STRATEGIC MANAGEMENT

Meaning of Strategy (3–4 MARKS)
Strategy is a unified, comprehensive and integrated plan that relates the strategic advantages of the firm to the challenges of the environment. It is designed to ensure that the basic objectives of the enterprise are achieved through proper execution by the organisation.

Key Characteristics of Strategy
• Long-range & future-oriented
• Concerned with overall purpose & scope
• Involves matching resources with environment
• Provides direction & unity of purpose
• Involves both formulation & implementation

Three Levels of Strategy (6 MARKS)

Level	Decided By	Focus	Example
1. Corporate Level Strategy	Board of Directors & Top Management	Overall scope & direction of the entire organisation • Which businesses to enter/exit • Diversification, merger, acquisition, stability, retrenchment	Tata Group deciding to enter aviation (Air India acquisition)
2. Business Level Strategy (SBU Level)	SBU Heads / Divisional Managers	How to compete successfully in a particular market • Cost leadership, differentiation, focus	Maruti Suzuki following cost leadership in small car segment
3. Functional Level Strategy	Functional Heads (Marketing, HR, Finance, Operations, R&D)	Support business strategy through day-to-day actions • Marketing plan, HR policies, production efficiency	HUL’s aggressive rural marketing & Project Shakti for business strategy

Conclusion (1 MARK)
All three levels must be aligned and mutually supportive for effective strategy execution. Corporate strategy gives direction, business strategy creates competitive advantage, and functional strategies ensure implementation.

Memory Help (Super Easy)
C-B-F → Corporate (What business?) → Business (How to win?) → Functional (How to execute?)
Think: “Chairman → Business Head → Functional Manager”

Meaning of Objectives (2 MARKS)
Objectives are specific, measurable, time-bound end results that an organisation seeks to achieve. They convert the mission and vision into performance targets and provide direction to all planning and actions.

Characteristics of Good Objectives (5 MARKS)
1. Specific – Clear and unambiguous
2. Measurable – Quantifiable (e.g., 15% growth)
3. Achievable – Challenging but realistic
4. Relevant – Aligned with mission
5. Time-bound – Has deadline
6. Hierarchical – Corporate → Business → Functional
7. Balanced – Covers financial & non-financial aspects
8. Consistent – No conflict between objectives

Process of Setting Objectives (3 MARKS)
1. Review mission, vision and values
2. Environmental scanning (SWOT/PESTLE)
3. Gap analysis (current vs desired performance)
4. Involvement of top management & key stakeholders
5. Prioritisation and finalisation
6. Communication & cascading down the hierarchy
7. Periodic review and modification

Example: Reliance Jio objective (2016): “Achieve 100 million subscribers within 18 months” → Specific, Measurable, Achievable, Relevant, Time-bound.

Conclusion
Well-set objectives act as a yardstick for performance measurement and motivate employees by giving clear direction.

Memory Help
SMART + CHBC
Specific → Measurable → Achievable → Relevant → Time-bound + Challenging → Hierarchical → Balanced → Consistent

Introduction: Objectives are specific, measurable end results an organisation wants to achieve within a time frame.

Characteristics (SMART):
• Specific • Measurable • Achievable • Relevant • Time-bound
• Challenging yet realistic • Hierarchical • Balanced

Process of Setting Objectives:
1. Review mission/vision
2. Environmental scanning
3. Gap analysis
4. Involvement of top management & key stakeholders
5. Communication & cascading down

Memory Help: SMART + C-H-B → Challenging, Hierarchical, Balanced

Introduction (2 MARKS)
PESTLE Analysis is a strategic tool used to scan and evaluate the macro-environmental (external) factors that can impact an organisation’s performance, especially in the global/international context. The acronym stands for Political, Economic, Social, Technological, Legal and Environmental factors.

Steps Involved in Conducting PESTLE Analysis (5 MARKS)

1. Data Collection – Gather information from reports, journals, government sources, trade bodies, global databases.
2. Identify Key Factors – List specific variables under each PESTLE dimension relevant to the industry/country.
3. Assess Impact – Determine whether each factor creates Opportunity or Threat and its magnitude.
4. Prioritise Critical Factors – Focus on high-impact, high-uncertainty factors (using impact-probability matrix).
5. Draw Strategic Implications – Suggest entry mode, timing, localisation, risk mitigation, partnerships.

PESTLE Factors in Global Environment (12 MARKS)

Factor	Key Global Aspects	Example / Implication
Political	Government stability, trade policies, tariffs, FDI regulations, bilateral relations, geopolitical tensions	US-China trade war → Indian firms gained electronics export orders
Economic	GDP growth, inflation, interest & exchange rates, labour cost, purchasing power, ease of doing business	Vietnam’s low labour cost → Apple, Samsung shifted manufacturing from China
Social	Demographics, lifestyle, education, cultural values, urbanisation, health consciousness	Ageing population in Japan → high demand for healthcare & robotics
Technological	R&D expenditure, automation, 5G/AI/IoT adoption, patent protection, digital infrastructure	India’s UPI success → attracted global fintech investments
Legal	Labour laws, taxation, IPR, antitrust, data privacy (GDPR), foreign ownership limits	EU’s GDPR → forced all global companies to upgrade data protection
Environmental	Climate change policies, carbon emission norms, renewable energy targets, waste management laws	EU Carbon Border Adjustment Mechanism (CBAM) → affects Indian steel/aluminium exports

Conclusion (1 MARK)
PESTLE is an indispensable tool for any firm operating or planning to operate globally. It helps identify favourable markets, anticipate risks, choose appropriate entry strategies and formulate contingency plans.

Memory Help (Super Easy)
PESTLE → Political-Economic-Social-Technological-Legal-Environmental
Steps → C-I-A-P-S → Collect → Identify → Assess → Prioritise → Strategic implications

Introduction & Meaning (2 MARKS)
The **External Factor Evaluation (EFE) Matrix** is a strategic tool that summarises and evaluates the major opportunities and threats in the external environment and measures how effectively the company’s current strategy is responding to them.

Purpose
• To quantify the firm’s responsiveness to external factors
• To compare competitors
• To identify areas where strategic change is needed

Steps to Develop EFE Matrix (6 MARKS)

Step	Description
1. List Key External Factors	Identify 10–20 critical Opportunities & Threats from PESTLE & Porter’s analysis
2. Assign Weights (0.0 to 1.0)	Weight reflects relative importance (total = 1.0) Higher weight → more important factor
3. Rate Company Response (1–4)	1 = Poor response 2 = Below average 3 = Above average 4 = Superior response
4. Calculate Weighted Score	Multiply Weight × Rating for each factor
5. Sum Total Weighted Score	Add all weighted scores

Interpretation (2 MARKS)
• Average total score = 2.5
• > 2.5 → Strong external position (effectively exploiting opportunities & minimising threats)
• < 2.5 → Weak external position (needs strategic improvement)

Conclusion
EFE Matrix converts qualitative external analysis into a quantitative score, helping managers decide whether current strategies are adequate or new strategies are required.

Memory Help (Super Easy)
**L-W-R-M-T** → List → Weight → Rate (1–4) → Multiply → Total (Average 2.5)

A. Strategic Groups (5 MARKS)

Definition: Clusters of firms within an industry that follow similar business models or strategies along key dimensions (price, quality, geography, technology, etc.).

Key Points
• Firms within the same group are direct competitors.
• Mobility barriers exist between groups (e.g., brand, technology, scale).
• Profitability can differ significantly between groups.
• Helps identify closest rivals and attractive positions.

Example (Indian 2-Wheeler Industry)
• Premium segment: Royal Enfield, Harley-Davidson
• Volume segment: Hero, Honda, Bajaj
• Electric segment: Ather, Ola Electric

B. Scenario Planning (5 MARKS)

Definition: A disciplined method for imagining and preparing for several alternative futures by developing multiple plausible stories about how the environment might evolve.

Key Features & Benefits
• Challenges “single official future” thinking
• Identifies early warning signals
• Tests strategy robustness across different futures
• Encourages strategic conversation & flexibility

Steps (Brief): Identify driving forces → Develop 2–4 plausible scenarios → Analyse implications → Develop contingency plans.

Example: Shell Oil famously used scenario planning in 1970s to prepare for oil price shocks.

Conclusion
Strategic groups improve competitive analysis; scenario planning prepares for uncertainty — both are essential for robust strategy formulation.

Memory Help
• Strategic Groups → “Same Strategy Club”
• Scenario Planning → “Multiple Possible Tomorrows”

Strategic Groups: Clusters of firms following similar strategies.
Scenario Planning: Developing multiple plausible future scenarios to test strategy robustness.

Memory Help: Groups = Similar strategy clusters | Scenarios = Multiple futures

Meaning of Differentiation (2 MARKS)
Differentiation is a competitive strategy in which a firm seeks to be unique in its industry along some dimensions that are widely valued by buyers. It creates a perception that the product/service is superior to competitors, allowing the firm to charge a premium price (Michael Porter).

Types / Bases of Differentiation (4 MARKS)

Type	Description	Example
1. Product Differentiation	Features, performance, design, durability, reliability	Apple iPhone (design + ecosystem), Volvo (safety)
2. Service Differentiation	Delivery, installation, customer training, after-sales service	Asian Paints (free colour consultancy), Caterpillar (24×7 service)
3. Personnel Differentiation	Better-trained, courteous, knowledgeable employees	Singapore Airlines cabin crew, Ritz-Carlton staff
4. Channel Differentiation	Coverage, expertise, performance of distribution channels	Amway direct selling, Dell direct-to-customer model
5. Image Differentiation	Brand image, reputation, symbols, advertising	Luxury brands: Louis Vuitton, Rolex, Mercedes-Benz

Advantages of Differentiation (2 MARKS)
• Premium pricing → higher margins
• Customer loyalty → lower price sensitivity
• Higher entry barriers
• Better bargaining power against suppliers & buyers
• Reduced threat of substitutes

Disadvantages / Risks (2 MARKS)
• Higher costs (R&D, quality, advertising)
• Risk of imitation by competitors
• Over-differentiation (buyers may not value uniqueness)
• Changing customer tastes can make differentiator irrelevant

Conclusion
Successful differentiation creates a sustainable competitive advantage when the uniqueness is valuable, rare, difficult to imitate, and backed by organisational capabilities.

Memory Help (Super Easy)
Types → P-S-P-C-I
Product → Service → Personnel → Channel → Image

Advantages → P-L-E-B-S (Premium price, Loyalty, Entry barrier, Bargaining power, Substitute protection)

Meaning of Competitive Strategy (2 MARKS)
Competitive strategy (or business-level strategy) refers to the integrated set of actions taken by a business unit (SBU) to achieve competitive advantage and superior performance in its chosen industry or market segment.

Porter’s Three Generic Competitive Strategies (3 MARKS)
1. **Cost Leadership** – Lowest cost producer (e.g., Walmart, Ryanair, Reliance Jio)
2. **Differentiation** – Unique & valued features (e.g., Apple, Mercedes, Titan)
3. **Focus** – Serving narrow segment exceptionally well
- Cost Focus (e.g., Aldi, Kia in some markets)
- Differentiation Focus (e.g., Rolex, Ferrari, Rolls-Royce)

How Competitive Strategy is Formulated (5 MARKS)
1. **Analyse Industry Structure** – Using Porter’s Five Forces
2. **Identify Sources of Competitive Advantage** – Cost drivers or Differentiation drivers
3. **Assess Internal Capabilities** – Value chain analysis, core competencies
4. **Choose Appropriate Generic Strategy** – Cost, Differentiation or Focus
5. **Translate into Functional Policies** – Marketing, Operations, HR, Finance, R&D policies must support the chosen strategy
6. **Continuous Review & Adaptation** – Because of changing environment & competition

Conclusion
A well-formulated competitive strategy creates a sustainable advantage by delivering superior value to customers while maintaining profitability.

Memory Help
**C-D-F** → Cost Leadership | Differentiation | Focus
**Formulation Steps** → Industry → Advantage → Capabilities → Choose → Implement → Review

Major Dimensions of Competitive Strategy (Hofer & Schendel) (9 MARKS)

Dimension	Key Questions	Example
1. Specialisation	Breadth of product line & market segments served	Parle (only biscuits) vs ITC (multiple categories)
2. Brand Identification	Degree of branding & promotion	Lux, Nike vs generic/unbranded products
3. Push vs Pull Strategy	Emphasis on trade promotion vs consumer advertising	Pharma → Push; FMCG → Pull
4. Channel Selection	Direct, indirect, exclusive, online, retail	Boat → D2C + selective retail
5. Product Quality	High-end vs economy	Toyota (reliability) vs Rolls-Royce (luxury)
6. Technological Leadership	Leader vs follower	Tesla (EV tech) vs traditional car makers
7. Vertical Integration	Control over supply chain	Reliance (refinery to retail) vs others
8. Cost Position	Low-cost vs premium	Jio vs Airtel (initial phase)
9. Service	Level of customer service	Amazon vs traditional retail
10. Price Policy	Premium, parity or discount pricing	Patanjali (value pricing)
11. Leverage/Financial Policy	Debt-equity structure	High leverage for aggressive growth
12. Relationship with Parent (for SBUs)	Autonomy vs control	Tata Motors vs Tata Steel

Conclusion (1 MARK)
These dimensions help managers create a unique strategic position that is difficult for competitors to imitate.

Memory Help (Super Easy)
**S-B-P-C-Q-T-V-C-S-P-L-R** → Specialisation, Brand, Push/Pull, Channel, Quality, Technology, Vertical integration, Cost, Service, Price, Leverage, Relationship with parent

Corporate Governance (4 MARKS)

Definition: Corporate Governance is the system of rules, policies, processes and practices by which a company is directed and controlled. It essentially involves balancing the interests of all stakeholders — shareholders, management, customers, suppliers, financiers, government and the community.

Key Objectives:
• Transparency • Accountability • Fairness • Responsibility • Independence

Major Global Models of Corporate Governance (4 MARKS)

Model	Ownership Pattern	Key Features	Examples
Anglo-American (Market-based)	Dispersed shareholders	Strong stock market, independent directors, one-tier board, focus on shareholder value	USA, UK, India (post-SEBI reforms)
German (Bank-based / Two-tier)	Banks & families hold large stakes	Supervisory board + Management board, co-determination (worker representation)	Germany, Netherlands
Japanese (Keiretsu)	Cross-shareholding among group companies	Lifetime employment, main bank system, long-term relationships	Toyota, Mitsubishi groups
Family-dominated (Asian/Indian)	Promoter/family control	Concentrated ownership, professional CEOs in later stages	Tata, Reliance, Birla, Bajaj

Business Ethics & Examples (2 MARKS)
Business Ethics refers to moral principles and values that guide behaviour in the world of business.

• Tata Group → Refused to pay bribe in colonial era → “We do not bribe” policy
• Infosys → Voluntary disclosure, highest standards of transparency
• Patagonia → Environmental responsibility (“Don’t buy this jacket” campaign)
• Satyam scandal → Classic failure of ethics & governance

Conclusion
Good corporate governance and strong business ethics are two sides of the same coin — both are essential for sustainable success, stakeholder trust and long-term value creation.

Memory Help (Super Easy)
Models → **A-G-J-F** (Anglo-American | German | Japanese | Family)
Ethics → **Tata-Infosys-Patagonia** (positive) vs **Satyam** (negative)

Introduction
The General (or Macro) Environment consists of broad external forces that affect all organisations operating in an economy or society. It is also known as the remote environment or societal environment.

Components (PESTLE)
• Political-Legal • Economic • Social-Cultural • Technological • Legal • Ecological/Environmental

Relevance to Strategic Management
1. Source of Opportunities & Threats – Identifies major trends that can create new markets or destroy existing ones.
2. Shapes Industry Structure – Changes in macro factors can make an industry more or less attractive.
3. Influences Choice of Business – Firms enter industries/markets where macro environment is favourable.
4. Forces Strategic Adaptation – Companies must realign strategies when macro environment changes significantly.
5. Long-term Planning Horizon – General environment affects the organisation over 5–10+ years.

Examples
• Rise of digital India + 4G/5G (Technological) → created multi-billion dollar opportunity for Jio, Paytm, Zomato.
• Health consciousness + ageing population (Social) → huge growth in health foods, wellness, insurance, and senior care services.
• Stringent emission norms (Political-Legal + Environmental) → forced automobile companies to shift to EVs.

Conclusion
No strategy can be formulated in isolation from the general environment. Continuous scanning and alignment with macro trends separate winning organisations from the rest.

Memory Help: PESTLE → “Outer circle of strategy”

Introduction
Michael Porter’s Five Forces Framework (1979) is the most widely used tool to analyse the competitive intensity and attractiveness of an industry.

The Five Forces
1. Threat of New Entrants – Barriers to entry (capital, brand, patents, scale, regulation).
2. Bargaining Power of Suppliers – Few suppliers, unique input, high switching cost.
3. Bargaining Power of Buyers – Few buyers, low switching cost, price sensitivity.
4. Threat of Substitute Products/Services – Availability of alternatives.
5. Rivalry Among Existing Competitors – Number of players, growth rate, exit barriers, differentiation.

Strategic Implications
• High forces → Low profitability → Avoid or change the rules.
• Low forces → High profitability → Attractive industry.
• Helps choose positioning, influence forces (e.g., create entry barriers), or exit unattractive industries.

Example: Indian telecom (high rivalry + low entry barriers initially) → price war → consolidation.

Memory Help: “New Entrants → Suppliers → Buyers → Substitutes → Rivalry” (clockwise circle)

Definition
Critical Success Factors (CSFs) are the limited number of areas in which satisfactory results will ensure successful competitive performance for the organisation.

Sources of CSFs
1. Industry Characteristics – e.g., low cost in budget airlines, on-time delivery in courier.
2. Competitive Position & Strategy – market leader sets the benchmark.
3. Environmental Factors – e.g., digital reach for e-commerce, fuel price for airlines.
4. Temporal/Internal Factors – e.g., new technology adoption, leadership change.

Characteristics
• Few in number (usually 4–8)
• Different for each industry
• Change over time

Example: For Swiggy/Zomato → Delivery time < 30 min, Restaurant tie-ups, App experience, Pricing.

Conclusion
Identifying and continuously monitoring CSFs helps management focus resources on what really matters for survival and success.

Memory Help: **I-C-E-I** → Industry | Competition | Environment | Internal

Definition
Corporate Culture is the set of shared values, beliefs, norms, assumptions and “the way we do things around here” that shapes employee behaviour and organisational performance.

Characteristics
• Invisible but powerful
• Learned through stories, rituals, symbols, heroes
• Can be strong (high commitment) or weak

Role in Strategy
• Strong, adaptive culture → fastest strategy implementation
• Misaligned culture → biggest barrier to change
• Culture eats strategy for breakfast (Peter Drucker)

Examples
• Tata → Integrity, trust, nation-building
• Google → Innovation, “Don’t be evil”, openness
• Amazon → Customer obsession, ownership, frugality

Conclusion
Successful organisations consciously build and manage culture that supports their strategy and values.

Memory Help: Culture = “Organisation ka DNA”