Module 1

Introduction to Strategic Management

1.1Meaning And Nature of Strategic Management:

 Meaning Of Strategy: Strategy is a general plan to achieve one or more long-

term or overall goals under conditions of uncertainty.

 Definition of Strategic Management: Strategic management provides overall

direction to an enterprise and involves specifying the organization's objectives,
developing policies and plans to achieve those objectives, and then allocating
resources to implement the plans.
Ex: Ensuring the school has funds to create high-tech classrooms and hire the
most qualified instructors. The college also invests in marketing and recruitment
and implements student retention strategies.

1.2Importance and Levels of Strategic Management

 Importance of Strategy

1. IDENTIFY OPPORTUNITIES: Strategic management is necessary to identify

opportunities. Tap into opportunities and identify strengths and weaknesses by
studying the internal structure of your organization. Within every team, there’s
unrealized potential that needs your attention. You may even discover new ways to
implement existing strategies.

2. PREPARE FOR THE FUTURE: Strategic management helps you prepare for the future.
Organizations can benefit from understanding the importance of strategic
management because it can help you prepare for contingencies. A business
environment is dynamic and fast-paced. Evolve and adapt your strategies to keep
abreast of vital changes in the business sphere.
3. BE ACTION ORIENTED: Don’t become complacent in your management style. If
you’re driven by action and purpose, you can easily alter policies and business plans
to drive the organization forward. A sound action plan is sustainable and important for
the growth and survival of your company.

4. STRENGTHENS ORGANIZATION STRUCTURE: Working in a team is important to

achieve shared goals. Each member is dependent on another for guidance, especially
in a stressful situation. This gives rise to the need for strategic management. You can
reflect on your organization’s internal structure and make changes wherever you feel
necessary. Only a strong organizational structure can endure testing times.

5. SUSTAINED COMPETITIVE ADVANTAGE: It’s necessary to have a sustained

competitive advantage in today’s market. To do well compared to other players in the
market and avoid failure when faced with setbacks, build a plan that’s viable and
long-lasting.
The importance of strategic management lies at the intersection of your company’s
internal and external environments. Constructing a strategic vision with long-term
objectives in mind is useful for achieving organizational goals. Every company needs
a contingency plan to fall back on. If you have a sound strategic plan ready and
accessible to all the stakeholders, you can overcome any hurdle.
  Levels of Strategy

1.Corporate Strategy: At the corporate level strategy however, management must not only
consider how to gain a competitive advantage in each of the line of businesses the firm is
operating in, but also which businesses they should be in in the first place. It is about
selecting an optimal set of businesses and determining how they should be integrated into a
corporate whole: a portfolio. Typically, major investment and divestment decisions are made
at this level by top management.

Ex: Growth: To expand the business and increase profits.

Stability: To maintain current business operations.
Renewal: To revive an ailing business

2. Business Strategy: The Business-level strategy is what most people are familiar with and
is about the question “How do we compete?”, “How do we gain (a sustainable) competitive
advantage over rivals?”. In order to answer these questions, it is important to first have a
good understanding of a business and its external environment. At this level, we can use
internal analysis frameworks like the Value Chain Analysis and the VRIO Model and
external analysis frameworks like Porter’s Five Forces and PESTEL Analysis.
Ex: Product differentiation, improve customer experience, Cornering a younger market,
Attractive pricing strategy
3. Functional Strategy: Functional-level strategy is concerned with the question “How do
we support the business-level strategy within functional departments, such as Marketing, HR,
Production and R&D?”. These strategies are often aimed at improving the effectiveness of a
company’s operations within departments. Within these department, workers often refer to
their ‘Marketing Strategy’, ‘Human Resource Strategy’ or ‘R&D Strategy’. The goal is to
align these strategies as much as possible with the greater business strategy.

Ex: Marketing Efficiency – Reducing the overall cost of marketing.

Human Resources Efficiency – Reduction in the expenditure of the onboarding employee

Operations Efficiency – minimize wastage of products.

Purchase department Efficiency – to negotiate the best price while purchasing.

1.3Strategic Management Process

Strategic management is a continuous process that appraises the business and industries in
which the organization is involved; appraises its competitors; and fixes goals to meet all
the present and future competitor’s and then reassesses each strategy.

Strategic management process has following four steps:

1. Environmental Scanning- Environmental scanning refers to a process of collecting,

scrutinizing and providing information for strategic purposes. It helps in analysing the
internal and external factors influencing an organization. After executing the
environmental analysis process, management should evaluate it on a continuous basis
and strive to improve it.

2. Strategy Formulation- Strategy formulation is the process of deciding best course of

action for accomplishing organizational objectives and hence achieving organizational
purpose. After conducting environment scanning, managers formulate corporate,
business and functional strategies.

3. Strategy Implementation- Strategy implementation implies making the strategy

work as intended or putting the organization’s chosen strategy into action. Strategy
 implementation includes designing the organization’s structure, distributing resources,
developing decision making process, and managing human resources.

4. Strategy Evaluation- Strategy evaluation is the final step of strategy management

process. The key strategy evaluation activities are: appraising internal and external
factors that are the root of present strategies, measuring performance, and taking
remedial / corrective actions. Evaluation makes sure that the organizational strategy as
well as its implementation meets the organizational objectives.

These components are steps that are carried, in chronological order, when creating a new
strategic management plan. Present businesses that have already created a strategic
management plan will revert to these steps as per the situation’s requirement, so as to
make essential changes.

Components of Strategic Management Process

Strategic management is an ongoing process. Therefore, it must be realized that each

component interacts with the other components and that this interaction often happens in
chorus
1.4Strategic Decision Making

Definition: Strategic decision making includes the mission & vision and both short and long
term goals. The decisions relate to the entire environment in which the company operates, all
resources within the organisation and all interaction between the company and the outside
world.

Some features of strategic decision-making are set out below.

 Strategic decisions often include important proposals for the distribution of resources
 Strategic decisions relate to more than one activity
 Strategic decisions often involve far-reaching decisions
 Strategic decisions are complex in nature
 Strategic decisions are made at the highest level of the organisation and involve risks

Objectives of strategic decisions:

a) Strategic decision-making is the process of charting a course based on long-term goals
and a longer-term vision.

b) By clarifying your company's big picture aims, you'll have the opportunity to align
your shorter-term plans with this deeper, broader mission – giving your operations
clarity and consistency.

c) Strategic decision making is about choosing the best path to success. For instance, if
you’re starting a new business, you need to consider factors like cost, time and the
target market. How do you classify decisions to reach the ideal solution? Strategic
decision making will help you formulate a plan of action and align your small-term
goals with the big picture.

d) From a management perspective, strategic decision-making is different from the

routine choices you make every day. As a manager, for instance, you have to delegate
roles, communicate goals to your teammates or external stakeholders and account for
 uncertainties. The decisions you make not only affect you but the organization as a
whole. It’s a good practice to cultivate objective decision-making abilities, free from
bias and prejudice.

Examples for Strategy Decision Making: A manager of a cat food company notices that
his customers prefer higher quality and fresh food instead of cat food sold in very large
quantities for a low price. The company’s mission is to be the best cat food company in the
country. In order to adapt the company to the changing needs of customers, the manager
decides to shift the focus on his products to quality and freshness. This means a shorter best-
before date, but also a higher margin due to the fact that cat owners are prepared to pay more
for fresh food.

Advantages of Strategic Decision Making;

 It allows organizations to be proactive rather than reactive: A strategic plan

allows organizations to foresee their future and to prepare accordingly. Through
strategic planning, companies can anticipate certain unfavourable scenarios before
they happen and take necessary precautions to avoid them.

 It sets up a sense of direction: A strategic plan helps to define the direction in which
an organization must travel, and aids in establishing realistic objectives and goals that
are in line with the vision and mission charted out for it. A strategic plan offers a
much-needed foundation from which an organization can grow, evaluate its success,
compensate its employees and establish boundaries for efficient decision-making.

 It increases operational efficiency: A strategic plan provides management the

roadmap to align the organization’s functional activities to achieve set goals. It guides
management discussions and decision making in determining resource and budget
requirements to accomplish set objectives — thus increasing operational efficiency.

 It helps to increase market share and profitability: Through a dedicated strategic

plan, organizations can get valuable insights on market trends, consumer segments, as
 well as product and service offerings which may affect their success. An approach
that is targeted and well-strategized to turn all sales and marketing efforts into the best
possible outcomes can help to increase profitability and market share.

 It can make a business more durable: Business is a tumultuous concept. A business

may be booming one year and in debt the next. With constantly changing industries
and world markets, organizations that lack a strong foundation, focus and foresight
will have trouble riding the next wave.
1.5Strategic Formulation: Vision, Mission, Values, Objectives, Goals and
Policies

The importance of an organization to develop a vision, mission, and values is important for
strategic direction. Without the individual foundations of strong values illustrated by a vision
to be undertaken by a mission, an organization cannot become an overly successful
organization. Without developing a mission, vision, and values to assist in developing a
strategy, an organization cannot identify, distinguish or explain itself to its employees and
customers alike.

Mission Statement: A mission statement is important for an organization because it defines

the business, products or services, and customers. In addition, a mission statement allows the
organization to differentiate itself form competitors by answering three key questions: What
do we do, for whom do we do it, and what is the benefit? Mission statements build and
identify the relationships between employees and the mission, the organization itself, the
customer, suppliers, and co-workers.

Vision Statement: A vision statement describes how the future will look if the organization
achieves its mission. An organizations vision or preferred future must contain information
that is realistic, credible, and attractive for the organization in the future. According to Payne
“Strategists try to focus the energies of the workforce on the corporate vision. A realistic,
credible, and attractive vision statement attracts commitment and energizes people, while
creating meaning in workers’ lives. In addition, a well thought out vision statement bridges
the present with the future while establishing a standard for excellence.

Values at Strategic: Values are enduring, passionate, and distinctive core beliefs, and
they’re an essential part of developing your strategy. They are based on enduring tenets—
guiding principles—to adhere to no matter what mountain you climb. Your core values are
part of your strategic foundation. They are the beliefs that guide the conduct, activities and
goals of your organization. An organization’s values can dominate the kind of strategic
moves it considers or rejects. When values and beliefs are deeply ingrained and widely
shared by directors, managers and staff, they become a way of life within the organization,
and they mould organizational strategy.
Strategic goals: A strategic goal is achieved by reaching specific strategic objectives that
represent intermediary and incremental advances within the overall strategic plan. This is
necessary because "high-level" strategic goals are often abstract, and therefore difficult to
assess in terms of achievement without referring to some specific, often physical objectives .

Strategic Objectives: Strategic objectives are the big-picture goals for the company: they
describe what the company will do to try to fulfil its mission. Strategic objectives are usually
some sort of performance goal—for example, to launch a new product, increase profitability,
or grow market share for the company’s product.

Policies: Policies are designed to guide the behaviour of managers in relation to the pursuit
and achievement of strategies and objectives. Policies are instrument for strategy
implementation. The term policy has various definitions in management literature. Some
authors equate policy with strategy. Others do this inadvertently by using "policy" as a
synonym for company mission, purpose or culture. This thesis defines policy much more
narrowly as specific guides to managerial action and decisions in the implementation of
strategy. Policy refers "to specific guidelines, methods, procedures, rules, forms, and
administrative practices established to support and encourage work towards stated goals."
Most authors consider procedures and rules to be policies.

1.6Strategic Fit and Intent, Business Model

Strategic fit:
 Strategic fit expresses the degree to which an organization is matching its resources
and capabilities with the opportunities in the external environment. The matching
takes place through strategy and it is therefore vital that the company has the actual
resources and capabilities to execute and support the strategy.
 Strategic fit can be used actively to evaluate the current strategic situation of a
company as well as opportunities such as M&A and divestitures of organizational
divisions.
  Strategic fit is related to the Resource-based view of the firm which suggests that the
key to profitability is not only through positioning and industry selection but rather
through an internal focus which seeks to utilize the unique characteristics of the
company’s portfolio of resources and capabilities.
 A unique combination of resources and capabilities can eventually be developed into
a competitive advantage which the company can profit from. However, it is important
to differentiate between resources and capabilities. Resources relate to the inputs to
production owned by the company, whereas capabilities describe the accumulation of
learning the company possess.

Ex:

 Common sales force to call on customers.

 Advertising related products together.

 Use of same brand names.

 Joint delivery & shipping.

 Joint after-sale service & repair work.

Strategic Intent:

 Strategic intent advocates use the term to describe “aspirational plans or an

overarching purpose needed to achieve an organization’s vision.
 ” Embedded within the “aspirational” part of that definition is a focus on winning.
Winning customers, winning against competitors, and winning over the broader
market.
 How does strategic intent inspire winning? By focusing a firm’s strategy on change
initiatives that will lead to competitive advantages. To do that, the first step is to break
down what competitive advantages look like in a given industry.
 For internet retailers, it might be efficiency in logistics and distribution.
 For pharmaceutical companies, it might be product efficacy and pricing. Whatever the
case, strategic intent turns strategy from a “fit” exercise to a “stretch” exercise. I.e., an
internet retailer not thinking about how to match a competitor’s operations but to
create even better operations.
Ex: Japan and Honda. Some time ago, Honda made the decision to enter the motorcycle
market. But rather than look to imitate Harley Davidson or Yamaha's success, Honda chose
to start with products that were intentionally different.

1.7Components of Business Model

A business model describes the rationale of how an organization creates, delivers, and
captures value. Entrepreneurs need to develop and refine a business model for themselves as
they seek clarity about what they are doing, and also for discussing with colleagues, partners,
and other stakeholders.

Value propositions: A company creates value, or benefits, for customers by solving a

problem or satisfying a need. The value proposition is the reason that customers choose one
option over another when deciding what to buy. Although certainly not an exhaustive list,
customers may value: newness, performance, customization, design, brand, price, cost
reduction, risk reduction, accessibility, and convenience.

Target Customers: Without customers, businesses cannot survive. Businesses must identify
and understand their customers, and they can group these customers into segments with
common characteristics.
Distribution Channels: Channels bring the value proposition to the customers through
communication, distribution, and sales. Companies can reach their customer segments
through a mix of channels, both direct (e.g., through sales force and web sales) and indirect
(e.g., through own stores, partner stores, and wholesalers), to raise awareness, allow for
purchase and delivery, provide customer support, and support other important functions of
the business.

Customer relationships: Companies need to maintain relationships with their customers to

acquire and retain customers and boost sales. Strong customer relationships can significantly
impact overall customer experience. There are many categories of customer relationships
including personal assistance, self-service, automated service, user communities, and
cocreation.

Core Capabilities: Any business needs resources—physical, financial, intellectual, and/or

human—to function. These resources enable the company to provide their products or
services to their customers.

Partner Networks: Companies build partnerships to optimize their business, reduce risk, or
gain resources. There are four main types of partnerships: strategic alliances between
noncompetitors, coopetition—strategic alliances between competitors, joint ventures, and
buyer-supplier relationships.

Cost structure: All businesses incur costs through operation, whether fixed or variable. They
may also face economies of scale and scope. Companies consider their cost structures in two
strategies—cost-driven, where all costs are reduced wherever possible, and value-driven,
where the focus is on greater value creation. Cost structures will often consider fixed costs,
variable costs, economies of scale, and economies of scope.

Revenue model: A revenue model is a framework for generating financial income. It

identifies which revenue source to pursue, what value to offer, how to price the value, and
who pays for the value.
 Module 2

Strategic Environmental Analysis

A. External Environment:

2.1 Pestel Analysis: A PESTEL analysis is a framework or tool used by marketers to

analyse and monitor the macro-environmental (external marketing environment) factors that
have an impact on an organization, company, or industry.

1. POLITICAL FACTORS: Political factors, tell us how government policy and

actions that occur in the economy and other factors that can affect a business. Some of
the factors are tax policy, trade restrictions. Ex: A company decides to move its
operations to a different state after a new government is elected on a campaign to
implement policies that would adversely impact the company’s core operations.
2. ECONOMICAL FACTORS: Economic Factors take into account the various
aspects of the economy, and how the outlook on each area could impact your
business. These factors include inflation, interest rates, economic growth rates etc.
Ex: A company decides to refinance its debt after an interest rate decrease is
announced.
3. SOCIAL FACTORS: These factors are related to the cultural and demographic
trends of society. Social norms and pressures are keys to determine consumer
behaviour. Some of the factors are Health Consciousness, Age Distribution Ex: The
percentage of the American population that smokes have decreased since the 1970s,
due to changes in society’s perception of health and wellness.
4. TECHNOLOGICAL FACTORS: Technological factors are linked to innovation
in the industry, as well as innovation in theoverall economy. These may include
automation, R&D. Ex: A company decides to digitize their physical data files to
allow for quicker access tocompany information.
5. ENVIRONMENTAL FACTORS: Environmental factors concern the ecological
impacts on business. Some of the factors are weather conditions, temperature,
climate change etc. Ex: An agricultural company has to adjust its harvest
forecasts due to unexpectedly dryseasonal conditions that will prevent crop growth.
6. LEGAL FACTORS: Legal factors pertain to any legal forces that define what a
business can or cannot do. Legal factors include licenses & permits, labour Laws,
intellectual property. Ex: A restaurant is forced to shut down after not meeting food
safety standards set out in statelaw.
2.2 PORTER’S FIVE FORCES MODEL:

I. Competitors in the industry: Number of competitors and their ability to undercut a

company. The larger the number of competitors, along with the number of equivalent
products and services they offer, the lesser the power of a company.
II. Threat of new entrants: A company's power is also affected by the force of new
entrants into its market. An industry with strong barriers to entry is ideal for existing
companies within that industry since the company would be able to charge higher
prices and negotiate better terms
III. Power of Suppliers: Here it says how easily the suppliers impact the industry or cost
of inputs. The fewer suppliers to an industry, the more a company would depend on a
supplier. When there are many suppliers a company can keep its input costs lower and
enhance its profits.
IV. Power of Customers: The ability that customers have to drive prices lower. A
smaller and more powerful clientbase means that each customer has more power to
negotiate for lower prices and better deals.
V. Threat of Substitutes: When close substitutes are available, customers will have the
option to forgo buying a company's product, and a company's power can be weakened.
2.3PORTER’S DOMINANT ECONOMIC FEATURE:

I. FACTOR CONDITIONS: Factor conditions in a certain country refer to the natural,

capital and human resources available. Created factor conditions are more important
than natural factor conditions that areavailable.
II. DEMAND CONDITIONS: The nature of local demand for industry’s products and
services.
III. FIRM’S STRATEGY, STRUCTURE AND RIVALRY CONDITIONS: The
conditions in the economy governing how companies are created, organized, and
managed the nature of domestic rivalry.
IV. RELATED AND SUPPORTING INDUSTRIES: The presence or absence in the
economy of supplier industries and related industries that is highly competitive.
V. CHANCE: Acknowledging the extent to which an industry’s competitiveness is related to
historical pathof development.
VI. GOVERNMENT: The ability of government is to manage the determinants to benefit their
basic industries. Ex: IT Industry
2.4 INDUSTRY LICE CYCLE:

The industry life cycle refers to the evolution of an industry or business through four stages
based on the business characteristics. The four phases of an industry life cycle are the
introduction, growth, maturity, and decline stages.

A. INTRODUCTION PHASE: The introduction, or start-up, phase involves the

development and early marketing of a new product or service.
B. GROWTH PHASE: Consumers in the new industry have come to understand the
value of the new offering, and demand grows rapidly. Once the new product has
demonstrated viability, larger companies tend to enter the market through acquisitions
or internal development.
C. MATURITY PHASE: The maturity phase begins with a shakeout period, during
which growth slows, focus shifts toward expense reduction, and consolidation occurs.
As maturity is achieved, barriers to entrybecome higher, and the competition becomes
clearer.
D. DECLINE PHASE: The decline phase marks the end of an industry's ability to
support growth. Obsolescence andevolving end markets negatively impact demand,
leading to declining revenues’ Ex: Nokia 3310 handset.
2.5 The New BCG Matrix:

A BCG matrix helps businesses analyse both the current and future competitive landscape of
their industry, and then plan accordingly.

Ex: https://www.businessnewsdaily.com/5693-bcg-matrix.html (real life example)

A. Stars: The business units or products that have the best market share and generate the
most cash are considered stars. Monopolies and first-to-market products are
frequently termed stars.
B. Cash Cows: A cash cow is a market leader that generates more cash than it consumes.
Cash cows are business units or products that have a high market share but low
growth prospects.
C. Dogs: Dogs or pets are referred to as units or products that have both a low market
share anda low growth rate. They are neither earning nor consuming more cash.
D. Question Marks: These parts of a business have high growth prospects but a low
market share. They consume a lot of cash but bring little in return.
B. Internal Environment

2.6 Competencies and Critical Success Factors

CORE COMPETENCY: Core competency is a combination of multiple resources and skills

which distinguish a firm’s marketplace. It is a production technique which defines additional
value to customers. A variety of resources, such as talent pool, physical assets, patents, and
brand equity, make a contribution to a company's core competencies.

Ex: McDonald's has standardization. It serves nine million pounds of French fries every day,
and every one of them has precisely the same taste and texture.

Apple has style. The beauty of its devices and their interfaces gives them an edge over its
many competitors.

CRITICAL SUCCESS FACTORS: Critical success factors or CSFs are the elements of an
organization or project that are vital toits success. Identifying and communicating CSFs
within your organization is essential to ensure that your business or project stays focused on
what needs to be done to achieve success. It can also help you to avoid wasting effort and
resources on less important areas of the business.

There are four types of critical success factors namely:

Industry factors: result from the specific characteristics of your industry. These are the
thingsthat you must do to remain competitive within your market. Example: A tech start-up
might identify innovation as a CSF.

Environmental factors: result from macro-environmental influences on your organization.

Example: The business climate, the economy, your competitors, and technological
advancements. A PEST Analysis can help you to understand your environmental factors
better.

Strategic factors: result from your organization's specific competitive strategy. They might
include the way your organization chooses to position and market itself. Example: Whether
it's a high-volume, low-cost producer; or a low-volume, high cost one.
Temporal factors: Result from your organization's internal changes and development, and
areusually short-lived. Specific barriers, challenges and influences will determine these CSFs.
Example: A rapidly expanding business might have a CSF of increasing its international
sales.

2.7 TOWS MATRIX and SWOT MATRIX:

A TOWS analysis is very similar to SWOT, TOWS force you to look atyour
external environment first (your threats and opportunities) which allows you to gain better
understanding of the strategic choices.

Ex: Apple (Detailed explanation: https://harappa.education/harappa-diaries/tows-matrix/)

SWOT MATRIX: SWOT analysis (or SWOT matrix) is a strategic planning and strategic
management technique used to help a person or organization identify strengths, weaknesses,
opportunities, and threats related to business competition or project planning. It is sometimes
called situational assessment or situational analysis.

This technique is designed for use in the preliminary stages of decision-making processes and
can be used as a tool for evaluation of the strategic position of organizations of many kinds
(for-profit enterprises, local and national governments, NGOs, etc.). It is intended to identify
the internal and external factors that are favourable and unfavourable to achieving the
objectives of the venture or project.

Ex: Apple (https://harappa.education/harappa-diaries/tows-matrix/)

2.8Value chain analysis (VCA): is a process where a firm identifies its primary
and support activities that add value to its final product and then analyse these activities to
reduce costs or increase differentiation.

Value chain represents the internal activities a firm engages in when transforming inputs into
outputs.

PRIMARY ACTIVITIES

Inbound logistics: comprise packaging, machining, testing, equipment maintenance,

assembly, and other activities associated with transforming inputs into the ultimate products.

Outbound logistics: is an element of primary activities in value chain analysis. It is

concerned with providing the buyer with information, inducement, and opportunities to buy
the product. It includes promotional activities such as advertising, sales promotion, public
relations,personal selling, sales force etc.

Service: concerns itself with activities associated with enhancing and maintaining the
products’ value to customers, such as repair of machines, installation of machinery, training
to customer’s supply of parts, prompt response to customer’s query, etc.
SUPPORT ACTIVITIES: The support activities in the value chain analysis are necessary
for supporting the primary activities to take place. The support activities in the value chain
analysis have indicators. Such as: -Firm’s infrastructure, Human resource management,
Technological development, Procurement of resources, finance, inventory, etc.

2.9 VRIO FRAME

VRIO is an initialism for the four-question framework asked about a resource or capability to
determine its competitive potential: the question of Value, the question of Rarity, the
questionof Imitability (Ease/Difficulty to Imitate), and the question of Organization (ability
to exploit the resource or capability).

The Question of Value: "Is the firm able to exploit an opportunity or neutralize an
external threat with the resource/capability?"

The Question of Rarity: "Is control of the resource/capability in the hands of a relative
few?"

The Question of Imitability: "Is it difficult to imitate, and will there be significant cost
disadvantage to a firm trying to obtain, develop, or duplicate the resource/capability?"

The Question of Organization: "Is the firm organized, ready, and able to exploit the
resource/capability?" "Is the firm organized to capture value?

Ex: Starbucks (https://www.thepowermba.com/en/blog/vrio-analysis)

3.0 Benchmarking and Its Types, Balance Score Card:

Definition: Benchmarking is a tool of strategic management, that allows the organization to

set goals andmeasure productivity, on the basis of the best industry practices.

TYPES OF BENCHMARKING:

Internal Benchmarking: When measurement and comparison of key operationsbetween

teams, groups and individuals are made within the organization, the benchmarking is said to
be internal.

External Benchmarking: When measurement and comparison of key operations are made
with the competitors, then, it is called as external benchmarking Ex: Online (An e-commerce
business uses benchmarking to establish an average cost per conversion across different
product categories, measuring and predicting seasonal trends in sales.)
BALANCED SCORE CARD: The term balanced scorecard (BSC) refers to a strategic
management performance metric used to identify and improve various internal business
functions and their resulting external outcomes.

Ex: Banks often contact customers and conduct surveys to gauge how well they do in
their customer service. These surveys include rating recent banking visits, with questions
ranging from wait times, interactions with bank staff, and overall satisfaction.
 Module 3

Competitive Strategies

Corporate Strategies (Integration, Diversification, Strategic Alliances,

Outsourcing, Globalization Strategies)

3.1 Integration Strategy – Definition, Types, Pros, Cons & Examples

Any successful business person wants to be in charge of its business operations. Sometimes, a
businessman has to play a leading role in order to get things in line. Integration’s strategy is
also about taking control over your business operations.

What is Integration Strategy?

Integration strategy also goes by the name of the management control strategy. As the name
implies, it provides the business an option to have control over various processes
like competitors, suppliers, or distributors.

Types of Integration Strategies

Business-integration strategy has two major types and sub-types; horizontal integration and

vertical integration. They’re as follows: Horizontal and Vertical Integration.

Horizontal Integration
Businesses use horizontal strategy when they’re facing competition. A horizontal integration
strategy is when a company acquires the supply chain system of the different/same industries
that are operating at the same level. In other words, horizontal integration in similar businesses
is when a fast-food brand merges with the chain of the related business in the other country and
foreign market.

Strategic Management Reasons

As we know that horizontal integration is when a business acquires and merges with a
similar/dissimilar company. Businesses do it for various reasons like entering into the newer
markets, expand the market, lower the risks, develop a unique product, achieve economies of
scale, and increasing the company’s size and capabilities.

Standard Oil bought 40 refineries is a very good example of horizontal integration.

 Horizontal integration usually has long-term benefits on the strategy and planning of the
business. Therefore, the company has to make the right choice. The acquired and merging
business should be suitable to market and customers’ expectations. The company needs to
perform a comprehensive analysis before of its resources before the integration.

Advantages of Horizontal Integration

Some of the main advantages of horizontal integration are as follows;

▪ Enter into New Market. If the business acquires/merges with a foreign company, it makes it
easier for the acquiring business to enter into the new market.

▪ Market Power. When a business acquires and merges with another foreign company, the
customers’ market of the acquired company also comes along with it during the acquisition. It
would help the company to access the bigger for the distribution of its products.

▪ Differentiation. Acquisition and merging provide an opportunity for both companies to share
their expertise and develop something new. It results in the form of a new differentiating
product.

▪ Economies of Scale. When two businesses and companies integrate their experiences and
expertise for mass production, it reduces the overall manufacturing cost.

Disadvantages of Horizontal Integration

The acquiring business should be able to handle the bigger company in order to achieve the
advantages of horizontal integration. If it doesn’t, the following disadvantages would happen;

▪ No Benefits. The merging companies expect certain benefits from the horizontal integration, but
the hardware and software of either of the companies don’t match up. The expected synergies
turned out to be non-existent from the integration.

▪ Rigidness. Sometimes horizontal integration brings a lot of benefits in many ways. But it
becomes bigger and loses its management and operational flexibility. The functionality of the
company becomes so rigid that it would become very difficult to change it.

▪ Legal Issues. The acquiring and merging companies should keep in mind the legal issues. If the
alliance of two firms becomes a monopoly and it threatens to end the business of competitors
permanently, then it would result in serious legal issues.
Vertical Integration

Businesses also use vertical integration when they’re facing competition. Vertical integration
allows the company to have control over various stages of supply, distribution, and production.

Companies choose vertically-integrated strategy to make sure that they have complete control
over the raw material, supply chain, and manufacturing processes. Most importantly, the
purpose of vertical integration is to take charge of the distribution channels of the company’s
products.

For instance: Carnegie Steele Company acquires the iron mines to guarantee the consistent
supply of raw material. Next, the company controls the railroads to support the distribution of
raw material and final products. That’s how Carnegie Steele Company manufactures cheap
steel and controls the steel market.
 Types of Vertical Integration

Forward Integration: When a business takes over the distribution system and sells its
products/services directly to the customers. For instance, an automotive and mobile brand
opens up its retail showrooms to sell vehicles and mobile phones directly to the end consumers.

Backward Integration: When a business takes control over the supply of the raw material,
it’s backward integration. For instance, a supermarket and a fruit seller buy the vegetable and
fruit farm to control the supply of its products. An automotive company buys the electronic
parts and tire manufacturing companies to ensure the availability of material.

Balanced Integration:

As the name implies, balanced integration is a combination of forward integration and

backward integration. Here the business acquires both raw material supply chain
and distribution channels to control everything.

When Vertical Integration is Attractive

Vertical integration is suitable for the company under the following circumstances;

The market and the industry is growing at a significant rate.

▪ Suppliers and distributors control a major portion of the business, and the company has the
resources to buy either one or both of them.

▪ The profit margin of suppliers and distributors is high.

▪ The price range of distribution and suppliers is volatile and inconsistent.

▪ Distributors and suppliers are unreliable and they delay the delivery of the products and material
and it’s costing the company.
 Advantages of Vertical Integration

▪ Effectiveness. When a company buys either one of the channels or both, its productivity and
core effectiveness would increase.

▪ Cost & Profit. The most important benefit of vertical integration that it helps the company to
lower the cost and the business makes more profit as a result.

▪ Efficient. When a company takes over the distribution channels, it allows the company to
carefully deliver the final products.

▪ Smooth Supply. It allows the company to have a smooth supply of raw material without
inconsistency.

Disadvantages of Vertical Integration

▪ Management Issues. When a company integrates with either one of the channels, it changes the
company’s focus on the supply chain or the distribution channels. The company’s core products
suffer resultantly.

▪ Sustainability Problem. The company increases the supply of raw materials to achieve
economies of scale. It loses control over the production of raw material.

▪ Low Quality. When you remove the competition from the market, the quality of the raw material
or the finished goods would fall.

Examples of Integration Strategies

The social app Facebook is the world’s largest social media platform and Instagram is also a
different type of social media platform. Facebook horizontally integrated with Instagram and
increased the customer’s market share and competitive advantage.

Apple is one of the five world’s top tech companies. The company uses the balance vertical
integration of manufacturing the parts of its iPhones and Apple laptops. The brand also owns
the retail stores to sell its finished products.

Netflix is one of the world’s largest paid online video streaming companies. The company
follows the forward vertical integration by controlling the distribution of its video content.
3.2Diversification:

What is Diversification?
Diversification strategy is applied when companies wish to grow. It is the practice of
introducing a new product into your supply chain in order to increase profits. These products
could be a new segment of the industry your company already occupies, known as business-
level diversification. Alternatively, corporate-level diversification occurs if you penetrate a
new market.

Growth Strategies: Diversification is one of four different growth strategies popularised by

Igor Ansoff. Depending on the industry, size, and ambition of your company, one of these
growth strategies is more likely to be a fit than the others. They are:

• Penetration
• Product Development
• Market Development
• Diversification
 Penetration refers to entering the market at an incredibly low sale price in order to price out
your competitors. Product development refers to the creation and testing of new products
within your current market. Market development refers to entering new markets outside of your
current industry. But, let’s talk about diversification.

What are the types of diversification strategies?

There are three different types of diversification strategies that are commonly used today.
These are:

1. Concentric Diversification

2. Horizontal Diversification

3. Conglomerate Diversification

Concentric Diversification

Concentric diversification refers to the development of new products and services that are
similar to the ones you already sell. For example, an orange juice brand releases a new
“smooth” orange juice drink alongside its hero product, the orange juice “with bits”.

Horizontal Diversification

Horizontal Diversification refers to the development of new products that are somewhat related
to your original lines. For example, while your original product was plant pots, you are now
selling seeds for many varieties of herbs and flowers.

Conglomerate Diversification

Conglomerate diversification refers to the development of new products that are unrelated to
your original lines. For example, your t-shirt company has now decided to start stocking apple
products.

Conglomerate diversification is a much riskier strategy than both concentric diversification and
horizontal diversification. This is because it requires more outlay in terms of product
development and advertising. Plus, due to the goal of penetrating a new industry- this
diversification strategy has more likelihood of failure.
3.3Strategic Alliances

Strategic alliances develop between two or more businesses that largely remain independent of
one another. Rather than a merger, the businesses opt for less permanent joint ventures and
virtual collaborations. Each business offers a crucial part of the puzzle, such as a product on
one side and well-developed distribution channels on the other, and stand to make more profit
working together. Culture clashes, procedural differences and even technological
incompatibilities create problems in some strategic alliances. Successful strategic alliances
require ongoing communication between the businesses at all levels.

Strategic Alliances as Strategy

Strategic alliances provide a number of benefits that can translate into direct business strategy.
A strategic partnership that gets a product to market first lets a business capitalize on first-
mover advantage. This advantage, in essence, holds that the first to market captures the most
market share and brand recognition. Some strategic alliances block competitors by providing a
business with better resources, distribution or competencies. Strategic alliances also offer the
potential for access to previously closed markets or markets that are difficult to penetrate.

Considerations

Strategic alliance strategies provide a number of advantages, but the strategic partnerships
themselves require management. Even with apparently ideal strategic partners, agreement in
principle between business owners or upper management does not always translate into
operational success. Lack of trust among employees from both organizations or cultural
differences often create antagonistic relationships that slow or derail the alliance. Strategic
partners should structure the agreement to include parameters and mechanisms for exiting the
arrangement in an amicable and orderly way.
3.4 Strategic Outsourcing

What is strategic outsourcing?

Strategic outsourced services represent a set of operations that are delegated by a company for
management to a third-party service provider. Most commonly, this process is associated with
small companies that do not have enough resources to manage all tasks themselves.
Outsourcing is also widely used among mid-sized companies and large enterprises. With the
help of strategic outsourcing, companies across various industries can leverage a partner’s
expertise gained through years of practice and research. As a result, a company can improve
its business state in several areas.

Benefits of Outsourced Services

A. When handing over operations to an outsourced partner, a company can leverage the
following strategic benefits of outsourcing:
B. Reduced costs. One of the main reasons why companies use strategic outsourcing is the
desire to cut costs. You can fully rely on a partner’s knowledge and experience rather
than hiring specific personnel. Automation and optimization commonly go along with
outsourcing, thus allowing businesses to save on operational costs.
C. More time to focus on core business. Outsourcing helps companies get rid of an array
of routine and repetitive tasks, thus giving more time to manage their major
specialization and business challenges that require human interaction and judgment.
D. Better risk management. When trying to solve challenges yourself without the required
expertise, you are likely to make costly mistakes. Even attempts to acquire said
expertise could be in vain. You might hire the wrong person, or there is not enough
consistent workload to keep this person in house on a full-time job. However, when you
outsource the work to experts, you can better manage risks across the entire
organization.
E. Improved resource utilization. Many companies employ out-of-box software and might
not take maximum advantage of its use. The reason for this is that these systems are not
adjusted to the specific company’s needs and goals, and they can’t be. But outsourcing
software customization and integration to third party experts, helps you leverage its full
potential.
F. Gain competitive advantage. The above-mentioned advantages bring us to the main
benefit delivered with the strategic outsourced services. Every business desires to be
 the best in its market and own a competitive advantage over other players.
Transformation across an array of areas in your business will help you become more
flexible, drive growth, manage costs and stay on top of the competition.
G. Access to a global knowledge base. You can’t be an expert in everything. But you can
easily access a pool of resources and knowledge when partnering with various service
providers. Companies that specialize in outsourced services spend their time and money
to provide you with the best specialists in the market allowing you to benefit from their
expertise. Because just like you, they want to stay competitive and provide the best
services at the best possible price
3.5GLOBALIZATION
International business is a complex field where business managers are required to coordinate
input from multiple teams from several different locations around the world. Although there is
not a single universally accepted definition of a “global business manager”, Christopher
Bartlett, an authority in global business management, proposes one of the most commonly
adopted models. Bartlett’s model defends that there is “no such thing” as a general, all-
encompassing global business manager. Rather, Bartlett divided the role of Global Manager
into several distinct manager types that, together, compose the global business management
team.

According to Bartlett, business managers, country managers, and functional managers provide
the majority of the direction while senior executives coordinate the entire management team.
Together, these four types of managers overview strategy, country profiling, local
regulation, resource management, worker performance, and overall production. Bartlett’s
model of global management exposes the first challenge of global management: a high level of
coordination.

Another challenge of international business is balancing the market expectations of multiple

countries at once. Every national business operation needs to understand its domestic demand
for current and upcoming products. For each new country a business enters, an additional set
of demands and market conditions need to be considered, increasing the complexity of
managing the business at the global level.

Three Keys to a Winning Global Business Strategy

We can start seeing why operating in multiple national markets is a daunting task. According
to Professor Tomas Hult, Director of the International Business Centre in the Eli Broad College
of Business at Michigan State University, there are three keys for a successful global business
strategy:

A. The first key is to define the core business strategy for each strategic business unit in a
company.
B. The second key is to adapt the core business strategy to each national market, to
internationalize the core strategy. It is also important to take in consideration that the
internationalization process typically results in local business strategies with large
differences between countries. These differences affect the business’ cost position,
product quality and competitive differentials at the global level.
 C. The third key to a successful global business strategy is to counteract the weaknesses
created by the internationalization of the core strategy by incorporating the original
unique characteristics of the business into each local national strategy.

This process can be called “globalization”. A global business should balance global
consistency (globalization) with local responsiveness (internationalization). While global
consistency can significantly increase leverage and competitive advantage for the firm at the
global level, local responsiveness (internationalization) can improve competitiveness at the
local level. Therefore, it is crucial to avoid “over globalizing” or “under globalizing”.

Benefits of a Successful Global Strategy.

 Business Level Strategies

3.6Competitive positioning and Business Strategy

Competitive positioning is about defining how you’ll “differentiate” your offering and create
value for your market. It’s about carving out a spot in the competitive landscape, putting your
stake in the ground, and winning mindshare in the marketplace – being known for a certain
“something.”

A good positioning strategy is influenced by:

• Market profile: Size, competitors, stage of growth

• Customer segments: Groups of prospects with similar wants & needs

• Competitive analysis: Strengths, weaknesses, opportunities and threats in the landscape

• Method for delivering value: How you deliver value to your market at the highest level

Business Strategy
Definition: Business strategy can be understood as the course of action or set of decisions
which assist the entrepreneurs in achieving specific business objectives.

It is nothing but a master plan that the management of a company implements to secure a
competitive position in the market, carry on its operations, please customers and achieve the
desired ends of the business.

In business, it is the long-range sketch of the desired image, direction and destination of the
organisation. It is a scheme of corporate intent and action, which is carefully planned and
flexibly designed with the purpose of:

• Achieving effectiveness,

• Perceiving and utilising opportunities,

• Mobilising resources,
• Securing an advantageous position,

• Meeting challenges and threats,

• Directing efforts and behavioural action.

Levels of Business Strategy
1. Corporate level strategy: Corporate level strategy is a long-range, action-oriented, integrated
and comprehensive plan formulated by the top management. It is used to ascertain business
lines, expansion and growth, takeovers and mergers, diversification, integration, new areas for
investment and divestment and so forth.

2. Business level strategy: The strategies that relate to a particular business are known as business-
level strategies. It is developed by the general managers, who convert mission and vision into
concrete strategies. It is like a blueprint of the entire business.

3. Functional level strategy: Developed by the first-line managers or supervisors, functional level
strategy involves decision making at the operational level concerning particular functional
areas like marketing, production, human resource, research and development, finance and so
on.
3.7 Strategic Groups and Retrenchment Strategy
A strategic group is a name given to the group of companies in a particular industry that uses
a similar business model or a set of strategies. These strategic groups provide services of a
specific segment of the industry. Each strategic group is segmented based on their
operating environment, threats, and opportunities of the industry.

Because of this, all the companies that provide services in a particular segment of the industry
are referred to as members of one strategic group. For example, in the restaurant industry, there
are different strategic groups formed based on different variables such as presentation,
preparation time, and pricing of the food, etc. The various strategic groups in the restaurant
industry are fast food, fine dining, etc.

The term “Strategic group” is introduced by Michael S. Hunt, a Harvard professor in 1972, in
his doctoral thesis report. While studying the appliances industry, he learned that the companies
that are part of subgroups have high competition among them.
 Retrenchment Strategy

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

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

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

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

2. The hotel may focus on the room facilities which is more profitable and may shut down the less

3. The institute may offer a distance learning programme for a particular subject, despite teaching
the students in the classrooms. This may be done to cut the expenses or to use the facility more
efficiently, for some other purpose.

Examples of retrenchment strategies:

 Selling Assets. Selling assets such as investments, facilities, machines or entire

divisions of your organization.

 Abandoning Markets.
 Abandoning a Line of Business.
 Decreasing Production.
 Eliminating Redundancies.

 Downsizing.
 Outsourcing.
3.8 Ansoff’s Matrix

The Ansoff matrix is a strategic planning tool that provides a framework to help executives,
senior managers and marketers devise strategies for future growth. It is named after Russian
American Igor Ansoff, an applied mathematician and business manager, who created the
concept.

Growth Strategies: Ansoff, in his 1957 paper, provided a definition for product-market strategy
as "a joint statement of a product line and the corresponding set of missions which the
products are designed to fulfil". He describes four growth alternatives for growing an
organization in existing or new markets, with existing or new products. Each alternative
poses differing levels of risk for an organization.

Market Penetration: In market penetration strategy, the organization tries to grow using its
existing offerings (products and services) in existing markets. In other words, it tries to
increase its market share in current market scenario. This involves increasing market share
within existing market segments. This can be achieved by selling more products or services
to established customers or by finding new customers within existing markets. Here, the
company seeks increased sales for its present products in its present markets through more
aggressive promotion and distribution
This can be accomplished by:

 Price decrease

 Increase in promotion and distribution support

 Acquisition of a rival in the same market

 Modest product refinements

Market Development: In market development strategy, a firm tries to expand into new
markets (geographies, countries etc.) using its existing offerings and also, with minimal
product/services development.

This can be accomplished by:

1. Different customer segments

2. Industrial buyers for a good that was previously sold only to the households;

3. New areas or regions of the country

4. Foreign markets.

This strategy is more likely to be successful where:

A. The firm has a unique product technology it can leverage in the new market

B. It benefits from economies of scale if it increases output

C. The new market is not too different from the one it has experience of

D. The buyers in the market are intrinsically profitable.

E. This additional quadrant moves increases uncertainty and thus increases the risk
further.

Product Development: In product development strategy, a company tries to create new

products and services targeted at its existing markets to achieve growth. This involves
extending the product range available to the firm's existing markets. These products may be
obtained by:

 Investment in research and development of additional products;

 Acquisition of rights to produce someone else's product;
 Buying in the product and "badging" it as one's own brand;
  Joint development with ownership of another company who need access to the
firm's distribution channels or brands.

This also consists of one quadrant move so is riskier than market penetration and a similar
risk as market development

Diversification: Diversification an organization tries to grow its market share by introducing

new offerings in new markets. It is the riskiest strategy because both product and market
development are required.

Related diversification: There is relationship and, therefore, potential synergy, between the
firms in existing business and the new product/market space. Concentric diversification, and
Vertical integration.

Unrelated diversification: This is otherwise termed conglomerate growth because the

resulting corporation is a conglomerate, i.e., a collection of businesses without any
relationship to one another. A strategy for company growth by starting up or acquiring
businesses outside the company's current products and markets.

Diversification consists of two quadrant moves so is deemed the riskiest growth option.
 Module 4

3.9Strategic Implementation and control

Organizational structure: An organizational structure defines how activities such as task

allocation, coordination, and supervision are directed toward the achievement of
organizational aims.

Advantages of structure:

1. Faster decision making: When your company's various teams are able to
communicate more effectively, your company's overall communication will be
positively impacted as well. This will then lead to quicker decision-making. In other
words, the flow of information with an organizational structure can be used to
promote faster decision-making.
2. Multiple business locations: If you're a business owner, having an organizational
structure helps to ensure all of your locations are operating in a similar manner and
are abiding by the same procedures.
3. Improved operating efficiency: Because organizational structures divide companies
into various teams or branches, they're helping to ensure that all tasks and
responsibilities specific to those divisions are met more easily.
4. Greater employee performance: When an employee is delegated certain tasks and
responsibilities in a clear manner, they're able to perform well at their job.
5. Eliminates duplication of work: When employees are divided into teams according
to their skills and expertise, the risk of overlapping job duties is eliminated.
6. Reduced employee conflict: Using organizational structures can potentially eliminate
conflict between employees. While several factors can come into play in this regard,
once an employee knows their duties, the more focused they'll be on their own work.
For the most part, this is a great way to avoid any rising conflict between co-workers.
7. Better communication: While this will vary from company to company and depend
on the specific organizational structure in place, an organizational hierarchy has the
potential to foster healthy communication between different divisions and teams.
Types of organizational structures

There are four types of organizational structures. Understanding how they work and what
their benefits and drawbacks are can help you make a more informed decision as to which to
implement in your workplace. The four types are:

1. Functional structure
2. Divisional structure
3. Flatarchy
4. Matrix structure

1. Functional structure: In a functional structure, organizations are divided into

specialized groups with specific roles and duties. A functional structure is also
known as a bureaucratic organizational structure and is commonly found in small
to medium-sized businesses.
2. Divisional structure: In a divisional structure, various teams work alongside each
other toward a single, common goal. Each of these divisions has its own executive
who manages how that branch operates, controls its budgets and allocates its
resource.
3. Flatarchy: In a flatarchy, there are little to no levels of management. A company
using this structure could have only one manager in between its executive and all
other employees. It is called a flatarchy because it is a hybrid of a hierarchy and a
flat organization.
4. Matrix structure: In the matrix style of organizational structure, employees are
divided into teams that report to two managers—a project or product manager
along with a functional manager.
Leadership:

Leadership is the ability of an individual or a group of individuals to influence and guide

followers or other members of an organization.

1. Authoritarian Leadership

Authoritarian leadership styles allow a leader to impose expectations and define outcomes. A
one-person show can turn out to be successful in situations when a leader is the most
knowledgeable in the team. Although this is an efficient strategy in time-constrained periods,
creativity will be sacrificed since input from the team is limited.

2. Participative Leadership

Participative leadership styles are rooted in democratic theory. The essence is to involve team
members in the decision-making process. Team members thus feel included, engaged and
motivated to contribute. The leader will normally have the last word in the decision-making
processes.

3. Delegative leadership

Also known as "laissez-faire leadership", a delegative leadership style focuses on delegating

initiative to team members.

4. Transactional leadership

Transactional leadership styles use "transactions" between a leader and his or her followers -
rewards, punishments and other exchanges - to get the job done. The leader sets clear goals,
and team members know how they'll be rewarded for their compliance.
 Process innovation: Process innovation is about implementing a new or improved
production or delivery approach, including changes in operational methods, the techniques
used and the equipment or software.

 Examples of process innovations:

 The first firms betting on SaaS (software as a service) technology, and using, for instance,
cloud contact centres from Talk desk, changed the way their customer support processes used
to be organized
 The first hotels that decided to make decisions based on big data using, for instance, insights
from the Climber Hotel, made changes on their decision-making approach.

Difference between product and platform-based competition

Product based competition Platform based competition

 Product works on platform and helps  It is an ecosystem with a
in its core assets. monetizable core assets.

 Product is designed keeping only  Platform is designed keeping both

customers/ consumer in mind. products and consumer in mind.

 Products create value by charging  Platform creates its value through

money for certain features/ items interaction between uses and third
based on customer needs. parties.

 Here the customer is the one who  Platform economy is not straight
bears the costs. forward.

 Products have single revenue  Platforms have many revenue

stream. streams

 Enterprise and users drive products  Consumer and partner drive the
business. platform business.
Technology based competition:

Firms competing through international technology-based strategies rely on an organization

system that uses a strong culture to bond human assets, senior leadership, and resources
together in ways that cultivate and promote core competencies and capabilities.

Strategy

Strategy has a lot of different meanings. But in the McKinsey 7S model, strategy refers to the
approach that a company uses to gain a competitive advantage and reach its long-term goals.
A great strategy is one that is reinforced by a clear vision and mission as well as strong
values. Most importantly, a firm’s strategy should be in alignment with the other six factors
of the McKinsey 7S model. For instance, even if a short-term strategy usually doesn’t help
provide exceptional results, it may help a company do so if it's aligned with the other six
factors.

Structure

As the name suggests, the term structure in the McKinsey 7S Model refers to organizational
structure. In simple terms, it involves the chain of command and knowing who takes
instructions from whom. Without proper structure, it’s really difficult, if not impossible, to
conduct daily operations successfully. A lack of structure can lead to chaos and confusion.
That’s why the McKinsey consultants who created this consulting framework added structure
to the model.
Systems

'Systems' refers to the processes and procedures that are employed to conduct a business’s
daily activities. A company’s standard operations consist of such procedures and workflows.
Basically, systems determine how business is done and it includes everything from
production to distribution of goods and services.

Shared values

McKinsey consultants put shared values at the core of this model. If you see the McKinsey
7S model presented as a diagram, you’ll find that all the other factors revolve around ‘shared
values. Basically, shared values include norms and behaviour that are expected from all staff
members. These are usually mentioned in the company guidelines and employees are
required to familiarize themselves with them before commencing the job.

Skills

Again, as the name suggests, 'skills' refers to the skills and competencies of people who are
employed by a company. To ensure that an organization has the right skill set to achieve its
goals, it can either up skill current employees or hire new ones.

Style

Style refers to the management style that is prevalent in a company. It also includes the
company’s informal rules and culture. A good leadership style is essential to ensure job
satisfaction and productivity.

Staff

This factor not only includes employees, but also involves how they are hired, trained, and
maintained. One must also consider other factors, such as the size of the workforce, its
diversity, employee benefits, etc. For example, refer this link-
https://consultport.com/consulting-academy/the-mckinsey-7s-model-explained-with-a-
practical-example/
Strategic Control: Strategic control is the process used by organizations to control the
formation and execution of strategic plans; it is a specialized form of management control,
and differs from other forms of management control in respects of its need to handle
uncertainty and ambiguity at various points in the control process.

Categories of strategic control:

 Premise Control
Your business strategy is based on an assumed premise of how things will occur in the
future. Premise controls allow you to examine whether this assumption still holds true once
you actually put your ideas into action. Ex-inflation, interest rates

 Implementation Control
Use implementation controls to ensure no adjustments to your strategy are necessary. Two
basic types of implementation controls are monitoring strategic thrusts and doing milestone
reviews. Ex- budgets, schedules

 Special Alert Control

You will need mechanisms in place to assess the position of your business in the case of
sudden events, such as natural disasters, product recalls or market spikes. Special alert
controls allow you to reconsider the relevancy of your strategy in light of these new events.
Prepare how you will handle these special alerts with procedures to be followed, priorities
to keep and tools to be used. Ex- market crash, natural disasters

 Strategic Surveillance Controls

Strategic surveillance controls allow you to monitor multiple sources for these threats.
Continually safeguard your strategy by following trade journals, attending conferences and
keeping awareness of industry trends to meet these risks as they arise. Ex- trade magazines,
financial journals.
Innovation ecosystem:

An innovation ecosystem refers to a loosely interconnected network of companies and other

entities that co-evolve capabilities around a shared set of technologies, knowledge, or skills,
and work cooperatively and competitively to develop new products and services.

Creating innovation ecosystem [designing innovation system for business

growth and sustainability]:

Create an Innovation Environment

Provide Opportunity Through Personal Autonomy

Build Cross-Organizational Networks

Encourage Diversity of Thought

Focus on Goal-Based Thinking

 Create an Innovation Environment

Generate an environment where creative ideas flourish, not just in R&D but throughout the
organization, at every level. Consumers and frontline staff are in the best position to know
what is needed and the ubiquitous availability of technology is creating innovation
ecosystems out of the control of large corporations.

 Provide Opportunity through Personal Autonomy

Provide an opportunity to prove the idea and surface the innovation to those who can make
the change. It is important to create this opportunity by providing autonomy to employees to
process their thoughts and present their ideas.
  Build Cross-Organizational Networks

Connect the innovator to the sponsors and the implementers. Fast connections between senior
leadership and grassroots have proven to be the most important enabler for an innovative
organization.

 Encourage Diversity of Thought

Encourage diversity of thought and remove limiting assumptions. All organizations need to
dispel and discourage the belief that disenfranchised groups cannot innovate.

 Focus on Goal-Based Thinking

Focus on the goal and don’t measure the performance. Measuring innovative performance is
perhaps the best way to stifle it.
 Module 5

Emerging strategic Trends:

Country evaluation:

It is the process that determines the geographical opportunities firms choose to pursue and the
challenges of marketing and production site location. It goes on to carefully examine the
process by describing the choice and weighing of variables used for opportunity and risk
analysis as well as the inherent problems associated with data collection and analysis of a
particular country.

Country selection:
The Basics of Country Selection is that firms lack sufficient resources to pursue all potential
(international) opportunities, where they must:
determine the order of country entry establish the rates of resource allocation across countries

• In selecting geographic sites, firms must decide:

I. where to market their products
II. where to produce their products
Eg: If transportation costs are high and/or government regulations require local production, a
firm may be forced to produce a product in the same country in which it sells it.

Objectives of country evaluation and selection:

• To grasp company strategies for sequencing the penetration of countries.

• To see how scanning techniques can help managers both limit geographic alternatives and
consider otherwise overlooked areas.

• To discern the major opportunity and risk variables a company should consider when
deciding whether and where to expand abroad.

• To know the methods and problems when collecting and comparing information
internationally.

• To understand some simplifying tools for helping to decide where to operate

Entry strategies:
Entry strategy is a planned distribution and delivery method of goods or services to a new target
market. In the import and export of services, it refers to the creation, establishment, and
management of contracts in a foreign country.

Types of Entry strategies:

• Licensing.

• Franchising.

• Partnering.
• Joint Ventures.

• Buying a Company.

• Piggybacking.

• Turnkey Projects.

Choosing a Global Strategy

What is global strategy?
A global strategy is a strategy that a company develops to expand into the global market. The
purpose of developing a global strategy is to increase sales across the world. The term "global
strategy" includes standardization, international and multinational strategies. Developing a
global strategy can benefit your company in many ways, including making sales in new
markets, increasing your global brand awareness and more.

How do you choose Global Strategy?

1. Set Goals for Your International Strategy

Before you do anything, take the time to understand what you want to get out of your
international strategy. Every business wants to gain more customers, but your goals should be
more specific than that. What are your sales goals for year one, year five, and beyond? What
kind of customer retention can you realistically expect? How much time and money do you
expect to spend on the expansion? How long will it take to see a return on investment?
2. Identify Your Product/ Service
While this might seem obvious, you need to know what you’re going to sell in the new market.
If your company only has one product or service, this step will be easy. If you have numerous
offerings, decide which ones you will begin your expansion with.

3. Research New Markets

With your goals in hand, look for international markets where you can meet or exceed those
goals. Cast your net wide by looking at several markets. Many governments and trade
associations offer resources to help you understand foreign markets.

4. Understand Your Competition

To do well in any market, you need to understand the local competition and how they approach
the market. Each market has its own mix of competitors and cultures that define how an
industry works.

5. Plan Your Marketing Strategy

Even before you choose a target market, think about your overall marketing strategy. Do you
want to have a different advertising message in each market you enter? Do you want to maintain
a global brand? Or do you want a consistent, global brand that is slightly tailored for each
marketplace? Choose whichever strategy will most clearly communicate your competitive
advantage to new markets.

6. Plan Your International Organizational Structure

Entering one or more international markets will affect your organizational
structure. A proactive plan will keep your staff focused on their individual responsibilities and
promote efficient work. Consider how you will staff for each new market and how teams from
different markets will communicate to share ideas.

7. Determine Your Distribution Strategy

There are many ways to get your offerings to a new market. Determine which channel best fits
your business before entering the new market. Each one comes with its own set of advantages
and disadvantages.

8. Assemble a Strategy Document

A written plan keeps your team aligned and can guide your organization as it begins an
international expansion. A plan can keep your company focused on the right goals and
strategies rather than simply reacting to the market.
Expanding operations into an international market can be challenging, but it opens the door to
many new and exciting opportunities.

Blue ocean strategy and red ocean strategy:

Blue ocean strategy:

Blue Ocean Strategy is referred to a market for a product where there is no competition or very
less competition. This strategy revolves around searching for a business in which very few
firms operate and where there is no pricing pressure.
Example:

• Apple ventured into digital music in 2003 with its product iTunes.

• Apple users can download legal and high-quality music at a reasonable price from iTunes
making traditional sources of distribution of music irrelevant. Earlier compact disks or CDs
were used as a traditional medium to distribute and listen to music.

• Apple was successful in capturing the growing demand of music for users on the go. All the
available Apple products have iTunes for users to download music.

Red ocean strategy:

A red ocean strategy involves competing in industries that are currently in existence. This often
requires overcoming an intense level of competition and can often involve the commoditization
of the industry where companies are competing mainly on price.
Example:
In India, Indigo and SpiceJet are instances of companies adopting the Red Ocean strategy; they
offer low-cost airlines that have gained customers but are continually in direct competition with
one another
4 Action Framework

Eliminate
In each column, it’s important to ask questions about the industry standards among your
product space. First, ask yourself, which factors that the industry has long competed on should
be eliminated? Think of the factors that require a lot of investment and effort, but don’t bring
a lot of revenue/new customers and, in general, don’t drive key metrics up. These can also be
the factors that made more sense in the past but are not as useful now — for example, a feature
of differentiated a digital product in the past but became obsolete as time passed.

Reduce
Which factors should be reduced well below the industry’s standard? Think of the
features/characteristics of your product that are well designed to beat the competition but take
too much time and resources. Can you strip this down to something more simple but still
competitive and relevant to your users?

Raise
Which factors should be raised well above the industry’s standard? What are the pain points
that the market does not address? Think of the way you can build features that will help your
customers solve challenges that other companies are not solving.

Create
Which factors should be created that the industry has never offered? This is one of the most
challenging questions and it requires a deep understanding of your customers’ interests and
desires, as well as a good insight into where the industry is going. The goal is to think about
the future and the challenges customers haven’t articulated yet.

Example: Four actions framework of blue ocean applied to jet blue.

Eliminate:
- Factors which the industry takes for granted.
- Flying experience is the same across the industry.
- High Fares.
- Hub and Spoke system.
- Ticket bookings through travel agents.
- Paper filled cockpits.
- Different types of aircrafts need to be operated.
- Profitability from the beginning.

Reduce:
- Costly hub and spoke system avoided.
- Avoided travel agents (average cost USD14 per ticket)
- Used only one type of aircraft Airbus 320 (therefore had to service and maintain only one
type of aircraft and avoided complications of service and maintenance for other type of
aircrafts)

Raise:
- Factors which should be raised well above industry standards.
- Flying experience.
- Lower / Discounted / Affordable fares
- Direct routes.
- Industry leading high rate of on time arrivals.

Create
- Somethings that are never offered by the industry. • Unique flying experience. ( individual
TV monitors, choice of channels, leather seats, more legroom, direct routes and an
affordable price. )
- Online ticket sales and reservation agents answer calls from home thus reducing ticket costs
and avoiding overheads.
- Paperless cockpit which equips pilots with laptops that speed up maintenance checks and
turnaround times at gates.

Co-creation of value
Co-creation of value is a business strategy, one that promotes and encourages active
involvement from the customer to create on-demand and made-to-order products. With co-
creation, consumers get exactly what they want and have a hand in making it happen.

Traditional to transformational business model in Indian context:

This model means how the operations of business has changed over the years.
The business world has evolved over the centuries to take advantage of new trade opportunities,
technologies and consumer demands. The business models that entrepreneurs create have also
changed. A business model is a strategic plan for earning a profit, the means of showing how
income will exceed expenses.

Examples:
1) Example: Physical retail isn’t dying, it’s just changing. Today’s innovative retailers have
come up with ways to blend digital and physical experiences for consumers to offer a highly
personalized one. Retailer like First Cry have found ways to make their physical stores a
significant part of their enhanced and personalized digital customer experience. If leading
retailers are successful, consumers will like it even more when companies enhance the
experience phone in hand.

2) Also, when it comes to delivery services, we have Swiggy and Zomato in food delivery
services. Earlier food was just available at restaurants but over the period of time the food is
being delivered to our desired location.