BPS Syllabus

Notes by - Khushi Katyal, Batch’23

Unit 1
Introduction to Business Policy and Strategy:
Nature & importance of business policy & strategy; (SC Notes)
Introduction to the strategic management process and related concepts; (Spiral
Pg 5 - 8) (Benefits & Limitations Pg 24-25)
Characteristics of corporate, business & functional level strategic management
decisions;

Corporate Level:
. Focus on overall direction of the organization: mission, vision, values
. High risk and uncertainty involved: affect entire org., major changes to org
structure, operations and market position
. Address issues at the organizational level: affect entire org: restructuring M&A,
diversification etc.
. Have long term focus: long term affect. not playing short term game.

Business Level Strategic Management:

. Focused on how to compete effectively in a specific market or industry.
. Determines the product offerings and pricing strategies.
. Focuses on marketing campaigns and customer acquisition and retention.
. Concerned with achieving a competitive advantage in the market.
. Has a medium-term time horizon of 1 to 5 years.\
. Each business is treated as a Strategic Business Unit (SBU).

Functional Level:
. Focus on specific functions/departments: finance, marketing, production
. Low risk and uncertainty: affect specific department and not entire org
. Address operational issues: department specific: quality control, cost reduction,
marketing budget etc.
. Have short term focus: focus is on resolving short term operational issues
 Company’s vision and mission, (SC Notes)
need for a mission statement. (SC Notes)

→ Cultivate organisational culture

→ Motivate employees to work towards org goals
→ Keeps the org going in tough times
→ reduces dependencies on few individuals as everyone knows what the overal
direction of org is
→ Serves as a PR tool
→ helps to communicate effectively with suppliers and retailers
→ helps to differentiate itself from competitors

→ difference between vision and mission

V: where the org wants to be

M: who is it, what it does, how will it be there where it wants to be

V: broader scope and abstract in nature

M: specific and action oriented

V: future desires
M: present goals and direction

V: guidance and inspiration

M: clarity and focus to achieve goals

Unit 2
Environmental Analysis & Diagnosis: (SC Notes)
Analysis of company’s external environment;

PESTEL:
Political:
UK Based airlines recalculate fares and routes after Brexit.
Economic:
Tata Motors, Ashok Leyland etc stop sending vehicle kits to Sri Lanka after their
crisis of forex reserves.
Social:
Taco Bell failed with their spicy tacos in Japan
Technological:
Rise of Apple and Nokia’s downfall with i phone
Environmental:
Walmart in news because of greenwashing and provide cheap low quality products.
Legal:
→ Nestle maggi ban.
→ Danone fined for 9 billion $ for false claims of health benefits for its Activia and
DanActive yoghurt.

Features of Business Environment:

. Dynamic
. Uncertain
. Complex
. Relative
. Total of external and internal factors

Environmental Analysis:

. Find the factors affecting

. Collect data
. Determine impact
. Create strategy with respect to it

Michael E. Porter’s 5 Forces model;

→ Level of Competition: High for Starbucks (local cafes and suppliers, CCD, Barista
coffee)
→ Threat of Substitutes: Low for DMRC as it enjoys monopoly
→ Bargaining power of suppliers: Low for Apple as global suppliers who can provide
them with components
→ Bargaining power of customers: High for Uber as shorter waiting time, enjoy lower
transaction costs
→ Potential of New Entrants: Low for Disney: Marvel acquired, movies, theme parks,
 Internal analysis,

SWOT Analyses

S: differentiating it from competitors, provide clear advantage to it

W: areas of improvement
O: use them for its benefit
T: beware of

McKinsey 7S Framework
It is a tool used to assess and optimize the organizational effectiveness of a
company. The framework consists of seven elements that must be aligned for an
organization to be successful. The seven elements are:
. Strategy: The plan devised to maintain and build competitive advantage over the
competition.
. Structure: The organization of the company, including the hierarchy and the
relationships between different departments and teams.
. Systems: The processes, procedures, and routines that guide how work is done
within the organization.
. Shared values: The core values and beliefs that shape the culture of the company
and guide its actions and decisions.
. Skills: The capabilities and competencies of the company's employees, including
technical, managerial, and leadership skills.
. Staff: The employees of the company and their roles and responsibilities.
. Style: The leadership style of the company's top executives and how they interact
with employees and stakeholders.

Importance of organisation capabilities,

Organization capabilities (OC) are the intangible, strategic assets that an

organization draws from to get work done, execute its business strategy, and satisfy
its customers.

Some organizational capabilities examples are:

Organizational culture
Leadership performance
Strategic unity
 Innovation
Agility
Talent
Customer connectivity

Importance:

Gaining competitive advantage – The ability to manage resources and

information effectively helps focus an organization on meeting customer
demands with its distinctive products and services. This leads to surpassing
competitors and gaining prominence in the marketplace.
Adapting to change – An organization that makes effort to align with employees,
customers, and emerging trends and markets can better foresee and plan for the
new directions it must take.
Driving business performance – Investing in the development of organizational
capabilities hones a company’s strengths and identity. Harnessing this intangible
value promotes stability and makes the most of what everyone has to offer. This
delivers optimal performance.

competitive advantage and core competence;

Core Competence Model:

The Core Competence Model states that the strategic objectives should not focus
on fighting off the competition, but on creating a new competitive space using core
competences.

With a mixture, 4 core competences are developed.

Fill in the blanks

An organization identifies what core competences can be used in existing markets,
in which these core competences can be deployed in two manners: in certain
markets for specific services or to strengthen the organization’s position.
White spaces
By deploying competences in new markets, there is a risk that an organization may
have too large a diversification of products/services. The organization therefore
needs to stay close to its “core business”. By formulating clear targets, it will become
clear what core competences will be needed in the future and how these can be
developed.
Premier plus ten
The strategic starting principle is to deploy a new (and high-quality) core
competence in an existing market in ten years time.
Mega Opportunities
This strategy has a high yield potential. Because the organization is moving into
unfamiliar territory, there are potential risks involved in this. It could mean a mega
opportunity for an organization because competences are improved and the market
reach will be expanded.

Michael E. Porter’s Value Chain Analysis,

Divides org activities into primary and support activities and analyses the bvalue
contributed byt hem to the final product.
Primary Activities: directly involved in the creation and delivery of the
product/service

. Inbound Logistics: receiving and storing raw materials and delivering them to
production line as needed
. Operations: actual production of product or delivery of service (machining,
assembling, packaging)
. Outbound Logistics: storing and distribution of final product to customer
. Marketing and Sales: marketing it to customers and making sales
. Service: after sales support to customers such as repairs and maintenance

Support Activities: support primary activities and enable them to be performed

effectively

. Procurement: sourcing raw materials

. Technological Development: developing new production processes, R&D etc for
improving product quality
. Human Resource Management: managing workforce: hiring, training and
performance management
. Infrastructure: finance, accounting and legal support which provide foundation
to help other activities to be performed effectively.
 What Is a Value Chain Analysis? 3 Steps | HBS Online

Porters Diamond Theory of National Advantage.

Porter Diamond is a model that emphasizes the competitive advantage of an industry

or business that makes it work better than other competitors in a region or country.
Also known as the Porter Diamond Theory of National Advantage, the model explains
why certain industries thrive in particular nations. Companies use this model to
analyze the competitive environment in foreign markets before entering them.

#1 – Company Structure, Rivalry, and Strategy

The region in which the firms operate determines the structure and strategies to be
framed to compete in the home market.
As a result, the strategies differ from nation to nation. In addition, rivalry plays an
important role in driving every entity operating in the same sector to improve,
innovate, and perform better than each other. Therefore, the businesses have to be
consistent. This makes them trustworthy and reliable national companies around
the globe in the long run.

Example: Italy, known for its fashionable clothing, will definitely have a different
approach than Greece, which emphasizes tourism and related facilities.

#2 – Factor Conditions
Factor conditions include resources available to businesses that help them perform
well. The availability of resources could be influenced by the skillset, strategies,
infrastructure
, or nature.
The natural resources constitute the basic factors, while the infrastructure, skilled
experts, and capital form the advanced factors.

Example:

France’s luxury goods industry has a long history that began more than 500 years
ago.
Eight hundred years ago, France was Europe’s silk centre with a booming silk
industry.
King Louis XIV, the country’s most fashionable royalty recognized the importance of
luxury goods to the national economy. Under his leadership, the country developed a
powerful textile industry which in turn boosted trading and the country’s
infrastructure.
France was the perfect country for Louis Vuitton to be born in. The country provided
the luxury brand with perfect factor conditions.

#3 – Demand Conditions
The demand for a particular product or service also plays an essential factor. Porter
Diamond model’s third attribute indicates how the increase in demand for an item
among local customer boosts the growth of a brand or business.
When customers want a product, businesses strive to improve the quality and live up
to their expectations. As a result, they become competent enough to acquire the
number one position on the global platform.

Example: Having no speed limits and an aspiration of citizens to have a quality and
speedy life encourages the demand for high-speed luxury cars in the Germany like
BMW, Audi, Volkswagen.

#4 – Supporting and Related Industries

Another factor that influences business growth is the complementary services that
lend support to the companies of national advantage.

For example,: the tourism services in Greece would never be the best if the
accommodation facilities and food units over there did not support the industry.

#5 – Government
The government also plays a vital role in developing and retaining the competitive
advantage by offering a conducive environment for businesses to flourish. This
includes developing a robust infrastructure, ensuring fair market practices,
developing education institutions, etc.

Example: In Norway, almost everyone owns a Tesla because to go green,

government banned taxes on EV, gave free parking to owners of EV etc.

#6 – Chance
In addition, chance or luck may also contribute to competitive advantage or
disadvantage. For instance, unpredictable events like wars, natural disasters,
political situations, etc., can positively or negatively impact an industry or nation,
creating a competitive advantage or wiping it off.
VRIO Framework

The VRIO framework is a tool used to evaluate the internal resources and
capabilities of a company to determine its competitive advantage. VRIO stands for
Value, Rarity, Imitability, and Organization. Here's a brief overview of each
component of the framework:
. Value: The first step in the VRIO framework is to assess whether the resource or
capability in question provides value to the company. If the resource or capability
doesn't add value, then it doesn't contribute to the company's competitive
advantage.
. Rarity: The next step is to determine whether the resource or capability is rare. If
the resource or capability is widely available, then it's unlikely to provide a
competitive advantage.
 . Imitability: The third step is to assess how easy it is for competitors to imitate or
replicate the resource or capability. If it's easy for competitors to copy, then it
doesn't provide a sustainable competitive advantage.
. Organization: The final step is to determine whether the company is organized to
take advantage of the resource or capability. This includes assessing whether the
company has the right structure, systems, and processes in place to leverage the
resource or capability effectively.

Unit 3
Formulation of Competitive Strategies:
Michael E. Porter’s generic competitive strategies,
implementing competitive strategies- offensive & defensive moves;
formulating Corporate Strategies-
Introduction to strategies of growth, stability and renewal,
types of growth strategies –
concentrated growth,
Concentrated growth is a growth strategy that involves focusing on a single
product, market, or geographic region and investing heavily in that area to
achieve growth. The goal is to gain a significant share of the market and
become the dominant player in that area. Here are some potential benefits
and risks of pursuing a concentrated growth strategy:
Benefits of concentrated growth:
a. Focus: Concentrated growth allows a company to focus its resources,
attention, and expertise on a single product, market, or region, which can lead
to greater efficiency, innovation, and customer satisfaction.
b. Economies of scale: By focusing on a single area, a company can achieve
economies of scale in production, marketing, and distribution, which can
reduce costs and increase profitability.
c. Brand recognition: By becoming the dominant player in a single area, a
company can achieve brand recognition and customer loyalty, which can be
difficult to achieve in a highly competitive market.
d. Reduced risk: Focusing on a single area can reduce the risk associated with
diversification, as the company is not spread too thin across multiple products,
markets, or regions.
 Risks of concentrated growth:
a. Dependence: Concentrated growth can make a company overly dependent on
a single product, market, or region, which can make it vulnerable to changes
in customer demand, regulatory changes, or economic conditions.
b. Limited growth opportunities: Focusing on a single area can limit a company's
growth opportunities, as it may not be able to expand beyond that area or may
face significant barriers to entry in other markets.
c. Increased competition: Concentrated growth can attract competitors who
may seek to challenge the company's dominance in that area, which can lead
to increased competition and lower profitability.
d. Lack of diversification: Concentrated growth can make a company less
diversified, which can increase its exposure to risk and limit its ability to
weather changes in the market or industry.

Types of Concentration Strategy (3 obtained from Ansoff Matrix)

. Market Penetration
. Market Development
. Product Development

Ansoff Matrix

The Ansoff Matrix, is a two-by-two framework used by management teams and the
analyst community to help plan and evaluate growth initiatives.
Breakdown of Ansoff Matrix, including Products on the X-axis and Markets on the Y-
axis

Market Penetration
The least risky, in relative terms, is market penetration.
Typical execution strategies include:
Increasing marketing efforts or streamlining distribution processes
Decreasing prices to attract new customers within the market segment
Acquiring a competitor in the same market

Market Development
A market development strategy is the next least risky because it does not require
significant investment in R&D or product development. Rather, it allows a
management team to leverage existing products and take them to a different
market. Approaches include:
Catering to a different customer segment or target demographic
Entering a new domestic market (regional expansion)
Entering into a foreign market (international expansion)

Product Development
Achieved in a variety of ways, including:
Investing in R&D to develop an altogether new product(s).
Acquiring the rights to produce and sell another firm’s product(s).
Creating a new offering by branding a white-label product that’s actually
produced by a third party.

Diversification
(below explain)

product development,
integration,

Consolidation of operations units anywhere along the value chain to produce

greater efficiencies and achieve economies of scale.
2 types:

Vertical integration refers to the process of a company expanding its

operations by taking control of the entire production process, from the raw
materials to the finished product. This can involve acquiring or merging with
suppliers, distributors, and retailers in order to have more control over the
supply chain and reduce costs. For example, a company that produces cars
might acquire a tire manufacturer to ensure a reliable supply of tires at a lower
cost.

When to pursue vertical integration:

a. Ensuring a reliable supply chain: Vertical integration can provide greater
control over the supply chain and reduce the risk of disruptions due to
suppliers' failure.
b. Reducing costs: By integrating the different stages of production, a company
can reduce transaction costs, increase efficiency, and eliminate
intermediaries' markups.
c. Improving quality control: Vertical integration can improve quality control by
providing greater oversight over the production process.
d. Differentiating from competitors: Vertical integration can help a company
differentiate its product offerings from its competitors by providing unique,
exclusive access to certain raw materials, manufacturing capabilities, or
distribution channels.
 Cons of vertical integration:
. Higher costs: Integrating multiple stages of production can require significant
capital investment, and it can also increase operating costs due to increased
complexity and administrative overhead.
. Reduced flexibility: Vertical integration can make a company less flexible and
more rigid to changes in the market, as it requires a greater level of coordination
and synchronization across the various stages of production.
. Increased risk: By taking on more stages of the production process, a company
also assumes more risk, including supply chain disruptions, quality control issues,
and regulatory compliance challenges.
. Reduced innovation: Vertical integration can lead to a focus on efficiency and
cost reduction rather than innovation and creativity, as the company becomes
more focused on operational issues than strategic thinking.

2 Types of vertical Integration:

. Forward integration: This strategy involves a company expanding its operations

into downstream activities in the supply chain. For example, a manufacturer of
automobiles might decide to open its own retail showrooms to sell its cars directly
to consumers. By doing so, the company can improve its control over the
distribution process and capture more of the value chain.
. Backward integration: This strategy involves a company expanding its operations
into upstream activities in the supply chain. For example, a manufacturer of
automobiles might decide to acquire a supplier of raw materials to ensure a
stable and reliable supply of key components. By doing so, the company can
improve its control over the production process and reduce its dependence on
external suppliers.

Horizontal integration, on the other hand, involves a company expanding its

operations by acquiring or merging with other companies that produce similar
products or provide similar services. This can allow the company to increase
its market share, eliminate competition, and achieve economies of scale. For
example, a soft drink company might acquire another soft drink company to
increase its market share and expand its product line.

When to pursue horizontal integration:

 a. Increasing market share: Horizontal integration can increase market power by
eliminating competition and expanding a company's customer base.
b. Achieving economies of scale: Horizontal integration can reduce costs and
increase efficiency by achieving economies of scale in production, marketing,
and distribution.
c. Expanding product line: Horizontal integration can allow a company to expand
its product line, providing a broader range of offerings to its customers.
d. Entering new markets: Horizontal integration can provide entry into new
markets or new geographies by acquiring a company with an established
presence in that market.

Cons of horizontal integration:

a. Reduced competition: Horizontal integration can reduce competition, which
can lead to higher prices for consumers and reduced innovation in the
industry.
b. Increased complexity: Horizontal integration can lead to increased complexity
and administrative overhead, as the company has to integrate different
cultures, processes, and systems.
c. Cultural clashes: Merging with or acquiring other companies can lead to
cultural clashes, as the company has to integrate different cultures, values,
and ways of doing business.
d. Regulatory scrutiny: Horizontal integration can draw regulatory scrutiny,
especially if the combined company has a significant market share or if the
industry is highly concentrated.

diversification,
2 types: Conglomerate: expanding into unrelated businesses
Concentric: expanding into related businesses
→ Reasons:
. Reduce risks: spread risks across various industries. conglomerate: offset losses
from 1 business with gains from another one
. Capitalize on new market opportunities: concentric: businesses similar
customers, distribution channels or technologies
. Build brand recognition: build goodwill n reputation. conglomerate: helps in
entering into new businesses if you already have a name
. Economies of scale: concentric: helps to leverage existing production facilities,
distribution channels, supply chains etc. leads to cost savings and efficiencies
 . Competitive Advantage: allows to offer broader range of offerings and beat its
competitors. increases market share and profitability
. Innovation: foster creativity and innovation by diversifying into new businesses.
helps to bring fresh perspectives into the company. helps it to stay ahead of the
curve.
. Revenue Growth: Earn additional sources of income by tapping into new
markets and products
international expansion (multi domestic approach, franchising, licensing
and joint ventures),

Multi domestic approach:

Modifying or differentiating a product to make it attractive or suitable to the foreign
markets.
Eg: Mc Donalds when entered in India.

Licensing:

Licensing generally involves allowing another company to use patents, trademarks,

copyrights, designs, and other intellectual in exchange for a percentage of revenue
or a fee.

Example:

In May 2018, Nestle and Starbucks entered into a $7.15 billion coffee licensing deal.
Nestle (the licensee) agreed to pay $7.15 billion in cash to Starbucks (the licensor) for
exclusive rights to sell Starbucks’ products (single-serve coffee, teas, bagged beans,
etc.) around the world through Nestle’s global distribution network. Additionally,
Starbucks will receive royalties from the packaged coffees and teas sold by Nestle.
The licensing agreement provided Starbucks with the ability to drive brand
recognition outside of its North American operations through Nestle’s distribution
networks. For Nestle, the company gained access to Starbucks’ products and strong
brand image.

Advantages:
Obtain extra income for technical know-how and services.
Quickly expand without much risk and large capital investment.
 Retain established markets closed by trade restrictions.
Political risk is minimized as the licensee is usually 100% locally owned.

Diasdvantages:
Lower income than in other entry modes
Loss of control of the licensee manufacture and marketing operations and
practices leading to loss of quality
Risk of having the trademark and reputation ruined by an incompetent partner
The foreign partner also can become a competitor by selling its products in
places where the parental company has a presence

Franchising

Franchising is the practice of using another firm’s successful business model.

Example, McDonald’s expands overseas through franchises. Each franchise pays

McDonald’s a franchisee fee and a percentage of its sales and is required to
purchase certain products from the franchiser. In return, the franchisee gets access
to all of McDonald’s products, systems, services, and management expertise.

Advantages of Franchising
. Rapid expansion: In a franchise model, the franchisee provides the capital and
the franchisor provide the brand and technical know-how to quickly expand with
the minimum capital requirement.

. Local business knowledge: Franchisors have the ability to work with the
franchisees to become aware of the knowledge about local market conditions.

. Lower operating cost: In some franchising models, the franchisor would

negotiate volume pricing and group buying on behalf of the franchisees. This will
help lower the operating cost of a franchisee business. Further, since the
franchisee is aware of the local market conditions, the franchisor can save on
doing expensive research on local markets, business procedures, etc.,

. Branding: Franchise business is typically better advertised and branded when

compared to traditional business. More the locations where it opens, more the
 brand presence.

. Legal action preventative: Franchise contracts tend to be unilateral contracts in

favor of the franchiser, who is generally protected from lawsuits from their
franchisees because of the non-negotiable contracts that require franchisees to
acknowledge, in effect, that they are buying the franchise knowing that there is
risk, and that they have not been promised success or profits by the franchiser.

Disadvantages of Franchising

. Negative publicity: In case the franchising business gets negative publicity due
to the actions of the franchisor or another franchisee, the entire brand would
suffer. This could lead to loss of sales or customers for a franchisee that was not
involved in that act as well.

. Difficult in motivating franchisees: Generally, a franchise is an agreement for a

specific period ranging between five and ten years. During this period, the
business may witness several ups and downs. When the business is down, the
franchisee may lose his initiative in business. The franchisor in such situations,
finds it difficult to motivate the employees. Moreover, he experiences problems in
motivating independent operators to price, deliver, promote and hire according to
the standards of the business.

. Problems of inconsistent quality: Franchisees deliver unique service concept.

They are service outlets licensed by a principal. The franchisees should distribute
the services according to the specifications of the franchisor. If the franchisee
does not deliver the service properly, the brand name of the franchisor will suffer.
Low performing franchisees will always undermine the name and reputation of
the franchisor.

Example: Target is a celebrated brand in the US, but it didn’t get the formula right
when it expanded into Canada in 2013. Although shoppers were excited to visit the
new stores when they opened to the public, they didn’t find the same products and
services their American counterparts gushed about. In Canada, the stores were
smaller, the prices were higher and the displays were much more disorganized.
More than 120 franchise units were established across Canada within just 10
months, costing over £3.3 billion. But, unfortunately, customers were not impressed
with the new stores, and Target lost roughly £1.5 billion over the two years that
followed.

Joint Venture
A joint venture is a common way of combining the resources and expertise of two
otherwise unrelated companies.

Example: Sony and Ericsson (2001)

A 50:50 joint venture example. It created Sony Ericsson, a famous mobile handset
brand of that period. Ericsson was a mobile handset maker and Sony had the
technology. This JV gave the organization the capacity to compete with leading
companies like Nokia and Apple.

Advantages of joint venture

Business grow faster, increase productivity and generate greater profits.
access to new markets and distribution networks
increased capacity
sharing of risks and costs (ie liability) with a partner
access to new knowledge and expertise, including specialised staff
access to greater resources, for example, technology and finance

Disadvantages of joint venture

Problems are likely to arise if:
the objectives of the venture are unclear
the communication between partners is not great
the partners expect different things from the joint venture
the level of expertise and investment isn't equally matched
the work and resources aren't distributed equally
the different cultures and management styles pose barriers to co-operation

Example: Suzuki TVS

This was a joint venture between the Japanese company Kinetic Honda and the
Indian company. Suzuki wanted the complete control of the TVS Motors based in
Chennai but the India company was hesitant. The chairman and managing director
of the TVS Motors had built his company from scratch, they had launched several
products that had become a success and was not willing to hand over his company
to the Japanese. In the year 2001, the two companies parted ways, they realized
major losses.

CAGE distance framework,

The CAGE framework (Mariadoss, 2017) helps a firm gauge the distance that the
target country is from the firm’s home country on four dimensions. The greater
the distance or difference, the more risk exists and the less opportunity there is
for success.

. Cultural Distance: This refers to the differences of cultures between the target
and home countries. The history of relationships between nations provides one
source of explanation for the closeness (similarity) or distance (difference)
between cultures.

For instance, many countries suffered under the domination of imperial rule
during colonial times with effects that are evident in their contemporary culture
and influencing national relationships. For example, as a former colony of Great
Britain, there is a smaller cultural distance between the US and the United
Kingdom than there is between the US and Spain. However, this is not always the
case. Western European countries have a significant cultural distance with many
Asian countries despite having colonized many of those same territories.
Therefore, history provides a partial insight into cultural distance.

. Administrative Distance: The legal and political systems of the home and target
countries determine the administrative distance between the two. In countries
where the political systems are different, for example, democracy versus
communism, there is a greater distance and more uncertainty. Different laws
between countries can make compliance and doing business more difficult.
For example: In the Dominican Republic, for instance, companies are required to
pay employees a thirteenth month of salary at the end of the year, as a bonus.
Alternatively, some nations protect the civil rights of people who fall within
protected categories in the US (e.g., age, race, sex, class, gender, sexual
 orientation, etc.), but other nations may not. This raises particularly tricky
questions for firms who must abide by US laws, but seek to expand abroad.

. Geographic Distance: The literal physical distance between the home and target
country are a key consideration of this dimension. The more miles the countries
are apart, the longer and more costly it is to go there or to ship from one to the
other. But mileage is not the only factor. The ease of communication between
countries is another. Advances in telephone and internet communications have
made this almost a non-issue in most countries. However, when two countries are
twelve time zones apart, like the US and China, communication can be hampered
when work schedules are twelve hours out of sync. Geographic distance can also
be affected by the infrastructure of a country in other ways other than
communication and internet capabilities.

For example,: Haiti is physically close to the US, but its lack of adequate port
facilities make it a poor target for outsourcing manufacturing.

. Economic Distance: International business between two countries is also

impacted by the differences in their economic factors. The greater the
differences in the two economies, the more difficult it is to be successful. One
way to measure the difference is by GDP per capita. Countries with a similar GDP
per capita have a greater opportunity for success. If the purchasing power and
disposable income of the target country are quite different from the home
country, working in the target country is more challenging.

Example: Starbucks failed miserably in Australia as it was way too expensive for
the Australians and they charged much more than the local cafes.

Types of renewal strategies – retrenchment and turnaround.

Renewal/Retrenchment Strategies

Retrenchment strategy is a renewal strategy used by companies that are facing

financial or operational difficulties, and involves cutting back on the company's
activities to reduce costs and improve efficiency.

→ Turnaround Strategy: plan of action designed to help a struggling org improve its
financial or operational performance to restore it to profitability.
For example, when IBM was facing financial difficulties in the early 1990s, it
implemented a turnaround strategy by restructuring its operations and reducing its
workforce. This strategy helped IBM return to profitability and regain its position as a
market leader.
→ When needed?
. Declining financial performance: increasing costs, declining revenue, cash flow
issues etc
. Poor management: lack of clear vison and mission, poor leadership styles
. High employee turnover: difficulty in retaining good talent
. Declining market share: beaten by competitors,
. Change in external environment: new technologies, customer preferences
changed, or new policies came
. Declining customer satisfaction: quality of products going down, or customer
service poor or pricing issues
. Financial distress: going down in loans, liquidity issues, bankruptcy issues

→ Divestment strategy: This involves selling off non-core business units or assets to

generate cash and refocus on the company's core activities. For example, when
Procter & Gamble acquired Gillette in 2005, it implemented a divestment strategy by
selling off Gillette's battery and electric razor businesses to refocus on its core
personal care and grooming products.

→ Liquidation strategy: This involves shutting down the company's operations and
selling off its assets to pay off its debts. This strategy is typically used as a last resort
when a company is unable to recover from its financial difficulties. For example,
when Toys "R" Us filed for bankruptcy in 2017, it implemented a liquidation strategy
by closing all of its stores and selling off its assets to pay off its creditors.

Strategic fundamentals of merger & acquisitions. (SC Notes too)

Mergers and Acquisitions

Merger → two separately owned companies become one jointly owned company.
Acquisition → happens when one company, usually a bigger company, takes over
another company, usually a smaller company, and runs the establishment with its
identity.

Example:
In 2005, Google purchased Android, a mobile startup. Android gave Google the
mobile operating system (OS) it needed to compete with the likes of Apple and
Microsoft in the growing mobile market, and expand their reach far beyond
desktops.

Advantages of Mergers and Acquisitions

. Improved Economic Scale

A new large business or a business that has acquired another company generally
has increased needs in terms of materials and supplies. And when a business has
high demands, it means it has a high purchasing power. A high purchasing power
enables a company to negotiate bulk orders, and when a business is able to
negotiate bulk orders, it results in cost efficiency.

. Enhanced Distribution Capacities

A merger or an acquisition may result in a business expanding geographically, which
would, in turn, increase the business's ability to distribute goods or services to more
people.

. Increased Market Share

. More Financial Resources

Two companies pool their financial resources, and that can result in, among other
things, a business being able to reach more customers because of a larger
marketing budget.

Disadvantages of Mergers and Acquisitions

. Job Losses
When two companies doing the same activities come together and become one
company, it might mean duplication and over-capability within the company, which
might lead to retrenchments.

Example: Elon Musk fired 1000s of employees on acquiring Twitter in 2022

. Diseconomies of Scale
Sometimes mergers and acquisitions can result in diseconomies of scale. For
example, this can happen if the owner of the new larger company lacks the control
required to run a bigger company.

. Lost Opportunities
The energy, time, and funds that go into the merger or acquisition process could
mean that the businesses involved give up other potential opportunities.

Example: eBay’s acquisition of Skype.

The theory was that this would allow communication between buyers and sellers on
eBay, smoothing transaction flow and generating more revenue - beautiful
synergies.
What eBay didn’t bargain for was that people don’t really want to talk to strangers
about transactions if they can just email them. eBay soon saw there was no real
need for the acquisition and ended up selling two-thirds of Skype for US$1.9 billion
just four years later.

Unit 4
Strategic Analysis and Choice:
Strategic gap analyses;
Difference between desired and actual outcome and what must be done to minimize
this gap.
portfolio analyses –

Corporate Level: GE, Hofer’s Matrix, DPM,

Business Level: BCG Growth Share Matrix, SWOT, Experience Curve, Grand
Strategy Selection Matrix, Product Life Cycle Matrix

BCG Growth Share Matrix,

GE,

→ BCG: corresponds to only products

→ GE: corresponds to products, whole product lines, services or even brands.
GE matrix has 2 dimensions: industrial attractiveness and competitive strength.

Industrial Attractiveness: how much the business unit is going to accrue profit from
that industry.
Dependent on:
→ entry/exit barrier
→ bargaining power of suppliers/buyers
→ industrial size
→ growth potential
→ Since it requires long term investment: how your product is going to change over
time, pricing and labor requirements

Accordingly, the vertical axis has 3 categories: Low, Medium and High from bottom
to top.

Competitive Strength: how much your business is going to fare with respect to your
competitors
Dependent on:
→ Brand awareness
→ Customer loyalty and satisfaction
→ Market share expected
→ Future industrial growth potential
→ USP of your product/service
→ Distribution channel strength

Accordingly, the horizontal axis has 3 categories: High, Medium and Low from left to
right

9 cells are created with 3 main strategies:

. Invest/Grow Strategy:

best position to be in. You can improve your product through investing in R&D,
capture new customers through marketing etc. However roadblock is the assets and
capital you need to grow bigger or capture more market size.

. Selectivity/Earnings Strategy:
Tricky position to be in. Either you have high competitive strength but in a
low/medium attractive market or vice versa.

Totally depends on business outlook how they move forward. Either they can
improve their competitive strength or shift to a more attractive market.

. Harvest/Divest Strategy

Worse position to be in.

Divest: selling off business unit to an interested buyer at a reasonable price.

Harvest: get enough investments to keep that business unit operayional so that you
can cash out whatever is left in that business. Eventually, the business is liquidated
and you exit that industry
 product market evolution matrix/Hofer Matrix,
experience curve,
directional policy matrix,
life cycle portfolio matrix,
grand strategy selection matrix;
behavioural considerations affecting choice of strategy;
impact of structure, culture & leadership on strategy implementation;

Impact of Structure:

Centralisation, department function wise or product wise, delegation how much?

a. Communication: The structure of an organization can either facilitate or

hinder communication between different departments and teams.
b. Decision-making: The structure can impact the speed and quality of decision-
making.
c. Resource Allocation: The structure can impact how resources are allocated
across different departments and projects.
d. Accountability: The structure can impact how accountability is established
and maintained.

Impact of Culture:

Values, beliefs of people in org.

a. Alignment: Organizational culture influences how employees perceive the

strategy and their willingness to align their behaviors with the strategy.
b. Change Management: Culture can be resistant to change, which can hinder
the implementation of the strategy.
c. Collaboration: A culture that values teamwork and open communication can
facilitate the sharing of information and coordination required for successful
implementation.
d. Employee Engagement: A culture that values employee engagement and
empowers employees can facilitate the successful implementation of the
strategy.
 e. Risk Management: A culture that values innovation and risk-taking can
encourage employees to take calculated risks required for successful
implementation.

Impact of Leadership:

democratic, laissez fair or autocratic leadership

. Vision and Direction: Leaders set the vision and direction for the organization,
which helps to align employees with the strategic objectives.
. Resource Allocation: Leaders allocate resources in a manner that supports the
achievement of the strategic objectives.
. Change Management: Leaders manage change and ensure that employees are
willing to adopt new behaviors and processes required for successful strategy
implementation.
. Collaboration: Leaders promote collaboration by creating a culture of open
communication and collaboration within the organization.

functional strategies & their link with business level strategies;

. Marketing Strategy: Marketing strategy focuses on promoting the products or
services of the organization to customers. It is closely linked to the business level
strategy as it helps to achieve the organization's overall objective of generating
revenue and market share.
. Operations Strategy: Operations strategy focuses on the processes and
procedures required to produce and deliver products or services to customers. It
is closely linked to the business level strategy as it helps to achieve the
organization's overall objective of delivering products or services efficiently and
effectively.
. Human Resource Strategy: Human resource strategy focuses on attracting,
retaining, and developing employees to support the organization's overall
objective. It is closely linked to the business level strategy as it helps to achieve
the organization's overall objective of having a skilled and motivated workforce.
. Financial Strategy: Financial strategy focuses on managing the financial
resources of the organization. It is closely linked to the business level strategy as
it helps to achieve the organization's overall objective of generating profits and
maximizing shareholder value.

introduction to strategic control & evaluation.

Strategic Control:

Strategic control is the process of monitoring and adjusting an organization's

strategic direction and performance.

Types:

. Premise control: Verifying the assumptions that the organization's strategy is

based on and ensuring they're still relevant.
. Implementation control: Monitoring the progress of the organization's strategy
implementation and making changes if needed.
. Strategic surveillance: Keeping an eye on the external environment for any
threats or opportunities that may impact the organization's strategy.
. Special alert control: Responding to unexpected events or crises that may require
immediate attention and action to avoid any negative impact on the
organization's strategy.

Strategic Evaluation Process:

. Establish performance metrics: Identify the key performance metrics to evaluate

the success of the strategy.
. Collect data on performance metrics: Collect data through various sources like
financial reports, customer feedback, and operational data to assess the
strategy's performance.
. Analyze the data to assess strategy performance: Use the collected data to
analyze the performance of the strategy and determine if it is meeting its goals.

AP: actual performance. BP: Budgeted performance

AP > BP: validity of standards must be rechecked.
AP = BP: tolerance limits must be set
AP < BP: area where performance is low must be corrected

. Identify areas of improvement or potential changes: Identify areas where the

strategy is falling short or where it could be improved.
. Make necessary adjustments to the strategy: Use the insights gained from the
analysis to make changes or adjustments to the strategy to improve its
effectiveness and achieve better results.
PYP Analyses

→ Balanced Score Card (SC Notes)

→ Turnaround Strategies

. Cost-cutting: A company facing financial challenges may reduce staff,

consolidate operations, or renegotiate contracts. For example, in 2019, Ford
announced a restructuring plan that involved cutting thousands of jobs and
closing several plants to reduce costs.
. Rebranding and marketing: A company may change its brand image or
marketing approach to attract new customers or differentiate itself from
competitors. For example, in 2018, IHOP (International House of Pancakes)
temporarily changed its name to IHOB (International House of Burgers) to
promote its new line of burgers and attract a wider audience.
. Product innovation: A company may develop new products or improve existing
ones to meet changing market demands. For example, in 2007, Apple introduced
the iPhone, which revolutionized the smartphone market and transformed the
company's fortunes.
. Financial restructuring: A company may restructure its debt or equity, sell assets,
or seek new sources of funding to improve its financial position. For example, in
2020, Hertz filed for bankruptcy and implemented a financial restructuring plan
that involved selling assets and issuing new stock to raise capital.
. Operational restructuring: A company may streamline operations, optimize
supply chains, or invest in new technologies to increase efficiency and reduce
costs. For example, in 2013, Starbucks implemented a new supply chain
management system that reduced waste and improved efficiency, saving the
company millions of dollars.
. Mergers and acquisitions: A company may acquire another company or merge
with a competitor to increase market share or diversify its product offerings. For
example, in 2017, Amazon acquired Whole Foods to expand its presence in the
grocery market and enhance its delivery capabilities.
→ Strategic Control
→ Strategic Evaluation explain
→ Why difficult:
→ Environment is dynamic
→ Assumptions taking the strategy change
→ Communication throughout is important while implementing a strategy
→ Resource Allocation and Budgeting may vary
→ Motivation of employees throughout is needed
→ Dog: Publications, Swadeshi Samridhi Sim Card
→ Question Mark: Ayurvedic Medicines, Natural Personal Care, Skin Care
→ Star: Herbal Home Care, Natural Health Care, Digestives
→ Cash Cow: Biscuits and Cookies, Agarbatti and Dhoops, Natural Food Products

Dog: divest
Question Mark: Marketing efforts, Brand Awareness Build, Product importance build
Star: Product differentiation promote
Cash Cow: Use cash from here to Question Mark.

Strategies taken under various categories of BCG Matrix

 . Stars:
Invest in research and development to maintain or increase market share.
Expand the product line to capitalize on growth potential.
Increase marketing efforts to attract new customers.
Expand geographically to reach new markets.
. Cash cows:
Optimize production and distribution to reduce costs.
Invest in incremental improvements to maintain market share.
Reduce prices to maintain customer loyalty.
Consider diversifying into related products or markets.
. Question marks:
Conduct market research to identify growth opportunities.
Invest in product development to increase market share.
Form strategic partnerships to leverage strengths and overcome weaknesses.
Consider divesting or phasing out products that are not profitable.
. Dogs:
Consider divesting or phasing out the product.
Focus on cost-cutting and efficiency measures to minimize losses.
Use the product to attract customers to other products in the portfolio.
Consider repositioning the product or finding new markets to sell it.

Political Factors:
→ Subsidies for low-income women
→ Taxes

Economic:
→ Inflation: high prices for female sanitary products
→ Disposable income: Not that much to afford them every month
Social:
→ Awareness has started to build. Social media spread
→ NGOs, female run org working together
→ Cultures and taboos around menstruation in India

Technological:
→ E-commerce sector, smartphone penetration for awareness and sales
→ Tech for eco-friendly sanitary products

Environmental:
→ Throwing of sanitary products to be kept in mind
→ Environmental laws aren’t strict.

Legal:
→ Product safety laws
→ Consumer protection act

→ Integration: horizontal or vertical:

→ Outsourcing which is costly to you: cost advantage
→ Build core competence over 1 part of chain: brand recognition
→ Go deep in 1-2 actvities and charge premium for it by R&D: differential advantage
→ Procure raw materials which aren’t available to anyone: competitive advantage.
→ Less wastage of resources over activities which aren’t providing value: divert
resources to activties which are actually beneficial.
→ Partnership Opportunities: retailers or with suppliers
→ Improved customer experience: focus on marketing and sales, services etc.

Eg: Apple, Honda

Primary Drivers for M&A:
→ International Expansion
→ Market share increase
→ Instead of building tech, acquiring the tech of another: Access to new tech
→ Fresh perspective in company
→ Revenue increase
→ supply chain efficiency
→ Diversification

Basic due diligence:

→ Culture match
→ How much employees to be laid off or hired?
→ Expectations from the M&A from both sides
→ Financial conditions: cash flows, debt, equity,
→ Brand Image Outcome after M&A
→ Accounting fraud if any
→ Legal fraud if any
→ Operational issues: supply chain
→ Commercial due diligence: market share, market growth rate, target customers,
brand image etc.
a. Concentric Diversification

→ Changing consumer taste

→ Increase market share in Japan
→ Location specific advantage
→ Risk offsetting
→ Increase revenue
→ Economies of scale

b. → Overestimate/Underestimate their core competencies

→ Technology keeps on involving. someone can come up with better tech.
→ Change in consumer tastes
→ Countermoves by competitors in response to their strategy (offensive strategies)
→ Relying too much on industry reports and market analyses
→ Focusing narrowly on direct competitors
→ Overlooking global competitors
1: Invest, Market Development
2: Innovation
3: Divest
4: Market Penetration
5: Market Penetration
6: Divest
7: Acquire
8: Differential Leadership
9: Merge
10: Cost Leadership
11: Harvest
12: Divest

Pioneering: Invest, Market Development

Growth: Market Development, Market Penetration
Maturity: Cost Leadership, Differentiation
Decline: Harvest, Divest
Sometimes, revival: Turnaround

Strategic Group

A strategic group is a set of companies within an industry that have similar business
models or strategies. Strategic groups can be based on several factors, such as
market position, target customers, product or service offerings, and distribution
channels. Companies within a strategic group compete against each other more
intensely than they do with companies outside the group.

Here are some key characteristics of strategic groups:

. Similar strategic orientation: Companies within a strategic group share a similar
strategic orientation, which means that they pursue similar objectives and follow
similar strategies to achieve those objectives.
. Similar assets and capabilities: Companies within a strategic group often have
similar assets and capabilities, such as similar product portfolios, manufacturing
facilities, and distribution networks.
. Similar competitive dynamics: Companies within a strategic group often face
similar competitive dynamics, such as similar pricing pressures, customer
demands, and regulatory challenges.
. High rivalry among group members: Companies within a strategic group
compete more intensely with each other than they do with companies outside the
group. This is because they share similar strategic orientations and compete for
similar customers.
. Low rivalry with other groups: Companies outside a strategic group are less likely
to compete with companies within the group because they have different
strategic orientations and compete for different customers.

Identifying strategic groups can be helpful in several ways, such as:

. Benchmarking performance: Companies can benchmark their performance

against their peers within the same strategic group.
. Understanding competitive dynamics: Companies can understand the
competitive dynamics within their strategic group and develop strategies
 accordingly.
. Identifying potential collaboration opportunities: Companies within the same
strategic group can identify potential collaboration opportunities to leverage their
shared strengths and capabilities.
. Identifying potential acquisition targets: Companies can identify potential
acquisition targets within their strategic group to strengthen their position in the
industry.

i) → Build core competence

→ Differentiation
→ Premium for tech product
→ Can be updated with changing customer preferences
→ Reach to larger audience

Example: ChatGPT, Apple

ii) Conditions:
→ No product differentiation
→ Similar markets
→ No diversification opportunity
→ Bargaining power of customers is high
→ Level of competition high
→ Overcapacity

How to guard?:
→ Diversification
→ Invest in R&D to improve product
→ Collaborate with companies for mutual benefit
→ Mergers and Acquisitions
→ Effective marketing to communicate USP
→ Create differentiation
→ Focus on niche markets
→ Offer bundle products.

Example: Jio, Vodafone, Airtel. Jio offer bundle products, cinemas, mobile set also
give.