- A company may require different strategies at different levels, including corporate, competitive, and functional strategies. - Corporate strategies deal with objectives, resource allocation, and coordinating business unit strategies. Types include stability, growth, retrenchment, and combination strategies. - Competitive strategies establish competitive advantage against rivals using low cost, differentiation, or focus approaches. Porter's five forces model analyzes industry competitiveness. - Functional strategies involve coordinating resources like marketing, finance, operations to execute business unit strategies efficiently.

1. STRATEGIC MANAGEMENT- LESSON 3
Dr S Sarangapani
STRATEGIC MANAGEMENT- LESSON 3
Dr S Sarangapani

2. Strategy- IntroductionStrategy- Introduction
Can all companies have same strategies? GD
A company will need strategy at various levels, as there is a different need at each
level.
A company may have a different business with a central corporate office. Thus,
there will be multiple strategies at different levels.
The three main levels of strategy are:
• Corporate level strategy
• Competitive strategy
• Functional/Departmental strategy

4. Corporate level strategy
It is every business must choose the number of businesses
in which it will compete and the relationships that will exist
among those businesses.
Corporate level strategy occupies the highest level of
strategic decision-making and covers actions dealing with
the objective of the firm, acquisition and allocation of
resources and coordination of strategies of various SBUs
for optimal performance.
Corporate level strategy makers analyze the commonalities
of various business units and work to add value to the
whole besides individual growth of participating business
units to enhance stakeholders’ value.
Assessing the value of a business unit in the overall
portfolio of activities is also a corporate level decision
alongside with optimal resource allocation for units (Ex:
BCG Matrix).

5. 55
Types ofTypes of Corporate level StrategiesStrategies
Corporate level
strategies
•Stability Strategies
•Growth/Expansion
Strategies
•Retrenchment Strategies
•Combination Strategies.

6. Sability strategiesSability strategies
• Stability Strategy: -stability is to consolidate(strengthen or secure)
rather than taking chances of exploring new areas.
• When used? when an economy is slowing down,
• particular industry forecast show rapid changes and needs to
safeguard the same against possible threat of new entrants, etc.,
• Under stability strategies the following are the variants:
• ---------------------------------------------------------------------------
• No change strategy: the firm shall concentrate on protecting the
present position for sometime rather taking charge to expand and
diversify.
• This normally happens when there is a major shift in the top
management
and it shall take sometime for the new management to understand the
current situation of the business.

7. Stability strategiesStability strategies
• Pause and proceed:
• Slow growth is preferred rather than sudden expansion.
• The basic idea is to watch the changes of these forces to asses the
positive/negative impacts and then formulate the strategy.
• when major changes are expected in the political and economical factors that
have a bearing on the business, the management adopts to ‘pause and proceed’
strategy.
• Profit strategy:
• When the firm is in a turbulent (unstable) business environment with
uncertainty,
• it prefers to defend its markets and safeguard the present profitability through
cutting costs and reduction in wastage of resources, etc.

8. Growth StrategiesGrowth Strategies
• When an economy is booming and the industry indexes are showing
positive signs a firm shall embark on growth strategies
1. Concentration strategy (Growth through concentration):
• expanding the existing business to the maximum possible extent. The
firm wishes to exploit the business to the maximum extent by
concentrating on its products and markets.
• Example:Instant food sellers want to expand into rural markets of
Oman
• The variants of this strategy are developed by Ansoff .
a. Market penetration strategy : aimed to cover the existing markets
to the full extent with existing products to enhance the market
share.
• backed by advertising and sales promotion ; It is a process to pull the
customers from competitors and convert non users into users.

9. Growth StrategiesGrowth Strategies
Market development strategy: This is done with
developing new markets for existing products, which
are so far unexploited (unused) with new channel
partners and expanding globally.
Product development strategy : It is aimed to develop
new products for existing markets in the form of
substitutes and compliments.
Example: a toothpaste manufacturer can expand by
adding tooth powder (substitute), tooth brushes and
mouth fresheners (compliments)
• Diversification (Diffusion): This involves the process of
developing new products and venturing into new markets

10. 2. Growth thro Integration(Vertical & horizontal integration)2. Growth thro Integration(Vertical & horizontal integration)
• Vertical integration strategy: If the firm venture
backwards or manufacture its own raw material and
components, it is vertical integration.
• Backward integration:
• Example: a steel plant may acquire iron ore mines—
• Forward integration: when a firm starts its own
distribution channels and warehousing, it is forward
integration.
• Example: (For example, a consumer electronic firm opens
own showrooms to sell the products directly to consumers.
• Horizontal integration : When a firm acquires
competing firms in the same line of business to increase
the size, sales, profits, and potential market share.

11. Diversification
• Diversification means a strategy of expanding into related
or unrelated products or market segments.
• Advantages of Diversification: 1. It helps to move the
organisation into other businesses, or new product line.
2. It helps the organisations to diversify their risk.
• Disadvantages:
• 1. It forces the organisation to split its attention &
resources among many products or markets instead of one.
• 2. If too much diversification is followed it may
undermine(weaken) the organisation’s ability to compete
successfully in its chosen markets.
• Types of diversifications:
• Related diversification
• Conglomerate diversification

12. Related diversification means diversifying into other
business, industry or product line in such a way that an
organisation’s line of businesses still possess some kind of fit/
match.
Example: A Television channel diversifying into radio.
Conglomerate diversification means diversifying into
products or markets that are not related to the organisation’s
present business.
Example: a company diversifying into unrelated fields like real
estate, hotels, paper, edible oils, etc.

13. (d)Growth through internationalization: This is
the result of the firm’s search to explore the
international markets with its existing products
or by manufacturing products that are in demand
in global target markets.
Red Bull entered from Austria to Germany and
other European countries and then throughout
the world.
Growth thorough cooperation: Strategic alliances
form part of this type of expansion. Firms come
together with their distinct advantages like
market access, financial capability, and
technological supremacy and HR skills to share
the benefit among them.

14. Retrenchment StrategiesRetrenchment Strategies
3. Retrenchment Strategies: This alternative
is opted under a situation when a firm
wishes to apply contraction of or wind up
(closing) of its operations. This is done
through:
• (i)Turnaround;
• (ii) Divestment;
• (iii)Liquidation
•

15. (Exercise for testing your understanding)(Exercise for testing your understanding)
• Which is one of the methods of Growth/Expansion Strategy-?
• A Diversification B Ownership
• C Concentric D Conglomerate
• Corporate Strategy is keen to care about –
• A Market B Divestment
• C Management D Investment
• Which is not the type of stability strategy-?
• A pause with caution strategy B profit strategy
• C market research strategy D no change strategy
• Which element is not related with turnaround management-?
• A changes in the top management B review of old strategies
• C control D better internal coordination
•

16. Retrenchment strategiesRetrenchment strategies
• Turnaround Strategy: Turnaround strategy is for
reversing a negative trend in business by cutting the costs,
reducing the distribution and selling expenses, and finding
other useful ways to get out of unprofitable products and
transforming the company into profit making and efficient
organisation. (turning sick company into good company)
• (ii) Divestment Strategy: This involves the sale of those
units or parts of a business that no longer contribute to the
profits and growth of the business.
• Example, a longstanding labour dispute may be one reason
for starting a spin off (removal)firm.
• Liquidation Strategy: Liquidation involves closing
down a firm and selling its assets.When both turnaround
and divestment attempts fail to improve the firm’s
position, as a last resort the firm opts for liquidation.

17. 4) Combination Strategies:
If the SBU follows more than one strategy
say in one SBU the stability strategy,
another SBU following diversification,
and yet another SBU retrenchment strategy may be applied.
Hence, it is called combination strategies and they are a
common feature of modern business.
II. Competitive Strategies (Business Level Strategies)
• According to Michael Porter, competitive strategy is a
plan to establish a profitable and long-term competitive
position against competition. According to Porter, 3 basic
or generic competitive strategic options are possible:
• 1. Cost Leadership, 2. Differentiation and 3. Focus

18. Cost Leadership
• The objective is to become the lowest cost producer in the industry.
Sometimes such organizations also give discounts to maximize sales and
further increase the market share.
• Cost leadership requires tight cost and overhead control, cost minimisation in
areas like R&D, etc.. Once achieved, the low cost position provides high
margin which can be re-invested to build up the resources in order to maintain
the cost leadership.
• Differentiation
• It involves differentiating the product or service giving customers clear
reasons to prefer the product over competitor’s products.
• Example of Differentiation: Samsung S5 differentiates from other mobiles in
scanning the person for identity and adding many features
• Mercedes-Benz emphasizes quality, Oman Air emphasizes safety and
punctuality. So many toilet soaps, still Dove soap is known for soft facial
appearance
• This strategy involves selecting one or more important features of product as
preferred by buyers. Approaches to differentiation can take many forms such
as:
• Design or brand image
• Technology , Customer service

19. Focus strategyFocus strategy
• A business pursuing a focus strategy selects a market
segment and builds its competitive strategy on serving the
customers in its market better and sometimes more cheaply
than its competitors. This is also called niche marketing,
concentrating on single segment Example: In USA, there
are certain readymade cloth manufacturers who focus on
very tall or fat people.
• This strategy is focusing on a particular buyer group,
segment of product line, or geographical market.
• The entire focus strategy is build around serving a
particular target very well, and each functional policy is
developed with this in mind.

20. Competitive Strategy and Michael
Porter’s 5 Forces Model
Competitive Strategy and Michael
Porter’s 5 Forces Model
• To formulate a competitive strategy, the
manager should
1. understand the competitive forces that
determine how intense (strong) the
industry’s rivalries are and how to best
compete.
2. Based on that analysis, the organization
must find a sustainable competitive
advantage.
According to Porter, competitive strategy

21. Competitive Strategy and Michael
Porter’s 5 Forces Model
Competitive Strategy and Michael
Porter’s 5 Forces Model
Tutor Peter Considine. (Core Text Exploring CorporateStrategy, Seventh Edition, ©Pearson Education Ltd2005) 3
The Five Forces Framework
Source: Adapted fromM.E. Porter, Competitive Strategy: Techniques for Analyzing Industries and Competitors ©1980, Free
Press, 1980, p. 4. Copyright 1980,1988 by The Free Press, a division of Simon &Schuster Inc. Reproduced with permission.
Exhibit 2.5

22. Competitive Strategy and Michael Porter’s 5 Forces
Model
Competitive Strategy and Michael Porter’s 5 Forces
Model
• Threat of entry: There are several barriers which can make it
difficult for new entrants to enter the business.
• Example: to enter automobile industry (to manufacture cars or
trucks), high investment required for plant, equipment and
technology. Not easy.
• Government rules and regulations make it more difficult. For
example, in Oman before, there was only one mobile service provider
because except Oman Mobile, no other company had the license.
Now there are several mobile service providers because the
government allows more licenses for the other providers
• Competitive Rivalry among existing competitors
• Rivalry among existing competitors results in tactics like price
competition, advertising battles(wars), and increased customer
services.
• Example: the competition among competitors in the housing sector
in Dubai was not so intense (more) a decade ago. But the level of
competition has changed with the entry of more property

23. Competitive Strategy and Michael Porter’s 5 Forces
Model
Competitive Strategy and Michael Porter’s 5 Forces
Model
• Pressure from substitute products:
• substitute products performs the same or similar functions. The more
substitutes available for a product, the more would be the competition.
every company wants to retain its customers from moving to substitute
products by offering lower prices, discounts, schemes, etc.
• Example: Coffee and tea are good examples of substitute products.
• Bargaining power of buyers Power to negotiate in buying
• example, a buyer group is powerful if it purchases large volumes of the
company sales. Wal-Mart purchases huge volumes of products for it s
stores all over the world. Wal-Mart naturally dictates the terms.
• Bargaining power of the suppliers. Suppliers can also influence an
industry’s competitive intensity
• Example, by threatening to raise prices or reduce quality, The bargaining
power of the suppliers increases when:
• There are only a few firms supplying the item--electricity
• few substitutes are available-petrol

24. Functional StrategiesFunctional Strategies
• The functional level of the organization is
the level of the operating divisions and
departments. The strategic issues at the functional
level are related to business processes and the
value chain. Functional level strategies in
marketing, finance, operations, human resources,
and R&D involve the development and
coordination of resources through which business
unit level strategies can be executed efficiently
and effectively.

25. • Defensive
taking care of customers lest a competitor takes them away.
That calls for a defensive marketing strategy designed to
retain customers and continually win their business. CRM
and customer loyalty programs are two excellent
marketing tactics for improving markets and revenues
around your best customers. Ex: Apple & Blackberry
• Offensive
• Offensive strategy is to be carefully adopted as you are
about to touch the competitor and may invite resistance
from competitors in the form of improved
advertisements/price reductions/better value products. Best
example of offensive strategy is the smart phone
leadership of Samsung, which made the company market
leader due to sustained R & D and product.

26. • Flanking
• All-out marketing assaults are too costly and too risky. Instead you
have to pick your battles carefully
• Duckwall-ALCO, a national chain of discount and variety stores,
found one such weakness10 years ago. It target towns less than 5,000
residents that is too small for a Wal-Mart store. Duckwall has been
expanding its stores in small towns across America and pleasing
stakeholders ever since.
• Guerrilla
• The principles of guerrilla warfare are:
• (i) Find a segment of the market small enough to defend,
• (ii) No matter how successful you become, never act like the leader
• (iii) Withdraw if the strategy fails and adopt a new strategy.
• For example, small retailers in India offer credit for the monthly
groceries and customers feel it convenient to buy from them avoiding
the BIG Hypermarkets due to ease in the payment. Thus guerrilla
marketing is low cost, quick hit initiatives that either succeed or fail
without fear of sinking the ship.
•
•

27. Lesson 4Lesson 4
Value chain analysis & Core competency

28. Significance of Value Chain Analysis:Significance of Value Chain Analysis:
• eliminates waste and contributes to lower cost and high
profits.
• Improved production methods contributes to quality
enhancement and less defectives
• creates value all long the chain of activities for better value
service to customers.
• The process aims at time management in procurement and
dispatch.
• Improved performance with emphasis on employee training
results in employee satisfaction /less absenteeism and attrition.
• in competitive advantage to a firm both through overall cost
leadership and improved attributes of product
• improved coordination among various activities for synergy.
• prompt a firm to take out-sourcing decisions all along the value

29. The core competencyThe core competency
• The core competency is the strategic advantage a
business firm enjoys over its rival competitors to gain
market position.
• It is that strength through which a firm can dictate
terms of its own in the market. (Competition finds it
difficult to imitate this particular advantage in the short
run.)
• The area of core competency can be a low price, market
coverage, product features, brand and customer base, etc.
• example, Toyota cars are known for the quality and market
coverage.
• Sony products are known for quality. Samsung for
Technology and features

30. Developing the core competencyDeveloping the core competency
• Learning Curve Effect: It is the efficiencies acquired by a firm
through the passage of time. As the same business activity is done
time and again, the chances of improving the technology, methodology
and employee skills are bright, compared to a new business . (In
Diploma how u found it to do presentation and now how you do it) This
practice makes the business achieve better and develops
competencies like patents, cost leadership and superior quality goods
and services. This is core competency.
• Acquisition advantage: A core competency may be the result of
acquisition of another business venture.
• Example, an existing steel plant without its own iron ore mines
-- acquires a company with iron ore mines
• thus, can develop competency to deliver the product at cheaper cost.
• Alliance: A competency may be acquired through partnership with
other businesses, which are strong in a particular area of expertise.
For example, Fiat of Italy has formed its alliance with TaTa Motors,
which has strong dealer network in India to distribute its cars.
• Innovation: A core competency may be because of constant R&D
activity and creativity on the part of the business to invent new
technology, methods of operation, etc. Example Samsung mobile