or services which you can sell through your own distribution channels.
 Reducing your costs and overheads through shared marketing budgets, increased purchasing power and
lower costs.
 Reducing competition. Buying up new intellectual property, products or services may be cheaper than
developing these you.
 Organic growth, ie the existing business plan for growth, needs to be accelerated. Businesses in the
same sector or location can combine resources to reduce costs, remove duplicated facilities or departments
and increase revenue.
 Competitive Edge: The combined talent and resources of the new company help it gain and maintain a
competitive edge.

Blue Ocean Strategy with respect to Hospitality Industry. Give suitable example.

Blue Ocean Strategy is a concept that has been pioneered by INSEAD Professors, W. Chan Kim, and Renee
Mauborgne to describe the market universe. It is the simultaneous pursuit of differentiation and low cost to
open up a new market space and create new demand. It is based on the idea that every enterprise can achieve
higher profit by creating new demand in non-competitive market. The profit is much easier than the rivalry
with the competition on existing markets.

Blue Oceans represent markets where demand is large and unmet and where growth and profits can be
actualized through value innovation, which is the simultaneous pursuit of low differentiation and low cost in
other words the blue ocean is a wider, deeper and unexplored market space with untapped potential.

According to Kim and Mauborgne, the move to blue oceans helps create a leap in value for the company, its
employees and its customers as well as identifying new demand and making the need for competition
irrelevant. A key aspect of the Blue Ocean Strategy is the concept of value innovation which as originally
presented by the two authors in the 1997 article “Value Innovation – The Strategic Logic of High Growth”
(HBR 75: 103-112). This concept is the simultaneous pursuit of both differentiation and low cost, which in
turns results in value for all parties involved, including the company and the customer.


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The key premise of the Blue Ocean strategy is that companies must unlock new demand and make the
competition irrelevant instead of going down the beaten track and focusing on saturated markets.

The Blue Ocean Strategy Tools – Four Actions Framework

The 4 actions framework is used to add new values to the strategic canvas value curve. The four actions
taken here are:
Create – Here, the idea is to create new industry factors that can generate value and anew market and were
not offered before.
Reduce – Here, the idea is to reduce any of those factors which were nothing more than a consequence of the
competition between industry players to differentiate themselves.
Eliminate – In this step, the idea is to identify those factors which have been the basis of industry
competition for a long time.
Raise– Finally, the idea is to identify those factors that need to be raised above where they are in the industry
at present.

How Hotels manage the period between when an insight is first generated and when a concept is ready for
development is the key to getting discontinuous innovation off the ground. These are crazy ideas that don’t
fit the existing capabilities of the Hotel business models and carry high risks. And these crazy ideas
represent Blue Ocean Strategies. Blue Ocean Strategies focus on uncontested markets and traditional Red
Ocean Strategies focus on known markets.
Blue Ocean Strategies presents a systematic approach to making the competition irrelevant and outlines
principles and tools any Hotels can use to create and capture their own blue oceans.
Now is the time for Hotels to be proactive and not think tomorrow will look like today, but anticipate change
and implement new innovative Content and Social Media Strategies.

Content and Social Media Value Innovation is the key components for the future.
4 key factors to become a leader in Content and Social Media Hospitality are;
 Value proposition: The Hotels promise to deliver on a particular combination of values – price, quality,
performance, selection, and convenience.
 Value-driven Hotel: Combination of operation processes, management systems, hotel structure, and a
culture that provide the hotel to deliver its value proposition.
 Value discipline: Combining operation models and value propositions to be the best in their markets.
 Value innovation: The Content and Social Media Tipping point for Hotels lays in Value Innovation.
Value Innovation is created where a Hotels action favorable affect both its cost structure and its value
proposition to buyers.

Cost savings are made by eliminating and reducing factors that the Hotel Industry competes on. Guests today
are seeking new and innovative ways to add value to their overall customer experience.

Over lapping Region is Value Innovation.

As Hoteliers, we play a key role in our guest’s journey, stories and experience. Traditionally innovation has
represented a predictable pattern based on studies, surveys, forums, and trends. Today we are facing major
shifts towards more disruptive innovations. Disruptive innovations break new barriers and taps into new
market and value networks. Today customers have all the information available in the blink of an eye. They
don’t even have to google information or use a metasearch engine to gather valuable information that will
help make an educated decision.

Any Hotel with respect for itself has a Social Media presence today. So, do online travel agencies and
community-driven online marketplace and hospitality service.
Content and Social Media Strategies are crucial today, but Hotels need to focus on fundamentally different
strategies that make competition irrelevant.
Of course, Hotels can always continue waste time trying to out-tweet, out-publish, outshout, or out-webinar
the next Hotel.
Disruptive innovation focuses on changing the way customers think about the basics of Hotels.

Making a market-creating strategic move

The key for Hotels to today is to take on the role of a teacher, coach, and mentor.
All they have to do is ask their Social Communities, and they will get an abundance of information.
There are three ways in which market creating strategies are made. Hotels can:
1. Offer a breakthrough solution for the industries existing problems.
2. Redefine the industries problem and solve it.
3. Identify and solve a brand-new problem or seize a brand-new opportunity.

In the Hotel space, we know that price traditionally boost the intensity of the competition. This leads to
shrinking profit margins and market shares. And on top of this we know more Hotels is built, and in many
areas, the supply is overtaking the demand. We see Hotels claim differentiation, but when it comes down to
the basics everything is still the same – providing guests products and services like a room to stay. It is a
challenge for Hotels to make a shift towards creating a new market space that is uncontested.

A disruptive innovative approach focuses on looking at;

 Alternative industries
 Strategic groups within the industry
 Redefine industry buyer group
 Complementary products and service offerings
 The functional-emotional orientation of the industry
 Shaping external trends over time

Differentiate Blue Ocean and Red Ocean Strategy

Sr Red ocean strategy Blue ocean strategy

no
.
1 The Red Ocean is where every industry is The Blue Ocean, on the other hand, is calm,
today. There is a defined market, defined smooth, with lots of food and little or no
competitors and a typical way to run a competition. 
business in any specific industry
2 Focus on current customers. There is Focus on non-customers. In the Blue Ocean, there
effort to attract new buyers to the industry, is a focus on trying to increase the size of the
thus the focus on the customers currently industry by attracting people who have never
purchasing in that industry. purchased in that industry.
1 Compete in Existing Markets. Existing Create uncontested markets. There is only a winner,
markets are all the customers doing you. No one else is fighting for the business because
business in the industry right now, whether either they don’t know about it, or they don’t know
they are doing business with you or your how. They will try, of course, but if you have done
competitors. If someone wins a customer, things the Blue Ocean Strategy way, they will not
then it is assumed, someone will lose a be successful for a very long time. 
 customer. For someone to win, someone
must lose
2 It beats the competition This makes the competition irrelevant. he whole
idea of Blue Ocean Strategy is to have high value at
low cost
3 It exploit existing demand It create and captures new demand
4 This makes the value cost trade off This breaks the value cost trade off
5 This aligns the whole system of a firm’s This aligns the whole system of a firm’s activities in
activities with its strategic choice of pursuit of differentiation and low cost.
differentiation or low cost.
6 “In red oceans, there is a competitive- “In blue oceans, demand is created rather than
advantage worldview, companies are often fought over. There is ample opportunity for growth
driven to outperform rivals and capture that is both profitable and rapid.”
greater shares of existing or shrinking
market space.”

6 Paths framework for strategies:

Framework Blue Ocean Strategy Red Ocean Strategy

Industries Looks across alternative industries Focus on rivals within its industry
Strategic Groups Looks across strategic groups with in the Focus on competitive position within
industry strategic group
Buyers Redefines the industry buyer group Focus on better serving the buyer group
Scope of Looks to complementary products and Focus on maximizing the value of product
Products and services and service offerings within the bounds of
Services the industry.
Functional- Focus on improving price performance Rethinks the functional emotional
Emotional within the functional emotional orientation. orientation of its industry.
Orientation
Time Occur Shapes external trends over time Focus on adapting to external trends as
they occur.

Purple ocean strategy with suitable example

The modern masterpiece of "Blue Ocean Strategy" puts forward the classic business concepts of "Red
Oceans" and "Blue Oceans", which have helped thousands of companies to go beyond keen competitions,
create new markets in their corresponding industries. To compete in the bloody "Red Oceans", enterprises
end up with very thin or even no profits; nevertheless, to create the brand-new "Blue Oceans", enterprises
have to bear heavy cost and involve unforeseeable risks. In light of helping enterprises to search and redefine
their competitive edges in the ever-fiercely-competitive business arena, Mr Jeffrey Hui, "The Father of
Purple Oceans", suggests enterprises to leverage the "Purple Oceans", the most value-adding dynamic
opportunity, lies between the "Red Ocean" and "Blue Oceans". "Purple Ocean Strategy", synergizing the
Western business wisdom of strategic marketing and brand management with the Chinese wisdom of
traditional and management philosophies, presents business owners and practitioners with vaster horizons
about the business world in the new era.

Objectives of Purple Ocean Strategy:

 To distinguish "Red Oceans", "Blue Oceans" and "Purple Oceans"

 To understand the landscape of the business world in the new era
 To gain knowledge about the fundamentals of "Purple Ocean Strategy"
 To master the toolboxes for uncovering "Purple Oceans"
 To provide a platform where participants can learn, master and apply "Purple Ocean Strategy" in a
variety of domains.

 Sample Outlines of Purple Ocean Strategy:

1. In Search of "Purple Oceans"

o Business Landscape of the New Era
o "Blue Oceans", "Red Oceans" and "Purple Oceans"
o "Purple Oceans" - Your Golden Mines
2. "Purple Oceans Strategy"
o Introduction to "Purple Ocean Strategy"
o Keystones of "Purple Oceans"
o Different levels of "Purple Oceans"
o "Purple Oceans" Showcases 1

3. "Purple Oceans Strategy" in Use

o The Purple Oceans Dynamics
o "Purple Oceans" Showcases 2
o Purple Oceans Toolboxes - Basic
o Exercises: Catching Your "Purple Oceans" 1

4. Catching Your "Purple Oceans"

o Purple Oceans Toolboxes - Advanced
o Exercises: Catching Your "Purple Oceans" 2
o Sustaining Your "Purple Oceans"

THE PURPLE Ocean strategy is the new terminology that describes the “red ocean” and “blue ocean”
mixing together. In simple words, it is about the “red ocean” that is related to highly competitive markets
mixing with “blue ocean” that stands for NEW UNTOUCHED MARKETS which are mostly NEW
BUSINESS CATEGORIES.