STRATEGIC MANAGEMENTModule-II

(Strategic choice)

Prof. Ayesha Farooq

ayeshafarooq4@gmail.com

https://professorayeshafarooq.com

FMSR ,AMU

Introduction to Strategic Management: Understanding Strategy; Defining and Explaining Strategy; Levels at which Strategy Operates;

Strategic Decision-making; The Process of Strategic Management; Strategies and their Role in Strategic Management

Strategic Intent: Hierarchy of Strategic Intent; Vision; Mission; Business Definition; Goals and Objectives

Business Strategy Formulation: Business Level Strategy; The Concept of Competitive Advantage; SWOT Analysis; Key Success Factors;

The Value Chain

External Analysis: Industry Structure; Pest Analysis; Defining the Scope of the Industry; Dynamics of Competition

Corporate Strategy Formulation: Typology of Corporate Strategy; Single-business Firms; Diversification; Portfolio Techniques for

Corporate Strategic Planning; Mergers and Acquisitions; Joint Ventures, Strategic Alliances and Inter-Organizational Relations; Value

through Corporate Strategy

International Strategies: Opportunities and Challenges from Globalizations; Impact of National Conditions on Competitive Advantage;

Strategies in Geographical Expansion

Strategic Organizational Design: Organizational Structure and Design; Organizational Structure and Its Competitors; Basic

Organizational Configurations; Relationship between Strategy and Structure

Learning and Knowledge Organization Strategy: Dynamic Capabilities; Organizational Learning; A Model for Knowledge Organizations

Family and Micro Business Strategy: Family Business as s System; Strategic Concerns of the Family Business; Corporate Strategy in

Family Business; Strategic Decision-Maker in a Micro Business; Global Linkages of Micro Business; Local Linkages for Micro Business

Internetworking and E-Business Strategy: Value Proposition of the Internet working Strategy; Types of Internetworking Business

Models; Level and Form of Internetworking Models

Strategic Leadership: Significance of Strategic Leadership; Models of Strategic Leadership

Corporate Governance and Business Ethics: Corporate Governance Mechanisms; Corporate Governance in India; Corporate

Governance: Shareholder Versus Stakeholder Theory; Corporate Social Responsibility Strategic Planning and Change Management:

Triggers for change; Strategic Planning; Types of Changes in Organizations; Managing Strategic Change; Internal Changes as Firms

Privatize

Strategic Control: Context for Strategic Control; Criteria for Strategic Control; Mechanisms for Strategic Control

Strategic Decision-Making: Planning Process; Programming System; Performing Modalities; Profitability Factor; Development Growth

DGM14 - STRATEGIC MANAGEMENT AND ETHICS

StrategyFormulation

StrategyImplementation

Concept of Strategy

&

Strategic Intent

2

Corporate- Level Strategic Analysis

Corporate Portfolio Analysis

A set of techniques that help strategists in taking strategic decisions with regard to

individual products or businesses in a firm’s portfolio.

THE BCG MATRIX

BOSTON CONSULTING GROUP (BCG) MATRIX is developed by BRUCE

HENDERSON of the BOSTON CONSULTING GROUP IN THE EARLY 1970’s.

A means of analysing the product portfolio and informing decision making

about possible marketing strategies

According to this technique, businesses or products are classified as low or

high performers depending upon their market growth rate and relative

market share.

MARKET SHARE• Market share is the percentage of the total market that is being

serviced by the company, measured either in revenue terms or unit

volume terms.

• RELATIVE MARKET SHARE

• RMS = Business unit sales this year

Leading rival sales this year

• The higher your market share, the higher proportion of the market

you control.

MARKET GROWTH RATE

Market growth is used as a measure of a market’s attractiveness.

MGR = Industry sales - industry sales

this year last year

Industry sales last year

Markets experiencing high growth are ones where the total market share

available is expanding, and there ’ s plenty of opportunity for

everyone to make money.

THE BCG GROWTH-SHARE MATRIX

It is a portfolio planning model which is based on the observation that a

company’s business units can be classified in to four categories:

Stars

Question marks

Cash cows

Dogs

It is based on the combination of market growth and market share

relative to the next best competitor.

BCG MATRIX

STARS: HIGH GROWTH, HIGH MARKET SHARE

Stars are leaders in business.

They also require heavy investment, to maintain its large market share.

It leads to large amount of cash consumption and cash generation.

Attempts should be made to hold the market share otherwise the star

will become a CASH COW.

CASH COWS: Low growth , High market share

They are foundation of the company and often the stars of yesterday.

They generate more cash than required.

They extract the profits by investing as little cash as possible

High market share

Low growth markets – maturity stage of PLC

Low cost support

QUESTION MARKS/PROBLEM CHILD

High growth , Low market share

Most businesses start of as question marks.

They absorb great amounts of cash if the market share remains

unchanged, (low).

Products having a low market share in a high growth market

Question marks have potential to become star and eventually cash cow

but can also become a dog.

Investments should be high for question marks.

May produce negative cash flow

Potential for the future.

DOGS: Low growth, Low market share

Dogs are the cash traps.

Dogs do not have potential to bring in much cash.

Number of dogs in the company should be minimized.

Business is situated at a declining stage.

Have low or declining market share (decline stage of PLC)

Associated with negative cash flow

May require large sums of money to support

Is your product starting to embarrass your company?

PORTFOLIO ANALYSIS

© Boston Consulting Group

WHY BCG MATRIX ?

To assess :

Profiles of products/businesses

The cash demands of products

The development cycles of products

Resource allocation and divestment decisions

MAIN STEPS OF BCG MATRIX

Identifying and dividing a company into SBU.

Assessing and comparing the prospects of each SBU according to

two criteria :

1. SBU’S relative market share.

2. Growth rate of SBU’S industry.

Classifying the SBU’S on the basis of BCG matrix.

Developing strategic objectives for each SBU.

BENEFITS

BCG MATRIX is simple and easy to understand.

It helps to quickly and simply screen the opportunities open , and

helps think about how you can make the most of them.

It is used to identify how corporate cash resources can best be used

to maximize a company’s future growth and profitability.

LIMITATIONS

BCG MATRIX uses only two dimensions, Relative market share and

market growth rate.

Problems of getting data on market share and market growth.

High market share does not mean profits all the time.

Business with low market share can be profitable too.

GE NINE- CELL

HIGH

MEDIUM

LOW

STRONG AVERAGE WEAK

BUSINESS STRENGTH/ COMPETITIVE POSITON

I

N

D

U

S

T

R

Y

A

T

T

R

A

C

T

I

V

E

N

E

S

S

GREEN

YELLOW

RED

INVEST/ EXPAND

SELECT/ EARN

HARVEST/ DIVEST

IMPROVE

OR QUIT

GENERATE

CASH

PROCEED

WITH CARE

ZONESTRATEGIC

SIGNAL

STRATEGIC IMPLICATIONS OF THE G.E. 9-CELL

MATRIX

SBUs in 3 upper left cells get top investment priority

SBUs in 3 middle diagonal cells merit steady investment to maintain &

protect their industry positions

SBUs in 3 lower right cells are candidates for harvesting or divestiture

Advantages of G.E. 9-Cell Matrix

Allows for intermediate rankings between high & low and between

strong & weak

Incorporates a wider variety of strategically relevant variables than the

BCG matrix

Stresses the channeling of corporate resources to SBUs with the

greatest potential for competitive advantage & superior performance

PRODUCT LIFE CYCLES

Product Life Cycle – shows the stages that products go through from

development to withdrawal from the market:

Each product may have a different life cycle

PLC determines revenue earned

Contributes to strategic marketing planning

May help the firm to identify when a product needs support, redesign,

reinvigorating, withdrawal, etc.

May help in new product development planning

May help in forecasting and managing cash flow

PRODUCT LIFE CYCLES

The Stages of the Product Life Cycle:Development

Introduction/Launch

Growth

Maturity

Saturation

Decline

Withdrawal

PRODUCT LIFE CYCLES

The Development Stage:

Initial Ideas – possibly large number

May come from any of the following –Market research – identifies gaps in the market

Monitoring competitors

Planned research and development (R&D)

Luck or intuition – stumble across ideas?

Creative thinking – inventions, hunches?

Futures thinking – what will people be using/wanting/needing 5,10,20 years hence?

PRODUCT LIFE CYCLES

Product Development: StagesNew ideas/possible inventionsMarket analysis – is it wanted? Can it be produced at a

profit? Who is it likely to be aimed at?Product Development and refinementTest Marketing – possibly local/regionalAnalysis of test marketing results and amendment of

product/production processPreparations for launch – publicity, marketing

campaign

PRODUCT LIFE CYCLES

Introduction/Launch:

Advertising and promotion campaigns

Target campaign at specific audience?

Monitor initial sales

Maximise publicity

High cost/low sales

PRODUCT LIFE CYCLES

Growth: Increased consumer awareness

Sales rise

Revenues increase

Costs - fixed costs/variable costs, profits may be made

Monitor market – competitors reaction?

PRODUCT LIFE CYCLES

Maturity:

Sales reach peak

Cost of supporting the product declines

Ratio of revenue to cost high

Sales growth likely to be low

Market share may be high

Competition likely to be greater

Monitor market – changes/amendments/new strategies?

PRODUCT LIFE CYCLES

Saturation:New entrants likely to mean market is ‘flooded’

Necessity to develop new strategies becomes more pressing: Searching out new markets: Linking to changing fashions Seeking new or exploiting market segments Linking to joint ventures – media/music, etc.

Developing new uses Focus on adapting the product Re-packaging or format Improving the standard or quality Developing the product range

PRODUCT LIFE CYCLES

Decline and Withdrawal:Product outlives/outgrows its usefulness/value

Fashions change

Technology changes

Sales decline

Cost of supporting starts to rise too far

Decision to withdraw may be dependent on availability of new products and whether fashions/trends will come around again?

PRODUCT LIFE CYCLES

Sales

Time

Development Introduction Growth Maturity Saturation Decline

Product Life Cycles

Sales

Time

Effects of ExtensionStrategies

Product Life Cycles

Sales/Profits

Time

PLC and Profits

PLC

Losses

Break Even

Profits