2-In-Sem

Corporate strategy

1. Industry Life Cycle Analysis

This model describes the stages an industry goes through from its inception to decline. It helps
businesses understand market dynamics and plan strategies accordingly.

Stages:

1. Introduction:

o Characteristics:

 High costs due to research and development, marketing, and establishing the
product in the market.

 Limited consumer awareness and demand.

 Minimal competition as the product or service is new to the market.

o Business Focus:

 Create awareness about the product.

 Target early adopters and innovators.

 Invest in product quality and marketing.

o Example:

 Electric vehicles (EVs) during their initial launch phase, with significant
investment in infrastructure and advertising.

2. Growth:

o Characteristics:

 Increasing demand as customers adopt the product.

 Profits rise as economies of scale kick in.

 Entry of competitors as the market shows potential.

o Business Focus:

 Expand production and distribution.

 Differentiate the product to gain a competitive edge.

 Focus on customer acquisition and retention.

 Smartphone industry during the early 2010s, with numerous brands entering
the market.

3. Maturity:

o Characteristics:

 Market saturation, as most potential customers have adopted the product.

 Growth slows, and competition intensifies.

 Profit margins stabilize or shrink due to price wars and increased competition.

o Business Focus:

 Focus on operational efficiency to reduce costs.

 Innovate with new features to retain customers.

 Diversify product lines or enter new markets.

o Example:

 The traditional laptop industry, which has reached a stable level of demand.

4. Decline:

o Characteristics:

 Decreasing demand as new products or technologies replace the existing one.

 Companies face challenges like overcapacity and falling revenues.

o Business Focus:

 Exit the industry or reinvent the product to regain demand.

 Focus on niche markets if large-scale demand diminishes.

o Example:

 Landline telephone industry being replaced by mobile phones.

Flowchart:

Introduction → Growth → Maturity → Decline

2. Business-Level Strategies

Business-level strategies help organizations achieve a competitive advantage within a specific market or
industry by focusing on how they deliver value to customers.
Types:

1. Cost Leadership:

o Definition:

 A strategy focused on producing goods or services at the lowest cost in the

 Companies compete by offering products at lower prices than competitors.

o How it Works:

 Achieve cost efficiency through economies of scale, advanced technology, or

o Example:

 Walmart, which offers low-cost products by optimizing its supply chain and
reducing operational costs.

2. Differentiation:

o Definition:

 A strategy focused on offering unique products or services that provide superior

 Customers are willing to pay a premium for these distinctive features.

o How it Works:

 Invest in innovation, design, branding, and customer service to stand out in the
market.

o Example:

 Apple, which differentiates itself with its innovative technology, premium design,
and robust ecosystem.

3. Focus Strategy:

o Definition:

 A strategy aimed at serving a specific niche or segment of the market.

 Focus can be on cost (Cost Focus) or differentiation (Differentiation Focus).

o Types:

 Cost Focus: Offering the lowest cost within a niche market. Example: Ryanair
focusing on budget-conscious travelers.
  Differentiation Focus: Offering specialized, premium products for a niche
market. Example: Rolls-Royce focusing on luxury car buyers.

o How it Works:

 Deeply understand the needs of the niche market and cater to them better than
competitors.

Key Differences Between Strategies:

Strategy Focus Competitive Advantage Target Market

Cost Leadership Lowest cost Price Broad

Differentiation Unique Quality and innovation Broad

Focus (Cost/Differentiation) Niche segment Cost efficiency or uniqueness Narrow niche market

3. Operational-Level Strategies

Definition:
Operational-level strategies focus on day-to-day activities and how efficiently resources are used to
achieve business objectives. These strategies bridge the gap between strategic goals and execution.

Key Areas of Focus:

1. Efficiency in Production:

o Objective:

 Minimize waste and costs while maintaining product quality.

o How to Achieve:

 Use lean manufacturing techniques.

 Implement automation to increase speed and accuracy.

 Monitor production metrics like cycle time and defect rates.

o Example:

 Toyota employs Just-in-Time (JIT) production to reduce waste and optimize

2. Resource Allocation:

o Objective:
  Allocate financial, human, and physical resources effectively to meet operational
goals.

o How to Achieve:

 Use resource planning tools like Enterprise Resource Planning (ERP) software.

 Prioritize tasks and projects based on strategic importance.

o Example:

 Amazon efficiently allocates resources in its warehouses using advanced

3. Daily Task Execution:

o Objective:

 Ensure seamless execution of routine operations aligned with the company’s

o How to Achieve:

 Assign clear roles and responsibilities.

 Use Standard Operating Procedures (SOPs) to maintain consistency.

 Monitor daily progress using Key Performance Indicators (KPIs).

o Example:

 McDonald’s standardizes food preparation processes globally to maintain quality

4. Strategic Choice and Forces Analysis

Definition:
Strategic choice refers to selecting the best strategy based on external and internal analyses. One widely
used tool for analyzing industry competition is Porter’s Five Forces. This framework helps businesses
assess their competitive position and shape strategies to enhance profitability.

Porter’s Five Forces:

1. Competitive Rivalry:

o Definition:

 The intensity of competition among existing players in the industry.

o Factors Affecting Rivalry:

 Number of competitors.
  Industry growth rate.

 Differentiation among products.

o Example:

 The fast-food industry sees high rivalry among companies like McDonald’s,
Burger King, and KFC.

2. Supplier Power:

o Definition:

 The ability of suppliers to influence prices, quality, and availability of inputs.

o Factors Affecting Supplier Power:

 Number of suppliers in the market.

 Uniqueness of the supplier's product or service.

o Example:

 In the semiconductor industry, suppliers like TSMC have significant power due to
the limited availability of advanced manufacturing facilities.

3. Buyer Power:

o Definition:

 The ability of buyers to influence prices and demand better quality or service.

o Factors Affecting Buyer Power:

 Buyer concentration relative to industry size.

 Availability of substitute products.

o Example:

 Buyers in the automotive industry have considerable power due to the

4. Threat of Substitution:

o Definition:

 The risk of customers switching to alternative products or services.

o Factors Affecting Substitution:

 Availability of substitutes.

 Price-performance trade-off of substitutes.

o Example:
  Streaming services like Netflix face substitution threats from free platforms like
YouTube.

5. Threat of New Entry:

o Definition:

 The risk of new competitors entering the market and increasing competition.

o Factors Affecting New Entry:

 Barriers to entry (e.g., high capital investment, regulations).

 Economies of scale.

o Example:

 The airline industry has high entry barriers due to costs and regulatory
requirements.

Flowchart for Porter’s Five Forces:

Supplier Power

Threat of New Entry → Competitive Rivalry ← Threat of Substitution

Buyer Power

5. Strategic Models

Strategic models help organizations plan and evaluate strategies to achieve business goals. Below are
detailed explanations of popular strategic models: Ansoff Matrix, BCG Matrix, General Electric (GE)
Matrix, and 7S Framework, along with flowcharts and diagrams for clarity.

Ansoff Matrix

Definition:
The Ansoff Matrix is a tool used to identify and explore growth strategies based on products and
markets.

Strategies in the Ansoff Matrix:

1. Market Penetration:

o Focus: Increase sales of existing products in existing markets.

o How:

 Aggressive marketing campaigns.

 Increasing customer loyalty.

o Example: Coca-Cola increasing sales through promotional offers in its existing markets.

2. Product Development:

o Focus: Develop new products for existing markets.

o How:

 Innovate and improve product features.

 Introduce complementary products.

o Example: Apple launching the AirPods for its existing customer base.

3. Market Development:

o Focus: Enter new markets with existing products.

o How:

 Expand geographically.

 Target new customer segments.

o Example: Netflix expanding its streaming services to new countries.

4. Diversification:

o Focus: Develop new products for new markets.

o How:

 Enter entirely new industries.

 Leverage existing capabilities for new offerings.

o Example: Amazon entering the cloud computing market with AWS.

Flowchart:

Existing Products | New Products

-------------------------------------------|------------------------------

Existing Markets | Market Penetration | Product Development

New Markets | Market Development | Diversification

BCG Matrix
Definition:
The Boston Consulting Group (BCG) Matrix helps businesses allocate resources based on market growth
rate and market share.

Components of the BCG Matrix:

1. Stars:

o Characteristics:

 High growth, high market share.

 Require significant investment but have the potential to become cash cows.

o Example: Tesla’s Model Y in the growing electric vehicle market.

2. Question Marks:

o Characteristics:

 High growth, low market share.

 Require significant investment to increase market share.

o Example: A new smartphone model entering a competitive market.

3. Cash Cows:

o Characteristics:

 Low growth, high market share.

 Generate steady cash flow and require minimal investment.

o Example: Microsoft Office suite in a saturated market.

4. Dogs:

o Characteristics:

 Low growth, low market share.

 Generate minimal profit or incur losses; candidates for divestiture.

o Example: Outdated product lines like older versions of operating systems.

Diagram:

Market Growth → High Low

Market Share ----------------------------

High | Stars | Cash Cows

Low | Question Marks | Dogs

Definition:
The GE Matrix evaluates business units or products based on Market Attractiveness and Business
Strength. It provides a more comprehensive alternative to the BCG Matrix.

Evaluation Factors:

1. Market Attractiveness:

o Market size, growth rate, competitive intensity, profit margins.

o Example: E-commerce is highly attractive due to rapid growth and profitability.

2. Business Strength:

o Market share, product quality, brand strength, distribution network.

o Example: A strong logistics system enhances Amazon's business strength.

Categorization:

 Invest (High Attractiveness, Strong Strength): Grow aggressively.

 Hold (Medium Attractiveness, Medium Strength): Maintain status quo.

 Harvest (Low Attractiveness, Weak Strength): Divest or minimize investment.

7S Framework

Definition:
The 7S Framework focuses on organizational alignment and effectiveness by analyzing seven interrelated
elements.

Components of the 7S Framework:

1. Strategy:

o Long-term plans to achieve competitive advantage.

o Example: Google’s focus on innovation in AI technology.

2. Structure:

o Organizational hierarchy and communication channels.

o Example: Flat hierarchies in startups to foster faster decision-making.

3. Systems:

o Processes and workflows supporting operations.

4. Shared Values:

o Core values that define company culture and priorities.

o Example: Tesla’s commitment to sustainability.

5. Style:

o Leadership and management styles.

o Example: Apple’s emphasis on design and innovation under Steve Jobs.

6. Staff:

o Human resources, including skills and motivation levels.

o Example: Google’s emphasis on hiring top talent and fostering creativity.

7. Skills:

o Core competencies and technical expertise.

o Example: Microsoft’s expertise in software development.