ESSENTIALS

OF
STRATEGIC
MANAGEME
Prof. G. Senthilkumar

NT
Essentials of Strategic
Management
Unit 1: Introduction to Business Policy
Unit 2: Scope of Strategic Management
Unit 3: Policy Development
Unit 4: Strategic Marketing Variables
Unit 5: Diversification & Corporate Image
Unit 6: Business Environment
UNIT 3:
POLICY
DEVELOPMENT
Unit 3: Topics for
Discussion
 Marketing orientation  Classification of
to policy development strategies
 Corporate strategy  Competitive
 Distinction between Analysis
strategy and strategic
plan 
 Industry
Self Analysis of
 Defensive strategy and Analysis
organizations
Offensive strategy
Organizational
Orientations
 Production Orientation follows the premise that any product of high
quality can be readily sold.
 Product Orientation is chiefly concerned with the quality of its
product.
 Selling Orientation focuses primarily on the selling and
promotion of a
particular product.
 Marketing Orientation starts with the customer, finds out what they
want, and then produces it for them.
 Holistic Marketing incorporates integrated marketing, relationship
management, internal marketing, and social responsibility to build a
unified and shared brand.
Marketing
Orientation
 Marketing orientation is a business model that focuses on
delivering products designed according to customer desires,
needs, and requirements, in addition to product
functionality and production efficiency (i.e., production
orientation).
 Marketing orientation is “The organization-wide generation
of market intelligence pertaining to current and future
customer needs, dissemination of the intelligence across
departments and organization wide responsiveness to it.”
 Marketing Orientation Components
 Customer orientation
 Competition orientation
 Levels of
Strategy
 Corporate Strategy
 This describes a company’s overall direction towards growth by managing business and product lines.
 Coco cola, Inc., has followed the growth strategy by acquisition. It has acquired local bottling units to emerge as the
market leader.

 Business Strategy
 Usually occurs at business unit or product level emphasizing the improvement of competitive position of a firm’s
products or services in an industry or market segment served by that business unit.
 Apple Computers uses a differentiation competitive strategy that emphasizes innovative product with creative
design.

 Functional Strategy
 It is the approach taken by a functional area to achieve corporate and business unit objectives and strategies by
maximizing resource productivity.

 Operating Strategy
 These are concerned with how the component parts of an organization deliver effectively the corporate, business and
functional –level strategies in terms of resources, processes and people.
Corporate Strategy

 Corporate strategy means a company’s vision and tactics to

outperform its competition.
 Corporate Strategy refers to the overall strategy of an
organization that is made up of multiple business units,
operating in multiple markets.
 Corporate Strategy entails a clearly defined, long-term
vision that organizations set, seeking to create corporate
value and motivate the workforce to implement the proper
actions to achieve customer satisfaction.
 Corporate Strategy is a continuous process that requires
a
constant effort to engage investors in trusting the company
with their money, thereby increasing the company’s equity.
Corporate Strategy of Adidas

 OUR CORE BELIEF: Through sport, we have the power to

change lives
 OUR MISSION: TO BE THE BEST SPORTS COMPANY IN THE
WORLD
 STRATEGIC BUSINESS PLAN: ‘CREATING THE NEW’
 Tata Steel consistently focuses on driving and maintaining excellence
in its operations through a relentless drive for improvement in process,
product and people.
 Today, we are amongst one of the few steel companies that has its
operations fully integrated – from mining to manufacturing and
marketing of finished products.

Our manufacturing strategy has always focused on ensuring raw

material security. This goes a long way in enabling cost
competitiveness and efficiencies, and has enabled Tata Steel to
become the lowest cost producer of steel in Asia.

Our Raw Material Division operates captive iron ore and coking coal
mines in the Indian states of Jharkhand and Odisha.
 KEY TASKS OF DEVELOPING AND IMPLEMENTING A
CORPORATE STRATEGY

 Exploring and determining the vision of the company  Installation of a continuous comparable review
in the form of a vision statement. system to create a controlling mechanism and
also generate data for selecting future course
 Developing a mission statement of the company that of action threats, opportunities etc.
should include statement of methodology for
achieving the objectives, purposes, and the  Finding out ways by which a company profile
philosophy of the organization adequately reflected can be matched with its environment to be able
in the vision statement. to accomplish mission statement
 Defining the company profile that includes the  Deciding on the most desirable courses of
internal analysis of culture, strengths and capabilities actions for accomplishing the mission of an
of an organization. organization
 Making external environmental analysis to identify  Selecting a set of long-term objectives and
factors as also
the corresponding strategies to be adopted in
 Implementing the chosen strategies in a planned line with vision statement.
way
based on budgets and allocation of resource,  Evolving short-term and annual objectives
outlining the action programs and tasks. and
defining the corresponding strategies that
would be compatible with the mission and
vision statement.
Key Benefits of Corporate
Strategy
 1. Universal outlook
 2. Keeping Pace with Changing Environment
 3. Minimizes Competitive Disadvantage
 4. Clear Sense of Strategic Vision and Sharper Focus on Goals
and
Objectives
 5. Motivating Employees
 6. Strengthening Decision-Making
 7. Efficient and Effective Way Of Implementing Actions For Results
 8. Improved Understanding of Internal and External Environments
of Business
Approaches to Crafting a
Strategy
 The Chief Architect approach: A single person assumes the role of
chief strategist
 The Delegation Approach: Here the manager in charge delegates big
chunks of the strategy-making task to trusted subordinates, down-
the-line managers
 The Collaborative or Team Approach: This is a middle approach when
by a manager with strategy-making responsibility enlists the
assistance and advice of key peers and subordinates in hammering
out a consensus strategy
 The Corporate Entrepreneur Approach: In the corporate entrepreneur
approach, top management encourages individuals and teams to
develop and champion proposals for new product lines and new
business ventures
 Distinction between strategy and
strategic plan
 A strategy is a blueprint, layout,  A plan is an arrangement, a pattern, a
design, or idea used to accomplish a program, or a scheme for a definite
specific goal. purpose.
 A strategy is very flexible and open for  A plan is very concrete in nature and
adaptation and change when needed. doesn’t allow for deviation.
 Strategy is with larger scope & long  Plan is with comparatively smaller
term scope & short term /medium term
 Strategy gives directions  Plan describes methodology
 Strategy is about reasoning WHY  Plan is about focusing on HOW
 Strategy is developed first  Plan is developed around the
strategy
Basis for Comparison Planning Strategy

Planning is thinking in advance, for

Best plan opted for achieving the
Meaning the actions which are going to take
desired outcome.
place in the future.

Planning is a road map for Strategy is the path chosen for

What is it?
accomplishing any task. achieving the objectives.

Related to Thinking Action

Basis Assumptions Practical considerations

Term Depending upon the circumstances. Long Term

Nature Preventive Competitive

Part of Management Functions Yes Sub-part of Decision Making

Sequence Second First

 Defensive strategy and Offensive
strategy

 Competitive strategies can be

divided into offensive and
the defensive strategies.
 Companies pursuing offensive
strategies directly target
competitors from which they want
to capture market share.
 In contrast, defensive
strategies are used to discourage
or turn back an offensive
strategy on the part of the
Defensive strategies

 Defensive strategy is defined as a marketing tool

that helps companies to retain valuable customers
that can be taken away by competitors.
 When rivalry exists, each company must protect its
brand, growth expectations, and profitability to
maintain a competitive advantage and adequate
reputation among other brands.
 To reduce the risk of financial loss, firms strive to
take their competition away from the industry.
 Defensive strategies
…..
 Retrenchment: It consists of the reduction  Divest: When the company sells some of
of the expenses by employees’ layoffs to its assets to accomplish a certain
increase profitability. This forces objective, such as higher returns or
employees to manufacture the company’s reduces debts. Usually, companies that
products with limited resources or with implement this strategy want to invest that
cheaper raw material. capital to create higher future revenue.
 For example, HSBC lay off 200 employees  For example, in 2009 Ailing Lehman
in Pune recently.In 2009, Starbucks had Brothers Holdings divested its venture-
closed down 600 units in the United States capital division as the firm sol In December
and 61 in Australia; they lay off employees 2009, L&T sold its 17% stake in Bangalore
in thousands. Another example is Tech International Airport Ltd (Bial) to GVK
Mahindra and IBM in India went on Power and Infrastructure Ltd. (GVKPIL)
retrenchment drive in past two years. for ₹ 686 crore; part of the assets were
sold to generate enough cash to pay their
debts.
Defensive strategies
…..
 Liquidation: Liquidation is the hardest strategy to perform by a
company because it means that it went into bankruptcy. This can
be caused because the operation and administration of the firm was
not appropriate or the managers were not trained enough to control
the activities of the firm.
 In this case, the unique solution is to sell all the company’s assets in
small parts to shareholders, stakeholders or other companies that are
economically solvent. Although this is a tough decision, it is better
to stop the operational chaos instead of continuing losing more
money.
 The National Company Law Tribunal (NCLT) has ordered liquidation of
two Rotomac group companies’ Global and Exports companies whose
promoter Vikram Kothari is accused of being involved in a banking
fraud.
 Offensive strategies
…..
 Frontal Attack: A frontal attack  Flank Attack: The Flank attack is the
is attacking a competitor ahead on by marketing strategy adopted by the
producing similar products with similar challenger firm and is intended
to attack the weak points or blind
quality and price; it is highly risky spots
unless the attacker has a clear of the competitor, especially when
advantage. The most prominent competitor enjoys leadership position
example is war between Pepsi & Coca in market. LG outflanked the other
Cola. Both are cash rich. Since ages colored TV producers in India, by
they use frontal attack strategy against launching a rural-specific colour TV
each other. Both are market leaders “Sampoorna”, thereby becoming the
in beverage market. When Pepsi first one to tap the rural areas. LG
introduced diet Pepsi, Coke introduced demonstrated that Rural Customers are
not just price conscious, but are
diet Coke. actually value conscious and are ready
to pay reasonable premium if
organization deliver solution to their
long-standing problem with their
 Offensive strategies
…..
 Encirclement Attack: This form of  Bypass Attack: This type of strategy is
market challenger strategy is used when found in a firm which has the brains to
the competitor attacks another on the innovate. And when it innovates, it
basis of strengths as well as bypasses the complete competition and
weaknesses and does not leave any creates a segment of its own.
stone unturned to overthrow the
competition. The current e-commerce  Long back, Sony Corp. was selling
scenario is the best example of the bulky cassette deck which was difficult
encirclement attack where the E- to carry while going out.
commerce companies are ready to go  In 1979, the sleek little device
negative in their margins to beat a Soundabout hit the market. Sony
competitor on turnover basis. They then changed the name to the
want to come on top and gain Walkman which became a craze.
maximum customers by hook or crook.
 Offensive strategies
…..
 Guerrilla marketing: Making small but
useful changes, which repeatedly puts
a brand in the forefront, and slowly
but surely makes it a huge name in
the market, is the crux of Guerrilla
marketing. Guerrilla marketing
campaigns are highly targeted in
terms of location where they are
launched.
 For example, McDonald’s simulates
that the lines are French fries coming
out of the typical package of the
hamburger brand.
 strategic
management
process
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Low Price Leadership
Strategy
 An organization seeking a low-cost strategy seeks to become a leader
in providing low-cost products to its customers.
 The strategy is to produce (or purchase) comparable value goods or
services at a lower cost than its competitors.
 The lower cost will attract the majority of customers and allow it to
profit by the volume of goods sold.
 For this strategy to be successful, it requires that only one or two
companies can be industry leaders in this position.
 For example, Walmart and Costco are leaders in the overall low-cost
strategy. IKEA is a low-cost leader using a focused low-cost strategy,
appealing to a particular segment of the overall market.
Differentiation Leadership
Strategy
 A strategy based on differentiation (distinction) calls for goods and
services that offer unique features and that have high value for the
target customer. The features must be perceived by the customer
to be so much better than what the competition offers that they are
worth an additional cost.
 Sony and Apple produce a large number of quality products that
appeal to the wide technology consumer market. Businesses that
sell luxury goods in any industry are employing a focused
differentiation strategy.
 BMW, and Rolex are all companies whose strategy depends upon
maintaining a loyal customer base convinced of the superior quality
and uniqueness of their products—and who are also willing to pay
a premium for the perceived quality value.
Integrated
Strategy
 In today’s highly competitive market, customers expect distinction and
low cost. Some companies have responded by adopting an integrated
strategy.
 The organizations strive to provide more value than the average
competitor but also focus on keeping costs low.
 Examples of integrated strategy firms include the automobile
companies who manufacture a “luxury” brand, such as the Kia K900.
Kia keeps costs down by using many components of its low-cost
models but adds additional features comparable to luxury car
producers.
 This approach is risky, because these products run the risk of being
too expensive for the economy-driven customer but not having the
prestige of the classic luxury brands.
Competitive analysis

 Competitive analysis (or

competitive research) is a
field of strategic research
that specializes in the
collection and review of
information about rival firms.
 It's an essential tactic for
finding out what your
competitors are doing and
what kind of threat they
present to your company's
success.
Why is it important to research on competitors?

 Competitive research (or competitive intelligence) is a field

of strategic research that specializes in the collection and
analysis of information about rival firms.
 It's an essential tactic for finding out what your competitors
are doing and what kind of threat they present to the
success of your company.
 According to new data from Crayon, a research firm based
in Boston, 41% of business professionals "strongly agree"
that competitive intelligence is critical to their company's
success.
How to conduct your competitive analysis?

 1. Identify your top ten competitors

 2. Analyse and compare their product
/service
 3. Analyze their market visibility
 4. Look at their media engagement
 5. Identify areas for improvement
How to do competitor analysis?

 Competitor analysis is the process of evaluating your

competitors’ companies, products, and marketing
strategies.
 To make your analysis truly useful, it’s important to:
 Pick the right competitors to analyse
 Know which aspects of your competitors’ business
are worth
analysing
 Know where to look for the data
 Understand how you can use the insights to improve your
Industry analysis

 Industry analysis is a tool that facilitates a company's

understanding of its position relative to other companies
that produce similar products or services.
 Understanding the forces at work in the overall industry is
an important component of effective strategic planning.
 Industry analysis enables small business owners to identify
the threats and opportunities facing their businesses, and to
focus their resources on developing unique capabilities that
could lead to a competitive advantage.
Industry Analysis …..

 Elements of Industry Analysis

 The underlying forces at work in the industry
 The overall attractiveness of the industry
 The critical factors that determine a company's success within the industry.

 One way in which to compare a particular business with the average

of all participants in the industry is through the use of ratio
analysis and comparisons.
 Ratios are calculated by dividing one measurable business factor by
another, total sales divided by number of employees, for example.
 Many of these ratios may be calculated for an entire industry with
data available from many reports and papers published.
Self Analysis of organizations

 An organisational assessment is a systematic process for

obtaining valid information about the performance of an
organisation and the factors that affect performance.
 Some advantages of a self-assessment are that it
encourages the organisation’s ownership of the assessment,
and thereby increases the latter’s acceptance of feedback
and commitment to the evaluation’s recommendations.
 However, drawbacks of the self-assessment approach are
that external stakeholders may question the independence
or validity of the findings and may fear that hard issues
will not be tackled, due to potential sensitivities within the
organisation.
END OF UNIT
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