MODULE 3: FORMULATION

OF STRATEGIC ACTIONS

Dr.Anilkumar.R
 Objectives
• Levels of Strategies, Corporate Level Strategies – Stability,
Expansion, Retrenchment and Combination strategies
• Business level strategy: Cost, Differentiation, and Focus
Strategies- Strategy in the Global Environment
• Corporate Strategy - Vertical Integration - Diversification
and Strategic Alliances- Building and Restructuring the
corporation- Strategic analysis and choice – Environmental
Threat and Opportunity Profile (ETOP) – Organizational
Capability Profile - Strategic Advantage Profile - Corporate
Portfolio Analysis – GAP Analysis - Mc Kinsey's 7s
Framework - GE 9 Cell Model – BCG Matrix - Balance Score
Card, Internal Factor Evaluation (IFV) Matrix
 Corporate Level Strategies –
Stability, Expansion, Retrenchment
and Combination strategies
Types of strategies
Overview of Strategies Level:
Business you should be in..

Tactics to beat the competition

Operational Methods to implement the Tactics

The following table shows distinctive characteristics of
the three levels of strategy:
 Corporate Strategies
Corporate strategy is primarily about the choice of direction for the corporation as a whole. The
basic purpose of a corporate strategy is to add value to the individual businesses in it. A corporate
strategy involves decisions relating to the choice of businesses, allocation of resources among
different businesses, transferring skills and capabilities from one set of businesses to others, and
managing and nurturing a portfolio of businesses in such a way as to obtain synergies among
product lines and business units, so that the corporate whole is greater than the sum of its individual
business units.
It includes planning and
implementation steps.
The essence of a corporate strategy
vis-a-vis a business-level strategy is
summarized in Figure
 Managers at the corporate level act on behalf of shareholders and
provide strategic guidance to business units. In these circumstances, a key
question that arises is to what extent and how might the corporate level
add value to what the businesses do; or at least how it might avoid
destroying value.
Corporate strategy is thus concerned with two basic issues:
1. What businesses should a firm compete in?

Corporate 2. How can these businesses be coordinated and managed so that they
create “Synergy.”

Strategies Examples of corporate strategies:

• Diversification.
(Continued) • Forward or backward integration.
• Horizontal integration.
• Profit.
• Turnaround.
• Divestment.
• Market penetration.
• Liquidation
Corporate Level Strategies
Corporate level strategy
Corporate level strategy, also known as grand strategy, defines the
overall direction and scope of an organization. It guides the company's
long-term decisions regarding which industries or markets to compete
in, how to allocate resources across different business units, and how
to grow or diversify its portfolio. Think of it as the "big picture" plan
determining the company's future trajectory.
 Corporate Strategy deals with the following
questions:
• What should be the nature and values of the organization
in the broadest sense?
• What are the aims in terms of creating value for
stakeholders?
• What kind of businesses should the organization be in?
• What should be the scope of activity?
• Whether divestment is required?
• Whether expansion is required?
• What structure, systems and processes will be necessary
to link the various businesses to each other and to the
corporate centre?
• How can the corporate centre add value to make the
whole worth more than the sum of the parts?
 TYPES OF CORPORATE STRATEGIES

Corporate level strategies are also termed as grand

strategies. There are four types of generic corporate
strategies. They are:
• Stability strategies: make no change to the organization’s current
activities
• Growth strategies: expand the organization’s activities
• Retrenchment strategies: reduce the organization’s level of activities
• Combination strategies: a combination of above strategies
Retrenchment strategies
Retrenchment Strategy
Retrenchment Strategy
Combination Strategy
Differentiate Strategy:
Stability Strategy
Stability Strategy
A stability strategy, also known as a "no-change" or "maintenance" strategy, aims to
sustain an organization's current position in the market. This means focusing on
preserving market share, profitability, and operational efficiency without
undertaking significant expansion or major changes. It's typically adopted when a
company is content with its performance and finds the external environment
relatively stable.
Key Characteristics of Stability:
1. Maintaining existing products and markets
2. Incremental improvements
3. Risk-averse approach
4. Emphasis on cost control and operational efficiency
Types of Stability Strategies:
1. No-Change Strategy:
Focus: Minimal alterations to existing operations, products, and markets.
Ideal for: Mature industries with predictable demand and limited growth opportunities.
Strengths: Minimizes risk, maintains predictability, leverages brand
2. Profit Retention Strategy:
Focus: Maximizing profit from existing operations through cost-cutting, price adjustments, and operational efficiency
improvements.
Ideal for: Periods of economic downturn or when facing profitability challenges.
3. Market Share Consolidation Strategy:
Focus: Defending current market share against competitors through aggressive marketing, customer loyalty
programs, product differentiation, and responding to competitive moves.
Ideal for: Competitive industries with established players and limited room for significant expansion.
4. Pause Strategy:
Focus: Briefly halting expansion or major changes to optimize the business model, refine internal processes, and prepare for
future opportunities.
Ideal for: Periods of rapid growth or significant internal restructuring.
5. Sustainable Growth Strategy:
Focus: Balancing stability with moderate expansion opportunities by offering new products or entering adjacent markets
aligned with core competencies.
Ideal for: Companies seeking to extend their reach without risking major disruptions.
When is a Stability Strategy Suitable?
• Mature markets: When the core market offers limited growth
opportunities, maintaining a strong position becomes crucial.
• Stable environment: If the industry and competitive landscape are
relatively stable, significant changes may not be necessary.
• Profitable operations: When a company enjoys healthy
profitability, maintaining the status quo might be optimal.
• Risk-averse culture: Some organizations prioritize predictability and
prefer to avoid the risks associated with major expansion or
diversification.
Advantages of Stability Strategies:
• Reduced risk: Minimizes exposure to uncertainty associated with
major expansions or new ventures.
• Predictability: Helps maintain consistent performance and cash
flow, which can be attractive to investors.
• Operational efficiency: Focus on efficiency allows for cost
optimization and improved financial performance.
• Strong brand value: Can leverage existing brand recognition and
customer loyalty to maintain a strong position.
Disadvantages of Stability Strategies:
• Limited growth: May miss out on potential growth opportunities in
new markets or product lines.
• Vulnerability to disruption: Competitors pursuing aggressive
strategies or disruptive innovations could threaten the market
position.
• Stagnant innovation: Over-reliance on stability can hinder innovation
and adaptability, leading to long-term challenges.
• Employee motivation: Lack of growth opportunities may impact
employee morale and motivation.
When to Consider a Shift from Stability:
• Changing market dynamics: If the market undergoes significant
changes or new opportunities emerge, adapting the strategy becomes
essential.
• Declining profitability: Persistent profit decline might necessitate
exploring new markets or product lines for long-term sustainability.
• Competitive threats: Aggressive competitor actions or disruptive
innovations can force a response to maintain market share.
• Internal factors: Changes in leadership, company culture, or
employee skillsets could necessitate strategic adjustments.
Combination Strategy
 Activity

Search the internet for information on

three different groups of organizations.
Compare the business models of each
one of them and briefly explain the type
of corporate strategies that these follow.
 An organization’s core competencies should be focused on
satisfying customer needs or wants inorder to achieve above
average returns. This is done through Business-level strategies.
Business level strategies detail actions taken to provide value to
customers and gain a competitive advantage by exploiting core
competencies in specific, individual product or service markets.
Business Business-level strategy is concerned with a firm’s position in an
industry, relative to competitors and to the five forces of
Strategy competition discussed above. Customers are the foundation of
an organization’s business-level strategies. Who will be served,
what needs have to be met, and how those needs will be
satisfied are determined by the senior management.
Example: cost, quality, distribution, technology, and
intellectual property (IP)
What five business-level strategic options are
available to firm
a. Cost leadership

b. Differentiation

c. Focused cost leadership

d. Focused differentiation

e. Integrated cost leadership/differentiation

 It is a low cost competitive strategy that aims at broad
mass market. It requires vigorous pursuit of cost
reduction in the areas of procurement, production,
Cost storage and distribution of product or service and also
economies in overhead costs. Because of its lower
Leadership costs, the cost leader is able to charge a lower price
for its products than its competitors and still make
Strategy satisfactory profits.
For example, McDonald’s fast food restaurants have
successfully followed low cost leadership strategy.
 Achieving Cost Leadership
Strategy
To achieve cost leadership, following are the actions that could be taken:
1. Forecast the demand of a product or service promptly.
2. Optimum utilization of the resources to get cost advantages.
3. Achieving economies of scale leads to lower per unit cost of product/service.
4. Standardisation of products for mass production to yield lower cost per unit.
5. Invest in cost saving technologies and try using advance technology for
smart working.
6. Resistance to differentiation till it becomes essential.
 Differentiation Strategy
• This strategy is aimed at broad mass market and
involves the creation of a product or service that is
perceived by the customers as unique. The uniqueness
can be associated with product design, brand image,
features, technology, dealer network or customer
service. Because of differentiation, the business can
charge a premium for its product.
• Differentiation does not guarantee competitive
advantage, especially if standard products sufficiently
meet customer needs or if rapid imitation by
competitors is possible. Durable products protected by
barriers to quick copying by competitors are better.
Successful differentiation can mean greater product
flexibility, greater compatibility, lower costs, improved
service, less maintenance, greater convenience, or
more features. Product development is an example of
a strategy that offers the advantages of differentiation.
Basis of Differentiation
There are several basis of differentiation: product, pricing and organization.
Product: Innovative products that meet customer needs can be an area where a
company has an advantage over competitors. The pursuit of new product offerings
can be costly – research and development, as well as production and marketing
costs can all add to the cost of production and distribution. The payoff, however,
can be great as customer’s flock to be among the first to have the new product.
Pricing: It can fluctuate based on its supply and demand, and also be influence by
the customer’s ideal value for the product. Companies that differentiate based on
product price can either determine to offer the lowest price, or can attempt to
establish superiority through higher prices.
Organisation: Organisational differentiation is yet another form of differentiation.
Maximizing the power of a brand, or using the specific advantages that an
organization possesses can be instrumental to a company’s success. Location
advantage, name recognition and customer loyalty can all provide additional ways
for a company differentiate itself from the competition
 Achieving Differentiation
Strategy
To achieve differentiation, following are the measures that could be
adopted by an organization to incorporate:
1. Offer utility for the customers and match the products with their tastes and
preferences.
2. Elevate the performance of the product.
3. Offer the promise of high quality product/service for buyer satisfaction.
4. Rapid product innovation.
5. Taking steps for enhancing image and its brand value.
6. Fixing product prices based on the unique features of the product and
buying capacity of the customer.
 Focus Strategies
• A successful focus strategy depends on an industry segment that is of sufficient size,
has good growth potential, and is not crucial to the success of other major
competitors. Strategies such as market penetration and market development offer
substantial focusing advantages. Midsize and large firms can effectively pursue focus-
based strategies only in conjunction with differentiation or cost leadership based
strategies. All firms in essence follow a differentiated strategy. Because only one firm
can differentiate itself with the lowest cost, the remaining firms in the industry must
find other ways to differentiate their products.
• Focus strategies are most effective when consumers have distinctive preferences or
requirements and when rival firms are not attempting to specialize in the same target
segment. Risks of pursuing a focus strategy include the possibility that numerous
competitors will recognize the successful focus strategy and copy it, or that consumer
preferences will drift toward the product attributes desired by the market as a whole.
An organization using a focus strategy may concentrate on a particular group of
customers, geographic markets, or on particular product-line segments in order to
serve a well-defined but narrow market better than competitors who serve a broader
market
 Focused cost leadership
A focused cost leadership strategy
requires competing based on price to
target a narrow market. A firm that
follows this strategy does not necessarily
charge the lowest prices in the industry.
Instead, it charges low prices relative to
other firms that compete within the target
market. Firms that compete based on
price and target a narrow market are
following a focused cost leadership
strategy.
Focused differentiation:
A focused differentiation strategy requires offering unique features that
fulfill the demands of a narrow market. As with a focused low-cost
strategy, narrow markets are defined in different ways in different
settings. Some firms using a focused differentiation strategy
concentrate their efforts on a particular sales channel, such as selling
over the internet only. Others target particular demographic groups.
Firms that compete based on uniqueness and target a narrow market
are following a focused differentiations strategy. For example, Rolls-
Royce sells limited number of high-end, custom-built cars
 Achieving Focused Strategy

To achieve focused cost leadership/differentiation,

following are the measures that could be adopted by
an organization:
• Selecting specific niches which are not covered by cost leaders and
differentiators.
• Creating superior skills for catering to such niche markets.
• Generating high efficiencies for serving such niche markets.
• Developing innovative ways in managing the value chain.
McKinsey 7S Model
 McKinsey 7S Model
• McKinsey 7s model was developed in 1980s by McKinsey consultants Tom Peters, Robert Waterman and Julien
Philips with a help from Richard Pascale and Anthony G. Athos.

• Since the introduction, the model has been widely used by academics and practitioners and remains one of the
most popular strategic planning tools. The McKinsey 7S Model is a framework for organizational analysis and
design that was introduced by McKinsey & Company in the late 1970s. The model provides a structure for
considering how different elements of an organization fit together and impact one another.The goal of the
model was to show how 7 elements of the company: Structure, Strategy, Skills, Staff, Style, Systems, and Shared
values, can be aligned together to achieve effectiveness in a company.

• The key point of the model is that all the seven areas are interconnected and a change in one area requires
change in the rest of a firm for it to function effectively
 The 7S model is a strategic model that can be
used for any of the following purposes:
• Organizational alignment or performance improvement
• Understanding the core and most influential factors in an
organization’s strategy
• Determining how best to realign an organization to a new strategy or
other organization design
• Examining the current workings and relations an organization exhibits

The model, made famous by the McKinsey consulting company, is good for
a thorough discussion around an organizations activities, infrastructure,
and interactions.
The model and its
usage: Here is the 7S
model that portrays
seven elements of an
organization
 The 7S elements are:
1. Structure: The formal and informal ways in which the organization is organized, including its reporting relationships,
communication channels, and decision-making processes.

2.Strategy: The organization's plan for achieving its goals and objectives, including its competitive positioning, value proposition,
and target markets.

3. Systems: The processes and procedures that the organization uses to carry out its work, such as its information systems,
human resources systems, and financial systems.

4. Shared values: The values and beliefs that are held in common across the organization, shaping the culture and behavior of its
employees.

5. Skills: The capabilities and competencies that the organization possesses, including the knowledge, experience, and expertise
of its employees.

6. Staff: The people who work in the organization, including their numbers, characteristics, and attitudes.

7. Style: The leadership and management approach of the organization, including the way in which decisions are made, problems
are solved, and power is exercised.
 To assess each of these elements, here are
some questions to ask:
Strategy • How do the employees align themselves to the
• What is the organization’s strategy seeking to strategy?
accomplish? • How are decisions made? Is it based off of
• How does the organization plan to use its centralization, empowerment, decentralization or
resources and capabilities to deliver that? other approaches?
• What is distinct about this organization? • How is information shared (formal and informal
channels) across the organization?
• How does the organization compete? Systems
• How does the organization adapt to changing • What are the primary business and technical
market conditions? systems that drive the organization?
• What and where are the system controls?
Structure • How is progress and evolution tracked?
• How is the organization organized? • What internal rules and processes does the team
• What are the reporting and working relationships utilize to maintain course?
(hierarchical, flat, silos, etc.)?
 To assess each of these elements, here are
some questions to ask:
Shared Values Style
• What is the mission of the organization? • What is the management/leadership style
• What is the vision to get there? If so, what like? How do they behave?
is it? • How do employees respond to
• What are the ideal versus real values? management/leadership?
• How do the values play out in daily life? • Do employees function competitively,
collaboratively, or cooperatively?
• What are the founding values that the
organization was built upon? • Are there real teams functioning within
the organization or are they just nominal
groups?
• What behaviors, tasks and deliverables
does management/leadership reward?
 To assess each of these elements, here are
some questions to ask:
Staff products and/or services? Are these
• What is the size of the organization? skills sufficiently present and available?
• What are the staffing needs? • Are there any skill gaps?
• Are there gaps in required capabilities • What is the organization known for
or resources? doing well?
• What is the plan to address those • Do the employees have the right
needs? capabilities to do their jobs?
Skills • How are skills monitored, assessed,
and improved
• What skills are used to deliver the core
 7-S Checklist Questions
Here are some of the questions that you'll Structure:
need to explore to help you understand your • How is the company/team divided?
situation in terms of the 7-S framework. Use What is the hierarchy?
them to analyze your current (Point A)
situation first, and then repeat the exercise • How do the various departments
for your proposed situation (Point B). coordinate activities?
Strategy: • How do the team members organize and
align themselves?
• What is our strategy?
• Is decision making and controlling
• How do we intend to achieve our centralized or decentralized? Is this as it
objectives? should be, given what we're doing?
• How do we deal with competitive • Where are the lines of communication?
pressure? Explicit and implicit?
• How are changes in customer demands
dealt with? How is strategy adjusted for
environmental issues?
Systems:
• What are the main systems that run the organization?
• Consider financial and HR systems as well as communications and document storage.
• Where are the controls and how are they monitored and evaluated?
• What internal rules and processes does the team use to keep on track?
Shared Values:
• What are the core values? What is the corporate/team culture?
• How strong are the values? What are the fundamental values that the company/team
was built on?
Style:
• How participative is the management/leadership style?
• How effective is that leadership?
• Do employees/team members tend to be competitive or cooperative?
• Are there real teams functioning within the organization or are they just nominal
groups?
Staff:
• What positions or specializations are represented within the team?
• What positions need to be filled?
• Are there gaps in required competencies?
Skills:
• What are the strongest skills represented within the company/team?
• Are there any skills gaps?
• What is the company/team known for doing well?
• Do the current employees/team members have the ability to do the
job?
• How are skills monitored and assessed?
 We’ll start with a small startup, which offers
services online. The company’s main strategy
is to grow its share in the market. The
Current company is new, so its structure is simple and
made of a very few managers and bottom
position #1 level workers, who undertake specific tasks.
There are a very few formal systems, mainly
because the company doesn’t need many at
this time.
 Alignment
So far the 7 factors are aligned
properly. The company is small
and there’s no need for
complex matrix structure and
comprehensive business
systems, which are very
expensive to develop
Current position #2
• The startup has grown to become large business with 500+
employees and now maintains 50% market share in a domestic
market. Its structure has changed and is now a well-oiled bureaucratic
machine. The business expanded its staff, introduced new motivation,
reward and control systems. Shared values evolved and now the
company values enthusiasm and excellence. Trust and teamwork has
disappeared due to so many new employees.
 Alignment
The company expanded and a few problems came with it. First, the company’s strategy is no longer
viable. The business has a large market share in its domestic market, so the best way for it to grow is
either to start introducing new products to the market or to expand to other geographical markets.
Therefore, its strategy is not aligned with the rest of company or its goals. The company should have
seen this but it lacks strategic planning systems and analytical skills. Business management style is still
chaotic and it is a problem of top managers lacking management skills. The top management is
mainly comprised of founders, who don’t have the appropriate skills. New skills should be introduced
to the company.
Current position #3
• The company realizes that it needs to expand to other regions, so it
changes its strategy from market penetration to market development.
The company opens new offices in Asia, North and South Americas.
Company introduced new strategic planning systems hired new
management, which brought new analytical, strategic planning and
most importantly managerial skills. Organization’s structure and
shared values haven’t changed.
Alignment Strategy, systems, skills and style have changed and are now properly aligned with the rest of the
company. Other elements like shared values, staff and organizational structure are misaligned. First,
company’s structure should have changed from well-oiled bureaucratic machine to division structure. The
division structure is designed to facilitate the operations in new geographic regions. This hasn’t been done
and the company will struggle to work effectively. Second, new shared values should evolve or be introduced
in an organization, because many people from new cultures come to the company and they all bring their
own values, often, very different than the current ones. This may hinder teamwork performance and
communication between different regions. Motivation and reward systems also have to be adapted to
cultural differences.
GE 9 Cell Model
• Today’s business world is more focusing on its decisions related to
investments due to the increasing scarcity of resources.
• In this scenario of limited availability of resources, Businesses are required
to make decisions based upon the best utilization of their cash and
investments aiming at maximum ROI (Return on investment).
• The quarrel for investments can be viewed in every stage of a firm such as
among teams, departments, business units, or divisions.
• In the case of diversified businesses, more complexity arises in this
resource allocation quarrel as various brands, products, and portfolios are
supposed to be managed.
• So, it becomes a headache for people or management to decide upon how
much and where to invest cash for its proper utilization.
ORIGIN OF GE-MCKINSEY MATRIX

• The GE-McKinsey Matrix was developed in the 1970s when McKinsey

& Company was hired by GE (General Electric) company to develop a
tool or model for analysis and management of a business portfolio
that is best suitable as per their requirements.
 GE nine cell matrix

GE nine-cell or nine-box matrix is a strategy tool that

offers a systematic approach for the multi business
enterprises to prioritize their investments among the
various business units.
It is a framework that evaluates business portfolio and
provides further strategic implications.
Invest or Invest or
Expand Expand
Each business is appraised in terms of two major
Invest or
dimensions – Market Attractiveness and Business Or Divest
Expand
Strength. If one of these factors is missing, then the
business will not produce desired results. Neither a
strong company operating in an unattractive market, nor Or Divest Or Divest
a weak company operating in an attractive market will
do very well
 The vertical axis denotes:
Before any business can plot their products on the matrix, they must first define both
competitive advantage and industry attractiveness on x-axis and y-axis .
Industry attractiveness indicates how hard or easy it will be for a company to compete
in the market and earn profits. The more profitable the industry is the more attractive it
becomes. When evaluating the industry attractiveness, analysts should look how an
industry will change in the long run rather than in the near future, because the
investments needed for the product usually require long lasting commitment.
• Long run growth rate • Product life cycle changes
• Industry size • Changes in demand
• Industry profitability: entry barriers, exit • Trend of prices
barriers, supplier power, buyer power, threat • Macro environment factors (use PEST or
of substitutes and available complements PESTEL for this)
(use Porter’s Five Forces analysis to determine • Seasonality
this) • Availability of labor
• Industry structure (use Structure-Conduct- • Market segmentation
Performance framework to determine this)
 Horizontal axis represent:
Along the X axis, the matrix measures how strong, in terms of competition, a particular
business unit is against its rivals. In other words, managers try to determine whether a
business unit has a sustainable competitive advantage (or at least temporary
competitive advantage) or not.

• Total market share Competitive Profile Matrix to determine this)

• Market share growth compared to rivals • Strength of a value chain (use Value Chain
• Brand strength (use brand value for this) Analysis and Benchmarking to determine this)
• Profitability of the company • Level of product differentiation
• Customer loyalty • Production flexibility
• VRIO resources or capabilities (use VRIO
framework to determine this)
• Your business unit strength in meeting
industry’s critical success factors (use
Green zone
Suggests you to ‘go ahead’, to grow and build, pushing you through
expansion strategies. Businesses in the green zone attract major
investment.

Yellow zone
Cautions you to ‘wait and see’ indicating hold and maintain type of
strategies aimed at stability.

Red zone
Indicates that you have to adopt turnover strategies of divestment and
liquidation or rebuilding approach.
Strategic implications of the matrix

With each SBU plotted on the matrix, the business can choose one of three strategies
according to whether it has low, medium, or high competitive strength and industry
attractiveness.
Let’s take a look at these below.
Grow/invest strategy
• A growth strategy is prudent when a product has a competitive advantage in an
attractive market.
• Investment in growth and a focus on maintaining strengths is a priority. Profitability can
also be increased with an emphasis on productivity.
• This is a position every business aspires to and is characterized by moderate to high
industry attractiveness and moderate to high competitive strength.
• The biggest challenge for businesses in this area of the matrix is a lack of assets or capital
that prevents growth or hinders it from maintaining a dominant market position.
• For those who can afford to do so, growth strategies may involve increasing production
capacity, targeting new consumer demographics, or mergers and acquisitions.
Hold strategy

• A hold strategy occurs when a product has both average competitive

advantage and market attractiveness.
• The way forward, in this case, is a little more difficult to define than in
the previous example.
• Depending on the outlook of the company, it could either shift to a
more attractive industry or strive to improve its competitive position
in the current industry.
• If the business decides to improve the current competitive position of
one of its SBUs, it should only do so if there is capital leftover from
investments in the grow/invest strategy.
Harvest strategy

• If the product is at a competitive disadvantage and resides in an

unattractive industry, a harvest strategy should be employed.
• This means investing just enough capital to keep the SBU afloat and
continuing to invest as long as the investment made does not exceed
the cash that is generated.
• Business units that are making a loss, on the other hand, should be
sold as soon as possible or when the cash value is at its peak.
• These strategies ensure that low viability products do not negatively
impact other, more profitable SBUs.
Advantages

1. Businesses that have business units more than a hundred can raise complexity. Also,
businesses are lack of infinite resources for investment. The GE-McKinsey Matrix facilitates
businesses to make an analysis of the portfolio of their business units to discover:
Business units that should get less or more investment.
New products that should be added to the portfolio of business.
Products or business units that need to be divested.
2. It helps in raising awareness for the performance of business units or products in the
respective industry or market. Also, it assists in strategy development to gain maximum
returns from available resources.
3. Facilitates in extracting information related to the strengths and weaknesses of a
business unit and to use strategies for improving the performance of business units.
4. Helps businesses in their growth and acts as an information resource for market
opportunities in the future.
Disadvantages

Different challenges or limitations are also there with the matrix such
as:
• It is very difficult to determine the attractiveness of the market
especially in a market that is operating in an ever-changing
environment.
• Also, discovering the business unit’s strength and assigning weight to
it against industry attractiveness is also quite tough. So, in the case of
a mismatch of variables, a company might invest in the growth of a
business, which is otherwise required to be held back and it
ultimately leads to unnecessary wastage of resources.
Explain the Organizational Capability
Profile?
 Explain the organizational capability?
• 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.
• These capabilities cannot originate from a single effort instead, they are acquired and
refined internally from multiple interactions to be organization-specific. They can include
expertise, activities, information, knowledge, procedures, processes, skills, systems,
technologies, or unique adaptive features.
• The strength and alignment of such assets define a company’s identity and differentiate it
from competitors. Each organization develops and integrates these attributes into its
culture over time, seo thy are challenging for others to pinpoint and replicate.
• For instance, Coca-Cola could sell its soft drink formula to another company, but that
company would not be able to emulate the same emotional connection customers have
with Coke.
• Building organizational capabilities is an indispensable part of the organizational
development process.
Some organizational capabilities examples
are:
1. Organizational culture
2. Leadership performance
3. Strategic unity
4. Innovation
5. Agility
6. Talent
7. Customer connectivity
Importance of organizational capabilities

• The most successful and admired companies have distinct

combinations of attributes that make them stand out from the
competition. People respect organizations like Starbucks, Apple,
and Disney because of their capabilities, not their structures. It’s
their knack for innovation and their willingness to adapt to
consumers’ changing needs that make them trustworthy and
relevant.
• Boston Consulting Group (BCG) conducted a detailed survey and
interview of senior executives from international corporations in
various industries to determine why their companies are thriving.
The results pointed to a clear correlation between organizational
capabilities and success.
The right mix of organizational capabilities helps businesses
operate effectively and deliver excellent service and
satisfaction to customers. Organizational capabilities are a
driving force in:
• Gaining competitive advantage
• Adapting to change
• Driving business performance
Impact of Organisational Capabilities
Types of organizational capabilities

• In order to focus on Operational capabilities

building organizational
capabilities, it is helpful Strategic capabilities
to understand the big Dynamic or meta capabilities
picture of what they
are. Definitions of Context capabilities
organizational
Core vs. non-core capabilities
capabilities might vary,
as there are multiple Behavioral vs. structural
different types and capabilities
categorizations of OC.
Here’s an overview of a
few broad categories:
 Examples of organizational capabilities
• It’s useful to see what OC look like in a real-world application. Since the many
different kinds of organizational capabilities are too numerous to cover, let’s go
over just the following seven examples:

An inclusive company culture empowers and engages employees, and supports organizational
goals:
Organizational culture – Culture supports development and shapes the organization’s identity.
– Employees’ mindsets help them function well.
– Collaboration promotes teamwork, forms alliances, and allows cross-functional communication
Business leaders represent the company well and effectively manage and inspire employees:
– A clear leadership brand exists that distinguishes the company from competitors.
– Perception of leadership is positive.
Leadership performance
– Leadership qualities remain consistent throughout teams.
– Leadership skills are embedded throughout the organization, with learning opportunities for all
employees.
Examples of organizational capabilities

Strategic unity Strategic point of view is articulated and embraced throughout the organization:
– There is a continual investment in the practices and procedures necessary for strategy
development and to implement the strategy.
– All employees throughout the organization consistently understand the business
strategy is and why it matters.
– Employees recognize how their role supports the strategy.
– Employees feel heard and see their suggestions acted on.
Innovation Delivering successful new products and services. Regularly updating processes for
continuous improvement:
– Focused on the future, not the past.
– Willingness to re-invent parts of the organization.
– Sound processes are in place that can take on something new.
– An atmosphere of excitement is created over new concepts.
 Examples of organizational capabilities
Agility
Agility – Skilled and knowledgeable employees who are prepared to adapt.
– Prompt decision-making processes that don’t rely on bureaucracy.
– Proactive planning that can be adjusted to respond to the competition or unexpected events.
– Flexible systems and workflows that can accommodate the organizational change process or
expansion.

Talent Employees at all levels are competent in what they do:

– Employees are equipped with the skills and tools they need to perform their roles in the present
and for future requirements.
– Employees are committed to doing their jobs well and consistently.
– Learning and development is championed and provided.
– Ability to motivate and retain competent employees.

Customer Established customer relationships based on trust and overall strong customer focus are the
connectivity mainstay.
– Priority is placed on dedicated teams who have a meaningful connection with customers.
– Committed accountability to customers.
– Strong customer data collection and analytics.
How L&D and HR teams can help build organizational
capabilities

Here are some actions you can take to assess and cultivate organizational capabilities:
1. Engage leadership
2. Define and list your organizational capabilities
3. Conduct an organizational capabilities assessment
4. Understand the capability gap
5. Prioritize and create an action plan
6. Track progress and follow up
Concluding points

Organizational capabilities have a profound impact on any business. A

thorough understanding of organizational capabilities and their
different types allows you to focus your efforts on building the most
impactful ones. L&D and HR professionals who can provide guidance in
this area will help their organizations be better equipped for future
success and ready to thrive in a rapidly changing environment.
 Business Portfolio Matrix
• A tool for allocating resources
to investment decisions in
corporate strategy.
• The Boston Consulting Group
developed the Business
Portfolio Matrix.
• Figure shows, a simplified
version of the matrix, shows
the linkages between the
growth rate of the business
and the relative competitive
position of the firm identified
by the market share.
• The portfolio matrix was
developed for large
corporations with several
divisions that are often
organized around strategic
business units.
Figure : Cash Flows and Desired Movement in BCG Matrix
BCG Matrix and the Product Life Cycle
 Conclusion: BCG matrix

Taken all of these factors together, you can draw the ideal path to follow in the BCG
Matrix, from start-up to market leader. Question Marks and Stars are supposed to be
funded with investments generated by Cash Cows. And Dogs need to be divested or
liquidated to free up cash with little potential and use it elsewhere. In the end, you will
need a balanced portfolio of Question Marks, Stars and Cash Cows to assure positive cash
flows in the future.
BCG Matrix of
Samsung
BCG Matrix of
PepsiCo:
Identify cash
cows
Bcg of apple
BCG Matrix of
Nestle
BCG Matrix of
Unilever
BCG Matrix of
McDonalds
BCG Matrix of
KFC
itc
Reliance bcg
matrix
What is a Business Model?
• A business model describes the rationale of how an
organization creates, delivers, and captures value.
• The business model is like a blueprint for a strategy to be
implemented through organizational structures,
processes, and systems.
The Business Model Canvas
• Book on Business Model Generation
• Alex Osterwalder and Yves Pigneur
• The Business Model Canvas
The building blocks …
• Customer Segments

An organization needs to understand who is their target

customer. They may serve one or several Customer Segments.

– For whom are we creating value?

The building blocks …
• Value Propositions

It seeks to solve customer problems and satisfy customer

needs with a bundle of benefits.

– What value do we deliver to the customer?

– Which one of our customer’s problems are we helping to
solve?
– Which customer needs are we satisfying?
– What bundles of products and services are we offering to each
Customer Segment?
The building blocks …
• Channels

Value propositions are delivered to customers

through communication, distribution, and sales channels.

– Through which Channels are Customer Segments

to be reached?
– Can the Channels be integrated?
– Which ones work best?
– Which ones are the most cost-efficient?
The building blocks …
• Customer Relationships

Customer relationships are established and maintained with

each Customer Segment. They deeply influence the overall
customer experience.

– What type of relationship does each of our customers want?

– Segments expect us to establish and maintain with them?
– Which ones have we established?
– How are they integrated with the rest of our business model?
– How costly are they?
The building blocks …
• Key Resources

Key resources are the assets required to offer and deliver

the previously described elements.

– What key resources are required for the value

proposition?
– Does it depend on distribution channel, customer
relationship
or revenue streams?
The building blocks …
• Key Activities

Key activities are the most important actions a company

must take to operate successfully.

– What Key Activities do our Value Propositions require?

– Our Distribution Channels?
– Customer Relationships?
– Revenue streams?
The building blocks …
• Key Partnerships

The key partnerships describes the network of suppliers

and partners (to acquire resource or reduce risk) that make
the business model work.

– Who are our Key Partners?

– Who are our key suppliers?
– Which Key Resources are we acquiring from partners?
– Which Key Activities do partners perform?
The building blocks …
• Cost structure

The Cost Structure describes all costs incurred to operate a

business model- right from creating value proposition to
delivering and maintaining customer relationships.

– What are the most important costs inherent in the

business model?
– Which Key Resources are most expensive?
– Which Key Activities are most expensive?
– Are fixed costs high or variable costs?
The building blocks …
• Revenue Streams

Revenue streams result from value propositions successfully

offered to customers.
– For what value are our customers really willing to pay?
– For what do they currently pay?
– How are they currently paying?
– How would they prefer to pay?
– How much does each Revenue Stream contribute
to overall revenues?
 The

BALANCED
SCORECARD
What Is a Balanced Scorecard?

A Measurement
System?

A Management
System?

A Management
Philosophy?
Balanced Score Card

Kaplan and Norton developed an innovative and multi- dimensional

corporate performance scorecard known as the Balanced Scorecard. It
compels the firm to align its performance measurement and controls from
the customers’ perspective, internal business processes, and learning and
growth perspectives and investigate their impact on the financial indicators
 Translating Vision and Strategy: Four
Perspectives
FINANCIAL
“To succeed Objectives Measures Targets Initiatives
financially,
how should we
appear to our
shareholders?”

CUSTOMER INTERNAL BUSINESS PROCESS

“To achieve our Objectives Measures Targets Initiatives “To satisfy our Objectives Measures Targets Initiatives
vision, how Vision and shareholders
should we and customers,
appear to our Strategy what business
customers?” processes must
we excel at?”

LEARNING AND GROWTH

“To achieve our Objectives Measures Targets Initiatives
vision, how
will we sustain
our ability to
change and
improve?”
 The Balanced Scorecard Focuses on
Factors that Create Long-Term Value
• Traditional financial reports look backward
• Reflect only the past: spending incurred and revenues earned
• Do not measure creation or destruction of future economic value
• The Balanced Scorecard identifies the factors that create long-term economic value in an
organization, for example:
• Customer Focus: satisfy, retain and acquire customers in targeted segments
• Business Processes: deliver the value proposition to targeted customers
• innovative products and services
• high-quality, flexible, and responsive operating processes
• excellent post-sales support
• Organizational Learning & Growth: Customers
• develop skilled, motivated employees;
• provide access to strategic information
• align individuals and teams to business unit objectives Processes People

.
 The Four Perspectives Apply to
Mission Driven As Well As Profit
Driven Organizations
Profit Driven Mission Driven

• What must we do to satisfy our Financial Perspective • What must we do to satisfy our financial
shareholders? contributors?
• What are our fiscal obligations?

• What do our customers expect from Customer Perspective • Who is our customer?
us? • What do our customers expect from
us?

• What internal processes must we Internal Perspective • What internal processes must we excel
excel at to satisfy our shareholder and at to satisfy our fiscal obligations, our
customer? customers and the requirements of our
mission?

• How must our people learn and Learning & Growth • How must our people learn and develop
develop skills to respond to these and Perspective skills to respond to these and future
future challenges? challenges?

Answering these questions is the first step to develop a Balanced

Scorecard
The Balanced Scorecard Framework Is Readily Adapted to Non-
Profit and Government Organizations

The Mission

"If we succeed, how ”To achieve our vision,

will we look to our how must we look to
financial donors?” our customers?”

“To satisfy our customers,

financial donors and mission,
what business processes
must we excel at?"

“To achieve our vision, how

must our people learn,
communicate, and work
together?”

The Mission, rather than the financial / shareholder objectives, drives

the organization’s strategy
 The City of Charlotte Corporate-level Linkage Model
Customer Perspective
Availability of
Increase Improve Maintain Promote
Reduce Strengthen Safe,
Perception Service Competitive Economic
Crime Neighborhoods Convenient
of Safety Quality Tax Rates Opportunity
Transportation

Financial Accountability Perspective

Expand Maintain
Maximize Grow Tax
Non-City AAA
Benefit/Cost Base
Funding Rating

Internal Process Perspective

Promote Secure
Increase Community Streamline Increase Promote
Funding/ Improve
Positive Based Customer Infrastructure Business
Service Productivity
Contacts Problem Interactions Capacity Mix
Partners
Solving

Learning and Growth

Perspective
Enhance Achieve
Knowledge Close Positive
Management Skills Gap Employee
Capabilities Climate
Why are Companies Adopting a Balanced
Scorecard?
• Change The Revenue Growth Strategy

“Improve stability by br oadeni ng the sour ces of revenue from

current customers”

Increase
Customer
Confidenc e
Our
Advice
Broaden
Revenue
Mix

in
Financial
Improve
Returns
Improve
Operating
Efficiency
The Productivity Strategy

“Improve operating efficiency by s hifting c ustomers to more cost-

effective channels of distribution”

Increase
Customer
Satisfaction
Through Superi or
Execution
Financial
Perspective

Customer
Perspective

Internal
Perspective

Understand Develop Cross-Sel l Shift to Provide

Minimize
Customer New the Product Appropriate Rapid
Problems

Formulate and communicate a new strategy

Segments Products Line Channel Response

Increase
Employee
Productivity Learning
Perspective

Develop Access to Align

Strategic Strategic Personal
Skills Information Goals

for a more competitive environment

•Growth
Increase revenues, not just cut costs and
enhance productivity

• Implement
From the 10 to the 10,000. Every employee
implements the new growth strategy in their
day-to-day operations
Why Do We Need a Balanced Scorecard?
To Implement Business Strategy!
“Business Strategy is now the
single most important issue…
and will remain so for the next
five years”
Business Week

“Less than 10% of strategies

effectively formulated are
effectively executed”
Fortune
Barriers to Strategic Implementation
The Vision Barrier

Only 5% of the work force

understands the strategy

The People Barrier The Management Barrier

9 of 10 companies 85% of executive teams spend less
Only 25% of managers have
incentives linked to strategy
fail to execute than one hour per month
strategy discussing strategy

60% of organizations don’t link

budgets to strategy

The Resource Barrier

Today’s Management Systems Were Designed to Meet The Needs of Stable

Industrial Organizations That We’re Changing Incrementally

You Can’t Manage Strategy With a System Designed for Tactics

 Question:
How can complex organizations Answer:
achieve results like this in such short
periods of time? Alignment!
The Balanced Scorecard process allows an organization
to align and focus all its resources on its strategy

BUSINESS UNITS EXECUTIVE TEAM

STRATEGY

HUMAN RESOURCES INFORMATION

TECHNOLOGY

BUDGETS AND CAPITAL

INVESTMENTS
How Do They Do It?
The Seven Ingredients of Highly Successful Balanced Scorecard
Programs

1. A Process to Mobilize the Organization and Lead Ongoing Change

2. Scorecards That Describe the Strategy
3. Linking Scorecard to Create an Organization Alignment
4. Continuous Communication to Empower the Workforce
5. Aligning Personal Goals, Incentives, and Competencies With the
Strategy
6. Aligning Resources, Budgets and Initiatives With the Strategy
7. A Feedback Process That Encourages Learning and Experience
Sharing
 Corporate Strategy - Vertical Integration,
Diversification and Strategic Alliances,
Building and Restructuring the corporation
Vertical Integration
Definition of Vertical Integration

• A vertically integrated supply chain includes suppliers of raw materials

and components, intermediate manufacturers of the final product,
and logistics suppliers or distribution channels who deliver
components to the assembly plant and customers who uses finished
products. In single sentence vertical integration can be defines as “all
aspects of a product’s manufacture from raw materials to
distribution”.
• Two Type of Vertical Integration
 Type of Vertical Integration
Forward Vertical Integration
• Forward vertical integration is where one company mergers,
acquires or expands with a firm that is ahead of it in the
supply chain. In its most basic form, the supply chain
contains the raw material extractors, the manufacturers,
and the retail distributors.
• Forward vertical integration is where the company
essentially mergers or buys its customer. For instance, EA
sports manufacturers and designs video games. It is in the
middle of the supply chain, so forward vertical integration
would occur if it was to purchase a retailer such as Target or
Gamestop.
• Also known as upstream integration, this type of vertical
integration is not so common. Generally speaking, it is the
big retailers and the companies at the end of the chain that
has the greatest purchasing power. This allows them to be
the ‘predator’ rather than the ‘prey’ – meaning the firms at
the end of the chain have the money to purchase companies
behind them, whilst the opposite is true for firms earlier in
the supply chain.
Backward Vertical Integration

• Backward vertical integration is where a company joins with another that is

at a stage before itself in the supply chain. In other words, it integrates
with one of its suppliers. For instance, Ikea is dependent on manufacturers
of wood. When it integrates with the manufacturer, we see backward
vertical integration.
• It is known at backward vertical integration because the firm is behind in
the supply chain. So in a basic supply chain of raw material extraction,
manufacturing, and distribution – the distributor could merge with the raw
material extractor or the manufacturer and be classed as backward vertical
integration. This is because they are at the stage behind in the supply
chain.
• Also known as downstream integration, this type of vertical integration is
quite common. This is because big businesses at the end of the supply
chain tend to have the purchasing power to consume their suppliers.
Balanced Integration

• There is a third type of integration – balanced integration. This is

quite simply a combination of both backward and forwards
integration. For instance, balanced integration would be where a
company mergers’ with both a company that is before it in the supply
chain, as well as one that is after.
Advantages of Vertical Integration
1. Reliability
2. Power over Suppliers/Buyers
3. Economies of Scale
4. Flexibility
5. Lower Consumer Prices
Diversification and Strategic
Alliances
Disadvantages of Vertical Integration

1. High Costs
2. Management Difficulties
3. Loss of Focus
4. Reduced Flexibility
Diversification Strategies
Reasons for Adopting Related and Unrelated
Diversification Strategies
Concentric and Conglomerate Diversification
Activity
Strategic Alliances
Strategic Alliance
Strategic Alliance
Building and Restructuring the
corporation
Corporate Restructuring
• Corporate restructuring is an action taken by the corporate entity to
modify its capital structure or its operations significantly. Generally,
corporate restructuring happens when a corporate entity is
experiencing significant problems and is in financial jeopardy.
Types of Corporate Restructuring

• Financial Restructuring: This type of restructuring may take place due to a

severe fall in the overall sales because of adverse economic conditions.
Here, the corporate entity may alter its equity pattern, debt-servicing
schedule, equity holdings, and cross-holding pattern. All this is done to
sustain the market and the profitability of the company.
• Organisational Restructuring: Organisational Restructuring implies a
change in the organisational structure of a company, such as reducing its
level of the hierarchy, redesigning the job positions, downsizing the
employees, and changing the reporting relationships. This type of
restructuring is done to cut down the cost and to pay off the outstanding
debt to continue with the business operations in some manner.
Reasons for Corporate Restructuring

Corporate restructuring is implemented in the following situations:

• Change in the Strategy: The management of the distressed entity attempts to improve its performance by
eliminating certain divisions and subsidiaries which do not align with the core strategy of the company. The
division or subsidiaries may not appear to fit strategically with the company’s long-term vision. Thus, the
corporate entity decides to focus on its core strategy and dispose of such assets to the potential buyers.
• Lack of Profits: The undertaking may not be enough profit-making to cover the cost of capital of the
company and may cause economic losses. The poor performance of the undertaking may be the result of a
wrong decision taken by the management to start the division or the decline in the profitability of the
undertaking due to the change in customer needs or increasing costs.
• Reverse Synergy: This concept is in contrast to the principles of synergy, where the value of a merged unit is
more than the value of individual units collectively. According to reverse synergy, the value of an individual
unit may be more than the merged unit. This is one of the common reasons for divesting the assets of the
company. The concerned entity may decide that by divesting a division to a third party can fetch more value
rather than owning it.
• Cash Flow Requirement: Disposing of an unproductive undertaking can provide a considerable cash inflow
to the company. If the concerned corporate entity is facing some complexity in obtaining finance, disposing
of an asset is an approach in order to raise money and to reduce debt.
• Characteristics of
Characteristics of Corporate Restructuring

• To improve the Balance Sheet of the company (by disposing of the unprofitable division from its
core business)
• Staff reduction (by closing down or selling off the unprofitable portion)
• Changes in corporate management
• Disposing of the underutilised assets, such as brands/patent rights.
• Outsourcing its operations such as technical support and payroll management to a more efficient
3rd party.
• Shifting of operations such as moving of manufacturing operations to lower-cost locations.
• Reorganising functions such as marketing, sales, and distribution.
• Renegotiating labour contracts to reduce overhead.
• Rescheduling or refinancing of debt to minimise the interest payments.
• Conducting a public relations campaign at large to reposition the company with its consumers.
Important Aspects to be Considered in Corporate
Restructuring Strategies
• Legal and procedural issues
• Accounting aspects
• Human and Cultural synergies
• Valuation and funding
• Taxation and Stamp duty aspects
• Competition aspects, etc.
Types of Corporate Restructuring Strategies

• Merger
• Demerger
• Reverse Merger
• Disinvestment
• Takeover/Acquisition
• Joint Venture (JV)
• Strategic Alliance
• Slump Sale
 Benefits of Corporate Restructuring
Through mergers and acquisitions, companies hope to benefit from the following:
(1) Increase in Market Share – Merger facilitates increase in market share of the merged company. Such rise in market
share is achieved by providing an additional goods and services as needed by clients. Horizontal merger is the key to
increasing market share. (E.g. Idea and Vodafone)
(2) Reduced Competition – Horizontal merger results in reduction in competition. Competition is one of the most
common and strong reasons for mergers and acquisitions. (HP and Compaq)
(3) Large size – Companies use mergers and acquisitions to grow in size and become a dominant force, as compared to
its competitors. Generally, organic growth strategy takes years to achieve large size. However, mergers and acquisitions
(i.e. inorganic growth) can achieve this within few months. (E.g. Sun Pharmaceutical and Ranbaxy Pharmaceutical)
(4) Economies of scale – Mergers result in enhanced economies of scale, due to which there is reduction in cost per
unit. An increase in total output of a product reduces the fixed cost per unit.
(5) Tax benefits – Companies also use mergers and amalgamations for tax purposes. Especially, where there is merger
between profit making and loss-making company. Major income tax benefit arises from set-off and carry forward
provision u/s 72A of the Income-tax Act, 1961.
 Benefits of Corporate Restructuring
(6) New Technology – Companies need to focus on technological developments and their
business applications. Acquisition of smaller companies helps enterprises to control unique
technologies and develop a competitive edge. (E.g. Dell and EMC)
(7) Strong brand – Creation of a brand is a long process; hence companies prefer to acquire
an established brand and capitalize on it to earn huge profits. (E.g. Tata Motors and Jaguar)
(8) Domination – Companies engage in mergers and acquisitions to become a dominant
player or market leader in their respective sector. However, such dominance shall be subject
to regulations of the Competition Act, 2002. (E.g. Oracle and I-Flex Technologies)
(9) Diversification – Amalgamation with companies involved into unrelated business areas
leads to diversification. It facilitates the smoothening of business cycles effect on the
company due to multiplicity of businesses, thereby reducing risk. (E.g. Reliance Industries &
Network TV18)
(10) Revival of Sick Company – Today, the Insolvency and Bankruptcy Code, 2016 has created
additional avenue of acquisition through the Corporate Insolvency Resolution Process.
Notable mergers/demergers/acquisitions that took place are Myntra acquiring Jabong, RIL
acquiring Network TV18, Sun Pharma absorbing Ranbaxy; Wirpo demerger, Reliance
Industries demerger.
Strategic Analysis and Choice
Strategic Analysis and Choice
Techniques used in Strategic Analysis:
Characteristics of Strategic Analysis and
Choice
 GAP Analysis
• A gap analysis is a process of assessing the differences in performance between a
business’ information systems or software applications to decide whether
business requirements are being met and, if not, what steps should be taken to
make sure they are met successfully.
• Gap Analysis can be understood as a planned tool used for analyzing the gap
between the target and expected results, by assessing the extent of the task and
the ways, in which gap might be bridged. It engages makes a comparison of the
present performance level of the entity or business unit with that of the standard
established previously.
GAP Analysis
• Gap Analysis is a process of identifying the gap between optimized
distribution and integration of resources and the current level of allocation.
In this, the concern’s strengths, weakness, opportunities, and threats are
analyzed, and possible moves are examined.
• Different strategies are selected on the basis of:
• Width of the gap
• Importance
• Chances of reduction
• If the gap is thin, stability strategy is the best alternative. However, when
the gap is large, and the reason is environment opportunities, expansion
strategy is appropriate, and if it is due to the past and proposed a bad
performance, retrenchment strategies are the perfect option.
Types of Gaps

The term ‘strategy gap’ entails the

variance between actual performance
and the desired one, as mentioned in
the organization’s mission, objectives,
and strategy for reaching them. It is a
threat to the concern’s future
performance, growth, and survival,
which is likely to influence the
efficiency and effectiveness of the
company. There are four types of Gap:
 Alternative Courses of Action
In case, gaps are discovered the organization’s management has three
alternatives:
Redefine the objectives
If there is any various between objectives and forecast, first and
foremost the organization’s top executives need to check whether the
objectives are realistic and achievable or not. If the objectives are
deliberately set at a high level, the company should redefine them.
Do nothing
This is the smallest amount employed action, but it can be considered.
Change the Strategy
Finally, to bridge the gap between the organization’s objectives and
forecast, the entity can go for changing strategy, if the other two
alternatives are considered and rejected.
Before making any modification in the strategy, one must consider
that the gap exists between the current and proposed state of affairs.
It is too large to be noticed, and the organization is encouraged to
reduce it. The organization’s management is of the opinion that
something can be done to reduce it.
Self Review Questions
• What are the reasons to adopt Diversification Strategies?
• What five business-level strategic options are available to the firm? Explain
• effectiveness of a firm’s performance?
• distinctive characteristics of the three levels of strategy?
• Four Actions Framework in Blue Ocean strategy?
• Write short note on Balanced Scorecard?
• BCG growth share matrix and GE Nine cell matrix for portfolio analysis of organizations?
• Differentiatie BCG and GE Nine Cell matrix?
• five business-level strategic options are available to firm. Explain each strategy in detail?
• Benefits of Corporate Restructuring
• Explain Corporate Level Strategies – Stability, Expansion, Retrenchment and Combination strategies?
• dDstinctive characteristics of the three levels of strategy?
• Types of Stability Strategies?
• McKinsey 7S Model?