AN OVERVIEW OF STRATEGIC

MANAGEMENT
 Unit I
• Definition, nature, scope, and importance of strategy;
and strategic management (Business policy). Strategic
decision-making. Process of strategic management and
levels at which strategy operates. Role of strategists.
• Defining strategic intent: Vision, Mission, Business
definition, Goals and Objectives.
• Environmental Appraisal—Concept of environment,
components of environment (Economic, legal, social,
political and technological). Environmental scanning
techniques- ETOP, QUEST and SWOT (TOWS) PEST.
 Unit II
• Internal Appraisal – The internal environment,
organizational capabilities in various
functional areas and Strategic Advantage
Profile. Methods and techniques used for
organizational appraisal (Value chain analysis,
Financial and non financial analysis, historical
analysis, Industry standards and
benchmarking, Balanced scorecard and key
factor rating). Identification of Critical Success
Factors (CSF).
 Unit IV
• Strategy implementation: Resource allocation,
Projects and Procedural issues. Organist ion
structure and systems in strategy
implementation. Leadership and corporate
culture, Values, Ethics and Social responsibility.
Operational and derived functional plans to
implement strategy. Integration of functional
plans.
• Strategic control and operational Control.
Organizational systems and Techniques of
strategic evaluation.
 The Concept of Strategy
• The term ‘strategy’ has its origin in the Greek
word strategos. Strategos generalship-the
actual direction of military force.
• Strategos is to plan the destruction of one’s
enemies through the effective use of sources.
• “a plan or course of action which is of vital,
pervasive, or continuing importance to an
organization as a whole”.
 Examples
• Kotak Mahindra Finance Ltd is a major non banking finance
company(NBFC) that has experienced low profitability. It is
planning to adopt a diversified strategy in wholesale
corporate lending and focusing on new growth areas, such
as wealth management, retail, insurance, and information
services.
• Birla TransAsia Carpets is a sick unit from Yash Birla Group.
As it is faced with excessive manpower and high interest
costs it is attempting a turnaround strategy by retrenching
three-fourth of its employees, importing synthetic carpets
and tiles, and exporting to U.S carpets markets.
• Singer India is entering in white goods and color television
market as part of its diversification strategy.
• How different companies reacted to their
environment?
• They adopted a course of action which
seemed to be appropriate to them. Such a
course of action may involve actions like
expansion, diversification, focus, turnaround,
stability or divestment.
• An old established company facing threats in
the environment.(has to rethink the course of
action)
• Some new opportunities emerge in the
environment which had not been in the past.
• These course of action are what we may call
strategies.
 Definitions
• The determination of the basic long term goals
and objectives of an enterprise and the adoption
of the course of action and the allocation of
resources necessary for carrying out these goals.

Alfred D Chandler(1962)
• The pattern of objectives, purpose, goals, and
the major policies and plans for achieving
these goals stated in such a way so as to
define what business the company is in or is to
be and the kind of company it is or it is to be.

Kenneth Andrews(1965)
• Strategy is about achieving competitive
advantage through being different- delivering
a unique value added to the customer, having
a clear and enact able view of how to position
yourself uniquely in the industry.

Michael Porter
 Strategy
• A plan or course of action or a set of decision rules forming
a pattern or creating a common thread,
• The pattern or common thread related to the organization’s
activities which are derived from its policies, objectives and
goals,
• Related to pursuing those activities which move an
organization from its current position to derived future
state,
• Concerned with the resources necessary for implementing
a plan or following a course of action, and
• Connected to the strategic positioning of a firm, making
trade offs between its different activities and creating a fit
among these activities.
 Levels at which Strategy Operates
• Strategy can be formulated on three different
levels:
Corporate level
Business unit level
Functional or departmental level
• A single strategy is not only inadequate but
also inappropriate.
• The need is for multiple strategies at different
levels.
• Strategic Business Unit(SBU): Any part of a
business organization which is treated
separately for the strategic management
purpose.
• Corporate strategy is the selection and
development of the markets (or industries)1
in which a firm competes. Therefore,
corporate strategy deals with what industries
(or markets) a firm seeks to compete in.
• Business level strategies (low cost,
diversification, and focus) are HOW a firm
competes in a single market or industry.
 Corporate level Strategies
• Corporate level strategy is the "big picture" view of the organization
and includes deciding in which product or service markets to
compete and in which geographic regions to operate.
• For multibusiness firms, the resource allocation process like cash,
staffing, equipment and other resources are distributed is
established at the corporate level.
• Market definition is also in the domain of corporate-level
strategists, the responsibility for diversification, or the addition of
new products or services to the existing product/service line-up,
also falls within the realm of corporate-level strategy.
• Similarly, whether to compete directly with other firms or to
selectively establish strategic alliances—falls within the purview
corporate-level strategy
 Critical questions answered by corporate-level
strategists include:
• What should be the scope of operations-what businesses
should the firm be in?
• How should the firm allocate its resources among existing
businesses?
• What level of diversification should the firm pursue;- which
businesses represent the company's future? Are there
additional businesses the firm should enter or are there
businesses that should be targeted for termination or
divestment?
• How diversified should the corporation's business be?
• How should the firm be structured? Are the responsibilities
or each business unit clearly identified and is accountability
established?
• Should the firm enter into strategic alliances—cooperative,
mutually-beneficial relationships with other firms?
• Corporate strategies represent the long-term direction for
the organization. The top management has the primary
decision making responsibility in developing corporate
strategies and these managers are directly responsible to
shareholders.
• They are paralyzed without accurate and up-to-date
information from managers at the business level.
• Corporations are responsible for creating value through
their businesses which they do so by managing their
portfolio of businesses, ensuring that the businesses are
successful over the long-term, developing business units,
and ensuring that each business is compatible with others
in the portfolio.
 Example
• The Tata group has a wide range of business from cars, software to
Insurance .The main strategic responsibilities of Tata’s CEO Ratan
N.Tata is to
i. Overall strategic objectives
ii. Deciding whether the firm should divest itself from any of its
business
iii. Allocating resources among different business
iv. Decisions on any new acquisitions or mergers for any particular
unit
v. Corporate strategies and policies for business which fall under
the brand umbrella ‘Tata’
vi. Managing corporate portfolio of business
vii. Maximize corporate responsibility
viii. Give a sense of direction to the Corporation
 Strategic Business Unit
• A strategic unit may be a division, product line
or other profit center that can be planned
independently from the other business units
of the firm.
 At the business level, the strategy
formulation phase deals with:
• Positioning the business against rivals
• Anticipating changes in demand and
technologies and adjusting the strategy to
accommodate them
• Influencing the nature of competition through
strategic actions such as vertical integration
• Developing and sustaining a competitive
advantage for the goods and services that are
produced.
• Taking again Tata group as an example and in particular
Tata consultancy services. The responsibility of the
Managing Director, N.Chandrasekharan will be to
i. Translate the general statement of intent from the
CEO into strategies for TCS
ii. Formulate strategy for TCS
iii. Take strategic decisions regarding the company’s
market foray
iv. Develop strategies against competitors
v. Assess and take appropriate action on the progress
of the company in the market
vi. Lookout for suitable acquisitions which will help
enhance the competitiveness of the company
• According to Michael Porter three generic
strategies-cost leadership, differentiation, and
focus can be implemented at the business unit
level to create a competitive advantage and
defend against the adverse effects of the five
forces.
Five Generic Strategies
Competitive Advantage
Cost Uniqueness

Competitive Scope Cost Leadership Differentiation

Broad
target

Integrated Cost
Leadership/
Differentiation
Narrow
target

Focused Cost Focused

Leadership Differentiation
 Toyota
• Toyota Motor Corporation primarily conducts business in the
automotive industry. Toyota also conducts business in the finance
and other industries. Its business segments are automotive
operations, financial services operations and all other operations.
Its automotive operations include the design, manufacture,
assembly and sale of passenger cars, recreational and sport utility
vehicles, minivans and trucks and related parts and accessories.
Toyota pursues a combined cost leadership and differentiation
strategy that is economies of scopes are relevant. A dual focus on
both cost leadership and differentiation is often required across the
various segments of the value chain. Toyota’s production system is
reportedly the most efficient in the world. This efficiency gives
Toyota a low cost strategy in the global car industry. At the same
time Toyota has differentiated its cars from those of rivals on the
basis of superior design and quality. This superiority allows the
company to charge a premium price for many of its popular models.
Thus Toyota seems to be simultaneously pursuing both a low cost
and a differentiated business level strategy, which is called stuck in
the middle.
 Low Cost Strategy
• The low cost strategy emphasizes having the lowest
costs, not necessarily the lowest price, in a market. A
firm attempting to realize a low cost strategy should
stress resources that facilitate efficiency. A firm that
has successfully achieved a low cost position will have
the lowest costs relative to competitors. A firm can use
such a position to either lower its prices and gain
market share and sales from rivals OR keep its prices at
the present market level and make relatively more
profit per unit sold. The key idea is that cost and price
are independent choices, and this strategy is focused
on cost.
 Differentiation Strategy
• The differentiation strategy focuses on developing a
unique product or (equally useful) a perception of a
unique product that customers are willing to pay a
premium for. If a firm is not receiving a premium price
for its goods or services it is NOT a differentiator. A firm
seeking to follow a differentiation strategy should
attempt to develop and enhance its resources that
promote customer responsiveness, quality, and/or
innovation. Note that costs are still important to a
differentiator because it is possible that the costs of
making the product unique will be greater than the
premium consumers are willing to pay for it.
 Functional Level Strategy

The functional level of the organization is the

level of the operating divisions and
departments. The strategic issues at the
functional level are related to business
processes and the value chain.
• Functional units of an organization are
involved in higher level strategies by providing
input into the business unit level and
corporate level strategy, such as providing
information on resources and capabilities on
which the higher level strategies can be based.
Once the higher-level strategy is developed,
the functional units translate it into discrete
action-plans that each department or division
must accomplish for the strategy to succeed.
• For example in the above two cases where the
CEO gave direction to the conglomerate as a
whole and the managing director of TCS set to
implement his company’s strategy on the lines of
the corporate policy, it will actually be the
Functional level managers such as in Human
resource, product development, customer service
etc who actually carry on the task of
implementing this strategy. As above it could be
in production, service ,finance or any integral
functional unit in the company.
• The manager in product development in TCS will have his work cut out as
follows
i. Implement the general strategic outline provided by the managing
director
ii. Plan, communicate and implement the strategic outline provided by
the MD
iii. Determine which products are to be followed up with, products which
are to be done with
iv. Identifying the right, viable products for R&D
v. Ensure quality conforming to the standards of the organization
vi. Ensure smooth running of the product development unit
vii. On the look out for new technologies to acquire
viii. Staying tuned with the competitors R&D work
ix. Give feedback to the corporate & business level managers about the
success of their policies or drawbacks since they are in the frontline of the
battle.
 STRATEGIC MANAGEMENT
• “The on-going process of
formulating, implementing and controlling
broad plans guide the organizational in
achieving the strategic goals given its internal
and external environment”.
• Art and science of
formulating, implementing, and evaluating
cross-functional decisions that enable an
organization to achieve its objectives.
 Interpretation
1. On-going process:
Strategic management is a on-going process which is in existence
through out the life of organization.
2. Shaping broad plans:
First, it is an on-going process in which broad plans are firstly
formulated than implementing and finally controlled.
3. Strategic goals:
Strategic goals are those which are set by top management. The
broad plans are made in achieving the goals.
4. Internal and external environment:
Internal and external environment generally set the goals. Simply
external environment forced internal environment to set the goals
and guide them that how to achieve the goals?
 IMPORTANCE OF STRATEGIC
MANAGEMENT

Why do we need to lay so much stress on

strategic management?
Strategic management becomes important due
to the following reasons:
• Globalization: The survival for business
(global considerations impact virtually all
strategic decisions!)
• E-Commerce: A business tool
(electric commerce (e-commerce) has become
a vital strategic-management tool.)
• Earth environment has become a major
strategic issue
 Importance
• Strategic management can and will influence the organization’s
performance. That’s why you can have organizations that face the
same environmental conditions, but with different performance
levels – and considering recent studies, there is a wide belief that
organization’s that use strategic planning usually have better
performance that the ones that don’t.
• Another reason that supports the importance of strategic
management has to do with the continually changing situation that
organizations face these days, because it helps managers to
examine relevant factors before deciding their course of action,
thus helping them to better cope with uncertain environments.
• Finally, strategic management is important most organizations are
composed by diverse divisions and departments that need to be
coordinated, else there would be no focus on achieving the
organization's goals
 Strategic management – A route to
success
• The study of strategic management integrates
different topics. Different courses are
integrated due to the study of this course so
that businesses become successful in every
sector. It integrates the following:
Marketing
Management
Finance
Research and development
 Phases in Strategic management
process
• There are four essential phases in the strategic
management process.
Establishing the hierarchy of strategic intent,
Formulation of strategies,
Implementation of Strategies, and
Performing strategic evaluation and control.
Elements in the Strategic Management
Process
1. Establishing the hierarchy of strategic intent:
a) creating and communicating a vision
b) designing a mission statement
c) defining the business,
d) setting objectives,
2) Formulation of strategies:
e) performing environmental appraisal,
f) doing organizational appraisal,
g) considering corporate level strategies,
h) considering business level strategies,
i) undertaking strategic analysis,
j) exercising strategic choice,
k) formulating strategies,
l) preparing a strategic plan.
3) Implementing of strategies
m) activating strategies,
n) designing structures and systems
o) managing behavioral implementation,
p) managing functional implementation,
q) operationalising strategies,
4) Performing strategic evaluation and control:
r) performing strategic evaluation,
s) exercising strategic control, and
t) reformulating strategies.
• The strategic-management process is dynamic
and continuous.
• Strategy formulation, implementation, and
evaluation activities should be performed on a
continual basis, not just at the end of the year
or semiannually.
• The strategic-management process never
really ends.
 Nature of Strategic Management
• Without understanding and commitment,
strategy-implementation efforts face major
problems.
• Implementing strategy affects an organization
from top to bottom; it impacts all the functional
and divisional areas of a business.
• Change comes through implementation and
evaluation, not through the plan.
• A technically imperfect plan that is implemented
well will achieve more than the perfect plan that
never gets off the paper on which it is typed.
 “Strategic Management” Synonymous with
"Strategic Planning”
• Strategic management
Used more often in academia
• Strategic planning
Used more often in the business world
• Strategic management Refers to:
Strategy formulation
Strategy implementation
Strategy evaluation
Strategic planning Refers to:
Strategy formulation
 Adapting to change
Organizational survival depends on:
 Continuous monitoring of internal and external
factors
 Well-timed changes
 Effective adaptation calls for a long-run focus
 Incremental rise in degree of change
1. Technology
2. E-commerce
3. Merger-mania
4. Demographics
• The need to adapt to change leads
organizations to key strategic management
questions, such as
“What kind of business should we become?”
“Are we in right field?”
“Should we reshape our business?”
“Are new technologies being developed that
could put us out of business?”
 Nature, Importance and scope of
strategic planning
• Serves as a road map for the corporation.
• Lays down the growth objectives of the firm and
also provides the strategies needed for achieving
them.
• Serves as a hedge against uncertainly arising from
environmental turbulence.
• Ensures that the firm remains a prepared
organization.
• Helps the firm understand trends in advance and
provides the benefits of a lead time for taking
crucial decisions and actions.
• Helps avoid haphazard response to environment.
• Provides the best possible fit between the firm
and the external environment.
• Ensures that the firm’s businesses, products and
markets are chosen wisely.
• Ensures best utilization of the firm’s resources
among the product- market opportunities.
• Helps build competitive advantages and core
competencies.
• Prepare the firm to not only face the future
but even to shape the future in its favor, helps
the firm influence its mega environment in its
favor to the extent possible.
 Concerns of Strategic Planning
• Future: Long term dynamics is its concern, not
day to day tasks.
• Growth: Direction, extent, pace and timing of
growth.
• Environment: The fit between the business
and its environment.
• Business Portfolio: Product market scope.
• Strategy: Strategy is its concern, not the
operational activities.
• Integration: Integration of all management
functions is its concern, not a particular
function.
• Creating core competencies/competitive
advantages, creating long term, sustainable
organizational capability is its concern.
 Key Strategic Management Terms
1.Strategists
2. Vision statements
3. Mission statements
4. External opportunities and threats
5. Internal strengths and weaknesses
6. Long-term objectives
7. Strategies
8. Annual objectives
9. Policies
 Strategists
Usually found in high levels of management (CEO)
• Help organization gather, analyze, and organize
information
• Track industry and competitive trends
• Develop forecasting model and scenario analyses,
evaluate corporate and divisional performance,
• Spot emerging market opportunities, identify
business threats, and develop creative action
plans.
 Vision Statements

• Answers the question: “What do we want to

become?”
• First step in strategic planning
• Oftentimes a single sentence
 Mission Statements
• Mission statements are "enduring statements of purpose
that distinguish one business from other similar firms.
• A mission statement identifies the scope of a firm's
operations in product and market terms.
• It addresses the basic question that faces all strategists:
What is our business? A clear mission statement describes
the values and priorities of an organization.
• Developing a mission statement compels strategists to
think about the nature and scope of present operations and
to assess the potential attractiveness of future markets and
activities.
• A mission statement broadly charts the future direction of
an organization.
 Example
• Microsoft's mission is to create software for the
personal computer that empowers and enriches
people in the workplace, at school and at home.
Microsoft's early vision of a computer on every
desk and in every home is coupled today with a
strong commitment to Internet-related
technologies that expand the power and reach of
the PC and its users. As the world's leading
software provider, Microsoft strives to produce
innovative products that meet our customers'
evolving needs.
 Environmental Scanning
• The process of conducting research and
gathering and assimilating external
information is sometimes called
environmental scanning or industry analysis
• SWOT
• The external environment consist of
opportunities and threats variables that outside
the organization. External environment has two
parts:
Task Environment
Social Environment
Task Environment:
• Task environment includes all those factors which affect the
organization and itself affected by the organization. These
factor effects the specific related organizations. These
factors are shareholders community, labor
unions, creditor, customers, competitors, trade
associations.
Social Environment:
• Social environment is an environment which includes those
forces effect does not the short run activities of the
organization but it influenced the long run activities or
decisions. PEST analysis are taken for social environment
PEST analysis stands for political and legal economic socio
cultural logical and technological.
 External Opportunities & Threats

• Largely beyond the control of a single organization

Economic
Social
Cultural
Demographic
Environmental
Political
Governmental
Technological
Competitive trends & events
• A basic tenet of strategic management is that
firms need to formulate strategies to take
advantage of external opportunities and to
avoid or reduce the impact of external threats.
For this reason, identifying, monitoring, and
evaluating external opportunities and threats
are essential for success.
 Internal Strengths & Weaknesses/
Internal Assessment
 Controllable activities that are performed well or
poorly relative to competitors
 Based on functional analysis of activities in the firm’s:
Management
Marketing
Finance/accounting
Production/operations
Research and development
Computer information systems
 Organizations strive to pursue strategies that capitalize
on strengths and improve weaknesses
 Corporate Objectives-Example of
Reliance Industries
• Shareholders value of Reliance would be doubled by the year 2002.
• Sales revenue would reach Rs. 20,000 crore by the year 2002.
• In petrochemicals, production capacity would be raised by 50 per
cent from 6 million tones to 9.3 million tones.
• In EPS, 20 percent CAGR would be achieved.
• A dividend of around 25 percent would be paid out every year.
• The company will be choosing the best in class technologies in all its
businesses, emphasis would be on strength in advanced process
control and computer integrated manufacturing.
• There would be substantial investment towards enhancing the
expertise of staff.
• Best of attention will be given to community health, safety and
environmental protection.
 Long-Term Objectives
• Objectives can be defined as specific results that an
organization seeks to achieve in pursuing its basic
mission. Long-term objectives represent the results
expected from pursuing certain strategies. Strategies
represent the actions to be taken to accomplish long-
term objectives.
• The time frame for objectives and strategies should be
consistent, usually from two to five years.
• Objectives are essential for organizational success
because they state direction
• Objectives should be challenging, measurable,
consistent, reasonable, and clear.
 The Nature of Long-Term Objectives
• Objectives should be quantitative, measurable,
realistic, understandable, challenging,
hierarchical, obtainable, and congruent among
organizational units. Each objective should also
be associated with a time line.
• Objectives are commonly stated in terms such as
growth in assets, growth in sales, profitability,
market share, degree and nature of
diversification, degree and nature of vertical
integration, earnings per share, and social
responsibility.
 Benefits
• Objectives help stakeholders understand their role in
an organization's future.
• An organization can minimize potential conflicts later
during implementation.
• They serve as standards by which individuals, groups,
departments, divisions, and entire organizations can be
evaluated.
• Objectives provide the basis for designing jobs and
organizing activities to be performed in an
organization.
• They also provide direction and allow for organizational
synergy.
• Without long-term objectives, an organization
would drift aimlessly toward some unknown
end! It is hard to imagine an organization or
individual being successful without clear
objectives. Success only rarely occurs by
accident; rather, it is the result of hard work
directed toward achieving certain objectives.
 Strategies
• Strategies are the means by which long-term
objectives will be achieved.
• Business strategies may include geographic
expansion, diversification, acquisition, product
development, market penetration,
retrenchment, divestiture, liquidation, and
joint venture.
 Annual Objectives
• Annual objectives are short-term milestones that
organizations must achieve to reach long-term objectives.
• They should be established at the corporate, divisional, and
functional levels in a large organization.
• Annual objectives should be stated in terms of
management, marketing, finance/accounting,
production/operations, research and development, and
information systems accomplishments. A set of annual
objectives is needed for each long-term objective.
• Annual objectives are especially important in strategy
implementation, whereas long-term objectives are
particularly important in strategy formulation. Annual
objectives represent the basis for allocating resources.
• Example Long Tern Objective:
- To improve return to shareholders by x% over the next
three years, through reduction of the cost of production
Annual objective:
- To implement a "just in time" delivery system to reduce
storage costs by x%
Policy:
- When stock levels reach a certain point the line manager
is responsible for contacting the vendor to arrange for a
delivery
- Stock levels above a certain volume are not to be stored in
the warehouse
 Policies
• Policies are the means by which annual objectives will be achieved.
Policies include guidelines, rules, and procedures established to
support efforts to achieve stated objectives.
• Policies are most often stated in terms of management, marketing,
finance/ accounting, production/operations, research and
development, and computer information systems activities.
• Policies can be established at the corporate level and apply to an
entire organization, at the divisional level and apply to a single
division or at the functional level and apply to particular operational
activities or departments.
• Policies, like annual objectives, are especially important in strategy
implementation because they outline an organization's
expectations of its employees and managers. Policies allow
consistency and coordination within and between organizational
departments.
 Benefits of Strategic management
• The major benefits of Strategic management:
Proactive in shaping firm’s future
Initiate and influence actions
Formulate better strategies (Systematic, logical, rational approach)
• Financial benefits:
Improved productivity
Improved sales
Improved profitability
• Non-Financial benefits:
Increased employee productivity
Improved understanding of competitors’ strategies
Greater awareness of external threats
Understanding of performance reward relationships
Better problem-avoidance
Lesser resistance to change
 Why Some Firms Do No Strategic
Planning?
1. Poor Reward Structures—when an organization assumes success, it often
fails to reward success.
2. Fire-fighting
3. Waste of Time—some firms see planning as a waste of time since no
marketable product is produced. Time spent on planning is an investment.
4. Too Expensive—some organizations are culturally opposed to spending
resources.
5. Laziness—People may not want to put forth the effort needed to
formulate a plan.
6. Content with Success—particularly if a firm is successful, individuals may
feel there is no need to plan because things are fine as they stand. But
success today does not guarantee success tomorrow.
7. Fear of Failure—by not taking action, there is little risk of failure unless a
problem is urgent and
pressing. Whenever something worthwhile is attempted, there is some
risk of failure.
8. Overconfidence—as individuals amass experience, they may rely
less on formalized planning.
9. Prior Bad Experience—People may have had a previous bad
experience with planning, where plans have been long,
cumbersome, impractical, or inflexible. Planning, like anything, can
be done badly.
10. Self-Interest—when someone has achieved status, privilege, or
self-esteem through effectively using an old system, they often see
a new plan as a threat.
11. Fear of the Unknown—People may be uncertain of their abilities
to learn new skills, their aptitude with new systems, or their ability
to take on new roles.
12. Honest Difference of Opinion—People may sincerely believe the
plan is wrong. They may view the situation from a different
viewpoint, or may have aspirations for themselves or the
organization that are different from the plan. Different people in
different jobs have different perceptions of a
situation.
 Pitfalls to avoid in Strategic Planning
• Strategic planning is an involved, intricate, and
complex process that takes an organization
into non chartered territory. It does not
provide a ready-to-use prescription for
success; instead, it takes the organization
through a journey and offers a framework for
addressing questions and solving problems.
Being aware of potential pitfalls and prepared
to address them is essential to success.
Some pitfalls to watch for and avoid in
strategic planning are provided below:
• 1. Using strategic planning to gain control over decisions and resources
• 2. Doing strategic planning only to satisfy accreditation or regulatory requirements
• 3. Too hastily moving from mission development to strategy formulation
• 4. Failing to communicate the plan to employees, who continue working in the
dark
• 5. Top managers making many intuitive decisions that conflict with the formal plan
• 6. Top managers not actively supporting the strategic-planning process
• 7. Failing to use plans as a standard for measuring performance
• 8. Delegating planning to a "planner" rather than involving all managers
• 9. Failing to involve key employees in all phases of planning
• 10. Failing to create a collaborative climate supportive of change
• 11. Viewing planning to be unnecessary or unimportant
• 12. Becoming so engrossed in current problems that insufficient or no planning is
done
• 13. Being so formal in planning that flexibility and creativity are stifled.
• The extent of manager and employee
involvement in developing vision and mission
statements can make a difference in business
success. This lecture provides guidelines for
developing these important documents.
 Mission statement
• An enduring statement of purpose
• Distinguishes one firm from another in the
same business
• A declaration of a firm’s reason for existence
• It identifies scope of it operation in terms of
product offered and market served. Mission
also means what we are and what we do.
• Mission is divided into two categories:
Narrow Mission
Broad Mission
 Narrow Mission
• Narrow mission identifies our mission but it
restrict in terms of:
1. Product and services offered
2. Technology used
3. Market served
4. Opportunity of growth
 Broad Mission
• Broad mission wider our mission values in
terms of product and services, offered, market
served, technology used and opportunity of
growth. But main flow of this mission that if
creates confusion among employee due to its
wider sense.
• For example two different firms A & B. A deals
in Rail Roads and B deals in Transportation i.e.
we can say A co. has narrow mission and B co.
has a wider mission.
Components and corresponding questions that a
mission statement should answer are given
here.
• Customer: Who are the firm’s customers?
• Products or services: What are the firm’s major products or services?
• Markets: Geographically, where does the firm compete?
• Technology: Is the firm technologically current?
• Concern for survival, growth, and profitability: Is the firm committed to
growth and financial soundness?
• Philosophy: What are the basic beliefs, values, aspirations, and ethical
priorities of the firm?
• Self-concept: What is the firm’s distinctive competence or major
competitive advantage?
• Concern for public image: Is the firm responsive to
social, community, and environmental concerns?
• Concern for employees: Are employees a valuable asset of the firm?
• Nest vision computer college mission
statement reveals:-
“We are dealing in all activities which includes
in IT, definition”.
• Qarshi Laborites Mission Statement,
“Production of herbal product is our mission”.
 Apple Computer (www.apple.com)
• It is Apple’s mission to help transform the way customers
work, learn and communicate by providing exceptional
personal computing products and innovative customer
services. We will pioneer new directions and approaches,
finding innovative ways to use computing technology to
extend the bounds of human potential. Apple will make a
difference: our products, services and insights will help people
around the world shape the ways business and education will
be done in the 21st century.
AT & T (www.att.com)
We are dedicated to being the world’s best at
bringing people together giving them easy
access to each other and services they want
anytime, anywhere
 Vision Statement
• “Vision is the art of seeing things invisible
• Answers the question: “What do we want to
become?”
• First step in strategic planning
• Oftentimes a single sentence
• A vision statement is sometimes called a picture of
your company in the future but it’s so much more
than that.
• A lucid and clear vision lays down a foundation on
which a sound mission statement can be built.
• The vision statement answers the question, “Where do
we want to go?” Vision statement also answers the
question “What do we want to become?” What you
are doing when creating a vision statement is
articulating your dreams and hopes for your business.
It reminds you of what you are trying to build.
• While a vision statement doesn’t tell you how
you’re going to get there, it does set the
direction for your business planning.
• Unlike the mission statement, a vision
statement is for you and the other members
of your company, not for your customers or
clients.
• Our vision is helping individuals and
organizations discover and develop their God
given potentials to achieve the ultimate
Success”.
. . . . University of Management &
Technology, Lahore
 ADAMJEE Insurance Company
Limited
• Mission Statement: Being the leading insurance company
Pakistan and second best in Asia, our aim is to be a significant
participant in developing Pakistan’s image by providing
maximum insurance protection at the most competitive price
in a highly efficient manner for industrial and economic
growth.
• Vision Statement: To remain in the leading insurance
company of Pakistan and excelling it’s every aspect of
business and in delivering its obligations as a good corporate
citizen to its clients, employees and shareholders, public and
to the country.
 The Process of Developing a Mission
Statement
• First to select several articles about mission statements and
ask all managers to read these as background information.
• Then ask managers themselves to prepare a mission
statement for the organization.
• A facilitator, or committee of top managers, then should
merge these statements into a single document and
distribute this draft mission statement to all managers.
• A request for modifications, additions, and deletions is
needed next, along with a meeting to revise the document.
• All managers have input into and support the final mission
statement document, organizations can more easily obtain
managers' support for other strategy formulation,
implementation, and evaluation activities.
 Importance of Vision and Mission
Statements
• Unanimity of purpose within the organization
• Basis for allocating resources
• Establish organizational climate
• Focal point for direction
• Translate objectives into work structure
• Cost, time and performance parameters assessed and
controlled
• Most companies are now getting used to the idea of
using mission statements.
• Small, medium and large firms in Pakistan are also
realizing the need and adopting mission statements.
 Environmental Scanning
• Environmental scanning:
– The monitoring, evaluating, and disseminating of
information from the external and internal
environments to key people within the
organization to avoid strategic surprise and ensure
the long-term health of the firm.
 External Environment – 4 Analytical Tools:
Model 1: Macro/Societal environment (PEST):
• General forces that do not directly touch on the short-run activities but
often influence its long-run decisions.

Model 2: Task Environment (5 forces + 1):

• Task environment includes all those factors which affect the
organization and itself affected by the organization. The collective
strength of these forces in the task environment determines the
ultimate profit potential in the industry. The corporation must assess
the importance to its success of each of the six forces.

Model 3: Issues Priority Matrix

• Used to help managers decide which environmental trends should be
merely scanned (low priority) and which should be monitored as
strategic factors (high priority)

Model 4: Industry analysis (Group Map)

• An in-depth examination of key factors within a corporation’s task
environment.
What Environmental Forces Should Be Scanned?

Societal Environment (PEST)

Social-cultural Task Environment Economic

Forces (Industry) Forces

Shareholders Suppliers

Governments Internal
Environment
Special- Employees/
Interest Structures Labour Unions
Groups Culture
Resources
Customers Competitors

Creditors Trade Associations

Communities
Political-Legal Technological
Forces Forces
 1: Macro/Societal Environment
• PEST forces:
– Political-legal forces
• Allocate power, provide laws and regulations
– Economic forces
• Regulate the exchange of materials, money, energy, and
information
– Social-cultural forces
• Regulate values, mores, and customs
– Technological forces
• Generate problem-solving inventions
• Such factors usually are beyond the firms
control and sometimes present themselves as
threat.
• Changes in the external environment also
create new opportunities.
• STEP analysis.

4-105
 Model 1: PEST
Macro/Societal Environment: Important Variables

Political-legal Economic Social-cultural Technological

Antitrust regulations GDP trends Lifestyle changes Total government spending
for R&D
Environmental protection Interest rates Career expectations
laws Total industry spending for
Money supply Rate of family formation
R&D
Tax laws
Inflation rates Growth rate of population
Focus of technological
Special incentives
Unemployment levels Age distribution of efforts
Foreign trade regulations population
Wage/price controls Patent protection
Attitudes toward foreign Regional shifts in
Devaluation/revaluation New products
companies population
Energy availability and New developments in
Laws on hiring and Life expectancies
cost technology transfer from
promotion
Birth rates lab to marketplace
Disposable and
Stability of government
discretionary income Productivity improvements
through automation

3-106
 2: Task Environment
Forces Driving Industry Competition

MODEL 2:
5 Forces + 1
Relative Power

Other
Of Unions,
Governments,
Michael Porter’s
Stakeholders etc. Forces Driving
Industry Competition

3-107
 Model 2: Forces Driving Industry Competition

• Based on the model:

– Strong Force: a threat, because it is likely to
reduce profits
– Weak Force: an opportunity, because it may allow
the company to earn greater profits

3-108
 Porter’s model
• Corporation is concerned with the intensity of
competition within its industry.
• Collective strength of these forces determine
the ultimate profit potential of the industry.
• A strategist can analyze industry by rating
each competitive force as high, medium or
low in strength.
 Threat of New Entrants
• Bring new capacity
• Desire to gain market share, substantial
resources.
• Presence of entry barriers and the reaction
expected from existing competitors.
• No automobile companies have been
successfully established in U.S since 1930s.
 Entry Barriers
• Economies of scale(Intel Microprocessor)
• Product differentiation(Procter & Gamble Tide)
• Capital requirements( commercial airplanes)
• Switching costs( software programs in office)
• Access to distribution channels(shelf space for
small retailers)
• Cost advantage independent of size(Microsoft
operating system MS-DOS)
• Government Policy(licensing requirements)
Rivalry Among Existing Firms

Corporations are mutually dependent.

 Intense rivalry is related to the presence of
several factors:
• No of competitors( auto industry)
• Rate of industry growth( Airline industry)
• Product or service characteristics
• Amount of fixed cost
 Threat of Substitute Products or
Service
• A substitute product is a product that appears
to be different but can satisfy the same need
as another product.
• E-mail is substitute for the fax, water is
substitute for cola.
• Substitute limit the potential returns of an
industry by placing a ceiling on the prices
firms in the industry can profitably charge.
 Bargaining Power of Buyers
• A buyer purchase a large proportion of the
seller’s product or service(for example, oil filters
purchased by a major auto maker)
• A buyer has the potential to integrate backward
by producing the product itself( a newspaper
chain could make its own chain)
• Alternative suppliers are plentiful because the
product is standard or undifferentiated(motorists
can choose among many gas station)
• Changing suppliers cost very little
 Bargaining Power of Suppliers

Suppliers affect an industry through their ability

to raise prices or reduce the quality of
purchasing goods and services.
• A supplier or supplier group is powerful if some of the following
factors are apply:
• The supplier industry is dominated by a few companies, but it sells
to many(petroleum industry)
• Its product or service is unique and/or it has built up switching
costs( word processing software)
• Substitutes are not readily available.
• Suppliers are able to integrate forward and compete directly with
their present customers.(a microprocessor producer such as Intel
can make PCs)
• A purchasing industry buys only a small portion of the supplier
group’s goods and services and is unimportant to the supplier(sales
of lawn mover tiers are less important to the tier industry than the
sales of auto tires)
 Relative Power of Other Stakeholders
• Governments
• Creditors
• Trade associations
• Special interest groups
• Unions
• Shareholders
• Why are some companies better able to adapt
than others?

4-119
• Difference in ability of managers to recognize
and understand external strategic issues and
factors.

4-120
 Model 3: Issues Priority Matrix
Used to help managers decide which environmental trends
should be merely scanned (low priority) and which should be
monitored as strategic factors (high priority)
Probable Impact on Corporation

High Medium Low

High High Medium
High Priority Priority Priority
Probability
High Medium Low
Of Medium
Priority Priority Priority
Occurrence
Medium Low Low
Low Priority Priority Priority

3-121
 Model 4: Industry Analysis
• Industry
A group of firms producing a similar product or
service, such as soft drinks or financial services.

• Strategic Groups
– A set of business units or firms that pursue similar
strategies with similar resources.

3-122
 Model 4: Industry Analysis (Group Map)

3-123
 Competitive Analysis
Who are my competitors?

How do I analyze them?

SWOT Analysis Porter’s Five Forces Strategic Group Maps PEST analysis
There are many ways to analyze
your competitors; we’ve selected
Strategic group map of the video game industry the strategic group map technique.
High After answering a few questions,
Game
you’ll be ready to draw a strategic
publisher
Sony, map for your industry. This map will
Complexity s Sega,
of game
Nintendo illustrate the competitive forces
Arcade within your industry, your
Low
owners competitive position, and your
Arcades Consoles PCs
competitors’ positions.
Distribution channels
 Creating a strategic group map
1. Identify the two top competitive
factors in your market.
One competitive factor should be Hi
expressed in a high to low range. The
gh
other variable is more flexible, but Product
price
should still reflect the most important
competitive factor in your market.
These two factors will be the X and Y Lo
map variables. Hi w Bro Narr
Strategic focus differentiation
Market
gh ad ow
penetration

Lo
Hi w Specialty focus Broad range Low cost focus

gh Product line mix

Brand
image

Possible axes for your strategic map

Lo
w Direct mail Retail stores Online

Distribution channels
Creating a strategic group
map
2. List your five nearest competitors.
1. (Direct)
These can be indirect or direct competitors
but should be companies that compete
closely with your product or service. 2. (Direct)
These are the strategic groups that you’ll
plot on your map.
3. (Direct)

4. (Direct)

5. (Indirect)
 Creating a strategic group
3.
map
Create groups of competitors that fall into the same strategic space.
Looking at the list from Step 1 and the criteria from Step 2, assess each competitor’s
strengths and weaknesses against the competitive factors. You should have 2-3
groups. Include your own company in one of the groups.
Consider strengths that the companies have individually and strengths that they
share.
Consider unique characteristics of each company’s product or service as well as any
feature a company’s product or service lacks.
Consider market share, marketing approach, and product mix as well as any other
relevant, industry-specific factors.

4. Plot the strategic groups from Step 3 on your map.

Draw circles around each group, making circles proportional to the size of each
group's share of total industry sales.
 Build your own map
Fill in the text boxes below with the information you’ve gathered in the previous slides. Adjust the size of the
circles as needed and place them in the map.

High Title of map goes here

List strategic group

members here
Competitive
factor #1
goes here

List strategic group

members here Low

Range of factor

Competitive factor #2 goes here

List strategic group
members here
 Review your new map
Assess both the overall map and the position of each In his book, Competitive Strategy,
group. Michael Porter recommends
Are there any “empty” areas on the map that you or one of your these analytical steps:
competitors could move into by revising an existing product or Identify mobility barriers: Look
launching something new? at the qualities that protect each
Could you improve your strategic position by moving to a group from attack by other
different strategic group? groups. This can help you to
predict threats to the groups.
What advantages do your competitors have that you lack? Are
they significant to your position on the map or not? Chart directions of strategic
movement: Draw arrows from
If there are more than two important competitive factors in your each group that represent the
industry, you can draw additional maps to get a more complete direction in which the group
analysis of your competitive environment. seems to be moving in strategic
space.
Predict reactions: Firms in the
same group often react to an
industry event in the same way.
 Bharti Airtel
• Largest Private Integrated Telecom Company in India

• 3th Largest Wireless Operator in the World by

subscriber base.

• Largest & Fastest Growing Wireless Operator in India

• Largest Telecom Company listed on Indian Stock

Exchange

GROUP 7 130
 Business Divisons
Mobile Services Enterprise Services
– 2G/3G – Carrier
– GSM Mobile Service – Corporate

Telemedia Services
– Fixed Line
– Broadband
– DTH

GROUP 7 131
 Vision 2015
• By 2015 airtel will be the most loved brand,
enriching lives of millions.
 Vision 2020
• To build India's finest business conglomerate
by 2020
• Supporting education of underprivileged
children through Bharti Foundation
 Mission
• “ We at Airtel always think in fresh and
innovative ways about the needs of our
customers and how we want them to feel. We
deliver what we promise and go out of our
way to delight the customer with a little bit
more”
 Core Values
• Empowering People
• Being Flexible
• Making it Happen
• Openness and transparency
• Creating Positive Impact
 Objectives/Goals
• To undertake transformational projects that
have a positive impact on the society and
contribute to the nation building process.
• To Diversify into new businesses in
agriculture, financial services and retail
business with world-class partners
• To lay the foundation for building a
“conglomerate” of future
 Indian Telecom Sector
• Fastest Growing Sector across the world adding 15 to 20
million subscriber every month– CAGR 22% (2002-07)
• Crossed 500 Mn Mobile subscriber mark in Dec 2009.

• Second Largest Telecom Market

– Lowest tariff charges in the world
– Wireless Subscribers – 723.28 Mn(by Sep 2010)
– Teledensity – 60.99%

• 23 Circles - 4 Categories ( Metro, A, B & C)

• Bharti Airtel – Largest player with presence in 23 Circles

GROUP 7 137
 Tariff Wars
• Indian is most competitive market in the
world which has led to the tariff wars.
• Revenue growth has impacted significantly.
• Increase in Churn

GROUP 7 138
 Why Mad Rush for Telecom ??
Large number of additions Low teledensity (depicting Telecom
in telecom subscribers large untapped potential) Advantage

250 24

Teledensity (in percent)

Subscribers (in million)

18.3 19.9 20
200
12.8 16
150
9.1 12
225.21
100 7.0
206 8
5.1 140.3
50 98.4 4
53 76
0 0
2002–03 2003–04 2004–05 2005–06 2006–07 2007–08 (as
of June
2007)
Telecom Subscriber Base Teledensity

GROUP 7 139
Evolution of Telecom In India
Department of Telecommunication (DoT) is the main body formulating laws and
various regulations for the Indian telecom industry.

ILD services was

BSNL was Number portability
Independent opened to Intra-circle merger
established was proposed
Private players regulator, TRAI, competition guidelines were
by DoT Calling Party Pays
were allowed in was established (CPP) was
established Attempted to (pending)
Value Added Go-ahead to implemented boost Rural
Services the CDMA telephony
technology
1994 1999 2002 2005 2007
2003 2004
INDIA

1992 2000 Internet Unified Access 2006

1997
telephony Licensing (UASL)
initiated regime was Broadband
introduced policy 2004 was
National Telecom Decision on 3G
NTP-99 led to Reduction of formulated—
Policy (NTP) was FDI limit was services (awaited)
migration from high- licence fees Reference targeting 20
formulated increased from
cost fixed license fee Interconnect million
49 to 74 percent
to low-cost revenue order was subscribers by
sharing regime issued 2010

ILD – International Long Distance

GROUP 7 140
Regulatory Framework
 74% FDI Investment

 Lack of Transparency in
Spectrum & License
Allocation

 3G Policy & MNP still

Pending

GROUP 7 141
 Declinging Tariff – Rising Revenue

Source: TRAI Report

GROUP 7 142
Economic Factors
GDP growth rate - Return to 9% 2011-12

Rising Tele-density – 60.99%

The per capita income grew by 10.5 per cent to Rs 44,345 in 2009-10
against Rs 40,141 in the year-ago period, according to the
government

Falling Handset Prices

 Changing Demographics

Demand for VAS & Broadband

services Among Youth

28 % Urban Population(2008)

Rapid Urbanization

Rising Income level

Source: Mckinsey Report

Technology
CDMA – Already there are big
players in this segment 2G/3G
Reliance , Tata

3G – Value added services

potential still to be tapped
fully VoIP Technology CDMA

2G/3G – GSM Currently

commands 70% of mobile
subscribers in India WIMAX
Voice over internet protocol
Worldwide interoperability for
microwave access
Porter’s Generic Strategy

GROUP 7 146
 Porter’s 5 Forces
Customer
Bargaining
Power

Threat of
Threat from Threat of
New Competition Substitutes
Entrants

Supplier
Bargaining
Power

GROUP 7 147
 1. Threat from Competition
Wireless Market – Top 4 acquire 75% market share

HIGH

GROUP 7 148
 Competitor Analysis
Competitor Analysis
40.00%

30.00%

20.00%

10.00%

0.00%
Bharti Rcom IDEA MTNL

OP Margin Net Margin

Company Sep-07 Sep-08 Sep-072 Sep-083
Best OP Margins &
Net Profit Margins Bharti 43.00% 38.00% 26.40% 19.30%
among Peers Rcom 37.90% 31.60% 23.90% 13.20%
IDEA 32.80% 26.60% 14.10% 6.50%
MTNL 23.70% 22.90% 7.00% 6.80%
Source: CMIE November 2008

GROUP 7 149
 2. Customer Bargaining Power
 Lack of differentiation among Service HIGH

Providers
 Cut throat Competition
 Low Switching Costs
 Number Portability will have –Ve Impact

GROUP 7 150
3. Suppliers Bargaining Power
LOW

GROUP 7 151
 4. Threat of Substitutes
 Landline DIMINISHING MARKET HIGH
 CDMA

 Video Conferencing
BROADBAND
SERVICES
 VOIP - Skype, Gtalk, Yahoo Messenger
 e-Mail & Social Networking Websites

GROUP 7 152
5. Threat of New Entrants
 Huge License Fees to be paid upfront & High gestation
period
LOW
 Spectrum Availability & Regulatory Issues

 Infrastructure Setup Cost - High

 Rapidly changing technology

GROUP 7 153
SWOT
Strengths Weakness
• Largest Telecom Player in • Outsourcing of Core
India - ~80Mn, 22.6% Systems
• Strategic Alliance with other • Lack of emerging market
stakeholders in Bharti Airtel investment opportunity
include Sony-Ericsson,
Nokia - and Sing Tel
• Pan India Presence
• Strong Financials

Source: CMIE Report NOV 08

GROUP 7 154
SWOT
Opportunities Threats
• Bharti Infratel – Cutting • India centric – Major
Down cost in Rural area revenues from India
• Match Box Strategy – Scale • Falling ARPU
of Penetration
• Intense Competition &
• Current Tele-Density – 30.6
is still low among Shortage of Bandwidth
developing countries
• Low Broadband
Penetration, Rural
Telephoney

GROUP 7 155
 BCG Matrix for Bharti Airtel
Stars ?
Retail
Mobile Services Insurance
DTH & IPTV

Broad Band
Cows Dogs
• Fixed Line Services
LOW

HIGH LOW
GROUP 7 156
 GE Matrix Classification
Business Strength
Strong Medium Weak
5.00
High
Market Attractiveness

3.67
Medium

2.33
Low

GROUP 7 157
5.00 3.67 2.33 1.00
Factors Underlying Market Attractiveness
Factors Weight Rating Value =
(1 –5) (Weight * Rating)
Resource availability 0.20 3.5 0.7

Overall market size 0.15 4 0.6

Annual Market growth rate 0.20 4 0.8

Profitability 0.15 4 0.6

Competitive intensity 0.10 4 0.4

Technological requirements 0.20 4.5 0.9

Total 1.0 4.0

GROUP 7 159
Factors Underlying Market/Biz Strength
Factors Weight Rating Value =
(1 –5) (Weight * Rating)

Market share 0.15 5 0.75

New product development 0.10 3.5 0.35

Brand Image 0.10 4 0.40

Sales force 0.15 3 0.45

Pricing 0.15 3 0.45

Distribution capacity 0.10 4.5 0.45

Product quality 0.10 4.5 0.45

R&D Performance 0.15 3 0.45

Total 1.0 3.75

GROUP 7 160
Airtel’s GE Matrix
High Business Strengths Low

High 5.00
Attractive
Market Attractiveness

Airtel Enterprise
Mobile

3.67

Moderate
TeleMedia
Attractive
2.33

Unattractive

Low
GROUP 7 161
5.00 3.67 2.33 1.00
• Telemedia – Airtel Industry %
• BroadBand - 0.2 4.5 4
• Fixed Line 1.2 40 3
• Broadband ..HP and Airtel had a deal …
• As on March 31, 2008, the Company had
• 2,283,328 customers (a growth of 22%), of which 34.8%
• (~795,000) were subscribing to broadband / internet
• services.

• Broadband subscribers - 4.38 million at the end of June 2008 as compared to 3.87 million at the end of March 2008 (growth
rate @ 13.18%)Out of total 4.38 million broadband subscribers, 3.72 million are DSL based; 0.42 million Cable Modem; 0.11
million Ethernet LAN; 0.045 million Fiber; 0.057 million Radio, Leased Line 0.018 million and 0.005 million use other
technologies.

• The key financial results of the Long Distance Services

• division for the year ended March 31,2008 are presented
• below. About 25% growth ..

• Enterprise Services – Corporates--- 49% growth ….

GROUP 7 162
 Airtel – Strategy
MANTRA : Focus on Core Competencies and
Outsource the rest!
Product
Innovation

Core
Pricing VAS
Competencies

Marketing
and
Branding
 Strategy
• Airtel partnered with leading players in
telecommunication players across the globe.
• It has managed to work with the best of
domain specialists globally and emerge as a
world class entity.
• Partnerships include operational contracts
with marquee vendors and strategic investors
ranging from private equity investors to global
telecom giants.
Strategic partnerships/ Shareholders –
Technology and Capital
• Warburg Pincus – a celebrated PE investor
held a stake for a substantial period of time
and was instrumental in providing Airtel
support in its early stages.
• Vodafone was a strategic investor in Airtel.
• Temasek – the Singapore based investor holds
a considerable stake in it.
• Was also affiliated with Singapore Telecom.
 Outsourcing deals in 2004
• Ericsson was given the mandate to
provide, manage and maintain the equipment
as well as provide quality assurance in Airtel‘s
then 13 mobile circles.
• IBM was given the mandate to handle the
back office requirements of Airtel’s presence
in India
 Operational Strategies.
• Higher emphasis on ARPU/min – stark contrast
with other operators who concentrate on ARPU
only.
• Aim to be become a one stop shop for all
telecommunication services under the Bharti
umbrella.
• Exploring opportunities in international markets.
• Hived off tower infrastructure into a separate
entity.
 Performance till date
• Bharti Airtel has enjoyed an excellent run ever
since the telecom sector opened.
• It has managed to hold on to its leadership
position inspite of the presence of other
players with deep pockets –
Ambani’s, Tata’s, Birla’s and Vodafone.
• Has coped well with regulatory changes.
• Continues to attract and delight customers.
 Future Strategies
• Translate its expertise in Indian markets to other
emerging economies.
• This could call for acquisitions globally.
• Technology leadership is a must – Airtel must
ensure that its reliance on GSM technology does
not render it obsolete.
• Indian market inspite of being the worlds largest
is still not matured. Opportunities abound in the
hinterland which must be exploited.
Growth Factors
Infrastructure
Sharing

Rural
Growth Managed
Telephony Services
Factors

Enterprise
Telecom

GROUP 7 170
Road Map – Growth Path

VPN & VoIP

WiMAX

3G

2G/2.5G

GROUP 7 171
Airtel - Strategy
Product
Innovation

Pricing
Core VAS
Competencies

Marketing
and
Branding

MANTRA : Focus on Core Competencies and

Outsource the rest!
SBU
 HMT
• HMT is 50 year old public sector undertaking,
with 16 production units, 24 divisons, 35,000
employees and a large basket of products,
which include machine tools, flexible
manufacturing systems and factory
automation, tractors, printing machines, dairy
machinery, lamps and lamp making machines
and a wide range watches.
It is possible to group some of them, as they
are related in their basic function and the
markets they serve.
• HMT products can be grouped into five
groups.
Machine tools
Consumer products
Tractors
Engineering components and industrial
machinery
Technology and information systems.
• An SBU is a group of related businesses, that
can be treated as a unified for the purpose of
strategic planning.
The concept of strategic business unit
• It is scientific method of grouping the businesses
of a multi-business corporation, which helps the
firm in strategic planning.
• SBU can be taken and treated as one entity for
the purpose of strategic planning.
• Products within an SBU receive same strategic
planning treatment and priorities.
• Products/businesses that are related on the basis
of function are assembled together as a distinct
SBU. Unrelated products/businesses in any are
seprated.
• Grouping the businesses on SBU lines help in removing
confusion
• Each SBU is a separate business from the strategic
planning standpoint. In basic factors-mission,
objectives, competition and strategy-one SBU will be
distinct from other.
• Each SBU will have its own distinct set of competitors
and its own distinct strategy.
• Each SBU will have a CEO. He will be responsible for
strategic planning for the SBU and its profit
performance, he will also have control over the factors
affecting its profit.
 INTRODUCTION

BOSTON CONSULTING GROUP (BCG)

MATRIX is developed by BRUCE
HENDERSON of the BOSTON
CONSULTING GROUP IN THE EARLY
1970’s.

According to this technique, businesses or

products are classified as low or high
performers depending upon their industry
growth rate and relative market share.
 Relative Market Share
and Industry Growth
To understand the Boston Matrix
you need to understand how market
share and Industry growth
interrelate.
 MARKET SHARE
• Market share is the percentage of the total market that is
being serviced by your company, measured either in revenue
terms or unit volume terms.

• RELATIVE MARKET SHARE

• RMS = Business unit sales this year

Leading rival sales this year

• The higher your market share, the higher proportion of the

market you control.
 IINDUSTRY GROWTH
RATE
• Industry growth is used as a measure of a market’s
attractiveness.

• IGR = Individual sales - individual sales

this year last year
Individual sales last year

• Industries experiencing high growth are ones where the total

market share available is expanding, and there’s plenty of
opportunity for everyone to make money.
 THE BCG GROWTH-SHARE
MATRIX
• It is a portfolio planning model which is based on the
observation that a company’s business units can be classified
in to four categories:
 Stars
 Question marks
 Cash cows
 Dogs

• It is based on the combination of market growth and market

share relative to the next best competitor.
 STARS
High growth, High market share

• Stars are leaders in business.

• Stars are net users of resources.
• They also require heavy investment, to
maintain its large market share.
• It leads to large amount of cash
consumption and cash generation.
 Stars
• Investment—continue to invest for capacity
expansion
• Earnings—Low to high earnings
• Cash-flow—Negative (net cash user)
• Strategy Implications
– Continue to increase market share—even at the
expense of short-term earnings
 CASH COWS
Low growth , High market share

• They are foundation of the company and

often the stars of yesterday.
• Cash Cows are net generators of resources.
• They generate more cash than required.
• They extract the profits by investing as little
cash as possible
• They are located in an industry that is
mature, not growing or declining.
 DOGS
Low growth, Low market share

• Dogs are the cash traps.

• Dogs do not have potential to bring in
much cash.
• Number of dogs in the company should be
minimized.
• Business is situated at a declining stage.
 Dogs
• Investment
– Gradually reduce capacity
• Earnings—High to low
• Cash-flow
– Positive (net cash contributor) if deliberately
reducing capacity
• Strategy Implications
– Plan an orderly withdrawal to maximize cash flow
 QUESTION MARKS
High growth , Low market share

• Most businesses start of as question marks.

• They will absorb great amounts of cash if
the market share remains
unchanged, (low).
• Why question marks?
• Question marks have potential to become
star and eventually cash cow but can also
become a dog.
• Investments should be high for question
 Question Marks
• Investment—heavy initial capacity
expenditures and high R&D costs
• Earnings—negative to low
• Cash-flow—negative (net cash user)
• Strategy Implications
– If possible to dominate segment, go after share. If
not, redefine the business or withdraw
 BCG Matrix
(Three Paths to Success)
• Continuously generate cash cows and use the
cash throw-up by the cash cows to invest in
the question marks that are not self-
sustaining
• Stars need a lot of reinvestments and as the
market matures, stars will degenerate into
cash cows and the process will be repeated.
• As for dogs, segment the markets and nurse
the dogs to health or manage for cash
Three Paths to Success (cont’d)
Relative Market Share
High Low

High

Market
Growth
Rate

Low
 BCG Matrix
(Three Paths to Failure)
• Over invest in cash cows and under invest
in question marks
– Trade further opportunities for present cash
flow
• Under invest in the stars
– Allow competitors to gain share in a high
growth market
• Over milked the cash cows
 Three Paths to Failure (cont’d)
Relative Market Share
High Low

High

Market
Growth
Rate

Low
 WHY BCG MATRIX ?

To assess :
 Profiles of products/businesses
 The cash demands of products
 The development cycles of products
 Resource allocation and divestment
decisions
 MAIN STEPS OF BCG MATRIX
• Identifying and dividing a company into SBU.
• Assessing and comparing the prospects of
each SBU according to two criteria :
1. SBU’S relative market share.
2. Growth rate OF SBU’S industry.
• Classifying the SBU’S on the basis of BCG
matrix.
• Developing strategic objectives for each SBU.
BCG MATRIX WITH CASH FLOW
 BENEFITS
• BCG MATRIX is simple and easy to understand.
• It helps you to quickly and simply screen the
opportunities open to you, and helps you
think about how you can make the most of
them.
• It is used to identify how corporate cash
resources can best be used to maximize a
company’s future growth and profitability.
 LIMITATIONS

• BCG MATRIX uses only two

dimensions, Relative market share and market
growth rate.
• Problems of getting data on market share and
market growth.
• High market share does not mean profits all
the time.
• Business with low market share can be
profitable too.
 PRACTICAL USE
• MAHINDRA & MAHINDRA
• HLL
• IES
 BCG MATRIX

scorpio

Jeep
balero
 CONCLUSION

Though BCG MATRIX has its limitations it is one

of the most FAMOUS AND SIMPLE portfolio
planning matrix ,used by large companies
having multi-products.
GE(General Electric)/McKinsey Multi-
Factor Matrix
• Originally developed by GE’s planners
drawing on McKinsey’s approaches
• Market attractiveness is based on as many
relevant factors as are appropriate in a
given context
• Business-position assessment also made
on a many factors
– SBU needs to be rated on each factor
GE Multifactor Portfolio Matrix
Industry Attractiveness

High Medium Low

Protect Invest to Build

High Position Build selectively

Selectively Limited
Build manage for expansion or Invest/Grow
Medium selectively earnings harvest
Selectivity
/earnings
Protect & Manage for
Low refocus earnings Harvest
Divest /Divest
 Industry Attractiveness
• Industry potential
• Current size of the industry
• The rate of growth of the industry
• The industry structure
• Profitability of industry
 Company's Business Strength
• Current market share
• Growth rate
• Differentiation strength
• Brand Image
• Corporate image