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SARANSHLast Mile Referencer for
STRATEGIC
MANAGEMENT
The Institute of Chartered

Accountants of India
(Setup by an Act of Parliament)
Board of Studies (Academic)
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Saransh - Last Mile Referencer for Strategic Management
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PREFACE
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Mile Referencer for Strategic Management’ wherein the significant concepts dealt
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CA. Aniket S. Talati

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Accounting, Auditing & Cost Management and Strategic Decision Making in this series of
Saransh — Last Mile Referencer, publications for these subjects, Financial Management,
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INDEX
Topic Pg No.
STRATEGIC MANAGEMENT
Introduction to Strategic Management 1
Dynamics of Competitive Strategy 4
Strategic Management Process 9
Corporate Level Strategies 12
Business Level Strategies 14
Functional Level Strategies 19
Organisation and Strategic Leadership 23
Strategy Implementation and Control 25
© ICAI BOS(A)
SARANSH
© ICAI BOS(A)
SARANSH Strategic Management
STRATEGIC MANAGEMENT
CHAPTER 1 : INTRODUCTION TO STRATEGIC MANAGEMENT

Business Policy Concept of Strategy
“The common thread among the organization’s activities and
Origin
product-markets that defines the essential nature of business
• Origin of business policy is traced back to 1911. that the organization has or planned to be in future.”
• In 1969, the American Assembly of Collegiate Schools of - Igor H. Ansoff
Business, made the course a mandatory requirement for
business schools. “A unified, comprehensive and integrated plan designed to
• During the next few decades, it spread to mamagement
assure that the basic objectives of the enterprise are achieved.”
institutes across different nations.
- William F. Glueck
'HÀQLWLRQ
Respond to
“The study of the functions and responsibilities of senior dynamic and
management, the crucial problems that affect success in the hostile external
total enterprise, and the decisions that determine the direction forces
of the organization and shape its future.” Bring a sense Unravel
complexity
- Christensen of dynamic
and to reduce
direction, focus
and cohesiveness uncertainty of the
Strategy is environment
Importance consciously
considered and
flexibly designed
scheme of corporate
It tends to Long range intent and action
emphasise on the Exploit
blueprint of
rational analytical opportunities and
desired image,
aspect of strategic meet potential
direction and
management. threats
destination
Pursuit of
mission,
It presents a It enables a objectives to
framework for manager for achieve goals
understanding strategic handling general
decision making in management
organisations. responsibilities
effectively.
Strategy - Partly proactive and partly reactive
Proactive
Concept of Management
Strategy
Management is an influence process to make
things happen, to gain command over phenomena, Reactive
to induce and direct events and people in a
particular manner. The term is often used :
A company’s strategy is typically a blend of partly proactive
As a key group in an organisation in-charge and partly reactive.
of its affairs. Proactive Strategy: Proactive actions on the part of
managers to improve the company’s market position and
financial performance.
As a set of interrelated functions and Reactive Strategy: Reactions to unanticipated developments
processes carried out by the management of and fresh market conditions.
an organisation to attain its objectives.
© ICAI BOS(A) 1
Abandoned Strategy Features
Planned Strategy
Company New initiatives plus ongoing strategy
Experiences, features continued from prior periods
Know-how,
Actual
Resource Strength
Company
& weaknesses, and
Strategy
competitive
capabilities Reactive Strategy
Adaptive reactions to changing
circumstances
Figure: A company’s actual strategy is partly planned & partly reactive
Strategic Management Importance of Strategic Management

Strategic Management is very important for the survival and growth
Process of developing a strategic vision, setting objectives, of business organizations in dynamic business environment.
crafting a strategy, implementing and evaluating the
strategy, and initiating corrective adjustments where
deemed appropriate.
Defines the
goals and Helps the
mission. organisation to
Enhance the develop certain
longevity of core competencies
Concept Objectives the business. and competitive
advantages
To create competitive
Managerial process
advantage, so that the Helps
to develop vision, Importance
company can outperform organisations to
set objectives, craft, Serves as of Strategic
the competitors in order a corporate be proactive
implement and evaluate Management instead of reactive
to have dominance over defense
strategy. in shaping its
the market. mechanism
against mistakes future.
and pitfalls.
Initiate corrective To guide the company Provides
framework
adjustments successfully through Prepares the for all major
where deemed all changes in the organisation decisions of an
appropriate. environment. to face the enterprise.
future.
© ICAI BOS(A) 2
Limitations of Strategic Management
Environment is highly complex and turbulent. It is

Strategic management is a costly process. It add lot of
difficult to understand the complex environment and
expenses to an organization.
exactly pinpoint how it will shape-up in future.
Competition is unpredictable. It is difficult to clearly

Strategic management is a time-consuming process. estimate the competitive responses to a firm’s
strategies.
Strategic Levels in Organisations

Three main levels: Corporate, Business & Functional
Corporate Level Head office

CEO, Board of Directors other senior executives and corporate staff
Business Level
Division A Division B
Divisional managers and staff
Functional Level Business Business

Functional managers Functions Functions
Figure: Level of Strategic Management
Strategic Management
in Government and Not-
IRUSURÀW2UJDQLVDWLRQV Educational Medical Governmental agencies
Institutions Organizations and departments
• There are many organizations • Significant change in the • Advances in the diagnosis • Formulating, implementing,
that do not have any competitive climate and treatment of diseases and evaluating strategies
commercial objective of • Adopting different • Providing better facilities • Efficient and effective
making profits. strategies for attracting and services to the utilization of resources
• They are set up for social, best students patients • Public funds are used.
charitable, or educational • There are interactions • Diversification - hospitals • Several government
purposes. between Academic opening pathological labs organizations are making
institutions and • Better collaboration with significant surpluses
• There are not-for-profit and industries physicians • Little freedom to alter
government organizations that • Online education is new missions or redirect
outperform many private firms phenomena objectives.
in managing their affairs.
• Legislators and politicians
• Often function as a monopoly, can have direct or indirect
produce a product or control.
service that offers little or no • Issues get discussed and
measurability of performance. debated in the media and
• Dependent on outside legislatures.
financing.
© ICAI BOS(A) 3
CHAPTER 2 : DYNAMICS OF COMPETITIVE STRATEGY

Competitive Strategy Strategy Balance
An organization must identify its position relative to the evolves over of external
competitors in the market. Competitive strategy generates Risk
a period and internal
competitive advantage, increase the loyalty of customers and of time factors
beat competition. A competitive strategy consists of:
Strategy is result Strategic analysis involves Identify potential
Attract customers
of a series of small a workable balance imbalances or risks
decisions taken between diverse and and assess their
over extended conflicting internal and consequences.
period of time.
Withstand competitive pressures external considerations.
Issues to consider for Strategic Analysis

Strengthen an organization’s market position Time
Short-term Long-term
Having a competitive advantage is necessary for a firm to Errors in interpreting Changes in the
External
compete in the market. the environment cause environment lead
Strategic Risks strategic failure to obsolescence of
strategy
Competitive Landscape
Competitive landscape refers to a process or method of
Organizational Inconsistencies
identifying direct or indirect competitors to help comprehend
capacity is unable with the strategy
Internal
their mission, vision, core values, niche market, strengths, and

to cope up with are developed on
weaknesses.
strategic demands account of changes
Competitive intelligence is required to understand competitive
in internal capacities
landscape. The cognitive faculty of mind and the information
and preferences
input involved here is referred to as competitive intelligence
Framework of Strategic Analysis
Strategic Analysis
Put all the External Analysis Internal Analysis

information
together Customer Analysis: Performance Analysis:
Determine the
weakness of the Segments, Motivations, Profitability, sales, customer
competitors unmet needs. satisfaction, product quality,
Determine the
strengths of the Competitor Analysis: relative cost, new products,
competitors Strategic groups, human resources.
performance, obectives, Determinants Analysis:
Understand the
competitors strategies, culture, cost Past and current strategies,
structure. strategic problems,
Identify the Market Analysis: organizational Capabilites
competitor Size, growth, profitability, and constraints, Financial
entry barriers. resources, strengths, and
Environmental Analysis: weaknesses.
Steps to understand the Competitive Landscape Technological, government,
economic, cultural,
demographic.
Strategic Analysis
Proper diagnosis of the company’s situation is necessary for
managerial preparation for deciding on a sound long-term Opportunities, threats, Strategic strengths,
direction, setting appropriate objectives, and crafting a winning trends, and strategic, weaknesses, problems,
strategy. The analytical sequence is from strategic appraisal of the uncertainties constraints and uncertainties
external and internal situation, to evaluation of alternatives, to
choice of strategy. Two most important situational considerations
are:
Strategy Identification & Selection
(1) industry and competitive conditions and
• Identify strategic alternatives
(2) an organisation’s own competitive capabilities, resources, • Select strategy
internal strengths, weaknesses, and market position. • Implement the operating plan
• Review strategies
© ICAI BOS(A) 4
Industry and Competitive Analysis

Industry and competitive analysis provides a way of thinking strategically about any industry’s overall situation and drawing conclusions about
whether the industry represents an attractive investment for organisational funds.
Dominant
Issues in Industry Economic Features
Factors to consider include size, of market, its growth rate, position in life
and Competitve of the Industry
cycle, rivals, buyers, profitability, capital requirement, etc.
Analysis
Delving into the industry’s competitive process to discover what the main
Nature and Strength
sources of competitive pressure are and how strong each competitive
of Competition
force is.
There are driving forces that impact and bring changes in the industry’s
Triggers of Change structure and competitive environment. Analyzing driving forces involves
identifying what the driving forces are and assessing their impact.
Strategic Group It is done by comparing the market positions of each competitor

Mapping separately or for grouping them into like positions in an industry.
Likely Strategic To outmanoeuvre rivals organisations need to monitor actions, strategies,

Moves of Rivals and anticipate likely moves of competitors.
They are strategy elements, product attributes, resources, competencies,

Key Success Factors competitive capabilities, and business outcomes that affect ability to
prosper and lead to competitive success or failure.
Prospects and Financial Strategists assess industry outlook carefully, decide whether industry and
Attractiveness of competitive conditions present an attractive business opportunity for the
Industry organisation or whether its growth and financial prospects are gloomy.
Core Competence
C.K. Prahalad and Gary Hamel defined core competency as the collective learning in the organization, especially
coordinating diverse production skills and integrating multiple streams of technologies. Capabilities that are
valuable, rare, costly to imitate, and non-substitutable are core competencies.
Competitor
C.K. Prahalad Competence that is unique and difficult for competitors to imitate.
differentiation
and Gary Hamel
identified major
core competencies
in three areas
- competitor Customer value A fundamental benefit for the end customer that has real impact.
differentiation,
customer value
and application.
Application of Competence must be applicable to whole organization and can open

competencies up potential market to be exploited.
© ICAI BOS(A) 5
How to build Core Competencies Competitive Advantage

Strategic
Competitiveness
Above-average
returns
Capabilities
(Organizational Routlines)
Competitive
Advantage
Building
Core
Competencies Resources
Tangible Intangible
Core
Competencies Physical Financial Human Skills Technology Reputation
Capabilities
Team of Four Criteria
of Sustainable Value Chain Value Creation
resources Analysis
Advantages The concept of value creation was introduced primarily for
• Rare • What to do in-house providing products and services to the customers with more
Resources • Valuable • What to outsource worth. Value is measured by a product’s features, quality,
• Tangible
• Intang ible
• Costly to Imitate availability, durability, performance and by its services for which
• Nonsubstitutable customers are willing to pay.
Value Chain Analysis Value to Customer

Customer’s
Value chain analysis has been widely used as a means of Surplus
describing the activities within and around an organization, Price
and relating them to an assessment of the competitive strength
of an organization (or its ability to provide value-for-money Profitable
Pricing Band
products or services). The primary activities of the organization Firm’s
are grouped into five main areas: inbound logistics, operations, Margin
outbound logistics, marketing and sales, and service. For an
organisation it is important to identify those competences which
critically underpin the organization’s competitive advantage. Firm’s Cost of Value Creation
These are known as the core competences and will differ from
one organization to another.
0
Thus, we can say that the value creation is an activity or
Firm Infrastructure performance by the firm to create value that increases the worth
of goods, services, business processes or even the whole business
Support Human Resource Management
Activities Margin system.
Technology Develoment
Procurement
Inbound Operations OutboVnd Marketing & Service
Portfolio Analysis
logistics logisticT Sales Experience Curve
Margin Experience curve is akin to a learning curve which explains
the efficiency increase gained by workers through repetitive
productive work. Experience curve is based on the commonly
observed phenomenon that unit costs decline as a firm
Primary Activities accumulates experience in terms of a cumulative volume of
production. The concept of experience curve is relevant for a
Value Chain (Michael Porter) number of areas in strategic management.
Competitive Advantage
Competitive advantage allows a firm to gain an edge over rivals
when competing. ‘It is a set of unique features of a company and
Cost per Unit
its products that are perceived by the target market as significant

and superior to the competition.’
Competitive advantages and the differences they create in
the firm’s performance are often strongly related to the resources
firms hold and how they are managed. Resources and capabilities
are not inherently valuable, but they create value when the
firm can use them to perform certain activities that result in a
competitive advantage. Cummulative Production in Units
© ICAI BOS(A) 6
Product Life Cycle

Product life cycle (PLC) an S-shaped curve which exhibits the Market penetration
relationship of sales with respect of time for a product that passes refers to a growth strategy where the business focuses on
through the four successive stages of introduction (slow sales selling existing products into existing markets.
growth), growth (rapid market acceptance) maturity (slowdown
in growth rate) and decline (sharp downward drift).
Market development
refers to a growth strategy where the business seeks to sell its
existing products into new markets.
Product development
y De
urit clin
Mat refers to a growth strategy where business aims to introduce
Sales
e
new products into existing markets.
th
ow
Gr
ction
Diversification
du
Intro
refers to a growth strategy where a business markets new
Time products in new markets.
Product Life Cycle
C. ADL Matrix
A. Boston Consulting Group (BCG) Growth-Share Matrix The ADL matrix is a portfolio analysis technique that is based on
BCG helps to classify different businesses on a two-dimensional product life cycle. The approach forms a two dimensional matrix
growth-share matrix based on stage of industry maturity and the firms competitive
position, environmental assessment and business strength
assessment. Stage of industry maturity is an environmental
high measure that represents a position in industry’s life cycle.
QUESTION MARKS STARS
Competitive position is a measure of business strengths that helps
remainder select in categorization of products or SBU’s into one of five competitive
divested a few positions: dominant, strong, favourable, tenable and weak.
Low Market Share High Market Share
& &
High Market Growth High Market Growth Stage of industry maturity
The opportunities no one You’re well-established, Competitive Embryonic Growth Mature Ageing
knows what to do with. These and these are fantastic position
opportunities need serious opportunities.
Dominant Fast grow Fast grow Defend Defend
Market Growth
though as to whether increased

investment is warranted. invest Build Attend cost position position
barriers leadership Attend cost Renew
Act Renew leadership Focus
DOGS CASH COWS offensively Defend Renew Consider
liquidate position Fast grow withdrawal
Act Act
offensively offensively
Strong Differentiate Differentiate Lower cost Find niche
Low Market Share High Market Share
Fast grow Lower cost Focus Hold niche
& &
Attack small Differentiate Harvest
Low Market Growth Low Market Growth
firms Grow with
Your market presence is You’re well-established.
industry
weak. It’s going to be However, the market
difficult to make a profit. isn’t growing and your Favourable Differentiate Focus Focus Harvest
opportunities are limited. Focus Differentiate Differentiate Turnaround
low Fast grow Defend Harvest
Find niche
low Market Share high
Hold niche
Turnaround
Grow with
B. Ansoff’s Product Market Growth Matrix industry
A useful tool to decide product and market growth strategy. Hit smaller
firms
Existing Products New Products
Tenable Grow with Hold niche Turnaround Divest
industry Turnaround Hold niche Retrench
Markets
Existing
Market Product Focus Focus Retrench

Penetration Development Grow with
industry
Withdraw
Markets
Market Weak Find niche Turnaround Withdraw Withdraw

New
Diversification Catch-up Retrench Divest

Development Grow with Niche or
industry withdraw
Ansoff’s Product Market Growth Matrix
© ICAI BOS(A) 7
D. General Electric Matrix [“Stop-Light” Strategy Model] TOWS Matrix

The strategic planning approach in this model has been inspired
Heinz Weihrich developed a matrix called TOWS matrix by
from traffic control lights. The lights that are used at crossings to
matching strengths and weaknesses of an organization with the
manage traffic are: green for go, amber or yellow for caution, and
external opportunities and threats. The incremental benefit of
red for stop. This model uses two factors while taking strategic
the TOWS matrix lies in systematically identifying relationships
decisions: Business Strength and Market Attractiveness.
between these factors and selecting strategies on their basis.
Thus TOWS matrix has a wider scope when compared to SWOT
#VTJOFTT4USFOHUI analysis. TOWS analysis is an action tool whereas SWOT
analysis is a planning tool.
Strong Average Weak
Internal
Invest/ Strengths – S Weaknesses – W
.BSLFU"UUSBDUJWFOFTT
High Invest/Expand Select/Earn

Expand
List Strengths List Weaknesses
External
Medium
Invest/
Select/Earn Harvest/Divest Opportunities – O SO Strategies WO Strategies
Expand
Use strengths to Overcoming weaknesses
List Opportunities take advantage of by taking advantage of
opportunities opportunities
Low Select/Earn Harvest/Divest Harvest/Divest

Threats – T ST Strategies WT Strategies
Use strengths to Minimize weaknesses
List Threats avoid threats and avoid threats
The GE Portfolio Matrix
SWOT Analysis
To enable management create a firm-specific business model SO The strengths can be used to capitalize or build
that will best align, fit, or match an organisational resources and (Maxi-Maxi) upon existing or emerging opportunities.
capabilities to the demands of the environment.
ST is a position in which a firm strives

ST
to minimize existing or emerging threats
(Maxi-Mini)
through its strengths.
Strength Weakness
Strength is an A weakness is an
inherent capability inherent limitation The firm needs to overcome internal
of the organization or constraint of the WO
weaknesses and make attempts to exploit
which it can use organization which (Mini-Maxi)
opportunities to maximum.
to gain strategic creates strategic
advantage over its disadvantage to it.
competitors.
A firm facing external threats and internal
WT
weaknesses may have to struggle for its
(Mini-Mini)
survival.
Opportunity Threat
Globalization
An opportunity is a A threat is an
For a company globalization means two things: (a) the company
favourable condition unfavourable
commits itself heavily with several manufacturing locations
in the organisation’s condition in the
environment organisation’s around the world and offers products in several diversified
which enables it environment which industries, and (b) the company’s ability to compete in domestic
to strengthen its causes a risk for, markets with foreign competitors.
position. or damage to, the • It is a conglomerate of multiple units in different countries
organisation’s position. but linked by common ownership.
• Multiple units draw on a common pool of resources.
• The units respond to some common strategy.
© ICAI BOS(A) 8
CHAPTER 3: STRATEGIC MANAGEMENT PROCESS

STRATEGIC PLANNING STRATEGIC INTENT
Strategic Intent
Strategic Strategic Planning is the process of arriving Strategic intent is a commitment to carrying
Planning at a set of interactive and overlapping out an action or actions in the future. It
decisions regarding the objectives of the involves mental activities such as planning
firm, resources required to attain these and forethought. It may be expressed in
objectives and formulation of policies to such broad terms as vision and mission or
govern the acquisition, use and disposition more specifically as goals and objectives.
of resources and formulation of a strategy
that would enable the firm to outperform
its own aspirations/ competition. The elements of strategic intent are:
Corporate planning Vision

It depicts the organisation’s aspirations and provides a glimpse of what the
organization would like to become in future.
Strategic planning Operational planning
Characteristics of Strategic Characteristics of Mission

planning Operational planning A mission is an answer to the basic question ‘what business
t4IBQFT UIF PSHBOJTBUJPO BOE JUT t%FBMT XJUI DVSSFOU are we in and what we do’.
resources. deployment of resources.
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environmental variables. strategy. Business Definition
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organisation. into the future. It seeks to explain the business undertaken by the firm, with respect to the
t%FWFMPQT PWFSBMM PCKFDUJWFT BOE customer needs, target markets, and alternative technologies.
t.BLFT NPEJGJDBUJPOT UP UIF
strategies. business functions but not
t*T DPODFSOFE XJUI UIF MPOHUFSN fundamental changes.
success of the organisation. Business Model
t*T UIF SFTQPOTJCJMJUZ PG
t*T B TFOJPS NBOBHFNFOU functional managers. Business model, as the name implies is a strategy for the effective
responsibility. operation of the business, ascertaining sources of income, desired
customer base, and financial details.
STRATEGIC DECISION MAKING

Goals and Objectives
Strategic Decision These are the base of measurement. Goals are the end results, that the
Making “Strategic decisions encompass the organization attempts to achieve. On the other hand, objectives are time-
definition of the business, products based measurable targets, which help in the accomplishment of goals.
to be handled, markets to be served,
functions to be performed and major
policies needed for the organisation
to execute these decisions to achieve
the strategic objectives.” Goals and Objectives
The major dimensions of strategic decisions are as follows: Business Model
Involvement of top management Business Definition
Substantial resource commitment

Mission
Consideration of factors in the external environment
Vision
Significant impact on the long-term prosperity of the firm
Future oriented- high degree of futurity Strategic

Intent
Multifunctional and multi-business implications
© ICAI BOS(A) 9
VISION
A Strategic vision is a road map of a company’s future – providing specifics about technology and
customer focus, the geographic and product markets to be pursued, the capabilities it plans to
develop, and the kind of company that management is trying to create.
The essentials of a strategic vision are:
Challenge in developing a strategic vision that is Forming a strategic vision is an exercise

creative and future directed. in intelligent entrepreneurship.
Essentials of
Strategic Vision
A well-articulated strategic vision Vision statement illuminates the direction in
creates enthusiasm in organisation. which organization is headed.
MISSION
A company’s mission statement is typically focused on its present business scope – “who we
are and what we do”. Mission statements broadly describe an organizations present capabilities,
customer focus, activities, and business makeup.
Points must be considered while writing a mission statement of a company are:
Needs which business The mission of a

To establish the special tries to satisfy, company should not
Good mission
identity of the business customer groups it be to make profit.
statements should
- one that typically wishes to target and Surpluses may be
be unique to the
distinct it from other the technologies and required for survival
organisation for which
similarly positioned competencies it uses and growth, but
they are developed.
companies. and the activities it cannot be mission of a
performs. company.
GOALS AND OBJECTIVES
Goals Objectives
Goals are open-ended attributes that denote the Objectives should be quantitative, measurable,
future states or outcomes. Objectives are close- realistic, understandable, challenging, hierarchical,
ended attributes which are precise and expressed obtainable, and congruent among organizational
in specific terms. Thus, the Objectives are more units. Objectives are short-term and long-term.
specific and translate the goals to both long term Long term objectives are subdivided into short
and short-term perspective. term such as monthly, weekly or daily objectives.
© ICAI BOS(A) 10
STRATEGIC MANAGEMENT MODEL The strategic management consists of following stages:
The strategic management process is dynamic and First a company must determine what directional
continuous. It involves strategy formulation, implementation, path the company should take and what changes
and evaluation. The major components of the strategic in the company’s product – market – customer
management process are shown in the model. – technology – focus would improve its current
Strategic
market position and its future prospect.
vision,
Deciding to commit the company to one path
mission and
Environmental versus another pushes managers to draw some
Analysis objective
carefully reasoned conclusions about how to
try to modif y the company’s business makeup
and the market position. Corporate goals and
Develop Generate, Strategic objectives flow from the mission.
Vision, Mission Analyse, and Implement Evaluation
and Objectives select Strategies Strategies and Control
Organisation
The stage would reveal organisational strengths
Appraisal and weaknesses which could be matched with
the threats and opportunities in the external
environment. External environment of a firm
Environ-
consists of economic, social, technological, market
Formulation Implementation Evaluation mental and
and other forces which affect its functioning.
organizational
Strategic Management Model Organisational analysis involves a review of
analysis
financial resources, technological resources,
productive capacity, marketing and distribution
STAGES IN STRATEGIC MANAGEMENT effectiveness, research and development, human
resource skills and so on.
Developing a The stage involves identif ying strategic

strategic vision Formulating alternatives, in depth analysis and choosing the
and formulation strategy most appropriate alternative which will serve
of statement of as strategy of the firm.
mission, goals and
objectives.
Environmental 1 Implementation and execution is an operations-
and oriented, activity aimed at shaping the
organisational performance of core business activities in a
analysis. Implemen- strategy-supportive manner. Good strategy
2
tation of execution involves creating strong “fits” between
strategy strategy and organizational capabilities, between
STAGES IN
Formulation STRATEGIC strategy and the reward structure, between
3 strategy and internal operating systems, and
of strategy. MANAGEMENT
between strategy and the organization’s work
climate and culture.
4
Implementation Assessing periodically that organisation is moving
of strategy.
towards achieving its strategic intent is desirable.
5 The final stage of strategic management process
Strategic – evaluating the company’s progress, assessing
evaluation the impact of new external developments, and
Strategic
evaluation and control making corrective adjustments – is the trigger
and control. point for deciding whether to continue or change
the company’s vision, objectives, strategy, and/ or
strategy-execution methods.
Mission defines strategy, and strategy defines structure.

- Peter Drucker
© ICAI BOS(A) 11
CHAPTER 4 : CORPORATE LEVEL STRATEGIES

Strategies are formulated at different levels of an organization The corporate strategies a firm can adopt may be classified
– corporate, business and functional. Corporate level strategy into four broad categories. The basic features of the corporate
occupies the highest level of strategic decision making and covers strategies are as follows:
actions dealing with the objective of the firm, acquisition and
allocation of resources and coordination of strategies of various Strategy Basic Feature
SBUs for optimal performance. Stability The firm stays with its current businesses
and product markets; maintains the
We can classify the different types of strategies on the existing level of effort; and is satisfied with
basis of levels of organisation, stages of business life cycle and incremental growth.
Expansion Here, the firm seeks significant growth-
competition.
maybe within the current businesses; maybe
by entering new business that are related
Basis of Types to existing businesses; or by entering new
Classification businesses that are unrelated to existing
Level Corporate Level businesses.
Business Level Retrenchment The firm retrenches some of the activities in
Functional Level some business (es), or drops the business as
Stages of Entry/Introduction Stage - Market such through sell-out or liquidation.
Business Life Penetration Strategy Combination The firm combines the above strategic
alternatives in some permutation/
Cycle Growth Stage - Growth/Expansion Strategy combination so as to suit the specific
Maturity Stage - Stability Strategy requirements of the firm.
Decline Stage - Retrenchment/Turnaround
Strategy Stability Strategy
Competition Competitive Strategies - Cost Leadership,
Differentiation, Focus A stability strategy is pursued by a firm when:
• It continues to serve in the same or similar markets and deals
Collaboration Strategies - Joint Venture,
in same or similar products and services.
Merger & Acquisition, Strategic Alliance
• The strategic decisions focus on incremental improvement of
functional performance
Corporate Strategy Alternatives
Stability strategy is not a ‘do nothing’ strategy. It involves
keeping track of new developments to ensure that the strategy
Growth/ Retrenchment Combination continues to make sense. This strategy is typical for those firms
Stability Expansion
whose product have reached the maturity stage of product life
cycle. Small organizations may also follow stability strategy to
consolidate their market position and prepare for the launch of
Merger & Strategic
Diversification
Alliances growth strategies.
Acquisition
Growth/Expansion Strategy
Intensification Diversification Growth/Expansion strategy is often characterised by significant
reformulation of goals and directions, major initiatives and
moves involving investments, exploration and onslaught into
Vertically Horizontally Concentric Conglomerate
new products, new technology and new markets, innovative
Integrated Integrated Diversification Diversification
decisions and action programmes and so on. Expansion also
Market includes diversifying, acquiring and merging businesses.
Penetration
• Expansion through diversification
Market Forward Backward
Development Diversification is defined as entry into new products or product
lines, new services or new markets, involving substantially
Product different skills, technology and knowledge. For some firms,
Development diversification is a means of utilising their existing facilities and
capabilities in a more effective and efficient manner.
© ICAI BOS(A) 12
Expansion or growth strategy can either be through (i) Vertically integrated diversification: In vertically integrated
intensification or diversification: Igor Ansoff gave a framework diversification, firms opt to engage in businesses that are
as shown which describes the intensification options available to related to the existing business of the firm. The firm remains
a firm. vertically within the same process sequence moves forward
Market Penetration Basic Feature or backward in the chain and enters specific product/process
Increase market share Add product features, steps with the intention of making them into new businesses
Increase product usage product refinement for the firm.
Increase the frequency used Develop a new-generation
Increase the quantity used product Forward and Backward Integration:
Find new application for Develop new product for the
current users Forward integration is moving forward in the value chain and
same market
entering business lines that use existing products.
Market Development Diversification involving
Expand geographically new products and new
target new segments markets On the other hand, backward integration is a step towards
Related / Unrelated creation of effective supply by entering business of input
Product-Market Expansion Grid providers.
(a) Intensification (ii) Horizontal Integrated Diversification: Through the

acquisition of one or more similar business operating at the
• Market Penetration: Highly common expansion strategy is same stage of the production-marketing chain that is going
market penetration/concentration on the current business. into complementary products, by-products or taking over
The firm directs its resources to the profitable growth of its competitors’ products.
existing product in the existing market.
RELATED UNRELATED
• Market Development: It consists of marketing present DIVERSIFICATION DIVERSIFICATION
products, to customers in related market areas by adding Exchange or share assets or • Investment in new
different channels of distribution or by changing the content competencies by exploiting product portfolios.
of advertising or the promotional media. • Brand name • Employment of new
• Marketing skills technologies.
• Product Development: Product development involves • Sales and distribution • Focus on multiple
substantial modification of existing products or creation capacity products.
of new but related items that can be marketed to current • Manufacturing skills • Reduce risk by operating
customers through establish channels. • R&D and new product in multiple product
capability markets.
(b) Diversification • Economies of scale • Defend against takeover
Diversification endeavours can be related or unrelated to existing bids.
businesses of the firm. Based on the nature and extent of their • Provide executive
relationship to existing businesses, diversification interest.
endeavours have been classified into four broad categories
Related vs. Unrelated Diversification
Forward Backward Horizontal (iii) Concentric Diversification: Concentric diversification

Integration Integration Integration too amounts to related diversification. In concentric
Raw diversification, the new business is linked to the existing
Materials B
businesses through process, technology or marketing.
a
c (iv) Conglomerate Diversification: In conglomerate
Intermediate k
diversification, no such linkages exist; the new
Goods w
businesses/ products are disjointed from the existing
a By Products
businesses/products in every way; it is a totally unrelated
r
diversification.
Manufacturing F d Competitive
Products
o Horizontal • Expansion through Mergers and Acquisitions
r Acquisition or merger with an existing concern is an instant
Marketing/ Complementary
w Products means of achieving the expansion. Merger and acquisition in
Sales
simple words are defined as a process of combining two or more
a
organizations together.
r
After Sales
Merger is considered to be a process when two or more
Service d companies come together to expand their business
Diversification operations. In such a case the deal gets finalized on friendly
© ICAI BOS(A) 13
terms and both the organizations share profits in the newly Retrenchment/Turnaround Strategy
created entity.
When one organization takes over the other organization (i) Retrenchment Strategy: It is followed when an organization
and controls all its business operations, it is known as substantially reduces the scope of its activity.
acquisitions. In this process of acquisition, one financially (ii) Turnaround Strategy: Retrenchment may be done either
strong organization overpowers the weaker one. internally or externally. For internal retrenchment to take
place, emphasis is laid on improving internal efficiency,
Types of Mergers known as turnaround strategy.
1. Horizontal merger: Horizontal mergers are combinations of (iii) Divestment Strategy: Divestment strategy involves the sale or
firms engaged in the same industry. liquidation of a portion of business, or a major division, profit
2. Vertical merger: It is a merger of two organizations that centre or SBU. Divestment is usually a part of rehabilitation or
are operating in the same industry but at different stages of restructuring plan and is adopted when a turnaround has been
production or distribution system. attempted but has proved to be unsuccessful.
3. Co-generic merger: In Co-generic merger two or more (iv) Liquidation Strategy: A retrenchment strategy considered
merging organizations are associated in some way or the the most extreme and unattractive is liquidation strategy,
other related to the production processes, business markets, which involves closing down a firm and selling its assets.
or basic required technologies. It is considered as the last resort because it leads to serious
4. Conglomerate merger: Conglomerate mergers are consequences such as loss of employment for workers and
the combination of organizations that are unrelated to other employees, termination of opportunities where a firm
each other. There are no linkages with respect to customer could pursue any future activities, and the stigma of failure.
groups, customer functions and technologies being used.
Combination Strategy
• Expansion through Strategic Alliance The above strategies are not mutually exclusive. It is possible to
A strategic alliance is a relationship between two or more adopt a mix of the above to suit particular situations. An enterprise
businesses that enables each to achieve certain strategic may seek stability in some areas of activity, expansion in some
objectives which neither would be able to achieve on its own. and retrenchment in the others. Retrenchment of ailing products
The strategic partners maintain their status as independent followed by stability and capped by expansion in some situations may
and separate entities, share the benefits and control over be thought of. For some organizations, a strategy by diversification
the partnership, and continue to make contributions to the and/or acquisition may call for a retrenchment in some obsolete
alliance until it is terminated. product lines, production facilities and plant locations.
CHAPTER 5 : BUSINESS LEVEL STRATEGIES

An organization’s core competencies should be focused on satisfying customer needs or want in order to achieve organisational
objectives. This is done through business-level strategies. Business level strategies are the courses of action adopted by an organisation
for each of its businesses separately, to serve identified customer groups and provide value to the customers by satisfaction of their
needs. In the process, the organisation uses its competencies to gain, sustain and enhance its strategic or competitive advantage.
Porter’s Five Forces Model –Competitive

Competitive Analysis
Analysis
(Porter’s Five Forces)
Michael Porter believes that the basic unit of analysis for
understanding is a group of competitors producing goods or
services that compete directly with each other. It is the industry
Business Level Strategies
where competitive advantage is ultimately won or lost. It is
through competitive strategy that the organisation attempts to
adopt an approach to compete in the industry.
Michael Porter’s Best Cost A powerful and widely used tool for systematically diagnosing the
Generic Strategies Provider Strategy significant competitive pressures in a market and assessing the
strength and importance of each is the Porter’s five-forces model
of competition. This model holds that the state of competition in
Cost an industry is a composite of competitive pressures operating in
Differentiation five areas of the overall market:
Leadership Focus Strategy
Strategy
Strategy
© ICAI BOS(A) 14
Threat of New Entrants

Competitive pressures associated with the market
manoeuvring and jockeying for buyer patronage that New entrants are always a powerful source of competition.
goes on among rival sellers in the industry. They can reduce industry profitability because they add
new production capacity and can substantially erode existing
Competitive pressures associated with the threat of new firm’s market share positions. To discourage new entrants,
entrants into the market. existing firms can try to raise barriers to entry. Common barriers
to entry include:
Competitive pressures coming from the attempts of
companies in other industries to win buyers over to Capital
their own substitute products. Requirements
Competitive pressures stemming from supplier Economies of

Possibility of
bargaining power and supplier-seller collaboration. Scale
Aggressive
Retailation
Competitive pressures stemming from buyer bargaining

power and seller-buyer collaboration. Threats of New
Entrants
Access to Product
Distribution Differentiation
The strategists can use the five-forces model to determine Channels
what competition is like in a given industry by undertaking the
following steps:
Step 1: Identify the specific competitive pressures associated Switching
Brand Identity
with each of the five forces. Costs
Step 2: Evaluate how strong the pressures comprising each of
the five forces are (fierce, strong, moderate to normal, or
weak).
Step 3: Determine whether the collective strength of the five Bargaining Power of Buyers
competitive forces is conducive to earning attractive Buyers of an industry’s products or services can sometimes exert
profits. considerable pressure on existing firms to secure lower prices or
better services. This leverage is particularly evident when:
POTENTIAL
NEW
ENTRANTS Competitive presures
coming from the threat Buyers have full knowledge of the sources of
of entry of new rivals products and their substitutes.
INDUSTRY
COMPETITORS They spend a lot of money on the industry’s
products i.e. they are big buyers.
SUPPLIERS BUYERS
Competitive
RIVALRY AMONG
Competitive pressures The industry’s product is not perceived as
pressures stemming stemming from buyer
from Suppliers
EXISTING FIRMS
Bargaining Power
critical to the buyer’s needs and buyers are
Bargaining Power more concentrated than firms supplying
the product. They can easily switch to the
Competitive substitutes available.
FIRMS IN OTHER pressures
INDUSTRIES coming from
OFFERING sunstitute Bargaining Power of Suppliers
SUBSTITUTE products Suppliers can influence the profitability of an industry in a
PRODUCTS
number of ways. Suppliers can command bargaining power over
a firm when:
Porter’s Five Force Model of Competition
Their products are
crucial to the buyer
Porter’s five forces model is one of the most effective and and substitutes are
not available.
enduring conceptual frameworks used to assess the nature of the
competitive environment and to describe an industry’s structure.
They can erect high
The interrelationship among these five forces gives each industry switching costs.
its own particular competitive environment. By applying
Porter’s five forces model of industry attractiveness to their own They are more
concentrated than
industries, the manager can gauge their own firm’s strengths, their buyers.
weaknesses, and future opportunities.
© ICAI BOS(A) 15
The Nature of Rivalry in the Industry

The intensity of rivalry in an industry is a significant determinant of industry attractiveness and profitability. The intensity of rivalry can
influence the costs of suppliers, distribution, and of attracting customers and thus directly affect the profitability. The more intensive the
rivalry, the less attractive is the industry. Rivalry among competitors tends to be cutthroat and industry profitability low when:
Competitors
The industry
Competitors in Competitors Competitors have little
An industry has faces slow or
the industry are operate with face high exit opportunity to
no clear leader. diminished
numerous. high fixed costs. barriers. differentiate
growth.
their offerings.
Threat of Substitutes
A final force that can influence industry profitability is the
Michael Porter’s Generic Strategies
availability of substitutes for an industry’s product. To predict According to Porter, strategies allow organizations to gain
profit pressure from this source, firms must search for products competitive advantage from three different bases: cost leadership,
that perform the same, or nearly the same, function as their differentiation, and focus. Porter called these base generic
existing products. strategies. These strategies have been termed generic because
they can be pursued by any type or size of business firm and even
Business-Level Strategies by not-for-profit organisations.
An organization’s core competencies should be focused on
satisfying customer needs or wants in order to achieve above
average returns. This is done through Business-level strategies Michael Porter’s Generic
Customers are the foundation of an organization’s business- Strategies
Cost leadership emphasizes producing
level strategies. Who will be served, what needs have to be met, standardized products at a very low per-
and how those needs will be satisfied are determined by the unit cost for consumers who are price-
senior management. sensitive.
Differentiation is a strategy aimed
at producing products and services
Who are the customers? considered unique industry wide and
Knowing one’s customers is very important in obtaining and directed at consumers who are relatively
price-insensitive.
sustaining a competitive advantage. Being able to successfully Focus means producing products and
predict and satisfy future customer needs is important. Perhaps services that fulfill the needs of small
one of Compaq’s mistakes was not understanding who their real groups of consumers.
customer was and what that customer -- end user -- wanted.
How to satisfy customer needs? Porter’s strategies imply different organizational arrangements,
Organizations must determine how to bundle resources and control procedures, and incentive systems. Larger firms with
capabilities to form core competencies and then use these core greater access to resources typically compete on a cost leadership
competencies to satisfy customer needs or create value for them. and/or differentiation basis, whereas smaller firms often compete
Business level strategies detail actions to be taken to provide on a focus basis.
value to customers and gain a competitive advantage by
exploiting core competencies in specific individual product or
COMPETITIVE SCOPE
service markets. Having selected a market, the organization must Cost

Broad Leadership Differentiation
develop a plan to be successful in that market. Business strategy
Target
therefore looks at how the organization can compete successfully
in the individual markets that it chooses to operate within.
Narrow Focussed Cost Focussed

Business level strategy is concerned with issues such as:
Target Leadership Differentiation
Achieving advantage over competitors.
Low-Cost Differentiated
Meeting the needs of key customers. products/services products/services
COMPETITIVE ADVANTAGE
Avoiding competitive disadvantage.
Michael Porter’s Generic Strategy
© ICAI BOS(A) 16
Cost Leadership Strategy

Differentiation Strategy
Cost leadership emphasizes producing standardized products at
a very low per-unit cost for consumers who are price-sensitive. Differentiation is a strategy aimed at producing products and
It is a low cost competitive strategy that aims at broad mass services considered unique industry wide and directed at
market. It requires vigorous pursuit of cost reduction in the areas consumers who are relatively price-insensitive. This strategy
of procurement, production, storage and distribution of product is aimed at broad mass market and involves the creation of a
or service and also economies in overhead costs. Because of its product or service that is perceived by the customers as unique.
lower costs, the cost leader is able to change a lower price for its The uniqueness can be associated with product design, brand
products than its competitors and still make satisfactory profits. image, features, technology, dealer network or customer service.
Because of differentiation, the business can charge a premium
Achieving Cost Leadership Strategy for its product.
To achieve cost leadership, following are the actions that could
be taken: Basis of Differentiation
There are several basis of differentiation: product, pricing and
Forecast the demand of a product or service promptly. organization.
Product: Innovative products that meet customer needs
Optimum utilization of the resources to get cost advantages. can be an area where a company has an advantage over
competitors. The pursuit of new product offerings can be
Achieving economies of scale leads to lower per unit costly – research and development, as well as production
cost of product/service. and marketing costs can all add to the cost of production
Standardisation of products for mass production to yield and distribution. The payoff, however, can be great as
lower cost per unit. customer’s flock to be among the first to have the new
product.
Invest in cost saving technologies and try using advance
technology for smart working. Pricing: It can fluctuate based on its supply
and demand, and also be influenced by the customer’s ideal
Resistance to differentiation till it becomes essential. 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
Advantages of Cost Leadership Strategy higher prices.
A cost leadership strategy may help to remain profitable even Organisation: Organisational differentiation is yet another
with: rivalry, new entrants, suppliers’ power, substitute products, form of differentiation. Maximizing the power of a brand, or
and buyers’ power. using the specific advantages that an organization possesses
can be instrumental to a company’s success. Location
Rivalry – Competitors are likely to avoid a price war, since the
low cost firm will continue to earn profits after competitors advantage, name recognition and customer loyalty can all
compete away their profits. provide additional ways for a company differentiate itself
from the competition.
Buyers – Powerful buyers/customers would not be able to
exploit the cost leader firm and will continue to buy its product. Achieving Differentiation Strategy
Suppliers – Cost leaders are able to absorb greater price To achieve differentiation, following are the measures that could
increases before it must raise price to customers. be adopt by an organization to incorporate that:
Entrants – Low cost leaders create barriers to market entry

through its continuous focus on efficiency and reducing costs. Offer utility for the customers and match the products with
their tastes and preferences.
Substitutes – Low cost leaders are more likely to lower costs to
induce customers to stay with their product, invest to develop
substitutes, purchase patents. Elevate the performance of the product.
Disadvantages of Cost Leadership Strategy

Offer the promise of high quality product/service for
Cost advantage may not be remaining for long as competitors buyer satisfaction.
may also follow cost reduction technique.
Cost leadership can succeed only if the firm can achieve Rapid product innovation.
higher sales volume.
Cost leaders tend to keep their costs low by minimizing Taking steps for enhancing image and its brand value.
advertising, market research, and research and development,
but this approach can prove to be expensive in the long run.
Fixing product prices based on the unique features of the
Technology changes are a great threat to the cost leader. product and buying capacity of the customer.
© ICAI BOS(A) 17
Advantages of Differentiation Strategy Achieving Focused Strategy

A differentiation strategy may help to remain profitable even To achieve focused cost leadership/differentiation, following are
with: rivalry, new entrants, suppliers’ power, substitute products, the measures that could be adopted by an organization:
and buyers’ power.
Selecting specific niches which are not covered by cost
Rivalry - Brand loyalty acts as a safeguard against competitors. leaders and differentiators.
It means that customers will be less sensitive to price increases, Creating superior skills for catering to such niche markets.
as long as the firm can satisfy the needs of its customers.
Generating high efficiencies for serving such niche markets.
Buyers – They do not negotiate for price as they get special
features and also they have fewer options in the market. Developing innovative ways in managing the value chain.
Suppliers – Because differentiators charge a premium

Advantages of Focused Strategy
price, they can afford to absorb higher costs of supplies and
Premium prices can be charged by the organisations for their
customers are willing to pay extra too.
focused product/services.
Entrants – Innovative features are an expensive offer. So, new Due to the tremendous expertise about the goods and services
entrants generally avoid these features because it is tough for that organisations following focus strategy offer, rivals and
them to provide the same product with special features at a new entrants may find it difficult to compete.
comparable price.
Disadvantages of Focused Strategy
Substitutes – Substitute products can’t replace differentiated The firms lacking in distinctive competencies may not
products which have high brand value and enjoy customer be able to pursue focus strategy.
loyalty.
Due to the limited demand of product/services, costs are high
which can cause problems.
Disadvantages of Differentiation Strategy
In long run, the niche could disappear or be taken over
In long term, uniqueness is difficult to sustain. by larger competitors by acquiring the same distinctive
competencies.
Charging too high a price for differentiated features may
cause the customer to switch-off to another alternative. Best-Cost Provider Strategy
The new model of best cost provider strategy is a further
Differentiation fails to work if its basis is something that is development of above three generic strategies. It is directed
not valued by the customers. towards giving customers more value for the money by
emphasizing both low cost and upscale differences. The objective
is to keep costs and prices lower than those of other sellers of
Focus Strategies comparable products.
Lower Cost Differentiation
Focus means producing products and services that fulfill
Overall
the needs of small groups of consumers. Focus strategies are A Broad Cross Broad
Low Cost
Section of Differentiation
most effective when consumers have distinctive preferences Buyers
Leadership
Strategy
Strategy
or requirements and when rival firms are not attempting to
Market Target
Best Cost
specialize in the same target segment. Risks of pursuing a focus Provider
strategy include the possibility that numerous competitors Strategy
will recognize the successful focus strategy and copy it, or that A Narrower Focused
Buyer Segment Focused Low Differentiation
consumer preferences will drift toward the product attributes (or Market Cost Strategy Strategy
desired by the market as a whole. An organization using a focus Niche) Company’s
strategy may concentrate on a particular group of customers, Figure: The Five Generic Competitive Strategies
geographic markets, or on particular product-line segments
in order to serve a well-defined but narrow market better than Best-cost provider strategy involves providing customers more
competitors who serve a broader market. value for the money by emphasizing low cost and better quality
Focused cost leadership: Firms that compete based on difference. It can be done:
price and target a narrow market are following a focused cost (a) through offering products at lower price than what is being
leadership strategy. offered by rivals for products with comparable quality and
Focused differentiation: Firms that compete based on features or
uniqueness and target a narrow market are following a focused (b) charging similar price as by the rivals for products with much
differentiations strategy. higher quality and better features.
© ICAI BOS(A) 18
CHAPTER 6 : FUNCTIONAL LEVEL STRATEGIES

The reasons why functional strategies are needed can be
enumerated as follows:
Functional strategies lay down clearly what is to be done
at the functional level. They provide a sense of direction
Marketing
Strategy to the functional staff.
They are aimed at facilitating the implementation
of corporate strategies and the business strategies
Human formulation at the business level.
Resource Financial They act as basis for controlling activities in the different
Strategy Strategy functional areas of business.
They help in bringing harmony and coordination as they
Functional are formulated to achieve major strategies.
Strategies Similar situations occurring in different functional areas
are handled in a consistent manner by the functional
managers.
Research and Thus, strategies need to be segregated into viable
Development Production functional plans and policies that are compatible with
Strategy Strategy each other. In this way, strategies can be implemented by
the functional managers. Environmental factors relevant
Logistics
to each functional area have an impact on the choice of
Strategy
functional strategies. Corporate strategies influence the
formulation of functional strategies.
Marketing Strategy
Marketing is a social and managerial process by which
Once higher level corporate and business strategies have individuals and groups obtain what they need and want
been developed, management need to formulate and through creating, offering and exchanging products of value
implement strategy for each of the functional areas of with others.
business. Strategy of one functional area cannot be looked
at in isolation. Different functional areas of the business Marketing Mix
are interwoven together and how a functional strategy is Marketing mix is a systematic way of classifying the key
synergised with other functional strategies determines its decision areas of marketing management. It is the set of
effectiveness. controllable marketing variables that the firm blends to
Functional strategies play two important roles. Firstly, produce the response it wants in the target market. The
they provide support to the overall business strategy. original framework of marketing mix comprises of 4Ps-
Secondly, they spell out as to how functional managers will product, price, place and promotion. These are subsequently
work so as to ensure better performance in their respective expanded to highlight certain other key decision areas like
functional areas. people, processes, and physical evidence. The elements of
Strategies in functional areas including marketing, original framework are:
financial, production, R & D and human resource Product: It stands for the “goods-and-service”
management are based on the functional capabilities of an combination the company offers to the target market.
organisation. For each functional area, first the major sub Price: It stands for the amount of money customers have
areas are identified and then for each of these sub areas, to pay to obtain the product.
content of functional strategies, important factors, and their Place: It stands for company activities that make the
importance in the process of strategy implementation are product available to target consumers and include
identified. marketing channel, distribution policies and geographical
In terms of the levels of strategy formulation, functional availablity.
strategies operate below the SBU or business-level strategies. Promotion: It stands for activities that communicate the
Within functional strategies there might be several sub- merits of the product and persuade target consumers to
functional areas. Functional strategies are made within the buy it. Modern marketing is highly promotional oriented.
framework of corporate level strategies and guidelines therein There are at least four major direct promotional methods
that are set at higher levels of the organization. Operational or tools – personal selling, advertising, publicity and sales
plans at the SBU level tell the functional managers what promotion.
has to be done while policies state how the plans are to be Expanded Marketing Mix: Typically, all organizations
implemented. use a combination of 4 Ps in some form or the other.
© ICAI BOS(A) 19
However, the above elements of marketing mix are not evolved, which are given below:
exhaustive. It is pertinent to discuss a few more elements
that may form part of an organizational marketing mix Social Marketing: It refers to the design, implementation, and
strategy. They have got more currency in recent years. control of programs seeking to increase the acceptability of a social
idea, cause, or practice among a target group.
Growth of services has its own share for the inclusion
of newer elements in marketing. A few new Ps are as
follows: Augmented Marketing: It is provision of additional customer
services and benefits built around the core and actual products that
People: all human actors who play a part in delivery of the relate to introduction of hi-tech services like movies on demand,
market offering and thus influence the buyer’s perception, on-line computer repair services, secretarial services, etc. Such
namely the firm’s personnel and the customer. innovative offerings provide a set of benefits that promise to elevate
customer service to unprecedented levels.
Process: the actual procedures, mechanisms and flow of
activities by which the product / service is delivered.
Direct Marketing: Marketing through various advertising media
Physical evidence: the environment in which the market that interact directly with consumers, generally calling for the
offering is delivered and where the firm and customer consumer to make a direct response.
interact.
Relationship Marketing: The process of creating, maintaining, and
Marketing Strategy Formulation enhancing strong, value-laden relationships with customers and
Marketing Analysis: A company must carefully analyze its other stakeholders.
environment in order to avoid the threats and take advantage
Services Marketing: It is applying the concepts, tools, and
of the opportunities. Areas to be analyzed in the environment techniques, of marketing to services. Services is any activity or
normally include: benefit that one party can offer to another that is essentially
1. Forces close to the company such as its ability to serve intangible and does not result in the banking, savings, retailing,
educational or utilities.
customers, other company departments, channel
members, suppliers, competitors, and publics.
Person Marketing: People are also marketed. Person marketing
2. Broader forces such as demographic and economic forces, consists of activities undertaken to create, maintain or change
political and legal forces, technological and ecological attitudes and behaviour towards particular person.
forces, and social and cultural forces.
Organization Marketing: It consists of activities undertaken
to create, maintain, or change attitudes and behaviour of target
audiences towards an organization. Both profit and non-profit
Analysis
organizations practice organization marketing.
Planning Implementation Control

Develop strategic Carry out the Measure results Place Marketing: Place marketing involves activities undertaken
plans plans to create, maintain, or change attitudes and behaviour towards
Evaluate results particular places say, business sites marketing, tourism marketing.
Develop marketing Take corrective
plans action
Enlightened Marketing: It is a marketing philosophy holding that a
company’s marketing should support the best long-run performance
of the marketing system; its five principles include customer-
Strategic marketing management process oriented marketing, innovative marketing, value marketing, sense-
of-mission marketing, and societal marketing.
Strategy Formulation: Marketing planning involves deciding Differential Marketing: It is a market-coverage strategy in which a
firm decides to target several market segments and designs separate
on marketing strategies that will help the company attain its offer for each.
overall strategic objectives. A detailed plan is needed for
each business, product, or brand. A product or brand plan
Synchro-marketing: When the demand for a product is irregular
may contain different sections: executive summary, current due to season, some parts of the day, or on hour basis, causing idle
marketing situation, threats and opportunity analysis, capacity or overworked capacities, synchro-marketing can be used
objectives and issues, marketing strategies, action programs, to find ways to alter the pattern of demand through flexible pricing,
promotion, and other incentives.
budgets, and controls.
Strategy Control: Strategic control involves monitoring and Concentrated Marketing: It is a market-coverage strategy in which
a firm goes after a large share of one or few sub-markets.
measuring of results and their evaluation. This would lead to
taking corrective actions in the 4 P’s of marketing.
Demarketing: It includes marketing strategies to reduce demand
temporarily or permanently. The aim is not to destroy demand,
Strategic Marketing Techniques but only to reduce or shift it. This happens when there is overfull
Over the years, a number of marketing strategies have been demand.
© ICAI BOS(A) 20
Financial Strategy products, transportation and deployment of inventory.

The financial strategies of an organization are related to Improvement in logistics can result in saving in cost of doing
several finance/ accounting concepts considered to be central business.
to strategy implementation. These are: acquiring needed When a company creates a logistics strategy, it is defining
capital/sources of fund, developing projected financial the service levels at which its logistics systems are highly
statements/budgets, management/ usage of funds, and effective. A company may develop a number of logistics
evaluating the worth of a business. strategies for specific product lines, specific countries
Various methods for determining a business’s worth can be or specific customers to address different categorical
grouped into three main approaches which are as follows: requirements.
(i) Net worth or stockholders’ equity: Net worth is the total
assets minus total outside liabilities of an organisation. Supply Chain Management
(ii) Future benefits to owners through net profits: These The term supply chain refers to the linkages between
benefits are considered to be much greater than the suppliers, manufacturers and customers. Supply chains
amount of profits. A conservative rule of thumb is to involve all activities like sourcing and procurement of
establish a business’s worth as five times the firm’s current material, conversion, and logistics. Planning and control of
annual profit. A five-year average profit level could also supply chains are important components of its management.
be used. Naturally, management of supply chains include closely
(iii) Market-determined business worth: This, in turn, working with channel partners – suppliers, intermediaries,
involves three methods. First, the firm’s worth may be other service providers and customers.
based on the selling price of a similar company. The Supply chain management is defined as the process of
second approach is called the price-earnings ratio method planning, implementing, and controlling the supply chain
whereby the market price of the firm’s equity shares is operations. It is a cross-functional approach to managing
divided by the annual earnings per share and multiplied the movement of raw materials into an organization and
by the firm’s average net income for the preceding years. the movement of finished goods out of the organization
The third approach can be called the outstanding shares toward the end-consumer who are to be satisfied as
method whereby one has to simply multiply the number efficiently as possible. It encompasses all movement and
of shares outstanding by the market price per share and storage of raw materials, work-in-process inventory,
add a premium. and finished goods from point-of-origin to point-of-
consumption. Organizations are finding that they must
rely on the chain to successfully compete in the global
Production/Operations Strategy market.
Production System Modern organizations are striving to focus on core
The production system is concerned with the capacity, competencies and reduce their ownership of sources of raw
location, layout, product or service design, work systems, materials and distribution channels. These functions can be
degree of automation, extent of vertical integration, and such outsourced to other business organizations that specialize
factors. Strategies related to production system are significant in those activities and can perform in better and cost
as they deal with vital issues affecting the capability of the effective manner. In a way organizations in the supply chain
organisation to achieve its objectives. do tasks according to their core-competencies. Working in
Strategy implementation would have to take into account the supply chain improve trust and collaboration amongst
the production system factors as they involve decisions which partners and thus improve flow and management
are long-term in nature and influence not only the operations of inventory.
capability of an organisation but also its ability to implement
strategies and achieve objectives. Is logistic management same as supply chain
management? Supply chain management is an
extension of logistic management. However, there is
Operations Planning and Control difference between the two. Logistical activities
Operations planning and control provides an example of typically include management of inbound and outbound
an organizational activity that is aimed at translating the goods, transportation, warehousing, handling of
objectives into reality. Some companies use quality as a material, fulfilment of orders, inventory
strategic tool. management, supply/demand planning. Although these
activities also form part of Supply chain management, the
Logistics Management latter has different components. Logistic management can
Management of logistics is a process which integrates the be termed as one of its part that is related to planning,
flow of materials into, through and out of an organization to implementing, and controlling the movement and storage
achieve a level of service that the right materials are available of goods, services and related information between the
at the right place at the right time, of right quality and at point of origin and the point of consumption.
the right cost. For a business organization effective logistics Supply chain management includes more aspects
strategy will involve raising and finding solutions to the apart from the logistics function. It is a tool of business
questions relating to raw material, manufacturing locations, transformation and involves delivering the right product
© ICAI BOS(A) 21
at the right time to the right place and at the right price. Research and Development Strategy
It reduces costs of organizations and enhances customer Research and Development (R&D) personnel can play an
service. integral part in strategy implementation. These individuals
are generally charged with developing new products and
Implementing Supply Chain Management improving old products in a way that will allow effective
System strategy implementation. R&D employees and managers
The following are the major steps which are required for the perform tasks that include transferring complex technology,
successful implementation of Supply Chain Management in adjusting processes to local raw materials, adapting processes
the business organizations: to local markets, and altering products to particular tastes
and specifications.
Product development: Customers and suppliers must work together Strategies such as product development, market
in the product development process. When products are developed penetration, and concentric diversification require that new
and launched in shorter time, it would help organizations to remain products be successfully developed and that old products be
competitive. significantly improved. But the level of management support
for R&D is often constrained by resource availability.
Procurement: Procurement requires careful resource planning,

Human Resource Strategy
quality issues, identifying sources, negotiation, order placement, Strategic Role of Human Resource Manager
inbound transportation and storage. Organizations have to coordinate The prominent areas where the human resource manager can
with suppliers in scheduling the uninterrupted supplies and also to play strategic role are as follows:
involve them in planning the manufacturing process.
Providing purposeful direction: The human resource
manager leads people and the organization towards the
desired direction involving people. He can ensure harmony
Manufacturing: Flexible manufacturing processes must be in place to between organisational objectives and individual objectives.
respond to market changes. They should be adaptive to accommodate
customization and changes in the taste and preferences. Changes in Creating competitive atmosphere: In the present business
the manufacturing process be made to reduce manufacturing cycle. environment, maintaining competitive position or gains
is an important objective of any business. Having a highly
committed and competent workforce is very important for
getting a competitively advantageous position.
Physical distribution: Delivery of final products to customers is the
last position in a marketing channel. Availability of the products at Facilitation of change: The human resource manager will
the right place at right time is important for each channel participant. be more concerned about furthering the organization not
Through physical distribution processes serving the customer become just maintaining it. He can devote more time to promote
an integral part of marketing. acceptance of change rather than maintaining the status
quo.
Diversion of workforce: In a modern organization,

Outsourcing: Outsourcing is not limited to the procurement of management of diverse workforce is a great challenge.
materials and components, but also include outsourcing of services Workforce diversity can be observed in terms of male
that traditionally have been provided within an organization. The and female, young and old, educated and uneducated,
company ought to focus on those activities where it has competency unskilled and professional employee and so on. Motivation,
and everything else will be outsourced. maintaining morale and commitment are some of the key
tasks that a HR manager can perform.
Empowerment of human resources: Empowerment

Customer services: Organizations through interfaces with the involves giving more power to those who, at present, have
company’s production and distribution operations develop customer little control on what they do and little ability to influence
relationships so as to satisfy them. They work with customer the decisions being made around them.
to determine mutually satisfying goals, establish and maintain
relationships. This in turn helps in producing positive feelings in the Building core competency: The human resource
organization and the customers. manager has an important role to play in developing core
competency of the firm. A core competence is a unique
strength of an organization which may not be shared by
others. Organization of business around core competence
Performance measurement: There is a strong relationship between implies leveraging the limited resources of a firm.
the supplier, customer and organisation. Supplier capabilities and
customer relationships can be correlated with a firm performance. Development of works ethics and culture: A vibrant
Performance is measured in different parameters such as costs, work culture will have to be developed in the organizations
to create an atmosphere of trust among people and to
customer service, productivity and quality.
encourage creative ideas by the people.
© ICAI BOS(A) 22
CHAPTER 7: ORGANISATION AND STRATEGIC LEADERSHIP

Organization Structure Simple Structure
In order to implement strategies organisations need an A simple structure is an organizational form in which the
organizational structure. Changes in corporate strategy often owner-manager makes all major decisions directly and
require changes in the way an organization is structured monitors all activities, while the company’s staff merely
for two major reasons. First, structure largely dictates how serves as an executor. Little specialization of tasks, few rules,
operational objectives and policies will be established to little formalization, unsophisticated information systems and
achieve the strategic objectives. The second major reason direct involvement of owner-manager in all phases of day-to-
why changes in strategy often require changes in structure day operations characterise the simple structure.
is that structure dictates how resources will be allocated to
achieve strategic objectives. Functional Structure
A functional structure groups tasks and activities by business
Chandler’s Strategy-Structure Relationship function, such as production/operations, marketing, finance/
accounting, research and development, and management
New strategy is New Organizational information systems.
formed administrative performance
problems emerge declines
Divisional Structure
A divisional structure can be organized in one of the four ways:
Organizational A new organizational by geographic area, by product or service, by customer, or
performance improves structure is established by process. With a divisional structure, functional activities
are performed both centrally and in each division separately.
Changing organizational design
Multi Divisional Structure
Multidivisional (M-form) structure is composed of operating
Old Organizational Design New Organizational Design
divisions where each division represents a separate business to
One large corporation Mini-business units & which the top corporate officer delegates responsibility for day-
cooperative relationships
to-day operations and business unit strategy to division managers.
Vertical communication Horizontal communication
Centralised top-down decision Decentralised participative Strategic Business Unit (SBU) Structure
making decision making
The SBU structure is composed of operating units where each
Vertical integration Outsourcing & virtual
organizations
unit represents a separate business to which the top corporate
officer delegates responsibility for day-to-day operations
Work/quality teams Autonomous work teams
and business unit strategy to its managers. The structure is
Functional work teams Cross-functional work teams
relevant to multi-product, multi-business enterprises. An
Minimal training Extensive training
SBU is a grouping of related businesses, which is amenable
Specialised job design focused Value-chain team-focused job
to composite planning treatment. The three most important
on individual design
characteristics of a SBU are:
It is a single business or a collection of related businesses
which offer scope for independent planning and
Simple which might feasibly stand alone from the rest of the
Structure organization.
Hourglass
Structure It has its own set of competitors.
Functional
It has a manager who has responsibility for strategic
Structure planning and profit performance, and who has control of
profit-influencing factors.
Network
Structure Organisational Matrix Structure
Structure
Divisional A matrix structure is the most complex of all designs
Structure because it depends upon both vertical and horizontal
flows of authority and communication (hence the term
Matrix
matrix). A matrix structure has dual lines of authority, dual
Structure
Multi sources of reward and punishment, shared authority, dual
Strategic Divisional reporting channels, and a need for an extensive and effective
Business Structure
Unit communication system. Matrix structure was developed to
Structure combine the stability of the functional structure with the
flexibility of the product form.
© ICAI BOS(A) 23
Network Structure
A company with network structure is often called a virtual
organization because it is composed of a series of project
groups or collaborations linked by constantly changing
non-hierarchical, cobweb-like networks. It could be termed
a “non-structure”, by its virtual elimination of in-house
business functions as many activities are outsourced.
Hourglass Structure
With the diminishing role played by middle management as
the tasks performed by them are increasingly being replaced
by the technological tools, a new form of organisation
structure is seen. Hourglass organization structure consists of
three layers with constricted middle layer. A shrunken middle
layer coordinates diverse lower level activities. Contrary to
traditional middle level managers who are often specialists,
the managers in the hourglass structure are generalists and
perform wide variety of tasks.
Strategic Leadership Strategy Supportive Culture

Every organisation has a unique organizational culture.
It has its own philosophy and principles, its own ways of
A strategic leader sets the firms direction
by developing and communicating vision approaching problems and making decisions, its own work
Strategic of future, formulate strategies in the light climate. It has its own embedded patterns of how to do things.
leadership of internal and external environment, its own ingrained beliefs, behaviour and thought patterns,
brings about changes required to and practices that define its corporate culture.
implement strategies and inspire the staff
to contribute to strategy execution. An organization’s culture is either an important
contributor or an obstacle to successful strategy execution.
The beliefs, vision, objectives, and business approaches and
practices underpinning a company’s strategy may or may not
Uses charisma and enthusiasm to inspire be compatible with its culture. Strong culture promotes good
people to exert them for the good of the strategy execution when there’s fit and impedes execution
organization. They offer excitement, when there’s negligible fit.
Transformational vision, intellectual stimulation and
leadership style personal satisfaction. They inspire
involvement in a mission, giving followers
a ‘dream’ of a higher calling so as to elicit Entrepreneurship and Intrapreneurship
higher performance. The terms Entrepreneur and Intrapreneur are frequently
used in the business world.
Entrepreneurship is the attempt to create value through
Focus is more on designing systems, recognition of business opportunity, the management of
Transactional controlling the organization’s activities risk taking appropriate to the opportunity and through
leadership style and improving the current situation. They management skills to mobilize financial, human and
try to build on the existing culture and
enhance current practices. The style uses material resources. The person who perceives the business
the authority to exchange rewards, such idea and takes steps to implement the idea is known as an
as pay and status. entrepreneur. He takes all types of risks, not only to put
the product or service into reality but also to make it an
extremely demanding one.
Strategic leader has several responsibilities, including the An intrapreneur is nothing but an entrepreneur who
following: operates within the boundaries of an organisation. He is an
• Making strategic decisions. employee of a large organisation, who is vested with authority
• Formulating policies and action plans to implement of initiating creativity and innovation in the company’s
strategic decision. products, services and projects, redesigning the processes,
• Ensuring effective communication in the organisation. workflows and systems. The intrapreneurs believe in change
• Managing human capital (perhaps the most critical of the and do not fear failure. They discover new ideas, look for such
strategic leader’s skills). opportunities that can benefit the whole organisation and
• Managing the company’s operations. take risks, promote innovation to improve the performance
• Sustaining high performance over time. and profitability of the organisation.
© ICAI BOS(A) 24
CHAPTER 8 : STRATEGY IMPLEMENTATION AND CONTROL

Strategic management process does not end when the firm Organizational success is a function of good strategy and
decides what strategies to pursue. There must be a translation proper implementation. The matrix in the figure below
of strategic thought into strategic action. This requires represents various combinations of strategy formulation and
support of all managers and employees of the business. implementation:
Implementing strategy affects an organization from top to
bottom; it affects all the functional and divisional areas of a
business. Strategy implementation requires introduction of
change in the organisation to make organisational member
adapt to the new environment. A B
Strategy Formulation
Sound
Strategic control has been discussed as an integral part of
strategic management. Strategic control focuses on whether
the strategy is being implemented as planned and the results
produced are those intended. In addition, we will also have an
C D
Flawed
overview of the emerging concepts in strategic management
namely strategy audit, business process reengineering and
benchmarking.
Weak Excellent
Interrelationship Strategy Implementation
between Strategy
Formulation and Strategy formulation and implementation matrix
Implementation
Square A is the situation where a company apparently has

Benchmarking Strategic formulated a very competitive strategy, but is showing
Change difficulties in implementing it successfully.
Square B is the ideal situation where a company has

Strategy succeeded in designing a sound and competitive strategy
Implementation and and has been successful in implementing it.
Control
Square C is reserved for companies that haven’t succeeded in
Business Strategic coming up with a sound strategy formulation and in addition are
Process Control bad at implementing their flawed strategic model.
Reengineering
Square D is the situation where the strategy formulation
is flawed, but the company is showing excellent
Strategy Audit implementation skills.
Successful strategy formulation does not guarantee successful

strategy implementation. It is always more difficult to do
something (strategy implementation) than to say you are
going to do it (strategy formulation)! Although inextricably
Interrelationship between Strategy linked, strategy implementation is fundamentally different
Formulation and Implementation from strategy formulation. Strategy formulation and
implementation can be contrasted in the following ways:
Strategic implementation is concerned with translating a
strategic decision into action, which presupposes that the Strategy Formulation Vs. Strategy Implementation
decision itself (i.e., the strategic choice) was made with some Strategy Formulation Strategy Implementation
thought being given to feasibility and acceptability. The Strategy formulation focuses on Strategy implementation focuses
allocation of resources to new courses of action will need effectiveness. on efficiency.
to be undertaken, and there may be a need for adapting the Strategy formulation is primarily Strategy implementation is
organization’s structure to handle new activities as well as an intellectual process. primarily an operational process.
training personnel and devising appropriate systems. Strategy formulation requires Strategy implementation requires
conceptual intuitive and motivation and leadership skills.
analytical skills.
Relationship with strategy formulation Strategy formulation requires Strategy implementation
A company will be successful only when the strategy coordination among the requires coordination among
formulation is sound and implementation is excellent. executives at the top level. the executives at the middle and
lower levels.
© ICAI BOS(A) 25
Strategic Change Strategic Control

The changes in the environmental forces often require Controlling is one of the important functions of management,
businesses to make modifications in their existing strategies and is often regarded as the core of the management process.
and bring out new strategies. Strategic change is a complex The controlling function involves monitoring the activity
process that involves a corporate strategy focused on new and measuring results against pre-established standards,
markets, products, services and new ways of doing business. analysing and correcting deviations as necessary and
maintaining/adapting the system. Primarily there are three
Steps to initiate strategic change: For initiating strategic types of organizational control, viz., operational control,
change, three steps can be identified as under: management control and strategic control.
Recognize the need for change: The first step is to diagnose which
parts of the present corporate culture are strategy supportive and
which are not. This basically means going for environmental scanning Operational Management Strategic
involving appraisal of both internal and external capabilities and Control:
then identify the problems/improvement areas and determine scope Control: When Control:
The thrust of compared with
for change. Strategic Control
operational operational control,
control is on is the process
management control of evaluating
individual tasks
is more inclusive and strategy as it is
or transactions
Create a shared vision to manage change: Objectives and vision of more aggregative,
as against total or formulated and
individuals and organization should coincide. Strategy implementers in the sense of
more aggregative implemented.
have to convince all those concerned that the change in business embracing the
management It is directed
culture is not superficial or cosmetic. The actions taken have to integrated activities
be fully indicative of management’s seriousness to new strategic functions. towards
of a complete
initiatives and associated changes. identifying
department, division
or even entire problems,
organisation, instead changes
or mere narrowly in premise
Institutionalise the change: This is basically an action stage
which requires implementation of changed strategy. Creating and circumscribed and making
sustaining a different attitude towards change is essential to ensure activities of sub- necessary
that the firm does not slip back into old ways of thinking or doing units. adjustments.
things. Besides, change process must be regularly monitored and
reviewed to analyse the after-effects of change. Any discrepancy or
deviation should be appropriately addressed.
Strategic control focuses on the dual questions of whether:

Kurt Lewin’s Model of Change: To make the change lasting, (1) the strategy is being implemented as planned; and (2) the
Kurt Lewin proposed three phases of the change process results produced by the strategy are those intended.
for moving the organization from the present to the future.
These stages are unfreezing, changing and refreezing.
Types of Strategic Control: There are four types of strategic
control as follows:
Unfreezing the situation: The process of unfreezing simply makes
the individuals or organizations aware of the necessity for change and
prepares them for such a change. Lewin proposes that the changes Premise control: Strategic Special alert Implementation
should not come as a surprise to the members of the organization. Premise control surveillance: control: At times control:
Unfreezing is the process of breaking down the old attitudes and is a tool for Contrary to the unexpected Implementation
behaviours, customs and traditions so that they start with a clean slate.
systematic and premise control, events may force control is directed
This can be achieved by making announcements, holding meetings
and promoting the ideas throughout the organization. continuous the strategic organizations towards assessing the
monitoring of the surveillance is to reconsider need for changes in
environment to unfocussed. It their strategy. the overall strategy
Changing to new situation: Once the unfreezing process has been verify the validity involves general Sudden changes in in light of unfolding
completed and the members of the organization recognise the need and accuracy of monitoring of government, natural events and results
for change and have been fully prepared to accept such change, their the premises on various sources calamities, terrorist associated with
behaviour patterns need to be redefined. H.C. Kellman has proposed
three methods for reassigning new patterns of behaviour. These are which the strategy of information attacks, unexpected incremental steps and
compliance, identification and internalisation. has been built. It to uncover merger/acquisition actions.The two forms
primarily involves unanticipated by competitors, of implementation
monitoring two information industrial disasters control are:
Refreezing: Refreezing occurs when the new behaviour becomes types of factors: having a and other such
(i) Monitoring
a normal way of life. The new behaviour must replace the former (i) Environmental bearing on the events may trigger
behaviour completely for successful and permanent change to take strategic thrust
factors organizational an immediate and
place. In order for the new behaviour to become permanent, it must
be continuously reinforced so that this new acquired behaviour does (ii) Industry factors strategy. intense review of (ii) Milestone reviews
not diminish or extinguish. strategy.
© ICAI BOS(A) 26
Strategy Audit includes three basic activities:

Strategic Surveillance
Examining the underlying bases

of a firm’s strategy.
Premise Control
Special Alert Control

Comparing expected results
with actual results.
Strategy Formulation Implementation Control
Strategy
Implementation Taking corrective actions
Time 1 Time 2 Time 3 to ensure that performance
conforms to plans.
Strategy Audit
“Strategy audit is a process for taking an objective look at the
existing strategies of the organization. It involves assessing the
Richard Rumelt’s Criteria for Strategy Audit
direction of a business and comparing that to the course to the
direction required to succeed in a changing environment.”
“A strategy audit is an examination and evaluation

of areas affected by the operation of a strategic Consistency: Consonance: Consonance
management process within an organization”. A strategy should not refers to the need for
present inconsistent strategists to examine
goals and policies. sets of trends, as well
A strategy audit provides an excellent platform for discussion as individual trends, in
Organizational conflict
with the top management regarding necessary corporate auditing strategies.
and interdepartmental
actions or changes in the existing business plan. It also A strategy must represent
bickering are often
identifies a company’s need to adjust the existing business an adaptive response to
symptoms of managerial
plan as well as its business. the external environment
disorder, but these
problems may also and to the critical changes
Need of Strategy Audit be a sign of strategic occurring within it.
A strategy audit is needed under the following conditions: inconsistency.
When the performance indicators reflect that a strategy

is not working properly or is not producing desired
outcomes.
When top-priority goals and objectives of the strategy are

Feasibility: A strategy must
not being accomplished. neither overtax available
resources nor create Advantage: A strategy must
When a major change takes place in the external unsolvable sub-problems. provide for the creation
environment of the organization. The final broad test of and/or maintenance of a
strategy is its feasibility; competitive advantage in
that is, can the strategy
When the top management plans: a selected area of activity.
be attempted within the
a) to fine-tune and an introduce a new set of strategies Competitive advantages
physical, human, and
and financial resources of the normally are the result of
b) to ensure that a strategy that has worked in the past enterprise? The financial superiority in one of three
resources of a business areas: (1) resources, (2)
continues to be in-tune with subtle internal and
are the easiest to quantify skills, or (3) position.
external changes that may have occurred since the and are normally the first
formulation of strategies. limitation against which
strategy is audited.
Adequate and timely feedback is the cornerstone of effective
strategy audit. Strategy audit can be no better than the
information on which it is based.
© ICAI BOS(A) 27
Business Process Reengineering

Time 3
Business Process Reengineering (BPR) is an approach to
unusual improvement in operating effectiveness through Customer Cycle Time
the redesigning of critical business processes and supporting
business systems. It is revolutionary redesign of key business
processes that involves examination of the basic process itself.
It looks at the minute details of the process, such as why the
work is done, who does it, where is it done and when it is Customer need is
recorded by the Customer need satisfier is
done. BPR refers to the analysis and redesign of workflows organization provided by the organization
and processes both within the organization and between
the organization and the external entities like suppliers,
Customer Time Cycle
distributors, and service providers. The orientation of
redesigning efforts is basically radical. In other words, it is
a total deconstruction and rethinking of business process in Benchmarking
its entirety. Benchmarking is an approach of setting goals and measuring
productivity of firms based on best industry practices or
BPR involves the following steps: against the products, services and practices of its competitors
or other acknowledged leaders in the industry. It developed out
Determining objectives: Objectives are the desired end results of the
redesign process which the management and organization attempts to
of need to have information against which performance can
realise. This will provide the required focus, direction, and motivation be measured. Benchmarking helps businesses in improving
for the redesign process. performance by learning from the best practices and the
processes by which they are achieved. Thus, benchmarking is a
process of continuous improvement in search for competitive
Identify customers and determine their needs: The Process advantage. Firms can use benchmarking practices to achieve
designers have to understand customers – their profile, their steps in improvements in diverse range of management functions like
acquiring, using and disposing a product. The purpose is to redesign product development, customer services, human resources
business process that clearly provides value addition to the customer.
management, etc.
The various steps in Benchmarking Process are as under:

Study the existing process: The study of existing processes will
Identifying the need for benchmarking: This step will define
provide an important base for the process designers. The purpose is to the objectives of the benchmarking exercise. It will also involve
gain an understanding of the ‘what’, and ‘why’ of the targeted process. selecting the type of benchmarking. Organizations identify realistic
However, some companies go through the reengineering process with opportunities for improvements.
clean perspective without laying emphasis on the past processes.
Clearly understanding existing decisions processes: The step will

involve compiling information and data on performance.
Formulate a redesign process plan: Formulation of redesign plan is
the real crux of the reengineering efforts. Customer focused redesign
concepts are identified and formulated. Alternative processes are
considered and the optimum is selected. Identify best processes: Within the selected framework best
processes are identified. These may be within the same organization
or external to them.
Implement the redesigned process : It is easier to formulate new

process than to implement them. It is the joint responsibility of the Comparison of own process and performance with that of others:
designers and management to operationalise the new process. Benchmarking process also involves comparison of performance of the
organization with performance of other organization. Any deviation
between the two is analysed to make further improvements.
Central Thrust of BPR

BPR is a continuous improvement process. Although BPR Prepare a report and implement the steps necessary to close the
is a multi-dimensional approach in improving the business performance gap: A report on benchmarking initiatives containing
recommendations is prepared. Such a report also contains the action
performance its thrust area may be identified as “the plans for implementation.
reduction of the total cycle time of a business process.” BPR
aims at reducing the cycle time of process by eliminating
the unwanted and redundant steps and by simplifying the Evaluation: Business organizations evaluate the results of the
systems and procedures and also by eliminating the transit benchmarking process in terms of improvements vis-à-vis objectives
and waiting times as far as possible. Even after redesigning and other criteria set for the purpose. They also periodically evaluates
and reset the benchmarks in the light of changes in the conditions that
of a process, BPR maintains a continuous effort for more and impact the performance.
more improvement.
© ICAI BOS(A) 28
SARANSH
© ICAI BOS(A)
SARANSH Last Mile Referencer for
STRATEGIC
MANAGEMENT


The Institute of Chartered Accountants of India
ICAI Bhawan, A-29,
Sector-62, Noida 201 309
E-mail: bosnoida@icai.in
Phone: 0120 - 3045930
https://boslive.icai.org
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SARANSHLast Mile Referencer for

The Institute of Chartered

Board of Studies (Academic)

© 2023. The Institute of Chartered Accountants of India (Also referred to as ICAI)

Published in June 2023 by:

Message of Key ICAI Office Bearers

CA. Aniket S. Talati

CA. Ranjeet Kumar Agarwal

ICAI consistently strives to provide exceptional educational content that empowers

CA. Vishal Doshi

CA. Dayaniwas Sharma

Introduction to Strategic Management 1

Dynamics of Competitive Strategy 4

Strategic Management Process 9

Corporate Level Strategies 12

Business Level Strategies 14

Functional Level Strategies 19

Organisation and Strategic Leadership 23

Strategy Implementation and Control 25

CHAPTER 1 : INTRODUCTION TO STRATEGIC MANAGEMENT

Abandoned Strategy Features

Figure: A company’s actual strategy is partly planned & partly reactive

Strategic Management Importance of Strategic Management

Limitations of Strategic Management

Environment is highly complex and turbulent. It is

Competition is unpredictable. It is difficult to clearly

Strategic Levels in Organisations

Corporate Level Head office

Functional Level Business Business

Figure: Level of Strategic Management

CHAPTER 2 : DYNAMICS OF COMPETITIVE STRATEGY

Issues to consider for Strategic Analysis

their mission, vision, core values, niche market, strengths, and

Framework of Strategic Analysis

Put all the External Analysis Internal Analysis

Industry and Competitive Analysis

Strategic Group It is done by comparing the market positions of each competitor

Likely Strategic To outmanoeuvre rivals organisations need to monitor actions, strategies,

They are strategy elements, product attributes, resources, competencies,

Application of Competence must be applicable to whole organization and can open

How to build Core Competencies Competitive Advantage

Value Chain Analysis Value to Customer

its products that are perceived by the target market as significant

Product Life Cycle

though as to whether increased

Market Product Focus Focus Retrench

Market Weak Find niche Turnaround Withdraw Withdraw

Diversification Catch-up Retrench Divest

D. General Electric Matrix [“Stop-Light” Strategy Model] TOWS Matrix

Strong Average Weak

High Invest/Expand Select/Earn

Low Select/Earn Harvest/Divest Harvest/Divest

ST is a position in which a firm strives

CHAPTER 3: STRATEGIC MANAGEMENT PROCESS

Corporate planning Vision

Characteristics of Strategic Characteristics of Mission

STRATEGIC DECISION MAKING

The major dimensions of strategic decisions are as follows: Business Model

Involvement of top management Business Definition

When the performance indicators reflect that a strategy

When top-priority goals and objectives of the strategy are