STRATEGY

Strategy is the direction and scope of

an organization over the long term,
which achieves advantage in a
changing environment through its
configuration of resources and
competences with the aim of
fulfilling stakeholder expectations.
 Strategic Decisions
Strategic decisions are about
• The long term direction of an organisation.
• Gaining advantage over competitors
• Building on resources and capability
• Values and expectation of stakeholders.
(Decision making is a fundamental skill for any
successful executive. But decisions at strategic
level are hard to make).
 Therefore, they are likely to
• Be complex in nature
• Be made in situations of Uncertainty
• Require an integrated approach
(When company decisions are taken by top management for a
long run
When there is a need of huge resources and need to be allocated
When management thinks about over all prosperity of
organization
When management consider all external perspective for growth
of organization)
ex:- entering new markets, or using new technology , starting a
new product line.etc.
• Ex:- P&G experienced a number of product failures
there during the 1980s. In one case, featured in
the Game Changer by CEO A.G. Lafley and Ram
Charan, the company launched a detergent line in
Mexico that marketers assumed would be a big hit
because it saved customers money and valuable
storage space.
• The product flopped. Why? Many of its customers
there did manual labor and were very sensitive to
perspiration odors as they bussed home from work.
What gave them confidence that their clothes were
getting clean was seeing their detergent foam –
something the new product lacked.
• Under Lafley, P&G launched a program to have its
managers actually live with representative
customers called “Living It.” Dubbed “immersion
research,”.
• P&G managers and even senior leaders spend time
in low-income homes around the world in order to
understand what matters to their customers in life,
as well as their desires, aspirations, and needs. P&G
has a bevy of statistics to suggest that improved
insights and assumptions have led to more effective
innovations – including laundry detergent with more
noticeable foam.
• Example:-UBER It all started in 2008, with the founders of Uber
discussing the future of tech at a conference. By 2010, Uber
officially launched in San Francisco. In 6 months, they had 6,000
users and provided roughly 20,000 rides. What was the key to their
success? For one, Uber’s founders focused on attracting both
drivers and riders simultaneously. San Francisco was the heart of
the tech community in the US and was thus the perfect sounding
board for this form of technological innovation to thrive.
• In the beginning, Uber spread their App through word of mouth,
hosting and sponsoring tech events, and giving participants of their
events free rides with their app. This form of go-to-marketing
persists today - giving 50% discounts to new riders for their first
Uber ride.
• This initial discount incentivized users to become long term riders,
and the rest was history. As more and more people took to social
media to tell the world about this innovative new App - the sheer
brilliance of their marketing strategy paid off.
• Strategic decision - We wanted to offer a discount, but
we are selling a premium brand. While a discount may
bring in customers this month, it will erode the value of
our brand. Instead, we should be doing marketing that
promotes the quality and uniqueness of our products.
• Ex:-
• Amazon made the strategic decision to focus on electronic
delivery of books through the Kindle Reader and the Kindle Read
App and gained an unstoppable competitive edge vs. Borders and
Barnes & Noble, eventually forcing Borders to close stores due to
declining traffic.
• A strategic business unit (SBU) is a part of an organization for
which there is a distinct external market for goods or services
that is different from another SBU. It can be a business division,
a product line of the division or even a specific product/brand,
targeting a particular group of customers or a geographical
location.
• Levels of Strategy:-
• Corporate level
– Determine overall scope of the organization
– Add value to the different business units
– Meet expectations of stakeholders
– Ex : Diversification a manufacturer of computers might begin
making calculators as a form of related diversification of its
existing business.
– ITC into hotel industry. –UNRELATED DIVERSIFICATION.
• Coca Cola Globalization Strategy-Thisis another
significant corporate business-level strategy.
Technological advancements have been significant for
contributing to Coca-Cola’s business growth through
globalization especially during the 20th century .
• For instance, transportation of products became
easier and cost effective especially following the
development of faster and bigger semi-trucks, trains,
jet aircrafts and cargo ships. This enabled and
continues enabling Coca-Cola manufacture and avail
its products in furthest markets. Due to technological
development, the company has taken advantage of
the situation and now has its presence in more than
200 countries in the world.
• Business level- How to compete successfully in particular
markets.
• A business-level strategy addresses the question of how a business
aims to compete in its particular industry. 
• Ex: Differentiation strategies-
• While at the corporate level, the decisions of growth can be seen
as merger or acquisition, at the business level these decisions are
looked upon as the need to hire more manpower or to allocate
resources in a manner that the growth(sales) is on the higher end.
• Ex:-Unlike Coca-Cola, PepsiCo deals in snack products as well. It
therefore makes its presence in the market by providing both
beverages and snacks.
• Operational level- How different parts of organisation deliver
strategy- encompasses the day-to-day activities, so the company
maintains its overall mission.
 Example
• IBM’s mission statement is “to lead in the creation,
development, and manufacture of the industry’s most
advanced information technologies, including
computer systems, software, networking systems,
storage devices, and microelectronics”. 
• IBM’s vision statement is “to be the world’s most
successful and important Information Technology
Company. Successful in helping out customers apply
technology to solve their problems. Successful in
introducing this extraordinary technology to new
customers. Important, because we will continue to be
the basic resource of much of what is invested in this
industry.”
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• Case on Dell :- Why were the issues facing
Dell Computers described as strategic?
• Complex in nature:- Multi-national firm,
technical nature of product (fast moving
markets), Coordinate activities over wide
geographical area.
• Uncertainty- Where digital technologies were
moving.
• Operational—Dell’s knowledge of internet
selling was fundamental to success.
• Long term direction of a company- The
transformation of Dell from a computer
product company with corporate clients to
mass market provider of consumer electronic
products would take a considerable period of
time.
• Scope- Important decisions about product
range or geographical coverage.
• Advantage over competitors- Dell felt that
margins earned by many competitors were
too high.
• Competences:- Dell’s ambitions in consumer
electronics were built on a belief that it’s
knowledge of digital technologies could be
explained across a wide range of products.
• Stakeholders- The 44,000 employees has an
interest in Dell’s success. Clearly, Michael
Dell has a clear vision for the company.
Investors had faith in the company.
• Dell sells personal computers (PCs), servers, data
storage devices, network switches, software,
computer peripherals, HDTVs, cameras, printers,
MP3 players, and electronics built by other
manufacturers.
• The company is well known for its innovations
in supply chain management and electronic
commerce, particularly its direct-sales model and
its "build-to-order" or "configure to order"
approach to manufacturing—delivering individual
PCs configured to customer specifications.
(Dell famously avoided retail channels, instead
offering every customer the opportunity to order a
unique product built to their specifications.)
• In 1990, Dell Computer tried selling its
products indirectly through warehouse clubs
and computer superstores, but met with little
success, and the company re-focused on its
more successful direct-to-consumer sales
model. In 1992, Fortune magazine included
Dell Computer Corporation in its list of the
world's 500 largest companies.
• In 1996, Dell began selling computers via its
web site.
• In 2002, Dell attempted to expand by tapping
into the multimedia and home-entertainment
markets with the introduction of televisions,
Dell Axim handhelds, and Dell DJ digital audio
players. Dell has also produced Dell-brand
printers for home and small-office use.
• Business Model:- Describes the structure of
product, service and information flows and role
of participating parties.
• A business model is a high-level plan for
profitably operating a business in a specific
marketplace. A primary component of the
business model is the value proposition. 
• Example:- The DELL offers customization by
enabling customers to select various features of
their computers.
• (A business model is a clear, concise way of
picturing how a business operates. )
• AI has been around for decades. Today, it’s
being used in applications such as video games,
fraud protection, and spam detection in your
emails.
• IoT-The ability to connect devices to the internet
is nothing new, but we’re now connecting more
“things” to the internet than ever before.
Imagine your alarm going off in the morning and
prompting your coffee maker to start brewing
your morning cup before your self-driving car
drives you to a smart office environment in
which your personal space is perfectly adapted
to your needs.
• The core of dell computer strategy was to use
its strong capabilities in supply chain
management, low cost manufacturing, and
direct sales capabilities to expand in to
product categories where it could provide
added value to its customer in the form of
lower price. 
•  Strategic decisions:
• Strategic decisions are major choices of actions and influence
whole or a major part of business enterprise. They contribute
directly to the achievement of common goals of the
enterprise. They have long-term implications on the business
en­terprise.
• They may involve major departures from practices and
procedures being followed earlier. Generally, strategic decision
is unstructured and thus, a manager has to apply his business
judge­ment, evaluation and intuition into the definition of the
problem. These decisions are based on partial knowledge of
the environmen­tal factors which are uncertain and dynamic.
Such decisions are taken at the higher level of management.
• Tactical
• These decisions relate to the implementation
of strategic decisions. They are directed
towards developing divi­sional plans,
structuring workflows, establishing distribution
chan­nels, acquisition of resources such as
men, materials and money. These decisions
are taken at the middle level of management.
• Operational decisions:
• These decisions relate to day-to-day op­erations of the
enterprise. They have a short-term horizon as they
are taken repetitively. These decisions are based on
facts regarding the events and do not require much of
business judge­ment. Operational decisions are taken
at lower levels of man­agement. As the information is
needed for helping the manager to take rational, well
informed decisions, information systems need to fo­
cus on the process of managerial decision making.
• Strategic Management includes understanding
the strategic position of an organisation,
strategic choices for the future, and turning
strategy into action.
Elements of Strategic Management
• I) Strategic position is concerned with
identifying the impact on strategy of the
external environment, an organisations
strategic capability (resources and
competences) and the expectations and
influence of stakeholders.
• Environment:- The Organisation exists in the context of a
complex political, economical, social, technological,
environmental and legal world.
• Strategic capability of an organisation made up of
resources and competences.
• Expectations of stakeholders
ex:- The decision to expand consumer electronics (Dell)
was influenced by a combination of market opportunities,
strengths in digital technologies, and the expectations
about the company’s continued financial success. So the
reason for understanding of the strategic position is to
form a view of the key influences on present and future
wellbeing of an organisation, and opportunities and
threats are created by the environment, the capabilities of
the organisation and the expectations of stakeholders.
• II) Strategic Choices- Strategic choices involve
understanding the underlying bases for future
strategy at both business unit and corporate levels
and the options for developing strategy in terms of
both the directions in which strategy might move &
the methods of development.
• There are strategic choices in terms of how the
organisation seeks to compete at business level.
This requires an understanding of both markets
and customers and the strategic capability of an
organisation. The Dell expected to gain advantage
through it’s knowledge of digital technologies.
•
• The corporate level strategy, which are
concerned with the scope of an organisations
strategies. This includes the decision about
portfolio of products, international strategies
are the key part of corporate level strategy.
• The strategy may develop in the future in
different directions. For ex:- The Dell was
progressively moving from a narrow product
base (Computers) and a narrow customer base
(Corporate clients) by extending it’s product
range and target customers.
• III) Strategy into action:- Is concerned with
ensuring that strategy working in practice.
Structuring an organisation to support
successful performance. –The organisation
structures, processes and relationships.
Enabling success through the way in which the
separate resource areas (people, information,
technology, and finance) of an organisation
support strategies.
• Managing strategy very often involves change.
 Different Context of Strategy
• Small • Single market. Limited product/service range. Restricted
Business funds.

• Multinatio • Diverse products/markets/businesses.

nal
Corporatio
n

• Manufactu • Manufacturing – physical product often augmented with

ring/ service, brand image for competitive advantage.
Service • Services – no physical product, competitive advantage
Organisatio based on intangibles.
ns
• For example, if a bakery owner positions her
business to increase profits but remain a small
local establishment, her operations, inventory,
marketing and customer service will align with
creating more varieties of baked goods more cost-
efficiently, and perhaps opening a coffee shop by
expanding into the space next door.
• If her positioning is to grow into a much bigger
regional or national company, then her
operations, inventory and marketing will align
with developing distribution channels throughout
the state and, eventually, the entire nation. 
 Contemporary Strategic Themes
• Internationalization • E-Commerce
• Changing purposes • Knowledge and
Learning
• Internationalization-Those entrepreneurs who are
interested in the field of internationalization of
business need to possess the ability to think
globally and have an understanding of
international cultures. By appreciating and
understanding different beliefs, values, behaviors
and business strategies of a variety of companies
within other countries, entrepreneurs will be able
to internationalize successfully.
• Entrepreneurs must also have an ongoing concern
for innovation, maintaining a high level of quality,
be committed to corporate social responsibility. 
• E-commerce has transformed the way business is done in
India. The Indian E-commerce market is expected to grow to
US$ 200 billion by 2026 from US$ 38.5 billion as of 2017.
Much of the growth for the industry has been triggered by an
increase in internet and smartphone penetration. The
ongoing digital transformation in the country is expected to
increase India’s total internet user base to 829 million by
2021 from 636.73 million in FY19.  India’s internet economy is
expected to double from US$ 125 billion as of April 2017 to
US$ 250 billion by 2020, backed primarily by E-commerce.
India’s E-commerce revenue is expected to jump from US$ 39
billion in 2017 to US$ 120 billion in 2020, growing at an
annual rate of 51 per cent, the highest in the world.
• Amazon has been and still is to this date a
pioneer in the online retailing space and the
world’s largest online retailer. It started as an
online bookstore, but it quickly expanded and
started selling anything that can be sold online.
What is more, Amazon has slowly but surely
expanded globally and now operates around the
world, through a combination of localized portals
and globalized delivery and logistics platforms.
• Amazon’s primary intensive growth strategy. The main
objective in this first strategy focuses on entry and
growth in new markets. From the beginning, Amazon has
kept expanding its borders and it has never stopped
adding new countries where it offers its services.
• If at first, Amazon provided its online retail services to
consumers in the United State, now the company
operates e-commerce websites in more than 10 countries,
including Canada, the United Kingdom, China and India.
Every new country represents another growth
opportunity for the company.
• Product development-
• The goal of this intensive growth strategy is
to develop and offer new products to gain higher
revenues. The growth of Amazon itself is partly
influenced by the development of new products.
• For instance, the company now offers AmazonBasics
products and Amazon Web Services – AWS. One
strategic objective based on this intensive growth
strategy is to increase research and development
investment, which can lead to rapid product
development and quick release on the online retail
market.
• Amazon has grown significantly since its
inception as a book-selling website and spread
its wings to other areas like logistics,
consumer technology, cloud computing, and
most recently, media and entertainment –
domains that did and would help Amazon
tread the path to emerge as a trillion-dollar
corporation.
• Amazon ranked 8th on Fortune 500 2018 list, 5th in
2019, and 2nd in the 2020 list – It’s the best rank ever
since Amazon made its presence in the magazine for
the first time in 2002. Since then, the company has
been continuously listed on the coveted list, each
time with a rank better than the previous year.
• Growing Revenue
• In the last five years, the sales of Amazon increased
by 161% – a whopping $280.52 Billion in 2019 – from
$107 billion in 2015. In 2019 alone, the revenue grew
by 20.8% when compared to 2018.
• Amazon’s Investment in Technologies
• Amazon Robotics
• Amazon has been investing considerably in robotic and
drones technologies for the past decade and has acquired
many patents on them. Its warehouses alone house more
than 45,000 robots.
• In 2012, Amazon acquired Kiva Systems – a company that
designs robots for picking and packing process – for $775
million. By 2014, the company had 14,000 robots for their 10
warehouses. The following year, the count increased by 114%
to 30,000 robots and in 2017 the number increased by 50% to
45,000 robots across 20 warehouses.
• In addition to acquisitions, Amazon also organizes challenges
in different universities and institutes across the world in
which they offer a large sum of money for inventing a next-
generation robot. In 2017, the prize money was $250,000.
• Amazon Drones
• Amazon is also researching drones for their initiative and future service of
drone delivery. In Britain, Amazon started its drone delivery service under
Amazon Prime Air.
• In Oct 2017, the US Federal Government approved a drone
delivery program in the US as well. The administration stated that they
wanted to open new opportunities and commercial uses for the drones
for creating jobs.
• Amazon has recently filed numerous drone patents on package delivery,
package parachute, and a floating airship warehouse. Also, it has patents
on drone design for better maneuvering, secure landing, and long flights.
• On an advanced level, they got a patent for a method to charge electric
vehicles through drones. This shows their interest in automobiles as the
future will require many methods to charge an EV. Further, there would
be no surprise if Amazon ventures in the domain of the automobile.
• E-commerce during Covid
• Social distancing becoming the new normal and increased
hygiene consciousness will also have an impact on the way
consumers will shop in the near future. This would also result
in an increased shift in consumers buying from traditional
shopping methods to shopping digitally. From the e-
commerce entities side, while consumer buying patterns and
social distancing and other hygiene norms will have to be
factored in and adhered to, by these entities, these entities
will also have to innovate to meet change in consumer
behavior.
• The Government can also provide impetus to the digital space
by introducing guidelines so as to encourage more and more
retail traders to use e-commerce platforms effectively and in a
hassle-free manner as an option for selling their products.
Covid-19 will definitely bring a sea change in not just day-to-
day lives across the world but also in the way we shop.
• Political Economic
• Business cycles
• Interest rates
• Inflation
• Unemployment
• Disposable income
• The Environment-Outline
• Macro environment
– PESTEL
• Scenarios
• Sources of competition
– 5-forces
• Understanding competition
– Strategic group analysis
– Market segments
– Critical success factors
• Strategic gaps
– Opportunities
– Threats
• National Diary Development Board (NDDB)
• However, in India, the milk producer gets more than 70 per
cent of the consumer's rupee on an average. Moreover, the
milk producer affiliated to co-operatives get more than 80
per cent share of the consumer's rupee.
• Hazard Analysis and Critical Control Point (HACCP) HACCP is
described as "a food safety program developed ... for
astronauts...; [it] focuses on preventing hazards that could
cause food-borne illnesses by applying science-based
controls, from raw material to finished products.
• The initiation of Total Quality Management (TQM) way back
in 1994 was to work with the well known quality
management initiatives which have proven to be effective
elsewhere to create a culture of transparency, openness
and leadership in the organization.
AMUL Model
• The objective was the ensure that the small
fragmented milk producers received the
maximum possible remuneration while
creating low cost high quality products for
consumers, while eliminating the middlemen.
Ensuring availability and providing great
service to both the suppliers and consumers
was of great importance as well.
• Organizational Alignment
• The heads of the village cooperatives sit on the
management of the union at the district level.
The heads of the unions at the district level
comprise the governing board for the
federation. This board appoints the chairman of
Amul diary. This strategy has effectively ensured
that the management has “skin in the game”.
• The incentive structure is also aligned in that it
reward suppliers who generate the most
amount of business, which is judged based on a
mix of the quality and quantity of milk supplied.
• Technology Initiatives
• An automatic Milk Collection System was established that could
identify and test the quality/quantity of milk. This leads to time
saving since over 1000 producers enter a village cooperative each
day and increased transparency.
• Enterprise-wide Integrated Application Systems were used to align
various sub software systems in place. A Geographic Information
System was also established to view supply disparities in real time.
Cyber stores have been recently launched as well.
• Marketing/Advertising Campaign
• One of the most interesting things about Amul is how a dairy
cooperative evolved into a social commentator through their
advertisements. The cartoon is usually has the Amul mascot (Amul
Girl) in a current context with a catchy tagline. These ads have
now become an establishment of their own right, elevating Amul’s
brand image from just a diary cooperative to a household name
outside the diary products context.
• Bridging Gaps in a Fragmented/Unstable
Supply Side Market
• Given the fragmented nature of the producers,
supply tends to vary based on various factors,
but demand remains fairly constant. The unions
have invested in cold storage facilities to ensure
that surpluses can be stored and redistributed to
village level centers that are facing a shortage of
supply, efficiently reducing supply instabilities.
• The objective was the ensure that the small
fragmented milk producers received the
maximum possible remuneration while
creating low cost high quality products for
consumers, while eliminating the middlemen.
Ensuring availability and providing great
service to both the suppliers and consumers
was of great importance as well.
• Wealth distribution is also uneven, with one
report estimating that 54 percent of the
country's wealth is controlled by millionaires,
the second highest after Russia as of
November 2016. 
• The richest 1% of Indians own 58.4% of
wealth. The richest 10 % of Indians own 80.7 %
of the wealth. This trend is going in the upward
direction every year, which means the rich are
getting richer at a much faster rate than the
poor. 
• Consumerism is defined as social force
designed to protect consumer interests in the
marketplace by organising consumer
pressures on business. Consumerism is a
protest of consumers against unfair business
practices and business injustices.
• It aims to remove those injustices, and
eliminate those unfair marketing practices,
e.g., misbranding, spurious products, unsafe
products
• India exported products worth $1.2 billion via the ecommerce channel
in 2018-19. These include categories like home décor/furnishings,
medicinal products, books, fashion apparel, beauty products and
office products. About 75,000 sellers or exporters are currently
enabled to sell on ecommerce.
• The Draft National Ecommerce Policy, which the Department for
Promotion of Industry and Internal Trade had floated last year,
mandated ecommerce companies to make seller details available on
the marketplace website for all products. It had proposed that the full
name of the legal entity, its address and contact details be provided.

“Sellers must provide an undertaking to the platform about

genuineness of products they are selling and the same must be made
accessible to consumers,” the draft had proposed, as part of a
measure to check online sale of counterfeits.
 Drivers of Globalisation

Market Globalisation
.Similar customer needs
.Global Customers

Globalisation of govt Cost Globalisation

policies • Scale economies
Trade policies Global Strategies • Sourcing efficiencies
Technical standards • Country specific costs
Host govt policies

Globalisation of Competition
Interdependence
Competitors Global
High export/import
 Drivers of Globalization
The Key drivers of change are forces likely to
affect the structure of the industry.
I) Market Globalisation- There is an increasing trend to
market globalisation for a variety of reasons. In some
markets, customer needs and preferences are
becoming more similar.
Ex: Soft drink, jeans,PC. . The opening of McDonald
outlets in most countries of the world signalled
similar tendencies in the fast food. (Industry
structure pertains to the number and size distribution
of competitors in an industry.)
• The power of our franchisees, suppliers and
employees working together toward a
common goal is what makes McDonald’s the
world’s leading quick-service restaurant brand.
• Franchisees bring the spirit of
entrepreneurship and commitment.
• Franchising allows business owners to grow
their businesses without having to spend
substantial amounts of their own money to
build new units.
• For franchisees, benefits include: a higher
chance of success than in a sole
proprietorship; shorter time to opening; initial
training and ongoing support; assistance in
finding an optimal site; the selling power of a
known brand; lower costs through group
purchasing; use of an established business
model.
•  The global customer is creating pressure on
suppliers to coordinate across countries and
businesses to deliver better service.
• EX:- ABB was an early mover into many
countries, and Eastern Europe in particular. It
now uses its extensive presence to host and
provide services to customers as it enters new
countries where ABB is already present.
• ABB (ASEA Brown Boveri) is a Swiss-
Swedish multinational corporation.  
• Ex:- Customer Solutions- It’s about IBM employees
and Business Partners around the world moving to a
single view of the customer and accessing that
customer information anywhere, in real-time.
• It’s about enabling fast, convenient self-service for
customers worldwide. And, it’s about improving the
way major, global IBM divisions collaborate with each
other and their business partners – all for the sake of
providing better customer service. In short, it’s about
one company’s determination to become a more
globally integrated, customer-focused company.
 Ex:-
• IBM- “Our goal is to be viewed as one IBM by
our customers and to work as one IBM
internally. We’re aiming to make IBM best of
class in its industry for sales, marketing and
customer service excellence. We believe we
can achieve this goal by using Siebel
applications to leverage our existing strengths.
 Continued,----
• IBM expects to bring one of the world’s largest
corporations closer to its customers, one by one.
The front-office elements of the solution include:
• •ibm.com Contact Centers
• • Pre-Sales and Post-Sales Technical Service and
Support
• • Business Partners
• • Field Sales (all IBM brands)
• • Professional Services (IBM Business Consulting
Services)
• • Marketing
• E-commerce - Interactivity with customers is another
integrating force. Electronic connections allow the company
to recognize and remember customers, to interact with them
and remember more about them, and then to customize the
firm’s offerings based on its knowledge of the customer.
• Most companies, however, have not mastered integrated
customer interactions. Interactivity requires the
management of dialogues and content across all media the
company uses to interact with the customer: Web site, e-
mail, call centre, salespersons, service representatives and so
on. 
 Building brands

• EX:- Today, products of the Coca Cola

Company are consumed at the rate of more
than one billion drinks per day.
• “Coca-Cola’s mission is to
• - Refresh the world...
II) Cost Globalisation- May give potential for
competitive advantage since some organisations
will have greater access to be more aware of
these advantages than others.
This is especially the case in industries in which
large volume, standardised production is
required for optimum economies of scale, as in
many components for the electronic industry.
Cost advantages from the experience built
through wider scale operations. The central
sourcing efficiencies from lowest cost suppliers
across the world.
• Economies of scale is an important issue for companies
both large and small. The term has been around for
hundreds of years, and has fueled the development
and profit potential of entire economies, especially
with the concept of mass production.
• the ability to cut production unit costs and create
stronger consumer demand by offering products with
lower costs to customers.
• Big players on the market, well-known for practicing it
are Procter & Gamble, Exxon Mobile Corporation,
United Parcel service, Fedex, Intel Corporation and
others.
• A definition focused on this aspect of global
sourcing is: "proactively integrating and
coordinating common items and materials,
processes, designs, technologies, and
suppliers across worldwide purchasing,
engineering, and operating locations.
• Low-cost country sourcing (LCCS)
is procurement strategy in which a company
sources materials from countries with
lower labor and production costs in order to
cut operating expenses.
• Sourcing- The process of low-cost sourcing consists
of two parties. The customer and the supplier
countries like US, UK, Canada, Australia, and West
European nations are considered as high-cost
countries (HCC) whereas resource rich and regulated
wage labor locations
like China, India, Indonesia, Bolivia, Brazil, Russia, M
exico, and East European nations are
considered low-cost countries (LCC).
• In low-cost-country sourcing the material (products)
flows from LCC to HCC while the technology flows
from HCC to LCC.
 Continued,…
• The country specific costs, such as labour.
• Advantage because of location.
• The s/w companies being located in India,
highly skilled but low cost staff.
• III) The activities and policies of government have
also tended to drive the globalisation of industry.
Political changes in 1990, almost all trading
nations function with market based economies.
• The globalisation has encouraged technical
standardisation between countries of many
products, such as in automobile, aerospace and
computing industries. (Standards govern the
design, operation, manufacture, and use of nearly
everything that mankind produces. There are
standards to protect the environment and human
health and safety).
• A market economy is an economic system in
which the decisions
regarding investment, production and distribution
are guided by the price, signals created by the
forces of supply and demand.
• India is characterised by mixed economy in which
both private and public exists side by side.
• IV) Changes in Macro-environment are
increasing global competition which, in turn,
encourages further globalisation. If the levels
of imports/exports between countries are
high, it increases interaction between
competitors on a global scale.
• If a business is competing globally, it also tend
to place globalization pressures on
competitors, especially if customers are also
operating on a global business.
• No country can now run their economy in
complete isolation. Every national economy is
integrated with the global economy in some
way. 
• Imagine an FMCG company that makes
food products. They operate on a huge scale, so
they must import some of their
raw materials like cocoa, honey, etc.
• Their ability to import such materials, produce
their goods and sell their product in local and
international markets will depend on the
global environment.
• Just a few years ago, Lava imported cheap phones from China.
Now it builds its own devices at two factories on the outskirts of
New Delhi that employ about 3,500 people, and expansion plans
are in the works.
• More than 120 new manufacturing units have created about
450,000 jobs in the mobile phone industry over the past four
years, according to the Indian Cellular and Electronics Association,
thanks largely to the 'Make In India' campaign and a phased plan
featuring stiff duties on imported devices and parts.
• The Indian industry's emergence is especially visible in Noida,
where Lava is based. Once a suburb for tech outsourcing firms,
Noida is now bursting with companies making everything from
headphones and chargers to high-end smart phones.
• The manufacturing plan includes import duties not only on phones,
but also on accessories such as phone chargers, batteries and
headphones, as well as components including pre-assembled printed
circuit boards.

Xiaomi, which competes with Samsung for the top spot in India's
Smartphone market, makes many of its phones using Foxconn's
plants in southern India, with a total of six facilities producing its
devices.
• (The finance minister announced increase in duty on chargers from
15 per cent to 20 per cent, motherboard from 10 per cent to 20 per
cent and in similar range for other components used in
manufacturing of mobile phones.)
• The specific drivers will vary by industry.
• For example, a retailer may be primarily
concerned with local customer tastes and
behaviour. A Computer manufacturer is likely
to be concerned with developments in the
technological environment that lead to
product innovation.
• Ex:- One of the most famous and groundbreaking
examples of process innovation is Henry Ford’s
invention of the world’s first moving assembly
line. This process change not only simplified
vehicle assembly but shortened the time
necessary to produce a single vehicle from 12
hours to 90 minutes.
• Ex:- Airbnb is a community-based online platform
for listing and renting local homes. It connects
hosts and travelers and facilitates the process of
renting without owning any rooms itself.
Moreover it cultivates a sharing-economy by
allowing property owners to rent out private flats.
• Airbnb is a community-based, two-sided online
platform that facilitates the process of booking
private living spaces for travelers. On the one side
it enables owners to list their space and earn
rental money. On the other side it provides
travelers easy access to renting private homes.
With over 1,500,000 listings in 34,000 cities and
190 countries, its wide coverage enables travelers
to rent private homes all over the world.
• Personal profiles as well as a rating and reviewing
system provide information about the host and
what is on offer. Vice versa, hosts can choose on
their own who to rent out their space to.
• Revenue Model
Airbnb receives commissions from two sources
upon every booking, namely from the hosts and
guests. For every booking Airbnb charges the
guest 6-12% of the booking fee. Moreover
Airbnb charges the host 3% for every successful
transaction.
• (Airbnb operates as a transaction facilitator
between hosts and travelers who are looking for
comfortable accommodation at a cheap price. )
 Porter’s diamond: The determinants of
National advantage

• Porter’s diamond suggests that there are

inherent reasons why some nations are more
competitive than others, and why some
industries within nations are more
competitive than others.
• framework that focuses on explaining why
certain industries within a particular nation
are competitive internationally, whereas
others might not. And why is it that certain
companies in certain countries are capable of
consistent innovation, whereas others might
not? 
• Porter’s diamond
Firms strategy,
Structure and
rivalry

Factor Demand
Conditions Conditions

Related and
Supporting Industries
• This is an another example of how the impact
of macro-environment factors on the
competitive environment can be understood
strategically.
• Porter’s suggest that the national home base
of an organisation plays an important role in
creating advantage on a global scale.
• I) Specific factor conditions- that help explain
the basis of advantage on a national level.
These provide initial advantages that are
subsequently built upon to yield more
advance factors of competition.
• Factor conditions in a certain country refer to
the natural, human resources available. Some
countries for example very rich in natural
resources such as oil for example (Saudi
Arabia). This explains why Saudi Arabia is one
of the largest exporters of oil worldwide. 
• Nations thus succeed in industries where they
are particularly good at factor creation.(Skill of
labor, knowledge)
• For example- In sweden, Japan, in which
legislation means that is difficult to lay off
labour, also in swiss, the linguistic ability has
provided a significant advantage their banking
industry.
II) Home based conditions/Demand conditions
• Provide the basis upon which the
characteristics of the advantage of an
organisation are shaped. Ex- Japanese
customers high expectations of electrical and
electronic equipment have provided an
impetus for those industries, leading to global
dominances.
• III) One successful industry may lead to
advantage in related and supporting
industries. In Italy, the leather footwear
industry, the leather working machinery and
design services, which underpin them, benefit
from one another. Ex;= In Singapore, port
services and ship repair industries are
mutually advantages.
• However, once these factors are in place, the
entire region or nation can often benefit from
its presence. We can for example see this in
Silicon Valley, where all kinds of tech-giants
and tech-start-ups are clustered in order to
share ideas and stimulate innovation.
• IV) The characteristics of firm’s strategy,
industry structure and rivalry in different
countries also help explain bases of
advantage.
• Ex:-  A good example for this is the Japanese
automobile industry with intense rivalry
between players such as Nissan, Honda,
Toyota, Suzuki, Mitsubishi and Subaru.
Because of their own fierce domestic
competition, they have become able to more
easily compete in foreign markets as well.
• Ex;- In Germany the propensity for systematic,
often hierarchical processes of management has
been particularly successful in providing technical
excellence in engineering industries.
• Significance:- The porter’s Diamond has been
used in various ways. At a national level, it has
been employed by govt. to consider the policies
that they should follow to encourage the
competitive advantage of their industries.
• Porter’s Diamond Model of National Advantage
explains why some industries in some countries
are so much more developed and competitive
compared to industries elsewhere on the planet.
 Industries and Sectors
• An Industry is a group of firms producing the
same principal product. Ex:- Mobile phones.
• Sector- A group of organisations providing the
same kind of services, ex:- Healthcare.
Competitive Forces in the Industry
– Determine attractiveness of industry
– Affect the way individual companies compete
– Influence decisions on product/market
strategy
• Changing Boundaries of Industries:-
It is important to remember that the boundaries
of an industry may be changing-
The Convergence is where previously separate
industries begin to overlap in terms of
activities, technologies, products & customers.
There are two set of forces, that might drive
convergence. First, convergence might be
supply led- where organisations start to behave
as though there are linkages between the
separate industries or sectors.
This is very common in public services where
sectors seem to be constantly bundled and un-
bundled into ministries with ever changing
names (Education, Education and Science,
Education and Skills).
 The boundaries of an industry might also be
destroyed by other forces in macro-environment.
Foe ex;- e-commerce is destroying the boundary of
traditional retailing by offering manufacturers
new or complementary ways to trade –
Such as e-auctions.
So, secondly convergence may also occur through
demand side (market) forces. For ex;- they start
to substitute one product with an another.
ex; Tv and PC’s.
• Or they see links between complementary
products that they want to have ‘bundled’.
• ex;- The package holiday is an example of
bundling air travel, hotels and entertainment
to form a new market segment in the travel
industry.
Sources of Competition:- The Porter’s five forces
framework was originally developed as a way of
assessing the attractiveness (Profit potential) of
different industries.
It must be used at the level of SBU’s. and not at
the level of whole organisations. This is because
organisations are diverse in their operations and
markets. For ex, an airline might compete
simultaneously in several different arena’s such
as domestic and long haul, and target different
customer groups such as leisure, business and
freight.
Porter’s Five Forces Model
Potential Entrants

Suppliers Competitive Rivalry Buyers

Substitutes
• I) The threat of entry:- Threat of entry will depend
on the extent to which there are barriers to entry.
These are factors that need to be overcome by
new entrants if they are to compete successfully.
• These are not permanent barriers to determined
potential entrants. Typical barriers are-
i) Economies of scale- In some industries economies
of scale are important. For ex, in the production
of automobiles in distribution (eg, brewing),, or in
sales and marketing (ad cost for FMCG).
• ii) The capital requirement of entry- The
capital cost of entry will vary, according to
technology and scale. The cost of setting-up a
dot.com business with leased premises is
minimal when compared with the cost of
entering capital intensive industries such as
chemicals, power or mining.
• iv) Access to supply or distribution channels-
In many industries, manufacturers have had
control over supply and/or distribution
channels.
v) In some industries, this barrier has been
overcome by new entrants who have bypassed
retail distributors and sold directly to
consumers through e-commerce.
(Dell computers, Amazon).
vi) Experience- Early entrants into an industry
gain experience sooner than others.
vii) Legislation or govt action- In 1990’s many
public services, such as telecommunications,
electricity and gas supply, traditionally operated
as state monopolies, increasingly faced
deregulation or privatisation.
• II) Threat of substitutes- The Substitution reduces
demand for a particular class of products as
customers switch to the alternatives. Ex- the e-mail
substituting for a postal service.
III) The power of buyers and suppliers- The buyer
power is high when some of the following
conditions prevail:- There are concentration of
buyers, particularly if the volumes purchased by
buyers are high and or the supplying industry
comprises a large number of small operators. Ex-
Milk in grocery sector in many European industries.
(Ex: Switch from Android to Apple (or vice versa) and
you will lose some of your apps and data).
• The cost of switching a supplier is low or involves
little risk, for example, if there are no long term
contracts or supplier approval requirements. Ex; E-
commerce transactions where buyers are more able
to shop around quickly and with no risk.
• The supplier power is likely to be high when;-
• Supplier power is increased if there are wide
number of buyers.
• (Ex;- And there are cases where suppliers also sell
directly to the end user as well as to another
company. Samsung sell displays and other
smartphone components to competitors as Apple
(e.g. iPhone X’s OLED display) and use them in their
own phones to sell to the end customer.
• Our everyday life is filled with examples of switching
cost. The effort required to learn how to use a new home
appliance from a different brand comes under switching
cost.
• The time spent waiting for a new supplier to provide raw
materials for your production.
• If you are comfortable with Windows operating system,
you will not shift to a Macbook because of huge time spent
and huge switching cost associated with learning a new
product. However, if you wanted to try a new soap, you can
do that with no cost associated to the switching.
• There are other simlar examples of switching cost. Firms
dealing with Apparel typically have very low switching
costs for consumers since it is comparably easy to find
another good deal on apparels by visiting multiple shops in
the same vicinity.
• To explain this cost, let us take the example of
a firm that is looking to change the supplier
that maintains its IT network. Searching for
the new supplier would not only take time and
effort but would also have the added
uncertainty of the kind of service the new
supplier would provide. Costs of set-up and
costs associated with learning to come under
direct switching costs.
• This switching cost refers to the psychological
distress caused to the consumer due to identity
loss and breaking of bonds with the current
supplier.
• Example – If you had a huge problem with an
existing vendor, if he was not supplying material
on time or if the quality of the product was
inferior, then the relations with the existing
supplier are poor which comes under Relational
switching cost.
 Example:-
•  Considering the combination of market conditions, this
Porter’s Five Forces analysis of McDonald’s establishes
the following intensities of the five forces:
• Competitive rivalry or competition – Strong Force
• Bargaining power of buyers or customers – Strong Force
• Bargaining power of suppliers – Weak Force
• Threat of substitutes or substitution – Strong Force
• Threat of new entrants or new entry – Moderate Force
 Example:-
• The company faces pressure from various
competitors, including large multinational
firms and small local businesses.
• Competitors- Burger King, Wendy’s, Subway,
and Dunkin’ Donuts, as well as food and
beverage businesses like Starbucks Coffee
Company.
• McDonald’s faces tough competition because
the fast food restaurant market is saturated.
This element of the Porter’s Five Forces analysis
model tackles the effects of competing firms in
the industry environment. In McDonald’s case,
the strong force of competitive rivalry is based
on the following external factors:
• High number of firms
• High aggressiveness of firms
• The fast food restaurant industry has many
firms of various sizes, such as global chains like
McDonald’s and local mom-and-pop fast food
restaurants. This external factor strengthens
the force of rivalry in the industry. Also, the
Five Forces analysis model considers firm
aggressiveness a factor that influences
competition.
• In this business case, most medium and large
firms aggressively market their products. This
factor increases the intensity of competitive
rivalry that McDonald’s Corporation
experiences.
• In addition, low switching costs make it easy
for consumers to transfer to other restaurants,
such as Wendy’s and Burger King.
• This external factor adds to the force of
competition. Thus, this element of the Five
Forces analysis of McDonald’s shows that
competition is among the most significant
external forces for consideration in the
strategic management of the business.
Bargaining power of Buyers (strong force)
• McDonald’s must address the power of customers on
business performance. This element of the Five Forces
analysis deals with the influence and demands of
consumers, and how their decisions impact
businesses. In McDonald’s case, the following are the
external factors that contribute to the strong
bargaining power of buyers:
• Low switching costs – Strong Force
• Large number of providers – Strong Force
• High availability of substitutes – Strong Force
• Moreover, the availability of substitutes is
relevant in this external analysis. In this case,
the availability of many substitutes adds to the
bargaining power of customers.
• For example, substitutes include food kiosks
and outlets, and bakeries, as well as microwave
meals and foods that one could cook at home.
Based on this element of Porter’s Five Forces
analysis, it is crucial to develop strategies to
increase customer loyalty, especially in the face
of the socio-cultural trends.
Bargaining power of suppliers-Weak force
• Suppliers influence McDonald’s in terms of the
company’s production capacity based on the
availability of raw materials.
• This element of the Five Forces analysis model shows
the impact of suppliers on firms and the fast food
restaurant industry environment. In McDonald’s case,
the weak bargaining power of suppliers is based on the
following external factors:
• Large number of suppliers – Weak Force
• Low forward vertical integration of suppliers – Weak
Force
 Threat of Substitutes (Strong force)

• There are many substitutes to McDonald’s products, such as

products from artisanal food producers and local bakeries.
Also, consumers can cook their food at home. In the Five
Forces analysis model, this external factor contributes to the
strength of the threat of substitution in the fast food service
industry. In addition, it is easy to shift from McDonald’s to
substitutes because of the low switching costs.
• For example, shifting from the company to substitutes
typically involves insignificant or minimal disadvantages, such
as slightly higher costs per meal in some cases, or additional
time consumption for food preparation. Moreover, substitutes
are competitive in terms of quality and customer satisfaction.
Threat of New entrants (Moderate force)
• New entrants can impact McDonald’s market
share and financial performance. This element of
the Five Forces analysis refers to the effects of
new players on existing firms. In McDonald’s
case, the moderate threat of new entry is based
on the following external factors:
• Low switching costs – Strong Force
• The low switching costs allow consumers to easily
move from McDonald’s toward new fast food
restaurant companies.
• Also, variable capital costs of establishing a new
restaurant empowers new businesses to enter the
global fast food restaurant industry. For example,
small restaurant businesses involve low capital costs
compared to major corporations in the market.
• This external factor leads to the moderate threat of
new entry against McDonald’s. On the other hand,
it is expensive to build a strong brand in the
industry. Many small and medium businesses lack
the resources to create a strong brand to match the
McDonald’s brand. Thus, the external factors in this
element of the Five Forces analysis shows that the
threat of new entrants is a considerable.
• Example:- Apple’s strategies are partly based on the
need to address forces in the external business
environment. These forces can limit or reduce the
firm’s market share, revenues, profitability. This Five
Forces analysis, based on Porter’s framework, points
to the following strengths or intensities of external
factors in Apple Inc.’s industry environment:
• Competitive rivalry or competition: Strong force
• Bargaining power of buyers or customers: Strong force
• Bargaining power of suppliers: Weak force
• Threat of substitutes or substitution: Weak force
• Threat of new entrants or new entry: Moderate force
• Considering the five forces, Apple must focus its
attention on competitive rivalry and the bargaining
power of buyers. 
• Competitive Rivalry- Strong force
• Companies like Samsung and LG aggressively compete
with Apple. Such aggressiveness, observable in rapid
innovation, aggressive advertising, and imitation,
impose a strong force in the industry environment.
Moreover, in terms of product differentiation, available
products in the market are generally similar in fulfilling
specific purposes. For example, many popular apps are
available for Android and iOS devices, and cloud
storage services from different companies are available
to iOS users.
• In Porter’s Five Forces analysis model, this
condition creates a strong force by making it
easy for customers to switch to other sellers
or providers.
• On the other hand, the low switching cost
means that it is easy for customers to switch
from Apple to other brands, based on price,
function, accessibility.
• Differences-This one applies only if you don’t use any
Google products on your iPhone. We all know that Google
makes money from adds and they gather a lot of
information from Android phones and Google apps. So, if
you use an Android phone you are a product, but if you
use an iPhone (without Google apps) you’re a consumer.
• Android phones tend to slow down after some
time. Some sooner, some later, but the slowdown process
is inevitable. The interface of an iPhone remains smooth
and fluid during the whole lifespan of the phone. The
winner is iOS.
• Android phones are more prone to malware. There have
been thousands of apps containing malware on Google
Play Store. Many malicious apps are still there. There have
been no malware in the wild targeting iPhones. The
winner is iOS.
• The bargaining power of buyers is strong in
affecting Apple’s business. This component of
Porter’s Five Forces analysis model determines
how buyers’ purchase decisions and related
preferences and perceptions impact
businesses. In Apple Inc.’s case, buyers’ strong
power is based on the following external
factors:
• It is easy for customers to change brands, thereby
making them powerful in compelling companies like
Apple to ensure customer satisfaction. On the other
hand, each buyer’s purchase is small compared to the
company’s total revenues.
• However, the availability of detailed comparative
information about competing products’ features
empowers buyers to shift from one provider to
another. This external factor enables buyers to exert a
strong force on Apple and other brands. Thus, this
part of the Five Forces analysis shows that Apple must
include the bargaining power of buyers or customers
as one of the most significant strategic variables in
the business.
• Bargaining power of suppliers- (weak force)
• The global size of its supply chain allows Apple
Inc. to access many suppliers around the world. In
Porter’s Five Forces analysis context, the resulting
high number of suppliers is an external factor that
presents only a weak to moderate force against
the company. In relation, the moderate to high
overall supply of inputs, such as semiconductors,
makes individual suppliers weak in imposing their
demands on firms like Apple. This external factor
reflects the presence of a small number of big
companies like Apple and Samsung, in contrast to
a larger number of medium-sized and big
suppliers. 
• Thus, this part of the Five Forces analysis
shows that the bargaining power of suppliers
is a minor issue in developing Apple Inc.’s
strategies for supply chain management, value
chain effectiveness, innovation.
• Threat of substitutes (weak force):-
• Some substitutes to Apple products are readily available in the
market. For example, instead of using iPhones, people can use
digital cameras to take pictures, In Porter’s Five Forces analysis
model, this external factor exerts a moderate force in the industry
environment. However, these substitutes have low performance
because they have limited features.
• Many customers would rather use Apple products based on
convenience and advanced functions. This condition makes
substitution a weak force in impacting the company’s business.
Also, buyers have a low propensity to substitute. For instance,
customers would rather use smart phones than go through the
hassle of buying and maintaining a digital camera, a cellular phone,
and other devices.
• This part of the Five Forces analysis shows that Apple does not
need to prioritize the threat of substitution, specifically in
management decisions in business processes like marketing, and
product design and development.
• Threat of new entrants- (Moderate force)
• Establishing a business to compete against
firms like Apple Inc. requires high capitalization.
Also, it is extremely costly to develop a strong
brand to compete against large companies like
Apple. These external factors make new
entrants weak. However, there are large firms
with the financial capacity to enter the market.
For example, Google has already done so
through products like Nexus smart phones.
Samsung also used to be a new entrant. 
• These examples show that there are large companies that
have the potential to directly compete against Apple Inc.
Thus, the overall threat of new entry is moderate. This
part of the Five Forces analysis shows that Apple must
maintain its competitive advantage through innovation
and marketing to remain strong against new entrants’
moderate competitive force. (major competitor,
particularly for the iPhone. The Samsung Galaxy and Note
series have been responsible for reductions in iPhone
sales for many years. Today, Samsung has developed into
one of the largest and most profitable companies, both in
the Asian region and in the world overall.)
• Strategic Groups:- Strategic groups are organisations
within an industry with similar
strategic characteristics, following similar strategies or
competing on similar bases.
It is useful to consider the extent to which organisations
differ in terms of characteristics such as:-
Scope of activities:-
Extent of product diversity
Extent of geographical Coverage
Number of market segments served.
Distribution channel used.
 Ex:-
• The Coca-Cola Company has on occasion introduced
other cola drinks under the Coke name. The most
common of these is Diet Coke, along with others
including Caffeine-Free Coca-Cola, 
Diet Coke Caffeine-Free, Coca-Cola Zero Sugar, 
Coca-Cola Cherry, Coca-Cola Vanilla, and special
versions with lemon, lime, and coffee. Coca-Cola was
called Coca-Cola Classic from July 1985 to 2009, to
distinguish it from "New Coke". (Since it announced its
intention to begin distribution in Myanmar in June
2012, Coca-Cola has been officially available in every
country in the world except Cuba and North Korea)
• Examples – e-business (selling through internet);
Direct Mail Order Houses; Chain Stores ( Nike,
Bata etc.); Direct selling (Amway; etc.)
• Indirect Channel:
• When a manufacturer employs one or more
intermediaries to sell and distribute their
product to the customers it is called as indirect
selling. In this, goods move from the point of
production to the point of consumption through
a distribution network.
• One-level:- Automobile manufacturers sell their cars
through authorized dealers.
• This channel of distribution involves two
intermediaries to transfer goods from the
manufacturer to the customer. In this wholesalers
and retailers act as a connecting link between
manufacturers and consumers. This network
enables manufacturer to cover a large market area.
It is a most adopted distribution channel for
consumer products.
Example
• A product line is a group of products that a
company creates under a single brand.
• P&G has product lines in Baby Care, Family Care,
Feminine Care, Fabric Care, Home Care, and Hair
Care. It also has product lines in Personal Health
Care, Grooming, Oral Care, and Skin and Personal
Care.
• For instance: Amul offers a series of closely
related products such as milk, butter, ghee, dahi,
yoghurt, ice cream, srikhand, Gulab jamun,
flavoured milk, chocolate, etc.
• Resource Commitment:-
Extent of Branding.
Marketing effort.
Extent of vertical integration.
Product or service quality.
Technological leadership
Size of organisation.
• An example of vertical integration is technology
giant Apple, which has retail locations to sell
product as well as manufacturing facilities around
the globe.
• A technological leader is a company that pioneers
an innovation. An example of a technological
leader is Nike. They spend more than most in the
industry on R&D to differentiate the performance
of its athletic shoes from that of its competitors.
 Ex:-
• Brand extension also may be applied to a
different product category. Google's core
business is a search engine, but it has attached
its name to new products such
as Google Wallet, the tap-to-pay app.
• Market Segments:- A market segment is a
group of customers who have similar needs
that are different from customer needs in
other parts of the market.
 Some Bases of Market Segmentation
Type of factor Consumer markets Industrial markets
Characteristics of Age, gender, race, income, Industry Location, size,
People/organisations family size, Life cycle stage, technology, profitability,
Location, Lifestyle management

Purchase/use situation Size of purchase Application

Brand loyalty Importance of purchase
Purpose of use Volume, Frequency of
Purchasing behaviour purchase, Purchasing
Importance of purchase procedure, Distribution
Choice criteria channel, choice criteria

User’s needs and Product similarity Performance requirements

Preferences for product Price preferences Assistance from suppliers
characteristics Brand preferences Brand preferences
Desired features Desired features
Quality Quality
Service requirements.
• Identifying the strategic customer:- The strategic
customer is the person at whom the strategy is
primarily addressed because they have the most
influence over which goods or services are
purchased.
• Ex;- In consumer goods, the retail outlet is the
strategic customer as the way it displays,
promotes and supports products in store is hugely
influential on the final consumer preferences.
Family doctors are the strategic customer for
pharmaceutical companies.
• Critical Success Factors:- CSF’s are those product
features that are particularly valued by a group of
customers and therefore, where the organisation
must excel to outperform competition.
• Ex:- The major critical success factor for Apple is
the innovation. "Small innovations can change
the world", this phrase encompasses Apple 's
design philosophy and development strategy.
• Exploring corporate strategy: Text and cases, –
Johnson, G., Scholes, K., & Whittington, R.,
Pearson Education. –(Recommended Textbook)