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MCS are the tools to implement strategies.
Strategies differ between organisations.
Controls should be tailored to suit the
specific strategies.
Different strategies require different task
priorities, different key success factors &
different skills, perspectives and behaviors
Strategies are plans to achieve
organisational goals.
Goals can be Profitability, Maximising
shareholder value etc
Strategy describe the general direction in
which an organisation plans to move to
attain its goals.
Firms develop their strategies by matching
the core competencies with industry
Strategies can be found at 2 levels
Strategies for the whole organisation
Strategies for business units within the
Strategy Key strategic Generic Primary
level issues Strategic Org. levels
Options involved
Corporate Are we in the Single Ind Corporate
Level right mix of Office
industries? diversification
What ind Unrelated
should we be diversification
Business What should Build, Hold, HO & BU
Unit be the mission? Harvest, Gen Mngr
Level Divest
How to realise Low cost, BU Gen
the mission? Differentiation Mngr
Environmental Internal Analysis
Tech know-how
Production Know-how
Mktg. Know-how
Distr. Know-how
Logistic Know-how
Social / Political

Opportunities & Strength & Weakness

Threats Identify core
Identify opportunities competencies

Fix internal
competencies with

Firms Strategies
Corporate level strategy

This is about being in the right mix of

It is concerned with the question of
where to compete rather than with how
to compete in a particular industry.
How to compete is a business unit
Companies can be classified into one of
3 categories.
Single Industry
Related diversification
Unrelated diversification
Single Industry Related Unrelated
firm diversified firms diversified firms

Competes in one Sharing of core Autonomous

industry competencies business in
across business different
Business Unit Strategies
The strategy of a BU depends on 2
interrelated aspects. Viz.,
Its mission (what are its overall objectives)
Its competitive advantage (how should the
BU compete in its industry to accomplish its
Cash source
High Low
High High

Star Question Mark

Hold Build
Growth Cash use

Cash Cow Dog

Harvest Divest
Low Low
High Low

Relative market share

Build:- Implies an objective of increased
market share, even at the expenses short-
term earnings & cash-flow

Hold:- It is used to protect the BUs market

share & competitive position

Harvest:- Has an objective of maximising

short-term earnings & cash flow even at the
expenses of market share

Divest:- It indicates a decision to withdraw

from the business.
Business Unit Competitive Advantage
Ask 3 interrelated questions like-

What is the structure of the industry in

which the business unit operates?
How should the business unit exploit the
industry structure?
What will be the basis of the BUs
competitive advantage?
Industry Analysis

New Entrants

Suppliers Industry Customers


Rivalry among existing competitors:

Factors affecting are:

Industry growth,
Product differentiation,
No. of competitors,
Level of F.C,
Exit barriers
Customers (Bargaining power) :

Factors affecting are:

No. of buyers,
Buyers switching costs,
Significance of BU volume to buyers,
Suppliers (Bargaining power):

Factors affecting are:

No. of suppliers,
Presence of substitutes,
BUs volume to suppliers
Substitutes (Threat from):

Factors affecting are:

Price/performance of substitutes,
Buyers switching cost, etc..
New entrants (Threat of):

Factors affecting are:

Capital requirement,
Access to distribution channels,
Economies of scale,
Product differentiation,
Govt. policies, etc..
The more powerful these forces are, the
less profitable an industry is.
If the aggregate profitability is high, these
5 forces are weak.
Depending on the relative strength of the 5
forces, the key strategic issues facing a BU
will differ from one industry to another.
Understanding the nature of each force
helps the firm to formulate effective
Generic Competitive Advantages:

Along with 5-force industry analysis

(which helps identify O & T), BUs should
also respond to 2 generic competitive
Low Cost;
Low cost:

Cost leadership can be achieved thru

Economies of scale,
Experience curve effect,
Tight cost control,
Cost minimisation.

Focus here is to differentiate the

product (creating something that is perceived as
being unique).
Approaches may include
Brand loyalty,
Superior customer services,
Product design & features
Value chain analysis

It is the complete set of activities

involved in a product, starting with
extraction of RM & ending with post
delivery support to customers.
Here the firm is broken down into
distinct strategic activities.
The most attractive competitive position
is to achieve cost-cum-differentiation.
i.e providing better customer value for an
equivalent cost or equivalent customer
value for a lower cost.
Basis for competitive advantage
Cost-cum- Differentiation
differentiation advantage
Relative advantage
position Low-cost Stuck-in-the-
advantage middle
Superior Inferior

Relative cost position

Value chain

Manufacturing Mktg & Sales Service/Logistic

Support activities: Finance, HR, IT