Unit-1 Strategic Management Final

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Unit-1
Introduction to
Strategic
Management
Dr. Prashant Kalaskar
What is Strategy..???
Why Strategy..???
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Why Strategy??
The ultimate goal of the organizations is
to be successful SUCCESS is:
Survival (long
(long--term success)
Achievement of Goals
Above average returns/Profitability (probably
most important, because it determines the
ability to achieve the above two)
To provide ROI to the investors.
To create a favorable environment for capital
raise
Need of Strategy..!!
Market has become Global

Market has become Dynamic
Ever Changing Technology
Growing Competition in domestic as well as in global
market
Information based Market
Customer dominated markets
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What is Strategy..???
Strategy: The unifying theme that gives
coherence (reason) and direction to the
decisions of any organization
Strategic Management: Consisting of the
analysis, decisions, and actions an
organization undertakes in order to create
and sustain competitive advantages.
Origin of Strategy..!!!
Strategy comes from the Greek word STRATEGOS
STRATEGOS,, which is
formed from stratos
stratos,, meaning army,
army, and ag
ag,, meaning to
lead
Strategy Dfinition
Strategies- Systematically planned course of actions
Strategiesfor achievement of organizational Objectives or Goals
Glueck: An Unified,
Glueck:
Unified, Comprehensive & integrated plan,
designed to assure that the basic objectives of the
enterprise are achieved
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More Recent Historical Development of

Business Strategy
Not until very large companies with the ability to
influence the competitive environment within their
industries did strategic thinking in the business world
begin to be articulated.
Alfred Sloan, CEO of GM, 1923 1946 - One of the first
to analyze competitioncompetition- Ford, and devise a strategic
plan based on its strengths and weaknesses.
Chester Barnard, Senior Executive of New Jersey Bell,
1930s - Argued managers should pay attention to
strategic factors which depend on personal
personal or
organizational action.
action.
More Recent Historical Development of

Business Strategy
Wartime (WWI and WWII) efforts also impacted
strategic thinking and use of formal strategic
tools and concepts:
Allocation of scarce resources

Use of quantitative analysis in planning
The concept of learning
learning curves
curves
The concept of distinctive

distinctive competence
competence
- first mentioned
by Philip Selznick, a sociologist.
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More Historical Development

These concepts serve as the foundation of strategic
management study:
Previous Business Policy perspectives looked at
maintaining a balance in accord with the underlying policies
of the business as a whole. Harvard
Kenneth Andrews
Andrews SWOT Analysis was developed still in
use today.
Theodore Levitts Marketing Myopia argued that when
companies fail typically, it is because firms focus on the
product rather than the changing patterns of consumer
needs and tastes.
Ex: Apple introduced a music player with name of iPod and not
just as another mp3 player.
More Historical Development

Igor Ansoff argued, in response to Levitt, that a firms
mission should exploit an existing need in the market,
market,
rather than using the consumer as the common thread in
business.. In reality, a given type of customer will
business
frequently have a range of product missions or needs.
needs.
Corporate Strategy,
Strategy, 1965.
1965.
BCG developed the experience curve and portfolio
analysis concepts
concepts..
McKinsey & Companys development of SBUs and the
ninenine-block matrix
matrix..
Mintzbergs Deliberate, Emergent & Realized Strategies
Porters Generic Strategies
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Pattern in Stream of Decisions

(H. Mintzberg & J. Waters)
Realized
Strategy
Unrealized
Strategy
Emergent
Strategy
**Normally emergent strategy comes from

learning and dissemination within the organization.
Intended & Deliberate

Planned strategies start with intentions, mostly
from the chief strategists of the firm. In this regard
intentions define the purpose in performing
strategic actions. Planning, however, also involves
deliberation, which would mean analyzing the
purpose for action and evaluating systematically
different courses of action. In this sense, intention
and deliberation is not the same. To put it simple:
intention is purpose,
purpose, deliberation stands for
conscious analysis.
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Forms of Strategy
Intended strategy
Decisions are determined only by analysis
Realized strategy
Decisions are determined by both analysis and
unforeseen environmental developments,
unanticipated resource constraints, and/or
changes in managerial preferences
The Three Big Strategic Analysis

Questions
1. Where are we now? What is our situation?
2. Where do we want to go?
Business(es
Business(es)) we want to be in and market positions we
want to obtain.
Buyer needs and groups we want to serve
Outcomes we want to achieve
3. How will we get there?
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Differing Perspectives of the Strategic

Management Process
I/O Model
RBV Model
External Environment
Resources
Industry Attractiveness
Capability
Strategy Formulation
Sustainable CA
Assets/Skills Assessment
Implementation
Implementation
The Strategy Concept

Levels of Analysis
Where to Compete?
Corporate
Strategy
Grand Strategies
How to Compete?
Business
Strategy
Generic Strategies
How to Contribute?
Functional
Strategy
Functional Strategies
(Mktg. Mix,
Choice of Products Operational, Financial
Choice of Markets etc.)
Choice of Competitors
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Definition of Strategic Management..!!

Decisions and actions where organizations
Analyze current situation
Develop appropriate strategies
Put strategies into action
Evaluate, modify, or change strategies
Characteristics of Strategic Management ..!!
Greater risk,cost,
and profit potential
Corporate-level
decisions
Greater need for

flexibility
Longer time horizons
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Bridge decisions at
corporate and functional
levels
Business-level
decisions
Are less costly, risky, and

potentially profitable than
corporate-level decisions
Are more costly, risky, and
potentially profitable than
functional-level decisions
Implement overall strategy

Functionallevel
decisions
Involve action-oriented
operational issues
Are relatively short range
and low risk
Incur only modest costs
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Strategy: Partly Proactive Partly Reactive
Planned Strategy
Companys
Experiences
Know
How's,
Strength &
Weaknesses
Competitive
Capabilities
New Initiatives Plus Ongoing

Strategy, Features Continued
from Prior Periods
Actual
Companys
Strategy
Adaptive Reactions to
Changing Circumstances
Strategy is how an organization intends

to create value for its stakeholders.
Private Sector Organizations
The Strategy
Financial Perspective
"If we succeed, how will we
look to our shareholders?
Customer Perspective
"To achieve our vision, how
must we look to our
customers?
Internal Perspective
"To satisfy our customers, at
which processes we must
excel?
Learning & Growth
"To achieve our vision, how
must our organization learn
and improve
Introducing
Strategy Maps
A simple model of
the value creation
process
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Strategic Management Process

There are two dimensions of every action
substantive and procedural.
Substantive dimension involves determination
(Strategy)) and
of what to do (Strategy
Procedural dimension is concerned with
determination of how to do (Strategic
(Strategic
Management Process).
Process).
The Term Strategic Management refers to the set

of managerial process of formingforming- a strategic vision,
- setting objectives,
- crafting strategy (Strategy Formulation),
- implementing & executing the strategy,
& then overtimes initiating whatever corrective
adjustments in the vision, objectives, strategies, &
executions are deemed to be appropriate
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Let us understand some terms

VisionsVisions- What Company wants to achieve in future
MissionMission- The reason for companys existence
GoalsGoals- What Company wanted to achieve in general in
constraint to VISION
ObjectivesObjectives- are specific goals to be achieved in future
Vision - big picture idea of what you want to achieve.
Mission - general statement of how you will achieve
your vision

The process of Strategic Management
involves 4 steps:
Strategic Intent
Environmental Analysis & Strategy Formulation
Strategy Implementation
Strategy Evaluation and Control
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Strategic Intent
Vision, Mission,
Business
Definition,
Objectives
Internal & External
Appraisal
SWOT Analysis
Corporate & Business
Level Strategies
Strategic Analysis & choice
Strategy
Implementation
Project &
Procedural
Implemen
tation
Strategic Evaluation
Control

Defining Vision,
Mission & Business
Objectives
Environmental
Analysis
Organizational
Analysis
Setting Objectives &
Goals
Identifying Alternative
Strategies
Choice of Strategy
Reformulate if
Required
Choice of Strategy
Strategy
Implementation
ReRe-implement if
Required
Evaluation & Control
Feedback
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Strategic Management
Strategic Management is the field that deals with
major intended & emergent initiatives, taken up by the
Top Managers on behalf of company.
It involves utilization of resources to enhance
performance of the firm, in their external competitive
environment.
It involves organizations Vision, Mission & Objectives
& then,
Developing Plans (Strategies) & Policies, so as to
achieve set objectives, then,
Allocation of resources
Strategic Management provides overall directions to
the organization.
Strategic Management involves not only the
Management Team but can also includes Board of
Directors, Stakeholders, depending upon
organizational Structure [size].
Strategic Management is an ongoing process that
evaluates & controls the business.
It allows companies to assess their competitors &
helps to set goals & plan strategies to outwit existing
& potential competitors.
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Strategic Management also allows reassessing of
implemented strategies on quarterly, half yearly or
annually basis.
This helps to understand, whether implemented
strategies are succeeded according to the plans or
needs the strategies to be modified or replaced.
If needed, new strategies can be implemented so as to
meet the changed circumstances, new competitors,
new PEST factors etc.
Formulation of Strategy:
It involves 3 main processes..
- Performing situation analysis, self evaluation &
competitors analysis (Internal & External Analysis)
- Simultaneously, the objectives are set, some objectives
are short term & some are long term.
- These objectives set (must be in the light of situation
analysis) suggest strategic plans. The plan provides the
details of how to achieve those objectives
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Strategy Evaluation:
Johnson, Schulez & Whittington presented a model to
evaluate strategic decisionsdecisions- Suitability (will it work)
- Feasibility (can it be made to work)
- Acceptability (will they (employees) work on it)
Suitability of Strategy:
Strategy:
Suitability deals with the overall rationale of Strategy
- Would it be suitable in terms of environment &
Organizational capabilities
Feasibility of Strategy:
It is concerned with whether the resources required to
implement the strategy are available, or can be
developed or obtained.
- Does it make economic sense
- Would the organization obtain economies of scale
Resources can be people, funds, time, information,
machines etc.
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Acceptability of Strategy:
To know, whether the stakeholders will accept the strategies with
its expected performance output, which can include:
- Return: Benefits expected by Stakeholders (financial or non financial)
Ex: Shareholders would expect increase in their wealth
Employees would expect improvement in their careers
Customers would expect good value to their money
- Risk: It deals with the probability & consequences of failure of
strategy
- Stakeholders Reaction
Reaction:: Deals with likely reactions like
like-Shareholders can oppose from new investment
Employees can oppose outsourcing for fear of loosing their jobs
Customers could have concern over a M&A with regard to
quality & Support
Importance of Strategic Management

Strategic Management is must for all those
organizations, who dreams to grow.
Survival of Fittest, does not mean a Strong or Large
company will survive.
Business has to follow war rule- Win or Lose
Companies need to have Competitive Advantage
These all characteristics of a successful business
organizations is possible to have if it followsStrategic Management- Strategic Analysis, Strategy
Formulation & Strategy Implementation.
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Importance of Strategic Management

Strategic Management has following benefitsa) It helps organization to be proactive than being reactive
(ex: Apple, Sony)
b)Strategic Management provides a framework for all
different decisions of business like- Product, Markets,
Manufacturing, resources & investment
c) Strategic Management performs a role of Path Finder by
making organizations able to identify opportunities in
the market & process how to reach them.
d)Strategic Management serves as a corporate defense
mechanism against mistakes & pitfalls
e) Strategic Management helps to develop core
competency & competitive advantage for survival &
Growth
Stakeholders in Business
What are Stakeholders?
Stakeholders are those individuals or group of

people, who can affect & are affected by the
Strategic Outcomes achieved & who have
enforceable claims on Companys Performance
- These people have stakes in Strategic Outcome of the
Company
- These people can be positively or negatively affected by
these outcomes
- These Strategic Outcomes is dependent upon the
support or active participation of certain Stakeholders
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Stakeholders Can Be Classified as:as:Product market
Stakeholders
Capital market
Stakeholders
Firm
Organizational
Stakeholders
Secondary
Stakeholders
Capital market Stakeholders:Stakeholders:Stock Market Investors, Debt Suppliers/Banks
Product Market Stakeholders:Stakeholders:Customers, Retailers, Suppliers
Organizational Stakeholders:Stakeholders:Owner, Employees, Managers, Staff
Secondary Stakeholders:Stakeholders:Community, Competitors, Government
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Stakeholders Expectations in Business

Stakeholder Group
Membership
Primary Expectations
Capital Market
Stakeholders
Shareholders
Wealth Enhancement
Lenders
Wealth Preservation
Product Market
Stakeholders
Customers
Reliable Products at Low Price
Suppliers
Receive Highest Sustainable Price
Organizational
Stakeholders
Employees
Secured, Dynamic, Rewarding Career
Unions
Ideal Working Conditions & Job Security
Community or
Environment
Group
Not affecting Environment
Secondary
Stakeholders
Government
Honest Tax Payment, Safety of Public,

Proper utilization of Resources
Different Type of Stakeholders have different
expectations or demands from the company
- MainlyMainly- Wealth Maximization & to get better ROI or
Value for their Money/Investment
- If Company provides ROI by Making Short Term
decisions, the company can negatively affects the
stakeholders
If company is making above average profitability, then
the company can satisfy its stakeholders
Ex: Reducing invest in R & D & giving dividends to investors as
short term objectives
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Strategic Intent
Strategic Intent is the leveraging a firms internal
resources, capabilities and core competencies to
accomplish the firms vision, mission and objectives in
a competitive environment. (Reason behind
formulation of strategy)
It is all about winning competitive battles and gaining
leadership position by putting organizational resources
to best use.
use.
Strategic Intent
When established effectivelyeffectively- a strategic intent can
cause people turn out excellent performance.
Strategic intent tries to establish the parameters that
shapes thetheValues,, Motives and Actions of people throughout
Values
their organization.
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The Hierarchy of strategic Intent

1) A broad Vision of what the
organizations should be.
2) The organizations Mission.
3) The strategic Objectives
and specific Goals to be
pursued relentlessly
4) The Plans that are
developed to accomplish the
intentions of management in
a concrete way.
1
2
3
Vision
Mission
Goals & Objectives
Vision
Top Management should decide the directional path,
path, on
which the company can walk &
To know what changes in the companyscompanys- Product
- Customer
- Focus
- Market
- Technology
would improve its current market position & future

prospect.
Thus Strategic Vision provides a particular direction to
the organization
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Vision
A Clearly articulated Strategic Vision, that
communicates managements aspirations to
stakeholders & helps steer the energies of
company personnel in common directions.
Ex.Ex.- Henry Fords Vision of a car in every garage had a power
because it captured the imagination of others,
others, aided
internal efforts to mobilize the Ford Motor Companys
resources & served as a reference point of guaging the
merits of Companys Strategic Actions
Examples of Vision Statements

There will be a personal computer on every desk running
:Microsoft software.
software.
Our vision is every book ever printed in any language all
available in 60 seconds: Amazon Kindle
GM: to be the world leader in transportation products and
related services. We will earn our customers, enthusiasm
through continuous improvement driven by the integrity,
teamwork, and innovation of GM people.
To be the number one athletic company in the world: Nike
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Mission
Mission is the Statement
Statement,, typically focused on its
present business scope, Who
Who We Are & What We
Do..
Do
Mission is nothing but the purpose or reason
behind existance of the business
Thus Mission statements broadly describes an
Organizations present capabilities
capabilities,, customer
focused,,
focused
activities
&
business
makeup
(Undertaken
Undertaken)).
Mission
Mission is a statement which defines the role that an organization
plays in society.
Ex
Ex..- Cadburry India
India-- To attain leadership position in the
confectionary market & achieve a strong presence in the food
& drinks sector
sector
To organize the worlds information and make it universally
accessible and useful Google
To give ordinary folk the chance to buy the same thing as rich
people do WalWal-Mart
To contribute to society through the pursuit of education,
learning, and research at the highest international levels of
excellence. - University of Cambridge
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Components of Mission Statement
Customers:
Customers: Who are the firms customers
Product/Services:
Product/Services: What are firms major pdts
pdts./Services.
./Services.
Markets:
Markets: Geographically, where does firm competes
Technology:
Technology: Which technology firm is using
Concern for Growth/Survival:
Growth/Survival: Is the firm committed to
growth & Financial soundness
Self Concept:
Concept: Firms major competitive advantage
Concern for Public Image:
Image: Is the firm responsive to Env.,
Env.,
Society etc.
Concern for Employees : We value our Customers
Mission
Organizations should have mission:mission:a) To ensure unanimity of purpose within the
organization..
organization
b) Provides basis for motivating the use of the
organizations resources.
resources.
c) To develop a basis or standard for allocating
organizational resources
d) To facilitate translation of objective & goals into a
work structure involving the assignment of tasks to
responsible elements within the organization.
organization.
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Characteristics of Good Mission Statement

1. It should be feasible:
feasible: It should be realistic & achievable on
the basis of available resources
2. It should be precise
precise:: Neither too small or too short
3. It should be clear:
clear: It should be clear enough to lead &
understand
4. It should be motivating
motivating:: Motivating to its employees
5. It should be distinctive:
distinctive: Distinctive to its competitor
6. It should indicate major components of strategy:
strategy: A growth
or combination strategy adopted by company.
7. It should indicate how objectives are to be
accomplished:: provide clues regarding the manner in which
accomplished
the objectives are to be accomplished
Objectives & Goals

Organizations Translate their Vision & Mission in to
Objectives
Objectives & Goals are Synonymous to each other.
Objectives are Open ended attributes that denotes
future states & outcomes. (Specific)
Goals are Closed ended attributes which are precise &
expressed in specific terms (Generic)
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Example of VMOSA
Agriculture Business Development Company
Vision: A vibrant rural economy driven by valuevalue-added agriculture.
Mission
Mission:: To create and facilitate the development of valuevalue-added
agricultural businesses.
Goal
Goal:: Recruit local farmers interested/experienced in business
development.
Objective
Objective:: Create a membership of twenty farmers by February 1.
Strategy
Strategy:: Use local farmer leaders with business development
skills to develop the businesses.
Action Plan:
Plan: Form a membership committee to recruit local farmer
leaders. Identify forty farm leaders in the area. List their
qualifications. Contact them individually with the expectation that
half of them will join.
Business Definition
Business DefinitionDefinition A Business definition is a clear statement of the business,
the firm is engaged in or is planning to enter.
It answers the question: What is our business in a precise
way.
Examples:
We are in the beautybeauty-enriching business Helen and
Curtis
We are in the business of computer technology Intel
We are in the transportation business TELCO
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D.F Abell suggested business along three

dimensions
1. Customer groups who is being satisfied (customer)
2. Customer needs what need is being satisfied
(products)
3. Alternative technologies how the need is being
satisfied
Business definition orientation

1. Product definition / orientation
2. Market definition / orientation
Company
Product definition
Market definition
Railways
We run railways
We are a people and

goods mover
Film producing
company
We make movies
We market
entertainment
Copying Machine
company
We make copying
equipment
We help improve office

productivity
Oil company
We sell gasoline
We supply energy
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Peter Druckers Business Definition View

Products may come and go but basic needs and
customer groups endure forever.
According to him business definition should cover three
vital aspects.
1. Product/ Service concept
2.Customer
2. Customer segment
3.
3.Value
Value creation
Critical Success Factors (CSF)

The concept of "success factors" was developed by
D. Ronald Daniel of McKinsey & Company in 1961
What gets measured, gets done..
A quality improvement tool that many organizations use
is Critical Success Factors (CSF) which are indicators that
measure how well an organization is accomplishing its
strategic plan and objectives i.e. Objectives Vs Strategic
Plans
As a general thumb rule, CSF should target those factors
which affects quality, customer satisfaction, cost, market
share and increased revenues.
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Critical Success Factors (CSF)

Lets Understand CSF for a Shoe Manufacturer.
1) High Quality Manufacturing of Shoes
2) Cost Efficiency
3) Proper Retailing
4) A Good Product Mix
5) A Good Brand Image
Lets Understand CSF for a Courier Service Company.
1) Speed of Delivery
2) Reliability
3) Price of Service
CSF with Goals & Mission

Mission:
Critical Success Factors
To become
number One
Produce store
in main street
-Create Successful Relationships

with Suppliers
- Attract & Satisfy new Customers
- Secure Financing for Expansion
Goals:
-Gaining a Market Share Locally by 20%
-Fresh Food from Farm to Consumers in 24 hrs for 75% Products
-- Sustain a 98% of Customer Satisfaction
-- Expand product range to attract new customers
-- Extend Store space to accommodate new Products & Customers
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3 Step Procedure for determining CSF

1) Generate the Success Factors (Identification of CSF)
(What does it take to be successful)
2) Refining of CSFs into Objectives
(Formulating objectives w.r.t.
w.r.t. identified CSFs)
3) Identify measures of Performance
(Know how, whether organization has succeeded with
identified CSFs)
Key Performance Indicators (KPI)

KPI are the measures to Evaluate CSF i.e. to measure
performance of the Organization.
If an Organization identify & works on CSF, it will help
to achieve its Vision/Objectives
To make the vision Operational (accomplishing vision),
it needs to determine its KPI
viz.:
Pre Tax Profit, Shareholders Equity etc.
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A Shoe Manufacturers KPI

A shoe manufacturer has CSF of High Quality product,
cost efficiency etc. Then its KPI will be
1) Brand Recall Rate by Customers
2) Reduced Product Rejection Rate
3) Reduction in number of Complaints from Customers
4) Footfall of New Customers etc.
KPI combination should be decided by the company to
measure & quantify its success.
Benefits of having KPI

It will help the company to measure its progress
towards its Objectives.
Every individual employee in the Organization will
understand-- What is important to achieve its objectives
understand
It can be a tool for Motivation of its Employees.
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Key Result Areas (KRAs)

KRAs are those functions or functional divisions/ Areas
of Performance in which Organization must continually
improve to be successful
Definition:
Definition: "In simple terms it may be defined as the
primary responsibility of an individual, the core area in
which each person is accountable"
Examples of KRAs
-
Product:: Quality & Demand

Customer: Value, Satisfaction -Product
Customer:
Marketing:: To reach ultimate consumers
Marketing
Production:: Continuity of Supply
Production
Finance:: ROI, Availability of Funds, Profits etc.
Finance
Example of KRAs for Human Resource

1)
2)
3)
4)
5)
6)
Staffing
Employee Relations
Employee Development
Compensation Planning & Administration
Policy Development
Career Development
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External Environmental Analysis

Environment outside the company in which it is
operating
This environment may contain various factors,
factors, which
may affect the strategic decision making & strategic
outcome of the company.
These factors can be classified as:
1) Macro Environmental factors &
2) Micro Environmental factors
It is depending upon the overall impact of these factors
on any company.
Need of External Env. Analysis.

It provides an idea for the company to understand:
1) Current & future trends in the market
2) Opportunities & Threats for the organization
3) Risks & strategic uncertainties
4) Also suggests corrective measures to overcome its
impact.
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Need of External Env. Analysis.

Analysis of general environment
Analysis of industry environment
Analysis of competitor
environment
The External
Environment
Strategic Intent
Strategic Mission &
Opportunities
Opportunities are the chances or favorable conditions
for the organizations growth or performance
Viz
Viz::
1) Emerging or Growing needs of customers
2) Quality & Technology improvements
3) Expansion in global market
4) Entry or Exit of competitors..
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Threats
An External factor that poses Danger or Risk to its
Wellbeing or Performance
Viz
Viz::
1) Change in Demographic /Demand
2) Emergence of Cheaper Technology
3) Regulatory Changes
4) Entry or Exit of Competitors
External Environmental Analysis

External Environmental Analysis can be done in three
perspectives:
1) Analysis of General Environment (PESTLE
(PESTLE Analysis)
Analysis)
2) Analysis of Industry Environment (Porters 5 Force)
3) Analysis of Competitors Environment
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External Environmental Factors

Macro Factors
1) Political Factors
2) Economical Factors
3) Socio
ocio--Cultural Factors
4) Technological Factors
5) Legal/Regulatory
6) Physical Environmental
Micro Factors
1) Global Environment
2) Suppliers Environment
3) Market Environment
PESTLE Analysis
Market Factors
Technological
Factors
Industry
Environment
Suppliers
Environment
Political Factors
Firm
Economical
Factors
Socio-Cultural
SocioFactors
Regulatory
Factors
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PESTLE Analysis
Definitions:
PEST analysis an analysis of the political, economic,
social and technological factors in the external
environment of an organization, which can affect its
activities and strategic performance.
PESTEL model involves the collection and portrayal of
information about external factors which have, or may
have, an impact on business.
Political Factors
Factors related to the Politics or Government of that
Nation.
Different Political Factors will have differential impacts
Political factors like:
- Nature of Political System, Ideology
- Political Structure & its Goals & Stability
- Elections, Funding of Elections, Industrial Promotion
- Governments Role in Business Development & Policies
- SocioSocio-Political factors
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Economical factors
Economic factors are related to the production &
distribution of wealth, which have its impact on
business of an organization.
Economic factors like;
- Economic stage of that country at that point of time
- Economic StructureStructure- Capitalistics/Socialistic/Mixed
Capitalistics/Socialistic/Mixed
- Policies like Industrial/Fiscal/monetary policies
- Economic Plans; 5 Yrs plan or Annual Budgets
- Per capita income, disposable income, GDP, GNP, BOP
- Financial Institutions, mode of transportation etc.
Socio-Cultural factors
Factors related to Human Relationships, human
behaviors etc.
SocioSocio-Cultural factors like:
- Demographic: Population, density & its distribution, age
composition, interinter-state migration, income distribution
- Concern of environment on pollution, corruption & role
of media
- Values like expectations of society from business, ritual
beliefs, changing lifestyle patterns
- Family Structure, role of family members in purchasing
decision, education level etc.
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Technological Factors
Factors related to Knowledge applied & materials &
machines used for production purpose, which can
affect the business.
Factors like;
- Sources of Technology: Internal or External, Cost of
acquisition of technology, Collaboration etc.
- Technology development stage, ManMan-Machine System
- Communication & Infrastructural Technology in
Management
Regulatory Factors
Factors related to Planning, Regulation & Promotion of
economic activities by government that affects
business.
Factors such as:
- Constitutional Framework, Fundamental Rights,
- Policies related to Licensing, Monopolies, FDI etc.
- Policies related to distribution & Pricing & their control.
- Policies related to Import & Export
- Other policies related to sick industries, consumer
protection etc.
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Suppliers Environment
Suppliers are associated with the distribution &
production system of the organization
Factors like:
- Cost, Availability & continuity of raw material supply
- Cost & Availability of Finance for implementing plans
- Costs, Availability & supply of Energy (power/Fuel)
- Cost, Availability of Machineries, spares & Maintenance
- Bargaining power of suppliers & availability of
Substitutes
How to perform the analysis?

The process of carrying out PESTLE analysis should
involve as many managers as possible to get the best
results. It includes the following steps:
Step 1. Gathering information about political,
economic, social and technological changes + any
other factor(s)
Step 2. Identifying which of the PESTLE factors
represent opportunities or threats.
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ETOP Model
Why to prepare an ETOP..?
Helps organization to identify Opportunities and
Threats
To consolidate and strengthen organizations position
Provides the strategists, which sectors have a
favorable impact on the organization
Organization knows where its stands with respect to
its environment
Helps in formulating appropriate strategy
Preparing an ETOP
Dividing the environment into different sectors.
Analysing the impact of each sector on the
organization.
Subdividing each environmental sector into sub factor.
Impact of each sub sector on organization in form of a
statement.
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Impact Calculation
Trends
Impact on Strategies
S1
S2
S3
Probability of
Occurrence
+2 Extremely favorable impact

+1 Moderately favorable impact
0 No impact
-1 Moderately unfavorable impact
-2 Extremely unfavorable impact
Probability of Occurrence
High
Medium
Low
ETOP Prparation
Trends
Probability of
Occurrences
Impact on Strategies
S1
S2
S3
Income Level
High
Spending Capability
High
-1
-1
Attitudes of Work
Average
-1
Adaption to Change
Low
-2
Social Factor
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ETOP for Automobile Industry

S.
Opportunity/
Environmental Factors
No.
Threats
Remarks
Macro-Economic Factors
Per Capita Income
Opportunity
Rising PCI means more affordability.

(Sixth Pay Commission)
Loans Availability
Opportunity
Banks are ready for giving loans.
Interest Rates
Opportunity People cant pay easy installments
Industry Environment Analysis

Industry is a group of companies, manufacturing
similar products , which can be substituted with each
other & all the companies are targeting to the same
set of customers.
Industry Analysis allows:
1) A new company to make a strategic decision
whether to enter (invest) in a particular industry or not
2) A old company already present in the industry to
make a strategic decision, whether to remain (invest)
in the industry or to exit out (divest) from the industry.
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Porter's 5 Force Model

Porter's 5 Force Model (suggested by Michael E. Porter
of Harvard Business School in 1979) is a framework to
analyze level of competition within an industry
and business strategy development.
Attractiveness in this context refers to the overall
industry growth & profitability with less Risk.
An "unattractive" industry is one in which the
combination of these five forces acts to drive down
overall profitability & produces risk.

The Five Forces model of Porter is an outside
outside--in
business unit strategy tool that is used to make an
analysis of the attractiveness (value...
(value...)) of an industry
structure..
structure
It captures the key elements of industry competition.
competition.
Five forces that determine the intensity of competition
in the and therefore Attractiveness of a Market.
Market.
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Porter's five forces include
Three forces from Horizontal' competition:
1) Threat of substitute products,
2) The threat of established rivals, and
3) Threat of new entrants; and
Two forces from Vertical' competition:
4) The bargaining power of suppliers and
5) The bargaining power of customers.

This five forces analysis, is just one part of the
complete Porter strategic models.
The other elements are the Value Chain and the
Generic Strategies.
Strategies.
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Porter's 5 Forces of Competition

Customer
Bargaining
Power
Threat of New
Entrants
Threat of
Substitutes
Threat from
Competition
Supplier
Bargaining
Power
Porter's 5 Forces of Competition

Potential
entrants
Threat of
new entrants
Bargaining power
of suppliers
Industry competitors
Suppliers
Buyers
Rivalry among
existing firms
Bargaining power
of buyers
Threat of
substitutes
Substitute
products
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Porters 5 Force Model

Porters 5 force model allows a company to understand
current competitive environment of the industry
(Opportunities & Threats)
Threats)
Then Companies can better understand its Strength &
Weaknesses,, which company tries to match with the
Weaknesses
competitive environment, so as to create a secure position in
the industry.
The analysis helps the company to formulate competitive
strategies to create profitability & improve its Market Share
Ex: A Company can have an increasing threats of New
Competitors as well of upcoming Technological Advancement
along with the existing competitors.
Threat of New Entrant

An Growing Industry, having a profitable trends,
trends,
attracts many new competitors to enter the
industry
Depending upon the Attractiveness of the industry,
new companies are ready to invest in the industry.
All those new companies, tries to influence the
customers of available competitor, so as to earn a
respectable market share.
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To do so, New Entrants do try to differentiate over
existing companys products byby Adding new production capacity
Brings in substantial resources in R & Ds
Technological advancement over competitors
The extent of threat of by the new entrant by the
available competitors can be reduced either byby1. Entry Barrier
2. Retaliation by the available competitors

Entry Barrier:
In this method, the available companies can create a
barrier for a new company to enter in the industry.
Either the entry procedure is difficultdifficult- so that new
company cant enter in the industry or
The entry in the industry is costly,
costly, & require huge
investment, which the new company just cant afford
So that existing companies will enjoy their sales &
Market share
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Entry Barrier:
The two most important barriers to entry are:

Capital requirements
Government policy and regulations
There are plenty of other potential barriers that

might scare new entrants away:
Proprietary products and knowledge
Access to inputs and distribution
Economies of scale and other cost advantages

Retaliation by the available competitors:
Retaliation is nothing but a strong reaction made by
the available companies, which is like not expected by
the new entrant company.
This will not let the new company to spread their roots
in the industry
- The retaliation is generally seen in consolidated
industry than in fragmented industry
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Retaliation by the available competitors:
The retaliation can be offered by the companies in
either of the following waysways Heavier investments as compare to new entrant
company, so that the machinery, technology or asset
advancement can be achieved.
By offering variety & improved quality products
Through economies of scale, reducing the prices of the
products, below which competitors just cant afford,
to reduce their prices

Industries with high barriers of entry:
Car making:
- high upfront capital investment in manufacturing
equipment;
- Compliance with safety and emission rules and
regulation,
- Access to parts suppliers, development of a network of
car dealerships, big marketing campaign to establish a
new car brand with consumers.
- Low barriers of entry: computer hard ware industry
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Bargaining Power of Supplier

It is the situation, which indicates that the market is
consisting of few & potential suppliers & large
customer base.
base.
Hence the terms & conditions of the suppliers are very
high to be handled by the company.
The suppliers may bargain individually or collectively
(through associations) or company direct selling is
restricted.

The bargaining may be for purchasing the products by
the suppliers at lower price with high margins
Selling the products/services at higher prices to the
customers.
Selling the products of inferior quality to the
customers
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Following are the conditions , where suppliers

bargaining power can be high:
When suppliers are few & buyers are in large number
When the products are unique & not commonly
available
When the substitutes of the products are not easily
available to the customers
When the suppliers are not critically dependent on the
earnings of products/services supplied

Following are the conditions , where suppliers
bargaining power can be high:
When the buyers buys in limited quantity,
quantity, which is not
important to the suppliers.
If the suppliers can have a forward integration with the
retailers, with which they can make their own
products.
Where the association of the suppliers is strong &
company is dependent on suppliers to supply their
products & services
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Examples:
The PC making industry faces the almost monopolistic
power of operating system supplier. Microsoft has
abused its power a number of times.
Industries using diamonds,
diamonds, such as jewelry and
electronics, face the huge power of DeBeers,
DeBeers, that
takes advantage of the supply concentration to
achieve dominant market share
Less Bargaining Power: Suppliers of Food Processing
industries has less BP from farmers
Bargaining Power of Buyers

Bargaining power of buyer means, the buyers
individually or collectively can put conditions/ demands
of purchasing products /services.
Bargaining power is the ability to influence the setting
of prices.
The bargaining may be for:
for:
Quality in products / services (Hotel Industry)
Prices of the products/ Services lower as they desire
Expecting more value against what they pay
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The bargaining power of the buyer is more when:
When the buyers are in limited in number
When the buyers are the potential buyer in volume
When the buyers have alternatives for supply & where
supplier can supply @ buyers conditions.
Switching cost is low, but can affect the suppliers to a
great extent
The bargaining power of the buyer is more:

1) When the buyers itself has the ability to integrate
backward to create own capacity supply source.
Ex.
Ex.-- Building constructor & material suppliers
- Schools & colleges with uniforms or other
material suppliers
Hence the customers can demands for the reducing
the prices, which may affect the total profitability of
the suppliers
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Threat of Substitute Products

Substitutes are those products which can be
substituted with each others.
When the products has a large number of substitutes,
the prices of the products doesnt move high
Availability of close substitutes produces, negative
competitive impact.
Any industry, where close substitutes are not available,
the company sales their products at higher prices

Threats of Substitute products is high when:
When the switching cost is low
Prices of substitute products are lower
Quality & performance of the substituted products are either
equal or little or greater than major industry products
In such cases, companies can offset the effect of substitute
products, by differentiation over competitors i.e. by
providing
Higher Quality, Lower Prices,
Better After Sales Services,
Location Advantage etc.
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Full substitute products are products from
different manufacturers that fulfill the exact same
purpose.
Ex.--Kellog's corn flakes and generic brand corn
Ex.
flakes.
Partial substitutes are products that only partially
substitute each other.
Ex.
Ex.-- A holiday in Pukhet is not exactly the same as a
holiday in Bankok,
Bankok, even though they are both cities
and they both feature channels.
Protecting against substitution

Distributors may try to protect themselves against
substitution with exclusive distribution agreements.
Buyers circumvent them with so called grey market
imports.
Producers may try to protect their products with
strong branding, trade marks, patents and other
psychological and legal barriers against substitutes.
Another way to protect from substitution is to make
the products incompatible with competing products.
An example are the different lens systems for
SLR cameras.
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Examples of Substitution:
Washing powder- A dozen of brands sitting on the shelves
and waiting for consumers to pick them up. Consumer will
often pick up the one that is on special on shopping day.
Oil. Although alternative forms of energy are being
studied and introduced, most engines today run on
gasoline. Gasoline can not be replaced that quickly on a
large scale.
Pharmaceuticals in the short term, because they are
protected by patents. In the long term, generics can dent
their market share and profits.
Intensity of Rivalry among competitors

In every industry, a good number of companies are
present, who competes with each other for creating a
competitive position in the industry
Depending upon the nature of the industry & stage of
industry, the number of competitors in the industry &
intensity of competition is dependent.
Dimensions of Rivalry among competitors:
A Competitive Structure
Demand Conditions
Exit Barriers
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A Competitive Structure: This refers toto No. of Competitors
Sizes & Diversity of the company
Different types of competitive structures have
different implications for existing firms & for new
entrant.
Structure of the industry vary from Consolidated to
Fragmented industry

Demand Conditions: This refers toto Nature of the companies &
Demand of existing customers in the industry
A high demand,
demand, increasing demand tends to moderate
competition,, as each company can earn respective MS
competition
depending upon their competency levels.
A stagnant demand or dede-growing market lead to
intensity of competition,
competition, so as to take over as much
possible market share from the competitors
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Exit Barriers: This refers to situation in the industry,
which prevents the companies from leaving the
industry, even though, the profitability, ROI is
less/negative in the industry.
The exit barriers may bebe Economic exit barriers
Emotional exit barriers
Strategic Factors, which prevent companies to exit
from the industry

Exit Barriers:
Barriers to exit are obstacles to market players who
realize that they will not turn a profit and would like to
quit the market.
The difficulties of exiting a market can force a player to
keep competing as the least bad alternative.
The increased competition affects negatively the other
incumbents.
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Exit Barriers: Examples
1) Industries with high barriers to exit:
Wireless Telecom:
Telecom: the production of an additional
minute of wireless call costs virtually nothing, most
costs being up front investment in expensive
equipment deployment.
Air Travel:
Travel: adding a passenger to a scheduled airplane
cost just a little bit of fuel, as opposed to the huge cost
of idle airplanes.

Exit Barriers: Examples
2) Industries with Low barriers to exit:
Retail:
Retail: inventory can be moved to more profitable
markets or liquidated.
Personal care services:
services: labor is the most important
price factor for these services.
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For Any Query..!!!!
Dr. Dr. Prashant B. Kalaskar

# 9975770407, 7350520025
Dr. Prashantkalaskar007@gmail.com
pbkalaskar@sinhgad.edu
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Market has become Global

Dr. Prashant Kalaskar

More Recent Historical Development of

More Recent Historical Development of

Allocation of scarce resources

The concept of distinctive

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More Historical Development

More Historical Development

Pattern in Stream of Decisions

**Normally emergent strategy comes from

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Intended & Deliberate

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The Three Big Strategic Analysis

3. How will we get there?

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Differing Perspectives of the Strategic

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The Strategy Concept

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Definition of Strategic Management..!!

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Characteristics of Strategic Management ..!!

Greater need for

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Characteristics of Strategic Management ..!!

Are less costly, risky, and

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Characteristics of Strategic Management ..!!

Implement overall strategy

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Strategy: Partly Proactive Partly Reactive

New Initiatives Plus Ongoing

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Strategy is how an organization intends

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Strategic Management Process

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Strategic Management Process

The Term Strategic Management refers to the set

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Let us understand some terms

Strategic Management Process

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Strategic Management Process

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Strategic Management Process

Evaluation & Control

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Dr. Prashant Kalaskar

Dr. Prashant Kalaskar

Importance of Strategic Management

Importance of Strategic Management

Stakeholders are those individuals or group of

Dr. Prashant Kalaskar

Dr. Prashant Kalaskar

Stakeholders Expectations in Business

Reliable Products at Low Price

Receive Highest Sustainable Price

Secured, Dynamic, Rewarding Career

Ideal Working Conditions & Job Security

Not affecting Environment