Description
This presentation explain strategic management quadrant 2.
MODULE 9: STRATEGIC MANAGEMENT
Quadrant 2
Animations:
1. Strategic Planning - Strategies Http://www.youtube.com/watch?V=kxanywaap0s
2. Alternative Competitive
Advantage
Http://www.youtube.com/watch?V=qpu4v_Ae0Vc
3. Generic Strategies Mini-Lecture Http://www.youtube.com/watch?V=v14kuqyesxe
4. Porter's 5 Force Model Http://www.youtube.com/watch?V=pen1pvahssa
5. McDonalds SWOT Http://www.youtube.com/watch?V=qbyb0ht-dsk
6. SWOT Analysis - A Tool for
Success
Http://www.youtube.com/watch?V=9n-ertzwu8i
7. Value chain Http://www.youtube.com/watch?V=heevocmbhhq
8. Strategic Planning For Your
Business
Http://www.youtube.com/watch?V=gh6ej2mpvjy
9. Strategy Execution: It's Not
That Complicated!
Http://www.youtube.com/watch?V=tqpofm0zdy4
10. Environmental Scanning Http://www.youtube.com/watch?V=LN03WRRlH
wc
11. Strategy Formation Http://www.youtube.com/watch?V=zhuhoo8dbye
12. Environmental Analysis Http://www.youtube.com/watch?V=Q8Rur4nemik
13. Introduction to Strategic
Management
Http://www.youtube.com/watch?V=rj2tmqrkicm
14. Strategize This! Strategy Evaluation
and Control
Http://www.youtube.com/watch?V=nfklogzir4s
Illustrations:
Page 1 of 33
1. SWOT analysis example Http://som.csudh.edu/depts/cis/meyadat/classespag
e/CIS502/casestudies/SWOT%20Analysis%20Exa
mple.htm
2. Strategic management Https://www.google.co.in/search?Q=strategic+man
agement+illustration&tbm=isch&tbo=u&source=u
niv&sa=X&ei=J z_fuor_gsgprqfc1icgcg&ved=0cco
qsaq&biw=1092&bih=507
3. Strategic management Http://www.slideshare.net/anicalena/strategic-
management-business-presentation-slides
4. A simplified approach to
strategic planning: Practical
considerations and an
illustrated example
Http://www.emeraldinsight.com/journals.htm?Artic
leid=843496&show=html
5. A scenario-based approach to
strategic planning
Http://www.scenarioplanning.eu/fileadmin/user_up
load/Scenario-based_strategic_planning_WP.pdf
Video demonstrations:
1. Strategic Management Video
Lectures
Http://www.google.co.in/url?Sa=t&rct=j&q=&esrc
=s&source=web&cd=17&ved=0cfyqfjagoao&url=
http%3A%2F%2Ffreevideolectures.com%2fcourse
%2F3014%2fstrategicmanagement&ei=6fiuutdjisl
wrqfd8oggbw&usg=afqjcnhfg2rcsqunacp_bcem1-
l4gvj2_A
2. Michael Porter - Strategy Http://www.youtube.com/watch?V=kvywkm5by0s
3. Strategic Management -Part 1
of 7
Http://www.youtube.com/watch?V=5_Uu1f0tSak
4. The evolution of strategic
management
Http://www.youtube.com/watch?V=tu6sqyawska
5. The Strategic Management
Process
Http://education-portal.com/academy/lesson/the-
strategic-management-process.html#lesson
6. Strategic Planning: SWOT &
TOWS Analysis
Http://www.youtube.com/watch?V=H8FANR-2u2q
7. Strategic Planning: PEST Analysis
and Contingency Planning
Http://www.youtube.com/watch?V=tg2dlgtgcy8
8. Porter's Value Chain Http://www.youtube.com/watch?V=hkisczfhx80
9. Value Chains versus Supply
Chains
Http://www.youtube.com/watch?V=mu9twlcjnkk
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10. Overview of the Strategic
Planning Process
Http://www.youtube.com/watch?V=su3flxndv_A
11. Why Indians Win In Business Http://www.youtube.com/watch?V=rlricpsdg8w
Interactive simulation:
1. 15 Business Simulation Games
Could Build Hands-on Business
Experience
http://classroom-aid.com/2012/11/09/15-
business-simulation-games-could-build-hands-
on-business-experience/
2. Business simulation http://en.wikipedia.org/wiki/Business_simulation
#External_links
3. Simulations - Harvard Business
for Educators
http://hbsp.harvard.edu/list/simulations
Page 3 of 33
Quadrant 3
Questions:
Answer the following Questions on your own (Indicative/brief answers are
provided at the end of the module):
1. Explain the various stages in strategic management process
2. Discuss PEST analysis with the help of an example
3. Highlight the characteristics of external business environment in India
4. List the macro-level factors that need to be considered while conducting economic
analysis.
5. List the key technological factors that should be given due attention while
conducting PEST analysis
6. List the key political factors that should be given due attention while conducting
PEST analysis
7. What are the important social factors that should be given due attention while
conducting PEST analysis
8. Discuss the seven factors to be analyzed while conducting industry analysis.
9. Explain the Porter’s five-forces model
10. What are the sources of information for conducting environmental analysis?
11. How do you structure environmental appraisal using ETOP approach
12. Discuss the construction of a BCG matrix that aids strategic decision making on
various businesses
13. Describe the utility of TOWS matrix for choosing appropriate business strategy
14. Explain with examples, M.E. Porter’s three generic strategies
15. What are the functional prerequisites for implementing the generic strategies
proposed by M.E.Porter?
16. What are the risks associated with the three generic strategies suggested by
M.E.Porter
17. Discuss the structural- and process- related strategic response of firms vis-à-vis
recent unprecedented changes in business environment
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18. Elaborate on how the choice of a strategy influences the design of organization
structure
19. Discuss the two cooperative strategies firms adopt.
20. What are the prominent reasons for firms to get into strategic alliance? Explain.
21. Discuss the various types of strategic alliances.
22. How are Mergers and Acquisitions classified?
23. Discuss the strategic considerations in Mergers and Acquisitions
24. How do you distinguish between forward and backward integration?
25. How does a company make a strategic choice? Explain.
26. Discuss the steps involved in making an effective contingency plan
27. What are directional strategies? Give their classification.
28. Explain with examples, the integration and diversification strategies.
29. What are turnaround strategies? Explain.
30. What are the symptoms of a distressed firm? How does a turnaround strategy help?
Quizzes:
(Solutions are provided at the end of the module):
Choose the Appropriate Answer:
1.
Strategic decisions are typically:
a) in the purview of top management
b) decisions having long term consequences for the organization
c) involve considerable amount of uncertainty
d) All the above
2.
Corporate strategy provides the overall plan of action for
a) a functional department
b) a diversified business enterprise
c) an enterprise with a single product line
d) corporators
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3.
Strategic business area of a firm is the
a) business area in which the firm perceives competitive advantage
b) group of all its business areas
c) area in which the firm can devise newer strategies
d) business area offering maximum profitability
4.
The primary purpose of environmental scanning in strategic management is to
a) know about the new entrants to business
b) ensure ecological balance in the long run
c) know about the opportunities and threats facing the firm
d) assess the competitors’ strengths
5.
The mission of Walt Disney’s theme park is to
a) provide unique guest experience
b) make more and more money
c) create more imaginative characters
d) beat the competition in the entertainment industry
6.
BCG matrix is a tool for analyzing
a) profitability of an industry
b) portfolio of investments
c) Growth rate of a market
d) Stability of business
7.
The three generic strategies namely, cost leadership, differentiation and focus are
propounded by
a) Michael Porter
b) Peter Drucker
c) CK Prahlad
d) Gary Hamel
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8.
BCG approach suggests to milk ‘Cash cows’ as much as possible to invest the
milked cash in
a) Some more Cash cows
b) Stars and Dogs
c) Stars and Question marks
d) Question marks and Dogs
9.
Which of the following is not a force in the Michael Porter’s Five forces model of
Industry attractiveness
a) Bargaining power of suppliers
b) Competitors
c) Government laws
d) Scope for Substitutes
10.
Differentiation strategy of the firm requires it to
a) Seek high efficiency to attain low cost structure
b) be unique in its product offering
c) Seek cost advantage in a niche market
d) Grow faster than others
11.
The advantage of being the first-mover into a market is
a) Possible brand loyalty
b) low development costs
c) Certainty in technological success
d) lesser financial and strategic risks
12.
‘T’ in PEST analysis represents
a) Threat
b) Technological changes
c) Time
d) Tax
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13.
Telco’s entry into passenger car segment with Tata Indica is a:
a) Policy matter b) Strategic issue
c) Regular procedure d) A major program
14. To know an organization's strategy, one needs to
a) Understand the mission statement of the firm
b) Go through its strategic plan
c) Observe what it does over a reasonable period of time
d) Ask the corporate planners
15. Regional culture may be considered to be a part of ………………… aspect of
macro-environment
a) Economic
b) Political
c) Social
d) legal
16. When a firm acquires its supplier, then it is called as ………………….. integration
a) forward vertical
b) horizontal
c) diagonal
d) backward vertical
17. Growth, retrenchment and stability can represent ……………… strategies
a) Business
b) Functional
c) Corporate
d) Sectional
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18. Adding new, unrelated products or services for present customers is …………….
a) Concentric diversification
b) Conglomerate diversification
c) Horizontal diversification
d) Product development
19. Managerial decisions that together determine the long-term performance of a firm
constitute:
a) Corporate planning
b) Tactical planning
c) Strategic planning
d) Operational planning
20. Porter’s 5-forces model is meant to analyze
a) Within company situation
b) The relevant industry
c) General business environment
d) None of the above
21. ETOP in strategic analysis refers to
a) Economic and Technological Opportunity Profile
b) Environmental Threat Occurrence Prediction
c) Environment Threat Opportunity Profile
d) Economic Treaty Of Partnership
22. Tata motor’s acquisition of J aguar Land Rover is with an intention of
a) Reducing financial risk
b) Reducing political risk
c) Gaining access to new market
d) Increasing production capacity
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23. A solar power company that produces photovoltaic products acquiring a firm that
manufactures the cells, wafers and modules to create those products is an example
for
a) Vertical backward integration
b) Conglomerate diversification
c) Concentric diversification
d) Vertical forward integration
24. A company producing finger chips diversifies into producing ketch-ups to be used
with the chips is an example for
a) Vertical backward integration
b) Conglomerate diversification
c) Concentric diversification
d) Vertical forward integration
B. State Whether True or False:
1. Business strategies are derived from the corporate strategies
2. Policies suggest the purpose of a business
3. Strategic management is comprised of actions to improve short-term performance
of the organization
4. A given external environment should present the same opportunities or threats to
all the firms in an industry
5. A big tours and travels company when expands business by acquiring several fuel
stations , it is called vertical backward integration
6. In BCG matrix, Star businesses represent businesses with larger market share in
low growth market
7. Air Deccan company adopted cost-leadership strategy for its business growth
8. Environmental analysis intends to examine exclusively the environment outside the
company
9. Merger of Air India and Indian Airlines to form Indian is an example of horizontal
integration
10. Retrenchment is a Turn Around strategy
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11. Corporate strategies are for organizations that run more than one type of business
units
12. Diversification is an example for retrenchment strategy
13. PEST analysis in strategic planning is about analyzing political, economic, social
and technological environment
14. Porter’s 5-forces model involves analyzing the role of government
15. Businesses under the ‘Question mark’ category have a potential to gain market
share and become stars
16. Collusion is a cooperative strategy that firms adopt to benefit from
C. Fill in the Blanks with Appropriate Words:
1. The activities of environmental scanning, strategy formulation, its implementation,
evaluation and control together are referred to as …………………
2. The process of gathering information about the newer opportunities and threats to
business is called ……………..
3. In a diversified business conglomerate, middle level managers have the
responsibility for developing and implementing ……………… strategies
4. When a yarn manufacturing firm acquires textile producing facility, it is engaging
in ……………………….. strategy
5. Anything a company can do which its competitors cannot or can do better than
competitors is represents ………………….
6. Businesses with low market share in a mature, slow-growing market are identified
as …………. in BCG matrix.
7. A firm diversifying (through acquisition or merger) into an entirely
different market or product that has little or no synergy with its core business is an
example for ……………… diversification
8. The process through which a potential acquirer evaluates a target company or its
assets before acquisition is known as …………. .
9. Ferrari targeting high performance sports car segment is an example for .............
form of generic strategy
10. …………………. is the capability of a company to produce unique core products
that support several end products
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D. Cross-word:
1 6
Left to Right
3
1. A generic strategy fromME Porter
1 2
2. 5-force analysis of industry was by …….
3. Acquisition of supplier or customer is ….
4. Businesses with larger market share in a high
growth market are called ……..
4
2
Top to Bottom
3 5
1. Strategic planning starts with …….. analysis
2. Grand plan of action to realize objectives
3. When two or more companies blend wholly to
formone new company, it is called
4. A legitimate cooperation between two or more
companies for mutual benefit
4
5. A company needs to deflect/eliminate …….
6. Illegal cooperative strategy of firms to exploit
market
Assignments:
(Answer the following questions with the help of web course material in
Quadrant 1 and Supplementary reading material in Quadrant IV)
1. Why do you think Strategic Management is very important today?
2. Define strategy. What is strategic management?
3. Discuss the hierarchy of strategies for a business conglomerate
4. What are the global mega trends that have characterized today’s business
environment? Explain.
5. Describe the mega trends that have characterized Asian business environment
6. How does BCG matrix analysis help prioritizing business efforts? Explain
7. Giving real life examples, illustrate the adoption of M.E. Porter’s generic strategies
8. Apply SWOT analysis for your engineering degree program in your college
9. Discuss any three key environmental factors that have a bearing on outsourcing
business in India
10. Explain the Michael Porter’s five forces model to assess industry attractiveness
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11. What are strategic alliances? Describe a few commonly seen forms of alliances
12. Differentiate between joint venture and licensing forms of strategic alliances
13. How do you use impact matrix to analyze the impacts of various trends in the
business environment on strategic alternatives?
14. How does a firm choose a strategy among several alternatives? Explain
15. Comment on the strategies relevant to various quadrants of TWOS matrix
16. How are business objectives and strategies related? Explain with an example
17. Differentiate between ‘cost leadership’ and ‘product differentiation’ strategies with
the help of examples
18. Discuss the various dimensions of grand strategies namely, (i) Internal/external, (ii)
Related/unrelated, (iii) Horizontal/vertical, (iv) Active/passive strategies.
19. Explain in detail the retrenchment strategies namely, turnaround, liquidation and
divestment strategies.
20. What are the criteria to be considered while evaluating strategic choice?
21. How the strategy chosen would be implemented? Give the typical process of
implementation.
22. List the various sources of information that can be used while conducting
environmental scanning
23. Identify the key aspects/issues that need to be examined in technological, social,
political and economic environments before contemplating on the development of
any strategy.
24. Profile the major opportunities and threats present before Indian education industry
25. Fetch the financial statements of a company, compute the various financial ratios to
assess a company’s financial capabilities
26. Choose a company that has imported technology, and delineate the actions that
enabled it to absorb the same.
27. Examine how a Balanced Score Card approach integrates financial with non-
financial measures while implementing business strategy
28. Construct a GE portfolio matrix for Samsung in the Smart phone industry and
analyse the same
29. Discuss Mc Kinsey’s 7S model proposed for diagnosing organizational problems
and formulating remedial programmes
30. Identify any one strategic group in the Indian health care industry and describe its
Page 13 of 33
characteristics.
31. With the help of examples, distinguish clearly between integration and
diversification strategies
32. Examine the case of Maruti Udyog Ltd to understand the advantages and
limitations of being the’ first mover’ in to Indian small car segment.
33. Conduct a SWOT analysis of your education institution
34. Discuss the Indian government’s strategy of divestment in Indian public sector
companies
35. Analyze the fit between strategy and structure of a firm operating in rapidly
changing business environment.
On-line feedback through discussion forums:
1. Strategic management forum http://www.smfi.org/
2. Strategic management forum http://strategicmanagementforum.org/
3. Strategic Management Society
Discussion forum
http://forums.strategicmanagement.net/
4. Balanced Score Card Institute –
Strategy Management Group
https://www.balancedscorecard.org/Resources/St
rategicPlanningBasics/tabid/459/Default.aspx
5. A Harvard Law school forum http://blogs.law.harvard.edu/corpgov/2012/08/23
/strategic-risk-management-a-primer-for-
directors/
FAQs:
1. FAQs on Strategic Management http://www.pim.com.pk/faq.htm
Page 14 of 33
Quadrant 4
Supplementary reading:
1. Strategic management ppt http://www.iuc-
edu.eu/group/mba_learning/2012STRATMAN/E
V%20L1%20Introduction.pdf
2. Introduction to Strategic
Management
http://www.introduction-to-
management.24xls.com/en233
3. Strategic management www1.ximb.ac.in/users/fac/Amar/...nsf/.../NCS2
-SM%20Evolution.ppt
4. Thinking strategically http://www.mckinsey.com/insights/strategy/thin
king_strategically
5. Strategic Management - A
Complete Study Guide
http://www.managementstudyguide.com/strategi
c-management.htm
6. SWOT Analysis http://www.mindtools.com/pages/article/newTM
C_05.htm
7. SWOT Analysis http://www.quickmba.com/strategy/swot/
8. Industry analysis http://www.marsdd.com/articles/industry-
analysis/
9. Value chain analysis https://www.inkling.com/read/strategic-
management-david-14th/chapter-4/value-chain-
analysis-vca
10. Value Chain Analysis
for Assessing
Competitive Advantage
http://www.imanet.org/PDFs/Public/Research/S
MA/Value%20Chain%20Analysis.pdf
11. GE McKinsey matrix http://www.quickmba.com/strategy/matrix/ge-
mckinsey/
12. BCG growth-share matrix http://www.strategicmanagementinsight.com/too
ls/bcg-matrix-growth-share.html
13. Enduring ideas - McKinsey 7S
framework
http://www.mckinsey.com/insights/strategy/endu
ring_ideas_the_7-s_framework
14. Strategic thinking http://www.1000ventures.com/business_guide/cr
osscuttings/thinking_strategic.html
Page 15 of 33
Wiki development on the course/Other resources:
1. Strategic planning http://en.wikipedia.org/wiki/Strategic_planning
2. Business strategy: Overview
of Business planning
http://en.wikibooks.org/wiki/Business_Strategy/O
verview_of_Strategic_Planning
3. Everything about Global
Strategic Alliances
https://www.google.co.in/url?sa=t&rct=j&q=&es
rc=s&source=web&cd=2&cad=rja&ved=0CDIQ
FjAB&url=http%3A%2F%2Fwww.vedpuriswar.
org%2Fbooks%2FGoingGlobal%2FChapter%25
2009_Partnering%2520for%2520competitive%25
20advantage.doc&ei=afgxUuWhEMjorAfly4HgC
A&usg=AFQjCNGZrY8YcAoXIP53Ne4eILgs23
ieBw
4. Reading material about
strategic thinking
http://www.1000ventures.com/business_guide/cro
sscuttings/thinking_strategic.html
5. SWOT analysis: the example
of the Indian Library
Association
http://www.ifla.org/node/5749
6. Global Strategic Alliances http://www.vedpuriswar.org/books/Glob_ceo/Cha
pter%207%20Global%20Strategic%20Alliances.
doc
7. An overview of strategic
alliances
http://www.ux1.eiu.edu/~cfyak/Articles/An%20o
verview%20of%20strategic%20alliances.pdf
8. Competitor analysis http://en.wikipedia.org/wiki/Competitor_analysis
9. Value chain http://en.wikipedia.org/wiki/Value_chain
10. GE multi-factoral analysis http://en.wikipedia.org/wiki/G._E._multi_factoral
_analysis
11. BCG Matrix & GE/McKinsey
Matrix
http://wiki.telfer.uottawa.ca/ci-
wiki/index.php/BCG_Matrix_%26_GE/McKinse
y_Matrix
12. BCG growth-share matrix http://en.wikipedia.org/wiki/Growth%E2%80%9
3share_matrix
13. McKinsey 7S framework http://en.wikipedia.org/wiki/McKinsey_7S_Fram
ework
Page 16 of 33
Open content in the internet:
1. Course lecture through slides:
Strategic Management: The
Competitive Edge
Http://nptel.iitm.ac.in/courses/110108047/
2. MIT Open Courseware
Lecture notes on Strategic
Management
Http://ocw.mit.edu/courses/sloan-school-of-
management/15-902-strategic-management-i-fall-
2006/lecture-notes/
3. Strategic Management -
NPTEL
Http://www.youtube.com/playlist?List=PL6NHnt
KSc5RyEZO7Zg8ir6CkzJ nYHaQfp
4. Core- Strategic management -
NPTEL
Http://www.youtube.com/playlist?List=PL03A70
BC250C931F0
Case studies:
1. Strategic Management Case
studies
Http://srinivasatimes.com/Strategic%20manage
ment%20case%20studies.pdf
2. A case study of Yahoo Http://www.academia.edu/3457826/A_case_stud
y_of_Yahoo
3. Darkness to light : How a
smart turnaround strategy
helped Havells to make a
comeback
Http://businesstoday.intoday.in/story/smart-
turnaround-strategy-helped-
havells/1/197235.html
4. Ebay: “The world’s largest
online marketplace”- A Case
Study
Http://dspace.iimk.ac.in/bitstream/2259/510/1
5. Strategic Management: A
Case study of Walmart Inc
Http://www.articlesbase.com/strategic-planning-
articles/strategic-management-a-case-study-of-
walmart-inc-945260.html
6. Case Study: Maruti Suzuki
Ritz – Live the moment
Http://www.indiasocial.in/case-study-maruti-
suzuki-ritz-live-the-moment/
7. Http://www.tcs.com/sitecollec
tiondocuments/case%20studie
s/bancs_case_sbi.pdf
Case Study: State Bank of India, World's Largest
Centralized Core Processing Implementation
8. Strategic Alliances and J oint
Ventures in Civil Aviation –
A Case study
Http://dspace.iimk.ac.in/bitstream/2259/490/1/30
9-322.pdf%20rel%3D%27nofollow%27
9. Strategic Alliance —Case
Study of Lenovo and IBM
Http://edissertations.nottingham.ac.uk/973/1/07
msclixlj2.pdf
Page 17 of 33
10. When Strategic Alliances
Really Work - A Case Study
Http://www.synthesis.biz/synergies/blog/031313
11. Vision, values and business
strategies
Http://businesscasestudies.co.uk/tesco/vision-
values-and-business-
strategies/introduction.html#axzz2gsvg4rqs
12. Fuelling the digital revolution
– An Arm case study
Http://businesscasestudies.co.uk/arm/fuelling-
the-digital-
revolution/introduction.html#axzz2gsvg4rqs
13. Using PEST analysis to
support decision making – A
J ohnson Matthey case study
Http://businesscasestudies.co.uk/johnson-
matthey/using-pest-analysis-to-support-decision-
making/introduction.html#axzz2gsvg4rqs
14. The acquisition of Dr
Pepper/Seven-Up company
inc A Cadbury Schweppes
case study
Http://businesscasestudies.co.uk/cadbury-
schweppes/the-acquisiton-of-dr-pepperseven-up-
company-inc/introduction.html#axzz2gsvg4rqs
Anecdotal information:
1. 7 Concepts of Strategic
Management - Illustration
from Mahabharata
http://www.citehr.com/342866-7-concepts-
strategic-management-illustration-
mahabharata.html
2. Strategy Stories http://www.easy-strategy.com/strategy-
stories.html
3. Winning mantra from the
Mahabharata
http://www.slideshare.net/psudhir20/learn-
winning-strategy-from-mahabharata-e-briks-
infotech
4. Do You Know How to Learn
Winning Strategy
from Mahabharat
http://www.dailymotion.com/video/xxytu9_do-
you-know-how-to-learn-winning-strategy-from-
mahabharata-by-ebriks-infotech_tech
Historical development:
1. A video on the Evolution of
Strategic Management by Dr.
Michael J . Mol, Warwick
Business School
Http://hstalks.com/main/view_talk.php?T=1824
&r=534&j=767&c=250
2. Historical development of
Strategic Management
Http://en.wikipedia.org/wiki/Strategic_managem
ent
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3. Business Strategy/History of
Business Management until
the 1970s
Http://en.wikibooks.org/wiki/Business_Strategy/
History_of_Business_Management_until_the_19
70s
4. The History of Strategic
Management
Http://catalog.flatworldknowledge.com/bookhub
/reader/3085?E=ketchen_1.0-ch01_s03
Page 19 of 33
MODULE 9: STRATEGIC MANAGEMENT
Answers to Questions and Quizzes of Quadrant 3
Answers to Questions:
Answers are only brief and indicative. Expand on them as appropriate.
1. Strategic management process essentially involves four stages namely,
a) Scanning the environment (Both external and internal environments)
° General external environment: Societal, technological, economic, regulatory, and
competitive environment (PEST and ETOP analysis)
Industry and Competition analysis: Porter’s 5-forces model, Value-chain analysis,
Strategic group analysis
° Internal environment: Organizational capability analysis (SWOT, TOWS and
evaluation of organization structure and culture, and assessment of organizational
resources.
b) Strategy formulation (Establishing mission and objectives, Corporate, Business and
Functional strategies, and the related policies)
c) Strategy implementation (Preparation and implementation of programs i.e., activities
needed to accomplish the plans; Budgets i.e., resource allocation for activities, and
Procedures i.e. sequence of steps to be executed to complete the job. Creating
necessary structure, processes and mechanisms to support implementation of the
chosen strategy).
d) Evaluation and control of performance (Monitoring the performance/progress, Using
feedback and control systems for analyzing the gap and take corrective actions).
2. Analyzing the components of external environment such as Political, Economical,
Social and Technological components from the perspectives of business interest is
known as PEST analysis. Usually this is intended for a long-term business analysis.
Analyse the examples:
a) A firm proposing to develop contraceptive pills for males
b) Hindustan Aeronautical Limited engaging in the indigenous development of
Light Combat Aircraft.
3. External business environment in India is characterized by:
a) complex and interactive relationships of too many factors (which have both
independent as well as interactive influences on the business outcome),
b) dynamic influences of these factors (which keep changing in magnitude,
direction and rate over time), and
c) multifaceted scenarios (with different environmental situations presents
opportunities for some, while threats for others)
Page 20 of 33
4. Some of the factors to be considered during economic analysis are:
° General economic conditions
° Economic conditions of different segments of population
° Trends in income distribution and consumer spending patterns
° Rate of growth of each sector of economy
° Rate of inflation
° Behavior of capital market
° Interest rate/exchange rate
° Tax rates
° Prices of materials/energy
° Labour scene
5. Important Technological factors to be considered are:
° Source of technology like company, external and foreign sources, cost of
technology acquisition, collaboration and transfer of technology.
° Technological development, rate of change of technology and research and
development.
° Impact of technology on human beings, the man-machine system and the
environmental effects of technology.
° Communication, infrastructure and managerial technology.
6. The key political factors to be considered are:
° The political system and its features like nature of the political system,
ideological forces of the political parties and sentries of power
° The political structure, its goals and stability
° Political process like party systems, elections, funding of elections and
legislation in economic and industrial matters and regulations
° Political philosophy, role of government in business and its policy approach
towards economic and business development
7. Important social factors to be considered are:
° Demographic characteristics
° Social concerns
° Social attitudes
° Family structure and changes in it
° Role of women in society, position of children and adolescents in family and
society
° Educational level, awareness and consciousness of rights and work ethics of
Page 21 of 33
members of the society.
8. Seven factors to be analyzed during industry analysis are:
a) General features and basic conditions of the industry (industry size, product
range, relative volumes, recent performance of the industry)
b) Industry environment (fragmented, emerging, matured, declining, and global
industries)
c) Industry structure (number of players, market size, relative shares of the player,
nature of the competition, differentiation practiced by the various players in the
industry, cost structure of the players)
d) Industry attractiveness (industry potential, industry growth, industry
profitability, future pattern of the industry barriers and forces shaping the
competition
e) Industry performance (production, sales, profitability and technological
development)
f) Industry practices (what a majority of the players do in the industry with respect
to essential aspects of the business such as distribution, pricing, promotion,
methods of selling, service field support, R&D and legal tactics)
g) Emerging trends and likely future (product life cycle, stage of the industry, rate
of growth, changes of buyer needs, innovation in product/process, entry and exit
of firms and emerging changes in the regulatory environment governing the
industry.
9. Porter argues that there are five forces that determine the profitability of an
industry. They are:
° Threat of industry,
° Bargaining power of suppliers,
° Bargaining power of buyers,
° Rivalry among existing players and
° Threat of substitute products.
The collective strengths of these forces determines the ultimate profit potential in
the industry, where profit potential is measured in terms of long run return on
investment capital.
Threat of Potential entrants
Bargaining power
of suppliers
Threat of substitutes
Bargaining powers
of buyers
Competitors: Rivalry
among existing
Page 22 of 33
10. Important sources of information for environment analysis include:
° Documentary and secondary (published) sources
° Mass media
° Internal sources of the company
° Industry associations, professional bodies
° Formal studies and surveys
° Corporate espionage and surveillance
11. We can use our personal/collective experience and judgement to identify and assess
the overall influence of various factors under each dimension of the business
environment so that a clearer picture of threat and opportunity presented by the
environment can be obtained. This can be done by Environment Threat Opportunity
Profile (ETOP)
Pick a dimension of the business environment. Say, Political. Identify its
subcomponents such as regulatory bodies, international pressure, stability of the
government, etc. For each of these subcomponents, see if the impact on our business
if favourable, neutral or unfavourable and indicate the influence by upward,
horizontal and downward pointing arrows. This representation provides us a clearer
picture of our business environment.
12. BCG matrix was created by Bruce D. Henderson for the Boston Consulting Group
in 1970 to help corporations to analyze their business units, i.e. their product
lines. To use the chart, analysts plot a scatter graph on which the business units (or
products) are located on the basis of their relative market shares and growth rates of
their respective markets. Four categories of businesses in the matrix are identified as
follows:
a) Cash cows: When a company has high market share in a slow-growing market.
These units typically generate cash in excess of the amount of cash needed to
maintain the business. They are to be ‘milked’ continuously with as little
investment as possible.
b) Dogs: These are units with low market share in a mature, slow-growing market.
These units typically ‘break even’, generating barely enough cash to maintain
the business’s market share. They depress a profitable company’s return on
assets ratio and they may be sold off.
Relative market share
High Low
Market
growth rate
High Stars Question Marks
Low Cash cows Dogs
c) Question marks: These are business operating in a high growth market, but
having a low market share. They are a starting point for most businesses.
Question marks have a potential to gain market share and become stars, and
eventually cash cows when market growth slows. They must be analyzed in
order to determine whether they are worth the investment required to grow
Page 23 of 33
market share.
d) Stars: These are units with a high market share in a fast-growing industry. They
are graduated question marks with a market or niche leading trajectory. Stars
require high funding to fight competitions and maintain a growth rate.
13. TOWS matrix is used to analyze the strategy development situation. The
information/data on the threats and opportunities facing the firm, and internal
strengths and weaknesses of the firm are gathered. They are plotted as shown in the
table below and analyzed. Strategies are worked out by matching the opportunities
and threats with internal strengths & weakness to gain advantages to the firm.
Internal environment
Strengths (ex. Resources,
core competence)
Weaknesses (lack of
resources and competence)
E
x
t
e
r
n
a
l
e
n
v
i
r
o
n
m
e
n
t
Opportunity (due to
conditions of
economy,
technology, society,
politics, legal
environment, etc.)
S-O: Maxi-Maxi strategy,
Maximise both strengths
and opportunities, Encash
the opportunities using
strengths.
W-O: Min-Maxi strategy,
Minimise weaknesses and
Maximise opportunities.
Utilize opportunities to
minimise weaknesses (say,
through acquisition, merger,
joint ventures, training, etc.).
Threat (due to
competition,
depleting resources,
Govt policies,
environmental &
Technological
changes, etc.)
S-T: Maxi-Min strategy,
Maximise strengths and
Minimise threats. Use
strengths to deflect or
cope up with threats.
W-T: Min-Min strategy,
Minimise both weaknesses
and threats.
Minimise weaknesses by
liquidating, retrenching, etc.
to eliminate/reduce the
threats.
14. Michael Porter suggested 3 generic strategies for use by business units. They are:
a) Overall cost leadership: Drive down cost based on experience. Objective is to
have lowest cost structure in the market.
Eg. HLLs Wheel powder v/s surf excel
Air Deccan’s low cost air travel v/s others
b) Differentiation strategy : Offer something unique in the product and process
which others cannot offer.
Eg. Hero Honda - mileage
Microsoft - user friendliness
Xerox- quality (min number of defects)
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c) Focus strategy: Focus on a special group of customers or a particular product
line or a specific region and concentrate all resources and efforts. This may be
achieved through cost leadership or differentiation strategies.
Eg. HDFC - Housing fiancé
Sony - Elite customers
NIKIE - Sports shoes
15. The following table indicates the prerequisites for implementing Porter’s generic
strategies.
Generic
strategy
Commonly required skills and
resources
Common organizational
requirements
Overall cost
leadership
•Sustained capital investment and
access to capital
•Process engineering skills
•Intense supervision of labour
•Products designed for ease in
manufacture
•Low cost distribution system
•Tight cost control
•Frequent detailed control
reports
•Structured organization and
responsibilities
•Incentives based on meeting
strict quantitative targets
Differentiation •Strong marketing abilities
•Product engineering
•Creative flair
•Strong capability in basic
research
•Corporate reputation for quality
or technological leadership
•Long tradition in the industry or
unique combination of skills
drawn from other businesses
•Strong cooperation from
channels
•Strong coordination among
functions in R&D, product
development and marketing.
•Subjective measurement and
incentives instead of
quantitative measures
•Amenities to attract highly
skilled labor, scientists or
creative people
Focus •Combination of the above
policies directed at the
particular strategic target
•Above policies directed at the
particular strategic target
•Combination of the above
policies directed at the
particular strategic target
16. Risks associated with the three generic strategies:
a) Overall cost leadership: A firm may have achieved this by economies of scale or
learning curve effects, or advanced technology, etc. It may not be easy to sustain
cost leadership for long.
Page 25 of 33
The risks associated with this strategy are:
(i) newer technological development may eliminate/reduce our advantage due
to economies of scale and learning curve effects;
(ii) other areas of advantage such as product improvement and market
development may be missed due to overemphasis on cost reduction;
(iii) inflation in the economy may offset the advantage;
(iv) competitors can cut costs learning inexpensively from the leaders’
experiences.
b) Product differentiation: If the cost of maintaining the differentiation is very
high, this strategy cannot be easily sustained. Imitation by competitors may
reduce differentiation. Buyers’ need for differentiation reduces as their needs
change.
c) Focus: Technological developments may eliminate the advantage of focus.
Competitors may enter our focused market or attempt to subdivide the market.
Cost differential of the focusing player relative to others may widen so that the
market niche slowly disappears.
17. The recent unprecedented changes in the business environment include
globalization, liberalization, rapid increase in the supply of and demand for
technological knowledge, and dramatic expansion of markets. In a bid to survive,
grow and prosper, business firms are responding to such changes by modifying their
structure and processes as follows:
Structure related responses include:
a) creation of strategic business units,
b) matrix structure to handle multiple projects effectively and efficiently,
c) de-layering and flattening the organization to speed up organizational response
to changes.
Process related responses include:
a) Quality Strategies - international quality certification programmes,
b) J ust-in-time Inventory
c) Benchmarking
d) Building Core Competencies
e) Setting Vision & Mission,
f) Cost & Asset Utilization Strategies,
g) Technological Up-gradation & Indigenization
h) Information Technology
i) Research & Development
j) Marketing Strategies,
k) Project Management
Page 26 of 33
18. Implementation of strategy requires right structure that balances the need for
specialization with the need for integration. Strategy determines the product
portfolio, scale of production, technology, degree of centralization, market focus,
etc. all of which in turn determine the structure.
In general, strategy
i) determines organizational tasks, the way they are to be grouped and the manner
in which they are to be aligned with the market needs.
ii) influences the choice of technology and people responsible for the
accomplishment of tasks and
iii) determines degree of centralization/decentralization
iv) determines the specific environment within which the organization will operate
All these, in turn, influence the design and operation of the organization structure
19. The two cooperative strategies firms adopt to benefit from are:
a) Collusion: Illegal arrangement/agreement (may be explicit or implicit) between
companies to collude together to reduce output so as to decrease supply and
thereby increase price of the product/service (Example: Oil producing
companies can reduce their output to increase the price of oil)
b) Strategic alliance: A strategic alliance is the legitimate cooperation between
one or two companies to achieve the mutually beneficial strategic objectives.
20. Some of the reasons for strategic alliance are:
a) To obtain technology or manufacturing capabilities (HCL with HP)
b) To obtain access to specific markets (Tata-J aguar, Mobil with BP)
c) To obtain access to local distribution network (P&G with Godrej)
d) To reduce the financial risk (Collaborative research of Siemens and Philips)
e) To access additional financial resources (Nissan with Renault)
f) To reduce political risk (Suzuki with Maruti Udyog)
g) To achieve or ensure competitive advantage (Arcelor- Mittal steels)
21. Types of strategic alliances include:
Formal alliances:
° Consortia
° J oint venture
° Franchising
° Licensing
° Subcontracting
Page 27 of 33
Informal alliances: These may vary in degree of relationship
22. Broadly, Mergers and Acquisitions (M&A) can be classified as:
1. Related v/s Unrelated
2. Horizontal v/s Vertical:
Horizontal M/A: This happens when both acquiring and acquired firms are in the
same industry (Eg. Merger of two or more petroleum refining firms). This may
enhance economies scale, reduce cost, facilitate access to modern technology and
skilled HR, etc.)
Vertical M/A: This occurs when one firm is a supplier or customer to the other (Eg.
Yarn supplier merging with textile manufacturing firm), This may reduce operating
cost, control over input quality, delivery time, market, etc.)
23. The predominant strategic considerations in M&A are:
a) fit with mission and strategy
b) fit with portfolio strategy
c) competitive impact
d) scale economies and synergy
e) preemptive motive
f) comparison with establishment of new unit
g) long-term financial considerations
h) tax shields and
i) strengthening ownership control and guarding against acquisition
24.
Backward integration: Owning a business that supplies input material/components to
the current business. Example: Textile manufacturer developing/acquiring a
business that produces yarns.
Forward integration: Owning a business that consumes the output of the current
business. Example: A textile manufacturer launching readymade garment production
too.
25. Strategic choice is the evaluation of alternative strategies and selection of the best
alternative. With firms conscious of the realities of a dynamic world arriving at the
strategy through consensus gives way to strategic choice by extensive and
conflicting arguments. Making a strategic choice is essentially a decision making
process. It consists of the following four steps.
a) Focusing on strategic alternatives
b) Choosing the selection criteria and evaluation of alternatives (objective as well
as subjective)
c) Making the choice among available alternatives (based on judgement,
experience, and research)
d) Prepare the strategic plan for implementation (also a contingency plan)
Page 28 of 33
26.
Steps involved in contingency planning are:
a) Identify the events favorable and unfavorable to the firm’s strategy
b) Specify trigger points
c) Assess the impact of each contingent event
d) Develop contingency plans as compatible with current strategies
e) Determine the potential value of each plan
f) Determine and monitor the early warning signals
g) Develop advance action plans for contingent events with reliable early
warnings.
27.
A directional strategy is often developed with a focus on one or more of the three
directions: Stability, Growth and Retrenchment. Once the business needs are
assessed, the firm can choose the type of directional strategy that suits its needs.
Without a directional strategy, companies may lose sight of their goals and
objectives.
They are categorized into three groups namely, (i) Growth (ii) Stability and (iii)
Retrenchment strategies.
Growth Stability Retrenchment
Concentration(integration):
° Vertical growth
° Horizontal growth
Diversification:
° Concentric
° Conglomerate
° Pause/proceed with
caution
° No change
° profit
° Turnaround
° Captive company
° Sell-out/Disinvestment
° Bankruptcy/liquidation
28. Concentration(integration):
Vertical Integration: This happens when a company integrates into its business,
firms that are on the same value chain. i.e., when a manufacturer integrates with
its supplier and/or distributor. Vertical integration can help companies reduce
costs and improve efficiency. Eg. A solar power company that produces
photovoltaic products acquires a firm that manufactures the cells, wafers and
modules to create those products.
Horizontal integration: This happens when the company acquires businesses that
are at the same level of the value chain in similar or different industries. This can
be achieved by internal or external expansion. Because the firms are operating in
the same stage of production, their integration allows them to share resources at
that level. Eg. An oil company acquiring additional oil refineries.
Diversification:
Concentric diversification (also called related diversification strategy): This
occurs when a company expands by entering into an industry related to its current
operations. Companies implement this strategy to attain synergy, which occurs
Page 29 of 33
when related businesses perform better as a whole than as the sum of their parts,
through sharing resources, combining operations and transferring knowledge. Eg.
A company producing finger chips diversifies into producing ketch-ups to be used
by the same customers with the chips.
Conglomerate diversification: This occurs when a firm diversifies (through
acquisition or merger) into an entirely different market or product that has little or
no synergy with its core business. The main reasons for adopting such a strategy
are first to improve the profitability and the flexibility of the company, and
second to get a better reception in capital markets as the company gets bigger. Eg.
ITC Ltd. acquiring businesses in the areas of tourism, edible oils, etc.
29. Turnaround strategy means plan of action to turn the business from negative (loss-
making) to positive (profit making). It is an action plan that can give struggling
businesses the guidance and direction they need to get revitalized. The aim is to
return an underperforming or distressed company to normal in terms of acceptable
levels of profitability, solvency, liquidity and cash flow.
30. The symptoms of a distressed firm include:
° Persistent negative cash flows
° Negative profits
° Declining market share
° Deterioration in physical facilities
° High turnover, low morale, Mismanagement
° Uncompetitive products, sick company
The turnaround strategy aims to reverse the negative trend in the performance of the
firm.
Answers to Quizzes:
A. Choose the Appropriate Answer
1. d 9. c 17. c
2. b 10. b 18. b
3. a 11. a 19. c
4. c 12. b 20. b
5. a 13. b 21. c
6. b 14. b 22. c
7. a 15. c 23. a
8. c 16. d 24. c
Page 30 of 33
Page 31 of 33
B. State Whether True or False
1. True 9. True
2. False 10. True
3. False 11. True
4. False 12. False
5. True 13. True
6. False 14. False
7. True 15. True
8. False 16. True
C. Fill in the Blanks
1. Strategic Management 9. focus
2. environmental scanning 10. core competence
3. business
4. vertical forward
5. distinctive competence
6. Dogs
7. conglomerate
8. Due diligence
Page 32 of 33
D. Cross-word:
S C
Left to Right
W M O
1. Porter’s Generic strategy
F O C U S E L
2. 5-force analysis of industry was by …….
T T R L
3. Acquisition of supplier or customer is ….
R G U
4. Businesses with larger market share in a high
growth market are called ……..
A E A S
P O R T E R L I
E L O
Top to Bottom
I N T E G R A T I O N
1. Strategic planning starts with …….. analysis
H Y A
2. Grand plan of action to realize objectives
R N
3. When two or more companies blend wholly to
formone new company, it is called
E C
4. A legitimate cooperation between two or more
companies for mutual benefit
S T A R S E
5. A company needs to deflect/eliminate …….
T
6. Illegal cooperative strategy of firms to exploit
market
Page 33 of 33
doc_887869799.pdf
This presentation explain strategic management quadrant 2.
MODULE 9: STRATEGIC MANAGEMENT
Quadrant 2
Animations:
1. Strategic Planning - Strategies Http://www.youtube.com/watch?V=kxanywaap0s
2. Alternative Competitive
Advantage
Http://www.youtube.com/watch?V=qpu4v_Ae0Vc
3. Generic Strategies Mini-Lecture Http://www.youtube.com/watch?V=v14kuqyesxe
4. Porter's 5 Force Model Http://www.youtube.com/watch?V=pen1pvahssa
5. McDonalds SWOT Http://www.youtube.com/watch?V=qbyb0ht-dsk
6. SWOT Analysis - A Tool for
Success
Http://www.youtube.com/watch?V=9n-ertzwu8i
7. Value chain Http://www.youtube.com/watch?V=heevocmbhhq
8. Strategic Planning For Your
Business
Http://www.youtube.com/watch?V=gh6ej2mpvjy
9. Strategy Execution: It's Not
That Complicated!
Http://www.youtube.com/watch?V=tqpofm0zdy4
10. Environmental Scanning Http://www.youtube.com/watch?V=LN03WRRlH
wc
11. Strategy Formation Http://www.youtube.com/watch?V=zhuhoo8dbye
12. Environmental Analysis Http://www.youtube.com/watch?V=Q8Rur4nemik
13. Introduction to Strategic
Management
Http://www.youtube.com/watch?V=rj2tmqrkicm
14. Strategize This! Strategy Evaluation
and Control
Http://www.youtube.com/watch?V=nfklogzir4s
Illustrations:
Page 1 of 33
1. SWOT analysis example Http://som.csudh.edu/depts/cis/meyadat/classespag
e/CIS502/casestudies/SWOT%20Analysis%20Exa
mple.htm
2. Strategic management Https://www.google.co.in/search?Q=strategic+man
agement+illustration&tbm=isch&tbo=u&source=u
niv&sa=X&ei=J z_fuor_gsgprqfc1icgcg&ved=0cco
qsaq&biw=1092&bih=507
3. Strategic management Http://www.slideshare.net/anicalena/strategic-
management-business-presentation-slides
4. A simplified approach to
strategic planning: Practical
considerations and an
illustrated example
Http://www.emeraldinsight.com/journals.htm?Artic
leid=843496&show=html
5. A scenario-based approach to
strategic planning
Http://www.scenarioplanning.eu/fileadmin/user_up
load/Scenario-based_strategic_planning_WP.pdf
Video demonstrations:
1. Strategic Management Video
Lectures
Http://www.google.co.in/url?Sa=t&rct=j&q=&esrc
=s&source=web&cd=17&ved=0cfyqfjagoao&url=
http%3A%2F%2Ffreevideolectures.com%2fcourse
%2F3014%2fstrategicmanagement&ei=6fiuutdjisl
wrqfd8oggbw&usg=afqjcnhfg2rcsqunacp_bcem1-
l4gvj2_A
2. Michael Porter - Strategy Http://www.youtube.com/watch?V=kvywkm5by0s
3. Strategic Management -Part 1
of 7
Http://www.youtube.com/watch?V=5_Uu1f0tSak
4. The evolution of strategic
management
Http://www.youtube.com/watch?V=tu6sqyawska
5. The Strategic Management
Process
Http://education-portal.com/academy/lesson/the-
strategic-management-process.html#lesson
6. Strategic Planning: SWOT &
TOWS Analysis
Http://www.youtube.com/watch?V=H8FANR-2u2q
7. Strategic Planning: PEST Analysis
and Contingency Planning
Http://www.youtube.com/watch?V=tg2dlgtgcy8
8. Porter's Value Chain Http://www.youtube.com/watch?V=hkisczfhx80
9. Value Chains versus Supply
Chains
Http://www.youtube.com/watch?V=mu9twlcjnkk
Page 2 of 33
10. Overview of the Strategic
Planning Process
Http://www.youtube.com/watch?V=su3flxndv_A
11. Why Indians Win In Business Http://www.youtube.com/watch?V=rlricpsdg8w
Interactive simulation:
1. 15 Business Simulation Games
Could Build Hands-on Business
Experience
http://classroom-aid.com/2012/11/09/15-
business-simulation-games-could-build-hands-
on-business-experience/
2. Business simulation http://en.wikipedia.org/wiki/Business_simulation
#External_links
3. Simulations - Harvard Business
for Educators
http://hbsp.harvard.edu/list/simulations
Page 3 of 33
Quadrant 3
Questions:
Answer the following Questions on your own (Indicative/brief answers are
provided at the end of the module):
1. Explain the various stages in strategic management process
2. Discuss PEST analysis with the help of an example
3. Highlight the characteristics of external business environment in India
4. List the macro-level factors that need to be considered while conducting economic
analysis.
5. List the key technological factors that should be given due attention while
conducting PEST analysis
6. List the key political factors that should be given due attention while conducting
PEST analysis
7. What are the important social factors that should be given due attention while
conducting PEST analysis
8. Discuss the seven factors to be analyzed while conducting industry analysis.
9. Explain the Porter’s five-forces model
10. What are the sources of information for conducting environmental analysis?
11. How do you structure environmental appraisal using ETOP approach
12. Discuss the construction of a BCG matrix that aids strategic decision making on
various businesses
13. Describe the utility of TOWS matrix for choosing appropriate business strategy
14. Explain with examples, M.E. Porter’s three generic strategies
15. What are the functional prerequisites for implementing the generic strategies
proposed by M.E.Porter?
16. What are the risks associated with the three generic strategies suggested by
M.E.Porter
17. Discuss the structural- and process- related strategic response of firms vis-à-vis
recent unprecedented changes in business environment
Page 4 of 33
18. Elaborate on how the choice of a strategy influences the design of organization
structure
19. Discuss the two cooperative strategies firms adopt.
20. What are the prominent reasons for firms to get into strategic alliance? Explain.
21. Discuss the various types of strategic alliances.
22. How are Mergers and Acquisitions classified?
23. Discuss the strategic considerations in Mergers and Acquisitions
24. How do you distinguish between forward and backward integration?
25. How does a company make a strategic choice? Explain.
26. Discuss the steps involved in making an effective contingency plan
27. What are directional strategies? Give their classification.
28. Explain with examples, the integration and diversification strategies.
29. What are turnaround strategies? Explain.
30. What are the symptoms of a distressed firm? How does a turnaround strategy help?
Quizzes:
(Solutions are provided at the end of the module):
Choose the Appropriate Answer:
1.
Strategic decisions are typically:
a) in the purview of top management
b) decisions having long term consequences for the organization
c) involve considerable amount of uncertainty
d) All the above
2.
Corporate strategy provides the overall plan of action for
a) a functional department
b) a diversified business enterprise
c) an enterprise with a single product line
d) corporators
Page 5 of 33
3.
Strategic business area of a firm is the
a) business area in which the firm perceives competitive advantage
b) group of all its business areas
c) area in which the firm can devise newer strategies
d) business area offering maximum profitability
4.
The primary purpose of environmental scanning in strategic management is to
a) know about the new entrants to business
b) ensure ecological balance in the long run
c) know about the opportunities and threats facing the firm
d) assess the competitors’ strengths
5.
The mission of Walt Disney’s theme park is to
a) provide unique guest experience
b) make more and more money
c) create more imaginative characters
d) beat the competition in the entertainment industry
6.
BCG matrix is a tool for analyzing
a) profitability of an industry
b) portfolio of investments
c) Growth rate of a market
d) Stability of business
7.
The three generic strategies namely, cost leadership, differentiation and focus are
propounded by
a) Michael Porter
b) Peter Drucker
c) CK Prahlad
d) Gary Hamel
Page 6 of 33
8.
BCG approach suggests to milk ‘Cash cows’ as much as possible to invest the
milked cash in
a) Some more Cash cows
b) Stars and Dogs
c) Stars and Question marks
d) Question marks and Dogs
9.
Which of the following is not a force in the Michael Porter’s Five forces model of
Industry attractiveness
a) Bargaining power of suppliers
b) Competitors
c) Government laws
d) Scope for Substitutes
10.
Differentiation strategy of the firm requires it to
a) Seek high efficiency to attain low cost structure
b) be unique in its product offering
c) Seek cost advantage in a niche market
d) Grow faster than others
11.
The advantage of being the first-mover into a market is
a) Possible brand loyalty
b) low development costs
c) Certainty in technological success
d) lesser financial and strategic risks
12.
‘T’ in PEST analysis represents
a) Threat
b) Technological changes
c) Time
d) Tax
Page 7 of 33
13.
Telco’s entry into passenger car segment with Tata Indica is a:
a) Policy matter b) Strategic issue
c) Regular procedure d) A major program
14. To know an organization's strategy, one needs to
a) Understand the mission statement of the firm
b) Go through its strategic plan
c) Observe what it does over a reasonable period of time
d) Ask the corporate planners
15. Regional culture may be considered to be a part of ………………… aspect of
macro-environment
a) Economic
b) Political
c) Social
d) legal
16. When a firm acquires its supplier, then it is called as ………………….. integration
a) forward vertical
b) horizontal
c) diagonal
d) backward vertical
17. Growth, retrenchment and stability can represent ……………… strategies
a) Business
b) Functional
c) Corporate
d) Sectional
Page 8 of 33
18. Adding new, unrelated products or services for present customers is …………….
a) Concentric diversification
b) Conglomerate diversification
c) Horizontal diversification
d) Product development
19. Managerial decisions that together determine the long-term performance of a firm
constitute:
a) Corporate planning
b) Tactical planning
c) Strategic planning
d) Operational planning
20. Porter’s 5-forces model is meant to analyze
a) Within company situation
b) The relevant industry
c) General business environment
d) None of the above
21. ETOP in strategic analysis refers to
a) Economic and Technological Opportunity Profile
b) Environmental Threat Occurrence Prediction
c) Environment Threat Opportunity Profile
d) Economic Treaty Of Partnership
22. Tata motor’s acquisition of J aguar Land Rover is with an intention of
a) Reducing financial risk
b) Reducing political risk
c) Gaining access to new market
d) Increasing production capacity
Page 9 of 33
23. A solar power company that produces photovoltaic products acquiring a firm that
manufactures the cells, wafers and modules to create those products is an example
for
a) Vertical backward integration
b) Conglomerate diversification
c) Concentric diversification
d) Vertical forward integration
24. A company producing finger chips diversifies into producing ketch-ups to be used
with the chips is an example for
a) Vertical backward integration
b) Conglomerate diversification
c) Concentric diversification
d) Vertical forward integration
B. State Whether True or False:
1. Business strategies are derived from the corporate strategies
2. Policies suggest the purpose of a business
3. Strategic management is comprised of actions to improve short-term performance
of the organization
4. A given external environment should present the same opportunities or threats to
all the firms in an industry
5. A big tours and travels company when expands business by acquiring several fuel
stations , it is called vertical backward integration
6. In BCG matrix, Star businesses represent businesses with larger market share in
low growth market
7. Air Deccan company adopted cost-leadership strategy for its business growth
8. Environmental analysis intends to examine exclusively the environment outside the
company
9. Merger of Air India and Indian Airlines to form Indian is an example of horizontal
integration
10. Retrenchment is a Turn Around strategy
Page 10 of 33
11. Corporate strategies are for organizations that run more than one type of business
units
12. Diversification is an example for retrenchment strategy
13. PEST analysis in strategic planning is about analyzing political, economic, social
and technological environment
14. Porter’s 5-forces model involves analyzing the role of government
15. Businesses under the ‘Question mark’ category have a potential to gain market
share and become stars
16. Collusion is a cooperative strategy that firms adopt to benefit from
C. Fill in the Blanks with Appropriate Words:
1. The activities of environmental scanning, strategy formulation, its implementation,
evaluation and control together are referred to as …………………
2. The process of gathering information about the newer opportunities and threats to
business is called ……………..
3. In a diversified business conglomerate, middle level managers have the
responsibility for developing and implementing ……………… strategies
4. When a yarn manufacturing firm acquires textile producing facility, it is engaging
in ……………………….. strategy
5. Anything a company can do which its competitors cannot or can do better than
competitors is represents ………………….
6. Businesses with low market share in a mature, slow-growing market are identified
as …………. in BCG matrix.
7. A firm diversifying (through acquisition or merger) into an entirely
different market or product that has little or no synergy with its core business is an
example for ……………… diversification
8. The process through which a potential acquirer evaluates a target company or its
assets before acquisition is known as …………. .
9. Ferrari targeting high performance sports car segment is an example for .............
form of generic strategy
10. …………………. is the capability of a company to produce unique core products
that support several end products
Page 11 of 33
D. Cross-word:
1 6
Left to Right
3
1. A generic strategy fromME Porter
1 2
2. 5-force analysis of industry was by …….
3. Acquisition of supplier or customer is ….
4. Businesses with larger market share in a high
growth market are called ……..
4
2
Top to Bottom
3 5
1. Strategic planning starts with …….. analysis
2. Grand plan of action to realize objectives
3. When two or more companies blend wholly to
formone new company, it is called
4. A legitimate cooperation between two or more
companies for mutual benefit
4
5. A company needs to deflect/eliminate …….
6. Illegal cooperative strategy of firms to exploit
market
Assignments:
(Answer the following questions with the help of web course material in
Quadrant 1 and Supplementary reading material in Quadrant IV)
1. Why do you think Strategic Management is very important today?
2. Define strategy. What is strategic management?
3. Discuss the hierarchy of strategies for a business conglomerate
4. What are the global mega trends that have characterized today’s business
environment? Explain.
5. Describe the mega trends that have characterized Asian business environment
6. How does BCG matrix analysis help prioritizing business efforts? Explain
7. Giving real life examples, illustrate the adoption of M.E. Porter’s generic strategies
8. Apply SWOT analysis for your engineering degree program in your college
9. Discuss any three key environmental factors that have a bearing on outsourcing
business in India
10. Explain the Michael Porter’s five forces model to assess industry attractiveness
Page 12 of 33
11. What are strategic alliances? Describe a few commonly seen forms of alliances
12. Differentiate between joint venture and licensing forms of strategic alliances
13. How do you use impact matrix to analyze the impacts of various trends in the
business environment on strategic alternatives?
14. How does a firm choose a strategy among several alternatives? Explain
15. Comment on the strategies relevant to various quadrants of TWOS matrix
16. How are business objectives and strategies related? Explain with an example
17. Differentiate between ‘cost leadership’ and ‘product differentiation’ strategies with
the help of examples
18. Discuss the various dimensions of grand strategies namely, (i) Internal/external, (ii)
Related/unrelated, (iii) Horizontal/vertical, (iv) Active/passive strategies.
19. Explain in detail the retrenchment strategies namely, turnaround, liquidation and
divestment strategies.
20. What are the criteria to be considered while evaluating strategic choice?
21. How the strategy chosen would be implemented? Give the typical process of
implementation.
22. List the various sources of information that can be used while conducting
environmental scanning
23. Identify the key aspects/issues that need to be examined in technological, social,
political and economic environments before contemplating on the development of
any strategy.
24. Profile the major opportunities and threats present before Indian education industry
25. Fetch the financial statements of a company, compute the various financial ratios to
assess a company’s financial capabilities
26. Choose a company that has imported technology, and delineate the actions that
enabled it to absorb the same.
27. Examine how a Balanced Score Card approach integrates financial with non-
financial measures while implementing business strategy
28. Construct a GE portfolio matrix for Samsung in the Smart phone industry and
analyse the same
29. Discuss Mc Kinsey’s 7S model proposed for diagnosing organizational problems
and formulating remedial programmes
30. Identify any one strategic group in the Indian health care industry and describe its
Page 13 of 33
characteristics.
31. With the help of examples, distinguish clearly between integration and
diversification strategies
32. Examine the case of Maruti Udyog Ltd to understand the advantages and
limitations of being the’ first mover’ in to Indian small car segment.
33. Conduct a SWOT analysis of your education institution
34. Discuss the Indian government’s strategy of divestment in Indian public sector
companies
35. Analyze the fit between strategy and structure of a firm operating in rapidly
changing business environment.
On-line feedback through discussion forums:
1. Strategic management forum http://www.smfi.org/
2. Strategic management forum http://strategicmanagementforum.org/
3. Strategic Management Society
Discussion forum
http://forums.strategicmanagement.net/
4. Balanced Score Card Institute –
Strategy Management Group
https://www.balancedscorecard.org/Resources/St
rategicPlanningBasics/tabid/459/Default.aspx
5. A Harvard Law school forum http://blogs.law.harvard.edu/corpgov/2012/08/23
/strategic-risk-management-a-primer-for-
directors/
FAQs:
1. FAQs on Strategic Management http://www.pim.com.pk/faq.htm
Page 14 of 33
Quadrant 4
Supplementary reading:
1. Strategic management ppt http://www.iuc-
edu.eu/group/mba_learning/2012STRATMAN/E
V%20L1%20Introduction.pdf
2. Introduction to Strategic
Management
http://www.introduction-to-
management.24xls.com/en233
3. Strategic management www1.ximb.ac.in/users/fac/Amar/...nsf/.../NCS2
-SM%20Evolution.ppt
4. Thinking strategically http://www.mckinsey.com/insights/strategy/thin
king_strategically
5. Strategic Management - A
Complete Study Guide
http://www.managementstudyguide.com/strategi
c-management.htm
6. SWOT Analysis http://www.mindtools.com/pages/article/newTM
C_05.htm
7. SWOT Analysis http://www.quickmba.com/strategy/swot/
8. Industry analysis http://www.marsdd.com/articles/industry-
analysis/
9. Value chain analysis https://www.inkling.com/read/strategic-
management-david-14th/chapter-4/value-chain-
analysis-vca
10. Value Chain Analysis
for Assessing
Competitive Advantage
http://www.imanet.org/PDFs/Public/Research/S
MA/Value%20Chain%20Analysis.pdf
11. GE McKinsey matrix http://www.quickmba.com/strategy/matrix/ge-
mckinsey/
12. BCG growth-share matrix http://www.strategicmanagementinsight.com/too
ls/bcg-matrix-growth-share.html
13. Enduring ideas - McKinsey 7S
framework
http://www.mckinsey.com/insights/strategy/endu
ring_ideas_the_7-s_framework
14. Strategic thinking http://www.1000ventures.com/business_guide/cr
osscuttings/thinking_strategic.html
Page 15 of 33
Wiki development on the course/Other resources:
1. Strategic planning http://en.wikipedia.org/wiki/Strategic_planning
2. Business strategy: Overview
of Business planning
http://en.wikibooks.org/wiki/Business_Strategy/O
verview_of_Strategic_Planning
3. Everything about Global
Strategic Alliances
https://www.google.co.in/url?sa=t&rct=j&q=&es
rc=s&source=web&cd=2&cad=rja&ved=0CDIQ
FjAB&url=http%3A%2F%2Fwww.vedpuriswar.
org%2Fbooks%2FGoingGlobal%2FChapter%25
2009_Partnering%2520for%2520competitive%25
20advantage.doc&ei=afgxUuWhEMjorAfly4HgC
A&usg=AFQjCNGZrY8YcAoXIP53Ne4eILgs23
ieBw
4. Reading material about
strategic thinking
http://www.1000ventures.com/business_guide/cro
sscuttings/thinking_strategic.html
5. SWOT analysis: the example
of the Indian Library
Association
http://www.ifla.org/node/5749
6. Global Strategic Alliances http://www.vedpuriswar.org/books/Glob_ceo/Cha
pter%207%20Global%20Strategic%20Alliances.
doc
7. An overview of strategic
alliances
http://www.ux1.eiu.edu/~cfyak/Articles/An%20o
verview%20of%20strategic%20alliances.pdf
8. Competitor analysis http://en.wikipedia.org/wiki/Competitor_analysis
9. Value chain http://en.wikipedia.org/wiki/Value_chain
10. GE multi-factoral analysis http://en.wikipedia.org/wiki/G._E._multi_factoral
_analysis
11. BCG Matrix & GE/McKinsey
Matrix
http://wiki.telfer.uottawa.ca/ci-
wiki/index.php/BCG_Matrix_%26_GE/McKinse
y_Matrix
12. BCG growth-share matrix http://en.wikipedia.org/wiki/Growth%E2%80%9
3share_matrix
13. McKinsey 7S framework http://en.wikipedia.org/wiki/McKinsey_7S_Fram
ework
Page 16 of 33
Open content in the internet:
1. Course lecture through slides:
Strategic Management: The
Competitive Edge
Http://nptel.iitm.ac.in/courses/110108047/
2. MIT Open Courseware
Lecture notes on Strategic
Management
Http://ocw.mit.edu/courses/sloan-school-of-
management/15-902-strategic-management-i-fall-
2006/lecture-notes/
3. Strategic Management -
NPTEL
Http://www.youtube.com/playlist?List=PL6NHnt
KSc5RyEZO7Zg8ir6CkzJ nYHaQfp
4. Core- Strategic management -
NPTEL
Http://www.youtube.com/playlist?List=PL03A70
BC250C931F0
Case studies:
1. Strategic Management Case
studies
Http://srinivasatimes.com/Strategic%20manage
ment%20case%20studies.pdf
2. A case study of Yahoo Http://www.academia.edu/3457826/A_case_stud
y_of_Yahoo
3. Darkness to light : How a
smart turnaround strategy
helped Havells to make a
comeback
Http://businesstoday.intoday.in/story/smart-
turnaround-strategy-helped-
havells/1/197235.html
4. Ebay: “The world’s largest
online marketplace”- A Case
Study
Http://dspace.iimk.ac.in/bitstream/2259/510/1
5. Strategic Management: A
Case study of Walmart Inc
Http://www.articlesbase.com/strategic-planning-
articles/strategic-management-a-case-study-of-
walmart-inc-945260.html
6. Case Study: Maruti Suzuki
Ritz – Live the moment
Http://www.indiasocial.in/case-study-maruti-
suzuki-ritz-live-the-moment/
7. Http://www.tcs.com/sitecollec
tiondocuments/case%20studie
s/bancs_case_sbi.pdf
Case Study: State Bank of India, World's Largest
Centralized Core Processing Implementation
8. Strategic Alliances and J oint
Ventures in Civil Aviation –
A Case study
Http://dspace.iimk.ac.in/bitstream/2259/490/1/30
9-322.pdf%20rel%3D%27nofollow%27
9. Strategic Alliance —Case
Study of Lenovo and IBM
Http://edissertations.nottingham.ac.uk/973/1/07
msclixlj2.pdf
Page 17 of 33
10. When Strategic Alliances
Really Work - A Case Study
Http://www.synthesis.biz/synergies/blog/031313
11. Vision, values and business
strategies
Http://businesscasestudies.co.uk/tesco/vision-
values-and-business-
strategies/introduction.html#axzz2gsvg4rqs
12. Fuelling the digital revolution
– An Arm case study
Http://businesscasestudies.co.uk/arm/fuelling-
the-digital-
revolution/introduction.html#axzz2gsvg4rqs
13. Using PEST analysis to
support decision making – A
J ohnson Matthey case study
Http://businesscasestudies.co.uk/johnson-
matthey/using-pest-analysis-to-support-decision-
making/introduction.html#axzz2gsvg4rqs
14. The acquisition of Dr
Pepper/Seven-Up company
inc A Cadbury Schweppes
case study
Http://businesscasestudies.co.uk/cadbury-
schweppes/the-acquisiton-of-dr-pepperseven-up-
company-inc/introduction.html#axzz2gsvg4rqs
Anecdotal information:
1. 7 Concepts of Strategic
Management - Illustration
from Mahabharata
http://www.citehr.com/342866-7-concepts-
strategic-management-illustration-
mahabharata.html
2. Strategy Stories http://www.easy-strategy.com/strategy-
stories.html
3. Winning mantra from the
Mahabharata
http://www.slideshare.net/psudhir20/learn-
winning-strategy-from-mahabharata-e-briks-
infotech
4. Do You Know How to Learn
Winning Strategy
from Mahabharat
http://www.dailymotion.com/video/xxytu9_do-
you-know-how-to-learn-winning-strategy-from-
mahabharata-by-ebriks-infotech_tech
Historical development:
1. A video on the Evolution of
Strategic Management by Dr.
Michael J . Mol, Warwick
Business School
Http://hstalks.com/main/view_talk.php?T=1824
&r=534&j=767&c=250
2. Historical development of
Strategic Management
Http://en.wikipedia.org/wiki/Strategic_managem
ent
Page 18 of 33
3. Business Strategy/History of
Business Management until
the 1970s
Http://en.wikibooks.org/wiki/Business_Strategy/
History_of_Business_Management_until_the_19
70s
4. The History of Strategic
Management
Http://catalog.flatworldknowledge.com/bookhub
/reader/3085?E=ketchen_1.0-ch01_s03
Page 19 of 33
MODULE 9: STRATEGIC MANAGEMENT
Answers to Questions and Quizzes of Quadrant 3
Answers to Questions:
Answers are only brief and indicative. Expand on them as appropriate.
1. Strategic management process essentially involves four stages namely,
a) Scanning the environment (Both external and internal environments)
° General external environment: Societal, technological, economic, regulatory, and
competitive environment (PEST and ETOP analysis)
Industry and Competition analysis: Porter’s 5-forces model, Value-chain analysis,
Strategic group analysis
° Internal environment: Organizational capability analysis (SWOT, TOWS and
evaluation of organization structure and culture, and assessment of organizational
resources.
b) Strategy formulation (Establishing mission and objectives, Corporate, Business and
Functional strategies, and the related policies)
c) Strategy implementation (Preparation and implementation of programs i.e., activities
needed to accomplish the plans; Budgets i.e., resource allocation for activities, and
Procedures i.e. sequence of steps to be executed to complete the job. Creating
necessary structure, processes and mechanisms to support implementation of the
chosen strategy).
d) Evaluation and control of performance (Monitoring the performance/progress, Using
feedback and control systems for analyzing the gap and take corrective actions).
2. Analyzing the components of external environment such as Political, Economical,
Social and Technological components from the perspectives of business interest is
known as PEST analysis. Usually this is intended for a long-term business analysis.
Analyse the examples:
a) A firm proposing to develop contraceptive pills for males
b) Hindustan Aeronautical Limited engaging in the indigenous development of
Light Combat Aircraft.
3. External business environment in India is characterized by:
a) complex and interactive relationships of too many factors (which have both
independent as well as interactive influences on the business outcome),
b) dynamic influences of these factors (which keep changing in magnitude,
direction and rate over time), and
c) multifaceted scenarios (with different environmental situations presents
opportunities for some, while threats for others)
Page 20 of 33
4. Some of the factors to be considered during economic analysis are:
° General economic conditions
° Economic conditions of different segments of population
° Trends in income distribution and consumer spending patterns
° Rate of growth of each sector of economy
° Rate of inflation
° Behavior of capital market
° Interest rate/exchange rate
° Tax rates
° Prices of materials/energy
° Labour scene
5. Important Technological factors to be considered are:
° Source of technology like company, external and foreign sources, cost of
technology acquisition, collaboration and transfer of technology.
° Technological development, rate of change of technology and research and
development.
° Impact of technology on human beings, the man-machine system and the
environmental effects of technology.
° Communication, infrastructure and managerial technology.
6. The key political factors to be considered are:
° The political system and its features like nature of the political system,
ideological forces of the political parties and sentries of power
° The political structure, its goals and stability
° Political process like party systems, elections, funding of elections and
legislation in economic and industrial matters and regulations
° Political philosophy, role of government in business and its policy approach
towards economic and business development
7. Important social factors to be considered are:
° Demographic characteristics
° Social concerns
° Social attitudes
° Family structure and changes in it
° Role of women in society, position of children and adolescents in family and
society
° Educational level, awareness and consciousness of rights and work ethics of
Page 21 of 33
members of the society.
8. Seven factors to be analyzed during industry analysis are:
a) General features and basic conditions of the industry (industry size, product
range, relative volumes, recent performance of the industry)
b) Industry environment (fragmented, emerging, matured, declining, and global
industries)
c) Industry structure (number of players, market size, relative shares of the player,
nature of the competition, differentiation practiced by the various players in the
industry, cost structure of the players)
d) Industry attractiveness (industry potential, industry growth, industry
profitability, future pattern of the industry barriers and forces shaping the
competition
e) Industry performance (production, sales, profitability and technological
development)
f) Industry practices (what a majority of the players do in the industry with respect
to essential aspects of the business such as distribution, pricing, promotion,
methods of selling, service field support, R&D and legal tactics)
g) Emerging trends and likely future (product life cycle, stage of the industry, rate
of growth, changes of buyer needs, innovation in product/process, entry and exit
of firms and emerging changes in the regulatory environment governing the
industry.
9. Porter argues that there are five forces that determine the profitability of an
industry. They are:
° Threat of industry,
° Bargaining power of suppliers,
° Bargaining power of buyers,
° Rivalry among existing players and
° Threat of substitute products.
The collective strengths of these forces determines the ultimate profit potential in
the industry, where profit potential is measured in terms of long run return on
investment capital.
Threat of Potential entrants
Bargaining power
of suppliers
Threat of substitutes
Bargaining powers
of buyers
Competitors: Rivalry
among existing
Page 22 of 33
10. Important sources of information for environment analysis include:
° Documentary and secondary (published) sources
° Mass media
° Internal sources of the company
° Industry associations, professional bodies
° Formal studies and surveys
° Corporate espionage and surveillance
11. We can use our personal/collective experience and judgement to identify and assess
the overall influence of various factors under each dimension of the business
environment so that a clearer picture of threat and opportunity presented by the
environment can be obtained. This can be done by Environment Threat Opportunity
Profile (ETOP)
Pick a dimension of the business environment. Say, Political. Identify its
subcomponents such as regulatory bodies, international pressure, stability of the
government, etc. For each of these subcomponents, see if the impact on our business
if favourable, neutral or unfavourable and indicate the influence by upward,
horizontal and downward pointing arrows. This representation provides us a clearer
picture of our business environment.
12. BCG matrix was created by Bruce D. Henderson for the Boston Consulting Group
in 1970 to help corporations to analyze their business units, i.e. their product
lines. To use the chart, analysts plot a scatter graph on which the business units (or
products) are located on the basis of their relative market shares and growth rates of
their respective markets. Four categories of businesses in the matrix are identified as
follows:
a) Cash cows: When a company has high market share in a slow-growing market.
These units typically generate cash in excess of the amount of cash needed to
maintain the business. They are to be ‘milked’ continuously with as little
investment as possible.
b) Dogs: These are units with low market share in a mature, slow-growing market.
These units typically ‘break even’, generating barely enough cash to maintain
the business’s market share. They depress a profitable company’s return on
assets ratio and they may be sold off.
Relative market share
High Low
Market
growth rate
High Stars Question Marks
Low Cash cows Dogs
c) Question marks: These are business operating in a high growth market, but
having a low market share. They are a starting point for most businesses.
Question marks have a potential to gain market share and become stars, and
eventually cash cows when market growth slows. They must be analyzed in
order to determine whether they are worth the investment required to grow
Page 23 of 33
market share.
d) Stars: These are units with a high market share in a fast-growing industry. They
are graduated question marks with a market or niche leading trajectory. Stars
require high funding to fight competitions and maintain a growth rate.
13. TOWS matrix is used to analyze the strategy development situation. The
information/data on the threats and opportunities facing the firm, and internal
strengths and weaknesses of the firm are gathered. They are plotted as shown in the
table below and analyzed. Strategies are worked out by matching the opportunities
and threats with internal strengths & weakness to gain advantages to the firm.
Internal environment
Strengths (ex. Resources,
core competence)
Weaknesses (lack of
resources and competence)
E
x
t
e
r
n
a
l
e
n
v
i
r
o
n
m
e
n
t
Opportunity (due to
conditions of
economy,
technology, society,
politics, legal
environment, etc.)
S-O: Maxi-Maxi strategy,
Maximise both strengths
and opportunities, Encash
the opportunities using
strengths.
W-O: Min-Maxi strategy,
Minimise weaknesses and
Maximise opportunities.
Utilize opportunities to
minimise weaknesses (say,
through acquisition, merger,
joint ventures, training, etc.).
Threat (due to
competition,
depleting resources,
Govt policies,
environmental &
Technological
changes, etc.)
S-T: Maxi-Min strategy,
Maximise strengths and
Minimise threats. Use
strengths to deflect or
cope up with threats.
W-T: Min-Min strategy,
Minimise both weaknesses
and threats.
Minimise weaknesses by
liquidating, retrenching, etc.
to eliminate/reduce the
threats.
14. Michael Porter suggested 3 generic strategies for use by business units. They are:
a) Overall cost leadership: Drive down cost based on experience. Objective is to
have lowest cost structure in the market.
Eg. HLLs Wheel powder v/s surf excel
Air Deccan’s low cost air travel v/s others
b) Differentiation strategy : Offer something unique in the product and process
which others cannot offer.
Eg. Hero Honda - mileage
Microsoft - user friendliness
Xerox- quality (min number of defects)
Page 24 of 33
c) Focus strategy: Focus on a special group of customers or a particular product
line or a specific region and concentrate all resources and efforts. This may be
achieved through cost leadership or differentiation strategies.
Eg. HDFC - Housing fiancé
Sony - Elite customers
NIKIE - Sports shoes
15. The following table indicates the prerequisites for implementing Porter’s generic
strategies.
Generic
strategy
Commonly required skills and
resources
Common organizational
requirements
Overall cost
leadership
•Sustained capital investment and
access to capital
•Process engineering skills
•Intense supervision of labour
•Products designed for ease in
manufacture
•Low cost distribution system
•Tight cost control
•Frequent detailed control
reports
•Structured organization and
responsibilities
•Incentives based on meeting
strict quantitative targets
Differentiation •Strong marketing abilities
•Product engineering
•Creative flair
•Strong capability in basic
research
•Corporate reputation for quality
or technological leadership
•Long tradition in the industry or
unique combination of skills
drawn from other businesses
•Strong cooperation from
channels
•Strong coordination among
functions in R&D, product
development and marketing.
•Subjective measurement and
incentives instead of
quantitative measures
•Amenities to attract highly
skilled labor, scientists or
creative people
Focus •Combination of the above
policies directed at the
particular strategic target
•Above policies directed at the
particular strategic target
•Combination of the above
policies directed at the
particular strategic target
16. Risks associated with the three generic strategies:
a) Overall cost leadership: A firm may have achieved this by economies of scale or
learning curve effects, or advanced technology, etc. It may not be easy to sustain
cost leadership for long.
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The risks associated with this strategy are:
(i) newer technological development may eliminate/reduce our advantage due
to economies of scale and learning curve effects;
(ii) other areas of advantage such as product improvement and market
development may be missed due to overemphasis on cost reduction;
(iii) inflation in the economy may offset the advantage;
(iv) competitors can cut costs learning inexpensively from the leaders’
experiences.
b) Product differentiation: If the cost of maintaining the differentiation is very
high, this strategy cannot be easily sustained. Imitation by competitors may
reduce differentiation. Buyers’ need for differentiation reduces as their needs
change.
c) Focus: Technological developments may eliminate the advantage of focus.
Competitors may enter our focused market or attempt to subdivide the market.
Cost differential of the focusing player relative to others may widen so that the
market niche slowly disappears.
17. The recent unprecedented changes in the business environment include
globalization, liberalization, rapid increase in the supply of and demand for
technological knowledge, and dramatic expansion of markets. In a bid to survive,
grow and prosper, business firms are responding to such changes by modifying their
structure and processes as follows:
Structure related responses include:
a) creation of strategic business units,
b) matrix structure to handle multiple projects effectively and efficiently,
c) de-layering and flattening the organization to speed up organizational response
to changes.
Process related responses include:
a) Quality Strategies - international quality certification programmes,
b) J ust-in-time Inventory
c) Benchmarking
d) Building Core Competencies
e) Setting Vision & Mission,
f) Cost & Asset Utilization Strategies,
g) Technological Up-gradation & Indigenization
h) Information Technology
i) Research & Development
j) Marketing Strategies,
k) Project Management
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18. Implementation of strategy requires right structure that balances the need for
specialization with the need for integration. Strategy determines the product
portfolio, scale of production, technology, degree of centralization, market focus,
etc. all of which in turn determine the structure.
In general, strategy
i) determines organizational tasks, the way they are to be grouped and the manner
in which they are to be aligned with the market needs.
ii) influences the choice of technology and people responsible for the
accomplishment of tasks and
iii) determines degree of centralization/decentralization
iv) determines the specific environment within which the organization will operate
All these, in turn, influence the design and operation of the organization structure
19. The two cooperative strategies firms adopt to benefit from are:
a) Collusion: Illegal arrangement/agreement (may be explicit or implicit) between
companies to collude together to reduce output so as to decrease supply and
thereby increase price of the product/service (Example: Oil producing
companies can reduce their output to increase the price of oil)
b) Strategic alliance: A strategic alliance is the legitimate cooperation between
one or two companies to achieve the mutually beneficial strategic objectives.
20. Some of the reasons for strategic alliance are:
a) To obtain technology or manufacturing capabilities (HCL with HP)
b) To obtain access to specific markets (Tata-J aguar, Mobil with BP)
c) To obtain access to local distribution network (P&G with Godrej)
d) To reduce the financial risk (Collaborative research of Siemens and Philips)
e) To access additional financial resources (Nissan with Renault)
f) To reduce political risk (Suzuki with Maruti Udyog)
g) To achieve or ensure competitive advantage (Arcelor- Mittal steels)
21. Types of strategic alliances include:
Formal alliances:
° Consortia
° J oint venture
° Franchising
° Licensing
° Subcontracting
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Informal alliances: These may vary in degree of relationship
22. Broadly, Mergers and Acquisitions (M&A) can be classified as:
1. Related v/s Unrelated
2. Horizontal v/s Vertical:
Horizontal M/A: This happens when both acquiring and acquired firms are in the
same industry (Eg. Merger of two or more petroleum refining firms). This may
enhance economies scale, reduce cost, facilitate access to modern technology and
skilled HR, etc.)
Vertical M/A: This occurs when one firm is a supplier or customer to the other (Eg.
Yarn supplier merging with textile manufacturing firm), This may reduce operating
cost, control over input quality, delivery time, market, etc.)
23. The predominant strategic considerations in M&A are:
a) fit with mission and strategy
b) fit with portfolio strategy
c) competitive impact
d) scale economies and synergy
e) preemptive motive
f) comparison with establishment of new unit
g) long-term financial considerations
h) tax shields and
i) strengthening ownership control and guarding against acquisition
24.
Backward integration: Owning a business that supplies input material/components to
the current business. Example: Textile manufacturer developing/acquiring a
business that produces yarns.
Forward integration: Owning a business that consumes the output of the current
business. Example: A textile manufacturer launching readymade garment production
too.
25. Strategic choice is the evaluation of alternative strategies and selection of the best
alternative. With firms conscious of the realities of a dynamic world arriving at the
strategy through consensus gives way to strategic choice by extensive and
conflicting arguments. Making a strategic choice is essentially a decision making
process. It consists of the following four steps.
a) Focusing on strategic alternatives
b) Choosing the selection criteria and evaluation of alternatives (objective as well
as subjective)
c) Making the choice among available alternatives (based on judgement,
experience, and research)
d) Prepare the strategic plan for implementation (also a contingency plan)
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26.
Steps involved in contingency planning are:
a) Identify the events favorable and unfavorable to the firm’s strategy
b) Specify trigger points
c) Assess the impact of each contingent event
d) Develop contingency plans as compatible with current strategies
e) Determine the potential value of each plan
f) Determine and monitor the early warning signals
g) Develop advance action plans for contingent events with reliable early
warnings.
27.
A directional strategy is often developed with a focus on one or more of the three
directions: Stability, Growth and Retrenchment. Once the business needs are
assessed, the firm can choose the type of directional strategy that suits its needs.
Without a directional strategy, companies may lose sight of their goals and
objectives.
They are categorized into three groups namely, (i) Growth (ii) Stability and (iii)
Retrenchment strategies.
Growth Stability Retrenchment
Concentration(integration):
° Vertical growth
° Horizontal growth
Diversification:
° Concentric
° Conglomerate
° Pause/proceed with
caution
° No change
° profit
° Turnaround
° Captive company
° Sell-out/Disinvestment
° Bankruptcy/liquidation
28. Concentration(integration):
Vertical Integration: This happens when a company integrates into its business,
firms that are on the same value chain. i.e., when a manufacturer integrates with
its supplier and/or distributor. Vertical integration can help companies reduce
costs and improve efficiency. Eg. A solar power company that produces
photovoltaic products acquires a firm that manufactures the cells, wafers and
modules to create those products.
Horizontal integration: This happens when the company acquires businesses that
are at the same level of the value chain in similar or different industries. This can
be achieved by internal or external expansion. Because the firms are operating in
the same stage of production, their integration allows them to share resources at
that level. Eg. An oil company acquiring additional oil refineries.
Diversification:
Concentric diversification (also called related diversification strategy): This
occurs when a company expands by entering into an industry related to its current
operations. Companies implement this strategy to attain synergy, which occurs
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when related businesses perform better as a whole than as the sum of their parts,
through sharing resources, combining operations and transferring knowledge. Eg.
A company producing finger chips diversifies into producing ketch-ups to be used
by the same customers with the chips.
Conglomerate diversification: This occurs when a firm diversifies (through
acquisition or merger) into an entirely different market or product that has little or
no synergy with its core business. The main reasons for adopting such a strategy
are first to improve the profitability and the flexibility of the company, and
second to get a better reception in capital markets as the company gets bigger. Eg.
ITC Ltd. acquiring businesses in the areas of tourism, edible oils, etc.
29. Turnaround strategy means plan of action to turn the business from negative (loss-
making) to positive (profit making). It is an action plan that can give struggling
businesses the guidance and direction they need to get revitalized. The aim is to
return an underperforming or distressed company to normal in terms of acceptable
levels of profitability, solvency, liquidity and cash flow.
30. The symptoms of a distressed firm include:
° Persistent negative cash flows
° Negative profits
° Declining market share
° Deterioration in physical facilities
° High turnover, low morale, Mismanagement
° Uncompetitive products, sick company
The turnaround strategy aims to reverse the negative trend in the performance of the
firm.
Answers to Quizzes:
A. Choose the Appropriate Answer
1. d 9. c 17. c
2. b 10. b 18. b
3. a 11. a 19. c
4. c 12. b 20. b
5. a 13. b 21. c
6. b 14. b 22. c
7. a 15. c 23. a
8. c 16. d 24. c
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B. State Whether True or False
1. True 9. True
2. False 10. True
3. False 11. True
4. False 12. False
5. True 13. True
6. False 14. False
7. True 15. True
8. False 16. True
C. Fill in the Blanks
1. Strategic Management 9. focus
2. environmental scanning 10. core competence
3. business
4. vertical forward
5. distinctive competence
6. Dogs
7. conglomerate
8. Due diligence
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D. Cross-word:
S C
Left to Right
W M O
1. Porter’s Generic strategy
F O C U S E L
2. 5-force analysis of industry was by …….
T T R L
3. Acquisition of supplier or customer is ….
R G U
4. Businesses with larger market share in a high
growth market are called ……..
A E A S
P O R T E R L I
E L O
Top to Bottom
I N T E G R A T I O N
1. Strategic planning starts with …….. analysis
H Y A
2. Grand plan of action to realize objectives
R N
3. When two or more companies blend wholly to
formone new company, it is called
E C
4. A legitimate cooperation between two or more
companies for mutual benefit
S T A R S E
5. A company needs to deflect/eliminate …….
T
6. Illegal cooperative strategy of firms to exploit
market
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