SM NOTES

Key Points to study :

1. Michael Porters : Five Force Model , Value chain analysis , Five Generic
competitive strategies

2. Frameworks : PESTEL, VRIO, SWOT, ETOP, MCKINSEY’S 7-S MODEL, GE

MATRIX , BUSINESS MODEL CANVAS , ANSOFF MATRIX , COMPETITORS
ANALYSIS , KANO MODEL , COMPETITIVE LANDSCAPE , ERRC
FRAMEWORK , Strategic Fit of Business model , Business & Functional
Unit Level Strategies

3. Imp. GRAND /Corporate strategies : Expansion strategy , Integration

strategy, Expansion & Retrenchment Strategy

4. Offensive & defensive strategies , Blue & Red ocean Strategy ,RTA ,
Terminologies like PTA, CM,CU,EU,RTA, FTA, TRADE BARRIERS, FIRMS
MANAGEMENT ORIENTATION, SPAGHETTI BOWL EFFECT

5. FULL FORMS : CSF – CRITICAL SUCCESS FACTORS

KSF – KEY SUCCESS FACTORS
NOPAT – NETY OPERATING PROFIT AFTER TAX
OEM – ORIGINAL EQUIPMENT MANUFACTURER
SAP – STRATEGIC ADVANTAGE PROFILE
EVA – ECONOMIC VALUE ADDED ( EVA = NOPAT – CoC )
COC – COST OF CAPITAL
CVP – CUSTOMER VALUE PROPOSTION
CLV – CUSTOMER LIFETIME VALUE
CCC – CASH CONVERGENT CYCLE
SBU – STRATEGIC BUSINESS UNIT
KPI – KEY PERFORMANCE INDICATORS
KRA – KEY RESULTS AREA
SCA – SUSTAINABLE COMPETITIVE ADVANTAGE
POP – POINT OF PARITY
6. Try to understand the practical application of the concepts & strategies
“Strategic management is a stream of decisions and actions which lead to the
development of an effective strategy or strategies to help achieve corporate
objectives”. – Glueck and Jauch, 1984 3
“Strategic management is a process of formulating, implementing and
evaluating cross-functional decisions that enable an organisation to achieve its
objective”.

Vision is "an ideal that represents or reflects the shared values to which
the organisation should aspire".
Vision is "the shared understanding of what the firm should be and how it must
change".

EXAMPLES : 1. A Coke within arm's reach of everyone on the planet (Coca Cola)

2. Encircle Caterpillar (Komatsu)

3. Become the Premier Company in the World (Motorola)
 Mission : Hunger and Wheelen simply call the mission as the “purpose
or reason for the organisation’s existence”.
Example: l. Ranboxy Petrochemicals: To become a research based global
company.
2. Reliance Industries: To become a major player in the global chemicals
business and simultaneously grow in other growth industries like
infrastructure.

Goals denote what an organisation hopes to accomplish in a future

period of time. They represent a future state or outcome of the effort
put in now.
Example : A simple statement of “increased profitability” is thus a goal, not an
objective, because it does not state how much profit the firm wants to make.

Objectives are the ends that state specifically how the goals shall be
achieved.
Objectives are the end results of planned activity.
Example: “increase profits by 10% over the last year” is an objective.
Some of the areas in which a company might establish its goals and objectives
are:
1. Profitability (net profit)
2. Efficiency (low costs, etc)
3. Growth (increase in sales etc) 4. Shareholder wealth (dividends etc)
5. Utilization of resources (return on investment)
6. Market leadership (market share etc)
 External Assessment
Michael Porters Five Force Model :

1. The Threat of New Entrants:

 The first of Porter’s Five Forces model is the threat of new
entrants. New entrants bring new capacity and often substantial
resources to an industry with a desire to gain market share.
 Established companies already operating in an industry often
attempt to discourage new entrants from entering the industry to
protect their share of the market and profits.
 Particularly when big new entrants are diversifying from other
markets into the industry, they can leverage existing capabilities
and cash flows to shake up competition.
 Pepsi did this when it entered the bottled water industry,
Microsoft did when it began to offer internet browsers, and Apple
did when it entered the music distribution business.
2. Bargaining power of buyers:
 The third of Porter’s five competitive forces is the bargaining
power of buyers. Bargaining power of buyers refers to the ability
of buyers to bargain down prices charged by firms in the industry
or driving up the costs of the firm by demanding better product
quality and service.
 By forcing lower prices and raising costs, powerful buyers can
squeeze profits out of an industry. Thus, powerful buyers should
be viewed as a threat. Alternatively, if buyers are in a weak
bargaining position, the firm can raise prices, cut costs on quality
and services and increase their profit levels.
 Buyers are powerful if they have more negotiation leverage than
the firms in the industry, using their clout primarily to pressure
price reductions.

3. Bargaining power of suppliers:

 The fourth of Porter’s Five Forces model is the bargaining power of
suppliers. Suppliers are companies that supply raw materials,
components, equipment, machinery and associated products.
 Powerful suppliers make more profits by charging higher prices,
limiting quality or services or shifting the costs to industry
participants. Powerful suppliers squeeze profits out of an industry
and thus, they are a threat.
 For example, Microsoft has contributed to the erosion of
profitability among PC makers by raising prices on operating
systems. PC makers, competing fiercely for customers, have
limited freedom to raise their prices accordingly.

4. Threat of substitute products :

 The fifth of Porter’s Five Forces model is the threat of substitute
products. A substitute performs the same or a similar function as
an industry’s product.
 Video conferences are a substitute for travel. Plastic is a substitute
for aluminium. E-mail is a substitute for a mail. All firms within an
industry compete with industries producing substitute products.
 For example, companies in the coffee industry compete indirectly
with those in the tea and soft drink industries because all these
serve the same need of the customer for refreshment.

 PESTEL Analysis
 PESTEL Analysis is a checklist to analyse the political, economic,
socio-cultural, technological, environmental and legal aspects of
the environment. While doing PESTEL analysis, it is better to have
three or four well-thought-out items that are justified with
evidence than a lengthy list.
 Although the items in a PESTEL analysis rely on past events and
experience, the analysis can be used as a forecast of the future.
The past is history and strategic management is concerned with
future action, but the best evidence about the future may derive
from what happened in the past.
  ETOP Environmental Threats and Opportunities Profile (ETOP)
gives a summarized picture of environmental factors and their likely impact on
the organisation. ETOP is generally prepared as follows.
 SWOT Analysis
SWOT analysis stands at the core of strategic management. It is important
to note that strengths and weaknesses are intrinsic (potential) value
creating skills or assets or the lack thereof, relative to competitive forces.
Opportunities and threats, however, are external factors that are not
created by the company, but emerge as a result of the competitive
dynamics caused by ‘gaps’ or ‘crunches’ in the market.
Michael Porters Value Chain Analysis

Porter's Value Chain is a strategic management framework that analyses

a company's activities to identify its competitive advantage. It consists of
the primary activities directly involved in production and delivery and
the support activities that allow primary activities to be executed.

Porter’s generic value chain model is both broad and complete, but it is
not absolute. Rather, the model is adaptable to the unique needs of each
organization.

For example, a value chain can help an organization identify in-house

and outsourcing opportunities that take advantage of cost savings and
specialized expertise.
 Ultimately, value chain modelling offers the following benefits:

 Cost reduction
 Competitive differentiation
 Increased profitability and business success
 Increased efficiency
 Decreased waste
 Higher-quality products at lower costs
Primary activities contribute to the physical creation of the product or
service, its sale and transfer to the buyer and its service after the sale.

Support activities include such activities as procurement, HR etc. which

either add value by themselves or add value through primary activities
and other support activities

 Primary Activities

Inbound Logistics

These activities focus on inputs. They include material handling,

warehousing, inventory control, vehicle scheduling, and returns to
suppliers of inputs and raw materials.

Operations

These include all activities associated with transforming inputs into the
final product, such as production, machining, packaging, assembly,
testing, equipment maintenance etc

Outbound Logistics

These activities are associated with collecting, storing, physically

distributing the finished products to the customers. They include finished
goods warehousing, material handling and delivery, vehicle operation,
order processing and scheduling.

Marketing and Sales

These activities are associated with purchase of finished goods by the

customers and the inducement used to get them buy the products of the
company. They include advertising, promotion, sales force, channel
selection, channel relations and pricing.
Services

This includes all activities associated with enhancing and maintaining

the value of the product. Installation, repair, training, parts supply and
product adjustment are some of the activities that come under services.

 Support Activities

Procurement

Activities associated with purchasing and providing raw materials,

supplies and other consumable items as well as machinery, laboratory
equipment, office equipment etc.

Technology Development

Activities relating to product R&D, process R&D, process design

improvements, equipment design, computer software development etc.

Human Resource Management

Activities associated with recruiting, hiring, training, development,

compensation, labour relations, development of knowledge-based skills
etc.

Firm Infrastructure

Activities relating to general management, organisational structure,

strategic planning, financial and quality control systems, management
information systems etc.
  Strategic management Process

 Michael Porters Five generic Competitive Strategies

1. A low-cost provider strategy—striving to achieve lower overall costs

than rivals on comparable products that attract a broad spectrum of
buyers, usually by under-pricing rivals.

2. A broad differentiation strategy—seeking to differentiate the company’s

product offering from rivals’ with attributes that will appeal to a broad
spectrum of buyers.
3. A focused low-cost strategy—concentrating on the needs and requirements
of a narrow buyer segment (or market niche) and striving to meet these needs
at lower costs than rivals (thereby being able to serve niche members at a
lower price).
4. A focused differentiation strategy—concentrating on a narrow buyer
segment (or market niche) and outcompeting rivals by offering niche members
customized attributes that meet their tastes and requirements better than
rivals’ products.
5. A best-cost provider strategy—striving to incorporate upscale product
attributes at a lower cost than rivals. Being the “best-cost” producer of an
upscale, multi-featured product allows a company to give customers more
value for their money by under-pricing rivals whose products have similar
upscale, multifeatured attributes.

Core Competencies

 Core competence refers to that set of distinctive competencies

that provide a firm with a sustainable source of competitive
advantage.
 Core competencies emerge over time, and reflect the firm’s ability
to deploy different resources and capabilities in a variety of
contexts to gain and sustain competitive advantage.
 Core competences are activities or processes that are critically
required by an organisation to achieve competitive advantage.
 They create and sustain the ability to meet the critical success
factors of particular customer groups better than their competitors
in ways that are difficult to imitate.

 VRIO Framework

Barney, in his VRIO framework of analysis, suggests four questions

to evaluate a firm’s key resources.

1. Value: Does it provide competitive advantage?

2. Rareness: Do other competitors possess it?

3. Imitability: Is it costly for others to imitate?

 4. Organisation: Is the firm organised to exploit the resource?

If the answer to these questions is “yes” for a particular resource,

that resource is considered a strength and a distinctive competence.

 Critical Success factors (CSF )

 Critical Success Factors (CSFs) are defined as the resources,

skills and attributes of an organisation that are essential to
deliver success in the market place.
 It is very important to identify the CSFs for a particular
industry. Many elements relate not only to the environment
but also to the resources of organisations in the industry.
 To identify the CSFs in an industry, it is therefore useful to
examine the type of resources and the way they are
employed in the industry and then use this information to
analyse the environment outside the organisation

CORPORATE LEVEL STRATEGIES

The Grand Strategies are the corporate level strategies designed to identify
the firm’s choice with respect to the direction it follows to accomplish its set
objectives.
It involve the decision of choosing the long term plans from the set of
available alternatives.
The Grand Strategies are also called as Corporate Strategies.

 Grand Strategies ( Corporate Strategies )

1. Stability Strategy
2. Expansion Strategy
3. Retrenchment Strategy
4. Combination Strategy
1. Stability Strategy

The Stability Strategy is adopted when the organization attempts to

maintain its current position and focuses only on the incremental
improvement by merely changing one or more of its business operations
in the perspective of customer groups, customer functions and
technology alternatives, either individually or collectively.

1. No change – Status Quo

2. Profit Strategy
3. Pause/Proceed Strategy
2. Expansion Strategy

 The Expansion Strategy is adopted by an organization when it

attempts to achieve a high growth as compared to its past
achievements.

 In other words, when a firm aims to grow considerably by

broadening the scope of one of its business operations in the
perspective of customer groups, customer functions and
technology alternatives, either individually or jointly, then it
follows the Expansion Strategy.

Under this strategy, there are following strategies :

1. Concentration Strategy :

 Without moving outside the organisation’s current range of

products or services, it may be possible to attract customers by
intensive advertising, and by realigning the product and
market options available to the organisation.

 This is probably the most successful internal growth strategy

for firms whose products or services are in the final stages of
the product life cycle. Most of the approaches of intensive
strategies deal with product-market realignments.
Note : Given description are for understanding purpose. Don’t neglect
it because they are lengthy.

1. Market penetration: Market penetration seeks to increase market

share for existing products in the existing markets through greater
marketing efforts. This includes activities like increasing the sales
force, increasing promotional effort, giving incentives etc. Market
penetration is generally achieved through the following three major
approaches:
(a) Increasing sales to the current customers: This can be done
through:
(i) Increasing the size of the purchase
(ii) Advertising other uses
(iii) Giving price incentives for increased use
For example, if customers of toothpaste who brush once a day are
convinced to brush twice a day, the sales of the product to the
current consumers might almost double.

(b) Attracting competitor’s customers: If the firm succeeds in making

the customers to switch from the competitor’s brands to the firm’s
brands, while maintaining its existing customers intact, there will be
an increase in the firm’s sales. This can be done through:
(i) Increasing promotional effort
(ii) Establishing sharper brand differentiation
(iii) Offering price cuts

(c) Attracting non-users to buy the product: If there are a significant

number of non-users of a product who could be made users of the
product, there will be an opportunity to increase market share. This
can be done through: (i) Inducing trial use through sampling, price
incentives etc. (ii) Advertising new uses

2. Market Development: Market development seeks to increase

market share by selling the Notes present products in new markets.
This can be achieved through the following approaches:

(a) By entering new geographic markets: A company, which has been

confined to some part of a country, may expand to other parts and
foreign markets. Thus, market development can be achieved
through:
(i) Regional expansion
(ii) National expansion
(iii) International expansion Example: Nirma, which was confined
to local markets or some parts of the country in the beginning,
later expanded to the regional market and then to the national
market.

(b) By entering new market segments: This can be achieved through:

(i) Developing product versions to appeal to other segments
(ii) Entering other channels of distribution
(iii) Advertising in other media

3.Product Development: Product development seeks to increase the

market share by developing new or improved products for present
markets. This can be achieved through:
(a) Developing new product features
(b) Developing quality variations
2. Integration Strategy

 Integration basically means combining activities relating to the

present activity of a firm with no change in consumer groups.
Such a combination can be done on the basis of the industry
value chain.
 A company performs a number of activities to transform an
input to output. These activities include right from the
procurement of raw materials to the production of finished
goods and their marketing and distribution to the ultimate
consumers

Integration is basically of two types:

1. Vertical Integration
2. Horizontal Integration
  Vertical Integration :
Vertical integration involves gaining ownership or increased
control over suppliers or distributors.

Vertical integration is of two types:

1. Backward Integration:
 When we want to become cost-effective Backward
integration involves gaining ownership or increased
control of a firm’s suppliers.
 For example, a manufacturer of finished products may
take over the business of a supplier who manufactures
raw materials, component parts and other inputs.
 Brooke Bond’s acquisition of tea plantations is an
example of backward integration.
 Backward Integration increases the dependability of the
supply and quality of raw materials Notes used as
production inputs.

This strategy is generally adopted when:

(a) Present suppliers are unreliable, too costly or cannot meet the
firm’s needs.
(b) The firm’s industry is growing rapidly.
(c) The number of suppliers is small, but the number of
competitors is large.
(d) Stable prices are important to stabilize cost of raw materials.
(e) Present suppliers are getting high profit margins.
(f) The firm has both capital and human resources to manage the
new business.

2.Forward Integration:
 Forward integration involves gaining ownership or
increased control over distributors or retailers.
  For example, textile firms like Reliance, Bombay Dyeing, JK
Mills (Raymond’s) etc. have resorted to forward integration
by opening their own showrooms.

Forward Integration is generally adopted when:

(a) The present distributors are expensive, or unreliable or

incapable of meeting the firm’s needs.
(b) The availability of quality distributors is limited.
(c) The firm’s industry is growing and will continue to grow.
(d) The advantages of stable production are high.
(e) Present distributors or retailers have high profit margins.
(f) The firm has both the capital and human resources needed to
manage the new business

 Horizontal Integration

 Horizontal integration is a strategy of seeking ownership or

increased control over a firm’s competitors. Some authors
prefer to call this as horizontal diversification.
 By whichever name it is called, this strategy generally
involves the acquisition, merger or takeover of one or more
similar firms operating at the same stage of the industry
value chain.

 Example : Recent acquisition of Arcelor by Mittal Steels and

the acquisition of Corus by Tata Steel are good examples of
horizontal integration.

The most important advantage of horizontal integration is that it

generally eliminates or reduces competition.

Other advantages are:

1. It yields access to new markets.
2. It provides economies of scale.
3. It allows transfer of resources and capabilities.
 Horizontal integration is an appropriate strategy when:

1. A firm competes in a growing industry.

2. Increased economies of scale provide a major competitive
advantage.
3. A firm has both the capital and human talent needed to
successfully manage an expanded organisation.
4. Competitors are faltering due to lack of managerial expertise or
resources, which the firm has.

It should be noted that horizontal integration might not be an

appropriate strategy if competitors are doing poorly due to an
overall decline in industry sales.

3. Diversification Strategy
 Diversification is the process of adding new
businesses to the existing businesses of the company.
In other words, diversification adds new products or
markets to the existing ones.
 A diversified company is one that has two or more
distinct businesses. The diversification strategy is
concerned with achieving a greater market from a
greater range of products in order to maximize
profits.

Types of Diversification:

1. Concentric/ Convergent diversification.

2. Conglomerate diversification.

1. Concentric Diversification:
 Adding a new, but related business is called concentric
diversification. It involves acquisition of businesses that are
related to the acquiring firm in terms of technology, markets
 or products. The selected new business has compatibility
with the firm’s current business.

 The ideal concentric diversification occurs when the

combined profits increase the strengths and opportunities
and decrease the weaknesses and threats. Thus, the
acquiring firm searches for new businesses whose products,
markets, distribution channels and technologies are similar
to its own, and whose acquisition results in “Synergy’’.

 Diversification must create value for shareholders. But this is

not always the case. Acquiring firms typically pay premiums
when they acquire a target firm. Besides, the risks and
uncertainties are high. Why do firms still go in for
diversification? The answer, in one word, is “Synergy”.

 Ex. : Coca-Cola entering in beverages like soda water, fruit

juices etc.

2. Conglomerate Strategy
 Adding a new, but unrelated business is called
conglomerate diversification. The new business will have
no relationship to the company’s technology, products or
markets.

 Example : ITC which is basically a cigarette manufacturer,

has diversified into hotels, edible oils, financial services
etc.

 Similarly, Reliance Industries, which is basically a textile

manufacturer, has diversified into petrochemicals,
telecommunications, retailing etc.

Unlike concentric diversification, conglomerate diversification

does not result in much of synergy. The main objective is
profit motive. But it has important advantages.
4. Co-operation Strategy

Expansion through Cooperation is a strategy followed when an

organization enters into a mutual agreement with the competitor
to carry out the business operations and compete with one
another at the same time, with the objective to expand the
market potential.
 Cooperative strategies such as strategic alliance and joint ventures
are a logical and timely response to intense and rapid changes in
economic activity, technology and globalisation. Expansion of the
company can be made through :

1. Takeovers : write at own

2. Joint Ventures : In a joint venture, two firms contribute equity to form

a new venture, typically in the host country to develop new products
or build a manufacturing facility or set up a sales and distribution
network (Eg. Maruti Suzuki).

3. Mergers & Acquisitions : write your own points

4. Strategic Alliance : This is a collaborative partnership between two or more

firms to pursue a common goal. Each partner in an alliance brings knowledge
or resources to the partnership. Such an alliance is generally formed to access a
critical capability not possessed in-house.
Example: Boeing and Airbus formed a strategic alliance to develop a bigger
aircraft.

5. Internationalization/Globalization
 When the focus of a business is its domestic operations, but
a portion of its activities are outside the home country, it is
called an "International Company".
 In other words, an international company is one that is
primarily based in a single country but that acquires some
meaningful share of its resources or revenues from other
countries.
 For example, a small company engaged in exporting some of
its products beyond its home country, is called
"international" in its operations.
  Internationalisation involves creating an international
division and exporting the products through that division.
The firm really focuses on the domestic market, and exports
what is demanded abroad.
 All control is retained at home office regarding product and
marketing strategies.

4. RETRENCHMENT STRATEGY
 This strategy aims to reduce company’s one or more
operations/business to cut down the expenses & reach
financial position.
 A company may pursue retrenchment strategies when it has a
weak competitive position in some or all of its product lines
resulting in poor performance – sales are down and profits are
dwindling.
 In an attempt to eliminate the weaknesses that are dragging
the company down, management may follow one or more of
the following retrenchment strategies.

1. Turnaround
2. Divestment
3. Bankruptcy
4. Liquidation

1.Turnaround : A firm is said to be sick when it faces a severe cash

crunch or a consistent downtrend in its operating profits. Such firms
become insolvent unless appropriate internal and external actions are
taken to change the financial picture of the firm. This process of
recovery is called “turnaround strategy”.

The operating turnaround strategies are of four types.

These are:
1. Revenue-increasing strategies 2. Cost-cutting strategies
3. Asset-reduction strategies 4. Combination strategies
 2.Divestment : Selling a division or part of an organisation is called
divestiture. This strategy is often used to raise capital for further
strategic acquisitions or investments. Divestiture is generally used as
part of turnaround strategy to get rid of businesses that are
unprofitable, that require too much capital or that do not fit well with
the firm's other activities.

3.Bankruptcy : This is a form of defensive strategy. It allows

organisations to file a petition in the court for legal protection to the firm, in
case the firm is not in a position to pay its debts. The court decides the claims
on the company and settles the corporation's obligations.

4.Liquidation: Liquidation occurs when an entire company is dissolved and its

assets are sold. It is a strategy of the last resort. When there are no buyers for a
business which wants to be sold, the company may be wound up and its assets
may be sold to satisfy debt obligations.

5. Combination Strategy
 A company can pursue a combination of two or more corporate
strategies simultaneously. But a combination strategy can be
exceptionally risky if carried too far.
 No organisation can afford to pursue all the strategies that
might benefit the firm. Difficult decisions must be made.
 Priorities must be established. Organisations like individuals
have limited resources, so organisations must choose among
alternative strategies.
 Aligning internal aspects of BU : McKinsey’s 7-S model to serve a
framework to develop shared vision and good Internal control

Mc Kinsey’s 7-S model is good at capturing the importance of all these

elements in the implementation of strategy

This framework basically deals with organisational change. The main

thrust of change is not connected only with the organisation’s strategy.

It has to be understood by the complex relationships that exist between

strategy, structure, systems, style, staff, skills and super-ordinate goals. These
are called the 7-S of the organisation.
1. Structure: “Structure” means the organisational structure of the
company. The design of Notes organisational structure is a critical task of
top management. Organisational structure refers to the relatively more
durable organisational arrangements and relationships.

2. Systems: “Systems” mean the procedures that make the organisation

work. They include the rules, regulations and procedures, both formal
and informal, that complement the organisational structure. Systems
include production planning and control systems, cost accounting
procedures, capital budgeting systems, performance evaluation systems
etc.

3. Style: “Style” means the way the company conducts its business. Top
managers in organisations can use style to bring about change.
Organisations differ from each other in their “styles” of working. The
style of an organisation, according to the McKinsey framework, becomes
evident through the patterns of actions taken by the top management
team over a period of time.
 4. Staff: “Staff” refers to the pool of people who need to be developed,
challenged and encouraged. It should be ensured that the staff has the
potential to contribute to the achievement of goals.

5. Skills: “Skills” are the most crucial attributes or capabilities of an

organisation. Skills in the 7-S framework can be considered as an
equivalent of “distinctive competencies”.
For example, Hindustan Lever is known for its marketing skills, TELCO for its
engineering skills, IBM for its customer service, Du Pont for its research and
development skills and Sony for its new product development skills.

6. Strategy: “Strategy” is the long-term direction and scope of an

organisation. It is the route that the company has chosen to achieve
competitive success

McKinsey GE Matrix to analyse the Segment Attractiveness

Difference between BVG Matrix & GE Matrix

McKinsey- GE Matrix to Analyse Segment Attractiveness

1.Market size – Analyse the present demand of the market . The

projected demand growth.

2 Market growth – Future potential demand and projected demand

growth .

3 Market profitability – Analyse the costs ( investment and operating

expense ) for attracting/ penetrating the segments.

4. Price sensitivity – in markets where price sensitivity is high , margins of

each sale will be small and larger volume would be need to achieve
break even and maximize profit . Markets will low price sensitivity are
considered more attractive since margins can be maintained.
5 Bargaining power of channel / customers – when cost of selling and
distribution is high the market segment can be unattractive as profit
margins are reduced

6 Bargaining power of suppliers – where supply is controlled by a few

large entities / companies , suppliers can
dictate the terms and reduce the market attractiveness.

7 High Barriers to entry - Market entry barriers like policy , regulatory

norm , large capital intellectual property
patents to enter a market
  Strategic Fit of Business Model
1. Market assessment
2. Technical assessment
3. Financial Analysis

 Business Unit Level Strategy

BUSINESSS MODEL CANVAS

Template for strategic business development used for developing new

business models and documenting existing ones in a visual chart which
includes value proposition, infrastructure, customers and finances.
Competitors Analysis & Strength Weakness in Chosen segment
KANO Model

Explains how customers react to certain features or lack of them lead

to negative or low satisfaction levels.

an analysis tool that enables you to understand how customer

emotional responses to products or features can be measured
and explored.

1. Threshold Attributes ( Basic) : These are the basic features that

customers expect in a product or service . For example , in a
Mediclaim policy, basic illness /diseases covered and cash less
settlement services

2. Performance Attributes ( Satisfiers ) : These elements would include

features like large number of hospitals covered under the policy for
cash less claim settlement, pre hospitalization and health check up
expenses coverage . Third party assistance for cash less approval.

3. Excitement Attributes ( Delighters ) : These are the surprise elements

that shift the customers attitude . They features like family floaters on
single premium plus Travel ,accident and disease cover, no claim
bonus accumulation
Competitive Landscape

Challenger Leaders

Underdog High Performers

  Days of Inventory [ DOI ]
DOI = (Inventory at cost / COGS) * Period in consideration

 Days of Sales Outstanding [ DSO ]

DSO = (Accounts receivable / Total Credit sales ) * Period in
consideration

 Days Payable Outstanding [ DPO ]

DPO = ( Account Payable / Credit purchase ) * Period in consideration
  Days of Working Capital [ DWC ]

Days working capital indicates how many days it takes for a

company to convert its working capital into revenue. A firm that
requires fewer days to do so has a reduced need for financing,
since it is making more efficient use of its working capital.

DWC = ( Working Capital / Revenue from operations ) * Period in

consideration

Cash Convergent Cycle CCC = DPO – ( DSO + DOI )

If CCC comes in – ve (minus value) it means its good & recovers money
quickly

Strategies for Competing in International Market

7 Continents , 14 Trade Blocks

Terminologies in International market

1. Preferential Trade Agreement [ PTA ] : member countries agree to

lower, but not eliminate, trade barriers within the group to levels
below those erected against outside economies.

2. Free Trade Area / AGREEMENT [ FTA ] : eliminates all trade

restrictions between members of the trade bloc, but each member
maintains its own restrictions on trade with third

3. Countries.
4. Custom Unions [CU ] : is a free trade area whose members agree on
common tariffs against non-member countries.

5. Common Market [ CM ] : allows for the free trade of goods among

members, sets common tariffs against outside countries, and permits
the free movement of factors of production among members.

6. Economic Union [ EU ] : has all the characteristics of a CM plus

members agree to a uniform set of macroeconomic and
microeconomic policies.

7. Regional Trade Agreement

 Regional Trade Agreement ( RTA )

Regional trade agreements (RTAs) are defined as reciprocal trade

agreements between two or more partners.

As one progresses up the hierarchy of RTAs, the coverage area of

polices extend beyond in more areas such as tariffs, immigration,
taxation, and capital movements.

The fundamental premise of Regional economic integration is by way

of regional trade agreements.

 Restraining forces of RTA :

1. Culture
2. Nationalism
3. Costs
4. Geopolitical instability
5. Domestic Focus
6. Embargo
7. Law of the country
8. Quota
9. Exchange control
10.Import Tariff

 SPAGHETTI BOWL EFFECT

Complications which arise from the application of the domestic

rules of origin in signing of free trade agreement across nations.

Impacts the weaker nations doing business with developed

nations

“Spaghetti bowl" problem that bilateral and regional pacts

present in a region , creates a tangle of trade commitments that
can both overlap and work at cross-purposes.

 Trade Barriers
There are 2 types :

Tariff Barriers & Non-tariff barriers

1. Tariff Barriers
 Specific duty
Ad valorem tariff
Countervailing duty
Revenue tariff

2. Non-tariff barriers
Licences
Quotas
Voluntary Export Restrains
Tariff quota

 Firms Management orientation towards International Markets

BLUE Ocean & Red Ocean Strategy

What is a blue ocean strategy ? How does it help to create new market
or disruptive innovation?

Blue oceans are created not within existing industry boundaries but
across them. It is exploring and creating a new market space across the
existing boundaries.

Disruptive innovation is the creation of a new market outside or beyond

existing industry boundaries. A path to new industries, new jobs, and
profitable growth without hurting the communities, or job losses that
come with disruption. It’s a path beyond disruption, where business and
society can thrive together.
 ERRC 4 ACTION FRAMEWORK FOR Value Innovation
Sequence of Blue Ocean Strategy
India’s Foreign Trade Policy