WELCOME TO:

Advanced
Strategic Management
Credit hours: 2

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 Nowadays competitiveness is major challenges for
organizations.
• . What is the purpose of Business
Organization ?

To provide a match b/n what customers want

and what organizations are able to supply

What is difficult ?

Because the external environment is volatile and

changes the rules of the game
.customer taste changes
Thus, managers are seeking modern approaches to gain
more competitive advantage
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 All organizations seek answers for three
questions
• .
A) Where are we now?
B) Where do we want to go?
c) How do we get there?

This course tries to answer these

questions
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BRIEF CONTENT OF THE COURSE
CHAPTER I: overview of strategic
, management
CHAPTER II: STRATEGY ANALYSIS
& FORMULATION
CHAPTER III: Options &
alternative strategies
CHAPTER IV: Strategy Analysis
, and choice
CHAPTER V: Strategy Implementation
CHAPTER VI: Strategy evaluation
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 CHAPTER I
1. Overview of Strategic
Management

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 1.1 Defining Business Policy and Strategic
Management
Business policy
-Is a set of rules, guidelines, and procedures for
smooth functioning of the business
• Business policy defines the scope within which
subordinates in an organization can take decision.
• It permits the low-level management to deal with
the problem issues without consulting top-level
management every time for decision.
• Business policies are the guidelines developed by
an organization to govern its actions.
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 .
• It defines the limits within which decision
must be made.
• Business policy also deals with acquisition of
resources with which organizational goals can
be achieved
• Policies provide the framework or the
guidelines through which objectives can be
achieved.

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Comparison between policy & strategy
Policy strategy
The blueprint of the Concerned with those
organizational activities new organizational
which are routine in nature decisions
Deals with the daily Deals with organizational
activities essential for strategic decision
effective &efficient running
of the organization
-is what is, or what is not The methodology used to
done achieve a target

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 Distinguish the followings

A. Mission
B. Vision
C. Objectives
D. Strategic objectives
E. Strategies
F. Policies

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What is strategy ?
.

 Strategy is the pattern of activities, followed by

an organization in pursuit of its goals.
 A strategy is a comprehensive plan wherein all
the components of plan are interrelated with
each other
 A strategy is a unified ,comprehensive, &
integrated plan which associates the firm’s
strategic advantage with the environmental
challenges
 Hofer(1979) defines it, as the match b/n the
organization & the environment.
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 .

• Strategy is integrative & cross-functional

• Strategy concerns the whole organization interacting with its
environment
• Strategy has a long time horizon and is concerned with
projection and prediction of an uncertain future.
• Strategy nowadays is a big stuff.

• The defeat of Nazi Germany was arguably due to a dire

strategy by the leader of fighting a war on two fronts –

west(USA, UK) and east (Rusia)-so while the armed forces

were highly skilled and had technological superiority the

strategy was a huge mistake 11

 Schools of strategy

1.The planning school (Andrews,

1971,Ansoff,1965)
 Achieves a “fit” b/n the organizational strategy and
the environment in which it operates .
 Required detailed & inflexible planning not suitable
in turbulent/unstable markets.
 Uses a very bureaucratic and rational process
2. The “positional” school
 Focuses on a rational ,analytical approach of
making strategy.
 It gives emphasis on competitive advantage
 E.g: Generic strategies
3. The “Resource –based” school(Robert ,1998)
Looks to the internal environment instead of the market.
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 Strategy and plan
• A strategy is a solution to move from where you
are now (A) to where you want to be (B)…or put
another way, it is what you want to happen to
achieve an end.
• A plan is how you will move from (A) to (B). As
such it should support your strategy by providing
a way to reach (B) that provides an acceptable
balance of risk and reward.
• Your strategy is what you want to
do and your plan is how you will do it
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 Strategic management
Strategic means “of” or having to do with strategy
Definition

 “Strategic management includes understanding the

strategic position of an organization, making strategic choices

for the future and managing strategy in action.

 “Strategic management is defined as the process by which

managers of the firm analyze the internal and external

environments for the purpose of formulating strategies

and allocating resources to develop a competitive

advantage in an industry that allows for the successful

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achievement of organizational goal
Strategic management answers the following
3 questions: .
 Where is the organization at the moment?

 Where does it want to go?

 How it will get there?

Strategic management is a continuous process of strategic

analysis, strategy creation, implementation and

monitoring, used by organizations with the purpose of

achieving and maintaining a competitive advantage

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Need & Benefits of Strategic Management

 Strategic mgt gives guidelines to employer

regarding what organizations expecting them
to do.
 Assist organizations to be pro-active rather
than reactive
 Assist managers in getting a holistic approach
 Enhances coordination

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 .
 Assist business organizations in
influencing environment & put control
on its fate/destiny
 Can improve Business profits
 motivates organizations to have
positive attitude towards change
 makes the organization work in a
systematic manner.

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 Challenges to strategic management
 Innovation & Development of
Products/Services
 Issues concerning quality
 Boom & recession in the economy

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 Stages of the strategic management
process (3)
1. Strategy formulation,

includes developing a vision and mission

 , identifying an organization external

opportunities and threats, in determining

strengths and weaknesses,

 generating alternative strategies and choosing

particular strategies to pursue

 Consideration(core competencies, synergy)
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 Core competencies
• Refer to pools of cumulative experience,
knowledge and systems that exist within an
organization and that can be used to reduce
the cost or time required to create a new
resource or extend an existing one.
• Synergy
Synergy mainly deals with “2+2=5” phenomenon

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 2. Strategy implementation
 establish annual objectives, devise policies,
 motivate employees,
 allocate resources
 so that the formulated strategies can be executed.
developing a strategy-supportive culture
 preparing budgets,
 developing & utilization information system and
 linking employee compensation to organization
performance.
 Implementing strategy means mobilizing employees
and managers to put formulated strategies into action.
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 Strategy evaluation
Deals with assessing the extent to which the
stated goals are being achieved or not.
Three fundamental activities are:
1. Examine the external & internal factors of
current strategies.
2 . Measuring performance
3. Taking correctly action

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 Argenti (1980)identifies 5 phases
1.Organizations should set targets
2.Identify gaps that will emerge b/n targets & the
current strategy
3.Appraise both external & internal environments
4.Formulate new strategy on the basis of appraisal.
5. Implement the strategy by drawing up action plan
&budgets
• Roughly , the five groups can be grouped into
three.
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 Strategy process.

Argenti(1980)identifies 5 phases in to 3
• .
• .
Strategy Analysis
 External Audit
 Internal Audit

Strategy
Strategic choice Implementation
Identify  Manage change &
options culture
 Planning & allocate
Evaluate
resource
options  Organization
Select a structure
strategy  Strategic control &
Evaluation
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 Adapting to change
• Successful organizations effectively manage
change.
• continuously adapting there bureaucracies,
strategies, systems, products and culture to
survive the shocks and prosper from the forces
that decimate the competition
• The traditional view is that the external
environment is more or less uncontrollable.
• So the environment shapes the organizations &
its activities
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 .

• But some argue that organizations should not be

merely reactive.

• Organizations can create their own future-pro-

active .

• Organizations can mould both people and events

through lobbying, public relations

• Mangers interact with external environment to

improve their chance of success.
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 Guidelines for pursuing strategies
• Strategy must be a self-reflective learning process
that familiarizes managers and employees in the
organization
• Eliminate jargon and arcane planning language
• Open-mindedness:
 a willingness and eagerness to consider
new information, new viewpoints, new
ideas, and new possibilities is essential
• All organizational members must share a spirit of
inquiry and learning
• Organization should pursue only a few strategies at
any given time 27
Business ethics & strategic management
• Business ethics can be defined as principals of
conduct within organizations that guide
decision-making & behavior

• The organization introduce ‘‘Code of Ethics’’ for

employees so that they can know how to
conduct and behave in the work climate.

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 .
‘Ethics ‘are consensually accepted
standards of behavior for an
occupation, profession, or trade.

• ‘Morality’ seems to be more general and

perspective. It refers to the precepts of
personal behavior, which are derived
from religious or philosophical grounds.

 ‘Law’ means the formal codes, which

allow or prevents specific behavior &
may or may not apply ethics or morality
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Code of ethics are categorized under three
heads

1 Utilitarian approach
2 Individual right approach
3. Justice approach

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 Utilitarian approach

• Utilitarian approach states that we should

seek the greatest good for the greatest
number of people. Thus, action & plans must
be examine & evaluated from their outcomes.
• Best ethical action is the one that maximizes
utility to the well-being of the general people,
• Right or wrong based on the outcome of the
action

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 Individual right approach
This approach states that human beings exercise certain
fundamental rights, which the manager should respect in
each & every decision.
-Right or wrong action is also based on the outcome of that
action. However, what is best is based on maximizes utility to
the well-being of the ourselves;
-b/c, ethics are generated from, evaluated or justified by
individuals’ point of view,
E.g.
 Shareholder's right to information
 Privacy
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 Justice approach

• This approach to ethical behavior states that

the decision makers must be,
equitable,
fair,
and impartial while distributing the cost
& benefits to individual and groups.

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 Discussion
1. Discuss the three school of strategy with
examples . Explain differences and
similarities among them.
2. Describe the origin of strategy and its
importance for organizations.
3. Explain the difference b/n reactive and
proactive approach with examples.
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 Strategy is partly Proactive and partly Reactive
• A company’s strategy is typically a blend of :
1. Proactive action on the part of managers to improve the
company’s position and financial performance
2. As needed reactions to unanticipated developments and
fresh market conditions.
A company’s situation
External factors
Industry &
Abandoned strategy
competitive condition
Buyers preference New initiative & on going strategy
Societal, political, features
A company’s
economic,
strategy
technological, &
environmental Reactive strategy
considerations Adaptive reactions to changing
Internal factors circumstances
Resource
strengthens &
weaknesses
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Capabilities
Questions?
 Chapter two
STRATEGY ANALYSIS & FORMULATION

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 STRATEGY ANALYSIS & FORMULATION
Developing Vision & mission

 Vision
-Vision describes the route a company intends to take In
developing & strengthening its business. It pants a picture
of a company’s destination & provides a rationale for
going there.
• Vision is a statement of what you would like to
become.
 Vision is an imaginary view of the future, which all the
organizational members believe in, and is not easily achieved
 The vision statement helps the organizational members to
know where the organization is going to be in the future.
 The vision statement should answer the basic question,
 what do you want to become? 39
•It should be enduring and an ultimate stretch goal –
most likely something that will never be attained. (i.e.,
We strive to be the world’s best supplier of XXXX)

• A Vision statement outlines what a company wants

to be. It concentrates on the future;

• it is a source of inspiration;

• it provides clear decision-making criteria

• Example:
• "Be the safest, most customer-focused and
successful transportation company in the world.“
• A clear vision provides the foundation for developing
a comprehensive mission statement
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 Mission statement
• A mission is a statement of how we will accomplish
our vision.
• It should include a summary of core competencies
and competitive differentiation. (i.e., We supply the
best XXXX with unique capabilities in XXXXX to
deliver superior value to our customers)
• A Mission statement talks about what the company
is now.
• It concentrates on present; it defines the
customer(s), critical processes and it informs you
about the desired level of performance 41
 Benefits of Mission
Creating an effective mission statement provides the
following benefits.
• A mission statement gives direction to the organization
• Based on the mission ,the objectives and strategies of the
organization are formulated.
• Mission statements help in stimulating positive emotions
about the organization.
• Mission statement helps in resolving the different views of
the managers.
• With the help of mission statement ,every one in the
organization will come to know about the purpose and
there will be no exception
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 Comparison b/n mission & vision
A Mission A Vision
statement talks about statement outlines
HOW you will get to WHERE you want to be
where you want to be.

It answers the question, It answers the question,

“What do we do? What “Where do we aim to be?”
makes us different?”

A mission statement talks A vision statement talks

about the present leading about your future
to its future
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 Setting objectives
• Objectives are an organization’s performance targets-
the results and outcomes management wants to
achieve.
• They function as yardsticks for measuring how well the
organization is doing.
• Well stated objectives are quantifiable, or measurable
and contain a deadline for achievement.
• Objectives should be SMART
Examples.
• Reduce absenteeism by 5% by end year.
• Achieving lower overall costs than rivals.
• Achieving technological leadership
• Winning x% market share
Both short-term & long-tem objectives are needed.
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 Benefits of objectives
• With the help of objectives ,all the
organizational members can concentrate on
one particular direction.
• Objectives are the targets on the basis of
which actual performance is measured.
• With the help of objectives ,the organizations
can show their priorities or preferences

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 Environmental analysis
• What is environment?
• Environment refers to the
surroundings , external objects ,
influence or circum stances in which
someone or something occurs.
• As the environment affects an
organization in many different ways, it
is very essential for the managers to
understand it.
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 Characteristics of Environment
 Environment is complex. The environment includes
many factors, events conditions, & influences
emerging from various sources.
• Environment is dynamic ,the environment is
continuously changing in nature
 Environment is multifaceted
The shape and character of an environment relies on the
perception of the observer. Different observers perceive changes in
the environment or new development differently. It is often
observed that the same type of development is considered as an
opportunity by one organization & threat by another organization
 Environment has a far – reaching impact
• Environment has a significant impact on organizations.
The growth & profitability of the organization relies
mainly on environment in which it carries out its
operation
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 Major component of an organization’s external environment

1.Sociological factors, e.g. values , life styles,

demographics
2. Technological factors e.g. R&D, new products &
processes
3. Economic factors, e.g. economic growth, inflation,
interest rates
4. Political factors, e.g. policy , legislation, political
parties
5. Competitive Environment, e.g. competitors,
customers & suppliers 48
 1. Social ,cultural, demographic & environmental forces

• These factors have a major impact on products,

services, markets, and customers
What are opportunities & threats of organizations?
 Government regulation
 Lifestyle
 Number of marriage
 Cultures
 Demographics

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 2. Technological forces
Technological changes & discoveries are having a
dramatic impact on organizations

. Technological forces represent major

opportunities & threats that must be
considered in formulating strategies
What are technological opportunities &
threats for firms?

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 3. Economic forces
Economic factors have a direct impact on the
potential attractiveness of varies strategies.
What are opportunities & threats for organizations?
• Interest rates price fluctuation
• Inflation rates
• Unemployment trend Tax rates
• Import/export factors GDP trend
• productivity levels

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4. Political, governmental, & legal forces
Political, governmental, & legal forces can
represent key opportunities or threats for both
small and large organizations.
What are opportunities & threats on firms?
• world oil
• Local & state elections
• Import/ export restrictions,
• International investment restriction
• Exchange control restriction
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 A model of the macro-environment(based on Fahey &Narayanan,1986 )
• .
Political factors
Sociological factors

Economical factors Technological factors

Analysis for identifying ,tracking, projecting & assessing

trends,4 stages
1. Scanning the environment to detect ongoing and emerging change
2.Monitoring specific environmental trends and pattern to determine
their evolution
3. Forecasting future direction of environmental changes
4. Assessing current and future environmental changes for their
strategic & organizational implications 53
 5. Competitive Environment
• The nature of competition in an industry of a firm
is directly affected by the developments in the
competitive environment.
• The competitive environment includes;
competitors, customers, & suppliers.
• The key concept and analytical technique, which
are used by managers to evaluate their
competitive environment, are, Michael porters
five forces model which shows the way in which
these forces are used for describing profitability in
an industry.
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 The five –forces Model of competition
• .
Potential development of substitute

Bargaining Rivalry among Bargaining power

power of competing firms of consumers
suppliers

Potential entry of new competitors

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 .

Potential entry of new competitors

– Whenever new firms easily enter into particular
industry, the intensity of competitiveness among
firms increases
– Barriers to entry includes:
 The need to gain economic of scale quickly
 The need to gain technology &specialized know-how
 Lack of experience
 Large capital requirements
 Undesirable location
 Counterattack by entrenched firms
 Potential saturation of markets
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 Bargaining power of suppliers
• The suppliers can use their power over the firms and
influence the profit potential in two ways.
• BY raising the prices
• By decreasing the quality of products which are sold
The supplier can be considered as strong when,
 If the buyer has no alternative choice other than the
products of the suppliers then, the supplier becomes
the ‘’ demand for the markets’’
 If the suppliers products are differentiated i.e., if
they possess unique features when compared to its
competitors then they lead acquire competitive
position in the markets 57
 .

• Firms may pursue backward integration

strategy to gain control when suppliers are:
 Unreliable
 Too costly
 Not capable of meeting needs of the firms at a
consistent basis

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 Bargaining power of consumers

Customers demand for the improved quality or increased

service at low cost thereby decreasing the competition
against each other, and all these activity holds influence
on the profit generation capability of an industry.
Buyers are powerful in the following situations
• The buyer himself pays a major part of the products price.
Hence, price becomes a crucial aspect for the buyers.
They always ask for the bargains by adopting suitable
techniques.
• If the switching cost is low, customers can spark a price
war between the suppliers for their advantage
• The buyer’s buying power will be higher if they have exact
information related to the demand, prices, and the
supplier costs prevailing in the markets. 59
 Rivalry among competing firms
• The activities of one firm may represent the counter- attack
for the competitor in terms of
• price – cutting
• product launches, alterations
• increased advertising
• enhanced services to the consumer
• or warranties .
 Lock of differentiation or switching cost
• If the firm’s products have any differentiating character then the buyers
will be loyal to those products only as they fulfill their desires.
• Whereas/if the products does not have any differentiating character the
competition increases as the buyers may shift to the products which are of
low cost but provide good service .
• If the switching cost of the product is lower; then the competitors can
easily affricate the buyers by offering the products at low prices, price
discounts, service offerings, etc.
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 Threat of substitute products

• Substitute products are those products that

are produced by the competitor industry and
which perform similar function as that of
products produced by the other industry
• The existence of substitute goods prevents the
competitors’ from charging high prices and if
there is a raise in the price of any substitute
good then the customer’s preference, any
loyalty shifts toward the relatively substituted
products

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 The process of performing an external audit

1. Gather information about economic, social,

cultural demographic, environmental,
political, governmental legal and
technological trends.
2. Evaluated the information gathered from
different means
3. Discus opportunities and threats facing the
firm in meeting

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F.g. Inputs for forecasting
.
• .
Scanning

Monitoring
Forecasting

Competitive intelligence

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 Environment scanning
 The scanning of environment deals with the
analysis of external environment to a firm for
estimating the environmental changes in future
and for recognizing the already existing changes
 Environmental scanning provides information to
the organization about the critical trends and
events before the changes have actually
established.

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 Environmental monitoring
• The environmental monitoring monitors the
evolution of environmental trends, series of
events or sequence of activities.
• The process of monitoring helps the firm to
analyze how drastically the environment trends
are changing the competitive perspective.
• The environmental scanning provide
information about the trends, which needs close
monitoring and close evaluation.

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 Competitive intelligence

• A Competitive intelligence assists an

organization to avoid surprises or shocks by
predicting moves & decreasing the response
time of competitors.
• It involves assembling of competitive
intelligence related with gathering data on
competitors and predicting such data for
taking managerial decisions

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 Environmental forecasting
• Forecasts are educated assumption about
future trends & events.
• Forecasting is complex activity because of
factors such as technological innovation,
cultural change , new changing social values,
unstable economic condition etc.

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 The External environment
• Organizations operate in 3 environments

Far environment (responding

Internal
Internal
environment
environment
(Control)
Near environment
(Influence

Far environment (responding)

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 Three environments

1.Internal environments of staff, resources, &

facilities within the organization
• and also include system & processes that bind
the resource of the organization together and
determine its organizational capabilities.
• We can control the internal environment
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 2.The near environment
• It includes customers, suppliers and
competitors. These can not be controlled but
• They can be influenced.

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 Far environment

• The far environment includes factors that can be

neither controlled nor influenced from within the

organization.

• They are normally called STEP /PEST factors

• Social, technological, economical & political.

• Some firms can influence political factors by lobbying

• But for most managers the best they can hope for is

to understand & anticipate the far environment

because it is beyond their control., We shrink from the unfamiliar

 .

• To be successful, organizations must

anticipate possible change and position
themselves to deal with opportunities and
challenges in a proactive rather than a
reactive way.
• A proactive relationship with ones
environment implies that it is important to
keep close contact with that environment.
• But there is a vast difference in doing this
from “the inside –out “as opposed to the
“outside-in”. 72
 .

• Many organizations are preoccupied with “inside-out”

management.
• They understand and act in relation to their environment
in terms that make sense from internal or in terms of what
powerful members want to do.
• As a result, they often end up acting in inappropriate way.
• Others, try to build from “ the outside in “ in the sense
that they embrace the environment holistically and shape
internal structure and processes with the wider picture in
mind.
• They use views and needs of customers and other key
stakeholders as a mirror through which they can see and
understand their own strengths and weakness
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 Activity

a) Identify three major changes that have happened to

your organization over the past five years.
b) Were these changes prompted by external factors? If
so, were they near or far environment and which of
the STEP factors involved?
c) Was your organization able to influence or anticipate
these changes?
d) Did these changes affect your strategies ?

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 ii. Internal assessment
1. The nature of an internal audit
 All organizations have strengths & weaknesses in
the functional areas as of business
 No enterprise is equally strong or weak in all
areas
 A firms strengths that can’t be easily imitated by
competitors are called distinctive competencies,
 Building competitive advantages involves taking
advantage of distinctive competencies
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 2. Micro environment
• The players of microenvironment do not affect all
companies in the industry in the same way.
• Their decisions & actions often vary in accordance
with the size capability of strategies of each company.
• Microenvironment of business is usually effected by
the following factors.
 Input suppliers or suppliers of inputs
 Workers’ & their union
 Customers
 Marketing inter me diaries
 Competitors
 The society 76
 The process of performing an internal
audit
• Gathering and assimilating information about
the firm’s management, marketing, finance,
/accounting, production/ operation, R&D and
management information system operation.
• Key factors should be prioritized so that the
firms’ strengths & weakness can be determined
collectively

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Questions?
 CHAPTER III: OPTIONS & ALTERNATIVE
STRATEGIES
After studying this chapter, you should be able to:
 Discuss the concept of competitive advantage
• Explain the range of business strategies
• Understand the intensive strategies & sustaining
competitive advantage
• Discuss generic strategies for pursuing
competitive advantage
• Differentiate defensive & offensive business
strategies
• Explain outsourcing strategy 80
 3.1 Competitive advantage

i. What is Competitive Advantage?

• Competitive advantage represents the superior position
enjoyed by the firm with respect to its certain functions,
or activities when compared to its competitors.
Firm’s strengths emanating from various reasons, e.g. for
manufacturing firm.
1. The firm may be efficient or effective in performing
some activities rather than competitors.
2. It may possess good equipment
3. It may be able to undertake the flexible process and
systems.
81
 ii. How do companies build or acquire
competitive advantage?
1. Incorporating competitive advantage as an essential
aspect of corporate strategy
 Corporate strategy acts as a major source for the achievement
advantage over their rival firms
 By formulating corporate strategy ,strategic actions can be made.
 Such actions if implemented properly enable the firm to gain
competitive advantage.
2. Analysis of internal & industry competition
 Firms need to analyze & compare strengths & weakness with that
of its competitors.
 This helps the firm in strengthening its market position adopting
strategies.
3.Benchmarking
 Benchmark is the process of measuring the performance of an
organization against the best in class companies
 and making use of this information for setting organizational targets,
strategies policies & implementations. 82
 .co n t

The benchmarking process helps the firm to

 identify its strengths & weakness ,
 To identify successful companies best practices and
to implement in their operations
Types of benchmark
1.Performance benchmark, mainly involves with direct
comparison and analysis of the competitors products/services
2.Process benchmarking, focuses on the work process like
billing, employee training or order entry.
It helps the organizations to bring in lots of creative ideas and
innovative techniques for enhancing their process.
3.Strategic benchmarking, organization studies the way in which
other companies formulate strategies & attain competitive
advantage over other firms in the industry & become successful
in the market.
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 iii. Strategy & competitive advantage
Strategies to be followed for building competitive advantage includes:

i. Innovation, the company gains competitive advantage by exercising

innovation ,enhancing quality& retaining its flexibility to bring change
and development

ii. Integration (horizontal & vertical)

iii. Alliance, mergers & acquisition

iv. Entry barriers, once the company has gained a leadership status it
develops entry barriers for other firms

v. R&D efforts are applied to gain the competitive advantage through cost
reduction, establishment of unique products,etc.

vi. Benchmarking, allows a firm to standardize the best practice of its

rival firms.

vii. Value chain analysis, the primary & support activities of a firm focus
on improving its value reducing the cost & improving the performance.
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 Value analysis
The term value indicates economic value.
 Value analysis is a systematic& critical
assessment of all the cost elements of a
product or services for removing the
unnecessary costs.
 It is regarded as a cost reduction tool.
• In value analysis ,value refers to the relationship
which exist between function and cost .
Value =Function/cost
• Value can be increased by enhancing the function at
constant cost or by maintaining the same function by
85
 Value chain analysis
 The value chain analysis, deals with the activities which
enhances the capabilities and economic performance of
the firm
 Value chain activities has two parts, primary activities &
support activities.
 The primary activities are those activities which directly
relate with actual creation ,manufacturing development sales
& servicing of products provided to customers.
 The support activities help in supporting the primary
activities.
 This activity help the firm in enhancing and coordination and
attain efficiency within the primary the value adding activities
86
 3.2 Types of growth strategies
• No organization can afford to pursue all the
strategies that might benefit the firm.
• Priority must be established, organizations, like
individuals, have limited resources.
• Both individual & organization must choose
among alternative strategies and avoid
excessive indebtedness.
• Some of the strategies are described in the
following text.

87
 3.2.1 Integration growth strategies
Integration could be of two types, vertical & horizontal integrations.
1. Vertical integration ,could be two types:
Backward integration & Forward integration
1 .1. Backward integration means retreating to the source of raw
materials It is a strategy of seeking ownership or increase control
of a firm’s suppliers.
• This strategy can be especially appropriate when a firm’s current
suppliers are unreliable, too costly, or can’t meet the firm’s needs.
Guidelines when backward integration taken as effective strategy
are:
 When the number of suppliers is small and the number of
competitors is large
 When an organization has both capital & human resources to
manage the new business of supplying its own raw materials
 When an organization needs to acquire a needed resource quickly

88
 1.2.Forward integration
 Forward integration involves gaining ownership or increased
control over distributors or retailers.
 Guidelines when forward integration is taken as effective
strategy are:
 When an organization’s present distributors are especially
expensive, or unreliable, or incapable of meeting the firm’s
distribution needs.
 When an organization has both the capital & human resources
needed to manage the new business of distributing its own
products.
 When present distributing or retailers have high profit margins;
 this situation suggests that a company profitably could
distribute its own products & price them more competitively by
integrating forward 89
 2.Horizontal integration
• Horizontal integration refers to a strategy of seeking ownership of

over a firm’s competitors.

• Mergers& acquisitions among competitors allow for increased

economic of scale and enhanced transfer of resources and

competencies.

• Mergers between direct competitors are more likely to create efficiency than

mergers between unrelated businesses.

Guidelines when horizontal integration may be

effective strategy are:
1.When an organization can gain monopolistic characteristics
2.When increased economies of scale provide major competitive
advantage
3.When an organization has both capital & human talents needed to
successfully manage an expanded organization. 90
 3.2.2.Intensive growth strategies

• Market penetration, market development, and product

development are sometimes referred to as an intensive
strategies .
• Embedded in a development of a strategy are many
choices
 Which markets or segments to penetrate or develop
 Which new or related products & services to develop
 Whether to diversify or divest activities
 How best to exploit & lever existing capabilities and
whether to develop new capabilities.
• Some of the options are clearly presented in the Ansoff
(1965) product/ market matrix shown below 91
 Ansoff’s matrix
This matrix consider options for strategy based on two dimensions: the products/services the organization
sells & the markets it serves

Product/services

Present New
Market penetration
Market
t
Presen

Product
Consolidation
Liquidation Development

Market Diversification
New

development

92
 1. Present products, present market
• A firm is pursuing a strategy of market penetration when it decides
to grow its existing market share using existing products or services.
• Consolidation -competitive position requires different actions,
depending on whether the market is growing, mature, or in decline.
• Total withdrawal from a market is referred to as liquidation
• It involves the closure of all activities related to that product/market
territory.
• This option pursued where profitability targets just can’t be met and
resources would be better deployed elsewhere.
Guidelines when market penetration may be effective strategy;
• When current market are not saturated.
• When market share\of competitors declining & industry sales
increasing
• When increasing economies of scale provide major competitive
advantage. 93
 2. Present products, new markets, (market
development)
• Here organization takes its existing products, services and
ventures in to new markets. However, this may be a high-
risk strategy

3. New products, present markets (product/ services

development
• This can be a strategic route to growth in established
markets where existing products ranges don’t fully exploit
the available opportunities.
• Product development is a strategy that seeks increased
sales by improving present products/services. 94
 4. New products , new markets (diversification)

• Strategic growth through diversification can be in

related or unrelated businesses.
• Diversification clearly carries significant risk &
uncertainty
Reasons for diversifications
 Opportunity to reduce input costs by finding &
controlling a new source of raw materials.
 Horizontal integration-synergy
 When the firm is in decline stage &looking for
potential new applications 95
 Class activity

• A typical commercial retail bank

facing with a choice as to how to
grow its business .
 Suppose it chooses all Ansoff’s
strategies, illustrate all the activities it
has to do in each of Ansoff’s six
strategies.

96
 If we were to map these strategies onto Ansoff’s
matrix , the following would result

Product/services
Mar Present New
Market penetration Product development
ket .Open new branches
Consolidation
Present .Information automation .Over telephone banking
Liquidation
.Close branches

Market development Diversification

New
Open oversea branches .Set up direct sales
insurance company

97
3.2.3. Generic strategies for pursuing
competitive advantage
1. Porter’s generics strategies
Competit Competitive Advantage
ive
Low cost Differentiation
scope
Broad Cost leadership Brand
target differentiation

Narrow Cost focus Differentiation

target
focus

98
 Cost leadership strategy
• If an organization can achieve & sustain cost leadership,
then it will be an above-average performer in its
industry.
• A successful cost leadership strategy usually permeates
the entire firm, as evidenced by high efficiency, low
overhead, limited perks, intolerance of waste, wide
span of control, etc.
• Some risks of pursuing cost leadership are that
competitors may imitate the strategy, then driving
overall industry profits down.
• Drivers of cost advantages:
-economic of scales, economics of learning, product 99
 Differentiation based strategy
• Here an organization seeks to be unique in its
industry along some dimensions that are valued by
buyers.
• A firm that can achieve & sustain differentiation will
be an above average performer in its industry.
• A risk is that the unique product may not be
valued highly enough by customer to justify the
higher price.
• When this happens, a cost leadership strategy will
defeat a differentiation strategy.
• Another risk is that competitor may develop ways to
copy the differentiating features quickly. 100
The .
following are some of differentiation strategies.
i. Product differentiation, based on the various
products /services characteristics as , its
features, reliability, maintenance, etc, the brand can
be differentiated.
ii. Personnel differentiation, attain a competitive
advantage over its rival by having experienced and
well trained employees.
iii. Channel differentiation, building their distribution
channel according to the coverage, expertise, and
performance.
Iv. Image differentiation, image means what the
public perceives about the firm or products
 Mintzberg identify six types of differentiation strategies:
Price, image, support, design, quality & undifferentiated.
-Coping what the competitors are doing is non-differentiated
strategy 101
 Focus based strategy
• A firm may pursue advantage from cost leadership
or differentiation.
• Focus strategies are most effective when
consumers have distinctive preference or
requirements and when rival firms are not
attempting to specialize in the same target
segment.
• Risk of pursuing a focus strategy includes the
possibility that numerous competitors will
recognize the strategy & copy its strategy or
customers will drift/flow to others. 102
 3.2.4. outsourcing strategy
 Outsourcing refers to the process of assigning work
to an outside company instead of carrying it in
house.
• A company whose internal business activities are
outsourced is termed as’ client company’
• and accompany who Provides outsourcing service
is known as “outsource provider”.
• Drivers of outsourcing/why/reasons:
 Cost-cutting
 Better operational efficiency
 Scarcity of internal resources
 Focus on innovation & core competence(focus on core objectives
& outsource non-core activities) 103
 Pros & cons of outsourcing
Advantages of outsourcing
 Helps to give emphasis for main objectives
 Cost saving especially for “labor”
 Gaining outside expertise, capabilities
 Acquiring outside technology
• Disadvantages of outsourcing
 Loss of control ,create dependence on partners
 Creating future competition

104
 3.2.5 Defensive & Offensive Business Strategies

The defensive strategies are:

• used for reducing the risk of being attacked

• weaken the effect of attack that occurs, and influencing
challengers to aim at attacking other rivals.
• not improve competitive advantage of the firm
• useful in protecting the competitive position

• protecting the process of initiation of its most valuable

resources & capabilities and defend whatever
competitive advantage it has. 105
 Types of defensive strategy
1. Blocking the choices available to challengers

 To reduce the threat of rivals attack with a better

technology
 A defending firm can add new features, new models, or
increase its product line.

2. Being expressive to rivals about impending

retaliation.

• The aim behind signaling to prevent them from attacking

or trying to divert them to less threatening options.

• That could be achieved by making aware challengers that

their attack will cost them more than its worth.

106
 Offensive strategy
• Implementation of offensive strategic moves
such as initiatives computed to produce a cost
advantage, a differentiation advantage, or a
resource advantage.
• The time required by a successful offensive
strategy to build a competitive advantage depends
on the competitive situations.
107
 Types of offensive strategies
1.Initiative to match or exceed competitors strengths
• Offering the product with equal features but at low cost, which
brings opportunity for acquiring market share if the competitor is
not able to bring down its price.
• Use of advanced technologies and make the rivals products
obsolete, adding new features
• which are appealing to the customer of rivals running T.V ads
2. Capitalizing on competitors Loopholes
• Taking an initiative for exploiting the rival’s
weakness can provide a better chance for success
than challenge the strengths of the rivals
3.Multi-dimensional offensive initiatives
• A company can take up simultaneous initiatives and
launch them more or less at the same time across a
wide geographic region
108
 4.End- run offensive
.

 The main idea of an end – run offensive is to move around competitors,

capture unoccupied or less occupied markets,
 change the rules of the competitive game in favor of aggressor by;

 Introducing new products

 Bringing in new technologies, replacing older products or services

5.Guerilla offensive
• Small challengers who lack resources and market visibility used
guerilla offensive for attacking its competitors.
• The guerilla offensive is based on hit and run principle here the
competitor tries to capture the sales and market share whenever
and wherever it gets the chance.
• It involves marking sudden & random attack on the leader’s
customers by using tactics like
 occasional reduction in price,
 or surprising the rivals through intensive promotional activity,
 conducting special campaigns to attract buyers away from those109
3.2.6Merger/Acquisition Growth Business
Strategy
.

• A merger occurs when two organization of about

equal size unit to form one enterprise.
• The other company which discontinuous its
business transfer its assets ,debts, etc., to the
company which is in existence
Acquisition/take over
• occurs when a large organization purchase
(acquire) a small firm or vice versa.
• In acquisition ,business is purchased through cash
110
 3,2.7 Strategic alliance
• Strategic alliance exists whenever two or more
independent organizations co-operate in the
development, manufacture, or sale of products or
services.
There are three main types of alliance.
1. Joint ventures
Company A and company B setting up company C to
achieve a commonly agreed purpose.
2. Collaborations
A flexible alliance between companies in which a new
corporate form is not necessarily created.
• 3. Consortia, Alliance between more than two 111
Questions?
 CHAPTER IV: Strategy Analysis and choice

• Learning objectives
• After studying this chapter you should be
able to ;
• Explain the nature of strategic choice
• Understand the nature of generating and
selecting choices
• Discuss testing of strategic options and
choice

114
 Strategic choice definition

What is strategy choice?

• Strategic choice is the decision to select strategies from
the grand strategies, the strategy which will best meet
the firm’s objectives.
• Identifying and evaluating alternative strategies should
involve managers and employees.
• All representatives or participants should have the firm’s
external and internal audit information.
• This information coupled with the firm’s mission
statement will help participants to generate ideas in the
meetings.
115
 2. The process of strategic choice as follows
1.Emphasizing on strategic alternatives

• The decision maker should emphasize on the

reasonable alternatives and should neglect the
other alternatives.
• The alternatives can be emphasized by imagining
the future condition and by working backwards .
• It is very essential for the firms to understand,
 the industry conditions
 and evaluate the risks
 and benefits associated with its competitive
positioning before a final selection 116
 2.Assessing the strategic alternatives.

criteria for strategic choice are:

1. Objective factor
• The objective factor is also referred to as rational,
normative, or prescriptive factors.
• These factors depends on the analytical techniques
and are hard facts or data which helps in making a
strategic choice.
2. Subjective factors
• A subjective factor relies on the individual’s personal
judgment and also are called collective or descriptive
factor.
117
 .
3.Evaluating the strategic alternatives

• The feasible alternatives are evaluated so that

its capability can assist the organization to
attain its objective.
• The evaluation process primarily deals with
bringing the complete analysis together
based on the subjective factors and objective
factors.

118
 4. Testing for suitability, feasibility and acceptability

• The suitability of proposed strategy can be assessed by

the extent to which it matches the needs identified
from a strategic analysis

• The test for feasibility of a proposed strategy will consider

how well it would work in practice and how difficult it might
be to achieve. The question to be asked would include:
• How will the completion react and how will the organization
cope with that reaction?
• Test for acceptability address the issue of how shareholders
might feel about the expected outcome of the strategy in
terms of risk, profitability, reward, ethics and the effect on
relationships.
• The three test of suitability, feasibility, and acceptability
provide an initial set of screening tools for strategic
choice. 119
 5. Risk and uncertainty in strategic choice

• Strategy is about charting a course for the future.

• Risk is concerned with assessing the probability of
foreseen outcomes.
• Uncertainty , is to do with outcomes that may be
unforeseen ,or those which are foreseen but against
which a degree of estimated risk cannot be set.
• In making choices about strategy acceptance of
different degrees of risk is often a matter of
personal preferences .
• Some individuals are very risk-averse ,other take
risks almost a matter of routine. 120
 6.Selecting from among the strategic alternatives

• The evaluation of strategic choice helps in

choosing the highly relevant alternative in the
prevalent conditions.
• Hence, the final step involves making the
strategic choice and chooses one or more
strategies for the implementation
• Finally, blue print which elucidates the strategies
and conditions under which they ( strategies)
operate is developed along with some
contingency strategies 121
Questions?
 Chapter v: Strategy Implementation

• Learning objectives
• Explain the characteristic feature of strategy implementation
• Discuss process of strategy implementation
• Identify barriers in strategy implementation
• Discuss the importance of annual objective and policies in
achieving organization commitment for strategies to be
implemented
• Compare & contrast restructuring & reengineering
• Explain why organization structure is so important in strategy
implementation
• Understand the importance of strategy control for successful
importance of 124
 ii. what is strategy implementation ?

• After strategy formulation the strategy needs to be

implemented which is useful in the attainment of
goals with the use of organization structure
implementing the strategy formulated .

125
 Contrast b/n strategy formulation &
implementation
Strategy formulation Strategy implementation

is positioning forces before is managing forces during the

the action action

focuses on effectiveness focuses on efficiency

requires coordination among requires coordination among

few individuals many individuals

Requires good intuitive& Requires special motivation &

analytical skills leadership skills

Is primarily an intellectual Is primarily an operational

process process

126
 Strategic Implementation
• comprised of ,
setting policies,
designing the organization structure,
and developing a corporate culture, which
helps to meet the organizational objectives
Activity
Think of your organization’s structure, culture,&
system for 1 minute. Tell us how they helped
you for successful implementation.
127
 iii. Features of strategy implementation

Action orientation
• The indispensable nature of strategy implementation is, it involves action.
Comprehensive in scope
• Strategy implementation is composed of several aspects and extensive
range of activities& functions.
Demanding varied skills
• Strategy implementation process deals with an extensive range of
activities,
Wide ranging involvement
The strategy implementation needs the involvement of middle level
managers
• Integrated process
• strategy implementation must act in holistic manner.
128
 iv. Mc Kinsey’s 7-s framework
Strategy implementation requires the 7-S factors
1. Strategy: A set of decision & action which aims to
gain competitive advantage
2.structure: The organizational chart presenting ,who
reports to whom, and how task to be divide.
3. Systems: Sequential activities engaged in the daily
operations
4.Style (leadership)
5. Staff (management):It related to employees training
6. Shared values (culture):is subjected to commonly
used beliefs ,mindsets &assumptions
7.Skills (management):concerned with organization’s
dominant capabilities & competencies
129
 Assignment 15%
1. What are the Process of strategy implementation
2. Consider your company and write some
offensive and defensive strategies employed by
your company
3. What are the similarity and distinction between
objective and goal

130
v. Major barriers to the process of strategy implementation

• Inability to effectively deal with change

• Poor or indefinite strategy
• Lack of guidelines or a role model to guide the
implementation
• Vague responsibility and accountability
• Working against the organizational power
structure.

131
 Ways to improve the implementation
problems
• Adopting a clear model of strategy
implementation
• Implementation activities does well based on the
skills and abilities of the managers involved in
those activities.
• There is a need for clear model of the strategy
implementation, which can provide unambiguous
guidelines for the managers while the
implementing strategy.
132
 Implementing strategies: Management issues
1. Matching structure with strategy
 changes in strategy leads to changes in
organizational structure.
 Structure should be designed to facilitate strategic
pursuit of the firm and therefore, follows strategy.
 However, most of the researchers are of the
opinion that there exist reciprocal relationship
between the strategy and the structure.
• The following figure indicates the two way
relationships existing between the structure and
strategy
133
 Strategy determine the structure .The structure also has impact
on strategy .
• .
Strategy

• Affects
• Determines

structure

134
 Annual Objectives and policies.
• Annual objective serves as a guideline for action,
directing and channeling efforts and activities of
organizational members.
• Policies refer to specific guidelines, methods,
procedures, rules, forms and administrative practices
established to support and encourage work towards
stated goals.
• Policies set boundaries, constraints, and limits on the
kind administrative actions that can be taken toward
and sanction behavior;
• They clarify what can and can not be done in pursuit of
an organization’s objectives.

135
 Some issues that may require a management policy are as follows .

• To centralize or decentralize employee-

training activities.
• To promote on the basis of merit or
seniority
• To promote from within or to hire from
the outside.
• To use one or more suppliers.
• To discourage sexual harassment
• To discourage smoking at work.
136
 3. Resource allocation

• Resource allocation is a central management

activity that allows for strategy execution.
• Strategic management enables resources to be
allocated according to priorities established by
annual objectives.
• All organizations that at least four types of
resources that can be used to achieved desired
objectives:
• Financial resources, physical resources ,human
resources, and technological resources.
.
137
 .
• .
Resourcerce

Human Resource
Intangible Specialized skills,
Tangible
Technology knowledge
Financial
Reputation Communication
Physical
Culture motivation

138
 Factors prohibit effective resource
allocation
• Over protection of resources
• To great emphasis on short-run financial criteria.
• Organizational politics
• Vague strategy target
• Reluctance to take risk.
• Lack of sufficient knowledge

139
 4. Restructuring and reengineering
Restructuring also called downsizing,
rightsizing, or delayring
• Involves reducing the size of the firm in
terms of:
number of employees,
number of division or units,
or number of hierarchical levels in
the organizational structure.
• The reduction in size is intended to improve
both efficiency and effectiveness.
• Restructuring is concerned primarily with
shareholders well-being rather than 140
 Reengineering
 Reengineering also called process
management, process innovation or
process redesign
 It involves redesigning work, jobs, and
processes for the purpose of improving
cost, quality, service, and speed.
 It does not imply employee layoffs.
 is concerned more with employee and
customer well-being than shareholder well-
being.
 The focus of reengineering is changing the
141
 5. Managing resistance to change

 No organization or individuals can escape change.

 Resistance in the form of sabotaging production
machine, absenteeism, unfounded grievance, and
unwillingness to cooperate regularly occurs in
organizations.
• People often resist strategy implementation
because they do not understand what is happening
or why changes are taking place.
• Change must view as an opportunity rather than
as threat by managers and employees.
142
 Approaches for implement change
Change Advantage
Description Disadvantages
strategies

Force change Giving order Implemented High

&enforcing fast resistance, low
commitment
Educative Convince High Implementatio
change people for commitment, n slow, and
change less difficult
resistance
Rational change Convince individual Implementation
easy

143
 Some Strategies to minimize resistance to change

• Offer training and development workshop

• Communication
• Individuals who affected by change should
participate in decision making of change

144
 Approaches of strategic control
• Organizational controls helps to compare the
actual results VS expected outcomes
• Effectively designed organizational controls
 gives clear information
 and makes clear about the behaviors, which
improves the firm’s overall performance.
• While designing the organizational controls, the
firm usually, makes use of
 strategic control
 and financial controls.
145
 Difference between strategic
control and financial control.
Strategic control Financial control
evaluating the extent to evaluate the firm’s performance
which the firm is using
adequate strategies
focus on the requirements for measures the firm’s present
implementing its strategies. performance with the past
outcomes as well as with the
competitor’s performance and
industry averages
focus on evaluating the fit focus on evaluating the firm’s
between what the firm might performance with the help of
do and what it can do unrelated diversification strategy
which is concerned with financial
outcomes.
146
 strategic control systems
• A firm makes use of two major forms of control
systems for assuring information control :
1. Conventional approaches to strategic control

Formulate strategies

Implement strategies

Strategic control

The control depends on a feedback loop,

which is from performance measurement to strategy formulation.
This type of control system is called single loop learning. This
method is suitable when the environment is stable & simple 147
 2.Modern approach to strategic control

Implement
Formulate
strategies
strategies

Behavioral control
Informational control
Strategic
control

Strategy formulation, strategy implementation and control influence

each other.
Two types of control, informational and behavioral control.
Informational control deals with whether the organization is
performing right things.
Behavioral control focuses whether the organization performing the
things right. 148
Questions?
 CHAPTER VI: STRATEGY EVALUATION
Learning objectives
After studying this chapter, you should able to do
the following.
1. Describe a practical framework for evaluating
strategies
2. Explain why strategy evaluation is essential for
organizational success
3. Discuss the importance of contingency planning
in strategy evaluation
151
 6.1 The nature of strategy evaluation
Strategic evaluation includes three basic activities.
1. Examining the underlying bases of a
firm’s strategy
2. Comparing expected results with
actual results
3. Taking corrective actions to ensure
that performance confirms to plans.
• Strategy evaluation is essential to
ensure that stated objectives are
being achieved
152
 What do you think?
.
 Too much emphasis on evaluating strategies ?
 Too little evaluation ?
• No evaluation ?

153
 Reasons why strategy evaluation is more
difficult today
• A dramatic increase in the environment’s
complexity
• The increasing difficulty of predicting the future
with accuracy
• The rapid rate of obsolescence of even the
best plans.
• The increase in the number of both domestic &
world events affecting organizations

154
 What should be the solution?

• Modern organization demands for

greater flexibility, creativity, and
initiative from employees
• A fundamental problem facing managers today
is how to effectively control employees in light of
these.

155
 The process of evaluating strategies
• Strategy evaluation is necessary for all sizes and kinds of
organization.
• A certain amount of management by wandering around at
all levels is essential to effective strategy evaluation.
• Strategy evaluation should be performed on a continuing
basis, rather than at the end of specified periods.
• If expectations deviate significantly from forecasts, then
the firm should renew strategy formulation activities,
perhaps sooner than planned.
• Through involvement in the process of evaluating
strategies, managers& employees become committed to
keep the firm moving steadily toward achieving objectives.
156
 A STRATEGY EVALUATION FRAMEWORK

1. Reviewing underlining bases of strategy

a) Prepare revised Internal factor Evaluation (IFE) matrix
• Focus on changes in mgt, marketing, finance,
operations, R&D, MIS : strengths & weaknesses
 Compare revised to Existing internal Factor Evaluation
b)Prepare revised External factor Evaluation (EFE)
matrix
• Compare revised to Existing External Factor Evaluation
(EFE)
• If différence occurs --- take corrective actions
• If no… measure organisationnel performance

157
 Measuring organizational performance

• comparing expected results to actual results,

• investigating deviations from plans, evaluating individual
performance, and examining progress being made toward meeting
stated objectives
• strategy evaluation is based on both quantitative & qualitative
criteria
Quantitative criteria used to evaluate finance are:
 Comparing the firm’s performance over different time period
 Comparing the firm’s performance to industry average
 Comparing the firm’s performance to competitors
Qualitative criteria
 Human factors such as high absenteeism& turnover rates; poor
production quality and quantity rates,
 low employee satisfaction can be underlying cause of declining
performance 158
 Taking corrective actions
• Taking corrective actions, requires making
changes to reposition a firm competitively for the
future,
Examples of changes that may be need are
 altering on organization’s structure,
• replacing one or more key individuals
• revising a business mission,
• revising objectives,
• devising new policies,
• developing new performance incentives, etc.
159
 Characteristics of an effective Evaluation
system
Strategy evaluation must meet several basic requirements to be
effective
• It must be economical ,too many controls can do more harm
than good
• It should be meaningful, they should specifically relate to a firm’s
objectives,
• It should provide timely information
• It should be designed to provide a true picture of what is
happening
• It should foster mutual understanding, trust, and common sense.
• Control need to be action oriented rather than information
oriented 160
 Contingency plan
• Contingency plans can be defined as alternative plans that can be put into
effect if certain key events do not occur as expected.
• Firms plan ways to deal with unfavorable and favorable events before they
occur.
Some contingency plans commonly established by firms include
 If a major competitor withdraws from particular markets as intelligence
reports indicate, what action should our firm take?
 If our sales objectives are not reached , what action should our firm
take to avoid profit losses?
 If demand for our new product exceeds plans, what actions should our
 firm take to meet the higher demand?
When strategy- evaluation activities reveal the need for a major
change quickly,
• Contingency plan can promote a strategists ability to respond quickly to
key changes in the internal & external bases of an organizations current
strategy.
• In some cases, external or internal conditions present unexpected
opportunities.
• When such opportunities occur, contingency plans could allow an
organization to capitalize on them quickly.
161
 Effective contingence plan processes.
• Identify both beneficial & unfavorable events that could possibly
derail the strategy
• Specify trigger points. Calculate about when contingent events
are likely to occur
• Assess the impact of each contingent event
• Estimate the potential benefit or harm of each contingent event
• Assess the counter impact of each contingency plan .i.e., estimate
how much each contingency plan will capitalize on or cancel out
its associated contingent event
• Determine early warning signals for key contingent events.
Monitor the early warning signals
• For contingent events with reliable early warning signals, develop
advance action plans to take advantage of the variable lead time
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 Why business is difficult today ?
• The relationship b/n suppliers and users are
changing as the power moves to customer.

• The external environment is volatile and

changes the rule of the game.
• Technology is moving the barriers of time and
space and markets are now defined
internationally.

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Questions?