1. TYPES OF STRATEGIES

GENERIC STRATEGIES

• COST LEADERSHIP STRATEGY(That allows the firm to excel

competitors by least cost)

• DIFFERENTIAL STRATEGY(that is making products & services more

valuable than competitors)

FOCUS STRATEGY(it is selecting of one or two segments in the total

market to meet the requirement of target group of customers)

Vertical Integration Strategies

• Forward integration

• Backward integration

• Horizontal integration

o Forward integration

• Gaining ownership or increased control over distributors or retailers

o Guidelines for Forward Integration

1. Present distributors are expensive, unreliable, or incapable of meeting

firm’s needs

2. Availability of quality distributors is limited.

3. When firm competes in an industry that is expected to grow markedly.

4. Present distributor have high profit margins.

Backward integration

• Seeking ownership or increased control of a firm’s suppliers

When present suppliers are expensive, unreliable, or incapable of

meeting needs

Number of suppliers is small and number of competitors large

High growth in industry sector

Firm has both capital and human resources to manage new business

Advantages of stable prices are important

Horizontal Integration:-

Seeking ownership or increased control over competitors

Guidelines for Horizontal Integration

Firm can gain monopolistic characteristics without being challenged by

federal government

Guidelines for Backward Integration

Competes in growing industry

Increased economies of scale provide major competitive advantages

Faltering due to lack of managerial expertise or need for particular

resources

2. Intensive Strategies

• Market penetration

• Market development

• Product development

Market penetration (Seeking increased market share for present

products or services in present markets through greater marketing

efforts)

GUIDELINES

Current markets not saturated.

Usage rate of present customers can be increased significantly.

Market shares of competitors declining while total industry sales

increasing.

Market Development

(Introducing present products or services into new geographic area)

GUIDELINES:

New channels of distribution that are reliable, inexpensive, and of

good quality.

Firm is very successful at what it does.

Untapped or unsaturated markets.

Capital and human resources necessary to manage expanded

operations.

Excess production capacity.

• Product Development ( Seeking increased sales by improving present

products or services or developing new ones)

• GUIDELINES:

Products in maturity stage of life cycle

Major competitors offer better-quality products at comparable prices

Compete in high-growth industry

Strong research and development capabilities.

Diversification Strategies

Concentric diversification

Conglomerate diversification

Horizontal diversification

Concentric Diversification ( Adding new, but related, products or

services) .Guidelines:

o Competes in no- or slow-growth industry

o Adding new & related products increases sales of current products

o New & related products offered at competitive prices

o Current products are in decline stage of the product life cycle

o Strong management team

Conglomerate Diversification

(Adding new, unrelated products or services)

GUIDELINES:

o Declining annual sales and profits

o Capital and managerial talent to compete successfully in a new

industry

o Exiting markets for present products are saturated.

Horizontal Diversification:- ( Adding new, unrelated products or services

for present customers)

Guidelines

o Revenues from current products/services would increase significantly

by adding the new unrelated products

o Highly competitive

o Present distribution channels can be used to market new products to

current customers

Defensive Strategies

1. Joint venture

2. Retrenchment

3. Divestiture

4. Liquidation

1. Joint Venture ( Two or more sponsoring firms forming a separate

organization for cooperative purposes)

a. Domestic forms joint venture with foreign firm, can obtain local

management to reduce certain risks

b. Overwhelming resources and risks where project is potentially

very profitable

c. Two or more smaller firms have trouble competing with larger

firm

d. A need exists to introduce a new technology quickly

2. Retrenchment ( Regrouping through cost and asset reduction to reverse

declining sales and profit .

a. Firm has failed to meet its objectives and goals consistently over

time

b. Firm is one of the weaker competitors

c. Inefficiency, low profitability, poor employee morale, and pressure

from stockholders to improve performance.

d. When an organization’s strategic managers have failed

3. Divestiture ( Selling a division or part of an organization)

a. When firm has pursued retrenchment but failed to attain needed

improvements

b. When a division needs more resources than the firm can provide

c. When a division is responsible for the firm’s overall poor

performance

d. When a large amount of cash is needed and cannot be obtained

from other sources.

4. Liquidation ( Selling all of a company’s assets, in parts, for their tangible

worth)

a. When both retrenchment and divestiture have been pursued

unsuccessfully

b. If the only alternative is bankruptcy, liquidation is an orderly

alternative

c. When stockholders can minimize their losses by selling the firm’s

assets

Environmental Threat & Opportunity Profile (ETOP)

• Environmental diagnosis is the assessment of environmental factors in terms

of opportunity or threat & the importance of their impact.

• Preparation of ETOP

1. Identification of different components of relevant environment.

2. Assessing Significance of environmental factors.

3. Assessing impact factors.

4. Combining significance & impact factors.

Organizational Capability Profile (OCP)

OCP is a summarized statement which provides an overview of strength &

weakness in key result areas likely to affect future of the organization. Information

may be in qualitative and quantitative. In qualitative terms, strengths & weaknesses

are described in the form of narration & in quantitative terms in the form of various

point scales (from 1 to 5 etc.)

Strategic Advantage Profile (SAP)

IT is the process by which strategists examine a firm’s resources &

capabilities in the key functional areas to determine where the firm has

significant strengths & weakness so that it can exploit the opportunities &

meet the threats in the environment.

The essential purpose of each analysis is to take advantage of the distinctive

competencies of the firm by way of :

A. developing different strategies & following a course of action different

from those of rival firms.

B. making it difficult for other firms to duplicate the strategies.

• Analysis of the following factors is must

1. marketing

2. finance

3. production

4. Personnel and labour relations

5. R& D

6. Management

CORPORATE PORTFOLIO ANALYSIS

• CPA is a set of techniques that help strategists in taking strategic decisions

with regard to individual product in a firm portfolio. The most common

technique in this is the Boston Consulting Group Matrix (BCG).

Competitive Analysis: Porter’s Five Forces

Rivalry among Competing firms

The central point lays the stress on rivalry of the competing firm. This

relates to the intensity of the rivalry.

How the firms compete with each other and to what extent? That should be

taken into account very carefully.

Potential entry of new competitors

Potential entry for new competitors shows a balance between

different firms competing in a market. It also refers whenever a new partner

enter into a market he may become threat for one and opportunity for other

competing partners. As all the new entries and existing firms are competing

with each other so the new entry will definitely make an effect on every one

transacting in the market.

Potential development of substitute products

A potential development of substitute products also develops an

environment of competition in the market among the competing partners. As

all firms want to compete in term of quality and substitute will lasts for

longer in the market if the quality of the substitute will be greater than the

existing alternate.

Collective bargaining power of suppliers and consumers

if vendors are less in the market and the organizations that have to

purchase from those vendors are more then the demand for those suppliers

will be more as the firms have to purchase from that less suppliers. The

reverse is the case if suppliers are more and buyers are less. Then the demand

for those suppliers will be less. Such circumstances create difficulties in

bargaining.

Mc Kinsey’s 7s Framework

The model is based on the theory that, for an organization to

perform well, these seven elements need to be aligned and mutually

reinforcing. So, the model can be used to help identify what needs to be

realigned to improve performance, or to maintain performance during other

types of change. Whatever the type of change – restructuring, new

processes, organizational merger, new systems, change of leadership, and so

on – the model can be used to understand how the organizational elements

are interrelated.

• Strategy: the plan devised to maintain and build competitive advantage over

the competition.

• Structure: the way the organization is structured and who reports to whom.

• Systems: the daily activities and procedures that staff members engage in to

get the job done.

• Shared Values:

• What is the corporate/team culture?

• How strong are the values?

What are the fundamental values that the company/team was built on?

• Style: the style of leadership adopted.

• Staff: the employees and their general capabilities.

• Skills: the actual skills and competencies of the employees working for the

company.

• Placing Shared Values in the middle of the model emphasizes that these

values are central to the development of all the other critical elements. The

company's structure, strategy, systems, style, staff and skills all stem from

why the organization was originally created, and what it stands for. The

original vision of the company was formed from the values of the creators.

As the values change, so do all the other elements

GAPS MODEL

Customer Gap

This is the focus of the model and in many respects the gap most

providers should address first. It represents the difference between 'expected

service' and 'perceived service‘. To close this gap, providers need to consider

closing the following four gaps.

GAP 1

It is that the service provider does not accurately know, understand or

appreciate what their customer expects. All service employees should be

charged with closing the resultant gap by changing or influencing service

policies and procedures. The gap can exist because there is insufficient or no

dialogue between providers and users. It can also exist because the

organization is unwilling to investigate expectations of the customer.

GAP 2

It is the difference between a service providers' perception of clients / users

expectations and the subsequent development of customer-driven designs

and standards. It is not enough to simply understand clients / users

perceptions, that knowledge must translate itself to meaningful service

offerings at an appropriate level or to an appropriate standard. The gap may

exist because the personnel responsible for determining and setting standards

are of the opinion that clients / users expectations are unrealistic or

unreasonable.

GAP 3

This is the gap between the service designs and standards and actual service

delivery. In other words having guidelines, manuals and well-communicated

standards is not enough to guarantee excellent service. Resources in the form

of people, systems and appropriate technology also need to be in place and

adequately monitored. Contact personnel must be properly trained,

motivated, measured and compensated according to service delivery

standards.

• Thus, successful implementation of service standards that adequately reflect

clients users expectations is meaningless if the quality of delivery falls

short. Ensuring that adequate resources are available is the only way the gap

can be narrowed.

GAP 4

The final gap exists when there is a difference between actual service

delivery and the external communications and promises made by the

provider. These can be in the form of leaflets, web pages, presentations and

any other promotional media.

Strategy implementation

• “The implementation of policies & strategies is concerned with the design

and management of systems to achieve the best integration of people,

structure, processes and resources, in reaching organizational purposes.”

• “strategy implementation may be said to consists of securing resources,

organizing these resources and directing the use of these resources within

and outside the organization.”

Issues in strategies implementation

1. Project implementation

2. Procedural implementation

3. Resource allocation

4. Structural implementation

5. Behavioural implementation

6. Functional & operational implementation

1. Project implementation

Phases of a project

1. Conception phase (idea generation)

2. Definition phase (priority arrangement of ideas)

3. Planning & organizing phase(creation of project team, arrangement of funds,

infrastructure)

4. Implementation phase

5. Clean phase (disbanding of project infrastructure & project is handed over to

those who run it.)

Use of PERT/CPM in Project Implementation

• It contributes in project implementation in the following ways:

1. It forces the managers to plan because it is impossible to make a time event

analysis without planning.

2. It focuses attention on critical activities because a delay in their performance

will delay the whole projects.

The process in preparation of PERT/CPM

1. Identification of activities.

2. Sequential arrangements of activities.

3. Time estimates of activities

4. Network construction

5. Critical path (where critical activities are determined)

2. Procedural implementation

Any organization which is planning to implement strategies must be aware

of the procedural framework within which the plans, programmes & projects

have to be approved by the government at the central, state & local levels.

The regulatory elements to be reviewed are as follows

1. Formation of company.

2. Licensing procedures.

3. SEBI requirements.

4. Monopolies & Restrictive Trade Practices (MRTP) requirements.

5. FEMA requirements.

6. Import & export requirements.

7. Patenting and trademarks requirements.

8. Labour legislation requirements.

9. Environmental protection & pollution control requirements.

10.Consumer protection requirements.

11.Incentives & facilities benefits.

Strategy formulation and implementation can be contrasted in the

following ways

1. Strategy formulation is positioning forces before the action.

2. Strategy implementation is managing forces during the action.

3. Strategy formulation focuses on effectiveness.

4. Strategy implementation focuses on efficiency.

5. Strategy formulation is primarily an intellectual process.

6. Strategy implementation is primarily an operational process

7. Strategy formulation requires good intuitive and analytical skills.

8. Strategy implementation requires special motivation and leadership skills.

9. Strategy formulation requires coordination among a few individuals.

10.Strategy implementation requires coordination among many persons.

3. RESOURCE ALLOCATION

• In strategic planning, a resource-allocation decision is a plan for using

available resources, especially human resources especially in the near term,

to achieve goals for the future. It is the process of allocating resources

among the various projects or business units.

Procurement of resources

1. Financial resources.

2. Physical resources.

3. Human resources.

4. Technological resources

Approaches to Resource Allocation

• Top down approach (top to operational level)

• Bottom up approach (starting from operational level)

• Mix of two above

Means of Resource Allocation

Strategic budgeting :

In this the Position papers on different aspects such as

environment , marketing , past performance and so on are prepared and presented

to the top management which uses them to formulate corporate policy guidelines

and stating long & short term goals.

The operating management meanwhile prepares operational plans and sets

targets which are coordinated with corporate objectives . Based on resources and

corporate guidelines, the strategic budget is prepared and presented to top

management for approval and then communicated down the line & task of

implementation taken up.

• BCG –based budgeting.

• PLC based budgeting.

• Zero based budgeting(in this the strategist justify resource allocation demand

, not on the basis of the previous years’ budget, but on “ ground zero”, which

is based on fresh calculation of costs each time a plan is to be implemented.)

Factors affecting Resource Allocation

• Preference of dominant strategists.

• Internal policies.

• External influences. (Government policies.)

Difficulties in Resource Allocation

• Resources are limited.

• There are competing organizational units with each trying to get more.

• Organization’s past commitments.

4. Structural implementation

• An organization structure is the way in which the tasks and subtasks

required to implement a strategy are arranged. the various structures :

• 1.Entrepreneurial structure.

• 2.Functional structure.

• 3. Divisional structure.

• 4. Strategic business unit.

• 5. Matrix structure.

Entrepreneurial Structure

• Organization that is owned & manage by one person. E.g SSI. These

organisations are, product or service based firms single-business that serve

local markets. The owner looks after all decisions , whether they are day to

day operational matters or strategic in nature.

Owner - Manager

Employees

Advantages

• Quick decision making.

• Timely response.

• Informal and simple organisation.

DISADVANTAGES:

• Excessive reliance on owner – manager.

• Inadequate for future requirements if volume of business expands.

Functional Structure

As the volume of business expands , the entrepreneurial structure outlives its

usefulness. The need arises for specialized skills & delegation of authority to

managers who can look after different functional areas.

General manager

Prod mgr. Mkt mgr. Fin mgr. Personnel mgr.

Advantages :

• Efficient distribution of work.

• Delegation of day to day operational function.

• Time for top mgt. to look for strategic decisions.

Disadvantages:

• Misuse of authority.

• Creates difficulty in coordination.

• Complicated

• No unity or command.

Divisional Structure

In this work is divided on the basis of product lines, types of

customers served, geographical area covered, and then separate divisions or groups

are created and placed under the divisional level management. The functional

structure still operates under divisional structures.

Advantages

• Generates quick response to environmental changes.

• Enables top mgt. to focus on strategic matters.

• The efficiency level is at its peak.

Disadvantages :

• Costly.

• Problem in allocation of resources.

• Problems of coordination.

• Competition between divisions.

Strategic business units

SBU has been defined by Sharplin as “any part of a business

organization which is treated separately for strategic management purposes.”

When the organization faces difficulty in managing divisional operations

due to an increasing size & number of divisions, it becomes difficult for the

top mgt. to exercise strategic control. Then the concept of SBU is

helpful .SBU is considers as a headquarter to control the divisions coming

under it.

CEO

GROUP HEAD SBU 1 GROUP HEAD SBU 2 GROUP HEAD SBU 3

Divisions Divisions Divisions

A , B, C D, E, F G, H, I

ADVANTAGES

• Better coordination .

• Better control.

• Assured accountability.