Formulation of Business Strategies in Business policy and strategy

This PPT Slide would discuss about the formulation of business policy in todays current situation.

1. TOPICS TO BE COVERED
FORMULATION OF COMPETITIVE STRATEGIES
•Strategic alternatives at corporate level
•Model of grand strategy
•Strategic alternatives at business level
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2. STRATEGY FORMULATION –CONCEPT
•Strategyformulationprocessisanintegral
partofstrategicmanagement.
•Ithelpsinframingeffectivestrategiesforthe
organization,tosurviveandgrowinthe
dynamicbusinessenvironment.
•Strategyformulationistheprocessofoffering
properdirectiontoafirm.

3. LEVELS OF STRATEGY FORMULATION

4. GRAND STRATEGIES
Concept:
•TheGrandStrategiesarethecorporate
levelstrategiesdesignedtoidentifythe
firm’schoicewithrespecttothedirection
itfollowstoaccomplishitssetobjectives.
•Itinvolvesthedecisionofchoosingthe
longtermplansfromthesetofavailable
alternatives.TheGrandStrategiesare
alsocalledasMasterStrategiesor
CorporateStrategies.

5. Therearefourgrandstrategicalternativesthat
canbefollowedbytheorganizationtorealizeits
long-termobjectives:

6. I) STABILITY STRATEGY
•TheStabilityStrategyisadoptedwhenthe
organizationattemptstomaintainitscurrent
position
•Focusesonlyontheincrementalimprovement
bymerelychangingoneormoreofits
businessoperations
•Itwillnotmakeanysignificantchangesinits
businessoperations

7. Stability Strategies could be of three types:

8. II) EXPANSION STRATEGY
•TheExpansionStrategyisadoptedbyan
organizationwhenitattemptstoachieveahigh
growthascomparedtoitspastachievements.
•Thereasonsfortheexpansioncouldbesurvival,
higherprofits,increasedprestige,economiesof
scale,largermarketshare,socialbenefits,etc.
•Theexpansionstrategyisadoptedbythosefirms
whohavemanagerswithahighdegreeof
achievementandrecognition.Theiraimistogrow,
irrespectiveoftheriskandthehurdlescomingin
theway.

9. The firm can follow either of the five expansion
strategies to accomplish its objectives:

10. Expansion through Concentration
•Marketpenetrationstrategy:Thefirmfocusingintenselyontheexistingmarket
withitspresentproduct.
•MarketDevelopmenttypeofconcentration:Attractingnewcustomersforthe
existingproduct.
•ProductDevelopmenttypeofConcentration:Introducingnewproductsinthe
existingmarket.

11. Expansion through Integration

12. Expansion through Diversification

13. Expansion through Cooperation

14. MERGER
There are basically four types of mergers
•Vertical Merger
•Horizontal Merger
•Concentric Merger
•Conglomerate Merger
•Demerger

15. TAKEOVER STRATEGIES
There are basically two types of takeovers;
•Friendly Takeovers
•Hostile Takeovers
JOINT VENTURES
•Between two firms in one industry
•Between two firms across different industries
•Between an Indian firm and a foreign company in India
•Between an Indian firm and a foreign company in foreign
•Between an Indian firm and foreign firm in a 3rd country

16. STRATEGICALLIANCES
Cooperationbetweentwoormoreindependentfirmsinvolvingshared
controlandcontinuingcontributionbyallpartnersformutualbenefit.
Example:TVS&Suzuki,Mahindra&Ford,BPL&SANYO,TajHotels&
BritishAirways….
TYPESOFSTRATEGICALLIANCES
•PROCOMPETITIVEALLIANCES:(Lowinteractionandlowconflict)
Theyareusuallyinterindustrywithverticalvaluechainrelationships,
suchasbetweensuppliersandmanufacturers
•NONCOMPETITIVEALLIANCES:(Highinteractionandlowconflict)
Theseareintraindustrypartnershipsbetweennon–competitive
firms
•COMPETITIVEALLIANCES:(Highinteractionandhighconflict)These
firmsenteringintopartnershiparerivalfirms
•PRECOMPETITIVEALLIANCES:(Lowinteractionandhighconflict)
Twofirmsfromdifferentandoftenunrelatedindustriesarebrought
togethertoworkonwelldefinedactivities.

17. Expansion through Internationalization

18. III) RETRENCHMENT STRATEGY
TheRetrenchmentStrategyisadoptedwhenan
organizationaimsatreducingitsoneormorebusiness
operationswiththeviewtocutexpensesandreachto
amorestablefinancialposition.

19. REASONS FOR RETRENCHMENT STRATEGIES
•Continuousnegativecashflowsfromaparticular
division
•Unabletomeetthecompetition
•Hugedivisionallosses
•Difficultyinintegratingthebusinesswithinthe
company
•Betteralternativesofinvestment
•Lackofintegrationbetweenthedivisions
•Lackoftechnologicalupgradationsduetonon-
affordability
•Marketshareistoosmall
•Legalpressures

20. IV) COMBINATION STRATEGY
•TheCombinationStrategymeansmakingthe
useofothergrandstrategies(stability,
expansionorretrenchment)simultaneously.
•Thecombinationofanygrandstrategyused
byanorganizationindifferentbusinessesat
thesametimeorinthesamebusinessat
differenttimeswithanaimtoimproveits
efficiencyiscalledasacombinationstrategy.

21. STRATEGIC CHOICE
•StrategicChoiceinvolvesawholeprocess
throughwhichadecisionistakentochoosea
particularoptionfromvariousalternatives.
•Therecanbevariousmethodsthroughwhich
thefinalchoicecanbeselectedupon.
•Managersanddecisionmakerskeepboththe
externalandinternalenvironmentinmind
beforenarrowingitdowntoone.

22. FACTORS AFFECTING STRATEGIC CHOICE:
•Environmental constraints.
•Internal organizations and management power
relationships.
•Values and preferences.
•Management`s attitude towards risk.
•Impact of past strategy.
•Time constraints-time pressure, frame horizon,
timing of decision.
•Information constraints.
•Competitor’s reaction.

23. STRICKLAND’SGRANDSTRATEGYSELECTION
MATRIX
•TheGrandStrategySelectionMatrixdevelopedby
Stricklandisonehelpfultoolinthedevelopment
oftalentthatislikelytoovercomeweaknesses,
buildonexistingstrengths,avertfuturethreats&
seizefutureopportunities.Itisusedinstrategic
businessplanning.
Itfocusesontwokeyissues:
•1)Shouldstrategistsdevoteattentionto
overcomingpresentweaknessortobuildingon
presentstrengths?
•2)Oritshouldstrategistsconcentrateefforts
insidetheorganizationoroutsideit?

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Abusinesssituationisdefinedintermsofthe
growthrateofthegeneralmarketandcompetitive
positioninthatmarket.
Whenthesefactorsareconsideredsimultaneously,
abusinesscanbebroadlycategorizedintofour
quadrants:
1)Strongcompetitivepositioninarapidlygrowing
market,
2)Weakpositioninrapidlygrowingmarket,
3)Weakpositioninaslow-growthmarket,
4)Strongpositioninaslow-growthmarket.
5)Eachofthesequadrantssuggestsasetof
promisingpossibilitiesforselectionofgrand
strategy.

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27. GRAND STRATEGY CLUSTERS
• Grandstrategyclustersareamodelthat
focusesoneachstrategyasitwouldworkwithin
thestrategicplansofacompany.
Thesestrategiesthenareclusteredtoshapethe
businessdirectionandfocusonthelongtermgoals
ofthecompany.
• Strategiesthatmaybemoreadvantageousfor
firmstochooseunderoneoffoursetsofconditions
definedbymarketgrowthrateandthestrengthof
thefirm’scompetitiveposition.
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28. GRAND STRATEGY CLUSTER MODELS
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29. BCG –MATRIX -CONCEPT
•BCGMatrixorotherwiseknownasBoston
ConsultingGroupgrowthsharematrixisusedto
representthecompany’sinvestmentportfolio.
•Largecorporationsusuallyfaceproblemsinallocating
resourcesamongstvariousunitsandproductlines.
Tocopewiththisproblem,in1970,Bruce
HendersondesignedamatrixfortheGroupcalledas
BCGmatrix.
•Itisbasedontwofactorswhichare:
•Thegrowthrateoftheproduct-market.
•Marketshareheldbythecompanyintherespective
market,incomparisontoitscompetitors.
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34. STRATEGIC ALTERNATIVES AT BUSINESS LEVEL
StrategicAlternativesaredevelopedtosets
directioninwhichhumanandmaterial
resourcesofbusinesswillbeappliedfora
greaterchanceofachievingselectedgoals.
•Strategy,ashasalreadybeensaid,referstothe
determinationofthepurposeormissionand
thebasiclong-termobjectivesofanenterprise,
andtheadoptionofcoursesofactionand
allocationofresourcesnecessarytoachieve
theseaims.
•Abusiness-levelstrategyisthesetofstrategic
alternativesfromwhichanorganizationchooses
asitconductsbusinessinaparticularindustryor
market.
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36. PORTER’S GENERIC STRATEGIES:
TheGenericStrategiescanbeusedtodeterminethe
direction(strategy)ofyourorganisation.Michael
Porteruses4strategiesthatanorganisationcan
choosefrom.Hebelievesthatacompanymust
chooseaclearcourseinordertobeabletobeatthe
competition.
•CostLeadership
•Differentiation
•CostFocus
•DifferentiationFocus
•MichaelPorterdescribedthetheoryinhis1985
book‘CompetitiveAdvantage:Creatingand
SustainingSuperiorPerformance’.
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WHATARETHESIMPLERULESTHATGUIDEOURSTRATEGIES?
Simplerules,whichgrowoutofexperience,fallintofivebroad
categories:
•How-torules:Everyonemustbepassionatelycommittedtosocial
justice,andsupportingtheagencyofpoor/excludedpeopleand
communities
•Boundaryrules:Anyinvestmentinadvocacyrequiresarealistic
chanceofwinningsomething,beitapolicychange,ashiftin
attitudes,orgettinganissueontothepublicagenda
•Priorityrules:Howmanypeoplewillbenefit?Howmanyofthem
willbelongtopoor/excludedpeopleandcommunities?Willthe
changesbesustainable?
•Timingrules:Whatcriticaljunctureorpolitical/organizational
windowofopportunitywilltheadvocacytakeadvantageof?
•Exitrules:Whowilldecideonexit?Onwhatevidence?Howwill
partnersandcommunitiesbeinvolvedinthedecision?

39. THANK YOU
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