Unit 5

Strategic Change
• A restructuring of an organization's business
or marketing plan that is typically performed
in order to achieve an important objective. For
example, a strategic change might include
shifts in a corporation's policies, target
market, mission or organizational structure.
 Kotter's Change Model
• Establishing a sense of urgency, or making sure
that there is a need for the change and that
people understand that need
• Creating a guiding coalition of supporters that
can help model the new change and work well
together as a team
• Developing both vision and strategy, a 'picture' of
where the company is going and the steps for
how to get there
• Communicating that vision to employees in a way
that is easy to understand
• Empowering employees throughout the company
to act on making the change possible
• Generating short-term wins or small celebrations
along the way to celebrate and encourage
success
• Consolidating what is learned from the current
change to help the company improve the change
process in the future
• Anchoring the change in the corporate culture
through strategies, such as making clear links to
performance, profit, and customer satisfaction
 Disruptive innovation
• Disruptive innovation is an innovation that
creates a new market and value network and
eventually disrupts an existing market and
value network, displacing established market-
leading firms, products, and alliances
• Example : Mobile phones, Email disrupting the
business of inland letters and Telegraph
 Competitive advantage
• Competitive advantage exists when there is a
match between the distinctive competences
of a firm and the factors critical for success
within its industry that permits the firms to
outperform competitors
• Competitive advantage, also called strategic
advantage, is essentially a position of
superiority of an organization in relation to its
competitors
Developing competitive advantage
• The product manufacturing route reflects core
competences, special capabilities, superior
product design, etc.
• The marketing route reflects marketing mix
application, positioning, offering a bundle of
benefits or value to the customer etc
• Both the routes are complementary to or
supporting or reinforcing each other
 Factors contributing to competitive
advantage

How to compete (basis)

•Business assets and skills

Way to compete
•Product strategy Competitive
•Pricing strategy Where to compete
strategy •Product-market selection
•Promotion strategy
•Distribution strategy

Whom to compete against

•Product-market selection
 Sources of competitive advantage
• Differentiation
• Pre-emption
• Low cost
• Focus
• Synergy
 Differentiation
• The objective of differentiation is to add value to
product offering and it should be clearly
perceived by the customers
• Product – technology, quality, brand, packaging
• Price – premium, discount
• Positioning
• Promotion – advertising, sales promotion,
communication, information
• Service
 Pre-emption
• Pre-emption or pre-emptive move gives a
company the pioneering or the first mover
advantage
• Pre-emptive moves need not be confined to
marketing policy or strategy only, it can be in
the production process or system, product,
logistics
• Successful in reducing costs or improving
quality
 Low cost
• Scale economies are the classical or conventional
ways to obtain low cost of production
• The key to scale economies is to determine the
optimum size of output or production or
operation
• Example : Low cost thrust or advantage can be
raw material cost, labor cost, locational
advantage, production innovation and
automation, low cost distribution
 Focus
• Concentrates on a particular product line or
one part of the market or segment or
customers
• Focus strategy generally provide a way to
compete with limited resources, bypass assets
and skills of larger competitors
• Targeting a special segment of a market may
also mean focussing on a niche
 Synergy
• Two or more businesses operating together
with a unified or common product-making
strategy is superior to the same SBUs
operating independently
• Synergy or pulling together the strengths of
different SBUs can provide a competitive
advantage of a company’s assets and skills or
resources and capabilities
 Competitive position matrix (Hunt and
Morgan)
Relative resource-produced value
LOWER PARITY HIGHER
1 2 3
LOWER
? Competitive Competitive
Relative resource cost

advantage advantage
4 5 6
PARITY
Competitive Parity position Competitive
disadvantage advantage
7 8 9

HIGHER Competitive Competitive ?

disadvantage disadvantage
 Competitive advantage cycles
• Depending on the speed of erosion of the
advantages, we can classify companies or
products in terms of three competitive
advantage cycles
• Fast cycle
• Standard cycle
• Slow cycle
 Fast cycle
• Companies or businesses in this cycle are
found in markets with short product life
cycles, continuous product innovation and
obsolescence alternating each other and fast
profit or margin compression
• Example : almost the entire range of
electronic products – consumer and industrial
 Standard cycle
• Production process are standardized and
products are addressed to mass markets or
segments
• Industrial products, consumer products
(FMCG, banks & financial services)
 Slow cycle
• Companies or businesses in this cycle have
durable or sustainable advantages because of
some assets or capabilities (include specialized
technology) which are unique, and shield
them from competitive pressures
• Example: patented drugs, MS-DOS systems
and lotus spreadsheet
 Hypercompetition and competitive
advantage
• Fast competitive advantages cycles imply
hypercompetition
• Hypercompetition takes place when the
frequency, boldness and aggressiveness of
moves by competitors accelerate to create a
condition of constant disequilibrium and
change
• Imitation should be hard
• Competing is necessary
 How to make competitive advantage
more sustainable?
• Durability – should not be vulnerable because of quick
obsolescence
• Valuable contribution – Significant contribution to
superior customer value
• Visibility – uniqueness should be focussed to ensure
high visibility
• Causal ambiguity – should keep the competitors
guessing about your ideas
• Duplicability – capability should be difficult to duplicate
• Retaliation – should be able to create barriers or
counter the efforts of competitors
 Balanced scorecard
• The balanced scorecard approach combines both
quantitative and qualitative criteria/measures of
evaluation and incorporates expectations of
different stakeholders in relating performance to
strategy
• This approach has been developed by kaplan and
Norton
• Balanced scorecard approach has been designed
to provide clear guidelines about what companies
should measure to balance the financial aspect in
implementation and control of strategic plans
The balanced scorecard approach work through
four critical perspectives :
• Financial
• Internal and business process
• Customer
• Learning and growth
Guided by vision and strategy
Perspectives is expressed through its own
objectives, targets, initiatives and measures
• Financial – To succeed financially, how should we
appear to our shareholders?
• Internal business process – To satisfy our
shareholders and customers, what business
processes must we excel at?
• Customer – To achieve our vision, how should we
appear to our customers?
• Learning and growth – To achieve our vision, how
will we sustain our ability to change and
improve?
• The balanced scorecard approach can, therefore,
be regarded as a management system and not
merely a measurement system
• Example : Mobil Corporation has followed
balanced scorecard methodology
• The approach clearly focussed on strategic
objective and strategic measures
• The methodology was developed to turn an
unprofitable business into a better performing
and profitable business
Balance scorecard – Mobil corporation
• Financial – Financially strong (Cash flow, low cost)
• Customer – Delight the consumer
- Win-win relationship (Improved dealer profit)
• Internal – Safe and reliable (Innovative products)
- Competitive supplier
- Improve health, safety, quality
• Learning and growth – Motivated and prepared
(Organization involvement, employee welfare)
 Corporate Social Responsibility
• It is defined as the alignment of business
operations with social values
• People think issues like pollution, waste
disposals, environment safety conservation of
natural resources are considered for formulation
of policy and strategic decision making
• An organization’s social policy should be
integrated into all management activities
including the mission statement and objectives
• Infosys, Wipro, ITC, Dr.Reddy’s, Godrej, Mahindra
& Mahindra and Tata steel
• The Infosys foundation works for both economic
and social upliftment of the villages it has
adopted
• ITC’s E-choupals have not only helped to meet
the information requirements of rural
households, but also immensely contributed to
the establishment of better relations with
customers and rural suppliers
 Strategic integration
• Strategic integration consists of incorporating
the strategies of a corporation’s various
business units to share resources and provide
greater return on investment for the
organization as a whole
• The vertical integration strategies of a fast food chain
might include the purchase of a cup factory or a bun
factory in order to cut the costs of those supplies.
Benefits of vertical integration strategies include
enhanced product quality and increased profitability.
• Horizontal integration often includes the practice of
acquiring and/or merging with other businesses within
the same industry to achieve organizational objectives.
For example, a shoe company may decide to acquire a
competitor in order to obtain a greater share of the
market.
Strategic issues in Not-for-Profit (NFP)
organizations
• Not-for-Profit (NFP): An organization that
provides some service or good with no
intention of earning a profit. NFP includes
Private nonprofit corporations (such as
hospitals, institutes, private colleges, and
organized charities) as well as Public
governmental units/agencies (such as welfare
departments, prisons and state universities)
• Several characteristics peculiar to the not for
profit organization constrain its behavior and
affects it strategic management.
• Service is often intangible/hard to measure
• Client influence may be weak
• Strong employee commitments to professions
• Resource contributors intrude on internal
management
• Restraints on use of rewards and punishments
 Strategic piggybacking
• Strategic piggybacking: Strategic piggybacking
refers to he development of a new activity for
the not-for-profit organization that would
generate funds needed to make up the
difference between revenues and expenses.
Its purpose is to help subsidize the primary
service programs. It appears to be a form of
concentric diversification but it is engaged in
only for its money generating value