STRATEGY AND

RESOURCE
ALLOCATION
Prepared by : Teg Mahip Kaur (MBA EP)
 STRATEG
• What is it?

Y
Harvard professor Alfred D. Chandler, Jr. defines strategy as:
“The determination of an enterprise's basic long-term goals, the adoption of courses of action, and the allocation of
resources necessary for achieving those goals.”

• Need
As Mike Kaufman states:
"The selection of investment projects and the allocation of corporate capital to them are among top management’s
primary responsibilities to shareholders. A good corporate investment program can mean sustained growth; failure to
invest wisely can impede growth or threaten company survival."

Strategy aligns a firm’s capabilities with external opportunities. Kenneth R. Andrews’ framework outlines strategic
formulation, considering:
• Complementarities & synergies between existing assets and new growth.
• Time-series relationships between present and future growth.
• Risk impact of new investments on the overall firm.
 Grand
Strategy
A company’s Grand Strategy focuses on:
• Growth (Concentration, Vertical
Integration, Diversification)
• Stability
• Contraction (Divestiture, Liquidation)
 Grand
A Grand Strategy defines a company's long-term direction and competitive approach. It is categorized
into three main types: Strategy
1. Growth Strategy (Firms pursue expansion through:)
A) Concentration – Expanding within the same industry (e.g., McDonald's in fast food).
B) Vertical Integration –
• Backward Integration: Controlling suppliers (e.g., Reliance Industries producing its own raw
materials).
• Forward Integration: Moving closer to customers (e.g., Apple opening its own retail stores).
C) Diversification – Expanding into new industries or markets.
• Related Diversification – Expanding into industries that are linked to the existing business,
leveraging synergies. Example: Apple entering wearables after smartphones.
• Unrelated Diversification – Expanding into completely different industries with no direct synergy.
Example: Tata Group operating in automobiles, steel, and software services.
2. Stability Strategy
• Focuses on maintaining current market position without
aggressive expansion.
• Suitable for mature industries or uncertain economic
conditions.

3. Contraction Strategy
• Reduces business operations to improve financial stability.
• Divestiture: Selling off a business unit (e.g., IBM selling its PC
division to Lenovo).
• Liquidation: Closing down unprofitable segments.
 Corporate
Strategy
• Also known as the “Portfolio Strategy”
• In a multi-business firm, allocation of resources across various businesses is a key
strategic decision. Main questions to be answered are:
1. What businesses should we be in and how resources should be allocated?
2.How should the corporate centre influence and relate to the businesses under it?
• Portfolio planning tools have been developed to guide the process of strategic
planning and resource allocation.
• Three such tools are the BCG matrix, the General Electric’s stoplight matrix, and
the McKinsey matrix.
 • BCG Matrix
The BCG matrix consists of four cells with market share on the horizontal axis and
market growth rate on the vertical axis.
 • General Electric’s Stoplight Matrix
The General Electric Company is highly admired for the sophistication, maturity, and
quality of its planning system. It uses a 3x3 matrix called the General Electric’s Stoplight
Matrix to guide the allocation of resources.

This matrix calls for evaluating

the businesses of a firm in
terms of two key issues:
A) Business strength:
How strong is the firm vis-a-vis
its competitors?
B) Industry attractiveness:
What is the attractiveness or
potential of the industry?
 • McKinsey Matrix
Very similar to the General Electric Matrix, the McKinsey matrix has two
dimensions viz., competitive position and industry attractiveness.
The criteria or factors used for judging industry attractiveness and competitive
position along with suggested weights for them are shown below:
 Business Level Strategies
Business-level strategies focus on how a company competes in a particular industry or market. Also
known as Porter’s Generic Competitive Strategies, these are as follows:
1) Cost Leadership
• Aims to be the lowest-cost producer in the industry. Focuses on economies of scale, efficient
operations, and cost-cutting. Example: Walmart (low-cost retailing).
2) Differentiation
• Offers unique products/services that customers perceive as superior. Focuses on branding,
innovation, and quality. Example: Apple (premium technology products).
3) Focus Strategy
• Targets a specific niche market rather than the entire industry. Can be cost-focused (low-cost
provider in a niche) or differentiation-focused (unique products for a niche). Example: Rolex (luxury
watches for a premium market).
4) Integrated Cost Leadership & Differentiation
• Combines cost efficiency with some level of product differentiation. Example: Toyota (affordable yet
quality cars).
Parenting
Advantage
The classic approach to business portfolio
management, as exemplified by the BCG matrix
or the McKinsey matrix, focuses on the overall
attractiveness of the industry and the business’s
competitive position within the industry.

It ignores the synergies between different

businesses in the firm’s portfolio and assumes
that the firm is the right owner for all its
businesses.

McKinsey and Company recommends a more

sophisticated approach to business portfolio
management that considers parenting advantage
along with the business unit’s inherent value
creation potential.
 MACS
Framework
Market Activated Corporate Strategy (MACS) Framework

• The horizontal dimension: Business unit’s potential of creating value as a stand-alone enterprise. The
horizontal dimension of a MACS matrix shows a business unit’s potential value as an optimally managed stand-
alone enterprise. This measures the optimal value of a business, sometimes it can be qualitative. When more
precise information is needed, the manager can use the net present value of the business unit and then compare
it with other units (factors like sales, value added, or funds employed can be also included).

• The vertical dimension: Parent Company’s ability to extract value from the business unit. The vertical axis
of the MACS matrix measures a corporation’s relative ability to extract value from each business unit in its
portfolio. If the parent company can extract the most value from the business unit than could be done by anyone
else, this company is the owner that can really create the most value from the assets and these business units
should be kept.
 CASE STUDY
Microsoft is one of the largest technology companies, generating over $230 billion in annual revenue (2023). With a
diverse product portfolio (Azure Cloud, Office 365, LinkedIn, and hardware like Surface and Xbox), Microsoft employs
a highly strategic and data-driven approach to sales management.
Its B2B sales strategy focuses on enterprise clients (corporate IT departments, governments, and large
organizations), and its resource allocation is optimized using AI, automation, and tiered sales structures.

2. Sales Strategy at Microsoft

Microsoft’s sales management strategy aligns with its core business goals:
1.Maximizing Recurring Revenue via subscription-based models (e.g., Microsoft 365, Azure Cloud).
2.Customer-Centric Selling by tailoring solutions for enterprise clients.
3.AI-Driven Resource Allocation for high-priority accounts.
4.Sales Channel Diversification using direct sales, partner networks, and self-service digital platforms.
 4. Implementation of Strategy & Resource Allocation

4.1 AI-Powered Sales Forecasting & Resource Allocation

Microsoft uses AI to predict revenue trends, allocate sales resources, and prioritize high-value accounts.
• Example: Microsoft Azure’s AI-powered sales engine analyzes market conditions, customer needs, and sales rep efficiency to
allocate sales personnel effectively.
• Impact: 35% increase in conversion rates for strategic accounts.
4.2 Account-Based Sales Strategy for Large Enterprises
• Microsoft allocates dedicated sales teams for top-tier clients (e.g., Fortune 500 companies, government contracts).
• Sales reps use customized sales pitches based on client-specific data analytics and pain points.
• Example: Microsoft customized Azure cloud solutions for the U.S. Department of Defense, securing a $10 billion JEDI cloud
contract.
4.3 Partner Network for SMB & Mid-Market Sales
• Instead of allocating high-cost enterprise sales teams to smaller businesses, Microsoft leverages a partner sales model.
• Example: Microsoft collaborates with thousands of IT resellers to sell Microsoft 365 subscriptions to small businesses.
• Impact: 75% of SMB sales are driven by Microsoft’s partner network, reducing internal sales costs.
4.4 Self-Service & Digital Sales Model
• Microsoft has optimized self-service sales portals for direct customers.
• Example: Businesses can purchase Microsoft 365 or Azure services without direct sales rep involvement.
Strategic Planning and Resource Allocation :
The bigger picture
 Conclu
sion
Effective strategy and resource allocation are essential for
businesses to sustain growth, navigate market uncertainties,
and maximize returns. Companies must align their strengths
with market opportunities, strategically allocate capital, and
balance growth with risk management. In an increasingly
dynamic economy, businesses that make data-driven,
forward-looking investment decisions gain a long-term
competitive edge.
 REFERENCE
S
1.McKinsey & Company. (2024). Matching the right projects with the right resources. https://www.mckinsey.com/
2.McKinsey & Company. (2024). How to put your money where your strategy is. https://www.mckinsey.com/business-
functions/strategy-and-corporate-finance/our-insights/how-to-put-your-money-where-your-strategy-is
3.McKinsey & Company. (2024). Resource allocation for long-term value creation. https://www.mckinsey.com/business-
functions/strategy-and-corporate-finance/our-insights/resource-allocation-for-long-term-value-creation
4.Corporate Finance Institute. (2024). Strategic planning - Definition, steps, and benefits.
https://corporatefinanceinstitute.com/resources/management/strategic-planning/
5.Forbes. (2024). 14 tips to create an effective strategy for resource
planning.https://www.forbes.com/sites/forbesbusinesscouncil/2024/04/14/14-tips-to-create-an-effective-strategy-for-resource-
planning/
6.Harvard Business Review. (2024). The finer points of linking resource allocation to value creation. Harvard Business Review.
https://hbr.org/2024/03/the-finer-points-of-linking-resource-allocation-to-value-creation
7.Boston Consulting Group. (2024). How companies can optimize capital allocation.
https://www.bcg.com/publications/2024/how-companies-can-optimize-capital-allocation
8.The Economist. (2024). Why strategic resource allocation matters in turbulent markets.
https://www.economist.com/business/2024/04/18/why-strategic-resource-allocation-matters-in-turbulent-markets
Thank
you