Business strategy

1. BUSINESS STRATEGY

4. Two Approaches to Strategic Thinking WAYS OF THINKING Application or creativity, intuition or imagination (lateral thinking) Application of reason (vertical thinking) NATURE OF THE PROBLEM Divergent with many solutions Convergent with one solution AREA OF RELEVANCE Creating the vision: establishing strategic objectives Realizing the vision:achieving operational effectiveness

11. Grand Strategy Selection Matrix Overcome weakness Maximise Strength Internal Redirected Sources Within the firm External (Acquisition or Merger for Resource capability Turnaround Divestiture Liquidation Vertical integration Conglomerate Diversification Concentrated Growth Market Development Product Development Innovation Horizontal integration Concentric Diversification Joint Venture

12. Model Grand Strategy Clusters Rapid Market Growth Slow Market Growth Strong Competitive Position Concentrated Growth Vertical integration Concentric Diversification Reformulation of concentrated growth Horizontal integration Divestiture Liquidation Concentric Diversification Conglomerate Diversification Joint Venture Turn around or Retrenchment Concentric Diversification Conglomerate Diversification Divestiture Liquidation Weak Competitive Position

19. Stuck in the Middle Market Share  Return on Investment  This graph may not hold good in every industry

25. Industry Evolution Introduction Growth Maturity Decline Time Industry Sales

37. Generic Strategy – Cost Leadership -- Requirements Generic Strategy Commonly Required Skills and Resources Common Organisational Requirements Overall Cost Leader ship Sustained capital investment and access to capital Tight cost control Process Engineering Skills Frequent, detailed control reports Intense supervision of labour Structured organisation and responsibilities Products designed for ease in manufacture Incentives based on meeting stict quantitative targets Low-cost distribution system

40. Generic Strategies – Differentiation -- Requirements Generic Strategy Commonly Required Skills and Resources Common Organisational Requirements DIFFEENTIATION Strong Maketing abilities Strong co-ordination among function in R&D, product development, and marketing Product Engineering Subjective measurement and incentives instead of quantitative measures Creative flair Amenities to attract highly skilled labour, scientists, or creative people Strong capability in basic research Corporate reputation for quality or technological leadership Long tradition in the industry or unique combination of skills drawn from other business Strong co-operation from channels

43. Generic Strategy -- Focus Strategic Target

44. Generic Strategy – Focus -- Requirements Generic Strategy Commonly Required Skills and Resources Common Organisational Requirements Focus Combination of the policies for the other two generic strategies, directed at the particular strategic target Combination of the policies for the other two generic strategies, directed at the particular strategic target

46. BCG Stars Question marks Cash cows Dogs A select few (net users of resources) (net suppliers of resources) Remainder divested Market Growth Rate Low Low High High Relative Market Share ( Cash Generation) Cash use

48. GE-McKINSEY-SHELL High Medium Low High Medium Low Divest Invest Selectively Invest Business Unit Position Industry Attractiveness Size Growth Share Position Profitability Margins Tech Pos Stren/Weak Image Pollution People Size Market Growth Pricing Market Diversity Competitive Structure Industry Profitability Technical Role Social Environmental Legal Human 1.Identify Industry attractiveness factors 2.Assign weight to each factor 3.Obtain weighted composite score 4.Classify the score into ratings H/M/L 5.Classify business units into different categories

49. Arthur D Little – Life Cycle Approach Out Natural Development Strategies are appropriate when the SBU is in a mature industry and is competitive. The SBU deserves strong support Selective Development refers to strategies that concentrate on industries that are attractive or on SBUs that have competitive competencies Prove Viability is transitional strategy that cannot be sustained. The situation has to be changed Out is a strategy for withdrawal Life Cycle Stage Competitive Position Natural Development Selective Development Prove Viability

51. BCG’s Strategic Environment Matrix Sources of Advantage Size of Advatage Small Small Big Big Fragmented Apparel, house-building, jewelry retailing, sawmills Specialisation Pharmaceuticals, luxury cars, chocolate confectionary Stalemate Basic chemicals, volume-grade paper, ship owning (VLCCs), Volume Jet engines, supermarkets, motorcycles, standard microprocessors

74. Vulnerability Matrix Defenceless Endangered Vulnerable Prepared Company’s ability to react Low High Impact Of threat Low High

76. 5 forces model Rivalry among Industry competitors Suppliers Substitutes New Entrants Buyers

78. The value Net company competitors complementors customers suppliers

156. Declining Industries – Strategies for Decline Leadership Or Niche Harvest Or Divest Quickly Niche Or Harvest Divest Quickly Relative Strength in Remaining Pockets of demand High Low  Unfavourable Favourable  For decline