3. RESOURCE
BASED
APPROACH
• It suggests that HR systems can contribute to
sustained competitive advantage through facilitating
the development of competencies that are firm
specific, produce complex social relationships, are
embedded in a firm’s history and culture and
generate tacit organizational knowledge
• Not all resources will be strategic resources
• Method of analyzing and identifying a firm’s
strategic advantages based on examining its distinct
combination of assets, skills, capabilities and
intangibles as an organization
• Analyzes and interprets internal resources of the
organizations and emphasizes resources and
capabilities in formulating strategy to achieve
sustainable competitive advantages
5. USING RESOURCE-
BASED APPROACH
IN INTERNAL
ANALYSIS
• Disaggregate resources
• Utilize a functional perspective
• Look at organizational processes
• Use Value Chain approach
7. VRIO
FRAMEWORK
• Tool used to analyze firm’s internal resources and
capabilities to find out if they can be a source of
sustained competitive advantage
• Originally developed by J.B.Barney, where he
identified four attributes that firm’s resources must
possess in order to become a source of sustained
competitive advantage
• The four resources must be Valuable, Rare,
imperfectly Imitable and Non-substitutable
• 4 questions – Valuable? Rare? Costly to Imitate? And
is a firm Organized to capture value of the resources
8. VALUE CHAIN
APPROACH
• Resource analysis technique
• Devised by Porter
• Technique which helps organization to assess its
resources and in so doing determine its strengths
and possible weaknesses
• Value or margin of a product is calculated by the
amount of revenue it earns, in this case total
revenue, which is calculated by the price of the
product (or service) multiplied by the quantity
consumed
• Consists of identifying the series of activities, which
are undertaken by the firm and are strategically
relevant for meeting customer demand and in
respect of which the firm may potentially have an
edge over its competitors
12. ADVANTAGES OF
VALUE CHAIN
ANALYSIS
• Creates profit
• Cooperation
• Return on investment
• Increases competitiveness
• Multiple benefits
• Improved customer service
• Cost savings and accelerated delivery times
13. DISADVANTAGES
OF VALUE CHAIN
ANALYSIS
• Strengths of flexibility
• Heavily oriented to a manufacturing business
• Scale and scope can be intimidating
• Few are experts in its use
• Its strategic impact for understanding, analyzing
and creating competitive advantage
15. CORPORATE
CULTURE
• Provides a framework within, which the behavior of
the members takes place
• Defined as asset of assumptions the members of an
organization share in common
• According to O’Reilly,” Organizational culture is the
set of assumptions, beliefs, values, and norms that
are shared by an organization’s members.”
16. ELEMENTS OF
CORPORATE
CULTURE
• Artifacts
• Stories, histories, myths, legends, jokes
• Rituals, rites, ceremonies, celebrations
• Heroes
• Symbols and symbolic action
• Belief, assumptions and mental models
• Attitudes
• Rules, norms, ethical codes and values
17. STRATEGIC
BUDGET
• Manifests the annual operating plan by displaying
categories in quantities
• Newer concept as a tool of resource allocation
among various SBUs and units of an organization
• Should be tied to an organization’s long-range plan
• Details the assignment of dollars to each
programme area – including expenses for employee
wages, overheads, equipments, etc
• Advantage is the budgetary control or performance
monitoring in the implementation phase
18. PROCESS OF
PREPARING
STRATEGIC
BUDGET
PREPARATION OF POSITION PAPERS
• Position paper on environment
• Position paper on organizational constraints and
resources
• Position paper on fast performance
• Position paper on future direction of activities
PREPARATION OF BUDGET
• Prepared through interaction between corporate
level and SBU level
• Communication about the likely course of future
action in light of past performance
• Show allocation of various resources according to
the needs and importance of various functions,
products or businesses
19. ADVANTAGES OF
STRATEGIC
BUDGETARY
CONTROL
• Future thinking
• Setting detailed plans
• Defines area of responsibility
• Basis for performance appraisal
• Promotes coordination and communication
• Economises management time
21. STRATEGIC
AUDIT
• Method of evaluating the performance of chosen
strategy
• Examinations and evaluations of strategic
management processes including measuring
corporate performance against the corporate
strategy
• Upon completion of the audit, a report will be
created regarding the auditing firm or group’s
findings and submit the report with recommended
remedies to the management of the organization
22. CHECKLIST FOR
CONDUCTING
STRATEGIC AUDIT
• Current situation
• Record of performance
• Corporate and top management
• Evaluation of strategy
• External environment
• Internal environment
• Strategy implementation and control
24. IMPORTANCE OF
STRATEGIC
AUDIT
• Provides insight into efficacy and effectiveness of
plan
• Help in attaining objectives
• Help to spot weakness
• Influences the behavior
• Helps in achieving stability and continuity
• Effective use of scarce and valuable resources
• Helps in addressing governance problems
25. SWOT ANALYSIS
• 2 most important parts of SWOT analysis are
drawing conclusions about what story the
compilation of strengths, weaknesses, opportunities
and threats tells about the company’s overall
situation, and acting on those conclusions to better
match the company’s strategy, to its resource
strengths and market opportunities, to correct the
important weaknesses, and to defend against
external threats
27. APPLICATIONS
OF SWOT
ANALYSIS
• Provides a logical framework
• Enables systematic comparison of internal and
external factors
• Building on strengths
• Minimizing weaknesses
• Seizing opportunities
• Counteracting threats
28. TOWS MATRIX
SO Strategy: Maxi-Maxi WO Strategy: Mini-Maxi
ST Strategy: Maxi-Mini WT Strategy: Mini-Mini
Internal factors
Externalfactors
29. CORPORATE
STRATEGY
• Often called grand strategy or master strategy
• Falls into 4 categories: expansion, stability,
retrenchment and combination
• Basis for achieving long term objective
• Broad decisions about the total organization’s scope
and direction are main concern
• 4 kinds of initiatives
i. Making necessary moves to establish positions in
different businesses
ii. Involve vigorously pursuing rapid-growth
strategies in the most promising LOB’s(Line Of
Balance)
iii. Pursuing ways to capture valuable cross-business
strategic fits and turn them into competitive
advantages
iv. Establishing investment priorties
30. IMPORTANCE OF
CORPORATE
STRATEGIES
• Focus
• Measurable progress
• Long-term success
• Rationalizes allocation of scarce resources
• Encourages management to choose the best course
of action to realize the objectives
31. LIMITATIONS OF
CORPORATE
STRATEGIES
• Complex process
• Time consuming and complicated
• Uncertain estimates
• Difficulty in achieving desired results
• Suitable only for long range problems
32. GROWTH/EXPANSION
STRATEGY
• Adopted to accelerate the rate of growth of sales,
profits and market share faster by entering new
markets, acquiring new resources, developing new
technologies and creating new managerial
capabilities
• Allows company to maintain their competitive
advantage even in the advanced stages of product
and market evolution
• Offers economies of scale and scope to an
organization, which reduce operating costs and
improve earnings
36. CONCENTRATION
STRATEGY
• Also known as “intensive” strategy
• Aim is to broaden the market share and to increase
the profit by making the existing products more
effective and by introducing new and various sets of
products in order to increase the market share too.
• Marketers apply them to gain maximum outcomes
38. ADVANTAGES OF
CONCENTRATION
STRATEGY
• Involves fewer organizational changes
• Less threatening and more comfortable staying with
present business
• Past experience is valuable as it is replicable
• Decision making has a high level of predictability
• Enables company to specialize by gaining an in-
depth knowledge of this business
39. DISADVANTAGES
OF
CONCENTRATION
STRATEGY
• Entail several risks when environments are unstable
• Product obsolescence and industry maturity create
additional risks
• Limited ability to switch to other areas
• Lead to cashflow problems
• May not provide enough challenge or stimulation to
managers
40. DIVERSIFICATION
STRATEGY
• Used to expand firm’s operations by adding
markets, products, services or stages of production
to the existing business
• Allows the company to enter lines of business that
are different from current operations
• Growth objective is ought to be achieved by adding
new products or services to the existing product or
service line
• Assumption is made that if sales increase, profits
will eventually follow
42. TYPES OF
DIVERSIFICATION
STRATEGY
• Related/Concentric diversification
1. A company expands into a related industry, one
having synergy with the company’s existing lines
of business, creating a situation in which existing
and new lines of business share and gain special
advantages from commonalities
2. Focuses on creating a portfolio of related business
• Unrelated/Conglomerate diversification
1. Product of two companies that have little in
common coming together, which presents a
unique set of advantages and disadvantages
2. Occurs when a firm diversifies into areas that are
unrelated to its current line of business
45. INTEGRATION
STRATEGIES
• Combining activities on the basis of value chain
related to the present activity of a company
• Results in widening of scope of the business
definition of company
• Part of diversification strategies
• 2 types: vertical integration and horizontal
integration
47. VERTICAL
INTEGRATION
• Type of growth strategy wherein new business units
are added which are complementary to the existing
business units
• Joining together of two or more firms which
produce goods which are in successive stages of
production
• Characterized by extension of firm’s business
definition in two possible directions from the
present - backward or forward.
48. HORIZONTAL
INTEGRATION
• Staying inside a single industry
• Company “sticks to the knitting”
• Allows a company to focus its managerial, financial,
technological, and functional resources and
capabilities on competing successfully in one area
• Company doesn’t make the mistake of entering new
industries where its existing resources and
capabilities add little value and/or where a whole
new set of competitive industry forces – new
competitors, suppliers, and customers – present
unanticipated threats
49. INTERNATIONALISATION
STRATEGY
• Type of expansion strategy that require
organizations to market their products and services
beyond the domestic or national market
• Describe significant difference in the operating
strategy, world view, orientation, and practice of
companies operating in more than one country
• Include 4 basic strategies : international, multi-
domestic, global and transnational strategies
50. COOPERATION
STRATEGY
• Idea of simultaneous competition and cooperation
among rival firms for mutual benefits
• Means by which firms work together to achieve a
shared objective
• Used to create value for a customer at a lower cost
• Powerful mechanisms for aligning stakeholder
interests and can help a firm reduce environmental
uncertainty
• Types
i. Strategic alliances
ii. Merger and acquisition
iii. Joint ventures
51. STABILITY
STRATEGY
• Basic approach is “maintain present course: steady
as it goes”
• Companies will concentrate their resources where
the company presently has or can rapidly develop a
meaningful competitive advantage in the narrowest
possible product-market scope consistent with the
firm’s resources and market requirements
• Less risky
54. RETRENCHMENT
STRATEGY
• Corporate level strategy that aims to reduce the size
or diversity of an organization
• Reduction in expenditure to become financially
stable
• Involves withdrawing from certain markets or the
discontinuation of selling certain products or
services in order to make a beneficial turnaround
• Denotes separation of employees mainly due to
decreased amount of work owing to recession or re-
organization of work
55. REASONS TO
PURSUE
RETRENCHMENT
STRATEGY
• Poor performance
• Threat to survival
• Redeployment of resources
• Insufficiency of resources
• For securing better management and improved
efficiency
57. TURNAROUND
STRATEGY
• Derive its name from the action involved, that is,
reversing a negative trend
• Goal is to return an underperforming or distressed
company to normal in terms of acceptable levels of
profitability, solvency, liquidity, and cashflow
• Emphasizes improvement of operational efficiency
• Most appropriate when a corporation’s problems
are pervasive but not yet critical
• Two basic phases of turnaround strategy are
contraction and consolidation
58. DIVESTMENT
STRATEGY
• Involves the sale of a firm or a major component of a
firm
• Involves sale or liquidation of a portion of business,
or a major division, profit centre or SBU
• Part of rehabilitation or restructuring plan and is
adopted when a turnaround has been attempted but
has proved to be unsuccessful
• Also called divestiture or cutback
59. LIQUIDATION
• Termination of the firm
• Advantage of voluntary liquidation over bankruptcy
is that board and top management make the
decisions rather than turning them over to a court,
which often ignores stockholders’ interests
• Least attractive of grand strategies
• Minimizes losses of all the firm’s stockholders
• Tries to develop a planned and orderly system that
will result in the greatest possible return and cash
conversion as the firm slowly relinquishes its
market share
60. CAPTIVE
COMPANY
STRATEGY
• Involves giving up independence in exchange for
security
• It is followed when
1. A firm sells more than 75% of its product or
services to a single customer
2. The customer performs many of the functions
normally performed by the independent firms
• Requires a management that is able to develop good
long-term relationships with its major customers
• Can be risky
61. COMBINATION
STRATEGIES
• Resource used by corporations or businesses to
further their identified business goals at the same
time
• Simultaneous pursuit of two or more growth
strategies
• Usually followed by organizations having different
business portfolios with each business facing
different problems
63. TYPES OF
COMBINATION
STRATEGY
• SIMULTANEOUS COMBINATION
1. divesting an SBU, product line, or division while
adding other SBUs, product lines, or divisions
2. Using a turnaround strategy while pursuing
growth strategy
• SEQUENTIAL COMBINATION
1. Employing a growth strategy for a specified time
and then using stable growth for a specified time
2. Using a turnaround strategy and then employing
growth strategy when conditions improve