Adv SBM

Advanced Strategic Business
Management
Prof. Shashank Divekar
Pune, India.
shashankd@yahoo.com
Strategic Business Management
What is Corporate Strategy ?

Corporate Strategy is the direction and scope of an
organisation, which achieves advantage for the organisation
through its configuration of resources within a changing
environment and to fulfill stakeholder expectations.
What is Strategic Managemant ?
It is the managerial process that focuses on identifying and
building competitive advantage
By
Generating good ideas and implementing them effectively.

An Overview
Definition : Corporate Strategy is the pattern of major

objectives, purposes or goals and essential policies or
plans (for achieving those goals), stated in such a way as
to define what business the company is in or is to be in
and the kind of company it is or is to be.
The task of corporate strategy is to create a distinctive
way ahead for an organisation, using whatever skills and
resources it has, against the background of the
environment and its constraints.
LEVELS OF STRATEGY
Corporate level strategy
It decides the business you should be in. Is concerned
with the overall purpose and scope of an organisation
and how value will be added to the different parts
(Business units) of an organisation.
Business Unit strategy
Also known as Competitive Strategy, it decides the tactics to
beat/ overcome the competition. Is about how to compete
successfully in particular markets. The concerns are about
competitors, opportunities and new products or services.
LEVELS OF
STRATEGY
Operational strategy
Also called the Go-to-Market Strategy or Functional Strategy,

it decides the operational methods to implement the tactics.
Are concerned with how the component parts of an
organisation deliver effectively the corporate and business-level
strategies in terms of resources, processes and people.

A Comprehensive Strategic Management Model
External
Audit
Vision &
Mission
Statements
LongTerm
Objectives
Generate,
Evaluate &
Select
Strategies
Implement
Strategies
Mgnt.
Issues
Implement
Strategies Functional
Measure &
Evaluate
Performance
Internal
Audit
Strategy Formulation
Strategy Implementation
Strategy
Evaluation

Key Terms in Strategic Management
The organisation, it mission and objectives
Strategic Analysis have to be examined and analysed. The top
management examines the objectives, the
environment and resources.
Strategy
Development
Strategy
Implementation
The strategy options have to be developed and

selected. The strategy has to be built on the
particular strengths of the organisation,
developing advantages over competition that are
sustainable over time.
The selected options have to be implemented.

Strategy Analysis
Judgment about what strategy to pursue needs to flow

directly from solid analysis of the companys external
environment and internal situation. The two most
important situational considerations are :
1. Industry and competitive conditions
2. Companys own competitive capabilities, resources,
internal strengths & weaknesses and market position.
Strategy analysis and choice seek to determine alternative
courses of action that could best enable the firm to achieve
its mission and objectives.

Strategy Implememtation
A technically imperfect plan that is implemented well, will achieve
more than the perfect plan that never gets off the paper on which
it is typed. Change comes through implementation and evaluation
and not through the plan.
The implementation tasks put to test the strategists abilities to

allocate resources, design structures, formulate functional policies,
and take into account the leadership styles required, besides
dealing with various other issues.
Strategy formulation concepts and tools do not differ greatly for
small, large, for-profit or non-profit organisations. However, strategy
implementation varies substantially among different types.
Strategy V/s Tactics

Strategy is the overall campaign plan, which may involve
complex operational patterns, activity, and decision-making
that lead to tactical execution.
Tactics are the actual means used to overcome some minor
problems and gain an objective.
At its most basic, strategy is a matter of figuring out what we
need to achieve, determining the best way to use the resources
at our disposal to achieve it, and then executing the plan.
Tactics are techniques and actions you perform to solve

immediate problems, while being a part of the larger strategy.
Mintzbetgs 5 Ps of Strategy
Henry Mintzberg has described Strategy in different viewpoints. He
argued that it is difficult to give a specific and concise definition of
Strategy, since the word is used in different ways, by different people
in different circumstances.
It is important to understand Strategy in the right context, for a
meaningful review and analysis of the same.
Strategy is defined as
1. Plan
2. Ploy
3. Pattern
4. Position
5. Perspective.
Strategy as a PLAN : This is the most commonly understood concept
of strategy. This is the default, automatic approach.
Dictionary meaning of Strategy is a plan, method or series of

maneuvers that help the enterprise achieve its basic objectives.
The objective of every strategy is action. According to Peter Drucker,
Strategy is Purposeful Action. According to Moore, it is Design for
action.
In Management theory, Strategy is a unified, comprehensive and
integrated plan.
In Game theory, it is a complete plan, which also specifies what
choices the player will make in every possible situation.
Strategy as a PLOY: According to Mintzberg, Strategy involves getting
better of the competitors, by plotting to disrupt, dissuade, discourage,
or otherwise influence them. In this sense, strategy is seen as a Ploy.
As a Ploy, strategy is a killer move, a technique for dealing with
impending troubles or problems.
Strategy as a PATTERN : While Plans and Ploys are both deliberate

exercises, sometimes strategy emerges as a past organisational
behaviour. It can become a consistent and successful way of doing
business, which can develop into a strategy.
By this definitiom, strategy is consistency in behaviour, whether or
not intended.
Strategy as a POSITION: How you decide to position yourself in the
marketplace can also be a strategy in itself. In this way, strategy helps
you explore the fit between your organisation and your environment,
and it helps you develop a sustainable competitive advantage.
By this definition, strategy becomes a mediating forcce, a Match
according to Hofer and Schendel, between organisations and
environment.
Strategy as a PERPECTIVE : This is about the corporate philosophy,
priorities and values behind every decision.
Under this conceept, strategy is all about how the organisation
perceives the market, its own status and its own way of conducting
business. In this sense, strategy is to the organisation, what
personality is to an individual.

ENVIRONMENTAL APPRAISAL
Environment is the sum of various external and some internal
forces that affect the functioning of business.
"The environment includes factors outside the firm which can lead
to opportunities for, or threats to the firm. Although there are
many factors, the most important of the sectors are socioeconomic, technological, supplier, competitors, and government.
- Glueck & Jauch
"Environment factors or constraint are largely if not totally, external
and beyond the control of individual industrial enterprises and their
managements. These are essentially the 'givers' within which firms
and their managements must operate in a specific country and they
vary, often greatly, from country to country.
- Barry M. Richman & Melvyn Copen

ENVIRONMENTAL APPRAISAL
Objectives of Environmental Appraisal :
1. To understand the current and potential changes taking place
2. To obtain necessary inputs for strategic decision making.
3. To facilitate and foster strategic thinking in organisations
Characteristics of Business Environment :
Environment is complex
Environment is Dynamic
Environment is multi-faceted
Far-reaching impact
Carries risks, uncertainties & opportunities

Micro Environment
Micro-environment is related to small area or immediate
periphery of the organisation. It influences the organisation
regularly and directly.
Decisions affected by Micro-Environment
Employees, their characteristics, attitudes and profiles.
The customer base
Methods and sources of finance

Vendors/ suppliers and the relationships
The local community
Direct competition

Macro Environment
Macro Environment consists of broad, indirect factors which
affect the overall business environment in a country or region,
across all industries.
DEMOGRAPHIC
ECONOMIC
LEGAL / REGULATORY
MACRO
ENVIRONMENT
GOVERNMENT
POLITICAL
CULTURAL
TECHNOLOGICAL
GLOBAL

How corp. strategy links the organisations resources with its environment
Environment
Competitors Attacking
Economy Growing
Opportunity
Threat
RESOURCES
Strategy needed
to direct
activities of its
people, finance,
factories etc.
Environment
Environment
Threat
Opportunity
Customers excited
about new products
& services
Suppliers becoming
more aggressive
Environment

How corp. strategy links the organisations resources with its environment
Economy at large
Substitutes
Suppliers
Legislation &
Regulation
Technology
Firm
Rivals
Buyers
New Entrants
Societal Values & Lifestyle
Population
Demographics
Environmental Threat & Opportunity Profile (ETOP)

Every business needs to conduct continuous environmental analysis
for strategic business decisions. This results into a mass of information
related to trends, events, issues and market expectations.
A Structuring of this data and information in esssential in order to
make it meaningful and relevant. ETOP is a technique which is used
for this purpose.
ETOP involves :
1. Dividing the environment into various sectors and further into
sub-sectors.
2. Analysing the impact of each sector and sub-sector on the
organisation
3. Describe the impact in the form of a statement (Favourable,
unfavourable or neutral).

Environmental Threat & Opportunities Profile (ETOP)
ENVIRONMENTAL
SECTOR
NATURE OF IMPACT
IMPACT OF THE SECTOR
ECONOMIC
Burgeoning middle class,

rising disposable incomes,
lifestyle changes.
MARKET
Several major players, lots of

small players and a large
unorganised sector, margin
pressures.
GLOBAL
Global slowdown, cheaper

imports, US$, crude prices.

ENVIRONMENTAL
SECTOR
NATURE OF IMPACT
POLITICAL
Coalition compulsions, lack

of direction, instability.
REGULATORY
Too many controls, inspector

raj, documentation and
licensing, reservations for SSI
etc.
SOCIAL
Changing attitudes,
acceptance of new social
values and norms, new ideas
and liberal outlook.

ENVIRONMENTAL
SECTOR
NATURE OF IMPACT
TECHNOLOGY
Cheaper technology
development, skilled and
trained indigenous talent.
SUPPLIERS
Too few vendors, new

suppliers reluctant to enter
the market. Pricing and
scheduling issues.

Competitive Analysis : Porters Five-Forces Model
1. Rivalry among competing firms

2. Potential entry of new competitors
3. Potential development of substitute products

4. Bargaining power of suppliers
5. Bargaining power of consumers

Competitive Analysis : Porters Five-Forces Model
The Five-forces model is used in three steps to determine

what competition is like in a given industry :
1. Identify the specific competitive pressures/ key
elements associated with each of the five forces, that
impact the firm.
2. Evaluate how strong are the pressures comprising each
of the five forces (Fierce, strong, moderate to normal
or weak).
3. Determine whether the collective strength of the five
competitive forces is conducive to earning attractive
profits.
Business Policy & Strategic Management

Vision, Mission & Objectives
Vision Statements and Mission Statements are the inspiring
words chosen by successful leaders to clearly and concisely
convey the direction of the organization.
A Vision Statement describes the desired future position of the
company.
A Mission Statement defines the company's business, its
objectives and its approach to reach those objectives.
Elements of Mission and Vision Statements are often combined to
provide a statement of the company's purposes, goals and values.
A Strategic Vision is a roadmap of a companys future providing
specifics about technology and customer focus, the geographic and
product markets to be pursued, the capabilities it plans to develop,
and the kind of company the management is trying to create.

The Vision statement communicates both the purpose and values

of the organization.
Vision refers to the category of intentions that are broad, allinclusive and forward-thinking. It is the image that a business
must have of its goals before it sets out to reach them.
A vision statement is a broad declaration of overall intent to
eventually achieve a widely acknowledged state of existence an aspiration for the future.

A Mission statement is an organization's vision translated into
written form. It makes concrete the leader's view of the direction
and purpose of the organization.
A mission statement defines in a paragraph or so any entity's
reason for existence. It embodies its philosophies, goals, ambitions
and mores. Any entity that attempts to operate without a mission
statement runs the risk of wandering through the world without
having the ability to verify that it is on its intended course.

A Mission statement should be a short and concise statement of
goals and priorities. In turn, goals are specific objectives that
relate to specific time periods and are stated in terms of facts.
Mission and Vision Statements are commonly used to:
Internally :
Guide management's thinking on strategic issues, especially
during times of significant change;
Help define performance standards;

Inspire employees to work more productively by providing focus
and common goals;
Guide employee decision making;

Help establish a framework for ethical behavior.

Mission and Vision Statements are commonly used to:
Externally :
Enlist external support;
Create closer linkages and better communication with
customers, suppliers and alliance partners;
Serve as a public relations tool.
Vision defines where the organisation wants to be in the future.

It reflects the optimistic view of the organisations future. It should
resonate with all members of the organisation and help them feel
proud, excited and part of something bigger than themselves.
Mission defines where the organisation is going now, basically
describing its purpose, its primary objectives.

Sample Vision Statements :
"PepsiCo's responsibility is to continually improve all aspects

of the world in which we operate - environment, social,
economic - creating a better tomorrow than today. Our vision
is put into action through programs and a focus on
environmental stewardship, activities to benefit society, and a
commitment to build shareholder value by making PepsiCo a
truly sustainable company."
We aspire to be the global steel industry benchmark for
Value Creation and Corporate Citizenship.
- Tata Steel

Sample Vision Statements :
Driven by the customer
TVS Motor will be responsive to customer requirements

consonant with its core competence and profitability. TVS
Motor will provide total customer satisfaction by giving the
customer the right product, at the right price, at the right time.
- TVS Motors
Sustain ITC's position as one of India's most valuable
corporations through world class performance, creating
growing value for the Indian economy and the Company's
stakeholders
- ITC

Sample Mission Statements :
Our mission is to be the world's premier consumer products

company focused on convenient foods and beverages. We seek
to produce financial rewards to investors as we provide
opportunities for growth and enrichment to our employees, our
business partners and the communities in which we operate.
And in everything we do, we strive for honesty, fairness and
integrity.
- Pepsico

Consistent with the vision and values of the founder Jamsetji

Tata, Tata Steel strives to strengthen Indias industrial base
through the effective utilization of staff and materials. The
means envisaged to achieve this are high technology and
productivity, consistent with modern management practices.
Tata Steel recognizes that while honesty and integrity are the
essential ingredients of a strong and stable enterprise,
profitability provides the main spark for economic activity.
- Tata Steel

We are committed to being a highly profitable, socially

responsible, and leading manufacturer of high value for
money, environmentally friendly, lifetime personal
transportation products under the TVS brand, for customers
predominantly in Asian markets and to provide fulfillment
and prosperity for employees, dealers and suppliers.
- TVS Motors
To enhance the wealth generating capability of the
enterprise in a globalising environment, delivering superior
and sustainable stakeholder value.
- ITC

External Audit
Firms should be able to respond either offensively of defensively
to external factors by formulating strategies that take advantage
of external opportunities or minimize the impact of potential
threats.
The purpose of External Audit is to identify key external variables
that offer actionable responses.
Key External Forces :
1. Economic
2. Social, Cultural Demographic & Environmental
3. Political, Governmental & Legal
4. Technological
5. Competitive

Internal Audit
Performing an internal audit requires gathering, assimilating
and evaluating information about the firms operations.
The internal audit involves collecting and analyzing data and
details about the firms management, marketing, finance/
accounting, production/ operations, R&D, and MIS operations.
Representative managers and employees from throughout the
firm need to be involved in determining the firms strengths and
weaknesses.
The process of performing an internal audit provides more
opportunity for the participants to understand how their jobs,
departments and divisions fit into the whole organization.

Goals & Objectives
Objectives are open-ended attributes that denote the future
states or outcomes.
Objectives are organizations performance targets the results
and outcomes it wants to achieve. They function as yardstick
for tracking an organizations performance and progress.
Goals are close-ended attributes which are precise and
expressed in specific terms.
Objectives may be qualitative while goals generally tend to

be quantitative.
The pursuit of objectives is an unending process such that
organizations sustain themselves. They provide meaning and
sense of direction to organizational endeavour.
Goals & Objectives

COMMON OBJECTIVES :
SURVIVAL
STABILITY
GROWTH
EFFICIENCY
PROFITABILITY

Characteristics of Objectives :
Objectives help an organization in pursuit of its vision and mission.
Objectives provide the basis for strategic decision-making
Objectives should define an organization's relationship with
its environment.
Objectives should provide the standards for
performance appraisal.
Objectives should be concrete and specific.
Objectives should be measurable, controllable and challenging.

Objectives should be set within constraints.

Strategic Analysis
External Analysis.
Internal Analysis
Opportunities, threats, trends and

strategic uncertainties
Strategic strengths, weaknesses,

problems, constraints and uncertainties
Strategy identification and selection

Identify strategic alternatives
Product-maker investment strategies
Functional area strategies
Assets, competencies and synergies
Select strategy
Implement the operating plan
Review strategies
Strategy Choice
Michael Porters Five Generic Strategies
1. Cost Leadership Low cost
2. Cost Leadership Best Value
3. Differentiation
4. Focus Low cost

5. Focus Best Value/ Differentiation

Types of strategies
Integration
Forward Integration :
Gaining ownership/ increased control

over channel partners
Backward Integration : Ownership/ control over suppliers

Horizontal Integration : Ownership/ control over competitors
Intensive
Market Penetration :
Seeking increased market share in

existing markets through extra efforts.
Market Development : Introducing existing product (s) into new

geographic areas
Product Development : Improving existing products or developing

new products

Types of strategies
Diversification
Related Diversification : Adding new but related products or services
Unrelated
Diversification :
Adding new, unrelated products or services
Defensive
Retrenchment : Regrouping through cost and asset reduction to
reverse declining sales/ profits
Divestiture :
Selling/ hiving off a division or part of the organisation
Liquidation :
Selling all the assets, in parts, for their tangible worth
Strategy Alternatives
Stability
Expansion
Retrenchment
Intensification
Market
Penetration
Market
Development
Combination
Diversification
Product
Development
Forward
Vertically
Integrated
Concentric
Diversification
Backward
Conglomerate
Diversification
Strategy Implementation concerns the managerial exercise of
putting a freshly chosen strategy into place.
Characteristics of Strategy Implementation :
Action Oriented
Comprehensive in scope
Requires varied skills
Wide-ranging involvement
Integrated Process
Managing strategy implementation and execution is an
operations-oriented activity aimed at shaping the performance
of core business activities in a strategy-supportive manner.

Implementation is the most demanding and time-consuming part of
the strategy-management process.
To convert strategic plans into actions and results, a manager
must be able to :
Direct organizational change
Motivate people
Build and strengthen company competencies
Strengthen competitive capabilities
Create a strategy-supportive work climate and
Meet or beat performance targets.
Effective strategy execution involves creating strong fits between
strategy and organizational capabilities, between strategy and reward
structure, between strategy and internal operating systems, and
between strategy and the organizations work climate and culture.

Strategic-management process does not end when the firm decides
what strategies to pursue. There must be a transition of strategic
thought into strategic action. Implementing strategy affects an
organisation from top to bottom; it affects all the functional and
divisional areas of a business.
A technically imperfect plan that is implemented well, will achieve
more than the perfect plan that never gets off the paper on which
it is typed. Change comes through implementation and evaluation
and not through the plan.
Strategy execution deals with the managerial exercise of
supervising the ongoing pursuit of strategy, making it work,
improving the competence with which it is executed and showing
measurable progress in achieving the targeted results.

Strategy formulation is fundamentally different from strategy implementation :
Strategy Formulation
Positioning forces before the

action
Managing forces during the

action
Focuses on effectiveness
Focuses on efficiency
Primarily an intellectual
process
Primarily an operational
process
Requires good intuitive and

analytical skills
Requires special motivation

and leadership skills
Requires coordination
among few individuals
Requires coordination
among many individuals
Strategy formulation concepts and tools do not differ greatly for small,
large, for-profit or non-profit organisations. However, strategy
implementation varies substantially among different types.
PORTERS VALUE CHAIN

One of the primary tasks of top management in any business is
to create a strong and sustainable competitive advantage.
For this, it is essential to analyse the various activities through
which such competitive advantage can be created. For this
purpose, Michael Porter modelled a firm as a chain of value
creating activities.
The term Value Chain was used by Michael Porter in his book
"Competitive Advantage: Creating and Sustaining superior
Performance" (1985).
Rather than looking at departments or accounting cost types,
Porter's Value Chain focuses on systems, and how inputs are
changed into the outputs purchased by consumers.

PORTERS VALUE CHAIN
The concept of Value chain looks at an organisation as a system,
made up of sub-systems. Each system and sub-system involves inputs,
transformation process and output.
Inputs, transformation processes, and outputs involve the acquisition
and consumption of resources - money, labour, materials, equipment,
buildings, land, administration and management. The costs incurred
and the profits earned are determined by the way value chain
activities are carried out.
Michael Porter classified the value chain activities into 2 categories :
1. Primary Activities/ Processes

2. Support Activities / Processes

PORTERS VALUE CHAIN
Primary Activities/ Processes :
1. Inbound Logistics : Include the receiving, warehousing, and
inventory control of input materials. Involve relationships with
suppliers and include all the activities required to receive, store,
and disseminate inputs.
2. Operations : These are the transformation and value-creating
activities that transform the inputs into the final product.
3. Outbound Logistics : These activities deliver your product or
service to your customer. These are things like collection, storage,
and distribution systems, and they may be internal or external to
your organization.
Contd..

PORTERS VALUE CHAIN
Primary Activities/ Processes :
4. Marketing & Sales : Inform buyers about products and services,
induce buyers to purchase them, and facilitate their purchase. These
are the processes to persuade clients to purchase from you instead
of your competitors. The benefits offered, and how well these are
communicated, are sources of value here.
5. Service : These are the activities related to maintaining the value of

your product or service to your customers, once it's been purchased.
Includes all the activities required to keep the product or service
working effectively for the buyer after it is sold and delivered.

PORTERS VALUE CHAIN
Support Activities/ Processes :
1. Procurement : Is the acquisition of inputs, or resources, for the
firm. This is what the organization does to get the resources it
needs to operate. This includes finding vendors and negotiating
best prices.
2. Human Resource Management : Covers all activities involved in
recruiting, hiring, training, developing, compensating and (if
necessary) dismissing or laying off personnel. People are a
significant source of value, so businesses can create a clear
advantage with good HR practices.
Contd..

PORTERS VALUE CHAIN
Support Activities/ Processes :
3. Technological Development : Pertains to the equipment,
hardware, software, procedures and technical knowledge brought
to bear in the firm's transformation of inputs into outputs.
Minimizing information technology costs, staying current with
technological advances, and maintaining technical excellence are
sources of value creation.
4. Infrastructure : These are a company's support systems, and the
functions that allow it to maintain daily operations. Accounting,
legal, administrative, and general management are examples of
necessary infrastructure that businesses can use to their
advantage.

PORTERS VALUE CHAIN
Infrastructure
Support
Activities
Human Resource Management

Technology Development
Procurement
Primary Activities
M
A
R
G
I
N
S
Porters Value Chain System

Supplier
Value Chain
Distributor
Value Chain
Organisations
Value Chain
Customer
Value Chain
BCG Matrix
The BCG Growth-Share Matrix is a portfolio planning model was
developed by Bruce Henderson of Boston Consulting Grup in the
early 1970s. It displays the various business units on a graph of the
market growth rate vs. market share relative to competitors.
This helps the company allocate resources and is used as an
analytical tool in brand marketing, product management, strategic
management, and portfolio analysis. It facilitates a comparison of
many business units at a glance.
The BCG Matrix uses two dimensions : Market Share and Market
Growth. The position of a business unit on the growth-share matrix
provides an indication of the cash generation and its cash
consumption.
BCG Matrix
Placing products or businesses in the BCG Matrix results in 4
categories in a portfolio of a company :
DOGS ( Low Growth, Low Market Share)
These neither generate nor consume large amounts of cash in
the business. However, these are cash traps because money is
tied up in a business that has little potential. They depress an
otherwise profitable companys return on assets ratio.
Question Marks (High Growth, Low Market Share)

This business unit has a small market share in a high-growth
market. These require resources and investment to increase the
market share, but success is doubtful. ders and thus also
generate large amounts of cash.
BCG Matrix
STARS (High Growth, High Market Share)
They consume large amounts of cash and are market leaders in a
high-growth market. Stars generate cash but on the other hand,
in order to maintain its market leadership, they also require large
infusion or investment.
Cash Cows (Low Growth, High Market Share)
Business unit that has a large market share in a mature, slow
growing industry. Cash cows require little investment and
generate cash that can be used to invest in other business units.
They are to be "milked" continuously with as little investment as
possible, since such investment would be wasted in an industry
with low growth.

GE Nine-Cell Strategic Model
The GE 9-Cell Matrix was developed with the intention to overcome
certain limitations of the BCG Matrix.
The Matrix was pioneered by General Electric Co., with the aid of
Boston Consulting Group and McKinsey & Co.
The matrix consists of 9 cells (3X3) and Two Key Variables :
Business Strength
Industry Attractiveness
Business Strengths :
Industry Attractiveness :
Product features/ Patents

Market Share
Profit Margins
Price/ Quality Competitiveness
Market Intelligence
Market Size & Growth

Economies of scale
Technology
Social/ environmental aspects
Competitive factors

If your enterprise falls in the green zone you are in a favorable
position with relatively attractive growth opportunities.
A position in the yellow zone is viewed as having medium attractiveness.
Leader
Growth
High
Industry
Attractiveness Medium
Low
Try Harder
Cash
Generation
High
Proceed
with care
Phased
Withdrawal
Medium
Enterprise Strength
Improve
or Quit
Phased
Withdrawal
Withdrawal
Low

A position in the red zone is not attractive. The suggested
strategy is that management should begin to make plans to
exit the industry.
Leader
Growth
High
Industry
Attractiveness Medium
Low
Try Harder
Cash
Generation
High
Proceed
with care
Phased
Withdrawal
Medium
Enterprise Strength
Improve
or Quit
Phased
Withdrawal
Withdrawal
Low

McKinseys 7 S Framework
The McKinsey 7- S framework is a popular model used in organisations
to analyse the environment to investigate if the company is achieving
its intended objectives.
The model was developed by Tom Peters & Robert Waterman,
consultants at the McKinsey & Company consulting firm.
The basic premise of the model is that there are seven internal aspects
of an organization that need to be aligned if it is to be successful.
The 7-S model can be used in a wide variety of situations to help
Improve the performance of a company.

Examine the likely effects of future changes within a company.
Align departments and processes during a merger or acquisition.
Determine how best to implement a proposed strategy.

The McKinsey 7S model involves seven interdependent factors which
are categorized as either "hard" or "soft" elements:
Hard Elements
Soft Elements
Strategy
Shares Values
Structure
Skills
Systems
Style
Staff
"Hard" elements are easier to define or identify and management can

directly influence them: These are strategy statements; organization
charts and reporting lines; and formal processes and IT systems.
Soft" elements, on the other hand, can be more difficult to describe,
and are less tangible and more influenced by culture. However, these
soft elements are as important as the hard elements if the
organization is going to be successful.


Hard Elements
Strategy It refers to the intended sequence of actions taken by a
company to achieve its goals and objectives. It deals with resource
allocation and includes competition, customers and the
environment.
Structure It refers to how the various business units are
structured and how they communicate with each other. A
companys structure may be centralized or decentralized or may
take many other forms depending on the companys culture and
values.
Systems This includes a host of systems within an organization

that define its processes and routines. It includes performance
appraisal system, financial systems, IT systems etc.

Soft Elements
Shared values These are the core values of the company that
connect all the other 6 factors. These are the fundamental ideas or
guiding principles that lay the foundation of businesses.
Skills: the actual skills and core competencies of the employees
working for the company.
Style This spans the core beliefs, norms and management style in
the organization.
Staff It refers to the number and type of employees in the
organization. It is very important for an organization to manage its
human capital to create competitive advantage.

SYNERGY
1+1=3
Synergy is a state in which two or more things work together in a

particularly fruitful way that produces an effect which is greater than
the sum of their individual effects.
Synergy describes the benefits a business experiences by strategically
organizing itself to maximize cooperation and innovation. In simple
terms, a synergistic organization achieves more as a group than its
parts could in isolation.
Increasing synergy requires a careful analysis of your organizations

current strategies to identify better ways of doing business.
The term Synergy is most commonly used in the context of mergers
and acquisitions. Synergy, or the potential financial benefit achieved
through the combining of companies, is often a driving force behind a
merger.

SYNERGY
Besides growth needs, acquisitions and mergers are done for the
purpose of achieving a measure of synergy between the parent and
the acquired entity.
Synergy may result from such bases as physical facilities, technical

and managerial skills, distribution channels, R&D, patents etc.
Business synergy may manifest itself in different ways either as
sustained higher profitability or as a strong competitive advantage in
the markets.
In management, synergies may be created between management
teams, resulting in increased capacity and workflow that was not
possible when the teams were working independently.

STRATEGIC FIT
Most business managers seeking to expand their company's
operation through a merger or acquisition will look for another
company that makes a good strategic fit with their own firm.
Strategic fit expresses the degree to which an organization is
matching its resources and capabilities with the opportunities in the
external environment.
A Strategic Fit is a situation that occurs when a specific project, target

company or product is seen as appropriate with respect to an
organization's overall objectives.
Synergy and Strategic Fit are two important factors which determine
the strategic business decisions and their outcomes.
Strategic Fit and Stretch

Startegic fit refers to matching the organisations activities and
business decisions to the environment in which it operates. Here, the
business strategy is designed according to the prevailing and expected
business environment.
Strategy development by 'stretch' is the identification and leverage of
the resources and competences of the organisation which yield new
opportunities or provide competitive advantage.
Strategic fit and stretch are opposite ideas.
Under fit, the strategic intent is seen as more realistic, while under
stretch and leverage, it is seen as idealistic.
Strategic Leverage
The ability to influence a system, or an environment, in a way
that multiplies the outcome of one's efforts without a
corresponding increase in the consumption of resources.
Strategic leverage is defined as a company's maneuver (its ability
to change its competitive position in a market) multiplied by its
return (changes in revenue, market share, or both that result
from any maneuver).
Leverage refers to Doing more, using lesser resources.
Leverage strategies usually rely on the use of outside business
partners to help you market your firm. Marketing partners can
have huge multiplying effects on your marketing efforts.
Strategy Evaluation
Strategic evaluation and control is the process of determining
the effectiveness of a given strategy in achieving the
organizational objectives and taking corrective actions
whenever required.
Managers can assess the appropriateness of the current
strategy in todays dynamic world with socio-economic,
political and technological innovations. Strategic Evaluation is
the final phase of strategic management.
The significance of strategy evaluation lies in its capacity to coordinate the task performed by managers, groups,
departments etc, through control of performance.
Strategy Evaluation
The process of Strategy Evaluation consists
of the following steps :
1. Fixing benchmarks of performance
2. Measurement of actual performance
3. Analysing variance
4. Corrective action
Management control is the set of measurement, analysis, and

action decisions required for the timely management of the
continuing operation of a process.
Strategic Control : It takes into account the changing
assumptions that determine a strategy, continually evaluate
the strategy as it is being implemented and take the necessary
steps to adjust the strategy to the new requirements.
The four basic types of strategic control are
1. Premise Control
2. Implementation control
3. Strategic surveillance
4. Special alert control
Operations Control :
It is aimed at allocation and use of organizational resources
through evaluation of performance of organizational units,
divisions, SBU`s to assess their contribution in achieving
organizational objectives.
Operational control systems are designed to ensure that dayto-day actions are consistent with established plans and
objectives. It focuses on events in a recent period. Operational
control systems are derived from the requirements of the
management control system.
Corrective action is taken where performance does not meet
standards. This action may involve training, motivation,
leadership, discipline, or termination.
The Balanced Scorecard

The Balanced Scorecard is a strategic performance management
framework that has been designed to help an organisation monitor
its performance and manage the execution of its strategy.
In 1992 Robert Kaplan and David Norton developed the Balanced
Scorecard, a performance measurement system that considers not
only financial measures, but also customer, business process, and
learning measures.
In a recent world-wide study on management tool usage, the
Balanced Scorecard was found to be the sixth most widely used
management tool across the globe which also had one of the highest
overall satisfaction ratings.

In its simplest form the Balanced Scorecard breaks performance
monitoring into four interconnected perspectives :
Financial
Customer
Internal Processes
Learning & Growth.
Data collection is crucial to providing quantitative results, which are

interpreted by managers and executives and used to make better longterm decisions.
The critical characteristics that define a Balanced Scorecard are :
Its focus on the strategic agenda of the organisation
The selection of a small number of data items to monitor
A mix of financial and non-financial data items.

The Financial Perspective covers the financial objectives of an
organisation and allows managers to track financial success and
shareholder value.
a.
Financial Results & Growth
b.
Key Financial Parameters and Perfoemance (ROE/ ROCE)
c.
Higher Profit Margins
d.
Improved Cash Flow
e.
Lower Bad Loans and Lower Debt
f.
Net Interest Margin
g.
Reduced Overhead Expenses

The Customer Perspective covers the customer objectives such

as customer satisfaction, market share goals as well as product
and service attributes.
a. Increase Customer Satisfaction
b. Increase Customer Loyalty

c. Retention of Key Customers
d. Sales Revenue per Customer

e. Competitive Pricing & product offering
f. High Quality Service

g. Customer preference

The Internal Process Perspective covers internal operational

goals and outlines the key processes necessary to deliver the
customer objectives.
a. Improve Operational Efficiency
b. Customer Relationship Management
c. Higher success rate in converting business
opportunities
d. Fast Business Decisions and Approvals
e. Proper work culture & Employee Confidence

The Learning and Growth Perspective covers the intangible

drivers of future success such as human capital, organisational
capital and information capital including skills, training,
organisational culture, leadership, systems and databases.
a. Employee Training & Development

b. Corporate Culture
c. Employee Turnover
d. Job Satisfaction & Motivation
e. Innovation
Strategy and Organisation Structure

An organisation's strategy is its plan for the whole business that sets
out how the organisation will use its major resources.
An organisation's structure is the way the pieces of the organisation fit
together internally. It also covers the links with external organisations
such as partners.
Organisational structures need to be designed to meet aims. They
involve combining flexibility of decision making, and the sharing of
best ideas across the organisation, with appropriate levels of
management and control from the centre.
The organisation structure defines how all the pieces, parts and
processes work together. This structure must be totally integrated with
strategy for the organization to achieve its mission and goals. Structure
supports strategy.

Matching Structure with Strategy
When a firm changes its strategy, the existing organisational
structure may become ineffective.
Changes in structure can facilitate strategy-implementation efforts,
but changes in structure should not be expected to make a bad
strategy good, to make bad managers good, or to make bad
products sell.
Chandler found a particular structure sequence to be often
repeated as organisations grow and change strategy over time.
New Strategy is
formulated
Improved
Organisational
Performance
New administrative
problems
New Organisational
Structure
Chandlers Strategy-Structure Relationship
Organisational
performance declines
Blue Ocean Strategy By - W. Chan Kim and Renee Mauborgne.

According to some thinkers, the key to exceptional business
success is to redefine the terms of competition and move into the
blue ocean, where you have the water to yourself.
The goal of these strategies is not to beat the competition, but to
make the competition irrelevant.
Kim & Mauborgne assert that these strategic moves create a leap
in value for the company, its buyers, and its employees, while
unlocking new demand and making the competition irrelevant.
Under this theory, markets are divided into two distinct types :
Red Ocean
Blue Ocean

Blue Ocean Strategy :
Red ocean represents all the industries in existence today - the known
market space. Here companies try to outperform their rivals to grab a
greater share of product or service demand. As the market space gets
crowded, prospects for profits and growth are reduced. and cutthroat
competition turns the ocean bloody; hence, the term red oceans.
Blue oceans, denote all the industries not in existence today - the
unknown market space, untainted by competition. In blue oceans,
demand is created rather than fought over. There is ample opportunity
for growth that is both profitable and rapid.
Blue Ocean is undefined market space, otherwise known as
Opportunity.

Mr. Kim and Ms. Mauborgne argue that businesses should focus less
on their competitors and more on alternatives; they also should
focus less on their customers, and more on non-customers, or
potential new customers.
The cornerstone of Blue Ocean Strategy is 'Value Innovation. Value

innovation involves a simultaneous pursuit of differentiation and
low cost, creating value for the buyer, the company and its
employees, thereby opening up new and uncontested market space.
The aim of Value Innovation is not to compete, but to make the
competition irrelevant by changing the playing field of strategy.

Kim and Mauborgne challenge the wisdom of restricting strategic
choice to Porters 5 forces and instead talk about four actions that
can help create a blue ocean strategy.
The actions are found by answering these questions:
1. Which of the factors that the industry takes for granted should be
eliminated ?
2. Which factors should be reduced well below industry standards ?

3. Which factors should be raised well above the industry standards ?
4. Which factors can be created, that the industry has never offered ?

Red Ocean V/s Blue Ocean :
1. Red Ocean is about competing in existing market space. Blue
ocean seeks to create new, uncontested market space.
2. Red ocean strategy is focused towards beating the
competition. Blue ocean seeks to make competition
irrelevant.
3. Red ocean strategy tries to exploit existing demand, while blue
ocean seeks to create and capture new demand.
4. Red ocean strategy seeks value-cost trade off. Blue ocean
breaks the value-cost trade off.
5. Under Red ocean, the firm tries to make the strategic choice
between differentiation or low cost. Under blue ocean, it
seeks differentiation and low cost.

Creating a Strategy-Supportive Culture
Strategists should preserve, nurture, emphasize and build upon
the positive aspects of an existing culture that are conducive
to proposed new strategies.
Aspects of an existing culture that are not favourable to new
strategies need to be identified and changed.
Triangulation proposed by James Duncan is an effective, multimethod technique for studying and altering a firms culture.
Triangulation includes the combined use of obtrusive
observation, self-administered questionnaires and personal
interviews to determine the nature of a firms culture.
The process of Triangulation reveals changes that need to be

made to a firms culture in order to benefit strategy.

Creating a Strategy-Supportive Culture
Schein indicated that the following elements are most useful
in linking culture to strategy.
Formal statement of organisational philosophy, charters, creeds,

materials used for recruitment and selection, and socialisation.
Designing of physical spaces, facades and buildings
Deliberate role modeling, teaching and coaching by leaders

Explicit rewards and status system, promotion criteria
Stories, legends, myths and parables about key people and events.
What leaders pay attention to, measure and control
Leaders reaction to critical incidents and organisational crises
How the organisation is designed and structured
Organisational systems and procedures
Model Question Bank

What is Environmental Analysis? How is environmental analysis
different at domestic level from global analysis?
Discuss the factors which influence environmental analysis at the
global level, both positively as well as negatively.
How do corporate strategies influence other strategies (Business and

Functional) ? What is the difference between single and multi-business
organisations?
What is value chain analysis? Describe the difference between primary
and support activities using value-chain analysis with respect to a
company pursuing a differentiation strategy.
What key concerns must functional strategies address in the functional
areas of Marketing, Finance, Operations, HR and Technology?
Model Question Bank

Discuss at length porters five forces model of industry analysis with
respect to any one of the following industry :
a) Telecom service providers.
b) Two wheeler manufacturers.
What is a Value chain? Explain the primary and support activities in
a value chain. Why do value chains of rival companies often differ?
How does a companys culture influence strategy implementation?
What problems are posed by new acquisitions to corporate culture?
Considering any one of the following industries, explain the 3 generic
strategies of : a) low cost b) differentiation c) focus.
Also bring out the strategic pitfalls of these 3 strategies.
Industry 1 : Civil Aviation (Passenger Airlines)
Industry 2 : White goods (T.V., Refrigerators, etc.)
Model Question Bank

How has the internet & telecom revolution impacted the business
models of the following firms?
a) Travel & Tourism companies.
b) Book Publishers.
c) Matrimonials.
What is a Mission statement? What are the characteristics of a good
Mission statement? Give an example of a good mission statement of
your choice, along with your own analysis and interpretation.
What are core competencies? How are they different from

strengths? How can core competencies be identified?
While the past has been about positioning the firm in its external
environment, today it is more about harnessing internal resources
aimed at providing superior benefits to customers. Discuss.
Model Question Bank

When it comes down to strategic management, the issues in
traditional brick and mortar businesses and the new economy ebusinesses are one and the same same problems and same
strategic tools to solve them. Do you agree? Discuss with proper
justification.
Critically analyse the difference between the BCG Matrix and the GE
9-Cell Matrix for portfolio analysis.
Discuss in how many ways can a Balanced Scorecard technique
help managers evolve wholesome business strategies to create longterm competitive advantage for the firm.
Diagnosing and solving organizational problems means looking not
merely to structural reorganization for answers but to a framework
that includes structure and several related factors. Discuss this
statement in relation to the McKinseys 7-S Framework.
Thank You..
Prof. Shashank Divekar
Pune, India
Email : shashankd@yahoo.com

Adv SBM

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Advanced Strategic Business

Strategic Business Management

What is Corporate Strategy ?

Strategic Business Management

Definition : Corporate Strategy is the pattern of major

Strategic Business Management

Strategic Business Management

Also called the Go-to-Market Strategy or Functional Strategy,

Strategic Business Management

Strategic Business Management

The strategy options have to be developed and

The selected options have to be implemented.

Strategic Business Management

Judgment about what strategy to pursue needs to flow

Strategic Business Management

The implementation tasks put to test the strategists abilities to

Strategic Business Management

Strategy V/s Tactics

Tactics are techniques and actions you perform to solve

Strategic Business Management

Strategic Business Management

Dictionary meaning of Strategy is a plan, method or series of

Strategic Business Management

Strategy as a PATTERN : While Plans and Ploys are both deliberate

Strategic Business Management

Strategic Business Management

Strategic Business Management

Strategic Business Management

Methods and sources of finance

Strategic Business Management

Strategic Business Management

Strategic Business Management

Societal Values & Lifestyle

Strategic Business Management

Environmental Threat & Opportunity Profile (ETOP)

Strategic Business Management

IMPACT OF THE SECTOR

Burgeoning middle class,

Several major players, lots of

Global slowdown, cheaper

Strategic Business Management

IMPACT OF THE SECTOR

Coalition compulsions, lack

Too many controls, inspector

Strategic Business Management

IMPACT OF THE SECTOR

Too few vendors, new

Strategic Business Management

1. Rivalry among competing firms

3. Potential development of substitute products

Strategic Business Management

The Five-forces model is used in three steps to determine

Business Policy & Strategic Management

Business Policy & Strategic Management

The Vision statement communicates both the purpose and values

Business Policy & Strategic Management

Business Policy & Strategic Management

Help define performance standards;

Guide employee decision making;

Business Policy & Strategic Management

Vision defines where the organisation wants to be in the future.

Business Policy & Strategic Management

"PepsiCo's responsibility is to continually improve all aspects