Unit 3

Strategic Management
Strategy formulation
 Strategy implementation
• Strategy implementation is the fourth step in
the strategic management process and it’s
where you turn your strategic plan into action.
This can be anything from executing a new
marketing plan to increase sales to
implementing a new work management
software to boost efficiency across internal
teams.
Types of strategies
 Vertical Integration
• Vertical integration requires a company's direct
ownership of suppliers, distributors, or retail
locations to obtain greater control of its supply
chain.
• The advantages can include greater efficiencies,
reduced costs, and more control along the
manufacturing or distribution process.
• Vertical integration often require heavy upfront
capital that may reduce a company's long-term
flexibility.
Forward And backward integration
• Forward integration occurs when a vendor
attempts to acquire a company further along
the supply chain (i.e. acquire a retailer).
• Backward integration occurs when a vendor
attempts to acquire a company prior to it
along the supply chain (i.e. a raw material
provider).
 ITC
• When a company moves backward , does the
process before manufacturing eg juice
producer company starts his business by
growing fruits , segregating it , warehousing
and then sends the fruits to the
manufacturing unit of its own subsidiary , for
propduction its backward integration .
 Cont..
• When the company expands its work process
by operating in packaging of
juices ,warehousing, out bound logistics,
selling , and providing after sales services to
the customer .
• Basically all those operations that company
takes place after manufacting and its done by
themselves is forward integration
• FORWARD AND BACKWARD integrations are
always done for a related product , whereas
horizontal deals with unrelated product lines.
 Mergers
• A merger is a business deal where two existing,
independent companies combine to form a new,
singular legal entity. Mergers are voluntary. Typically,
both companies are of a similar size and scope and both
stand to gain from the transaction.
• Mergers happen for a variety of reasons. They could
allow each company to enter a new market, sell a new
product, or offer a new service. They can also reduce
operational costs, improve management, change their
pricing models, or lower tax liabilities.
• Idea vodafone
 acquisition
• An acquisition, one company (the acquirer) buys
another company (the target) and takes control
of its assets and operations. After the acquisition,
the two companies can continue to operate as
separate legal entities or the acquiring company
could simply absorb the target company.
Acquisitions are more common than true
mergers, as one party generally has the upper
hand or more to gain when companies are
consolidating.
 turnaround strategy
• A turnaround strategy is a form of
retrenchment strategy when a company
realizes that it has made wrong decisions
earlier. Now, it needs to undo some of its
works before it could impact the company’s
profitability and income. It’s a strategy where
you retreat and back from the earlier made
wrong decision, and transform the company’s
position from loss to profitability.
When Is The Right Time For A Turnaround Strategy?

• A consistent decline in financial performance

over an extended period, evidenced by
decreasing revenue, profitability, and cash
flow.
• Growing losses that impact financial stability
and hinder the ability to meet financial
obligations, such as paying bills, meeting
payroll, and investing in necessary capital
expenditures.
• increasing liabilities that become
unsustainable, especially when servicing the
debt becomes a significant burden.
• Significant market disruptions that cause the
existing business model to become less
competitive or obsolete, leading existing
products to lose market share.
• An underperforming management team that
finds it challenging to make effective decisions
or adjust to rapidly changing situations.
• Operational inefficiencies from outdated
processes, excessive costs, and declining
competitiveness.
• External factors like recessions, economic
downturns, regulatory changes, and natural
disasters.
 Disinvestment
• Disinvestment is the action of an organization
or government selling or liquidating an asset
or subsidiary. Absent the sale of an asset,
disinvestment also refers to capital
expenditure (CapEx) reductions, which can
facilitate the re-allocation of resources to
more productive areas within an organization
or government-funded project.
 Joint Venture
• A strategic joint venture is a business agreement that is actively
engaged by two companies that make a concerted decision to work
together to achieve a specific set of goals.
• Joint ventures are instrumental in helping companies establish a
presence in a foreign country or gain a competitive advantage in a
particular market,
• Joint ventures have helped numerous companies achieve access to
emerging markets that they would otherwise have difficulty breaking
into.
• Unlike mergers and acquisitions, strategic joint ventures do not
necessarily have to be permanent partnerships. Furthermore, both
companies maintain their independence and retain their identities as
individual companies, thus allowing each one to pursue business
models outside the partnership mandate
 Strategic alliance

• A strategic alliance is a legal agreement

between two or more companies, which
commit resources to achieve a common set of
goals. These goals are typically access to new
markets, shared intellectual property,
infrastructure, technology, or people, or
simply combining complementary products or
service lines.
• Maruti suzuki , hero honda
 Diversification
• A diversification strategy is a corporate
strategy to increase growth by changing or
expanding products a company manufactures
or offers for sale. Companies might pursue a
diversification strategy to get an edge on
competitors, a process known as offensive
diversification, or a business might embark on
a defensive diversification after facing
significant pressure to change.
 Conglomerate diversification:
• Conglomerate diversification: When a company
diversifies by acquiring a different company in an
entirely unrelated field or new industry, it’s
known as conglomerate diversification. Disney is
the world's largest media conglomerate. Under
the direction of the former CEO Bob Iger, the
Walt Disney Company grew by acquiring other
large media companies, including Marvel, 20th
Century Fox, Pixar, and Lucasfilm.
 Henry Mintzberg
• Plans - This is an informal or formal intended course
of action.
• Patterns - Prior repeated behavior acts as a guide
to our future behavior.
• Positions - Locating one’s self or resources with
the intention of accomplishing a purpose.
• Perspectives - An outlook concerning how things
are done and a vision as to where a company is going.
• Ploys - Ploys are synonymous with tactics. They
are a specific actions intended to achieve a result.
 EPRG Model
• Ethnocentric Approach: Ethnocentric approach or home
country orientation is the approach where a company
simply markets its product or services internationally in the
same manner as they do domestically. Companies believe
that consumer’s needs and market conditions are more or
less homogeneous in international markets. Companies
prefer an ethnocentric approach in order to avoid the
expense of developing new marketing techniques to serve
foreign consumers. All functions are planned and carried
out from home base only with little or almost no difference
in product formulation or specifications.
• Polycentric Approach: In Polycentric approach,
companies go for customization for each foreign
market. They will customize the products
according to each country depending upon the
consumers taste or preferences or cultural or any
legal or political factors i.e. depending upon their
local marketing conditions and then enter into
that market. Companies customize the marketing
mix to meet the specific needs of each foreign
market.
• Regiocentric Approach: In a regiocentric approach,
company’s target a group of countries having
similar market characteristics, and then enter into
the market. Once the company is established in
various markets, attempts are made to form
market clusters based on geographical and psychic
proximity. The production and distribution of
products are made to serve the whole region with
an effective economy of operation, close control
and coordination.
• Geocentric Approach: In geocentric approach, the
company identifies the needs of consumers worldwide
and then enters into the market with standard
products with standardized marketing mix for all the
markets it serves. Companies have to identify the
similarities in consumption patterns that can be
targeted. The companies coordinate their distribution
network to distribute their products in various regional
and national markets by establishing manufacturing
and processing facilities around the world.
 4 generic business level strategies
• Cost Leadership
• Under the Cost leadership strategy, the
organization target for a broad, large scale
market. They provide the lowest possible
prices to attract customers. The intension of
this strategy is to reduce the costs as much as
possible.
• Differentiation
• Under the Differentiation strategy, the organization is
targeting a broad, large range of market but provide a
product with unique features. The organization has to
create the product in a very unique way in which the
product can achieve competitive advantage in the
industry. They should concentrate on attracting the
customers through the unique features of the product
and to increase the market share by that. This helps the
organization to face the rivalry competition successfully
in maximizing the profits.
• Cost Focus
• When the organization is implementing the cost
focus strategy, they are aiming a niche market with
a little competition. This is more a focused
market segment and the product will be provided
to the market with the lowest possible price. It is
importance for the organization to choose the
niche market correctly and provide to the market.
That will create repeat customers and the products
cost will remain low.
• Differentiation Focus
• When an organization is providing its product to
the market using the differentiation focus, they
select a niche market and provide a unique
product to that market. This involves a powerful
brand loyalty of the customers to the product. It
is highly important to make sure the product
features remain unique as the customer loyalty
is based on the uniqueness of the product.
 Summing up
• Cost Leadership - Minimizing the costs incurred in
providing value (product or service) to a customer or client.
• Differentiation - This means making ones product unique
or special, compared to other competitors or substitute
products in the market.
• Focus:
– Cost Focus - This does not mean a focus on cost. It means
minimizing costs in a focused market.
– Differentiation Focus - This does not mean a focus on
differentiation. It means an orientation toward differentiation
from other competitors/products within a focused market.
 Concentration strategies

• Market penetration involves trying to gain

additional share of a firm’s existing markets
using existing products. Often firms will rely
on advertising to attract new customers within
existing markets.
 Concentration strategies

• Product development involves creating new

products to serve existing markets. In the
1940s, for example, Disney expanded its
offerings within the film business by going
beyond cartoons and creating movies
featuring real actors. More recently,
McDonald’s has gradually moved more of its
menu toward healthy items to appeal to
customers who are concerned about nutrition.