Strategic Management

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Faculty, KCTBS
6 Ps
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Prior
Proper
Planning
Prevents
Poor
Performance
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Prepare a chart
describing a
business
environment
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 Environment
Change Market Govt
Opportunities Generic Public
Strengths Industry Shareholders
NGOs
ORGN
Threats competition Competitor
Culture

Structure
Supplier
CEO Distributors
Customers
Managers

Prepared by S.Sangeetha,
Employees Faculty, KCTBS
 Strategy
• An unified, comprehensive and
integrated plan that relates to the
strategic adv of the firm to the
challenges of the envt.

• the basic objective of the enterprise

• are achieved thro’ proper execution

by the orgn.
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 Is defined as the set of

• decisions & actions

• resulting in formulation &

• implementation of strategies
designed to achieve the objectives of
the orgn.

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Could you mention the
different levels of
management?

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 Levels of strategy

• Corporate

• Business

• Functional

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 Levels of strategy

Corporate
level Corporate

Business Business 1 Business 2 Business 3

level

Functional
PDN MKTG FIN RESEARCH
level

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Faculty, KCTBS
Strategic Management
model
Contributed by Pearce and
Robinson

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Faculty, KCTBS
 Strategic Management Model
Company Mission
What is
What is possible
Company profile External environment
(Internal Analysis) desired (PEST analysis)
f Strategic Analysis & Choice f
e e
e e
d LT Objectives Grand Strategy d
b b
a a
c Annual Objectives Operating strategies Policies c
k k

Institutionalisation of strategy

Control & Evaluation

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Faculty, KCTBS
"Management's job is to see
the company not as it is ...

but as it can become."

Prepared by S.Sangeetha,
Faculty, KCTBS
 Japanese proverb

"Vision without action is a

daydream.

Action without vision is a

nightmare."

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 Company Mission

•Enduring statement
•The image the company seeks to
project
•The promise to satisfy the
needs and wants
•Values & priorities
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 Company Profile
Firms Internal Analysis
determines its
Performance Capabilities
based on 2 things
•Existing Resources
•Accessible Resources

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 Company Profile
• Depicts Quality & Quantity of
Financial Resources
Human Resources
Physical Resources
• Strengths & Weaknesses of the firm’s
management & organisational structure
• Current Capabilities;
• Future Capabilities
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 External Environment/
Environment Scanning
Classification:
•Operating Environment
•Remote Environment

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 Economy

Industry

Firm

Operating Envt

Remote Envt

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 Operating Environment
( Within the Specific Industry)

•Within the Specific Industry

Changes result from: Strategic

actions
•firm
•firm’s competitors
•Consumers, Users, Suppliers or
Creditors Prepared by S.Sangeetha,
Faculty, KCTBS
 Remote Environment
(Beyond the Operating environment)
(PEST Analysis)
•Political - Import Restrictions on Raw
Materials
•Economic- Spiraling Inflation
•Social- Demographic swings of
population in the geographic areas
•Technological- Innovations make
existing Technology obsolete
Prepared by S.Sangeetha,
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 Strategic Analysis & Choice

Assessment
External Envt Company profile

Opportunities

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Decision Making process

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 Decision Making process
1. Developing Criteria
2. Creating no.of Alternatives
3. Comparing one set of
alternatives with all others
4. Evaluating the alternatives –
wholly acceptable/unacceptable
5. Selection of Best Solution
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What do you think
is the long term
goals of your
corporate?
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 Long Term Objectives
1. Profitability
2. ROI
3. Competitive Position
4. Technological Leadership
5. Productivity
6. Public Responsibility
7. Employee Relations
8. Employee Development
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 Objectives should be
•Specific
•Measurable
•Achievable
•Consistent with other
objectives of the firm
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My Company is small in size. There
is large scope for my business in
aboard. What can I do? As a
consultant Give your suggestions?

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 Grand Strategy
General plan of major
actions thro’ which a
firm intends to achieve
its LT Objectives in a
Dynamic Envt.

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Classifications of Grand Strategy

1. Concentration
2. Market Development
3. Product Development
4. Innovation
5. Horizontal Integration
6. Vertical Integration

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7.Conglomerate Diversification
8.Concentric Diversification
9.Joint venture
10.Mergers & Acquisition
11.Retrenchment &
Turnaround
12.Divestiture & Liquidation

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• I want to become a market
leader
• Target Period 2025.
• How can I become?
• Which year would be the right
time for execution?
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• 2025- 100% achievement of my goals
(market leader)
• 2020- 75% achievement of my goals
• 2015 – 50% achievement of my goals
• 2010 – 25% achievement of my goals

2008- 5% achievement
2009- 10% achievement of my goals

 2010 -10% achievement of my goals

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 Annual Objectives
The results an organisation
seeks to achieve within
one year.

Greater Specificity is
possible
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 Functional Strategies

Each distinctive Business Function /

Division needs a specific & integrative
plan of action.
Budgeting Process + Operating Strategies
to ensure
Specificity in the problem
Practicality process
Accountability

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 POLICIES

•They are Standard

Operating procedures
•They serve to increase
managerial effectiveness by
standardising routine
decisions
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Institutionalising the strategy

3 Organisational
Elements
Structure
Leadership
Culture
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A good manager is a man who isn’t
worried about his own career but
rather the careers of those who work
for him.
H. S. M. Burns

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 Control & Evaluation
Underlying & ultimate test of a
strategy is ability to achieve

•Annual objectives
•Long term objectives
•Mission

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• Strengths
•Weaknesses
•Opportunities
•Threats
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 Strengths

Tangible: Intangible:
Those things
that
•Loyal customers •Good leadership
you •Efficient •Strategic insights
distribution •Customer intelligence
do channels •Solid reputation
•High skilled workforce
well, •Very high quality
products
the high Best leverage
value or •Excellent
performance financial condition points for
points
growth
without
draining your
Prepared by S.Sangeetha,
Faculty, KCTBS
resources
 Weaknesses

They are
Those things Within •Bad leadership
that control
•Unskilled workforce
prevent •Insufficient resources
you from
doing what •Poor product quality
you really need •Slow distribution and
to do delivery channels
•Outdated technologies
Prepared by S.Sangeetha,
Faculty, KCTBS •Lack of planning
 Opportunities

Potential areas •Marketplace

•Unhappy customers with competitor’s
for growth and •Better economic conditions
higher performance •More open trading policies

Timing may be important for capitalizing on

opportunities

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 Threats

Challenges •Bad press coverage

confronting the •Shifts in consumer
organization, behavior
external in •Substitute products
nature •New regulations

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 Strengths Opportunities

•Availability of high skilled labour •Ageing popn

•Cost effective •Mktg Tie ups with fgn co’s
•Deep mktg & dbtn network thro’ •Global hub for clinical trials
out country •Fgn co’s – research centers
•High std R&D centres •Increasing partnerships &
•Potential ground for clinical trials JVs
•Rich biodiversity •Hotspot for contract
•Growing middle and lower class research
population

Weaknesses Threats
•Less invt •Drug price control order
•Little innovation • unclear Regulatory policies
•Lack of commn & coodn •Complex regn
•Large mkt for spurious drugs •china
•Lack of implementation of govt
policies
•Rural mkt- yet untapped
•Highly dependent on imports
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• Biocon- 3 partnerships
• Dr.Reddy’s Lab- 5 Partnerships
• Ranbaxy- 5 Partnerships
• Zydus Cadila- 1 Partnership

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Faculty, KCTBS
 Actions of Indian govt
• Regn of import, licensing, testing and
mftre
• Customs duty reduced from 10% - 5%
• Direct invt in clinical research-
service tax exempt for 10 years
• Protection for undisclosed data
• Facility to avail patent

Prepared by S.Sangeetha,
Faculty, KCTBS
Benefits of Strategic
Management

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Benefits of strategic management

• Problem prevention
• Group based strategic
alternatives
• Employee motivation
• Gaps & overlaps – reduced
• Resistance to change should be
reduced Prepared by S.Sangeetha,
Faculty, KCTBS
 Risks
• Costlier
• Time consuming
• Formulators & implementers
are different
• Managers must be  trained to
anticipate, minimise or
constructively respond
Prepared by S.Sangeetha,
Faculty, KCTBS
To Summarise
• Strategy has been defined as "that which
has to do with determining the basic
objectives of an organization and
allocating resources to their
accomplishment."
• A strategy determines the direction in
which an organization needs to move to
fulfill its mission.
• A strategic plan acts as a road map for
carrying out the strategy and achieving
long-term results.Prepared by S.Sangeetha,
Faculty, KCTBS
 Difference between Long Range
Planning & Strategy
Long-range Strategic
planning planning
builds on considers changes
current goals or anticipated
and practices changes in the
and proposes environment that
modifications suggest more radical
for the future. moves away from
Prepared by S.Sangeetha,
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 Grand Strategies

Quite
expensive
LT impact
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 Grand Strategies
Stability strategy
Growth Strategies
Retrenchment
Strategies
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 Why do
companies
adopt Stability
Strategy?
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 Stability Strategy
Firm continues to serve its client in the
same fashion as in the past.
Reasons
•Focus
Incremental improvement of financial
performance
Sticking to known business
May not have the resources &
capabilities for expansion
May not want to take the risks of
growth & expansion
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Is this stability
strategy a
profitable one?

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Dangers?

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 Dangers in adopting Stability
Strategy
The environment changes
Product line becomes
obsolete
May not allow the
development & advancement
of key employees
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 Growth Strategy
Redefining the business
•by adding new products /
services or
•new markets or
•by substantially increasing
the current business

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Reasons for
adopting
Growth
Strategy
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Reasons for adopting Growth Strategy
•No future
•Volatile/unstable
•Under utilisation of resources &
capabilities.
•Spreading the risks.
•Imitating competitors’ growth
strategies
•Urge to grow
•Increase Market share/ gain Dominance.
•Environmental opportunities
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 Retrenchment Strategies

Contraction of scope
Level of Business function
Drop product line, market, market
segmentation

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Why adopt retrenchment
Strategy?

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Reasons for adopting Retrenchment Strategy

•Certain divisions /product lines

/ product /market segments are
not profitable
•Actual Profits < target level
•Focus on Core business
•The company is too diversified
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 Grand Strategies
(i) Concentration Strategy
Concentrating in Current
business
•Single Market
•Single Technology
•Single Product
(large share of few markets than few
share of large mkts)
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Characteristics of Concentration Strategy

•Low risk
•Lowest additional resource
•Slow growth , Profitability
•Successful in case of small
business
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Advantages of concentration strategy

Specialisation
Distinctive Competence &
reputation
Can identify new developments &
trends within the industry &
respond to them

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How can you make
this strategy a
successful one?

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 Alternatives Available

Increasing present customers

rate of usage
Attracting competitors
customers
Attracting non users to buy
the product
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 Alternatives Available

Increasing present customers

rate of usage

Paste, Mobile phone service

providers;

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 Alternatives Available

Attracting competitors
customers

Eg: Tide Vs Rin

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 Alternatives Available

Attracting non users to buy

the product

Eg: free sim

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 Why do companies move from
Concentration Strategy in present
scenario?

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• Your are renowned Jeweler in
Coimbatore.
• Explain the scope for
development

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•Ganapathy silks
•Chennai silks

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Market Development

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Alternatives available to Market Development
Strategies

•Regional expansion
•National Expansion
•International Expansion

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 Alternatives available to Market Development
Strategies
•Regional expansion- Nellai
lala sweets- Gandhipuram,
goundampalayam, Kuniamuthur, Thudiayalur,
Bharathiyar road, Avinashi road.

•National Expansion-112
Kendras in India.

•International Expansion-
kritilal kalidas; jewel one
Prepared by S.Sangeetha,
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 Market Development
•Present products in new
markets

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Faculty, KCTBS
 Market Development
•Present products in new
markets
•Adding different channels of
distribution
•Changing the content of advertising /
promotional media

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Attracting other market segments

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 Attracting other market segments
Developing product versions to appeal to
other segments.

Attracting other channels of

distribution.

Advertising in other media.

Eg: Low priced Wheel , Nirma

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Faculty, KCTBS
MAGGI 2-MINUTE Noodles
MAGGI Vegetable Atta Noodles
MAGGI CUPPA MANIA
MAGGI Healthy Soups
MAGGI Masala-ae-Magic

MAGGI Sauces
MAGGI Pichkoo
MAGGI Pizza Mazza
MAGGI MAGIC Cubes
MAGGI Vegetable
Multigrainz Noodles

MAGGI Bhuna Masala

MAGGI Coconut Milk Powder
MAGGI Pazzta
MAGGI Sanjeevni Cup Soup

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Nestle:
•Baby foods
•Bottled water
•Cereals
•Chocolate & confectionery
•Coffee
•Culinary, chilled & frozen food
•Dairy
•Drinks
•Food service
•Healthcare nutrition
•Ice cream
•Petcare
•Sports nutrition
Prepared by S.Sangeetha,
Faculty, KCTBS
 Suguna poultry farm ltd.
9 states across India
• Tamil Nadu,
• Andhra Pradesh,
• Karnataka,
• Maharashtra,
• Gujarat,
• Orissa,
• West Bengal,
• Punjab and
• Haryana. Prepared by S.Sangeetha,
Faculty, KCTBS
Your company’s product is swept
away by new innovation . What will be
your remedial action?

Prepared by S.Sangeetha,
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 Product Development

•Substantial modification of existing

products / Creation of new but related
items.
•Adopted to
Prolong the PLC.
Take advantage of favourable
reputation & brand name

Prepared by S.Sangeetha,
Faculty, KCTBS
 Variants
Developing new product features
Calorie free Sugar

Developing quality variations

Developing additional Models &

Sizes
Hamam Soaps available in different
sizes.
Liquid soaps, Cleansing soaps, Antibiotic,
herbal, moisturiser soaps etc.
Prepared by S.Sangeetha,
Faculty, KCTBS
 Rs.3200 crore
turnover

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Faculty, KCTBS
• Apple – develops Iphone for China mobile

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 Risks

•The process of creating a broad

product line if they are expensive,
risky & potentially unprofitable

•Only few product ideas reach the

mkt.
Eg: Shampoos, Books, Godrej Hi
Care –Good Knight

Prepared by S.Sangeetha,
Faculty, KCTBS
How can you
create new
market?
Prepared by S.Sangeetha,
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 Innovation
•Producing new
products
•New technology-
•Electronic
gadgets
• Eg: Massager Apple’s ipad
Prepared by S.Sangeetha,
Faculty, KCTBS
 Products
Markets Existing New
Existing Mkt Pdt dvlpt
penetration
New Mkt dvplt Diversification

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 Your are a market
follower .
Think how you can
become market leader.
Strategies to beat your
competitor.
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Horizontal /
Vertical
Integration

Prepared by S.Sangeetha,
Faculty, KCTBS
 Horizontal Integration

•Acquires one / similar business operating

at the same stage of the production –
marketing Chain.
•The process to enter new markets by hiring
firms.

•(similar pdts/ substitutes / competitors)

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 Vertical Integration
• Acquisition of business that either
supply the firm with inputs or serve
as a customer for the firm’s output
Benefits:
• Elimination /reduction of buying &
Selling
• Improved Coordination
• In-house efficiency.
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• Coal mines and power stations
• Sugar cane cultivation and sugar mills
• Spare parts and automobile manufacturers

Prepared by S.Sangeetha,
Faculty, KCTBS
• COAL MINING:
CIL & NTPC
• Suguna Poultry Farm Ltd.
• Suguna Chicken

• Domino’s pizza

• Reliance
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• Hindalco Industries Limited is a global
leader in aluminium and copper
• vertical integration through access to
captive copper concentrates

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 Suppliers Horizontal Integration Suppliers
Backward Backward
Vertical Vertical
Integration Integration
Manufacturers Horizontal Integration Manufacturers
Forward Forward
Vertical Vertical
Integration Integration

Dealers/ Customers Horizontal Integration Dealers/ Customers

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Fortune company is
earning huge
profits. What shall
it do? Suggest.
Prepared by S.Sangeetha,
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 Diversification

Represents distinctive
departures from a firm’s
existing base of reputation.

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 Why do firms diversify
• Growth ambition
• Need to provide flexibility to portfolio
opportunities serve as attraction for
diversification
• Increase profit
• Availability of surplus resources
• Congruence of existing synergies &
emerging opportunities
• Recasting of mission leads to
diversification
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Does all diversification
land up with success?

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 All diversification will
not lead to profitability

Prepared by S.Sangeetha,
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Reasons why the diversification strategies fail

• No proper preparation
• Diversification requires resource
• Managerial competence
• Screening of Diversification
proposals

Prepared by S.Sangeetha,
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 Problems

• Managers are hired to act as an

agents to represent the interests of
stockholders
• Agency theory states – managers will
not always place stockholders
interests above the own.

Prepared by S.Sangeetha,
Faculty, KCTBS
 Concentric Diversification

• When diversification involves the

addition of a business related to the
firm in terms of
Technology
Markets
Products

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Faculty, KCTBS
 Reasons for adopting concentric Diversification
• Excess Cash flow
• Saturation of Pdt / mkt/ demand in the
industry
• Managerial Expertise
• Combining the related activities of separate
businesses into single operation to achieve
lower costs
• Exploiting common use of brand name
For example:
• breweries have been able to convert grain, a by-
product of the fermentation process, into feed for
livestock.
• Knit co’s producing mats out of the waste
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 Examples

• Eureka Forbes
• Usha International home –
appliances Juicer, Mixer , geyser ,
room cooler,fans, Washing
machines ,Sewing Machines etc

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 Conglomerate Diversification

Entering into unrelated field of

business

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 Reasons

• Acquiring a business which is promising

• Concern is profit pattern only

Examples:
Ponds India Limited
• Skin Care-Core business
• Leather-shoe, garments
• Thermometer
• Mushrooms
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 Joint Venture
• Two or More companies lacking a
component of success in a particular
competitive environment join together
• It is a cooperative arrangement
• It limits discretion, control & profit
potential but demands higher
attention from manager and more
resources.
Ex: Maruti & Suzuki,
Dabur with Osem of israel (food)
and Bongrain of France
Prepared by S.Sangeetha,
(Cheese)
Faculty, KCTBS
• Birla Art International- a joint venture between the Yash
Birla Group and the lesser-known J&K-based textile group

• Boeing, Tata JV to make aerospace parts

• Fiat Group Automobiles and Tata Motors - industrial Joint

Venture

• For the Godrej group, - with the US-based Selviac Nederland

BV (Pillsbury- part of the $21-billion global food and drinks
giant Diageo).

• Joint venture Toyota -Kirloskar Motor Pvt Ltd

• Coke's new joint venture with Procter & Gamble will

incorporate Coke's Minute Maid and Fruitopia plus P&G's
Sunny Delight juice drink and Pringles salty
snacks. Coke and P&G say focus will be "developing and
marketing innovative juices, juice-based beverages and
snacks on a global basis.
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 Conditions to make JV a Success

• Carefully Selecting a right partner

• Both of them should get mutual
benefits
• One cannot dominate other.

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 Strategic Alliance
•An agreement between two or more organizations to
cooperate in a specific business activity

•So that each benefits from the strengths of the other, and
gains competitive advantage.

•Formed–due to - globalization, increasing uncertainty ,

complexity in the business environment.

•Strategic alliances  sharing of knowledge , expertise

between partners , the reduction of risk and costs 
relationships with suppliers and the development of new
products and technologies.
A strategic alliance is sometimes = joint venture, but an
alliance may involve competitors, and generally has a shorter
life span. Strategic partnering is a closely related concept.
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Faculty, KCTBS
 Example
• HP and Apple Partner to Deliver
Digital Music Player and iTunes to HP
Customers
• Microsoft and Infosys strikes world
wide Strategic alliance. Companies to
work jointly to deliver world class
ebusiness solutions.

Prepared by S.Sangeetha,
Faculty, KCTBS
M&A
Prepared by S.Sangeetha,
Faculty, KCTBS
 Mergers and Acquisitions
 Merger
• When two or more companies combine into one
company
• Indian Iron and Steel Company (IISCO), with Steel
Authority of India Ltd (SAIL)

 Acquisition
• An act of acquiring effective control by one
company over the assets or management of
another company without any combination of
companies (they remain independent but
control in one hands)

• Eg: Jet Airways acquired Air Sahara

in a Rs 2,300-crore all-cash deal.
• Dabur acquired Balsara
Prepared by S.Sangeetha,
Faculty, KCTBS
• Philips India and Preethi mixie
• Turnover -?
• Dealers -?
• Market share -?
• Volume of sale -?

Prepared by S.Sangeetha,
Faculty, KCTBS
Strategic Myopia

Prepared by S.Sangeetha,
Faculty, KCTBS