Course Outcomes of Strategic Management:-

Code Subject Name L T P C

MC02SM Strategic Management 3 1 - 4
Pre-requisites Business Management
Co-requisites Management knowledge

CO No. Expected Course Outcomes Cognitive

Level
CO1 Provide Familiarity with the concepts of strategy, strategic U-L2
management and strategic management process.
CO2 Understand the scope and importance of environmental scanning U-L2
with various approaches to formulate strategies in the organization.
CO3 Gain insight into portfolio and competitive analysis with the help of Ap-L3
BCG matrix, GE 9 cell model, McKinsey's 7s Framework and its
application in business scenarios.

1
 CO4 Capability to analyze the various issues confronted during strategic An-L4
implementation and understand the importance of leadership role in
accomplishing the implementation of strategies

CO5 Awareness on the vitality of strategic control and its evaluation to U-L2
avoid derailing from the planned strategies.

Course Contents:
Module 1: Strategic Management: An Introduction - Concept of strategic management –
Characteristics of strategic management - Defining strategy, Strategy formulation -
Stakeholders in business - Vision, mission and purpose - Business definition, objectives and
goals – Environmental appraisal - Types of strategies - Guidelines for crafting successful
business strategies, Tailoring strategy to fit specific industry.

Module 2: Strategic Analysis and Choice: Environmental Threat and Opportunity

Profile(ETOP) - Organizational Capability Profile - Strategic Advantage Profile –Corporate
Portfolio Analysis - SWOT Analysis - Synergy and Dysergy – GAP Analysis - Porter's Five
Forces Model of competition – McKinsey's 7s Framework - GE 9 Cell Model – Distinctive
competitiveness - Selection of matrix.

Module 3: Strategy Implementation: Issues in implementation - Project implementation –

Procedural implementation - Resource Allocation - Budgets - Organization Structure –
Matching structure and strategy - Behavioural issues - Leadership style – Corporate culture -
Values - Power - Social responsibilities – Ethics.

Module 4: Strategy Evaluation: Importance - Symptoms of malfunctioning of strategy –

Organization anarchies - Operations Control and Strategic Control - Measurement of
performance - Analysing variances - Role of organizational systems in evaluation,. New
Business Models and strategies for Internet Economy - Shaping characteristics of Ecommerce
environment -E-Commerce Business Model and Strategies – Internet Strategies for Traditional
Business - Key success factors in E-Commerce.

References:
1. A concept of corporate planning-, Russel Ackoff, Newyork wiley
2. Business policy and strategic management- Tokyo, McGraw hill
3. Strategic Management-Text and Cases- V.S.P. Rao and V. Harikrishna
4. Strategic Management-Azar Kazmi
5. Strategic Management-Francis Cherunillam
6. Strategic Management-Subba Rao
7. Strategic Planning Formulation of Corporate Strategy - Ramaswamy
8. Strategic Management, 12th Ed. - Concepts and Cases - Arthur A. Thompson Jr. And
A.J.Strickland
9. Management Policy and Strategic Management (Concepts, Skills and Practices
R.M.Shrivastava
10. Strategic Management – Pearce
11. Strategy & Business Landscape - Pankaj Ghemawat

2
Module I- Strategic Management

Introduction to Strategic Management

• Till 1930- focus was on day to day activities and short term activities. The less & little
competitive environment, functional oriented, supported by budgeting and control
systems
• 1940- Ad hoc policy making led to planned policy making
• 1950 – integration of functional areas in the context of environmental demands
• 1960 -1980- characterised by great environmental changes, mass production,
international business and increased complexity of business functions necessitating
long range plans and comprehensive business policies aimed t long run success in the
competitive environment.
• 1980-90- interest in building competitive advantage.
• 2000- incremental
Historical Development of Strategic Management
Phase I: Basic financial planning
• Operational Control
• Annual Budget
• Functional Focus
Phase II: Forecast based planning
• More effective planning for growth
• Environmental Analysis
• Multi-year Plans
• Allocation of resources, etc.,
Phase III: Increasing response to markets and competition
• Situation & Competitive assessment
• Evaluation of strategic alternatives
• Dynamic allocation of resources
Phase IV: Strategic Management
• Integration of all resources to gain competitive advantage
• Strategically chosen planning framework
• Efficient Leadership
• Flexibility
Need for Strategic Management
• Change- makes planning difficult
• To provide guidelines- Minimise conflicts between job performance & job demands
• Leads to Systematic study
• Probability for better performance
• Better decision making
• To Improve communication & Coordination
• To improve allocation of resource
• Helps the managers to have a holistic approach
Definition of Strategic Management

3
The process by which organisations try to determine what needs to be done to achieve corporate
objectives and more importantly, how these objectives are to be met.
It is the process by which the senior management examines the organisation and the
environment in which it operates and attempts to establish an appropriate and optimal ‘fit’
between the two to ensure the organisation's success.
Elements of Strategic Management:
• Strategy Formulation
• Strategic Analysis
• Strategic Choice
• Strategy Implementation
• Strategy Evaluation
Characteristics of Strategic Management
• Strategic management and strategic planning interchangeably used.
• SM is all about how to create competitive advantage in the market place.
• It aims at leveraging organisational strengths(unique skills & capabilities) to exploit
market opportunities
• To meet the expectations & concerns of multiple stakeholders.
• Its comprehensive plan, concentrating on the total organisation rather than single
functional area.
• It involves the recognition of trade-offs between effectiveness(doing the right thing)
and efficiency(Doing things right)
• Helps in management of internal resources (strengths & weakness) efficiently &
effectively leading to superior organisational performance.
Approaches /Modes of Strategic Management
Modes of Strategic Management are the approaches adopted by the top level management.
1. Formal Structured Approach or planning mode: Formal structured (or simply
formal) approach involves strategic decision making in anticipation of the future state
that the organization wants to be in. Strategic decisions are based on socioeconomic
purposes of the organization, values of top management, external opportunities and
threats, and organization's strengths and weaknesses.
An approach to strategy formulation that involves systematic, comprehensive analysis along
with the integration of various decisions and strategies. The aim of this mode is to understand
the environment well enough to influence it.
2. Entrepreneurial mode: Strategy is developed mainly by a strong visionary chief executive
who heavily searches for new opportunities, oriented towards growth, willing to take risk and
take bold decisions.
3. Adaptive Mode: This is an approach to strategy formulation that emphasis taking small,
incremental steps, reacting to problems rather than seeking opportunities, and attempting to
satisfy a number of organisational power groups
4. Combining Different Approaches: Since there are many variables, which affect strategic
decision-making, many organizations follow a combination of different approaches.
Benefits of Strategic Management
• Helps an organisation to be proactive in shaping future
• Helps to respond to its relevant environment

4
 • Helps an organisation to make effective strategies
• Helps to be creative and innovative
• Helps the organisation to decentralise the management process
• Organisations can foresee the environmental changes
• Well-designed strategic planning boost the profits
• Enhances problem prevention capabilities
• Enhances controlled environment & individual responsibilities
• Provides cooperative, integrated and enthusiastic approach in tackling problems
Benefits of Strategic Planning/ Management
• It provides a road map for the firm to achieve its goals & targets
• Helps in efficient & effective utilisation of firm’s resource & time.
• Can easy 7 efficiently respond to environmental changes
• Minimises the chances of risks, mistakes and difficulties.
• Prepares a firm to confront future challenges.
• Creates a framework for internal communication among the personnel
• A comprehensive approach is adopted
• Encourages forward thinking
• Clarifies individual responsibility
• Develops favourable attitude towards the change.
• It provides cooperative, integrated and enthusiastic for tackling problems and realising
opportunities.
Steps in Strategic Management Process
1. Vision, Mission & Objectives: Vision statement- a clear description of what the
organisation wishes to become in the years ahead.
Mission: Specifies what an organisation is and why it exists.
Objectives: exhibits the firms commitment to responsible actions in line with the firms internal
(survival, growth & profitability) as well as external (ethics, corporate governance and social
responsibility).
2. External & Internal Analysis: Swot analysis
External environment: Challenging & Complex. Firm must develop requisite skills to identify
the opportunities & threats existing in the environment.
The external environment has three important parts:
i) The general environment(elements of the broader society that affects the industries and
the firm)
ii) The Industry environment(factors that influence a firm, its competitive actions and
responses and the industry’s profit potential
iii) The Competitive environment (in which the firm examines each major rival’s future
objectives, current strategies, assumptions and capabilities)
To exploit external opportunities, a firm must have internal resources and capabilities.
Study of Internal strengths & weakness is utmost important
A systematic internal appraisal helps a firm to find:
• What are its strength & weaknesses
• Where it stands in terms of its strength & weaknesses
• What its opportunities and threats based on its strength & weaknesses

5
 • What steps to take to bridge the gap
Based on this analysis should adopt best strategy

3. Strategy Formulation:
Is the process of offering proper direction to the firm to accomplish goals & deliver outstanding
values to the customers at all times.
Formulation of strategies must ensure best fit between goals, resources & efforts.
It includes assessing the external environment and internal problems and integrating the results
into goals & strategies
It seeks to set long term goals that helps to exploit its strengths & encash its opportunities.
A firms strategy occur at three levels, namely
• Corporate level
• Business Level
• Functional level

4. Strategic Analysis & Strategic choice:

• Strategic analysis is concerned with the strategic situation of the organisation. Here
the organisation looks into the changes in both internal & external environment & its
impact, assessment of its resources, strength & weakness.
• It provides base for the strategic choice
• It is basically concerned with the formulation of suitable course of actions, their
evaluation and choices between them.
Strategic choice: is concerned with the selection of appropriate strategies taking into broader
view of various factors, such as internal capabilities, competencies, resources strength, degree
of risk involved, timing of the decision, vision & mission statements, government rules &
regulations, customers & society at large.

5. Strategy Implementation: This is the action stage of strategic Management

Implementation means mobilising the employees to translate formulated strategies into
concrete actions. The following steps are required to implement the formulated strategy
a) Establish annual objectives

6
 b) Devise policies
c) Motivate employees
d) Allocate resources
e) Develop a strategy of supportive culture
f) Create an effective organisation structure
g) Channel marketing efforts
h) Prepare budgets
i) Develop & utilise information systems
j) Link employee rewards to organisational performance

6. Strategy Evaluation: Evaluation is utmost important

• Setting Standards
• Observing actual performance
• Compare Standards set & actual performance
• Find the deviations
• Take corrective actions

Strategy Formulation
Strategy is a broad plan developed by an organization to take it from where it is to where it
wants to be. A well-designed strategy will help an organization reach its maximum level of
effectiveness in reaching its goals while constantly allowing it to monitor its environment to
adapt the strategy as necessary.
Strategy Formulation is an analytical process of selection of the best suitable course of action
to meet the organizational objectives and vision. It is one of the steps of the strategic
management process. The strategic plan allows an organization to examine its resources,
provides a financial plan and establishes the most appropriate action plan for increasing profits.
Strategy Formulation is the process of developing the strategy. And the process by which an
organization chooses the most appropriate courses of action to achieve its defined goals. This
process is essential to an organization’s success, because it provides a framework for the
actions that lead to the anticipated results.

Steps in Strategy Formulation:-

7
Steps in Strategy Formulation
Strategy formulation process is an integral part of strategic management, as it helps in framing
effective strategies for the organization, to survive and grow in the dynamic business
environment.

1. Establishing Organizational Objectives: This involves establishing long-term goals of

an organisation. Strategic decisions can be taken once the organizational objectives are
determined.
2. Analysis of Organizational Environment: This involves SWOT analysis, meaning
identifying the company’s strengths and weaknesses and keeping vigilance over competitors’
actions to understand opportunities and threats. Strengths and weaknesses are internal factors
which the company has control over. Opportunities and threats, on the other hand, are external
factors over which the company has no control. A successful organization builds on its
strengths, overcomes its weakness, identifies new opportunities and protects against external
threats.
3. Forming quantitative goals: Defining targets so as to meet the company’s short-term and
long-term objectives. Example, 30% increase in revenue this year of a company.
4. Objectives in context with divisional plans: This involves setting up targets for every
department so that they work in coherence with the organization as a whole.
5. Performance Analysis: This is done to estimate the degree of variation between the actual
and the standard performance of an organization.
6. Selection of Strategy: This is the final step of strategy formulation. It involves evaluation
of the alternatives and selection of the best strategy amongst them to be the strategy of the
organization.
Levels of Strategies

Levels of Strategies

Corporate level strategy: This level outlines what you want to achieve: growth, stability,
acquisition or retrenchment. It focuses on what business you are going to enter the market.
Business level strategy: This level answers the question of how you are going to compete. It
plays a role in those organization which have smaller units of business and each is considered
as the Strategic Business Unit(SBU).

8
Functional level strategy: This level concentrates on how an organization is going to grow. It
defines daily actions including allocation of resources to deliver corporate and business level
strategies.
Hence, all organisations have competitors, and it is the strategy that enables one business to
become more successful and established than the other.

Vision
A vision is a clear, comprehensive „photograph‟ of an organization at some point in the future.
It provides direction because it describes what the organization needs to be like, to be successful
within the future
Vision comes from
 Philosophical- Knowledge, people & Society
 Practical – Language, skills, work & experience
 Personal beliefs & hopes.
Vision Statement A vision statement answers the question, “What will success look like?” The
pursuit of this image of success is what motivates people to work together.
•Strategic intent should lead to an end.
•That end is the vision of an organization or an individual.
•It is what the firm or a person would ultimately like to become. •Should be short and specific.
•It should be based on overall purpose of organization
Characteristics of Vision
1. It's a blue print of the kind of business organization the management is trying to create
and the market position it would occupy.
2. It should be forward looking a provide strategic course the management will adopt to
help the company prepare the future
3. Specific and provide guidelines to managers for making decisions and allocating
resources
4. Flexible to changing environment
5. Within realm of companies hope to achieve
6. Appeal to emotions and motivate employees
7. Narrow vision, can focus effort and excite people
8. May not fit to present circumstance, but contributes to future. Shows picture of future
Should be easy to explain to all stake holders and preferably short
Benefits of having a vision
• Good visions are inspiring and exhilarating.
• Help the organization to prepare for the future.
• Clarifies and crystallizes the senior executives view about the companies’ long term
direction.
• Good vision reduces risk-taking and experimentation.
• Good vision help to motivate and morale boosting of employees.
• Good visions are competitive, original and unique.
• Good visions represent integrity, they are truly genuine and can be used for the benefit
of people.
Limitations of a vision statement

9
 • Vague and incomplete
• Not forward looking
• Too broad
• Uninspiring
• Not distinctive
Examples of Vision Statements
1. BSNL Vision Statement: “To become the largest telecom service provider in Asia.”
2. Walt Disney vision Statement : “Make people happy”

Mission
Mission is a statement which defines the role that an organization plays in a society.
Defining Mission “Essential purpose of organization, concerning particularly why in existence,
the nature of the business in, and the customers it seeks to serve and satisfy.” and “it is the
purpose or reason for the organization's existence.”
“Mission is an enduring statement of purpose that distinguishes one firm from other similar
firm.”
Mission Statement “A mission statement is an enduring statement of purpose that distinguishes
one business from other similar firms. A mission statement identifies the scope of a firm's
operations in product and market terms.”

Characteristics
1) Declaration of attitude:-
• Not designed to specific or to have a concrete end. Is declaration of attitude and outlook
• Is meant to provide motivation, general direction, an image and a philosophy to guide
the organization
• Should be flexible, even vague to provide room for adapting to changing environments
and ways of operations
2) Customer orientation:- Reflects the anticipation of customer.
The operating philosophy of the organization is to identify customer needs and then provide a
product or service that fulfil those needs.
Should define:
• “what organization is and what is aspiring to be”
• be limited enough to exclude some ventures and broad enough to allow for creating
growth
• Have its own identity that distinguish it from others
• Serve as a framework to evaluate both current and prospective activities.
• be stated in terms sufficiently clear to be widely understood throughout the organization
• 3) Declaration of social policy:-
• Socially oriented policy suggest that the company takes into consideration not only
profit owed to shares and what it owes to major stakeholders, but also seriously
responds to responsibilities towards consumer, environmentalists, minorities.

Examples of Mission Statement

10
BSNL mission “To provide world class state of art technology telecom services to its customers
on demand at competitive prices.

“To provide world class telecom infrastructure in its area of operation and to contribute to the
growth of country's economy.
The mission statement of an organization is normally short, to the point, and contains the
following elements:
• Provides a concise statement of why the organization exists, and what it is to achieve;
• States the purpose and identity of the organization;
• Defines the institution's values and philosophy; and
• Describes how the organization will serve those

Formulating mission
1. What is the basic purpose of the organization?
2. What is unique about the organization?
3. What is unique in the company that will make it stand out in a crowd?
4. Who are & and who should be, your principal customers?
5. What are the basic beliefs, philosophical priorities of the firm?

Components of mission statement

1) Product or service: Invariably includes mention of the product or service the company
offers to customers.
2) Customers: Information in the mission statement describes the profiles of customers and
the organization it services.
3) Technology: Components of the mission statement generally refers to means of production,
operations and organizational functions. It include elements such as equipment's, materials,
techniques, processes
4) Survival, growth and profitability: make a general reference to the company's survival
and healthy functioning, which include growth and profitability.
5) Company philosophy: It reflects the basic believes, values, aspirations and ethical priorities
of company that guide the employee in conditioning organizational function.
6) Public image: Elements of the company deals with how the company wishes to be viewed
by external constituencies. To create a positive public image, the mission statement could
explicitly refers to the responsiveness of the company to concerns about the company and the
society
7) Employees: To develop a public image a company could include concerns for recognition
of the value of employees in the statement
Objectives
Objectives represent a managerial commitment to achieve specified results in a specified period
of time. They clearly spell out the quantity and quality of performance to be achieved, the time
period, the process and the person who is responsible for the achievement of the objective.
“Objectives are end results of planned activity” “Objectives state what is to be accomplished
by when and should be quantified if possible.”

11
 • Objectives are always measurable and particular
• Objectives are more specific and narrower
• It vary with the hierarchical level in the organization, becoming more focused and short
term going down from top level to frontline managers.
• Objectives are critical for organizational effectiveness and efficiency, and it has been
shown that managers who aggressively pursue objectives perform better that managers
who are not driven by them.

Importance & Characteristics of objectives

1. Objectives help to define the organization in its environment
2. Objectives help in coordinating decisions and decision-maker
3. Objectives help in formulating strategies
4. Objectives provide standards for assessing organizational performance

Characteristics of good Objective

1. Specific and Unambiguous
2. Time horizon
3. Flexible
4. Attainable
5. Measurable
6. Multiple objectives

Factors affecting Objectives

1. Size of the organization: Bigger size makes that objective formulation process
complex.
2. Level of management: Organizational objectives are set by managers. Different
levels of managers set different kinds of objectives.
3. Organization culture: Culture is a system of shared set of values, beliefs and norms
that guide behaviour.

Areas of objectives
1) Market share: Healthy market share should sustain even as an organization tries to
increase its share. Sustainable market share is important in stable markets and in
competitive environment.
2) Leadership in innovation & productivity: Innovation is needed for success and in
some cases for survival. Innovation must be translated into objectives and indicate what
the organization is aiming for.
3) Product quality and productivity: Designing and ensuring quality has been shown to
be critical competitive strength. Constant balance between achieving efficiency as
related to cost-cutting objective and maintaining quality.
4) Recourse level: Resources includes inventory, equipment's, capital, human capital.
Resources imply cost, their use should be minimized without any compromise in
aspects such as quality and service

12
 5) Customer satisfaction: Maintaining customer relations and building customer loyalty
and goodwill are highly desirable.
6) Performance level Related to productivity and effectiveness: Performance
objectives can also include innovation and professional development.
7) Social responsiveness: Business respond to society and community by specifying
explicit objectives for socially beneficial activities.

Example of Objectives
1. To achieve 10% growth in earnings per share.
2. To achieve 20% - 25% return on equity.
3. To achieve 27% return on capital employed.

Goals

Goal is defined as an “intermediate result to be achieved by a certain time as part of the grand
plan. A plan can, therefore have many goals.”
 Goal is a specific target that a firm intend to reach in long term.
 A describes clearly the activities and task to be completed by an individual, a
department or an organization.
 Goals should be measurable, quantitative, challenging, realistic, consistent and
prioritized.
 Provide basics for measuring company’s performance and the process it is making
towards the vision.
 Strategic goals help managers to establish end result of activities in general without
getting bogged down in details, such as issues of measurement and timing

Two types of Goals

1) Financial goals: These goals focus on achieving a certain level of financial performance,
measured in terms of return in investment or growth of revenues
2) Strategic goals: The goals focus on achieving strategic or competitive advantages within the
industry, like technology leadership, creativity and innovation and superior customer service

Characteristics of goal
1) Specific: so that they are precise and measurable, would assist management in monitoring
the progress towards achievement of goals at each specific point of time

2) Issues of goal: Short-term goals and objectives should be left to lower level managers to
identify, plan and achieve. Issues like lowering of cost and improving quality should be
included in goals of middle level managers

3) Should be well constructed, realistic and challenging: Challenging goals motivates

managers to be innovative, creative and ambitious in improving operations, marketing, sales,
etc.
4) Specification of time period

13
Examples of Strategic goals

Customer Service: Provide quality service to customer at least equal to the highest standard
in the industry
 Maintain reliability of service to customer at a level above 99%
 Ensure that customer are educated about the safety aspects of using electricity.

Community service: Promote economic growth and increased development of the company's
total service area. Provide job opportunities and investment in the service area which promotes
a higher standards of living for all citizens.
 Cooperate with and serve the educational institutions located in the service area in a
manner consistent with other leaders in the industry.

Shareholders relations: Assure that all expenditure are made in such a way as to protect and
enhance shareholders’ investment. Provide a rate of return to the shareholders which is
competitive with other investments Base all company involvement in new programmes or
projects on solid economic principles.

Employee-management obligations: Monitor and strive to improve the quality of

management and supervision Attract, develop and retain able and loyal employees
 Provide equal employment opportunities and a high degree of training along with
modern, professional tools.

Corporate communication: Make an assertive effort to provide information communication

on relevant company issues. Keep senior management apprised and educated on current topics
of interest. Enhance the community image of the company by being receptive to the needs of
customer and the community

Values Statement
Values are the beliefs behind your vision and mission. A worthy vision is guided by worthy
values. Values give dignity and direction to your mission. They are the moral compass and
expected behaviours during your vision quest. A values statement may include elements like:
 Integrity in all the overall actions of the organisations
 Commitment to employees
 Quality of products
 Protection of environment
 Innovative business ideas
 Continual learning
 Welfare of stakeholders

14
Should express these values for an improved work environment and to allow the organization
to prosper.

Strategy
• Strategy: a plan, method, or series of actions designed to achieve a specific goal or
effect. – Wordsmyth Dictionary

• The determination of the long‐run goals and objectives of an enterprise and the adoption
of courses of action and the allocation of resources necessary for carrying out these
goals. – Alfred Chandler, Strategy and Structure (Cambridge, MA: MIT Press, 1962).

• Strategy is the pattern of objectives, purposes, or goals and the major policies and plans
for achieving these goals, stated in such a way as to define what business the company
is in or is to be in and the kind of company it is or is to be. – Kenneth
Andrews

Essence of Strategy
• A way through a difficulty
• An approach to overcome an obstacle
• A response to an important challenge.
• A good strategy has coherence, coordinating, coordinating actions, policies and
resources so as to accomplish an important end.
• It sets the direction and decides the scope of the organisation.
• It aims at to create a sustainable competitive advantage and deliver superior
performance
• It’s a comprehensive, well integrated plan of actions
• Strategy is a game plan- how to compete, how to attract the customers etc.

Types of Strategies

Corporate/ Grand strategies –

Corporate/ Grand strategies – Which describes a company’s overall direction towards

growth by managing business and product lines. Serves as the guiding star of all the individual
business organizations belongs to the group of the conglomerate
• Occupies the highest level of strategic decision making
• Deals with the objectives of the firm
• Acquisition & allocation of resources of the firm
• Coordination of strategies of various SBUs for optimal performance
• Decisions tend to be value oriented, conceptual and less concrete than decisions at
business and functional levels

15
Broad or corporate wide strategy synchronizing various business level strategies into a
cohesive and coordinated efforts to achieve the vision of the entire business organization

Corporate-level strategy
Michael E. Porter, professor of business administration at the Harvard Business
School, defined corporate-level strategy is the overall plan for a diversified economy.
“Corporate strategy is about enabling an organization to achieve and sustain superior
performance by overcoming business challenges.” It is also about understanding industry
trends and linking tangible actions to a c

Corporate strategy is essentially answering the question “how should a company manage a
set of businesses together? “Corporation’s vision.

Corporate strategy deals with this challenge of managing a range of businesses. How to allocate
resources between them, maximize their contributions, and finally give them a common
direction – vision mission and corporate objectives

Characteristics of Corporate Strategy

• Formulation process and designing of sub strategies
• Decisions are complex and affects the entire organization
• It is concerned with the efficient allocation and utilization of scarce resources for the
benefit of the organization
• Corporate level strategies are mapped out around the goal and objectives of an
organization. They seek to translate these goals and objectives to reality
• Typical examples of decisions made are decisions on products and markets

Types of Corporate-level strategies/ Grand Strategies

1. Stability Strategy: - maintenance of the status of the organization. Stability strategies are
mostly utilized by successful organizations operating in a reasonably predictable environment.
It involves maintaining the current strategy that brought it success with little or no change. It
aims at maintenance of status quo and sustainable growth instead of using growth strategies.

Reasons adopting Stability Strategies: Satisfactory level of Profit from current operations, less
risk, lack of investment and managerial knowhow, executives- inertia for change, operating in
low growth or no-growth strategy, small firms more focused on quality and customer service.

There are three basic types of stability strategies, they are:

I. No change Strategy: When a company adopts this strategy, it indicates that the
company is very much happy with the current operations, and would like to continue
with the present strategy. This strategy is utilized by companies who are “comfortable”
with their competitive position in its industry, and sees little or no growth opportunities
within the said industry.

16
 II. Profit Strategy: In using this strategy, the company tries to sustain its profitability
through artificial means which may include aggressive cost cutting and raising sales
prices, selling of investments or assets, and removing non-core businesses. The profit
strategy is useful in two instances. To help a company through tough times or temporary
difficulty; and to artificially boost the value of a company in the case of an Initial Public
Offering (IPO)
III. Pause/ Proceed with caution Strategy: This strategy is used to test the waters before
continuing with a full-fledged strategy. It could be an intermediate strategy before
proceeding with a growth strategy or retrenchment strategy. The pause or proceed with
caution strategy is seen as a temporary strategy to be used until the environment
becomes more hospitable or consolidate resources after prolonged rapid growth.

2. Expansion / Growth Strategy: are those corporate level strategies designed to achieve
growth in key metrics such as sales / revenue, total assets, profits etc. A growth strategy could
be implemented by expanding operations both globally and locally. It is based on internal
factors which can be achieved through internal economies of scale. An organization can also
grow externally through mergers, acquisitions and strategic alliances.

Classification of Growth /Expansion Strategies are:-

I. Concentration strategy: This is mostly utilized for company’s producing product lines with
real growth potentials. The company concentrates more resources on the product line to
increase its participation in the value chain of the product through:

a. Market penetration: A company enters a new market, it strives for market penetration.
The main objective behind the market penetration strategy is to launch a product, enter the
market as swiftly as possible and finally, capture a sizeable market share. Market
penetration is also, sometimes used as a measure to know whether a product is doing well
in the market or not.

Market penetration is a measure of how much a product or service is being used by

customers compared to the total estimated market for that product or service. It relates
to the number of potential customers that have purchased a specific company’s product
instead of a competitor’s product.

Market penetration strategies:-

 Price Adjustment
 Augmented promotion
 Distribution Channels
 Product improvement
 Innovations
 Entry and exit barriers

b. Market Development: Market development is the strategy or action steps needed to

increase market share or penetration. While market penetration is a metric to determine the

17
 level of market share gained and the potential for new sales, market development focuses
on the steps to achieving the gains in market share.

c. Product Development: Product development strategy is the process of bringing a new

innovation to consumers from concept to testing through distribution. When existing
business revenue platforms have plateaued, it is time to look at new growth strategies. New
product development strategies look at improving existing products to invigorate an
existing market or create new products that the market seeks.

 Investing in R&D to develop new products to cater to the existing market

 Acquiring a competitor’s product and merging resources to create a new product that
better meets the need of the existing market
 Forming strategic partnerships with other firms to gain access to each partner’s
distribution channels or brand.
 Improve Existing Products
 Across all Industries
 Create New Products
 Bringing New Products to Market

II. Integration Strategies: Integration strategy also goes by the name of the management
control strategy. It provides the business an option to have control over various processes
like competitors, suppliers, or distributors. Business-integration strategy has two major types
and sub-types; horizontal integration and vertical integration. They’re as follows

a. Horizontal Integration strategies: - Businesses use horizontal strategy when

they’re facing competition. A horizontal integration strategy is when a company
acquires the supply chain system of the different/same industries that are operating
at the same level. In other words, horizontal integration in similar businesses is
when a fast-food brand merges with the chain of the related business in the other
country and foreign market.
Horizontal integration usually has long-term benefits on the strategy and planning
of the business. The acquired and merging business should be suitable to market
and customers’ expectations. The company needs to perform a comprehensive
analysis before of its resources before the integration.

b. Vertical Integration Strategies: - Vertical integration is a competitive strategy by

which a company takes complete control over one or more stages in the production
or distribution of a product.
Vertical integration integrates a company with the units supplying raw materials to
it (backward integration), or with the distribution channels that carry its products to
the end-consumers (forward integration).
A car manufacturer may acquire tyre and electrical-component factories (backward
integration) or open its own showrooms to sell its vehicle models or provide after-
sales service (forward integration).

18
i) Vertical growth strategy: the company participates in the value chain of the product by
either taking up the job of the supplier or distributor.
If the company assumes the function or the role previously taken up by a supplier, we call
it backward integration, while it is called forward integration if a company assumes the
function previously provided by a distributor.
ii) Horizontal growth strategy: Horizontal growth is achieved by expanding operations into
other geographical locations or by expanding the range of products or services offered in the
existing market.
Horizontal growth results into horizontal integration which can be defined as the degree in
which a company increases production of goods or services at the same point on an industry’s
value chain.

3) Diversification Strategy: when growth has reached its peak and there is no opportunity for
further growth in the original business of the company then it is diversified when it is in two
or more lines of business operating in distinct and diverse market environments.
Two basic types of diversification strategies are concentric and conglomerate:-

i) Concentric Diversification: This is also called related diversification. It involves the

diversification of a company into a related industry. This strategy is particularly useful
to companies in leadership position as the firm attempts to secure strategic fit in a new
industry where the firm’s product knowledge, manufacturing capability and marketing
skills it used so effectively in the original industry can be used just as well in the new
industry it is diversifying into.
ii) Conglomerate Diversification: This is also called unrelated diversification; it involves
the diversification of a company into an industry unrelated to its current industry. This
type of diversification strategy is often utilized by companies in saturated industries
believed to be unattractive, and without the knowledge or skill it could transfer to
related products or services in other industries.

19
4. Cooperative Strategies: Cooperative strategy refers to a planning strategy in which two or
more firms work together in order to achieve a common objective. Several companies apply
cooperative strategies to increase their profits through cooperation with other companies that
stop being competitors. A cooperative strategy advantages, especially to companies that have
a lack of competitiveness, know how or resources. Cooperative strategy also offers access to
new and wider market to companies and the possibility of learning through cooperation.

 Joint venture: - A joint venture is a shared equity firm wherein the participant commit
the same quantity of resources, this means that this legally independent new company
share resources, capabilities and risks to achieve a competitive advantage.

 Equity Strategic Alliance:- In this type of strategic alliance, each company owns a
part of the venture that they created, it is important to mention that every part must be
equal to be considered an equity strategic alliance.

 Mergers and Acquisition:- Mergers and acquisitions (M&A) are defined as

consolidation of companies. Differentiating the two terms, Mergers is the combination
of two companies to form one, while Acquisitions is one company taken over by the
other. M&A is one of the major aspects of corporate finance world. The reasoning
behind M&A generally given is that two separate companies together create more value
compared to being on an individual stand. With the objective of wealth maximization,
companies keep evaluating different opportunities through the route of merger or
acquisition.

Mergers & Acquisitions can take place:

• By purchasing assets
• By purchasing common shares
• By exchange of shares for assets
• By exchanging shares for shares
 Consortia: - A consortium is a group made up of two or more individuals, companies,
or governments that work together to achieving a common objective. Entities that
participate in a consortium pool resources but are otherwise only responsible for the
obligations that are set out in the consortium's agreement. Every entity that is under the
consortium, therefore, remains independent with regard to their normal business
operations and has no say over another member's operations that are not related to the
consortium.

III. Retrenchment / Divestment Strategies

Retrenchment Strategies: - Retrenchment strategies are pursued when a company’s product

lines are performing poorly as a result of finding itself in a weak competitive position or a

20
general decline in industry or markets. The strategy seeks to improve the performance of the
company by eliminating the weakness pulling the company back. Examples of retrenchment
strategies are:
i) Turnaround Strategy: This strategy is adopted for the purpose of reversing the
process of decline. This strategy emphasizes operational efficiency and is most
appropriate at the beginning of the decline rather than the critical stage of the
decline.
ii) ii) Divestment Strategy: Divestment also known as divestiture is the selling off of
assets for the different goals a company seeks to attain. This strategy involves the
cutting off of loss making units, divisions or Strategic Business Units (“SBU”).
iii) iii) Liquidation Strategy: Liquidation strategy is considered a last resort strategy,
it is adopted by company’s when all their efforts to bringing the company to
profitability is futile. The company chooses to abandon all activities totally, sell off
its assets and see to the final close and winding up of the business.
iv) Captive Companies Strategy:-
v) Transformation:- A transformation occurs when a firm makes a major change in
its outlook and operations, usually including moving from one kind of business to
another. Changes in strategy are usually quite substantial. Such strategies are
difficult to implement because they require a great deal of flexibility on the part of
the entire organization.
IV. Combination Strategies

It’s the combination of the other three strategies such as Stability strategies, growth strategies
and retrenchment strategies. In other words all the strategies discussed above can be applied
simultaneously, sequentially, or in a combination.
It includes:
 Portfolio
 Restructuring
 Joint ventures
 Mergers & Acquisition
 Strategic alliance

2. Business Level Strategies

Business Level Strategies: - Business level strategies are formulated for specific strategic
business units and relate to a distinct product-market area. It involves defining the competitive
position of a strategic business unit. The business level strategy formulation is based upon the
generic strategies of overall cost leadership, differentiation, and focus.
 Involves defining the competitive position of a strategic business unit.
 Decided upon by the heads of strategic business units and their teams.

21
According to Porter, two competitive dimensions are the keys to business-level strategy.
The first dimension is a firm’s source of competitive advantage: whether a firm seeks to
gain an edge on rivals by keeping costs down or by offering something unique in the
market.
The second dimension is a firm’s scope of operations: whether a firm tries to target
customers in general or seeks to attract just a segment of customers.
Business-level strategies examine how firms compete in a given industry. Firms derive
such strategies by executives making decisions about whether their source of competitive
advantage is based on price or differentiation and whether their scope of operations targets
a broad or narrow market.

Four generic business-level strategies emerge from these decisions:

(1) cost leadership
(2) Differentiation
(3) Focused cost leadership
(4) Focused differentiation.
(5) Integrated Cost Leadership/Differentiation Strategy.

In rare cases, firms are able to offer both low prices and unique features that customers find
desirable. These firms are following a best-cost strategy.

22
The 4 E’s to addressing Corporate Strategy byThompson and Cats-Baril
a. Extend
• Extending the business by going beyond its current business model by adapting a new
business model or entering into new businesses
b. Expand
• This option takes the form of adding products or services within the context of the
companies’ existing business concern or present area of operation
c. Exit
• This option takes the form of making some sacrifice by dropping some product lines and
services or business units deemed uncompetitive or unprofitable or less profitable to
operate
d. Enhance
• This option takes the form of adding functionality or improving a product or service that
is currently being offered

Functional strategy
It is the approach taken by a functional area to achieve corporate and business unit
objectives and strategies by maximizing resource productivity. It is concerned with
developing and nurturing a distinctive competence to provide the firm with a competitive
advantage.
• Known as Functional Strategy
• Deals with relatively restricted plan
• Irrespective of nature, scope, size, turnover & type of business must perform basic
functions like production/operations, finance, marketing, HRM & Research &
development
• Careful planning, execution & coordination of these functional department is needed
for efficient strategic planning, implementation & control.

23
 • Functional departmental activities are interwoven in attaining the organisational goals

Functional Level Strategy: -Functional strategies are described as "functional action

programs" complementing overall corporate strategy. Functional strategies are a
refinement of the basic strategy of the company with respect to the individual areas (e.g..
marketing strategies, production strategies, financial strategies for example, Procter and
Gamble spends huge amounts on advertising to create customer demand.

Functional Level Strategy:

A. Operational excellence
B. Execution
A. Operating strategy - These are concerned with how the component parts of an
organization deliver effectively the corporate, business and functional -level strategies in
terms of resources, processes and people. They are at departmental level and set periodic
short-term targets for accomplishment.

a) Functional strategy in Finance

• Forms the capital structure of the organization through choice of share structure, debt
and bonds by optimizing financial costs.
• Debt policy deals with decision-making about the size of the loan and its forms.
• Sources & Application of funds
• Allocation of funds
• Enterprise Asset Management
• Capital Budgeting Decisions.

24
 • Maximise optimum Revenue
• Investment Policies
• Dividend decisions
• Utilisation of funds

b) Functional strategy of Production/operations

Strategic management in production deals with
• The development of manufacturing methods and improving performance of people and
machines.
• It is essential for the production planning (determine the place, production volume and
production methods).
• It has a direct relationship with the quality of the manufactured products, costs incurred
during production
• Up gradation of Technology
• Automation
• Flexible manufacturing system
• Facility layout
• Production layout

c) Functional strategy of strategic HRM

Strategic management in HRM deals with:-
Human resource policy focuses on such aspects as:
• Workforce Recruitment & selection
• Training & Development
• Performance Appraisal
• Job Analysis
• Compensation Management
• Labour/employee relations
• Safety & welfare measures
• Workers participation management
d) Functional Level Strategy- Marketing
Functional level strategy in marketing:- Marketing strategy also deals with public
policies (elimination of legal, cultural and organizational obstacles). Summing up
marketing strategy is the most important element of the functional structure, for the
company trying to gain a loyal customer
• Focuses on promotional techniques and their application
• Price level optimization
• Problem of distribution (decisions about choosing distribution channels), structure of
production
• Public relations.
• Product range optimization.
• Promotion Mix
• Marketing Mix
• Determine the advertising

25
Module – 2 Strategic Analysis and Choice

Strategy analysis and choice focuses on generating and evaluating alternative strategies, as well
as on selecting strategies to pursue. Strategy analysis and choice seeks to determine alternative
courses of action that could best enable the firm to achieve its mission and objectives.
The firm’s present strategies, objectives, and mission together with the external and internal
audit information, provide a basis for generating and evaluating feasible alternative strategies.
The alternative strategies represent incremental steps that move the firm from its current
position to a desired future state.
Alternative strategies are derived from the firm’s vision, mission, objectives, external audit,
and internal audit and are consistent with past strategies that have worked well. The strategic
analysis discusses the analytical techniques in two stages i.e. techniques applicable at corporate
level and then techniques used for business-level strategies.

I. Environmental Threat & Opportunity Profile (ETOP)

ETOP analysis (environmental threat and opportunity profile) is the process of gathering
information about events and their relationships within an organization’s internal and external
environments. The basic purpose of environmental scanning is to help management determine
the future direction of the organization. Structuring of environmental issues is necessary to
make them meaning full for strategy formulation.

ETOP involves dividing the environment into different sectors. Each sectors can be subdivided
into sub sectors. For example oil & gas sector can be broken down into sub-sectors such as
exploration & production, integrated oil & gas, oil equipment & services, pipelines, renewable
energy equipment, alternative fuels producers, oil equipment, services & distribution,
alternative energy etc. ETOP further analyses the impact of each sector and sub-sector on the
organization.
ETOP Preparation: The preparation of ETOP involves dividing the environment into
different sectors and then analysing the impact of each sector on the organization. A
comprehensive ETOP requires subdividing each environmental sector into sub factors and then
the impact of each sub factor on the organization is described in the form of a statement.

• Environmental Threat & Opportunity Profile: is the process by which organisations

monitor their relevant environment to identify opportunities & threats affecting their
business for the purpose of taking strategic decisions.
• It is a technique to structure the environment for fundamental business analysis.
• William F. Glueck developed several models of strategic management based on the
general decision-making process.
• The preparation of the environment into different sectors (sub dividing each
environment sector into sub sectors) and then analysing the impact of each sector on
the organisation is described in a form of a statement.
• A summary of ETOP may only show the major factors for the sake of simplicity.

26
Process of ETOP
The strategic managers must keep focus on the following dimensions:-

Environmental Impact of each sector

Sectors
Social (↑) Customer preference for motorbike, which are fashionable, easy to Issue
ride and durable.
Political (→) No significant factor.

Economic (↑) Growing affluence among urban consumers; Exports potential high.
Regulatory (↑) Two Wheeler industry a thrust area for exports.
Market (↑) Industry growth rate is 10 to 12 percent per year, For motorbike
growth rate is 40 percent, largely
Unsaturated demand.
Supplier (↑) Mostly ancillaries and associated companies supply parts and
components, REP licenses for imported raw materials available.

Technological Technological up gradation of industry in progress. Import of

(↑) machinery under OGL list possible.

Selection: There is a likelihood of arriving at incorrect priorities. Therefore, the focus must be
on the priorities.
Accuracy of ETOP: The data must be collected from the reliable sources otherwise entire
process of environmental scanning goes waste.
Impact study: Focus on opportunities & threats & critical issues is vital.
Flexibility of operations: company should devise flexible & proactive strategies.
Environmental Threat and Opportunity Profile (ETOP) for a Motor Bike company

II. Organisational Capability Profile (OCP)

Organisational Capability Profile describes the skills, knowledge and resources that enable
the company to provide quality products or services to customers. The profile provides useful
background information for your marketing and corporate communications.
Organizational appraisal:
In order to develop successful strategies to exploit the external opportunities or control the
external threats(Due to continual changes in external environment) , analysis of an
organisation’s capabilities is important for strategy making which aims at producing a good fit
between a country’s resource capability and its external situation. Internal analysis helps us
understand the organizational capability which influence the evolution of successful strategies.

27
Organization behaviour Identity & character of an organization leadership, Mgt. Philosophy,
values, culture, Quality of work environment, Organization climate, organization politics etc.

The organizational capability profile is drawn in the form of a chart. Resource Behaviour
Distinctive competence - Any advantage a company has over its competitor - it can do
something which they cannot or can do better - opportunity for an organization to capitalize -
low cost, Superior Quality, R&D skills etc.
OCP
• The strategists are required to systematically assess the various functional areas and
subjectively assign values to the different functional capability factors and sub factors
along a scale ranging from values of -5 to +5

28
Methods & techniques used for organizational appraisal
• Comprehensive, long term Financial Analysis
• Ratio Analysis,
• EVA
• ABC Key factor rating
• Rating of different factors through different questions Value chain analysis
• VRIO framework (Valuable, Rare, Imitability & Organized): The VRIO framework
is a strategic analysis tool designed to help organizations uncover and protect the
resources and capabilities that give them a long-term competitive advantage.

Other Methods & techniques used for organizational appraisal

• BCG,
• GE Matrix ,
• Profit Impact of Market Strategy (PIMS)
• McKinsey 7S
• Balanced Scorecard:(Kaplan & Norton 1996) 4 performance measures
• Customer perspective
• Internal business perspective
• Innovation & learning perspective
• Financial perspective
• Competitive Advantage Profile
• Strategic Advantage profile(SAP)
• Internal Factor Analysis Summary

29
Strategic advantage profile
These functional areas are listed to identify their relative strength and weakness in SAP. Each
functional area is very broad having many components inside.
Strategic advantage factors of Marketing Department:
• Competitive structure and Market share
• Efficient and effectiveness of market research system
• % of Market share
• Marketing Mix
• Product mix- Quality & services
• Promotion Mix
• Product life cycle
• Product Innovation
• Ultimate customer Satisfaction
Strategic Advantage Factors- R&D
 Basic research capabilities within the firm:
 Development capability for product.
 Excellence in product design.
 Excellence in process design and improvements.
 Superior packaging developments being created.
 Improvements in the use of old or new materials.
 Ability to meet design goals and customer requirements.
 Well-equipped laboratories and testing facilities.
 Trained and experienced technicians and scientists.
 Work environment suited to creativity and innovation.

Approaches to develop competitive advantage

• 1st approach: Key Success Factors: It is based on the existing strengths, i.e. focus on
crucial points.
• 2nd approach: Based on existing strengths but avoids head-on competition. Would
concentrate on strengths and relative superiority with the competitors like technology,
sales network etc.
• 3rd approach: To compete directly with the competitors by building novel strategies.
• 4th approach: Build new creative strengths by way of product, process, market
segmentation, raw materials & satisfying customer utility function.

Corporate Portfolio Analysis

Corporate portfolio analysis can be defined as a group of techniques that assist strategists in
making strategic decisions regarding individual products or businesses in a firm’s portfolio.
Corporate portfolio analysis may be employed for competitive analysis and strategic planning
in multi-business corporations as well as for less diversified firms.

30
The main benefit of using a portfolio approach in a multi-business corporation lies in allocating
resources at the corporate level to the businesses with highest potential. For instance, a well -
diversified company may consider diverting resources from cash-rich businesses to the
businesses with faster-growth potential to achieve corporate objectives in an optimal way.

1. SWOT Analysis

SWOT analysis (or SWOT matrix) is a technique developed at Stanford in the 1970s,
frequently used in strategic planning SWOT is an acronym
for Strengths, Weaknesses, Opportunities, and Threats and is a structured planning method
that evaluates those four elements of an organization, project or business venture. A SWOT
analysis is a simple, but powerful, framework for leveraging the organization's strengths,
improving weaknesses, minimizing threats, and taking the greatest possible advantage of
opportunities.

A SWOT analysis is designed to facilitate a realistic, fact-based, data-driven look at the

strengths and weaknesses of an organization, initiatives, or within its industry. The organization
needs to keep the analysis accurate by avoiding pre-conceived beliefs or gray areas and instead
focusing on real-life contexts. Companies should use it as a guide and not necessarily as a
prescription.

SWOT ANALYSIS
• Identify & classify firm’s resources-S&W
• Combine firm’s strength into specific capabilities – Corporate capability- may be
distinctive competence
• Strategy that best exploits the firms resources
• Identify resource gaps & Invest in upgrading
• Organization capability - Capacity & ability to use distinctive competencies to excel in
a particular field - Ability to use its ‘S’ & ‘W’ to exploit ‘O’ & face ‘T’ in its external
environment.
• Organization resources - Physical & human cost, availability - strength / weakness.

Basic Concepts of SWOT Analysis

The SWOT analysis will help you understand the company's position which will encourages
ideas and decision-making on how to build on strengths, exploit opportunities, minimize
weaknesses and protect against threats. Below are four benefits of using a SWOT analysis for
your business:
 Identify Core Competencies - It provides a clear view of your core competencies, and
allows you to build on them to meet your business objectives
 Identify Weaknesses - Recognizing your company's weaknesses is one of the first
steps to improving your business. It reveals your weaknesses and provides a chance to
reverse them

31
  Explore Opportunities - It helps your to explore the opportunities that lies ahead.
Using this you can draft your strategic growth plans based on your strengths and
weaknesses
 Recognize Potential Treats - It helps you analyze possible threats to your business,
and you can subsequently make necessary changes to the business policies and
necessary actions. Additionally, it facilitates making supplementary or alternative
plans, contingency plans, and so on

Strengths
 Identify skills and capabilities that you have.
 What can you do particularly well, relative to rivals?
 What do analysts consider to be your strengths?
 What resources do you have?
 Is your brand or reputation strong?
Weaknesses
 What do rivals do better than you?
 What do you do poorly?
 What generates the most customer dissatisfaction and complaints?
 What generates the most employee dissatisfaction and complaints?
 What processes and activities can you improve?
Opportunities
 Where can you apply your strengths?
 How are your customers and their needs changing?
 How is technology changing your business?
 Are there new markets for your strengths? (e.g. foreign)
 Are there new ways of producing your products?
 Are your rivals' customers dissatisfied?
Threats
 Are customers able to meet their needs with alternative products?
 Are customers’ needs changing away from your product?
 What are your competitors developing?
 Are your rivals improving their product offerings or prices?
 Is new technology making your product obsolete?
 Is your cash-flow and debt position healthy?
 Are your employees satisfied?
 Is turnover high?
 Is new competition coming?
 Are sales growing slower than the industry average?

Synergy & Dysergy:

Derived from Greek word-Sunergos –Meaning working together or joint together.

32
Synergy: is defined as the idea that the whole is more than the sum of its parts, hence it is
positive synergy. 2+2=5(two plus two is equal to five). By combing efficiently gain more
outputs with less inputs.

Features of Synergy:
• Helps organisation to work in teams to achieve goals effectively.
• Optimum utilisation of resources leading to Increased productivity
• Efficient & effective utilisation of resources.
Types or Areas of Synergy
• Operational Synergy
• Marketing Synergy
• R & D Synergy
• General Management Synergy
• Financial Synergy
Advantages of Synergy:
• Economic benefits-(Debt Capacity, Tax benefits, Cash slack)
• Economies of scale
• Greater Outcomes
• Financial benefits(M&A, Strategic alliance)
• Increased Market Share
• Gain in efficiency- quality products, cost reduction
• Competitive advantage to the firm
• Better decision making
• Risk & uncertainty reduction
• Brand image building/ enhancement of company’s image
• Skill sharing
Disadvantages of Synergy
 Practically difficult
 High cost
 Implementation task is difficult
 Lack of clarity of roles & responsibilities
 Delayed decisions, Increased work
 Increased hierarchy.

Dysergy: is the idea that the whole is less than its parts. These are the combined
negative attitude or results. I.e. 2+2=3. This concept is used in Strategic Management
for corporate portfolio analysis. Based on its negative effect, it is called as dysergy.
Dysery occurs when a marketing inefficiency reduces production efficiency.

33
GAP Analysis
Gap analysis involves the comparison of actual performance with potential or desired
performance. It assesses the differences between the current and desired performance levels of
a company’s systems or applications.
Gap refers to the Gap/space between ‘where we are’ (present state) and the where we want to
be (the target state). A gap analysis may also referred as need analysis, need assessment or
need-gap analysis.’
Ways to conduct a Gap analysis:
 First step is to establish specific target objectives by looking at the company’s mission
statement, strategic goals, and improvement objectives
 Second step is to analyze the current business process by collecting relevant data on
performance levels and how resources are presently allocated to these processes.
 Resources can be collected from variety of sources such as documentation, conducting,
interviews, brain storming and observing project activities.
 Third step: comparing the target goals with the current status to identify the deviation.
 Fourth step: Gap description: should identify where the gap exists between the Co's
current and future states and outline the factors that contribute to gap.
 Fifth step bridging the gap: Company should draw a comprehensive plan that outlines
specific steps to take to fulfill the gap between its current and future states and reach its
target objectives.
There are various tools for Gap analysis:
 McKinsey 7S Framework
 Swot analysis

34
  Nadler –Tushman Model- how business processes works together and how
gaps affect the operational efficiency of the organization as a whole. The
model includes Inputs- includes the operational environment, tangibles
11and intangible resources used and company culture.
• Transformational – encompasses the existing systems, people and project
activities currently in place that convert input into output.
• Outputs- can take place in systems, individuals levels or groups levels
• This model highlights how the various components fit together, or are
congruent.. The more congruent these parts are the better the performance of
the company.

Porter’s Five Force Model:-

Aim of Portfolio Analysis

To analyse its current business portfolio & decide which businesses should receive
more or less investment.
To develop growth strategies, for adding new businesses to the portfolio.
To decide which business should no longer be retained

Balancing The Portfolio Balancing the portfolio means that he different products or
businesses in the portfolio have to be balanced with respect to 4 basic aspects- ✓
Profitability ✓ Cash flow ✓ Growth ✓ Risk This analysis can be done by any of the
following technologies,

35
They are –

1] BCG MATRIX
The BCG matrix is a matrix designed by the Boston Consulting group back in 1970’s. It is a
Matrix which helps in decision making and investments. It divides a market on the basis of its
relative growth rate and market share and comes up with 4 Quadrants – Cash cow, Stars,
Question marks and Dogs. Products may be categorized in any one of the quadrants and the
strategies for these products are decided accordingly.

Boston Consulting Group’s growth/share matrix has become one of the most widely used
approaches that facilitate corporate strategic analysis of likely “generators” and optimum
“users” of corporate resources.
The BCG matrix is a tool that can be used to determine what priorities should be given in the
product portfolio of a business unit. It has 2 dimensions; market share and market growth.
Market growth rate indicates relative attractiveness of the markets each of the businesses serves
in a portfolio of businesses. Relative competitive position means the ratio of a business’s
market share divided by the market share of the largest competitor in that market and provides
a basis for comparing the relative strengths of different businesses in the portfolio.

Stars (=high growth, high market share): Stars are businesses that have high market share
in a high growth environment. They are growing rapidly and are the best long-run opportunities
in terms of growth and profitability in the firm’s portfolio. They are leaders in their business
and generate large amount of cash. They require substantial investment to maintain and expand
their dominant position in a growing market.
Cash Cows (=low growth, high market share):- Cash cows are low-growth, high market-
share products or divisions. Because of their high market share, they have low costs and
generate cash. Since growth is slow, reinvestment costs are low. Cash cows provide funds for
overhead, dividends, and investment for the rest of the firm and are in excess of their needs.
Therefore, these businesses serve as a source of corporate resources for deployment elsewhere
(to stars and question marks) and are managed to maintain their strong market share while
efficiently generating excess They are the foundation of the firm, and stability is the appropriate
strategy for them.

Dogs (=low growth, low market share):- Business are defined as those in which the growth
rate is slow and the relative market share is low compared to the leading competitors. Because
of their low market share these businesses are often expected to have a higher cost structure
than industry leaders.
Divestment or rapid harvesting is the recommended strategies for such weak businesses. Often
these low capital intensity businesses can be fruitful cash generators.
Question Marks (= high growth, low market share):- Question marks are high-growth, low-
market-share products or divisions. Their conditions are the worst, for their cash needs are high,
but cash generation is low. Such businesses are seen to indicate opportunity. They need to gain
share by generating additional market share and hence lower cost via experience gains, while
the growth rate in the industry is high.

36
4 Strategies of BCG Matrix: There are four strategies possible for any product / SBU and
these are the strategies which are used after the BCG analysis. These strategies are

1) Build

By increasing investment, the product is given an impetus such that the product increases its
market share. Example – Pushing a Question mark into a Star and finally a cash cow (Success
sequence)

2) Hold

The company cannot invest or it has other investment commitments due to which it holds the
product in the same quadrant. Example – Holding a star there itself as a higher investment to
move a star into a cash cow is currently not possible.

3) Harvest

Best observed in the Cash cow scenario, wherein the company reduces the amount of
investment and tries to take out maximum cash flow from the said product which increases the
overall profitability.

4) Divest

Best observed in case of Dog quadrant products which are generally divested to release the
amount of money already stuck in the business.

Thus the BCG matrix or Boston matrix is the best way for a business portfolio analysis. The
strategies recommended after BCG analysis help the firm decide on the right line of action and
help them implement the same.

Limitations of BCG Matrix Analysis

37
Here are a few of the common limitations of using BCG matrix for analysing companies:

1. Growth-share analysis has been highly disapproved of for its simple calculations and
absence of a fruitful application.
2. Market share and Industry Growth are not the sole factors of profitability. Besides,
high market share always does not mean high profits.
3. This matrix does not take into consideration any other factors that may have an effect
on both competitive advantage & industry attractiveness.
4. It denies the correlation between different existing units. In reality, products
under Dogs may be assisting another unit to gain a competitive advantage.
5. The definition of a market is taken from a broader perspective and often neglects
smaller aspects.

2] GE 9 CELL Matrix
The GE McKinsey matrix is a product portfolio analysis matrix. GE nine-box matrix is a
strategy tool that offers a systematic approach for the multi business enterprises to prioritize
their investments among the various business units. It is a framework that evaluates business
portfolio and provides further strategic implications.

Each business is appraised in terms of two major dimensions – Market Attractiveness and
Business Strength. If one of these factors is missing, then the business will not produce desired
results. Neither a strong company operating in an unattractive market, nor a weak company
operating in an attractive market will do very well

The vertical axis denotes: Industry attractiveness indicates how hard or easy it will be for a
company to compete in the market and earn profits. The more profitable the industry is the
more attractive it becomes. When evaluating the industry attractiveness, analysts should look
how an industry will change in the long run rather than in the near future, because the
investments needed for the product usually require long lasting commitment.
 Long run growth rate
 Industry size
 Industry profitability: entry barriers, exit barriers, supplier power, buyer
power, threat of substitutes and available complements (use Porter’s Five
Forces analysis to determine this)
 Industry structure (use Structure-Conduct-Performance framework to
determine this)
 Product life cycle changes
 Changes in demand
 Trend of prices
 Macro environment factors (use PEST or PESTEL for this)
 Seasonality
 Availability of labour
 Market segmentation

Horizontal axis represent: Along the X axis, the matrix measures how strong, in terms of
competition, a particular business unit is against its rivals. In other words, managers try to

38
determine whether a business unit has a sustainable competitive advantage (or at least
temporary competitive advantage) or not.

 Total market share

 Market share growth compared to rivals
 Brand strength (use brand value for this)
 Profitability of the company
 Customer loyalty
 VRIO resources or capabilities (use VRIO framework to determine this)
 Your business unit strength in meeting industry’s critical success factors
(use Competitive Profile Matrix to determine this)
 Strength of a value chain (use Value Chain Analysis and Benchmarking to
determine this)
 Level of product differentiation
 Production flexibility

The GE Mckinsey matrix has two main variables which are plotted on the X and Y axis of the
matrix. These variables are the “Market attractiveness” and the “Business unit strength”. Once
each product is given a value for its market attractiveness as well as the business unit’s strength,
than it is plotted in its right place in the graph. The GE Mckinsey matrix is also known as the
nine box matrix, because in the graph, there are nine boxes where the product can be plotted.
Once the product is in its place, you can decide the strategy for the product. There are 3 main
strategies in the GE McKinsey matrix which are grow, hold and harvest.

Grow – If the business unit is strong against a strong attractiveness, you grow the business.
This means, that you are ready to invest a higher percentage of your resources in these
businesses. These business units have high market attractiveness and high business unit
strength. They are most likely to be successful if backed up with more resources. The quadrants
marked in green are the places where you can grow your business.

Hold – If the business unit strength or attractiveness is average, than you hold the business as
it is. It might be that the market is dropping in value, or that there is much high competition
which the business unit will be hard put to catch up. In both the cases, the business unit might
not give optimum returns even if resources are invested. Thus, in this case, you wait and hold
the business unit to see if the market environment changes or if the business unit gains
importance in the market as compared to other players.

39
Harvest – If the business unit or market has become unattractive, than you either sell or
liquidate the business or you can hold it for any residual value that it has. This strategy is used
in the GE McKinsey matrix when the business unit strength is weak and the market has lost its
attractiveness. The best measure in this case is to harvest the weak businesses and reinvest the
money earned into business units which are in growth.

Thus, based on the GE McKinsey matrix, you can manage your product portfolio efficiently
and can take the right decision of grow, hold or harvest for your products.

Challenges for the GE McKinsey matrix: - Like any other strategy, the GE McKinsey matrix
has its own challenges. Some of them are mentioned below.

1) Determining market attractiveness is a tough task especially looking at the fast paced market
environment.

2) Similarly, determining the strength of the business unit and weighing it against the
attractiveness is difficult.

3) Companies will be limited by resources even if the business unit falls in the growth criteria.
Thus, out of 50 products, if 25 fall in growth criteria, what does the management do when it
has limited resources? Taking decisions again becomes difficult.

Overall, the GE McKinsey matrix is an improvement over the BCG matrix. Where the BCG
matrix only has 4 quadrants with focus on business unit and market share, the McKinsey matrix
is a finer example of plotting the actual market conditions against the firm’s potential to stand
up in the current market. Thus, business decisions taken via the GE McKinsey matrix are likely
to be spot on.

3. Mckinsey’s Framework
How do you go about analysing how well your organisation is positioned and achieve its
intended objective?
Tom peters & Robert waterman two consultants working at the Mckinsey& company
consulting firm developed the frame work. “A set of values and aspirations that goes beyond
the conventional formal statement of corporate objectives. All targets and attention of all
activities and exercise of the other six levers of any organization should be directed towards
accomplishment of the best possible goals” - the ultimate & terminal point - where organization
will have to reach Effective organizational change - May be understood as a complex
relationship between 7Ss.
The basic premise of his model is that there are seven internal aspects of an organisation that
has to be aligned if it is to be successful.
Like
• To improve the performance of the company
• To examine the likely effects of the future changes within the company
• To align departments & processes at time of acquisition & mergers

40
 • Determine how best to implement a proposed strategy
The Mckinsey 7-S model involves seven interdependent factors which are categorised as either
‘Hard’ or ‘soft’

STRATEGY SHARED VALUES

HARD S

SOFT S

STRUCTURE SKILLS
SYSTEM STYLE
STAFF
Mckinsey’s 7s Framework
Hard elements are easier to define or identify and management can directly influence them.
These are strategy statements, organisation charts and reporting lines & formal process and IT
systems
Soft Elements: are more difficult to describe and are less tangible and more influenced by
culture.
Strategy: The plan devised to maintain and build competitive advantage over the competitors.
Includes purpose, mission, objectives, goal, action plans & policies
Structure: The way the organisation is structured and who reported to whom.
• relationship between/among various positions and activities
• Design of structure - critical task for top mgmt.

41
 • Need based structural changes - to cope with specific strategic tasks without
abandoning basic structural divisions throughout the organizations
• Systems: The daily activities and procedures that staff members engage in to get the
job done. It’s the Procedures & methods framed by organization & followed by
operational personnel in the respective functional area
• Shared Values: called “superordinate goals”. It’s the core values of the company
that are evidenced in the corporate culture and in the general work ethic.
• Style: The style of leadership adopted by the management in terms of managing
changes with regarding to culture, function, systems & procedure.
• Staff: The employees & their general & specific capabilities.
• Skills: The actual skills, knowledge, abilities & competencies of HR of the company.

Distinctive Competencies

Distinctive Competencies: Firms specific strengths that allow a company to gain competitive
advantage by differentiating its products/and achieving low cost among the rivals. It arises
from unique application of resources and acquisition of capabilities. Distinctive
competencies differentiate a company from it from its competitors. It basically includes a list
of valuable practices and technical skills that make the organization better than others.

It is a competency unique to a business organisation, a competency superior in some aspects

that the competencies of the other organisations, which enables the production of a unique
value proposition in the function of the business.

Sources of Distinctive Competencies

• Industry position
• Technology
• Customer Satisfaction
• People
• Market relations
• Being First
• Minimisation of cost/Cost Leadership
• Business process
• Manufacturing Process

Core and Distinctive competencies:

Core competencies is something a company does well relative to other internal activities.
Distinctive competencies is something a company does well relative to competitors. Whether
a core competencies represents a distinctive competence depends on how good the competence
is relative to what competitors are capable of.

42
Examples of Distinctive Competence
Google: Search Engine Giant.
• Name Recognition
• High end products
• Marketing
Amazon:
• Technology
• Economies of scale
• Marketing
• Talented workforce

Advantages of Distinctive Competence

Increased competitive advantage: often leads to efficient business strategies that would
benefit the company as a whole.
Beneficial for long-term goals: Distinctive competencies offer a sustainable advantage that is
beneficial for the company in the long run.
Better learning opportunities: This enables companies to devise new strategies and develop
new ideas to get ahead of competitors.

43
Module 3: Strategic Implementation

Strategic Implementation is the process through which a chosen strategy is put into action. It
is concerned with the design and management of systems to achieve the best integration of
people, structures, processes and resources in reaching organisational objectives. Successive
strategic implementation requires support, discipline, motivation and hard work from the
mangers & employees. It aims at Creating a proper ‘fit’ between firm’s goals and its other
activities proves to be an important criteria for successful implementation.

Essentials of Strategic Implementation

Action Focus: Implementation demands translation of formulated strategies into actionable
plans.
Involvements: Whole hearted commitment, involvement & support from all the levels of
employees related to the implementation process at every stage.
Leadership: Support & good leadership of the Top Management is utmost important in
motivating the employees in implementation process.
Co-ordination: Sufficient coordination is needed to connect people, processes, structure,
technology, and environment and to bring about the changes in the organisation to obtain the
best results.

Steps involved in the strategy implementation

1. Institutionalisation of Strategy
2. Formulation of action plans
3. Project related issues in implementation
4. Procedural issues in implementation
5. Resource mobilisation & allocation
6. Structural issues in implementation
7. Behavioural issues in implementation
8. Functional strategies- operations, finance, marketing & HRM
9. Leadership issues in implementation
10. Strategy evaluation & control.

Steps involved in the strategy implementation

1. Institutionalisation of strategy: People must support the chosen strategy.
It requires sense of belonging, open & honest sharing of relevant information, a conducive
organisational culture, motivating & encouraging people to put their best efforts.
Chosen strategy must be clearly communicated.
Doubts & objections, debates & discussions should be attempted for good.
Appropriate operating plans-like purchasing equipment's, hiring suitable staff, developing new
process etc.,
Key result areas that are critical for the successful implementation of the strategy must be put
to best use.

44
2. Formulation of action plans: A well designed strategy should be approved and
implemented automatically. To keep everything in track, well chalked out policies,
programmes and rules should be designed. Apart from this budgetary allocations and other
requirements need to be planned in advance.
3. Project related issues in implementation: A project demands a huge investment, require
careful attention and constant monitoring from top management. So it requires goals, policies,
procedures, rules, resources, people, deadlines etc. in an effective manner. Cost and time runs
would derail the project.
The various phases of Project are:
• Project conception & initiative
• Project Definition & planning
• Project launch & execution
• Project performance & control
• Project close.
4. Procedural issues in implementation: Project fails to deliver results for a variety of reasons
attributable to internal as well as external factors.
• Poor project specification & lack of solid project plan
• Inappropriate competent staff
• Centralised proactive management initiatives.
• Poorly defined roles & responsibilities.
• Poor communication & coordination.
• Insufficient senior management.
• It may be due to internal strife & disharmony.
• It may be due to time constraints & huge costs incurred.
• Many fail due to weak leadership & poor motivation.
• Failure to manage the change required.
5. Resource mobilisation & allocation: the scarce resources of a firm like financial,
physical, human, technological need to be allocated carefully according to the plan.
• They can adopt Top-down Approach or Bottom-up Approach.
• Resources are allocated after a proper segregation of various operational needs.
Means of Resource Allocation:
• Strategic budget
• Capital Budget
• Performance Budget
• Zero-based budget
Problems with Resource Allocation:
• Strategies requires maximum attention
• Overall objections
• Political relations
• External influences
6. Structural issues in implementation: A suitable organisational Structure is important to
implement strategies and achieve stated goals. It offers a platform for people to work
cooperatively towards common goals.

45
Organisational structure describes the framework of an organisation in which individual efforts
are coordinated.
Structure is a means to an end & not end itself. The types of structure are:
• Functional structure
• Product/Divisional
• Strategic Business unit Structure
• Matrix organisation structure
• Network Organisation
• Freeform of Organisation

Organisational systems & Processes:

• Control System: Designed to achieve predetermined objectives

• Reward system: Deals with appraisals, rewards & incentives to motivate people.
• Information System: Access & process of information, crucial for success.
• Types of information system-Transaction processing system, MIS, DSS
Structure & Strategy Implementation requires:
• Proper communication of plans, strategies, policies to various functional & divisional
units
• Enlisting the support people involved in the process
• Proper guidelines
• Support of top level management
• Appropriate structure & suitable climate to carry out the tasks
• Allocation of resources over competing alternatives with a view to maximise returns
• Establishment of appropriate control points to see what has been planned is achieved
effectively & efficiently.
• Thus strategy implementation includes the various management activities that are
necessary to put the strategy in motion, institute strategic controls that monitors
progress and ultimately achieve organisational goals.
7. Behavioural issues in implementation: Strategy implementation requires participation,
support and discipline from the employees & management.
• Leader’s personality, style, ethics and ability to get along with people would the
difference between success and failure.
• Stakeholder engagement: is all about resolving knotty issues confronting key
stakeholders through appropriate strategies and processes. It is an part of CSR.
• Discover what really matters to key stakeholders.
• Involve them in key corporate strategies& performance.
• Monitor and manage stakeholder's contribution & satisfaction levels.
8. Functional strategies- operations, finance, marketing & HRM:- Successful
implementation demands cooperation from all functional & divisional managers in an
organisation. They must exchange more freely, share resources in a spirit of give and take, take
all people along with them, monitor progress continuously, put everything on track and achieve
results in a smooth way.

46
 • It requires good exceptional communication, coordination & motivational skills that
help leaders to unite various powerful coalitions in an organisation effectively.
Operational strategies:
• Achieving superior customer responsiveness
• Achieving superior efficiency
• Achieving superior quality
• Achieving superior innovation with speed and flexibility.
• Cost leadership
• Inventory management
• EOQ, JIT,
• Logistics & Distribution Management
Financial strategy:
• Investment Decisions
• Capital budgeting decisions
• Working capital decisions
• Financial decisions
• Dividend decisions
• Capital structure decisions
Marketing Decisions:
• Product-style, shape, colour, physical feature, quality, line image, guarantees,
warranty, servicing, innovation etc.
• Price: includes the value of the product. Based on fixed & variable costs, competition,
company objective, proposed positioning strategies, target groups & willingness to pay.
• Place:
• Promotion:-mass marketing, segment marketing, customised marketing, niche
marketing etc.
9. Leadership issues in implementation: The process of influencing others towards the
accomplishment of goals. Leadership that inspires, motivates, guides & directs individual &
group members to achieve the unity of purpose & efforts.
Leadership styles should make a difference between effective & ineffective organisations.
Dynamic leadership, is an integral part of effective management, as competent performance is
closely related to quality of leadership.

Traits of effective leadership:

• Superior intelligence
• Emotional maturity
• Motivation inner drive
• Energy
• Risk taking ability
• Greater Common sense

Elements of Strategic Leadership:

1. Strategic vision:- A well-crafted appreciated and supported mission is at the heart
of a leader’s strategic vision.

47
 2. Pragmatism:-is the ability to make things happen and achieve positive results. This
can happen only when there is effective leadership that can utilise the resources in an
efficient way.
3. Structure & policies: - A visionary strategic leader as an agent of change, should
lay down rules of the game in concrete terms and resolve all issues in a proper way with
the help of policies, plans, procedures & budgets.
4. Communication network: - Both the formal & informal networks should be used
by the leader in his communication. Proper information should be provided about the
priorities & strategies should be made by the leaders.
5. Changing Culture:- Culture is a system shared values & beliefs that produces norms
of behaviour. Values (what is important) & beliefs (how things work)helps in building
norms(how we should do things). Culture is shared assumptions about practices, beliefs
& traditions governing behaviour. Character & personality of the leader influences the
culture of the organisation.
6. Managing change:-Effective leaders are responsible for initiating necessary changes
that ensure continued organisational success. External & internal factors such as
competition, new government regulations, labour market fluctuations, technological
changes etc. need to be handled carefully by the leaders. Motivate employees to adapt
& accept the change.
Effective leadership must look into the opportunities I the environment continually
and try to encash these opportunities before other competitors enter the arenas. As
change agents introduce the change in an effecting way. Should introduce the strategic
changes gradually taking the team members along with them, build on their core
strength, show flexibility in approach and commit themselves to what they firmly
believe would be in the best interest of the organisation.
7. Ensuring Corporate Governance: - Major responsibilities of the leaders are adopt
corporate governance. Accomplish organisational goals by creating values to all the
stakeholders.
• Good corporate governance is simply ‘good businesses.
• Adequate disclosures & effective decision making.
• Transparency in business transactions.
• Statutory & legal compliance.
• Protection of stake holders’ interest.
• Commitment to values & ethical conduct of the business.
8. Strategic Leadership & Competitive Advantage.
9. Building Trust & behave ethically:- Integrity, competence, consistency, loyalty &
openness.

Types of Leadership:-
• Autocratic leadership style.
• Democratic/ participatory leadership style
• Free rein style / laise fair style
Strategic leadership & conflict management:

48
Conflict is a perceived differences of values between two or more parties that results in mutual
opposition. The reasons are
• Incompatibility
• Perception
• Blocking
• Scarcity
• Latent or overt
• Verbal or non-verbal
• Active or passive
Conflict resolution styles of a leader
• Competing (dominance)
• Avoiding (with drawl)
• Accommodating (smoothing)
• Compromising style(lose-lose situation)
• Problem solving/confrontation/collaboration(win-win style)

Corporate Culture

Corporate culture is the collection of values, beliefs, ethics and attitudes that characterize an
organization and guide its practices. To some extent, an organization's culture can be articulated
in its mission statement or vision statement. Elements of corporate culture include the
organization's physical environment, human resource management practices and staff work
habits. Corporate culture is also reflected in the degree of emphasis placed on various defining
elements such as hierarchy, process, innovation, collaboration, competition, community
involvement and social engagement.

Corporate culture is sometimes referred to as organizational culture or company culture and

synonymous with workplace culture. Current global corporate culture focuses on which values
transparency, equality and communication, a secretive company with a strictly hierarchical
structure is likely to have trouble recruiting and retaining workers and appealing to customers
and partners.

Six Components of a Great Corporate Culture

1. Vision: A great culture starts with a vision or mission statement. These simple turns of phrase
guide a company’s values and provide it with purpose. That purpose, in turn, orients every
decision employees make. When they are deeply authentic and prominently displayed, good
vision statements can even help orient customers, suppliers, and other stakeholders.
2. Values: A company’s values are the core of its culture. While a vision articulates a company’s
purpose, values offer a set of guidelines on the behaviours and mind-sets needed to achieve that
vision.
3. Practices: Values are of little importance unless they are enshrined in a company’s practices.
If an organization professes, “people are our greatest asset,” it should also be ready to invest in

49
people in visible ways. For examples heralds values like “caring” and “respect,” promising
prospects in the job they love.

4. People: No company can build a coherent culture without people who either share its core
values or possess the willingness and ability to embrace those values. That’s why the greatest
firms in the world also have some of the most stringent recruiting policies.
5. Narrative: Corporate culture should be narrative then they are more powerful when identified,
shaped, and retold as a part of a firm’s ongoing culture.
6. Place: Whether geography, architecture, or aesthetic design — impacts the values and
behaviours of people in a workplace.

Values
Generally values are taken from moral ideas, general conceptions or orientations towards the
world or sometimes simply interest, attitudes, preferences, needs, sentiments and dispositions.
Values have major influence on a person’s behaviour & attitude and serve as broad guidelines
in all situations.
Values define what is good or bad, right or wrong. It guides the behaviour. Values such as
freedom, honesty, self-respect, equality etc. People are not born with values. They acquire and
develop them in their early lives.
Some common business values are fairness, innovation, & community involvement.
Professional Values: Business related beliefs or principles that guide professional behaviour.
Values may reflect ethics, practices, standards and other norms with in a commercial
environment.
Value are Qualities, characteristics, or ideas about which we feel strongly.
Our values affect our decisions, goals and behavior. A belief or feeling that someone or
something is worthwhile. Values define what is of worth, what is beneficial, and what is
harmful. Values are standards to guide your action, judgments, and attitudes.

Direction:
Values – Goals – Behavior – Self-value
• Values give direction and consistency to behavior.
• Values help you know what to and not to make time for.
• Values establish a relationship between you and the world.
• Values set the direction for one’s life.
Types of Values
Individual Values: These are the values which are related with the development of human
personality or individual norms of recognition and protection of the human personality such as
honesty, loyalty, veracity and honour. Personal values: Righteousness, humbleness, patience,
truthful, hard work etc
Collective values: Values connected with the solidarity of the community or collective norms
of equality, justice, solidarity and socialness are known as collective values.
Professional values: Loyalty, equity, fairness, integrity, team spirit etc.

50
Terminal Values: They reflect a person's preferences regarding the end’s to be achieved-
prosperity, achievement, world peace, freedom, equality, happiness, inner peace, friendship,
wisdom, personal & family life security.
Instrumental Value: - They represent the means for achieving desired ends- ambition, hard
work open-mindedness, competence, courage, honesty, courtesy, responsibility etc.
Intrinsic Value: - These are the values which are related with goals of life. They are sometimes
known as ultimate and transcendent values. They determine the schemata of human rights and
duties and of human virtues. In the hierarchy of values, they occupy the highest place and
superior to all other values of life.
Extrinsic Value:-

Sources of Values: - Parents, teachers, relatives, religion, friends, social circles, customs &
traditions, culture, employers, books and others.
Features of values:-
Values specify ‘what we ought to do’.
Values may be specific
Values are different from culture to culture
Managing Individual differences in Values:
 Clarify & Communicate
 Train & develop
 Reward & reinforce.
Functions of Values
• Values play an important role in the integration and fulfilment of man’s basic impulses
and desires in a stable and consistent manner appropriate for his living.
• They are generic experiences in social action made up of both individual and social
responses and attitudes.
• They build up societies, integrate social relations.
• They mould the ideal dimensions of personality and range and depth of culture.
• They influence people’s behaviour and serve as criteria for evaluating the actions of
others.
• They have a great role to play in the conduct of social life.
• They help in creating norms to guide day-to-day behaviour.

Ethics
The word ‘Ethics’ refers to principles of behaviour that distinguish between good or bad, right
or wrong. It is a person’s own attitude and beliefs concerning good behaviour.
Ethics are principles, values, & beliefs that defines what is right or wrong.
It is broader than what is stated by law, customs, and public opinion.
Ethical behaviour may differ from society to society.
Ethical standards are ideals of human conduct.
Defining ethical standards is a difficult task.
If an organisation fails to project a healthy image of itself in society- its, quality, service &
customer satisfaction- then its very existence is in danger.

51
In short ethical concerns are vital for individual, organisations & society.If ethics is missing in
the business,
Determinants of Ethics
• Family, school & religion.
• Peers, colleagues & superiors.
• Experiences in life.
• Values & morals.
• Threatening situations.
• Organisational demands.
• Legislations.
• Government rules & regulations.
• Industry and company ethical codes of behaviour.
• Social pressures.
Unethical practices of managers /Leaders
• Falsifying information on application blank
• Trading stocks on the basis of inside information
• Padding expenses accounts
• Divulging trade secrets to competitors.
• Using company properties for personal use.
• Giving or receiving gifts in return for orders.
• Stealing.
• Offering kickbacks.
• Cheating customers, overselling, unfair credit policies.
• Firing someone from a job.
Factors that raise Ethical Standards
• Provide clear guidelines for ethical behaviour.
• Teach ethical guidelines and their importance.
• Refrain from unethical practices.
• Conduct frequent and unpredictable audits.
• Punish trespassers in a meaningful way and make it public so that it may deter others.
• Emphasis regularly that loyalty that loyalty to the company does not excuse improper
behaviour or action.
• Creation of ethical workforce.

52
Module 4: Strategy Evaluation & Control

Strategy Evaluation
DEFINITION:
‘Strategy evaluation’ is the process through which the strategists know the extent to which
a strategy is able to achieve its objectives. In the words of Professor William F. Glueck and
Lawrence R. Jauch,

“Evaluation of strategy is that phase of strategic management process in which the top
managers determine whether their strategic choice as implemented is meeting the objectives
of the enterprise.”

Importance of Strategic Evaluation

 Evaluation Strategic helps to keep a check on the validity of a strategic choice.

 An ongoing process of evaluation would, in fact, provide feedback on the continued
relevance of the strategic choice made during the formulation phase. This is due to the
efficacy of strategic evaluation to determine the effectiveness of strategy
 During the course of strategy implementation managers are required to take scores of
decisions.
 Strategic evaluation can help to assess whether the decisions match the intended
strategy requirements.
 In the absence of such evaluation, managers would not know explicitly how to exercise
such discretion.
 The process of Strategic Evaluation provides a considerable amount of information and
experience to strategists that can be useful in new strategic planning
 Strategic evaluation, through its process of control, feedback, rewards, and review,
helps in a successful culmination of the strategic management process.
 Rewards: SEC helps in identifying the rewarding behaviours that are in tune with the
formulated strategies.

 To check on the validity of strategic choice: SEC provides a considerable amount of

information & experience for formulation of future plans.

 There is a need for feedback, reward & appraisal: SEC offers valuable feedback n how
things are moving in the organisation
 Congruence between decisions and intended strategy: Strategic evaluation can help to
assess whether the decisions match the intended strategy requirements

 Creating inputs for new strategic planning: The process of strategic evaluation provides
a considerable amount of information and experience to strategists that can be useful in
new strategic planning.

53
Symptoms of Malfunctioning Of Strategy

Symptoms of malfunctioning of strategy are as follows:

 Degree of risk is high as compared to rewards
 The strategy is inconsistent with the changing environment
 If strategy implementation does not give due cognizance to the time horizon, then it is
a symptom of strategy malfunction. 1) Company is not performing as well as against
its close rivals, similar companies or industry as a whole.
 Company is not performing in terms of stated objectives, return on investment (ROI),
market share, profitability trends, EPS, etc.,
 Corporate culture is not aligned with strategy.
 Implementation of the strategy is slow.
 Organisational conflict and interdepartmental bickering are often symptoms of strategy
malfunction,
 Managerial problems continue despite changes in personnel and if they tend to be issue-
based rather than people-based, their strategies may be inconsistent,
 If success for one organisational department means failure for another department then
it is a symptom of strategy malfunction,
 If policy problems and issues continue to be brought to the top for resolution, then the
strategy may be malfunctioning,
 Overtaxing of available resources is a symptom of strategy malfunction,

Nature of Strategic Evaluation

 Nature of the strategic evaluation and control process is to test the effectiveness of
strategy.
 During the two proceedings phases of the strategic management process, the strategists
formulate the strategy to achieve a set of objectives and then implement the strategy.
 There has to be a way of finding out whether the strategy being implemented will guide
the organisation towards its intended objectives.
 Strategic evaluation and control, therefore, performs the crucial task of keeping the
organisation on the right track.
 In the absence of such a mechanism, there would be no means for strategists to find out
whether or not the strategy is producing the expected results. The strategic-management
process results desired effect.
 The strategic-management process results in decisions that can have significant, long-
lasting consequence Timely evaluations can alert management to problems or potential
problems before a situation becomes critical

Strategy evaluation includes:

1. Examining the underlying bases of a firm's strategy
2. Comparing expected results with actual results
3. Taking corrective actions to ensure that performance conforms to plans

54
 Through the process of strategic evaluation and control, the strategists attempt to answer set
of questions, as below.
1. Are the premises made during strategy formulation proving to be correct?
2. Is the strategy guiding the organization towards its intended objectives?
3. Are the organization and its managers doing things which ought to be done?
4. Is there a need to change and reformulate the strategy? § How is the organization
performing?
5. Are the time schedules being adhered to?
6. Are the resources being utilized properly?
7. What needs to be done to ensure that resources are utilized properly and
objectives met?

Analysing Variance

Variance analysis measures the differences between expected results and actual results of
a production process or other business activity. Measuring and examining variances can
help management contain and control costs and improve operational efficiency.

Prior to an accounting period, a budget is made using estimates of material and labour costs
and amounts that will be required for the period. After the accounting period, compare the
actual material and labour costs and amounts to the estimates to see how accurate the estimates
were. The differences between the estimates and the actual results observed at the end of the
period are called the variance.

Commonly measured variances include direct labour rate variance, direct labour efficiency
variance, direct material price variance, and direct material quantity variance. These variance
analyses compare expected results to actual results. The purpose is to see if budget targets were
met. Or they see if the operations ended up being more expensive or less costly than originally
planned.

Measurement of Performance

Performance measurement comes in many forms, from financial reports to quality measures
like defect rates. Any activity a firm can perform can have a performance measure developed
to evaluate the success of that activity. There should be a lists of few common firm objectives
and how actions to achieve them might be evaluated. Evaluation involves setting a performance
standard, measuring the results of firm activities, and comparing the results to the standard.
One specific form of evaluation is called benchmarking, a process in which the performance
standard is based on another firm’s superior performance. In the hospitality industry, for
example, Disney theme park operations are used as standards for other companies in the theme
park industry. Universal theme parks, for example, likely compare their customer satisfaction
to Disney’s in order to evaluate whether or not they are also offering a superior park experience
to their customers.

55
 Three Different Actions to Support a Differentiation Strategy and Ways to Measure
Results

Tactical Performance
Strategic Plan Plan Operational Plan Measure

Number of new
Product Hire three engineers to
Innovation products
differentiation develop new products.
launched

Improve customer service Customer

Increase
Product with hiring and training complaints per
customer
differentiation program for customer 10,000 products
satisfaction
service associates. sold

Reduce defective products Defect rate per

Product Quality
by improving manufacturing 10,000 units
differentiation improvement
process accuracy. produced

Performance evaluation closes the strategy cycle because of what managers do with the
feedback they get in the evaluation process. When a manager compares performance to a
standard, he is deciding whether or not the performance is acceptable or needs to be improved.
The strategy cycle is a process managers use to achieve an advantage in the marketplace, and
the measurement and evaluation stage tells managers whether the advantage is being achieved.
If firm performance meets or exceeds objectives, then the manager reports the success to
middle and upper-level managers. The company CEO may develop more ambitious objectives
based on that success, and the strategy cycle starts over. If performance fails to meet objectives,
the operational manager must develop new actions to try to meet the objectives or report to
higher-level managers that the objectives cannot be met. In this case, a new round of
operational planning begins, or upper managers examine their strategic plan to see if they need
to make adjustments.

The strategy process is always circular. Performance feedback becomes part of the strategic
analysis of the firm’s capabilities and resources, and firm leadership uses the information to
help develop better strategies for firm success.

Performance measurement comes in many forms, from financial reports to quality measures
like defect rates. Any activity a firm can perform can have a performance measure developed
to evaluate the success of that activity. Table 9.2 lists a few common firm objectives and how

56
actions to achieve them might be evaluated. Evaluation involves setting a performance
standard, measuring the results of firm activities, and comparing the results to the standard.
One specific form of evaluation is called benchmarking, a process in which the performance
standard is based on another firm’s superior performance. In the hospitality industry, for
example, Disney theme park operations are used as standards for other companies in the theme
park industry. Universal theme parks, for example, likely compare their customer satisfaction
to Disney’s in order to evaluate whether or not they are also offering a superior park experience
to their customers.
Three Different Actions to Support a Differentiation Strategy and Ways to Measure
Results

Tactical Performance
Strategic Plan Plan Operational Plan Measure

Number of new
Product Hire three engineers to
Innovation products
differentiation develop new products.
launched

Improve customer service Customer

Increase
Product with hiring and training complaints per
customer
differentiation program for customer 10,000 products
satisfaction
service associates. sold

Reduce defective products Defect rate per

Product Quality
by improving manufacturing 10,000 units
differentiation improvement
process accuracy. produced
Table9.2 (Attribution: Copyright Rice University, OpenStax, under CC-BY 4.0 license)

Performance evaluation closes the strategy cycle because of what managers do with the
feedback they get in the evaluation process. When a manager compares performance to a
standard, he is deciding whether or not the performance is acceptable or needs to be improved.
The strategy cycle is a process managers use to achieve an advantage in the marketplace, and
the measurement and evaluation stage tells managers whether the advantage is being achieved.
If firm performance meets or exceeds objectives, then the manager reports the success to
middle and upper-level managers. The company CEO may develop more ambitious objectives
based on that success, and the strategy cycle starts over. If performance fails to meet objectives,
the operational manager must develop new actions to try to meet the objectives or report to
higher-level managers that the objectives cannot be met. In this case, a new round of
operational planning begins, or upper managers examine their strategic plan to see if they need
to make adjustments.

The strategy process is always circular. Performance feedback becomes part of the strategic
analysis of the firm’s capabilities and resources, and firm leadership uses the information to
help develop better strategies for firm success.

57
Strategic and Operational Control
Strategic evaluation operates at two levels:

Strategic level – It takes into account the changing assumptions that determine a strategy,
continually evaluate the strategy as it is being implemented and take the necessary steps to
adjust the strategy to new requirements.
 Wherein we are concerned more with the consistency of strategy with the environment.

Operational level – it is aimed at allocation and use of organisational resources through

evaluation of performance of organisational units, divisions, & SBU’s to assess the contribution
in achieving the organisational objectives. That is
 wherein the effort is directed at assessing how well the organisation is pursuing a given
strategy

Operational Control

It’s impossible to control the activities of Multi-products, multi-plant, & multi-location

organisations. So focus on key areas are very critical i.e. Key areas of success

Critical or Strategic Point Control:

 Key areas of the operations or events is identified. Like e.g. Quality, control department,
determine efficiency.
 Central areas must be comprehensive and economical
 Equal importance should be given to qualitative & quantitative factors.
 Should focus on deviations and problems to be solved.

Key Factor Rating: It is based on a close examination of key factors affecting performance
(financial, marketing, operations and human resource capabilities) and assessing overall
organisational capability based on the collected information.

Benchmarking It is a process of learning how other firms do exceptionally high-quality

things. Some approaches to bench marking are simple and straightforward. For example
Xerox Corporation routinely buys copiers made by other firms and takes them apart to see how
they work. This helps the firms to stay abreast of its competitors’ improvements and changes.

Depending on the time at which control is applied, controls are three types:

1. Feedback Control: also called as Historical or Post Control. It is a process of gathering

information about a completed activity. It helps on the evaluating the quality & feedback of
the existing standards.

Helps in building better strategies in the future.

58
2. Concurrent Control: Also called as real time control. Concurrent control techniques
immediately consider a problem and analyse it to take necessary and corrective steps before
any major change is done.

3. Predictive or feed forward control: the control system anticipates the problems that may
be encountered by the organisation in future or deviations from the standards in advance. It
helps in identifies th e action to be taken to solve such problems.

Strategic Control

Strategic Control: is concerned the tracking a strategy when it is being implemented, detecting
problems or changes in its underlying premises, and making necessary adjustments.

"Strategic control focuses on the dual questions of whether: (1) the strategy is being
implemented as planned; and (2) the results produced by the strategy are those intended.“

To help top management achieve the organisational goals through monitoring, & evaluating
the strategic management process.

There are four types of strategic control:

1. Premise Control To: Strategy are built around certain assumptions about the environmental
and organisational factors. Premise control is designed to check systematically and
continuously whether the premises on which the strategy is based are still valid

2. Implementation Control: It includes evaluating plans, projects, budgets, programs to see

if they guide the organisation to achieve predetermined organisation’s goals or not. It leads to
strategic rethinking. It consists of identification & monitoring of strategic thrusts.

3. Strategic Surveillance: It aims at generalised control. It is designed to monitor a broad

range of events inside & outside the organisation that are likely to threaten the course of the
firm. Organisational learning & knowledge management system capture the information for
the strategic surveillance.

4. Special Alert Control: It is a rapid response or immediate reassessment of the strategy in

the light of sudden or unexpected changes. It can be exercised through the formulation of
contingency strategies and a crisis management team.

Role of Organisational System In Strategic Evaluation

Strategic Evaluation is as important as strategy formulation. It sheds light on the

efficiency and effectiveness of the comprehensive plans in achieving the desired results

An organization develops various systems which help in integrating various parts of the
organization. The major organizational systems are: information system, planning system,
motivation system, appraisal system and development system.

All these organizational systems play their role in strategic evaluation and control.

59
 1. Planning System: It emphasizes that there is a plan which directs the behaviour and
activities in the organization. Control measures these behaviour and activities and
suggests measures to remove deviation. Thus, there is a reciprocal relationship between
planning and control.
2. Motivation System: Motivation plays a central role in this process. It energizes
managers and other employees in the organization to perform better which is the key
for organizational success. Lack of motivation on the part of managers is a significant
barrier in the process of evaluation and control.
3. Appraisal System: Appraisal or performance appraisal system involves systematic
evaluation of the individual with regard to his performance on the job and his potential
for development. While evaluating an individual, not only his performance is taken into
consideration but also his abilities and potential for better performance. Thus, appraisal
system provides feedback for control system about how individuals are performing
4. Information System: Evaluation and control action is guided by adequate information
from the beginning to the end. Management information and management control
systems are closely interrelated which the information system is designed on the basis
of control system.
5. Development System: Development system is concerned with developing personnel
to perform better in their present positions and likely future positions that they are
expected to occupy. Thus, development system aims at increasing organizational
capability through people to achieve better results. These results become the basic for
evaluation and control. Role of organizational systems in strategic evaluation should
not be undermined.

Techniques of Strategic Evaluation

1) Gap Analysis: The gap analysis is one strategic evaluation technique used to measure the
gap between the organization’s current position and its desired position. The gap analysis is
used to evaluate a variety of aspects of business, from profit and production to marketing,
research and development and management information systems.

Typically, a variety of financial data is analysed and compared to other businesses within the
same industry to evaluate the gap between the organization and its strongest competitors.

2) SWOT Analysis: The SWOT analysis is another common strategic evaluation technique
used as a part of the strategic management process. The SWOT analysis evaluates the
organization’s strengths, weaknesses, opportunities and threats. Strengths and weaknesses are
internal factors, while opportunities and threats are external factors.

This identification is essential in determining how best to focus resources to take advantage of
strengths and opportunities and combat weaknesses and threats.

3) PEST Analysis: Another common strategic evaluation technique is the PEST analysis,
which identifies the political, economic, social and technological factors that may impact the
organization’s ability to achieve its objectives.

60
  Political factors might include such aspects as impending legislation regarding wages
and benefits, financial regulations, etc
 Economic factors include all shifts in the economy,
 Social factors may include demographics and changing attitudes.
 Technological pressures are also inevitable as technology becomes more advanced each
day.
 These are all external factors, which are outside of the organization’s control but which
must be considered throughout the decision making process.

4) Benchmarking: Benchmarking is a strategic evaluation technique that’s often used to

evaluate how close the organization has come to its final objectives, as well as how far it has
left to go. Organizations may benchmark themselves against other organizations within the
same industry, or they may benchmark themselves against their own prior situation.

5) Value chain analysis: Firms employ value chain analysis to identify and evaluate the
competitive potential of resources and capabilities. By studying their skills relative to those
associated with primary and support activities, firms are able to understand their cost structure,
and identify their activities through which they can create value.

Evaluation Criteria

Quantitative Factors: employed to evaluate the strategies are financial ratios, sales growth,
profit growth, economic value added, ration analysis etc.
 To compare the firms performance over different periods.
 To compare the company’s performance with competitors.
 To compare the company’s performance with industry averages.
 Return on Investment
 Economic value added.-Performance metric that calculates the creation of shareholders
value. EVA= Net operating capital.
 Market Value Added profit after tax- Cost of
 -Company’s market value- Investment capital
 Return on equity
 Return on capital employed

Qualitative factors: certain qualitative bases based on intuition, judgement, opinions, or

surveys could be used to judge whether the firm’s performance is on the right track or not.
 Consistency: Avoid inconsistency
 Consonance: refers to the need for strategies to examine sets of trends as well as
individual trends in evaluating strategies.
 Feasibility: Can the strategy be attempted with in the physical, human, & financial
resources of the enterprise.
 Advantage: Should provide for the creation and maintenance
 Of a competitive advantage in a selected area of activity.

61
Process of Strategic Evaluation

1) Gap Analysis: The gap analysis is one strategic evaluation technique used to measure the
gap between the organization’s current position and its desired position.

The gap analysis is used to evaluate a variety of aspects of business, from profit and production
to marketing, research and development and management information systems.

Typically, a variety of financial data is analysed and compared to other businesses within the
same industry to evaluate the gap between the organization and its strongest competitors.

2) SWOT Analysis: The SWOT analysis is another common strategic evaluation technique
used as a part of the strategic management process.

The SWOT analysis evaluates the organization’s strengths, weaknesses, opportunities and
threats.

Strengths and weaknesses are internal factors, while opportunities and threats are external
factors.

This identification is essential in determining how best to focus resources to take advantage of
strengths and opportunities and combat weaknesses and threats.

2) Measurement of performance: The standard performance is a bench mark with which the
actual performance is to be compared.

The reporting and communication system help in measuring the performance.

For measuring the performance, financial statements like - balance sheet, profit and loss
account must be prepared on an annual basis.

3) Analysing Variance:- While measuring the actual performance and comparing it with
standard performance there may be variances which must be analysed.

1) Gap Analysis: The gap analysis is one strategic evaluation technique used to measure the
gap between the organization’s current position and its desired position.

The gap analysis is used to evaluate a variety of aspects of business, from profit and production
to marketing, research and development and management information systems.

Typically, a variety of financial data is analyzed and compared to other businesses within the
same industry to evaluate the gap between the organization and its strongest competitors.

2) SWOT Analysis: The SWOT analysis is another common strategic evaluation technique
used as a part of the strategic management process.

The SWOT analysis evaluates the organization’s strengths, weaknesses, opportunities and
threats.

62
Strengths and weaknesses are internal factors, while opportunities and threats are external
factors.

This identification is essential in determining how best to focus resources to take advantage of
strengths and opportunities and combat weaknesses and threats.

Mention the degree of tolerance limits between which the variance between actual and
standard performance may be accepted.

4) Taking Corrective Action:-Once the deviation in performance is identified, it is essential

to plan for a corrective action.

If the performance is consistently less than the desired performance, the strategists must carry
a detailed analysis of the factors responsible for such performance.

Barriers of Strategic Evaluation

The limits of Control: Too much control prevents the managers from taking initiatives,
experiment with the creative ideas and gains through calculated risks.

Difficulties in measurements: There is no proper yard stick, to measure various factors that
are valid, reliable and uniform.

Motivational problems: HR expects motivation all through the strategy formulation,

implementation & evaluation.

Participants in Strategic Evaluation

• Shareholders
• Board of Directors
• Chief executives
• Profit-centre heads
• Financial controllers
• Company secretaries
• External and Internal Auditors
• Audit and Executive Committees
• Corporate Planning Staff or Department
• Middle-level managers

OMMERCE

According to WTO “E-Commerce is a system of production, distribution, marketing and

supply of goods & services as well as financial settlement of transactions between the parties”.

E-Commerce is a system of buying & selling of goods & services or exchanging trade related
information including transaction settlement through computers connected with network.

E-Commerce is conducting business transaction on the web using electronic communication

and digital information processing technology.

63
Objective of Ecommerce

1. To expand the market to national & international level.

2. To provide quick services to customers
3. To provide unique buying opportunities
4. To offer quality goods & services at competitive prices.
5. To organise business more effectively, efficiently and economically.
6. To provide business service around the clock 24*7
7. To ensure quick settlement of the transactions
8. To build good communication strategies
9. To implement good store management and to lessen investment on physical
stock.
10. To ensure economy in purchasing various inputs
11. To build healthy competition
12. To save customer time, energy, efforts, money & time while trading in goods &
services.
13. To ensure effective distribution of goods & services.
14. To ensure automatic payment system.

Classification of Ecommerce / Business Models and Strategies

On the basis of transaction type, E-Commerce can be divided into

1. Business to Business Model (B2B): it is exchange of goods & services or
information between business rather business and consumers.
2. Business to Consumer Model (B2C): Business sells goods, services &
information directly to consumers through electronic means.
3. Consumer to Consumer Model (C2C): Provides an opportunity to trade in
goods & services between consumers who are connected with internet.
4. Business to Government Model (B2G): refers to the supply of goods and
service for online government procurement.
5. Government to Government Model (G2G): G2G websites are used by the
two or more governments to exchange information on various government
projects and issues.
6. Peer Model (P2P): arranges a direct communication between two parties
without the involvement forum in which without the intermediation of a third
party or a business organisation, the two parties directly discuss, exchange
information or communicates with each other.
7. Business to Administration Model (B2A): Covers all the transactions that are
carried out between businesses and government using the internet as a medium.
Eg. Accela.com- a software company that provides 24X7 public access to
government services for licensing, public health, social security, employment,
tax matters

64
Characteristics of the ECOMMERCE

1. Ease of Navigation
This is one of the most important aspects on your website. If the navigation is lacking, then
your customers are not able to browse through your store and find products they are looking
for. This will not only irritate the customer, but will cause a customer to never return to your
website. Making sure that your company does some user testing and design impact testing prior
to launching their website is an easy fix to navigational problems.

2. Fast Load Times

Having fast load times is essential to getting a good ranking in Google. Besides that, glaring
reason having a website that loads slow is subpar to a customer’s expectations. If the website
isn’t loading, they will most likely bounce from the website and take their business elsewhere.
Unfortunately, an online customer has a lot less patience for anything to go wrong than a
customer in a physical store.

3. Clear Polices
Clear Policies are crucial to having a successful business whether it is a physical store or an
online store. Policies are what protect not only the shopper but the merchant. For example,
having a clear return policy can mitigate any future conflicts with customers who want to return
a product too late. Or having a clear shipping policy will invoke confidence in the buyer that
the seller has a reliable system in place. This is all part of creating a culture of reliability and
confidence in your customer. Many individuals are still questioning the safety of using their
credit card online so having clear signals and policies to provide a safe environment is helpful
to becoming a good business person online.

4. Seamless Checkout Experience

The checkout experience is where a lot of shoppers become part of the shopping cart
abandonment statistic. When there is a problem in your checkout system your Google Analytics
will also not be able to calculate your conversion rates. Some of the best checkout systems are
at Amazon.com. Having customers create profiles where they can store their addresses and
payment methods can speed up the checkout experience and really speed up the time your
customer has to spend on your website.

5. Design Isn’t Distracting from Shopping

Let’s be honest, sometimes the design of a website drives us absolutely nuts. The design of a
website should not take away from the shopping experience. Remember that simple is always
better when it comes to design. Websites that are simply designed are ranked higher than
websites that are cluttered and hard to navigate. When a design takes away from the shopping
experience the customer is unable to navigate and complete a purchase.

6. Branded
Branding is important to establishing a business, and becoming a business that customers will
remember. Branding is essentially a symbol of the entire package that your customers will

65
experience. Your brand is the associations, experiences and characteristics that are melded into
one construct. Branding and marketing is what will make a customer come to your website in
the first place and also recall your website. If your branding doesn’t draw a customer into your
website, then you are doing something wrong, or the market is very over saturated.

7. Promotes Related Products

Related products are so important when a customer is shopping on your website. Due to the
fact that a lot of customers are looking for specific things, different designs, colors, or materials
that the product is made out of showing related products can help make a sale. When shopping
around I always feel relieved that I don’t have to re-search for a product and I can just go look
at things that are pretty similar.

8. Accurate Product Descriptions

There is nothing worse than going to a product and reading the description and then receiving
something completely different. It not only ruins the experience for the customer but it ensures
that they will not be a returning customer. Having the wrong description also does not mitigate
having customers’ expectations that cannot be fulfilled. Most often if you describe exactly what
your product is then your customer will not be confused on what they are receiving in the mail.

9. Effective Search
This is a no brainer, but not having an effective search is a common problem that e-commerce
websites have. The site is either so poorly organized that the customer cannot find the products
they want or the products do not accurately get recalled when the customer searches with key
words. Either scenario is not good. Unfortunately, unlike in a brick-mortar store you are able
to ask an attendant for help you are not able to ask for help on an e-commerce website. The
website should intuitively recall products that customers want even when the customer is being
vague about what they want.

10. Quality Photos and Videos

There is nothing worse than having a website with unclear photographs and videos. The
customer is unable to really accurately evaluate whether the product is what they want to buy.
Also it makes the customer have unrealistic expectations about the product. In this day and age
where even our cell phones are creating high resolution photographs there is no reason to not
be up to snuff on your photograph that is being featured on your e-commerce website.

Internet Strategies For Traditional Business

A strong online marketing strategy will help you boost your business. These 10 digital
strategies have been proven to help companies improve their performance. If you employ them,
you could be on your way to creating a concrete internet marketing strategy that helps you
brings in more customers and retain new ones.

1. Invest in Web Design

66
We don’t often think about web design as a marketing tactic, but it influences the amount of
time and attention a user will spend on your page. Your website is the center of all your digital
marketing efforts, so if your page is not clean, easy to read, and interesting, it won’t matter
how much time you put into strategy development – you’re still going to lose customers. If you
don't have the design skills to do it yourself, then it's worth hiring someone to create a website
that is modern, attention-grabbing, and mobile friendly.

2. Use Search Engine Marketing and Optimization

Search engine marketing and optimization are part of what helps make your business appear
higher on a list of search engine results. With a strong SEO strategy, your company website
will become associated with the keywords used to find your services. This increases your
chances of being the company an individual chooses to work with after searching online.

3. Affiliate and Associate Programs

With an affiliate program, people who believe in your company can share your information
and grow your market on a commission-based platform. An affiliate or associate
program doesn’t make sense for every business. However, if you do use these, you can quickly
see your marketing efforts improve without needing to do much yourself.

4. Hire a Coach or Consultant

If you’re not an expert in digital and internet marketing, ask someone who is. There are
hundreds of internet marketing coaches and consultants available to you, many of whom can
give you a consultation about what you should change to see success. For small business
owners who need to focus on other business systems, a coach or consultant can be extremely
helpful.

5. Use Email Marketing

It isn’t enough to just send out emails. You will want to consider various email lists that cater
to the specific needs of each individual and can present a personalized approach to your
campaigns. Take a hard and clear look at the purchasing habits of your customers and use that
information to develop your strategy.

6. Build an Opt-In Email List

An opt-in email list allows customers to come to you and sign up to receive email
correspondence. This allows you to connect with potential customers and current clients.

7. Get into Articles or News Stories

Work with a public relations professional to get your business into articles and news stories on
topics related to what you do. It will not only help establish you as a trusted expert, but it will

67
introduce your business to an even broader base of people. You can also sign up for free
services that connect you with writers looking for sources, such as Help a Reporter Out.

8. Write Online Press Releases

When you use online press releases, you’re getting your information out there in a formal
setting. This allows newspapers, blogs, or other media sources to see your information and
write posts about your company without you needing to put in the effort to connect and claim
a story.

9. Hold Contests and Giveaways

People love contests and giveaways. Anytime you can encourage promotion from your
customers in exchange for a free product or service, you will usually see a surge in purchases
or connections.

10. Maintain a Blog

Blog should be used for a number of reasons, including allowing to consistently post new
keywords and optimize your search engine strategy. More than that, your blog becomes
somewhere you can offer advice, share bits of information, and really connect with your
customers. A lasting relationship begins with trust, and your blog is a great way to build that.

Key Success Factor in E Commerce

1. Brand name
Create a memorable brand name: Like Amazon, eBay, Flipkart, etc., your business name
and domain name should be simple (maybe just one word) and catchy. It should be easy
to remember and pronounce. The reason is, most of the customers want to shop the
things in brand stores. Therefore, choosing a memorable brand name is the key first step
in starting the ecommerce business.
Make your brand consistent: Changing your online store name constantly affects your
credibility as a business and leads to a low volume of traffic. Your brand name
is the identity of your store. Once you select a name, don’t change unless it is
necessary.
Avoid changing your domain name: It’s not only your brand name but also your domain
name that needs to be consistent. Your customers are familiar with your website, thus
changing a domain name will make your site less visible in search
engines. Being consistent with the domain name provides trust among your customers.

2. Design of the store

Attractive design: When it comes to the look and appearance of the storefront, the
design should entice the customers. You have to build the stores with the latest features
and display the array of products in an aesthetically pleasing manner.

68
Create an easy-to-use interface: The user interface is the amazing thing that draws
the visitors’ attention. You can design the store in such a way that makes customers find
products easily and complete the purchase in a short period of time.
Transparency in your information: You have to display your contact information on
every page of the store clearly so that customers can communicate with you at any
point of time. Other details of the store like the product price, shipping charges, the
shipping time should be displayed in a precise way because transparency builds trust.

3. Search Engine Optimization (SEO)

Make your site SEO-friendly: You have to build a website that is search engine friendly
as it helps you rank top position in the search engines. For example, Purchase
Commerce is an SEO-friendly ecommerce platform that makes it easy to write a detailed
product description, also allowing its visibility in search engines when someone
searches for those products.
Use relevant keywords: You can use tools like Keyword Planner and Uber
Suggest to figure out the long tail purchase intent keywords for your store. Using these
keywords in the product description will increase its visibility in search engines.
Mobile responsiveness: You also check the responsiveness of your website in order to
help your mobile users. i.e., your site should be accessed or supported in the mobile
device.

4. Multichannel marketing
Promote on Social Media: As per stats, there are 3.2 billion social media users around
the world. Hence, you can use this excellent opportunity to advertise your
store. Create a Facebook and Instagram business page can boost your brand’s online
presence.
Content marketing: Content marketing is one type of ecommerce strategy where you
can acquire new buyers. Creating content about products and publishing them on your
web page is an added advantage to your site. Also, making a YouTube video about the
product review helps in getting more traffic to your online store.
Email marketing: Email is one of the best marketing places where you can get connected
with your customers. You can update the current status of your store to the buyers
through the email.

5. Personalized buying experience

Customer Satisfaction is the key: Customer satisfaction is the main thing to boost your
business globally. Every new customer is important for your business; therefore, you
should satisfy all the customers’ needs.
Make the customer work simple: Always don’t make the customer confused about your
product. You should make it clear what your business website actually provides. Hence,
display all the details in a well-defined way. Also, your site should have multilingual
support if you want to develop your business globally.
Offer discounts & deals: Offering daily deals with many seasonal offers and discounts
will make your buyers happy. By doing this, customers will feel to make a return in

69
terms of either shopping again in your store or recommending your store to their friends.
This is also indirect marketing to grow your business.

6. Multiple payment methods

In online shopping, 75.6% is the average rate of shopping cart abandonment. To avoid
this, you can provide multiple payment options in your store.
Online payment: The online money transactions are becoming popular now and buyers
are familiar with the net banking payment method. You can provide options like credit
card and debit card transaction along with the net banking to don’t lose out any
customers. You can even offer your store’s wallet to pay the amount.

Offer third-party payment: Payment methods like PayPal, Paytm, Google Pay, etc.,
are used increasingly these days where some buyers are interested to transfer money.
Provide offline payment: Customers are also more comfortable to pay the amount at the
time of delivery i.e., Cash on Delivery (COD) method. So, you can have an offline
payment option in your store.

7. Easy check-out process

Add savelist buttons: ‘Add to Cart’ and ‘Add to Wishlist’ buttons are primary features
in your store. These buttons aid customers to add their desired products. You can make
them mostly red color to make it attractive.
Single page check-out: To save the time of your buyers, you can make a one-page
checkout option. The various segments like personal details, billing statements,
shipping information are all given in the single page. Hence, buyers can quickly check-
out their products.
Third-party integration: You can integrate a third-party shipping method to your store.
The third-party member takes responsibility for delivering the products to the
customers securely on time.

8. Customer service:
Provide customer service: The first experience is the best experience. So, buyers can’t
forget the first conversation they had with your store. Therefore, providing service to
customers is one of the best ways to improve the customers’ trust in your business.
Get regular feedback: The customers who are disappointed with your store will give
more negative reviews to others when compared to satisfied people who had a
good experience. Therefore, taking into account the customer’s feedback, you have to
improve the quality of the store.
Answer all the customers’ queries: Be sure to satisfy all the customer queries on time
and you should maintain a friendly approach when communicating with your
buyers. Handling customer problems aids buyers to feel more comfortable towards your
ecommerce business.

Wrapping Up

70
The digital market has space for everyone who wants to succeed in their own ecommerce
business. You can follow these successful ecommerce strategies to stand out from your
competitions and also achieve success in your ecommerce business.

71