Peas Petty ec hids Li Peat itchanats and Issues tmplem 4.1. GENE 4.1.1. Introduction sde-on the nature and scope to Michael Porter has said that the firm has to decide aFgenetic euategies are which it can utilise its competitive advantage. The ae aa effective because they help in the framing of strategies h generic strategy and broad levels. There are various risks associated with eac! a ee the firm will have to bear those risks if it does not want to mediocre firm. Porter maintains that the firm’s relative position in the andustty stems from whether its profitability is more or less than the industry’s average. A firm is said to have an above average profitability if it has sustained its competitive advantage over the years. At the broad level, the firm can have two competitive advantages — it. can either aim at cost leadership or differentiation. Ghe competitive strategy of ihe firm comprises of various activities it ‘undertakes to acquire customers in the marketplace and satisfy their needs, in order to maintain its business position in the competitive market. In terms of application the focus area of competitive strategy is narrower than the business strategy. (Competitive strategy deals with the efforts of the management in providing superior value to its customers and also overcoming competition in the market. Business strategy deals with not only how the firm competes i $ les, a also solves other strategic issues faced by the firm. a Le Competitive Advantage Lower Cost Differentiation Broad ao a ‘ost Leadershi i iat Competitive T8* ship Differentiation Scope Narrow Cont F aes Cost Focus F Target cus Focused Differentiation Figu 4.1: Generic/Business Strategiesa: 41.2. Low Cost Le: this strategy, the firm ¢, producticn lines to dej competitors. Thus, here ices lower. It is chara 173 ™Ploys economi, ve down ee scale and brings efficiencies in the firm tri MS Products lower than that of its it the i i c is characterised by eae,” Competitors by keeping the vetion and ‘bution The ne eduction of overheads and fixed costs of insituations, where the customers ie apply the low cost leadership strategy product knowledge. a a flexibility of changing suppliers, have ind the produ ts ; le of this st a ct Ser 18 standardised. A ver od examp! rategy is Walmart Which has low overhead cost than other il chains. It builds ; es es ston ee hopping Complexes situated outside cities where the ee from them. This re rae iron 8np over its vendors and extracts the best ' Trev at tility which is demonstrated by its “every diy low Price” policy. In India, Big Bazaar 1 ial business model. This strategy also leads ton oe able to develop a similar : 1 expenditure on marketing the Fh as ibe Price of the Product itself is the biggest attraction to the customers. a Velops entry barriers and it is not easy for newcomers to compete with firm. vice Gis strategy is utilised by the firm in becoming a low cost producer in the industry. By applying this strategy, the firm aims to achieve complete cost advantage and economies of scale with: the help of offering a standardised product or service in the market. The critical aspects of cost leadership are operational details, stable product lines, giving special attention to formal profits and budgets, and relying on capital rather than low efficiency labour.) The firm aims to attain the lowest cost structure of the industry through strong and effective business activities, economies of scale and efficient cost control system. For example, the Chinese economy has invested large capacities for the making of consumer items at a very low cost. They can manufacture items at a Cost structure which is far less than any other country. This has given China a Competitive advantage in items like, consumer electronics, clothing, footwear, Porting goods etc. The critical thing in cost leadership ‘is to anticipate the “ompetition. Typically, every industry has one firm which undertakes cost adership. It is not profitable for other firms to take this role, (aa, Conditions under which Differentiation is Used W cost leadership is most effective in the poloyine situations: a in basi ition in the industry is price competition, len the main basis of competition in the industry apentlon When an industry sells a standardised, commodity product which is easily | accessible to many firms. : . | len it is possible to differentiate the product. in only limited number of Ways that has value for the customers. : : : ah the buyers have similar preferences regarding the ways they use the Product and when they are not seeking Geseenae ie 5) When there is low switching cost in moving # 7 al the buyers are looking for best price in the market. ini is hi When the target market is big and the bargaining power of the buyers is hig and whenBA Fifth Semester (Business Policy and Strategy) GGgyp,, BBA Fifth S a 74 ership Strategy :1.2.2. Benefits of Low Cost Ea Faria e the bene! f low cost leaders | ce a he following are the rae a able to create a sie of aversion _ voidance: A low cos Baan 3 habia oe jowards other competing firm: Bh a Hane cena ia : to the products offered by the low cost lea es ae He oe ea © g0 for the brands offering similar products unl ee , This helps low cost producers to get a dominan 1) dase i h the cost struct; rket $ tors cannot match th : ure 6 Strong Market Presence: Competit Nn - : the low N ader. Thus, the low cost leader is able to bring price st lity the industry and has strong market presence. 3) Creating Entry Barriers: Low cost leaders can create substantial ent i i i have barriers for potential new entrants in the industry. Since they very low Cost structures, they can lower the prices. This low cost leadership acts as 4 barrier for the new entrants. 4) Able to Sustain in Inflation: Low cost producers also are eet Placed to absorb price increases from their suppliers and do not pass 7 1 same to the end consumers. This is because they have a very low cost structure and even after the increase in price of the materials used in their product they are able to sustain a low end-user price. For example, Tata Motors bein; '§ a low cost leader in manufacturing automobile can bear the tise in the prices of iron with more ease than other competing automobile manufacturers. 5) Increases Market Share: market share and profitabil Indigo where both are cos share and profitability. iihe low cost leader invariably has a very high lity. Examples can be taken from Walmart and ‘leaders in their industry and have large market A123. Risks of Low Cost Leadership Strate. isks of low cost leadershi By P Strategy are as follows: : 1) Expensive: The ad 2) Cost leadership st Petit st leadership strategy is that : : etitors. Cost advanta sed ee rategies are not long lasting, Advantages which arise ou 3) Less Skill due to Lack of Research; strategy to keep the pe i activities like analysis etc. The low cost le: new trends and ch; situation, where lo Tivals, The entire emphasis is on the low cost OW. This often leads to a neglect of i S, research and initiatives: ‘ader is i and development initiat A qs 10 188 behind in detecting and adoplilé cost leader may Wu, °evitonment, This can lead to the ay lose its dominant marker neesion to ilsof Bosiness Strategies and Issues in Strategy Implementation (Unit 4) 175 | Differentiation Strategy 13 entation strategy is adopted by a firm which wants to differentiate its adits and services from its competitors. In other words, the firm wants to fat ht some paul or benefit in its product offering as superior to that of its Fpattors: Differentiation strategy is adopted when the firm is likely to esate more profit by focusing on a particular product attribute than becoming sit cost leader. This strategy resorts to heavy advertising to insert this value sition in the minds of its customers. In this manner it is able to create a rd loyalty for its products, This brand loyalty allows the company t0 charge a Wier pce oF brand premium, = “or example, LOréal has gained huge market share in hair colour segment by pighlighting the ‘no ammonia’ attribute of their product. It has been able to create avery high brand loyalty for its product. A successful differentiation strategy also allows the firm from erecting entry barriers which act as deterrents to new gmrants in the industry. jna differentiation strategy, the firm tries to differentiate its products and services. his can be done either through the use of advertising (Coca-Cola and Pepsi), distinctive product features, exceptional service levels (Scandinavian Airlines), or superior product quality (Apple). This strategy allows the firm to target the prospects that are willing to spend their money to get unique and high-end product ind services. For example, Cafe Coffee Day is a chain of coffee outlets in India which targets the youth in India and also those who want to drink coffee in a stylish imbience. That is why; it differentiates its products from its competitors and charges a premium alike its competitors. Another example in India is Mahindra Holidays and Resorts which targets family travellers and sells memberships which allows people to access its ‘network of hotels and resorts spread across India and the world. Another example of a service firm which has been able to differentiate from others in India is Jawed Habib Hair salons. Through excessive training and stress on quality, it has been able to differentiate its service and charge a premium for its hair cutting service from discerning customers. The flipside of differentiation is that it requires the company to spend a lot of money in advertising and brand building activities. Tt needs to invest in a strong tesearch and development team and innovative marketing strategies. It also needs to create a culture of creativity in its employees. If done successfully, a differentiation strategy helps to ward off competition and creates very strong entry barriers for the firm offering substitute products. 41.3.1. Conditions under which Low Cost Leadership Strategy is Used A differentiation strategy works in the following condition: 1) Other competitors have a differentiation strategy in place. 2) ‘The market is large enough for offering differentiated products. 3) Customers have diverse needs. 4) Other competitors in the industry offer largely, undifferentiated products and focus on the generic needs of the customers. Special needs of the cust ae are not being addressed. tomersBBA Fifth Semesiet ©" 176 Differ 4.1.3.2. Benefits of riff Major benefits of differentiation aaa iG 1) Brand Loyalty: Strong bran joya competition. Firms differentiate their through the use of trademarks fa ee which the customers associate Ss eh companies. This creates brand loyalty for the company entiation Strategy ws: i : Sey tas the firm in facing the s from their competitors tion. This leads to a Situation jn saa ducts with their respective products. h its advertising technique has been able to en happiness’ Hh For example, Coca-Cola through dvert create a very distinct image with its tagline “op' ; 3 entiation creates 2 culture of innovation in n be of two types — “transformational 2) Innovation: The practice of differ e organisation. Innovation cal oe aaa ‘ eae and “adopted product innovation”. Tutt oa is aimed at producing new products and services whicl eer ant features and benefits. Adopted product innovation, on the i . is aimed at bringing about changes in the existing products and oe be types of innovation create a win-win situation for the firm . the stakeholders by reviving the product mix, bringing about economies 0! scale and improving the production process. Creates Value: A firm which employs a differentiation strategy creates value in the eyes of its consumers as it focuses on the durability and cost savings. It thus creates a perception that the products of the firm offer more than the similar product offered by the rival firms. Thus it creates a perceived value to customers. 3 4) Non-Price Competition: A company can also differentiate from its competitors on the basis of features rather than price. For example, Mercedes Benz and Audi differentiate from other car manufacturers in terms of the luxury features in their car and also the kind of perceived superiority or snob value in the eyes of the customer. This strategy also helps small companies to carve out their own niche in the marketplace without having to resort to cutting prices. 5) No Perceived Substitute: When a firm selects differentiation strategy for competing in the market, they compete by stressing on the quality and design i of their offering. This leads to a perception amongst customers that here is no substitute for the company’s products and services. An example of _ i Apple. geen Stressing the superior products created by them. ve created a brand loyalty and a percepti t 1 y ption amongst that there are no substitutes for their products. While there are ite reonioanie in ‘are similar products like Samsung or Nokia, perior design of Apple Products it is perceived however, because of the su that they have no substitutes, 4.1.3.3. Risks of Diff ‘iati . Risk erentiation Strate; a Bene ae of differentiations sige ve as foll mtry: Product di! ati ie ae differentiation creates barriers of entry for new try. This i is because the customers start perceiving thece ice of Business Strategies and Issues in Strategy Implementation (Unit 4) 17 oducts of the company as superior and develop a very strong loyalty for the oduct. This superior brand image is created by immense advertising and this also acts as a significant deterrent for new entrants as they have limited fund and are not able to make large capital investment in advertising their products and services. Expense: Differentiation Strategy also requires a high amount of expense to support the superior support service, high product quality, research and development initiatives, promotion expenses etc. This leads to increase in product cost which the customer has to bear. 2) 3) Implementation: While implementing the differentiation strategy if the company is not able to differentiate its offering in a way that is not valued by the customer, it may not be able to generate any noticeable returns. This usually happens when a company offers an unnecessary product feature. For example, when Yippy Noodles were launched they were promoted as round and non-sticky noodles. But there differentiation strategy was not able to beat their main competitor Maggi. 4) Sustainability: There is also the problem of sustainability of product differentiation. The tastes of customers change with time and competitors also often imitate the features that differentiate on product from the other. In the long run therefore the customer no longer perceives the offering of the firm as unique. 5) Tough to Create Differentiation: Differentiation will also not work if the feature or benefit which is being highlighted as unique is not regarded so by the customer. 41.4. Focus Strategy The third generic strategy: after cost leadership and differentiation is focus. This isdifferent from the other two strategies because in this the firm focuses on a paticular segment or market within an industry. These segments may be defined ft terms of products, geography or customers. A firm is able to create a ffferentiated and secure market position by catering to a small set of customers. Focus can be of two types — Cost focus and Differentiation focus. A cost focused Sttegy implies. a cost’ advantage in the identified segment whereas a ferentiation focus focuses on a differentiated offering in the segment. i focus strategy achieves a low cost or differentiation in its segment. However es not have the same value proposition for the entire market. For example, Mahindra Holidays is a timeshare company in India which caters to family lience. In its segment Mahindra Holidays has a differentiated offer, as it offers 'Y Packages for the family. They focus on the family segment in the market. veompany Practising focus strategy can‘either be a low cost producer in its ent of it can offer a differentiated product which serves the needs of the ‘er in'a better way. A differentiated focused strategy assumes that there is a ent of customers who are looking for something more than what is being _,ness Policy and Strategy) ¢ 178 BBA Fifth Semester (B' Sty For example, Karbon mobite phy. as, a 1OW Cost focus str, Bee ihe mer ae oe iment within the market thay yf offered by other companies in the segment. were initially launched for low-middle umes that there is a small customer seg fied at a comparatively low cost. ich Foe! tegies are Used 4.1.4.1. Conditions under which Focus Sai ; 4 focus strategy can be applied inthe following contin 1) The presence of profitable niches which are : leaders. 2) Industry competition is low. eee 3) Players who follow a niche strategy can coeaalee for potential entray,, and market leaders from entering the market ce 4) It is possible to cater to a small segment more effectively than the entire market as being done by other players. : ‘Some small segments are being inadequately served by ae leaders, The company has an ability to identify the needs of the small custome; Segment and use its core competencies for satisfying those needs more efficiently and more effectively than the competing firms. 5) 6) 4.1.4.2. Benefits of Focus Strategy Following are the benefits of focus strategies: 1) Better Consumer Satisfaction: The adoption of a focus strategy allows the firm to cater to the needs of specific target segments that have very specific requirements. By making products addressed to the specific needs of customers, the company is able to satisfy the needs of the target customers. Through better marketing the company is able to offer better services to the customers, 2) Benefits Small Businesses: a also cater to the special needs of the small cluster of customers, Bigger players at times are not able to satisfy the requirements of the niche customer segments. 3) Competitive Advantage: The firm adoptin, brand marketing and : firm a ig focus as a strategy relies on innovation instead of efficiency for achieving Se the customers of small segments are ck substitutes, This is particularly true : . is particularly where the firm has desi Ic products to cater explicit needs of the 4) Highly Profitable: Sin 5) Avoid Direct Price Coeof Business Strategies and Issues in Strategy Implementation (Unit 4) 179 secome even safer from the big players. For he larger companies, it does not make sense t0 target these segments i + J 7 ‘nts as there is limited number of customers. jp this manner avoidance of direct competition from larger players and paving @ position that can be defended are the two main advantages of the focus strategy. f) Better Utilisation of Resources: Since the firm becomes a specialist in its own niche, it is able to bring about a better utilisation of its resources. This enables the firms to increase their competencies and capabilities. These are thus able to create more profitable niches based on their inherent competence. 4143. Risks of Focus Strategies qe risks associated with focus strategies are as follows: }) Difficulty in Reducing Costs: A focus strategy implies operating on a small scale. As a result the costs are not reduced to a great extent as they would be in the case of firm operating at a large scale. This limitation is sometimes overcome with the adoption of latest technologies. 2) Attracts the Competitors: With the increase in profits, more companies get attracted to enter the market. These competitors find innovative ways of challenging the existing companies operating on a focus strategy. For example, the entry of Japanese car makers in the luxury car market dominated by Mercedes and BMW. 3) Sacrifice of Economies of Scale: As in a focus strategy a firm caters to a narrow market, therefore it is not able to reap the benefits of economies of scale. Economies of scale can be achieved only by the firms operating in a wide market. 4) Less Distinct Needs: It is possible the segment or the niche that the firm is catering to loses its distinct identity and actually exhibit the same traits that are shown by the rest of the market. 5) Limited Expansion: If the firm having a focus strategy wants to expand to other markets once its existing segments are saturated, it has to invest the resources in developing new skills and capabilities. 6) Cost Burden: The higher cost of operation because of smaller scale of manufacturing becomes an issue for the company practicing focus strategy, 4.2. TOOLS AND TECHNIQUES CHOICE OF BUSINESS STRATEGIES FOR Cleat mission and defined goals are the most essential part of starting and ’naging a business. Deciding upon a mission, defining objectives and rmulating strategies to achieve those missions and objectives is called strategic ‘anning. Management utilises many tools and techniques for strategi i : ic pla Sette of them ane gic planning.ss Policy and Strategy) GGsppy Fifth Semester (Bi fe BBA Fi Tools and Techniques of Strategic ‘Analysis and Choice Environmental Threats and a Opportunities Profile (ETOP) BCG Model TOWS Matrix Eee eee Directional Policy Matrix (DPM) FE 4.2.1. BCG Matrix : The BCG matrix is a model used for analysing the portfolio of companies. This model was developed during the early 1970s by Bruce Henderson of the Boston Consulting Group. According to this model, the business units of an organisation can be classified into four different categories based on the market growth and market share as compared to the Jeader in that sector, Therefore, this method is also called as “growth-share matrix”. The growth- share matrix measures the positions of various business units along these two dimensions. The BCG matrix seeks to establish a relationship between the products or business units that are highly profitable (cash-generating) and highly unprofitable (cash-eaters). The market growth symbolises the attractiveness of a particular industry. It should also be kept in mind that the market growth here denotes the growth of overall industry that also includes the returns and profits of competitors. Boston Consulting Group (BCG) Matrix is a technique for estimating a company’s position on the basis of its product range. This technique helps an organisation to analyse its products and services so that various important decisions can be made about the ones it should invest in and the ones it should divest its money from. As per BCG matrix, the business units can be classified as high or low on the Lad of Relative market share and the Market growth rate. These are described low: 1) Relative Market Share: According to this model, the more’is the relative market share of a firm, more is the return. It says that the firm that produces more, enjoys higher economies of scale due to which the experience curve is higher for them, ‘hence these firms exploit the benefits of higher market share. However, sometimes, higher profit i i ' . , it is also a se firms tha! have low production market share. a 2) Market Growth Rate: If market growth rate is high, then there are Opportunities for higher returns, However, it © takes more capital - for fu “ : ever, it also ti@ eee eee EEE EEE ce of Business Strategies and Issues in Strategy Implementation (Unit 4) 181 Cells of BCG Matrix gp COTS ‘ foviye basis of the above classification, the firms in an industry can be classified pour tyes: High! < Sslet ©) Remainder» aFew Divested Market aaa Invest | Rate 7. “| eet | de High Low Relative Market Share ire 4.2: BCG Product-Portfolio Matrix 1) Stars: In this block those businesses are placed which enjoy high growth rate as well as higher market share. These businesses are most likely to be in the growth stage of the product life cycle (PLC). These firms pursue an aggressive strategy to expand the market and gain maximum penetration in consumer segments. For example, In India sectors like telecommunications, fast foods, retail, petrochemicals, etc., are some of the businesses which are having a very high growth. 2) Cash Cows: Cash cows are those business units which generate a lot of cash, but the growth rate of these business units is less. These businesses correspond to the maturation stage of the product life cycle, which enjoy the benefits of its high experience curve. The capital needed to reinvest in the business is quite less than the profit returns. To sustain in this position, the firm needs to implement stability strategies. In this stage, the firms focus on beneficial long-term opportunities and limited expansion. Since, these are pretty mature firms, hence they gradually lose their market share as well as their growth rate decline. Due to this, the profitability also decreases. At this point, retrenchment strategies are appropriate for these firms. The profit generated from cash cows can be reinvested into ‘star’ firms and ‘question mark’ firms, both of which require high resource investment. Some examples of cash cows in India are Scooters for Bajaj Auto, toothpaste for Colgate, etc. Question Marks (Problem Child or Wild Cat): These are the business units which have a low relative market share even when the industry growth is high. These firms require huge amount of capital to sustain that market share, These are generally those firms that introduce new products or services in the market with high growth opportunities. According to the Concept of experience curve, the firm that gains early profits can achieve the Cost advantages as well as market leadership. This will create entry barriers for other firms in the industry. In this phase, the firms need to decide their yx share, they need to adony sid also be appropriate jy, wih of these firms, they 192 eee sy can gain ™ le e ics wou ans. If they fee! yea future ph fi etrenchi expansion stratepies: Laan ig made in the Bre ; “doe? cpansion efficient inves : vn also become ‘dog’ firms thig phase. I swficient INVENT. or cls can alse ane 8" Firms jg ie convert into ed. In Ind industries like e-commerce cy ovided. ata very fast rale, but for the tention is nol PP sufficient ovicieds nn ving These are gf y ¢ ket share is very Ie Another example js ative mi question mark ayers the rel wth and have relatively less require investments. {7 at the stage of late holiday resorts. ich have slow gF0' carn profits, nor Td firms remain the firms wh neither of PLC, these f 4) Dogs: These are market share, These correlating with the stages maturity or decline. ht Strategy Model/GE Nine Cell Planning 4.2.2. Stop-Lig Grid ‘ The stop-light strategy model or the GE-9 cell model or GE business screen is a portfolio analysis technique, which was developed by General Electric Company (GEC) along with MeKinsey & Co. of the USA in order to overcome the loopholes of the BCG matrix. Strategic Signal S gz 5 3 Inves/Expand z§ 33 <2 Selecy/Earn g —— Be Be Harvest/Divest Strong Average Weak Business Strength Figure 4.3: GE Nine Cell lannin Instead of considering mé portfolio analysi es and relative market share as the basis for strength as the basis for cle ie considers industry attractiveness and oe into three categories, m: a ying the firms. These two factor Ss and business fi ‘ aking it a ni "hes ae firms as wine: 1B nine cell grid. These c i producers, Thin seegiesers: question mark arid. These cells elassity business Firms are differ e ys Shown in Figure 4.3, (ier Cuaincae et ane protit FED, BUCH as, the orgnnlsationy ean eee OF all the Kins pns should invest its resources i" winners and. quest estion marks, sj strength both are in favour since the industry altractiveness 1 business ' . eness and business are further s| Organisation: isations should also maintaf Profit businesses though eunialn the market po: average. Moreover, thi heir industry attractiveness y average busine ind : S and business strengths ave i business uni 88 Units S$ that are at loss should be sold-out as"Business Strategis and Issues in Strategy Implementation (Unit 4) 183 ractiveness and business strength both are not favourable. For "ple, Mahindra and Mahindra hived off its M-Seal brand of adhesives to Piditite industries (makers of Fevicol) as M-Seal was not part of the product Strategy of the Mahind The two ba oD) ¢ factors considered in analysing the business units are: Strength: Various factors that are jointly analysed under the basic rege Ott margin of the products, market share of the business unit, management skills, technology deployed, etc. the quantification of these factors can be done based on the estimation of the strength and importance of other factors for achieving success, The strategists can rate the strength and MPortance as per their personal experience, 2) Industry Attractiveness: Many factors are needed to be studied for analysing the industry attractiveness, such as, industry growth rate, profit margin of the industry, seasonal and cyclical trends of the industry, cconomies of scale, entry and exit barriers, technological development, legal the o., These factors can also be quantified in a similar ‘he business strength factors have bece estimated. itive position, whig eo, factors, i... industry attractiveness and only etitive position, which are furthes divided into three factors, instead of only two Factors in’ BCG matrix, i.e, market growth and market share, Zones of GE-9 Cell Model The nine cells of the GE matrix are divided into three zones and represented by the colours green, yellow and red, which ate similar to the traffic signals. Hence, these colours are interpreted in the similar ways, i.e., green represents ‘go’, yellow ‘wait’, and red represents ‘stop’. Due to this similarity, GE model is also dalled as the “spot-light strategy matrix”. Each of these zones suggests a particular Aalegy to be followed by the organisations, which are as follows: ') Invest/Expand: This is the first zone, which is Tepresented by green colour, and hence called as “green zone”. In this zone, firms have both the industry attractiveness and business strength in different degrees. This is the favourable situation for business units, but the business units do not remain in this situation for a long time as other firms get attracted to the industry. But this can be maintained by creating some entry barriers. An example of this is the fast food business. Earlier few fast food corners were there in India, such as McDonalds, Dominos, etc. But, gradually, numerous players have entered in the market such as KFC, Pizza Hut, Bikanervala, etc., Making this industry less attractive these days. The important strategy for the firms in this zone is to invest and oe businesses. It is clear from the figure that in the upper left corner, ; s are high, which is an idecl “dustry attractiveness and business strengths are high, whi StBDA Fifth Semester (Business Policy and Strategy) GGgypy, i Fifth Semes present realistic business situations Position. However, the other two cells re} wshigh industry attractiveness qr The middle cell of the top row indicate: a is cell would gro average business strength, The firms which See ee strength, eae the Tongcterm. ‘Though if the fim does not improve is Senet tf ae situation may prove to be unfavourable in future. For exav00 attractiveness ot have entered the e-commerce market in India looki ¢ business strengths the industry. However, most of the players have ave polaively Pate Another situation, where the business strength is Sic ae industry attractiveness is average represents the most realist these fing. Since, the firms that belong to this cell have oe ayaa ae can develop a competitive advantage, which in tun ete eine barrier in the industry. This explains the rise of ee fe ecae = the polyester and polymer businesses which were smpetitive strength. Reliance was able to get a good market share due to its comp. eth. 2) Select/Earn: This situation represents the middle or mixed situation for the i ists, but the organisation has the company. Not much growth opportunity exists, . - opportunity to do selective earning. This happens because either one of two Parameters of business strength and industry attractiveness are at high or middle level. The two situations of average strength and medium attractiveness and strong strength and low attractiveness indicate a strategy of hold i.e., to eam the profits at existing capacity with no additional investment. In the situation of high industry attractiveness the company has a flexible option. High industry attractiveness, low strength indicates an opportunity for the organisation. However, if the organisation is not able to build its business strength, then it makes sense to leave the business as the business is likely to turn into a ‘question mark’. Similarly, in case of strong strength and low industry attractiveness, the company can opt for backward or forward integration. A company can also diversify into other industries where it is able to utilise its business strengths. 3) Harvest/Divest: This is the third zone also which come under the zone have average strength and low attractiveness, ot average attractiveness and weak business Strength. For these firms, harvesting is the appropriate business Strategy. In harvesting, the company quits the business but withdraws gradual: emphasis is on reducing the costs by stopping those activities that have long- term business influence, such as and development, advertising, etc ‘The entire thrust of the organis these cases is to earn short term Profits as the business does not a long-term horizon. One thing that should be kept in mind that the ess units with low strength and low industry attractiveness should in mmediately be stopped and the company should divest its capital, Y De stopped and the company called “red zone”. The cells, ation in have busin Merits of GE-9 Cell Model GE-9 cell matrix hpois 0f Business Strategies and Iesues in Strate, 185 siders many fact, stalso consi nots like market share ‘ I) it is also a very pow, atket share, industry size, etc. 3) Pe ources bat busines tt © technique that channelises compara i and categori ae . i atactiveness and the medium yo high b an cee medium (0, De tilises many fact . sines th. . It also ut Y factors White ¢. : anvactiveness and busine strength, “ig the two variables of industry 4) erits of GE-9 Cel Model pasdes vatious advantages, Gg Cell matrix has th ing dis ages: i naa following disadvantages: Itean become quite complex suett itetease in size of the brsinene Industry attractiveness and hy jective vari 2 Bierffom pene eae siness Strengths are subjective variables and _3) New business units in a ing j hr i 9 ie el appropriately, developing industry cannot be analysed through this High Market Attractiveness, Weak Competitive Position: In this Guadrant, the market is attractive, but the company’s competitive Position is | Weak. The company needs to consider Strategies to increase or enhance its _ ompetitive position, such as investing in product development, marketing, | “operational improvements, Low Maricet Altractiveness, Strong Competitive Position: In this | Madrant, the company has a strong competitive Position, but the market lf is not Very attractive. Here, the company might want to focus on intaining its Position, optimizing operations, or even selectively Mihdrawing from certain segments of the market. lov Market Attractiveness, Weak Competitive Position: This quadrant Pisents the least favourable situation, where both market attractiveness MN competitiy, ‘ition are weak. Companies in this position might need to Pevaluate their ae strategies, consider restructuring, or even exiting the wn tee : .. ket if its not economically viable. .BBA Fifth Semester (Business Policy and Strategy) GGSIPy 186 ic decisions by visually mapping assisting leaders prioritise where hat the DPM is just one of eness depends on the The DPM is a beneficial tool for making strateg' out an organisation's position in the market and : to allocate resources and efforts. It is vital to note ae many strategic management tools available, and its ¢ ee ad Compa accuracy of the assessments made for market attract s position. 4.2.4. Hofer’s Product Market Evolution Matrix 7 Hofer’s Product Market Evolution Matrix was developed by oe Nit at It isa 15 squares matrix used to analyse the competitive position of tl eines ‘ion as Per its internal and external factors. It is a developed version of Mckinsey and ADL matrices, used for analysing the diversified entities. Competitive Position Strong Average Weak Development A Growth |B c Shakeout D Evolution 5 —#F 5. Z Saturation, Stages of Product/Market Decline F Figure 4.4: Hofer’s Product Market Evolution : le : derciction, growth, maturity or decline. Introdven, oe se rae development, accelerating growth stage ie represented by growth’ and decelerating growth stage is represented by shake-out. Th, y growth an circles and the size of the circle shows the Of the wohets are shown as share of the company is shown as a s tumover of the product. The market es. As a result, a particular > B as a busi i he i » C needs to be givers usiness which has t stablished winner, E a cash cow which von j2vestmenvresources, Dar aneady ; Ww Which can bev res, D an alr milked etc.a pce of Business Strategies and Issues in Strategy 187 a Implementation (Unit 4) qhe following inferences can, therefore, be drawn from this matrix: Development 4 Growth, B oO Shake out D ® Maturity/ & Saturation Decline Strong Average Weak competitive Position Figure 4.5: Hofer’s Product/Market Evolution Matrix 1) Strong Competitive Position: Businesses which are in the domain of strong competitive position and the market position is either developing or growth can be classified as future winners. 2) Average Competitive Position: Businesses which have an average competitive position but the market position is either developing or growth can be turned into winners if their competitive position is improved. 3) Weak Competitive Position: A business which is in a weak competitive situation and market position is either declining or stagnant are potential losers and such businesses should be hived off. 4) Strong Competitive Position and in Mature and Shakeout Markets: The company may have a strong competitive position but the market position may be weak, Such businesses should be treated as cash cows and milked for their cash generation. 5) Average Competitive Position and in Saturated and Declining Markets: Companies which have an average position and the market position is either stagnant or declining can also be garnered off. The circles indicate the size of the industry whereas the slices represent the market share of the company. Five organisations have been shown in terms of the industry size and their relative market share. Out of these: 1) Business A shows a very high potential and thus needs to be expanded through the infusion of capital and investment. 2) The product of business B is going to enter the shake-out stage and it has a strong competitive position in the market. There is a need of designing careful expansion strategies. -BDA Fitth Semester (Business Policy and Strategy) GGsypy, 188 D can be consider sidered a “Dog” whereas red a C can be considered a eae be diverted towards A and p fore disinvestment is decided, 3). The busines red a “T cash cow with high cash generation whi cems to be a loser and there! ate and complete corporate portfolio of an organisation In this way, a highly accur ition matrix or the Hofer's matrix. is portrayed by the product market evo i trix Features of Hofer’s Product Market Evaluation Ma Pe a 1) It includes 3x5 matrix to represent the produc Nand iti jisation. competitive position of the organisal ees - a es cr product market evolution are described’ in it. These are simita, to the stages of product life cycle and these include development, growth, shakeout, saturation and decline. ; ; : 3) An organisation’s corporate portfolio is described showing the competitive positioning of different business units. Strong, average and weak are the competitive positions of different business units. : 4) The allocation of business interest of the organisation among different product market evolution stages is also described in this matrix. z Advantages of Hofer’s Matrices i 1) Different businesses of an organisation relevant to different stages of its life cycle are represented by this matrix. Future development of the business portfolio may be predicted by this matrix. 2) 3 It shifts the focus of the management towards designing the strategies for the strategic business units. 4) Through this matrix, key success factors are identified. 5) The developing winners in the product market evolution can be identified and monitored in this matrix, 6) The distribution pattern of different businesses of the organisation relevant to different stages in the industrial revolution is illustrated in this matrix. Disadvantages of Hofer’s Matrices 1) The matrix does not provide a comprehensive analysis of the factors that make a market attractive, : 2 7 . t not the only factor which determines the . . are also other imy t fa $*which can impact the product portfolio of t portant factors* w the company. These may not necessarily be olution, 4.2.5. Profi E ae ane Impact of Market Strategy (PIMS) Model Schoefler and his ccm’, "stitute in Cambridge, Massachusetts, Sidney Ws colleagues stared gathering and analysing data from a huge ee sla the ‘middle of the 1960s, encompassing. literally i dite 1) Building an Organisation whic structure of an organisation should be sucl practical implementation. Moreover, the emp proficient enough in skilful execution of the strategy. responsibility for attaining the major implementation, to the suitable candidates or teams only.192 2) 3) 4) 5) 6) iness Policy and Strategy) GGstpy, cr (Business BBA Fifth Semester ive Budget: For the Purpose of should have the employee, equipment, a ct lishment of ssful accomp! Of th i assets needed for the successful eo as to Be foot amenities and. ass Seen rion about the $ ee eee lowed SEB teat jobs to be clone, the (yPes oe by recognising the chief jobs (0 | plans, ‘The jobs to © to be Y nt of formal i ans lying within on the ae which consists of action plans lying the organised in 2 7 i articular date. objectives to be attained “ a : sacatve seifort Stent Tera ene, fined in Tens of polices and processes poids eae ae ble behaviour, information systems, providing s\ rategically een on time, and all the aspects which a ppc Siving significant strategy-executing ability of the firm - | fee accounting, customer _ service, materials aL at a _ administrative systems. These internal systems shoul ee aa ae Ie management process, the manner in which the managers it ordinate, along with monitoring strategic progress. Rewards and Incentives: The next step deals with the planning that helps in associating the rewards and incentive with strategy and objectives. The personnel of various departments should be motivated to work towards accomplishing the strategy. The organisation should motivate its employees with the help of rewards, incentives, control, standards, constraints, etc. Giving Shape to the Corporate Culture for Fitting it in the Strategy: A Corporate culture which supports strategy is the major reason behind the diligence and intelligence of the organisations in attaining the strategy. Strategists should make an effort to focus on, the prevalent aspects that help in supporting the planned new Strategies. It is desirable to recognise and change the feature of the prevalent culture which opposes planned strategy. It S ti Establishment of a Strategy-Suppor' attaining strategic targets, the f Instalment of Inte with the prevailing organisational culture, available for changing the organisational culture, such as training recruitment, transfer, restructuring and Te-modeling of organisational design along with positive motivation, Exercising Strategic Leadership: Strategy are the parts of strategic lead Politics and pow There-are a number of techniques Dedicating and accomplishing ership. Constructive utilisation or Fes coming into the organisation and work for attaining 1 objectives, It is a common consent that change can ess, in case the leaders have highly optimistic attitude SS. the organisationa bring about suce towards its succe;poice of Business Strategies and Issues in Strategy Implementation (Unit 4) 193 ~ 43.4. Barriers to Implementation of Strategy ‘The following key issues arise from implementation of the strategy and their lationship with empowering system; which should be kept in mind by the angers: 5 Time Horizon: The organisation that believe in empowerment, is based both on Jong-term as well as short term dimensions. For example, the short term dimension can be in form of rewarding incentives like bonus based on efficiency by measuring quantitative performance. Whereas, it is quite apt to relate long term rewards with qualitative performance as well as some appropriate quantitative measures. 2) Risk Considerations: A qualitative measure of performance can be more useful in case it is desirable to have risk prone behaviour, ¢.8- rewards in the forms of stock options or the bonuses. The reason for this is that quantitative measures tend to avoid the risk, in order to eliminate the chances of failure, instead of taking the risk to attain the results. 3) Bases of Individual Rewards: The systems of rewards should be related to the ability, diligence and job satisfaction of the individual. Accelerating the rewards to only one part of the performance may adversely affect the other parts of the performance. 4) Bases of Group Rewards: One of the significant issue involve in the reward systems is the choice between individual and group reward. It would be quite tough to reward individuals for their performances and efforts if the structure of the organisation doesn’t permit to segregate individual’s performance from that of the other people. For example, in case of contributions by the managers to enhance the performance of the organisation can be regarded as useful as well as suitable, because contribution by the individual is comparatively independent from that of the others. In case the contributions given by the individuals are dependent upon each other’s performance, rewarding scheme formed on the basis of group performance would be more suitable. 5) Corporate and SBU Perspectives: In case of the organisations with several divisions, a system of rewards based on both corporate as well as Strategic Business Units interests has to be formulated, giving more freedom and autonomy’ to the business units. Similarly, unit based rewarding system would be more useful in case SBUs are unlikely to affect performance of the organisation. But it is important to note here that, a balance authority scenario has to be formulated, if general managers and directors are shouldering the dual role of attaining corporate as well as units’ objectives 6) Vision Barrier: A large number of personnel fail to understand the strategy of the organisation. Such a scenario was quite suitable at the beginning of the 20" century, when the employees were mainly parts of the industrial mechanism and the value was drawn by efficient use of the organisational resources. On the other hand, in the present scenario the knowledge or information based values are created on the basis of non-material resources le ~_BBA Fifth Semester (Business Policy and Strategy) GGsipy and inter and intra relationship betwee, Several organisations are sin and control, which are otherwise ganisational culture such as organisational _int fee eee ies! employees and the higher authoriti - following the age old tradition of authority inappropriate in the present scenario. 4.3.5. Role of Operational Factors in Strategy Implementation . : Aree ae ae required for integrating strategic plans with a rata is provided by the operational plans when the strategies a " © common organisational objectives and procedures. Such an information 7 if es: 1) What: The various strategies and course of actions required to be conducted, 2) Who: Individuals responsible for conducting the various strategies ang course of actions. 3) When: The time frame within which the strategies and course of actions must be accomplished. 4) How Much: The various financial resources required for the completion of strategies and course of actions. The role of operational factors in strategy implementations is stated below: 1) Determining the various accomplished and non-accomplished activities, 2) Executing remedial measures so that activities can be completed within the set time frame. 3) Ensuring the availability of resources when required. 4) In order to make sure that activities are being performed, motivating, supporting and supervising the manpower of the organisation. 5) Correcting operational plans whenever required. 6) Providing information to seniors, like directors, committee personnel, Board Members, etc. 4.3.6. Guidelines for Over Implementation Following are the tools which can help to overcome the obstruction coming in the way of strategic implementatio: 1) Focus: Having a lot of priorities implies lack of action be regarded as, or is a Priority. Distraction is quite obvi ties. Hence, itis the duty of the leaders to ; organisation by limiting it which are agreeable to the eae oe ogee Clear Communication: Ttis ess the objective of the organisati expected to explain th every level of leadershi which should be foll towards the accompli: coming Barriers in Strategy as everything cannot ious in case there are ascertain the point of ree major action plans n. . ‘ential for part of the leaders to clearly defin? ‘on to the subordinates and they are Is? em their roles in attaining the desired objectives. At HPs the tasks to be accomplished have to be recoznis¢ owed by laying emphasis on the employees’ effor shment of major actions.