Concept of 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
 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.
 Sometimes Strategic Formulation called “Strategic Planning” A strategic plan
also enables an organization to evaluate its resources, allocate budgets, and
determine the most effective plan for maximizing ROI (return on investment).
 A company that has not taken the time to develop a strategic plan will not be
able to provide its employees with direction.
Importance of Strategy Formulation
Focus Long Term objectives.
Support Strategy implementation.

Environmental Analysis.

Improve Competitive Advantages.

Show Scope of Business.

Maintain Strategic Fit.

Bring Organizational Effectiveness.

Fulfill Stakeholders Expectations.

Process of Strategy Formulation

Define Mission, Strength and Identification of

Goals and Weakness Unique
Strategies. Analysis. Resources.

Matching Unique
Locate Strategy Identity Core
Resources With
Advantages. Competency.
Core Competency.
 Strategic Vision.
 A vision Statements outlines “WHERE” you want to be.
 A guiding philosophy.
 Consistent with organizational value.
 A future-oriented declaration of the organization’s purpose and aspirations.
 Vision shows the big picture of what the organization wants to achieve in its lifetime.
 Strategy Vision Should look realistic, Credible, and attractive future for the operation.
Components of a vision Statement.
 Define your customers.
 Define your customer’s needs.
 Define your product or Service.
 Define your company’s values.
Characteristics of Strategic Vision.
 Foundation.
 Directional.
 Flexible.
 Focused.
 Desirable.
 Feasible.
 Unique Idea.
 Easy Communicative.
 Benefit/ Significance of Strategic Vision.
1. Facilitates Decision.
2. Attract and Motivate Talent.
3. Maintain Focus.
4. Maintain legacy.
5. Set Priority.
6. Define Cultural Value.
7. Set Performance Standard.
8. Facilitates Collaboration.
 Developing Strategic Vision.
 Assess Current Position.
 Project Board Direction.
 Consider Nature of institution.
 Developing Future Scenarios.
 Generating Alternative Visions.
 Selecting a Final Vision.
 Communicating Vision.
Communicating the Strategic Vision
 Vision Provides a clear understanding of what the company would look like.
 Strategic Vision represents the company’s values and standard of its
performance so it is essential to communicate the company vision to all the
stakeholders.
 It is the responsibility of managers to develop a strategy for communicating
vision.
Effective communication of strategic Vision:
 Simple Storytelling:
 Use multiple Channels:
 Authenticity in Leadership:
 Solicit Feedback:
 Communicate Repeatedly:
 Act Consistently:
 Map the path:
 Mission Statement.
• A mission statement is a role, or purpose, by which an organization intends to
serve its stakeholders.
• It describes what the organization does (current capabilities), who it to serve
(stakeholders), and what makes the organization unique (justification for
existence).
• Mission statements always exist at the top level of an organization, but may also
be set for different organizational levels or components.
• A mission statement is simply an organization's reason for existing.
• Mission involves fundamental purpose of the organization and its reason of
existence and functioning.
• Mission provides a sense of direction to the organization and guides the managers
in decision making.
• It tells a company’s stories and ideals in less than 30 seconds.
Characteristics of mission Statement.
• Feasible.
• Precise.
• Clear.
• Motivating.
• Distinctive.
• Indicate Strategy
• Achievable.
• Accomplish Objectives.
Benefit/ Importance of Mission Statement.
• Focus Objectives.
• Innovative ideas.
• Create Identity.
• Attract Talent.
• Guiding Culture.
• Drive Action.
• Employee Commitment.
• Improve Performance.
 Crafting a Mission Statement.
 Define Objectives:
 Specific Statement:
 Inspire Audience:
 Concise Statement:
 Improvement of Managers:
 Consider Institutional Nature:
 Communicate Stakeholder:
Linking vision and Mission with Company Values.
• Values are a company’s beliefs, traits and behavioral norms that company staff
are expected to display in conducting the company’s business and pursuing its
strategic vision.
• A company's Values are also referred to as Core Values.
• Company values relate to such things as fair treatment, integrity, ethical
behavior, innovativeness, teamwork, social responsibility, customer service
excellence, social responsibility, and corporate citizenship.
• A company’s values are often developed in a statement of values.
• The Values statement emphasize the expectation that values be reflected in
the conduct of company operations and behavior of company personnel.
• Most companies articulate between four and eight core values that company
personnel are expected to display and that are supposed to be mirrored in
how the company conducts its business.
 Objectives
 Objectives are what an organization wants to achieve in the future.
 Objectives represents broad aims that serve as guide for the action.
 Objectives give Meaning and purpose to the organization.
 An objective refers to the specific steps a company will take to achieve
the desired result.
 The objective determined by the organization must be specific and
measurable in the qualitative term.
Characteristics/ Components of Objectives
 Specific:
 Measurable:
 Acceptable:
 Realistic:
 Time-Bound:
 Benefits of Objectives
 Provide Guidance:
 Promote Good Planning:
 Source of Motivation:
 Evaluation and Control:
 Provide Distinct Image:
 Direct Integration:
Level of Objectives.

Corporate Level Objectives.

Business Level Objectives.

Functional Level Objectives.

Individual Level Objectives.

 Considerations For Crafting Objectives.
 Specific.
 Measurable.
 Acceptable.
 Realistic.
 Time Bound.
 Hierarchical.
 Motivating.
 Flexible.
 Set Priorities.
 Evaluation and Control.
Factors Affecting Objectives Formulation.
Size of Organization.

Management Value System.

Availability of Resources.

Level of Management.

Organizational Culture.

Environmental Forces.

Past Achievement.
Roles of Objectives in Strategic Management.
 Pursue Vision and Mission.
 Define Relationship.
 Support Strategic Decision.
 Facilitate unified Direction.
 Help to set Priorities.
 Basis of Performance Appraisal.
 Enhance Distinct Image.
 Policies
 Policy refers to the fundamental written statement of an organization which
can guide the manager for thinking and decision making.
 Policies provide guide to action, objectives set the target where we want to
go and policies project out how we can go there.
 A policy is a general statement which guides thinking, decision-making and
action in the organization.
 Policies decide the limits within which management can take decisions.
 “A policy is a guide to thinking action of those who take decisions” -koontz &
D Donnel
“Policies are general statements which guide or channel the thinking of all
personnel charged with decision-making” -Theo Haimann
 Example of policy:
Human Resource policy, Recruitment policy, Pricing policy, Promotion policy,
Production Policy etc.
Types of Policy
 Distributive Policies.
 Regulatory Policies.
 Constituent Policies.
 Redistributive Policies.
 Factor Affecting Policies
 Organizational Objectives.
 Resources Availability.
 Organizational Structure.
 Managerial Values.
 Political Factors.
 Social Factors.
 Strategies and Policies

Strategies Policies
Strategies refers to setting long
Policies is a set of principles and
term objectives of an organization
rules which directs the decisions
and selecting a course of action for
and activities of the organization.
achieving objectives.

It is the means of obtaining It helps management to determine

competitive advantage of the what is to be done in a particular
organization through the proper situation for the smooth
use of resources. functioning of the organization.
 Strategic Options
 Strategic options refer to the choices a company makes to achieve its
objectives and stay competitive in the market.
 Strategic options help organizations adapt to changing environments, exploit
opportunities, and mitigate risks.
 Flexibility, foresight, and alignment with organizational goals.
Strategic Options may be :
 Market Penetration:
 Product Development:
 Market Development:
 Diversification:
 Strategic Alliances:
 Cost Leadership:
 Differentiation:
Generating Strategic Options.

Corporate
Level Strategy.

Business
Level Strategy.
Functional
Level Strategy.
 SWOT Analysis
 SWOT analysis is a strategic planning tool used to identify and understand
the internal strengths and weaknesses of an organization, as well as the
external opportunities and threats it faces.
 It is the study of Strength, Weakness, Opportunities and threat that an
organization has to capitalize and to face.
 Use SWOT analysis as a foundation for strategic decision-making and
planning.
 Develop actionable strategies based on SWOT analysis findings.
 Allocate resources and prioritize initiatives to address key areas identified.
 Continuously monitor the environment and adjust strategies accordingly.
 Incorporate SWOT analysis insights into overall strategic planning
processes.
Components of SWOT Analysis.
• Strengths (S):
• Internal capabilities or resources that give the organization a competitive advantage.
• Examples: Strong brand reputation, skilled workforce, innovative products or services.
• Weaknesses (W):
• Internal limitations or deficiencies that hinder the organization's performance.
• Examples: Lack of technological infrastructure, high employee turnover, limited financial
resources.
• Opportunities (O):
• External factors or trends that the organization could exploit to its advantage.
• Examples: Emerging markets, advancements in technology, changing consumer preferences.
• Threats (T):
• External factors or challenges that could negatively impact the organization's performance.
• Examples: Intense competition, economic downturns, regulatory changes, disruptive
technologies.
 Advantage of SWOT Analysis.
Strategic Planning:
Focus on Core Competencies:
Risk Management:
Resource Allocation:
Decision Making:
Enhanced Communication:
Flexibility and Adaptability:
Competitive Advantage:
Continuous Improvement:
Limitations of SWOT Analysis
 Corporate Strategy
 Corporate strategy is a comprehensive plan outlining how a corporation
intends to achieve its long-term goals and objectives while maximizing
value for its stakeholders.
 It involves decisions and actions taken by top management to allocate
resources, manage risks, and position the company in its competitive
environment.
 Corporate strategy encompasses various aspects, including business
portfolio management, market positioning, diversification, mergers and
acquisitions, and organizational structure.
 It provides a framework for aligning the company's activities with its
mission, vision, and values, while also adapting to changes in the external
business environment.
 Overall, corporate strategy serves as a roadmap for sustainable growth
and profitability in the long run.
Corporate strategy provides a clear vision and direction for the organization by
defining its long-term objectives and goals.
Corporate strategy guides the allocation of resources, including financial,
human, and technological assets, towards activities that support the
organization's strategic objectives.
It ensures that resources are deployed efficiently and effectively to maximize
returns and achieve desired outcomes.
Corporate strategy identifies the organization's unique strengths and
capabilities and leverages them to gain a competitive advantage in the
marketplace.
Corporate strategy involves managing the organization's portfolio of businesses,
products, and services to optimize overall performance and growth.
Corporate strategy enables the organization to adapt to changing market
dynamics, consumer preferences, and technological advancements.
Corporate strategy establishes key performance indicators (KPIs) and metrics to
monitor progress towards strategic goals and objectives.
 Types of Corporate Level Strategy

Growth Strategy Combination

Stability Strategy Strategy
Retrenchment
(Capacity and scope
(Maintaining the of business operation Strategy (Combination
current strategy in Strategies are
is expanded through (Minimization of size
the organization that increasing the application of mix of
and area of operation
is successfully amount of stability, growth or
of a business)
Functioning) retrenchment
investment)
strategies. )
 Stability Strategy
 Stability strategies are a set of corporate strategies aimed at maintaining the
current level of operations and preserving the existing market share without
seeking significant growth or expansion.
 These strategies are typically employed when the organization's primary goal is to
maintain stability, minimize risk, and ensure steady performance
 Types of Stability Strategy
No Change Strategy.
(also known as a status quo strategy , an organization maintain its current course of action without making significant changes
to its operations, products, services, or market positioning. )
Profit Strategy.
(also known as a profit-maximization strategy, is a set of actions and decisions implemented by an organization to increase its
profitability and maximize financial returns. Profitability is a fundamental goal for businesses, as it ensures sustainability,
growth, and value creation for stakeholders.)
Proceed with Caution Strategy.
(known as a conservative strategy, is a deliberate decision-making approach adopted by organizations when facing uncertain
or volatile business environments. This strategy prioritizes risk mitigation, and careful evaluation of opportunities and threats
before making significant decisions or taking action.)
 Advantage of Stability Strategy
 A stability strategy is most suitable in short-run benefits if the
environmental is stable.
 Adopting a stability does not disrupt the routine work of the company.
 A stability strategy is less risky unless the environmental situation is not
drastically changed.
 Its main objective is to improve present level efficiency for earning more
profit.
 This strategy is more suitable if there is high competitive rivalry among the
companies.
 This strategy allows the company management to rethink its long term
strategies.
 Disadvantage of Stability Strategy
 There is less opportunities for innovation and growth due to a stable
strategy.
 This strategy has no use in the long run because it can minimize the overall
growth of business in the long run.
 This strategy is not suitable for small and medium scale industries.
 In this strategy the competitive position of the company may decline if
competitors come with an expansion strategy.
 The company may lose new opportunities that are created by changing the
external environment.
 Growth Strategy
 A plan of action implemented by an organization to expand its business
operations, increase market share, and achieve sustainable growth over time.
 Growth strategies are essential for organizations looking to capitalize on
opportunities, enhance competitiveness, and create value for stakeholders.
 Growth strategies are essential for organizations seeking to expand their
business operations, increase market presence, and achieve long-term
success in a competitive marketplace.
 Types of Growth Strategy.
 Concentration Strategy.
(A Concentration Strategy is a corporate strategy where an organization focuses its efforts and
resources on a single product, service, or market segment. Rather than diversifying its offerings or
expanding into new markets, the organization concentrates its efforts on a specific area to achieve
competitive advantage and maximize returns.)
 Horizontal Growth.
(New Product line which is closely related, Eg TV Company Starts to Produce Laptop.)
 Vertical Growth.
(Forward Product Cycle/Backward Product Cycle)
 Integration Strategy.
(Integration strategy refers to a set of actions taken by an organization to combine and align
different aspects of its operations, resources, and capabilities following a merger, acquisition, or
strategic alliance. Integration strategies aim to achieve synergy, streamline operations, and
maximize the value derived from the integration process)
 Diversification Strategy.
organization seeks to expand its business operations or portfolio by entering new markets,
industries, or product categories that are distinct from its existing offerings. Diversification
allows organizations to reduce risk, capture new growth opportunities, and enhance long-
term sustainability by spreading investments across different areas.
 Related Diversification.
 Unrelated Diversification.
 Co-operation Strategy.
Co-operation strategy involves collaborating with other entities to achieve mutual goals,
such as shared resources, expertise, or market access. It encompasses partnerships,
alliances, joint ventures, or strategic alliances to leverage strengths, mitigate weaknesses,
and capitalize on opportunities in a mutually beneficial manner.
 Internationalization Strategy.
Internationalization strategy involves expanding business operations beyond domestic
borders to capitalize on global opportunities. It includes market entry modes such as
exporting, licensing, franchising, joint ventures, or wholly-owned subsidiaries. This
strategy aims to increase market share, access new customers, diversify revenue streams,
and achieve economies of scale by leveraging international markets, resources, and talent.
 Retrenchment Strategy.
 A "Retrenchment Strategy" is a business strategy where a company reduces
its scale or scope of operations in order to improve its financial performance
and efficiency.
 This strategy is typically employed when a company is facing financial
difficulties, declining revenues, or other significant challenges that require
drastic action to restore profitability and sustainability.
 The goal of a retrenchment strategy is to restore the company to a position
of financial health and operational efficiency by making tough decisions to
streamline operations, reduce costs, and refocus on core priorities.
It's essential for companies to carefully consider the potential long-term
implications and consequences of retrenchment actions, such as the impact
on employee morale, customer relationships, and future growth
opportunities.
 Types of Retrenchment Strategy.
 Turnaround Strategy.
 Company is not doing well but possibility to sustain.
 Captive Company Strategy.
 When turnaround strategy doesn't become effective.
 Company is handover to other organization in exchange for its
security.
 Disinvestment Strategy.
 Sale or liquidation of a portion of business or major division.
 Restructuring plan.
 Liquidation Strategy.
 Closing down of a firm and selling its assets.
Benefits of Retrenchment Strategy

Applicable when any business unit is not doing so well.

Minimize expenses through minimization of the functional operation.

Reallocating resources from the loss unit.

Create innovations, Plans and strategies to survive in an economic downturn.

Limitations of Retrenchment Strategy.
This Strategy might reduce the company revenue due to decreased size of the business.

Provide negative impact on long term business activities.

Decline growth rate, Reduced Profit, Smaller workforce, Reduce productivity and inability
to meet consumer demand.

Decline work and working skills and efficiency of workers.

Fail to fulfil the changing demand and expectations of Customer.

 Combination Strategy.
 A "Combination Strategy" in business refers to the simultaneous use of
multiple strategic approaches to achieve organizational objectives.
 Instead of relying on a single strategy, companies adopt a combination of
strategies to leverage their strengths, mitigate weaknesses, and capitalize on
opportunities in the market.
 This approach allows businesses to be more flexible, adaptable, and resilient
in dynamic and competitive environments.
 By adopting a combination strategy, companies can achieve a balance
between different strategic approaches to create sustainable competitive
advantages and drive business success in a complex and evolving
marketplace.
Benefits of Combination Strategy
Risk Diversification:
Competitive Advantage:
Flexibility and Adaptability:
Synergies and Economies of Scale:
Enhanced Innovation:

Limitations of Combination Strategy.

Complexity and Coordination Challenges:
Resource Allocation Dilemmas:
Strategic Deviation:
Increased Costs:
Cultural and Organizational Challenges:
Risk of Overextension:
Measurement and Evaluation Difficulties:
 Business Level Strategy
 Business-level strategy refers to a company's approach to competing within a specific
industry or market segment.
 It involves making decisions about where to compete and how to position the company to
gain a competitive advantage over rivals.
 This strategy addresses who the target customers are, what value the company offers
them, and how it achieves a competitive edge.
 Businesses typically pursue three primary strategies: cost leadership, differentiation, or
focus.
 Cost leadership involves offering products or services at lower costs than competitors,
 Differentiation focuses on providing unique value to customers,
 Focus targets a specific market.
 Business-level strategy guides decisions about product offerings, pricing, marketing, and
resource allocation to ensure the company's success and profitability.
The goal is to create sustainable competitive advantages that enable the company to
outperform competitors and industry.
 Types of Business Level Strategies
 Porter’s Competitive Strategy.
Cost Leadership Strategy.
Differentiation Strategy.
Focus Strategy.

 Strategic Clock Strategy.

 Cost Leadership Strategy
 Lowest-cost producer in its industry or market segment.
 The primary goal of cost leadership is to offer products or services at prices lower than
those of competitors while maintaining acceptable levels of quality.
 By minimizing production and operational costs through efficient processes, economies
of scale, technological advancements, and strategic supplier relationships, companies can
achieve cost leadership and gain a competitive advantage.
Source of Cost Leadership Strategy.
 Economies of Scale:
 High Capacity utilization:
 Cost Saving Technology
 Standardized Products.
 Long Term Experience.
 Access to Raw Materials.
 Resources Sharing.
 Network of distribution.
Conditions of Cost Leadership Strategy Success.
1. Price Based Competition.
2. Standardized Product.
3. Bargaining power of Buyers.
4. No Customer Loyalty.
5. Low Switching Cost.
6. Similar Product.
Benefits of Cost Leadership Strategy
1. Face Competition.
2. Large Market Share.
3. Protect the company.
4. Cost Advantage.
5. Deal with Customer Bargaining.
6. Low chance of New Entrants.
7. Low threats of substitutes.
Risk Associated with Cost Leadership Strategy
1. Short Term Strategy.
2. Lack of market friendly Strategy.
3. Reduce Scope.
4. New Technology innovation.
5. Ignore Wealthy Customer.
6. Minimize Profit.
 Differentiation Strategy
 To differentiate product/ Services by giving a UNIQUE VALUE from the
same of competitors .
 With the differentiation strategy, the unique attributes and characteristics of a
firm’s product provide value to customers.
 Such differentiation can be achieved by adopting
1) A firm can use high-quality raw material inputs, superior process technology, speedy
and reliable distribution or better after-sales support.
2) It can incorporate features that offer utility for the customers and match their tastes
and preferences.
3) It can provide responsive customer service.
4) It can look for rapid product innovations and technological leadership.
5) It can incorporate features that enable the customers to claim distinctiveness from
other customers and enhance their status and prestige among the buyer community.
Sources of Differentiation Strategy.
 Unique Tangible Traits.
 Intangible Features.
 Superior Quality.
 Maintain Prestige.
 Uniform Supply.
 Service After Sale.

Conditions of Differentiation Strategy Success.

 Large Market Size.
 Diversified Customers.
 Quality Valued Customers.
 Limited Competitors.
 Sustain Brand Loyalty.
 Difficult to Imitate.
 Focus on Research.
 Proper Communication.
Benefits of Differentiation Strategy.
 Create Brand loyalty.
 Discourage New Entrants.
 Limited Rivals.
 Pay Premium Price.
 Low Chance of Substitute.
 Customer Satisfaction.

Risk Associated With Differentiation Strategy.

 Difficult to Sustain.
 Reduce Distinctiveness.
 Not Valued by Customers.
 High Premium Price.
 Increased Cost.
 Communication Lack.
 Focus Strategy
 Strategy where a company concentrates its efforts on serving a particular segment of the market.
 The company focus to a specific group of customers, a niche market, or a particular product line.
 This strategy allows the company to better understand the needs and preferences of its target market.
 Implementing a focus strategy requires a deep understanding of the target market and a commitment to
delivering value to customers within that market segment.
 It can be effective in building a strong competitive position and achieving higher profitability.

Cost Focus:
 The company aims to become the low-cost producer within its niche market.
 By focusing on cost reduction measures such as efficient production processes, economies of scale, or
sourcing cheaper materials, the company can offer competitive prices to its target customers.
Differentiation Focus:
 The company focuses on differentiating its products or services within the niche market.
 This could involve unique features, superior quality, specialized services.
Condition of Focus Strategy Success.

Identify Gaps

Develop Skill

Cost and Differentiation

Creativity and Innovation.

Understand Market.

Quick Response.
 Benefits of Focus Strategy.

Face Competition.

Customer Loyal.

New Entry Barriers.

Prevent Substitute.

Cover Small Market.

Sustain Business.
Risk Associated with Focus Strategy.

Focus Narrow Market.

Time Consuming Process.

Difficult to Move.

Niches are Temporary.

Increased Competition.

Rising Cost.
Strategic Clock-Oriented Market Based Generic Strategies.
 Provides a visual representation of competitive strategies based on price and
perceived value.
 It helps businesses understand where they fit in the market and how they can
position themselves for competitive advantage.
Eight generic strategies represented on the Strategic Clock:
Low Price/Low Value:
 Offering products or services at a low price point with relatively low perceived value.
 It's often associated with budget or discount brands.
Low Price:
 Offering products or services at a low price compared to competitors while maintaining
acceptable levels of quality.
 This strategy aims to attract price-sensitive customers.
Hybrid:
 Offer both low prices and some level of differentiation or added value.
 This can involve offering a basic product at a low price while also providing additional
features or services that justify a slightly higher price.
Differentiation:
 Offering products or services that are perceived as unique or superior in some way,
allowing the company to command higher prices.
 This can involve product innovation, superior quality, excellent customer service, or
strong branding.
Focused Differentiation:
 This involves targeting a specific niche market with differentiated products or
services.
 The company aims to meet the unique needs and preferences of this niche
market, often commanding premium prices.
Risk Reduction:
 Offering products or services that are perceived as lower risk to the
customer, often through established brand reputation, reliability, or extensive
warranties.
 This allows the company to charge higher prices.
Monopoly Pricing:
 Charging high prices for products or services that have limited or no
competition, often due to factors such as patents, exclusive distribution
agreements, or high barriers to entry.
Segmentation:
 Targeting multiple market segments with different products or services
tailored to each segment's specific needs and preferences.
 This allows the company to capture a larger share of the market and
maximize revenue.
 Functional Level Strategy.
 Functional level strategy involves the formulation and implementation of plans and
initiatives by individual departments or functions within an organization to support
the overall business strategy.
 It focuses on how each function, such as marketing, operations, finance, or human
resources, contributes to achieving the company's strategic objectives.
 This includes functional goals with the broader goals of the organization, allocating
resources effectively, and leveraging functional capabilities to create competitive
advantage.
 Collaboration between different functions
 Ability to measure performance and adapt to changing circumstances.
 Functional level strategy ensures that each part of the organization is working
towards common goals while also addressing specific challenges and opportunities.
 By optimizing the performance of individual functions with the company's overall
strategy, functional level strategy helps drive organizational success and
competitive advantage.
 Types of Functional Level Strategy.

Production Strategy.

Marketing Strategy.

Human Resource Strategy.

Finance Strategy.

Research and Development Strategy.

 Direction of Strategy Development.
 Strategic direction refers to the action plan that is implemented in the
organization for achieving its Strategic vision and Objectives.
 The direction of strategy development refers to the path that a company
follows when formulating and evolving its strategic plans over time.
 This direction is influenced by various internal and external factors, including
market dynamics, competitive landscape, organizational capabilities, and
leadership vision.
The Direction of Strategy Development.
Methods of Strategy
Development Internal Development.

Merger and Acquisition.

Joint Development and Strategic

Alliances.
Internal Development.
 Internal Development refers to company uses its own resources to grow
the business.
 The main objective of internal development is to increase sales, develop
efficiency, deals with customers better and help in expanding the business
activities of the company.
Situations of internal development of the organizations:
• High Technical Products.
• Knowledge and Capability.
• Spreading Investment.
• Minimizing Disruption.
• Nature of Market.
Mergers and Acquisition
 A merger occurs when two companies agree to combine their operations
into a single entity.
 An acquisition, involves one company purchasing another company, either
through a stock purchase or an asset purchase.
Types of Merger and Acquisition.
 Horizontal Merger.
 Vertical Merger.
 Concentric Merger.
Conglomerate Merger.
 Reasons for Merger and Acquisition
 Economic of Scale.
 Provide Synergy Effect.
 Diversification of Business.
 Minimize Competition Level.
 Increase Financial Capacity.
 Fulfill Stakeholder's Expectations.
 Joint Development and Strategic Alliances.
Joint development and strategic alliances are forms of collaborative partnerships
between two or more entities, or companies, aimed at achieving mutually
beneficial goals.
 Joint development typically refers to the cooperative effort between two or more
parties to create or develop a product, technology, or solution.
 This collaboration allows each party to leverage their respective strengths,
resources, and expertise to achieve a common objective.
Joint development can range from simple partnerships to more complex
arrangements involving shared research, development costs, and intellectual
property rights.
Strategic alliance is an agreement between two or more independent companies
to cooperate each other through sharing resources and competency for mutual
benefits.
 Strategic alliances are broader partnerships formed to pursue strategic objectives
such as expanding market reach, accessing new technologies or markets, or
sharing risks and resources.
 Joint Development and Strategic Alliances Cont….
 Alliances may involve various forms of cooperation, including joint ventures,
licensing agreements, distribution agreements and marketing partnerships.
 Strategic alliances can be between companies within the same industry or
across different industries, and they can take various forms depending on the
goals and resources of the parties involved.
Joint development and strategic alliances clear communication, alignment of
goals, trust, and mutual benefit.
 Partnerships can provide opportunities for innovation, cost-sharing, risk
mitigation, and access to new markets or capabilities that may not be
achievable independently.
Forms of Strategic Alliance.

Joint Venture:

Equity Alliance:

Non Equity Alliance:

Reasons for Strategic Alliance
 Share Resources:
 Develop Competency:
 New Market Penetration:
 Improve Competitive Position:
 Economies of Scale:
 Business Expansion:

Components for Successful Strategic Alliance

 Strategic Purpose:
 Fulfill Expectation and Benefit:
 Managing Relationship:
 Creation of Trust:
 Support of Management:
 Keep Alliance Flexible:
 Portfolio Analysis
 Portfolio analysis is strategic management tool that involves identification
and evaluation of all products or service groups offered by the organization in
the market.
 It involves evaluating the risk and return of individual components within the
portfolio, as well as their contribution to overall organizational objectives.
 Portfolio analysis provides valuable insights that enable organizations to
make informed decisions about resource allocation, risk management, and
strategic planning.
 By regularly analyzing and optimizing their portfolios, organizations can
enhance their competitiveness, maximize returns, and mitigate risks in an
evolving business environment.
 Advantage of Disadvantage of
Portfolio Analysis Portfolio Analysis
Support Investment Choices. Over Diversification of Risk.

Track Performance. Wrong Forecasting.

Liquidity Management. No Full Protection.

Balance Risk and Return. Environmental uncertainty.

Improve Financial Position. Based on Competency

 Boston Consulting Groups (BCG) Matrix
 BCG Matrix classifies Business Portfolio into four categories based on market
growth rate and relative market share.
General Electric (GE) Nine Cells Matrix
 GE nine cells 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. This matrix has also many points in common with
the MABA analysis.
 MABA is stands for Market, Attractiveness, Business position and
Assessment.
Five steps consider in order to formulate the Matrix

Determination of Market Attractiveness.

Determination of the Competitive Strength.

Plotting the Business units on a matrix.

Determination the Strategy Option.

Identify the Future Direction.