Managing

Strategy
by rakhi C
MFM-8
Lecture
Definition strategy
Strategy: Strategy can be defined as a plan of
action designed to achieve a long-term or overall
aim. In a business context, it refers to the
coordinated set of actions and decisions that an
organization takes to secure a competitive
advantage, allocate resources effectively, and
achieve its goals in a dynamic environment.

Strategic management is formulation and

implementation of initiatives by top management-
taking into consideration resources and
environmental opportunities
Strategic management and
its Importance
Business Model: is how the company is going to make money.
Whether customers will value what the company is providing.
Whether the company can make any money doing that.

Eg: a)Jeff Bezos pioneered a business model for selling books to consumers directly online
that worked.
Customers valued what amazon offered. Did Amazon make money doing it that way? Not
at first, but now absolutely.
b)Zepto, Swiggy -5-10 mins delivery

Importance of strategic management: Marvel comics example

1. It can make a difference in how well an organization performs. It helps explain why
some businesses succeed and others fail, even when faced with the same
environmental conditions.
2. Managers of all size and type of organization continually face changing situations. They
cope with this uncertainity by using the strategic management process to examine
relevant factors and decide what actions to take.
3. Strategic management is important because organizations are complex and diverse.
Each part needs to work together toward achieving the organization’s goals, strategic
management helps do this.
Strategic management process

1. Identifying org’s current mission, goals and strategies: Defining the mission forces
managers to identify what’s in business to do.
Some of the typical components to be included in the mission statement:
Philosophy: What are the firms beliefs, values and ethical priorities
Concern for public image: How responsive is the firm to societal and environmental
concerns.
Products or services: What are the firms major products or services
etc..
 Strategic management process
2. Doing an external analysis: Managers do an external analysis so they know, for instance, what the
competition is doing, what pending legislation might affect the organization, or what the labour
supply is like in locations where it operates.

In an external analysis, managers should examine the economic, demographic, political/legal ,

sociocultural, technological and global components to see the trends and changes.

Once they have analyzed the environment, the managers need to pinpoint the opportunities that
the organization can exploit and threats it must counteract or buffer against.

3. Doing an internal analysis: Internal analysis provides important information about an

organisation’s specific resources, and capabilities. An org’s resources are its assets:financial,
human, intangible-that it uses to develop, manufacture and deliver products to its customers. On
the other hand, its capabilities are its skills and abilities in doing the work. The major value -creating
capabilities of the org are known as core competencies.

After completing an internal analysis managers should be able to identify org’s strengths and
weaknesses.

Any activities that the org does well or any unique resources it has are called as strengths.
Weaknesses are activities the org doesnt do well or resources it needs but doesnt possess.

SWOT analysis: The combined external and internal analyses are called as SWOT analysis. After
completing this analysis, managers are ready to formulate appropriate strategies.
Strategic management process
4. Formulating strategies: As managers formulate strategies, they need to consider the
realities of the external environment and their available resources and capabilities in
order to design strategies that will help organisation achieve its goal
3 main categories of strategies managers formulate are:
Corporate
Competitive
Functional

5. Implementing strategies: Once the strategies are formulated they need to be

implemented .
Performance usually suffers if they are not implemented properly.

6. Evaluating the results: How effective have the strategies been at helping the
organisation reach its goals? What adjustments are necessary?
TYPES OF ORGANIZATIONALSTRATEGIES
 CORPORATE STRATEGY
A corporate strategy determines what businesses a company is in or wants to be in
and what it wants to do with those businesses. It’s based on the mission and goals of
the organisation and the roles that each business unit of the organization will play.

Growth(expands no. of
markets or products)

Stability(continues to
Corporate
do what its doing)

Renewal(that address
declining performance)
 CORPORATE STRATEGY
GROWTH STRATEGY: is when an org expands the number of markets served or
products offered either through current businesses or through new businesses.
Because of its growth strategy, an org may increase its revenues, no of emp, or market
share.

Diversification
Vertical Integration: Horizontal Integration: Finally an organization
Concentration:
An organisation might can grow through
An organization that choose to grow by vertical
An organisation might
diversification, either
grows using concentration integration, either backward choose to grow by
focuses on its primary line of related or unrelated.
, forward, or both. horizontal integration, Related diversification
business and increases the In backward vertical
a company grows by happens when a company
umber of products offered or integration, the organization
markets served in this primary becomes its own supplier so combining with combines with other
business. that it can control its input. competitors. companies in different
eg. Bose(developing (eg walmart) (Vodafone, idea but related industries.(eg.
innovative audio products) In forward integration, the Google’s acquisition of
organisation becomes its
cellular india to
compete against jio) businesses(youtube,
own distributor and is able
doubleclick, nest )(strategic fit-
to control its outputs.(apple)
search capabilities and
efficiency)
 CORPORATE STRATEGY
2. Stability Strategy: A stability strategy is a corporate strategy in which an
organization continues to do what it is currently doing. The organization does
not grow but it doesn’t fall behind either.

3. Renewal Strategy: Manager’s need to develop strategies called renewal

strategies that address declining performance. Two main types of renewal
strategies are retrenchment and turnaround strategies.
Retrenchment strategy: is a short-run renewal strategy used for minor
performance problems. This strategy helps an organization stabilize operations,
revitalize organizational resources and capabilities, and prepare to compete
once again.
Turnaround strategies: When an organization’s problems are more serious,
more drastic action-turnaround strategy is needed.
Managers do two things in renewal strategies: cut cost and restructure
organizational operations. Turnaround strategies are more expensive.
 HOW ARE CORP STRATEGIES MANAGED

When an org’s corporate strategy encompasses a number of businesses,

managers can manage this collection, or portfolio of businesses by using a
tool called a corporate portfolio matrix .
Corporate portfolio matrix: This matrix provides a framework for
understanding diverse businesses and help managers establish priorities for
allocating resources.

BCG Matrix: was developed by Boston Consulting Group and introduced the
idea that an an org’s various businesses could be evaluated and plotted
using a 2*2 matrix to identify which ones offered high potential and which
were a drain on organisational resources. The horizontal axis represents
market share(low or high) and the vertical axis indicates anticipated market
growth(low or high).
 HOW ARE CORP STRATEGIES MANAGED
A business unit is evaluated using SWOT analysis and placed in one of
the 4 categories which are as follows:
Stars: High market share/High anticipated growth rate
Cash cows: High market share/low anticipated growth rate
Question marks: Low market share/High anticipated growth rate
Dogs: Low market share/Low anticipated growth rate

Managing strategy:
Every org needs to have a mission drawn out of its vision. Defining the
mission aids the manager to identify the kind of business that should be
done and how to go about it?
The mission statement should include the customer market, concern for
survival , philosophy , products, technology, self-concept, and concern for
employees. Once your mission is clear, you can set the goals, and work on
the strategies and select the most viable option.

Manager should also do a SWOT analysis so that opp and threats can be
identified. Once the manager does the above the strategy can be
formulated and then implemented and evaluated.
 COMPETITIVE STRATEGIES
A competitive strategy is a strategy for how an organization will compete
in its businesses. For a small organization in only one line of business or a
large organization which has not diversified its products or markets, its
competitive strategy describes how it will compete in its primary or main
market.

For an organizations in multiple businesses , however each business will

have its own competitive strategy that defines its competitive advantage ,
the products or services it will offer, the customers it want to reach and
the like.
eg: Johnson and johnson has different competitive strategies for its
businesses, which includes pharmaceuticals, medical devices and
consumer products.

When an org is in several different businesses those single businesses that

are independant and that have their own competitive strategies are
referred to as strategic business units.
 COMPETITIVE ADVANTAGE
Developing an effective competitive strategty, requires an
understanding of competitive advantage, which is what sets an
organization apart-that is its distinctive edge.

That distincitve edge can come from the org’s core

competencies by doing something which the other’s cant do
or doing it better than others.

eg. Porsche has an advantage based on engineering and design

capabilities plus reputation for building high quality, high
performance vehicle.
 SUSTAINING COMPETITIVE ADVANTAGE
Why do some companies consistently appear at the top of lists
ranking the best or the most admired or the most profitable?

Not every organisation is able to effectively exploit its

resources and to develop the core competencies that can
provide with competitive advantage. And just not to create it
but should also be able to sustain it.

How managers can create sustainable competitive advantage?

Industry analysis using Porter’s five forces model”
1. Threat of new entrants
2. Threat of susbsitutes
3. Bargaining power of buyers
4. Bargaining power of suppliers
5. Current rivalry
 SUSTAINING COMPETITIVE ADVANTAGE
Choosing a competitive strategy: Once managers have assessed the forces
and done a SWOT analysis, they are ready to select an appropriate
strategy that is one that fits the competitive strengths(resources and
capabilities) of the organization and the industry it’s in.

According to Porter, no firm can be successful by trying to be all things to

all people. He proposed that managers select a strategy that will give the
org a competitive edge, either from having a lower costs than all other
competitors or by significantly different from competitors.

When an org competes on the basis of the lowest costs(costs or expenses

not prices) in its industry, its following a cost leadership strategy. A low-
cost leader is highly efficient. Overhead is kept to minimum, and the firm
does everything it can to cut costs.
Thank You