Strategy Implementation, Tools and Techniques of Strategic Analysis

Strategy Implementation, Strategic Analysis, Strategic analysis process, Strategic Choice, Steps in strategic choice, Factors affecting Strategic Choice, objective factors, subjective factors, Tools and Techniques of Strategic Analysis, The Boston Consulting Group (BCG) Matrix, GE Planning Grid, GE 9 Cell, Strategic Decisions, Invest, Protect, Harvest, Market Attractiveness , Competitive Strength, Industry Structure Analysis – The Life-Cycle MODEL, Porters 5 Force Model, Competitive advantage, PESTLE and Porter’s Five Forces Analysis, The McKinsey 7 – S Framework, VRIO Analysis, VRIO of H&M, Value Chain, Benchmarking, Mergers and acquisitions (M&A)

1. STRATEGYIMPLEMENTATION,
TOOLS AND TECHNIQUES OF
STRATEGIC ANALYSIS
Dr. Parveen Kaur Nagpal

2. STRATEGYIMPLEMENTATION
Strategicimplementationisthesumtotalofallthe
activitiesandchoicesrequiredfortheexecutionofa
strategicplan.
Itistheprocessbywhichstrategiesandpoliciesareput
intoactionthroughthedevelopmentofprograms,
budgetsandprocedures.
Strategyimplementationistheprocessofallocating
resourcestosupportthechosenstrategies.
Thisprocessincludesthevariousmanagementactivities
thatarenecessarytoputstrategyinmotion,institute
strategiccontrolsthatmonitorprogress,andultimately
achieveorganizationalgoals.
Dr. Parveen Kaur Nagpal

3. STRATEGICANALYSIS
StrategicAnalysisistheobjectivestudyofthe
environmentalfactors,bothinternalandexternal,which
areconsideredinprocessofstrategicchoice.
StrategicAnalysisistheprocessofconductingresearchon
thebusinessenvironmentwithinwhichanorganization
operatesandontheorganizationitself,inorderto
formulatestrategy.
TwotypesofStrategicAnalysiscanbedonebydifferent
organizationsforfutureplanning.Theyare:
i.InternalAnalysis(SWOT)
ii.ExternalAnalysis(PESTLE)
Dr. Parveen Kaur Nagpal

4. STRATEGICANALYSISPROCESS
Dr. Parveen Kaur Nagpal

5. STRATEGICCHOICE
Strategicchoiceisapartofthestrategicprocessand
involveselementsliketheidentificationandevaluationof
alternativeswhichthenleadstochoiceofaparticular
strategy.
InthewordsofWilliamGlueckandLawrenceJauch,
“StrategicChoiceisthedecision,whichselectsastrategy
fromamongthealternativegrandstrategies,whichwill
bestmeettheobjectivesofenterprise”
Dr. Parveen Kaur Nagpal

6. STEPSINSTRATEGICCHOICE
Analysis of
Environment
Setting
Objectives
Framing Alternative
Strategies
Evaluating
Alternatives
Considering
Decision Factors
Choice of
Strategy
Allocation of
Resources
Implementation
Review
Dr. Parveen Kaur Nagpal

7. FACTORSAFFECTINGSTRATEGICCHOICE
Strategic
Choice
Objective
Factors
Internal
Environmental
Factors
External
Environmental
Factors
Subjective
Factors
Dr. Parveen Kaur Nagpal

8. FACTORSAFFECTINGSTRATEGICCHOICE
A.OBJECTIVEFACTORS
I.InternalEnvironmentalFactors
✓Mission
✓ObjectivesandPolicies
✓Resources
✓Management–LabourRelations
II.ExternalEnvironmentalFactors
✓PESTLE
✓Competitors
✓Suppliers
✓DealersandCustomers
Dr. Parveen Kaur Nagpal

9. FACTORSAFFECTINGSTRATEGICCHOICE
B.SUBJECTIVEFACTORS
✓ManagementPhilosophy
✓PastOrganizationalStrategies
✓ValueSystemofTopManagement
✓AttitudeTowardsRisks
✓InternalPolitics
✓TimeFactor
Dr. Parveen Kaur Nagpal

10. Tools and Techniques of Strategic Analysis
Dr. Parveen Kaur Nagpal

11. THEBOSTONCONSULTINGGROUP(BCG) MATRIX
TheGrowth–shareMatrix(alsoknownastheProduct
PortfolioMatrix,BostonBox,BCG-matrix,BostonMatrix,
BostonConsultingGroupAnalysis,PortfolioDiagram)isa
chartthatwascreatedbyBruceD.Hendersonforthe
BostonConsultingGroupin1970tohelpcorporations
analyzetheirbusinessunitsandtheirproductlines.
Inthematrix,marketgrowthandmarketshareofthe
products(orservice)ofacompanyarecomparedtoeach
other.Thisallowsacompanytodeterminewhetherthey
shouldinvestinaproductorwhethertheyshouldde-
invest,orevenstoptheproductaltogether.
Thusithelpsthecompanyallocateresourcesandisused
asananalyticaltoolinbrandmarketing,product
management,strategicmanagement,andportfolio
analysis.
Dr. Parveen Kaur Nagpal

12. THEBOSTONCONSULTINGGROUP(BCG) MATRIX
Dr. Parveen Kaur Nagpal

13. THEBOSTONCONSULTINGGROUP(BCG) MATRIX
a)HighGrowth–LowMarketShare(QuestionMarks)
Productsinthiscellareinfastgrowingmarketsbuttheir
relativemarketshareislow.
QuestionMarksareproductsthatgrowrapidly,
consumelargeamountsofcash,butdon’tgenerate
muchcash.
Requiresheavyinvestmentandothercapabilities,ithas
thepotentialtogainmarketshareandbecomeastar,
andeventuallyacashcowwhenthemarketgrowth
slows.
Dr. Parveen Kaur Nagpal

14. THEBOSTONCONSULTINGGROUP(BCG) MATRIX
b)HighGrowth–HighMarketShare(Stars)
Starsarepromisingastheygeneratelargesumsofcash
becauseoftheirstrongrelativemarketshare.
Starsconsumelargeamountsofcashbecauseoftheir
highgrowthrate.
Starsareusuallyprofitableandwouldbefuturecash
cows.
Ifastarcanmaintainitslargemarketshareitwill
becomeacashcowwhenthemarketgrowthrate
declines
Dr. Parveen Kaur Nagpal

15. THEBOSTONCONSULTINGGROUP(BCG) MATRIX
c)LowGrowth–HighMarketShare
(CashCows)
Asthemarketmaturesorwhenthemarketgrowthrate
becomeslowthestarswouldratherbecomecashcows.
Cashcowsarehighmarketsharebusinessesinslow
growthindustriesthatdonotnormallyrequire
significantre-investment.
Asleadersinamaturemarket,cashcowsgeneratealot
ofcashwhichmaybeusedtofinancethedevelopment
ofstarsandquestionmarks.
Cashcowstendtogrowataslowrate,buttheyare
usuallymarketleadersintheindustrywherethereare
lotofentrybarriers.Thepresenceofentrybarriers
meansthattherewillbecompetition.
Dr. Parveen Kaur Nagpal

16. THEBOSTONCONSULTINGGROUP(BCG) MATRIX
d)LowGrowth–LowMarketShare(Dogs)
Productinthiscellarecalleddogs,theymayproduce
lowprofitsorloss.
Dogshavealowmarketshareandalowgrowthrate
andneithergeneratesnorconsumesalargeamountof
cash.Dogsmaybeconsideredfordivestment.
Dogsmaybeprovidingcrucialinputstostars,question
marksorcashcows,theymaybenecessarytocomplete
theproductrange,theymaybeheldtokeep
competitorsout,orforreasonslikegoodwill,
sentimentalfactorsetc.
Dr. Parveen Kaur Nagpal

17. Fourpotentialstrategiesthatcanbefollowedbasedon
theresultsofBCGmatrixanalysis:
Build–Increaseinvestmentinaproducttoincreaseits
marketshare.Forexample,Questionmarkpushedinto
astarand,finally,acashcow.
Hold–Ifonecan'tinvestmoreintoaproduct,holditin
thesamequadrantandletitbe.
Harvest–Reducetheinvestmentandtrytotakeoutthe
maximumcashflowfromtheproduct,whichincreases
itsoverallprofitability(bestforcashcows).
Divest–Releasetheamountofmoneyalreadystuckin
thebusiness(bestfordogs).
Dr. Parveen Kaur Nagpal

18. BCG MATRIXANDPRODUCTLIFE-CYCLE
The BCG matrix has a strong connection with the PLC.
QuestionMarksrepresentproductsorSBU’sthatarein
theintroductionphase.
StarsareSBU’sorproductsintheirgrowthphase.
CashCowsinthematurityphase
Dogsinthedeclinephase
Dr. Parveen Kaur Nagpal

19. BCG MATRIXOFNESTLE
Dr. Parveen Kaur Nagpal

20. •TheBCG-Matrixishelpfulformanagerstoevaluate
balanceinthecompany’scurrentportfolioofStars,
CashCows,QuestionMarksandDogs.
•BCG-Matrixisapplicabletolargecompanies
•Themodelissimpleandeasytounderstand.
•Itprovidesabaseformanagementtodecideand
prepareforfutureactions.
•Itisanimportanttoolinstrategicmanagement
BENEFITSOFTHEBCG-MATRIX
Dr. Parveen Kaur Nagpal

21. •TheBCG-Matrixneglectstheeffectsofsynergies
betweenbusinessunits.
•Highmarketshareisnottheonlysuccessfactor.
•Marketgrowthisnottheonlyindicatorfor
attractivenessofamarket.
•SometimesDogscanearnevenmorecashasCash
Cows.
•Therecanbeproblemsofgettingdataonthemarket
shareandmarketgrowth.
•Thereisnocleardefinitionofwhatconstitutesa
“market”.
LIMITATIONSOFTHEBCG-MATRIX
Dr. Parveen Kaur Nagpal

22. Ahighmarketsharedoesnotnecessarilyleadto
profitabilityallthetime.
Themodelusesonlytwodimensions–marketshare
andgrowthrate.Thismaytemptmanagementto
emphasizeaparticularproduct,ortodivest
prematurely.
Abusinesswithalowmarketsharecanbeprofitable
too.
Themodelneglectssmallcompetitorsthathavefast
growingmarketshares.
ThoughBCGmatrixhasitslimitationitisoneofthemost
famous&simpleportfolioplanningmatrix,usedbylarge
companieshavingmulti-products
Dr. Parveen Kaur Nagpal

23. THEGE PLANNINGGRID/ GE 9 CELL
TheGeneralElectronic(GE)Matrixwasdevelopedby
MckinseyandCompanyConsultancyGroupinthe
1970s.
WhereasBCGislimitedtoproducts,businessunitscan
beproducts,wholeproductlines,aserviceorevena
brand.
TheGEmatrixisplottedina3x3gridi.e.itincludes
ninecellsbasedon:
•longtermindustryattractivenessand
•businessstrengthandcompetitiveposition.
Soeachbusinessisappraisedintermsoftwomajor
dimensions–MarketAttractivenessandBusiness
Strength.
Dr. Parveen Kaur Nagpal

24. THEGE PLANNINGGRID/ GE 9 CELL
Ifoneofthesefactorsismissing,thenthebusinesswill
notproducedesiredresults.
Neitherastrongcompanyoperatinginanunattractive
market,noraweakcompanyoperatinginanattractive
marketwilldoverywell
Dr. Parveen Kaur Nagpal

25. Dr. Parveen Kaur Nagpal

26. GreenZone
Suggeststo‘goahead’,togrowandbuild,pushing
throughexpansionstrategies.
Businessesinthegreenzoneattractmajorinvestment.
YellowZone
Cautionsto‘waitandsee’indicatingholdandmaintain
typeofstrategiesaimedatstability.
RedZone
Indicatesthatyouhavetoadoptturnoverstrategiesof
divestmentandliquidationorrebuildingapproach.
THEGE PLANNINGGRID/ GE 9 CELL
Dr. Parveen Kaur Nagpal

27. Market/IndustryAttractivenessindicateshowhardor
easyitwillbeforacompanytocompeteinthemarket
andearnprofits.Themoreprofitabletheindustryisthe
moreattractiveitbecomes.
Itincludesfactorssuchas:
•Long run growth rate
•Industry size
•Industryprofitability:entrybarriers,exitbarriers,
supplierpower,buyerpower,threatofsubstitutesetc.
•Product life cycle changes
•Changes in demand
•Trend of prices
•Macro environment factors (PESTLE)
MARKETATTRACTIVENESS
Dr. Parveen Kaur Nagpal

28. Example:RelianceGroup,ledbyDhirubhaiAmbani,startedbackin
1966andwasmainlyfunctioningintheinfrastructure,powerand
communicationssector.In2006,thecompanytookaturnwhenthey
startedRelianceFresh.
Now,whyisitthatfromsellingelectricityandgadgetsReliance
directlycamedowntosellingpotatoesandtomatoes?
Arethesedecisiontakenbymarketersjustoutoftheblue?
Astudyof33marketsacrossthecountryhasanalysedthatthe
retailersofthevegetablesanddairyitemsaresellingataprofitof
48.8%thanthewholesaleprices.
Indiaisoneofthetop5retailmarketsintheworldandretailtrade
holdsabout10%ofourGDP.
RelianceFresh,whichnowhasabout700outletsinthe93cities,
hasbeentappingthepotentialretailmarketofthecountry.
Itevenplanstoinvest3.5billiondollarsinthecomingyearsto
optimizetheiroperations
MARKETATTRACTIVENESS
Dr. Parveen Kaur Nagpal

29. AlongtheXaxis,thematrixmeasureshowstrong,in
termsofcompetition,aparticularbusinessunitis
againstitsrivals.
CompetitiveStrengthfocusesoninternalfactorsand
theabilityoftheSBUtoovercomespecificissueswith
themarketandcompetitors.Itincludes:
•Total market share
•Market share growth compared to rivals
•Brand strength
•Profitability of the company
•Customer loyalty
•Level of product differentiation
•Production flexibility
Financial resources
COMPETITIVESTRENGTH
Dr. Parveen Kaur Nagpal

30. Example–HowmanyofusrememberFoodle?
Forthemanywhomaynotremember,itwasabrand
extensionofHorlicks,backin2010.
Thecompanylaunchedtheproductwithanideaofmaking
ahealthyalternativetoMagginoodles.
Butdespiteaggressivemarketingandpromotions,the
brandstillcouldn’tgatheraconsiderablemarketshare.
Itfacedatoughcompetitionfromthealreadyexisting
brand–Maggi,morespecificallyfromMaggiAttanoodles.
Howoftenwouldcompaniesbeabletosurvivewhenthe
marketisdominatedbycertainbrandsalready.
Asitturnedout,Itwasnotonlyanunsuccessfulbrand
extensionbutitalsohamperedtheprofitabilityofHorlicks.
COMPETITIVESTRENGTH
Dr. Parveen Kaur Nagpal

31. 1.INVEST-Onthebasisofexistingmarketattractiveness
intermsofgrowth.Alsoitisaffectedbytherespective
marketshareoftheorganization.
2.PROTECT-ProtectConditionreferstothesituation
whereabusinessdoesnotwantfreshinvestmentratherit
iswillingtohavethesecurityofthegiveninvestmentso
thatitdoesnotresultinlosses.
3.HARVEST-Situationwherethebusinesswantsto
generatecashoutofthegiveninvestment.
4.DIVEST-Conditionwhereabusinessorganizationhas
finallydecidedtosellanundertakingorapartof
undertaking.
STRATEGICDECISIONS
Dr. Parveen Kaur Nagpal

32. Itisamoresophisticatedmatrix,uses9cellsinsteadof
4cellsofBCG.
Itconsidersmanyvariablesanddoesnotleadto
simplisticconclusions
High/medium/lowandstrong/average/lowclassification
enablesafinerdistinctionamongbusinessportfolio
Itusesmultiplefactorstoassessindustryattractiveness
andbusinessstrength,whichallowuserstoselect
criteriaappropriatetotheirsituation
ADVANTAGESOFGE PLANNINGGRID
Dr. Parveen Kaur Nagpal

33. TheGEPlanningcangetquitecomplicatedand
cumbersomewiththeincreaseinbusinesses
Thoughindustryattractivenessandbusinessstrength
appeartobeobjective,theyareinrealitysubjective
judgmentsthatmayvaryfromonepersontoanother
Itcannoteffectivelydepictthepositionofnewbusiness
unitsindevelopingindustry
Itonlyprovidesbroadstrategicprescriptionsratherthan
specificsofbusinesspolicy.
LIMITATIONSOFGE PLANNINGGRID
Dr. Parveen Kaur Nagpal

34. INDUSTRYSTRUCTUREANALYSIS–THELIFE-CYCLEMODEL
PriortothearrivalofPorter’sfamousFiveForcesModelin
1979,muchofindustryanalysiswasconductedonthe
basisoftheproductorindustrylife-cyclemodel.
IndustryLifeCycleAnalysisispartoffundamentalanalysis
ofacompanyinvolvingtheexaminationofthestagean
industryisinatagivenpointintime.
Thismodeldividesthelifeofasuccessfulproductinto
fourdistinctphases:
1.Embryonic
2.Growth
3.Mature
4.Ageing
Dr. Parveen Kaur Nagpal

35. INDUSTRYSTRUCTUREANALYSIS–THELIFE-CYCLEMODEL
Dr. Parveen Kaur Nagpal

36. INDUSTRYSTRUCTUREANALYSIS–THELIFE-CYCLEMODEL
1.Embryonic
Intheembryonicphase,mostlynewcompanieswere
concernedwithestablishingagenericmarketforthe
product,todeveloptheirtechnology,tobe
entrepreneurialandtoestablishthemarketasastable
one.
2.Growth
Inthisstage,theproductbearsfruitintermsofrapidly
growingsales.Eventhen,profitswouldbesmallandthe
firmwouldneedtoreinvesttobuildcapacityinorderto
meetthegrowingdemand.
Inthisphase,successfulcompanywouldbeconcernedto
establishregulardistribution,becomethemarketleader
andinvestforthefuture.
Dr. Parveen Kaur Nagpal

37. INDUSTRYSTRUCTUREANALYSIS–THELIFE-CYCLEMODEL
3.Mature
Astheindustryapproachesmaturity,theindustrylife
cyclecurvebecomesnoticeablyflatter,indicatingslowing
growth.
Thesamelevelofnewinvestmentwouldnolongerbe
required,andthemainaimwouldbenotsomuch
innovationasanincreaseinoperatingefficiencyand
productivity.Thisphasecouldbelinkedtothe‘cashcow’
phaseoftheBostonBox.
Somecompetitionfromlateentrantswillbeapparent,
andthesenewentrantswilltrytostealmarketsharefrom
existingproducts.Thus,themarketingeffortmustremain
strongandmuststresstheuniquefeaturesoftheproduct
orthefirmtocontinuetodifferentiateafirm'sofferings
fromindustrycompetitors.
Dr. Parveen Kaur Nagpal

38. INDUSTRYSTRUCTUREANALYSIS–THELIFE-CYCLEMODEL
4.Ageing
Ultimately,theageingphaseovertakesthemarketandthe
firmstrugglestomaximisecash.
Ifproductinnovationhasnotkeptpacewithother
competingproductsand/orservice,orifnewinnovations
ortechnologicalchangeshavecausedtheindustryto
becomeobsolete,salessufferandthelifecycle
experiencesadecline.
Inthisphase,salesaredecreasingatanacceleratingrate.
Mergersandconsolidationswillalsobethenormasfirms
tryotherstrategiestocontinuetobecompetitiveorgrow
throughacquisitionand/ordiversification.
Dr. Parveen Kaur Nagpal

39. PORTERS5 FORCEMODEL
Porter'sFiveForcesofCompetitivePositionAnalysis
weredevelopedin1979byMichaelEPorterofHarvard
BusinessSchool.
Itisasimpleframeworkforassessingandevaluatingthe
competitivestrengthandpositionofabusiness
organization.
Porterrecognizedthatorganizationskeepaclosewatch
ontheirrivals,butheencouragedthemtolookbeyond
theactionsoftheircompetitorsandexaminewhat
otherfactorscouldimpactthebusinessenvironment.
Thisisabroadlyusedmodelinbusinessthatrefersto
thefiveimportantfactorsthatdriveafirm'scompetitive
positionwithinanindustry.
Dr. Parveen Kaur Nagpal

40. PORTERS5 FORCEMODEL
PorteroffershisFiveForcesmodelofcompetitionasa
meansofunderstandingindustryenvironmentsand
suggeststhat“competitivegenericstrategies”are
adoptedinthelightofanenvironmentalanalysisto
achieveacompetitiveindustryposition.
Dr. Parveen Kaur Nagpal

41. PORTERS5 FORCEMODEL
TheFiveForcesanalysishelpsthefirmtostaycompetitive
by:
Knowingthestrengthofthesefiveforces,onecan
developstrategiesthathelptheirbusinessesbemore
competitiveandprofitable.
Lookingatopportunities,onecanstrengthentheir
organization'spositioncomparedtotheotherplayers
forreducingthecompetitivepressureaswellas
generatecompetitiveadvantage.
Dr. Parveen Kaur Nagpal

42. Dr. Parveen Kaur Nagpal

43. 1.SupplierPower:Itrepresentstheextenttowhichthe
supplierscaninfluencetheprices.Whentherearealotof
suppliers,buyerscaneasilyswitchtocompetitors
becausenosuppliercan,actually,influencetheprices
andexercisecontrolintheindustry.
Supplierbargainingpowerishighwhen:
Themarketisconqueredbyafewbigsuppliers.
Uniquenessoftheirproductorservice
Thesuppliercustomerbaseisfragmented,makingtheir
bargainingpowerlow.
Highswitchingcostsfromonetoanothersupplier.
Dr. Parveen Kaur Nagpal

44. 2.BuyerPower:Thebargainingpowerofcustomerslooks
atcustomers'abilitytoaffectthepricingandqualityof
productsandservices.Whenthenumberofconsumers
ofaparticularproductorserviceislow,theyhavemuch
morepowertoaffectpricingandquality.Thesameholds
truewhenalargeproportionofbuyerscaneasilyswitch
toadifferentproductorservice
Customerbargainingpowerishighwhen:
Customersprocurelargevolumes.
Thesupplyingindustryconsistsofseveralsmall
operators.
Theproducthassubstitutes.
Switchingproductsiseasy,simpleanddoesnotincur
highcosts.
Dr. Parveen Kaur Nagpal

45. 3.CompetitiveRivalry:Inhighlycompetitiveindustries,
firmscanexerciselittleornocontrolonthepricesofthe
goodsandservices.However,whentheindustryenjoys
monopoly,businessescanfullycontrolthepricesofgoods
andservices.
Rivalrybetweenexistingplayersislikelytobehighwhen:
Playersarethesamesize.
Playershavecomparablestrategies.
Littleornodifferentiationbetweenplayersandtheir
productsleadingtopricecompetition.
Lowmarketgrowthrates.
Dr. Parveen Kaur Nagpal

46. 4.ThreatofSubstitution:Whereclosesubstituteproducts
existinamarket,itincreasesthelikelihoodofcustomers
switchingtoalternativesinresponsetopriceincreases.
However,whenabusinessfollowsaproductdifferentiation
strategy,itcandeterminetheabilityofbuyerstoswitchto
thecompetition.
Thisthreatisdeterminedbythingssuchas:
Branddependabilityofcustomers.
Securecustomerrelationships.
Switchingcostsforcustomers.
Therelativepriceforperformanceofsubstitutes.
Dr. Parveen Kaur Nagpal

47. 5.ThreatofNewEntry:Whenthebarrierstoentryintoan
industryarehigh,newbusinessescanhardlyenterthe
marketduetohighcostsandstrongcompetition.Some
Industriescanclaimacompetitiveadvantagebecausetheir
productsarenothomogeneous,andtheycansustaina
favorableposition.
Possiblebarrierstoentrycouldinclude:
Costadvantageofexistingplayers.
Brandloyalty.
Intellectualpropertylikepatents,licenses,etc.
Shortageofimportantresources.
Accesstorawmaterialsiscontrolledbyexistingplayers.
LegislationandGovernmentActs.
Dr. Parveen Kaur Nagpal

48. COMPETITIVEADVANTAGE
WhydoyoubuyAppleoverSamsung?
Theanswermaybe“competitiveadvantage”.
Competitiveadvantageisasetofuniquefeaturesofa
companyanditsproductsthatareperceivedbythetarget
marketassignificantandsuperiortothecompetition.
Itisthereasonbehindbrandloyalty,andwhyyouprefer
oneproductorserviceoveranother.
Therearethreedifferenttypesofcompetitiveadvantages
thatcompaniescanactuallyuse-price,product
differentiation,andcost.
Dr. Parveen Kaur Nagpal

49. COMPETITIVEADVANTAGE
Price-isoneofthemostinfluentialfactorsthatcanaffectthe
company'sprofit.Companiescantakeadvantagebyreducing
andincreasingthepriceoftheproduct,butitisgenerally
takentohaveshorttermbenefits.
ProductDifferentiation-"Whenaproductorservicehasa
valuable,uniqueofferingfortheircustomer"
Inordertogainanadvantage,acompanymaydifferentiateits
productfromthatofthecompetitor.
Cost-Ifthecostoftheproductishigherthanthecompetitor's
product,thentheprofitearnedbythecompanywillbeless.To
takeanadvantage,firmsmaytrytoreducethecostand
employeffectivetechniquesofproduction,sothatthefirm's
profitwillincrease.
Dr. Parveen Kaur Nagpal

50. PESTLE ANDPORTER’SFIVEFORCESANALYSIS
UsingthePESTLEandFiveForcesTechniquetogether
helpstoprovideadetailedpictureofthesituationfacing
anorganization.
Justusingonetechniquemayleavegapsinknowledge
andunderstanding.
ThePESTLEAnalysisenablestocreatealistofthe
potentialissueswithinthemacro-environmentthatcould
haveimplicationsforanorganization.However,whilst
understandingthemacro-environmentisessentialfor
developingstrategyitonlygiveshalfofthepicture.
Onealsoneedstohaveathoroughunderstandingoftheir
competitorsandtheimpacttheycanhaveonthe
organization.
TogainthisknowledgeoneneedstoconductPorter’sFive
ForcesAnalysis.
Dr. Parveen Kaur Nagpal

51. THEMCKINSEY7 –S FRAMEWORK
ThemodelwasdevelopedbyMcKinsey&Companyin
the1980s.Specifically,itwasdevelopedbyRobertH.
Waterman,Jr.andTomPeters.
Theirresearchhasshownthatthesuccessofan
organizationdependsonanumberofmutually
supportingvariables,besidesstrategyandstructure.
Accordingtothe7-Sframework,effectiveorganizational
changeisdrivenby7-Ss.Thereare“HardSs”and“Soft
Ss.”
Dr. Parveen Kaur Nagpal

52. Dr. Parveen Kaur Nagpal

53. 1.Strategy:istheplanofactionanorganizationprepares
inresponseto,oranticipationof,changesinitsexternal
environment.
Strategydealswithessentiallythreequestions:
i)Wheretheorganizationisatthismomentintime?
ii)Wheretheorganizationwantstobeinaparticular
lengthoftime?
iii)Howtogetthere?
Strategyisdesignedtotransformthefirmfromthe
presentpositiontothenewposition.
Itisaplandevisedtomaintainandbuildcompetitive
advantageinthemarket.
Dr. Parveen Kaur Nagpal

54. 2.Structure:Itistheorganizationalarrangements,formal
relationshipsandhierarchy.
Organizationsarestructuredinavarietyofways,
dependingontheirobjectivesandculture.
Thestructureofthecompanyoftendictatesthewayit
operatesandperforms.
Thebusinesseshavebeenstructuredinahierarchical
waywithseveraldivisionsanddepartments,each
responsibleforaspecifictasksuchashumanresources
management,productionormarketing.
Dr. Parveen Kaur Nagpal

55. 3.Systems:Everyorganizationhassomesystemsor
internalprocessestosupportandimplementthestrategy
andrunday-to-dayaffairs.
Itincludesalltherules,regulations,procedures,the
dailyactivitiesandproceduresthatstaffmembers
engageintogetthejobdone.
Earliertheorganizationswouldfollowabureaucratic-
styleprocessmodelwheremostdecisionsweretakenat
thehighermanagementlevel,leadingtounnecessary
delays.Today,organizationshavesimplifiedand
modernizedtheirprocessesbyinnovationanduseof
newtechnologytomakethedecision-makingprocess
quicker.
Dr. Parveen Kaur Nagpal

56. 4.SharedValues:Allmembersoftheorganizationshare
somecommonfundamentalideasorguidingconcepts
aroundwhichthebusinessisbuilt.
Thesevaluesandcommongoalskeeptheemployees
workingtowardsacommongoalandareimportantto
keeptheteamspiritalive.
Thecorevaluesofthecompanyareseeninthe
corporatecultureandthegeneralworkethics.
5.Style:Allorganizationshavetheirowndistinctculture
andmanagementstyle.
Itincludesthedominantvalues,beliefsandnorms
whichdevelopovertimeandbecomerelatively
enduringfeaturesoftheorganizationallife.
Italsoentailsthewaymanagersinteractwiththe
employeesandthewaytheyspendtheirtime.
Dr. Parveen Kaur Nagpal

57. 6.Staff:Organizationsaremadeupofhumansandit's
thepeoplewhomaketherealdifferencetothesuccessof
theorganizationintheincreasinglyknowledge-based
society.
Theimportanceofhumanresourceshasthusgotthe
centralpositioninthestrategyoftheorganization,
awayfromthetraditionalmodelofcapitalandland.
Allleadingorganizationsputextraordinaryemphasison
hiringthebeststaff,providingthemwithrigorous
trainingandmotivatingthemtoachieveprofessional
excellence.
Thisformsthebasisoftheseorganizations'strategyand
competitiveadvantage.
Dr. Parveen Kaur Nagpal

58. 7.Skills:Thisvariablereferstothecapabilitiesofthestaff
withintheorganizationasawhole.
Itincludestheactualskillsandcompetenciesofthe
employeesworkingforthecompany.
Thehardcomponentsarethestrategy,structureand
systemswhicharenormallyfeasibleandeasytoidentify
inanorganizationastheyarenormallywelldocumented
andseenintheformoftangibleobjectsorreportssuch
asstrategystatements,corporateplans,organizational
chartsandotherdocuments.
TheremainingfourS’s,however,aremoredifficultto
comprehend.
Dr. Parveen Kaur Nagpal

59. Itignorestheimportanceoftheexternalenvironmentand
depictsonlythemostcrucialelementsinthismodelfor
explainingtheinterdependenceofthekeyprocessesand
factorswithintheorganization.
Themodeldoesnotexplaintheconceptoforganizational
effectivenessorperformanceexplicitly.
Themodelhasbeencriticizedforlackingenoughempirical
evidencestosupporttheirexplanation.
Themodelisconsideredtobemoreofastatickindofmodel.
Itisratherdifficulttoassessthedegreeoffitwithaccuracy
successfully.
Itiscriticizedformissingoutthefinerareasinwhichthe
actualgapsinconceptualizationandexecutionofstrategy
mayarise.
LIMITATIONSOFMCKINSEY7 –S FRAMEWORK
Dr. Parveen Kaur Nagpal

60. TheVRIOAnalysiswasdevelopedbyJayB.Barneyasa
wayofevaluatingtheresourcesofanorganization
(company’smicro-environment)whichareasfollows:
Financialresources
Humanresources
Materialresources
Non-materialresources(information,knowledge)
VRIOanalysisisacomplementtoaPESTLEanalysisandis
usedtoassessthesituationinsidetheorganization-its
resources,theircompetitiveimplicationandpossible
potentialforimprovementinthegivenareaorforagiven
resource.
VRIO ANALYSIS
Dr. Parveen Kaur Nagpal

61. Organizationsshouldlookinsidethecompanytofindthe
sourcesofcompetitiveadvantageinsteadoflookingatthe
competitiveenvironment.
ThekeyconceptswithinthisviewarethereforeFirm
ResourcesandSustainableCompetitiveAdvantage.
Firmresourcescanbedefinedas‘allassets,capabilities,
organizationalprocesses,firmattributes,informationand
knowledgecontrolledbyafirmthatenablesittoimprove
itsefficiencyandeffectiveness’.
Resourcesareoftenclassifiedintocategoriessuchas
tangible(e.g.equipment,machinery,land,buildingsand
cash)andintangible(e.g.trademarks,brandreputation,
patentsandlicenses)orphysical,humanand
organizationalresources.
VRIO ANALYSIS
Dr. Parveen Kaur Nagpal

62. Inorderforcompaniestotransformtheseresourcesinto
sustainablecompetitiveadvantage,resourcesmusthavefour
attributesthatcanbesummarizedintotheVRIOframework.
(https://www.business-to-you.com/vrio-from-firm-resources-to-competitive-advantage/)
VRIO ANALYSIS
Dr. Parveen Kaur Nagpal

63. 1.Valuable
Resourcesmustbevaluablesuchthattheyenableafirm
toimplementstrategiesthatimproveafirm’sefficiency.If
noneoftheresourcespossessedbyafirmareconsidered
valuable,thefirmislikelytohaveacompetitive
disadvantage.
2.Rare
Resourcesmustberaresuchthattheymayonlybe
acquiredbyoneorfewcompanies.Ifacertainvaluable
resourceispossessedbyalargeamountofplayersinthe
industry,eachoftheplayershasacapabilitytoexploitthe
resourceinthesameway,therebyimplementinga
commonstrategythatgivesnoneoftheplayersa
competitiveadvantage.Suchasituationisindicatedas
competitiveparityorcompetitiveequality.
VRIO ANALYSIS
Dr. Parveen Kaur Nagpal

64. 3.Inimitable
Althoughvaluableandrareresourcesmayhelpcompanies
toengageinstrategiesthatotherfirmscannotpursue
sincetheotherfirmslacktherelevantresources,itisno
guaranteeforlong-termcompetitiveadvantage.
Itmaygivethecompanyafirst-moveradvantagebut
competitorswillprobablytrytoimitatetheseresources.
Anothercriteriathatresourcesshouldmeetistherefore
thattheyshouldbehardandcostlytoimitateor
substitute.
VRIO ANALYSIS
Dr. Parveen Kaur Nagpal

65. 4.Organization-widesupported
Theresourcesthemselvesdonotcreateanyadvantagefora
companyifthecompanyisnotorganizedinawayto
adequatelyexploittheseresourcesandcapturethevaluefrom
them.
Thecompanythereforeneedsthecapabilitytoassembleand
coordinateresourceseffectively.
Withoutthecorrectorganizationtoacquire,useandmonitor
theresourcesinvolved,evencompanieswithvaluable,rareand
imperfectlyimitableresourceswillnotbeabletocreatea
sustainablecompetitiveadvantage.
Whenallfourresourceattributesarepresent,thecompanyhas
adistinctivecompetencethatcanbeusedassourceof
sustainablecompetitiveadvantage.
VRIO ANALYSIS
Dr. Parveen Kaur Nagpal

66. VRIOattributesandtheresultingadvantagesthecompany
hasindifferentsituations.
VRIO ANALYSIS
Dr. Parveen Kaur Nagpal

67. Hennes&Mauritz(H&M)foundedbyErlingPerssonin1947in
Swedenfromasinglestoretonowover3700storesin61
countriesandmorethan1,32,000employees.
SinceinceptionH&Mwasintomuchslowprogressaveragingto
12countriesin13yearsuntilKarl-JohnPerssontookoverand
startedamassivefastpacedexpansion.
In2014,theCEOsignaledfurthergrowthopening400new
storesand5onlinemarkets,expandinginAustraliaand
Philippines.
H&Mbelievedmoreina‘DecentralisedStructureof
Organisation’andbelievesinoptimumutilisationofresources
andcapital.ButthecentralfunctionslikeDesign,Buying,
TechnologyandLogisticsweremuchcentralised.
H & M CASE
Dr. Parveen Kaur Nagpal

68. H&Mhasincurredhugeprofitmargininrealisingfrom
locationeconomiesbyoutsourcingbulkproductionin
ordertoachieveeconomiesofscale.
Decentralisedstructurealsoreduceburdenfromthe
Managementprovidingflexibilityindecisionmaking.
H&Mmainlyhaswhollyownedsubsidiariesasthey
generallyoptforrentingstoreratherthanbuying
properties.ThustheychosethewayforDirectInvestments
inemergingmarketslikeEurope,AsiaandNorthAmerica.
However,itshiftedtofranchisingasentrymode
particularlytoMiddleEastwithlegalrestrictionsinplace.
H & M CASE
Dr. Parveen Kaur Nagpal

69. OneofthemajorchallengesfacedbyH&Misthatitis
laggingbehinditsmaincompetitorinkeyemergingmarkets
inAsiaandSouthAmerica,whichcontributedtoH&Mfalling
behindZaraintermsofmarketcapitalisation.
Thankstoitslong-termadvertisingcampaignswithhigh-
profilecelebrities,H&Menjoysaclearbrandrecognitionand
reputationadvantageoveritsmajorrivalslikeZaraandGap.
Itisbeenclaimedthat70%ofproductionhappensinAsia,
while30%inEurope.StilltheyaremuchEuropedependent,
whichhappenstoeffecttheirleadtimeaswellasproduct
costtosomeextent.
Distributionisthemainnervoussystemofthecompany
whichprovidesacontroloversupplyanddemandshifts.
H & M CASE
Dr. Parveen Kaur Nagpal

70. AreasofAdvantage:
Storeoperationsandmanagement
Marketing
Socialmediapresence
Design
CSR
Logisticsanddistribution
HRM
InternationalisationandExpansion
H & M CASE
Dr. Parveen Kaur Nagpal

71. VRIOAnalysisofH&M
‘V’-Value-Thedesignoftheproductonthepricefactor
bringsavalue,
'R’-Rarity-Thedesignofclothingwithintoday'sfashion
industryisnotatallrare,
‘I’-Imitate-Fromtheproductstandpointdesignisnotat
allcostlytoimitatebutwithontime'sstandpointdueto
intensivechangeinfashiontrendsitoftenbecomescostly
todoso
'O’-Organization–Tobeexploitedasitcanbesaidthat
H&M'sdesigns,technology,HRManagementandlogistics
areorganizationallyembeddedwhichcanbeexploitedto
competeintheworldmarketwhileontheotherhandthe
productionismainlyoutsourcedtosuppliers,whoperform
understrictscrutinyandCSRguidelines.
H & M CASE
Dr. Parveen Kaur Nagpal

72. (Johnson,Whittington,Scholes,AngwinandRegnér,ExploringStrategy,10thedition,Instructor’s
ManualontheWeb)
H & M CASE
Dr. Parveen Kaur Nagpal

73. DoyouthinkthatH&Mcanmaintainan
advantagegoingforwardoverits
competitors?
H & M CASE
Dr. Parveen Kaur Nagpal

74. Understandinghowthecompanycreatesvalue,and
lookingforwaystoaddmorevalue,arecriticalelementsin
developingacompetitivestrategy.
MichaelPorterdiscussedthisinhisinfluential1985book
"CompetitiveAdvantage,"inwhichhefirstintroducedthe
conceptofthevaluechain.
Avaluechainisasetofactivitiesthatanorganization
carriesouttocreatevalueforitscustomers.
Porterproposedageneral-purposevaluechainthat
companiescanusetoexaminealloftheiractivities,and
seehowtheyareconnected.
Thewayinwhichvaluechainactivitiesareperformed
determinescostsandaffectsprofits,sothistoolcanhelp
inunderstandingthesourcesofvaluefortheorganization.
VALUECHAIN
Dr. Parveen Kaur Nagpal

75. Ratherthanlookingatdepartmentsoraccountingcosttypes,
Porter'sValueChainfocusesonsystems,andhowinputsare
changedintotheoutputspurchasedbyconsumers.Usingthis
viewpoint,Porterdescribedachainofactivitiescommontoall
businesses,andhedividedthemintoprimaryandsupportactivities.
VALUE CHAIN
Dr. Parveen Kaur Nagpal

76. Benchmarkingisastrategytoolusedtocomparethe
performanceofthebusinessprocessesandproductswith
thebestperformancesofothercompaniesinsideand
outsidetheindustry.
Benchmarkingisusedasawaytounderstandhowan
organizationcompareswithothers.
AccordingtoCamp,benchmarkingissimply“Findingand
implementingthebestbusinesspractices”.Managersuse
thetooltoidentifythebestpracticesinothercompanies
andapplythosepracticestotheirownprocessesinorder
toimprovethecompany’sperformance.
Xeroxhaspopularizedbenchmarkingandwasoneofthe
firstcompaniestointroducetheprocessofdoingit.
BENCHMARKING
Dr. Parveen Kaur Nagpal

77. Thebenchmarkingwheelmodel,introducedinthearticle
“BenchmarkingforQuality”isa5-stageprocess.
BENCHMARKING
Dr. Parveen Kaur Nagpal

78. 1.Plan-Assembleateam.Clearlydefinewhatistobe
comparedandassignmetricstoit.
2.Find-Identifybenchmarkingpartnersorsourcesof
informationfromwhereinformationistobecollected.
3.Collect-Choosethemethodstocollectinformation
andgatherdataforthemetricsdefined.
4.Analyze-Comparethemetricsandidentifythegapin
performancebetweenonescompanyandthe
organizationobserved.Providetheresultsand
recommendationsonhowtoimprovethe
performance.
5.Improve-Implementthechangestoonesproducts,
services,processesorstrategy.
BENCHMARKING
Dr. Parveen Kaur Nagpal

79. MergersandAcquisitionsareoftentreatedtogetherinthe
literature,legallytheyaretransactionsofadifferentkind.
Anacquisitionisanoutrightpurchaseofonecompany
byanother.Itoccurswhenonecompanyacquires
enoughofanothercompany’ssharestogaincontrolor
ownership.
Examples:
✓ZomatoAcquiredUberEats
✓TataSteelAcquiredBhushanSteel
✓HindustanUnileverLimited(HUL)AcquiredGSK
ConsumerHealthcareofGlaxoSmithKline(GSK)
MERGERSANDACQUISITIONS(M&A)
Dr. Parveen Kaur Nagpal

80. Amergerisintheoryacollaborativeagreementbytwo
companiestocombinetheirinterests,ownershipand
companystructuresintoonecompany.
Examples:
✓VodafoneIndiaandIdeaCellular
✓FlipkartandEbayIndia
MERGERSANDACQUISITIONS(M&A)
Dr. Parveen Kaur Nagpal

81. M&Asaregenerallypresentedtoshareholdersashighly
rationalstrategieswithclearlydefinedgoalsand
objectives.Typicallytheseareofafinancialorstrategic
nature.
Financialgoalsincludeincreasingshareholderwealth
andfinancialsynergythrougheconomiesofscale,
transferofknowledgeandincreasedcontrol.
Strategicreasonsincludeincreasingmarketshare,the
reductionofuncertaintyandtherestorationofmarket
confidence.
Mergersandacquisitionscanalsobesoughtbycompanies
seekingtowardoffhostiletake-overbids.
Duetoeconomicglobalisation,cross-bordermergersand
acquisitionshaveemergedasthebusinessgrowtharea.
MERGERSANDACQUISITIONS
Dr. Parveen Kaur Nagpal

82. PriceWaterhouseCoopershaveidentifiedseveralactionsthat
needtobecarriedoutifM&Asuccessistobeachieved:
1.Clarifythedealobjectivesandbusinesscase
Theproposeddealprice,expectedimplementationcosts,
valueofinevitablelossesasaresultofthecombination(e.g.
staff),andthevalueofsynergies,shouldallbemadeclearat
theoutset.
2.Monitorimplementationagainstcontributionto
shareholdervalue
Effectiveprogressinmergersrequiresanunderstandingof
notjustwhattaskshavebeencompletedbutalsowhat
benefitshavebeenrealised.Flexibilityisalsorequired,to
accommodatechangealongtheway.
MERGERSANDACQUISITIONS
Dr. Parveen Kaur Nagpal

83. 3.Integratequickly
Amajorcontributortoriskinmergersituationsis
uncertaintyandtheimpactitcanhaveonmotivationand
staffperformance.Thismeansthatmergingentitiesshould
quicklyidentifythoseactivitiesandfunctionsthatare
essentialtotheimmediatebringingtogetherofthe
companiesandotherimprovementprojectsthatcanbe
undertakensubsequently.
4.Focusonretainingexistingbusiness
Mergerscancauseashiftinfocusfromexternaltointernal
attheverytimewhenthemergingenterprisesareunder
greatestscrutinyfrombothclientsandinvestment
consultants.Asaresult,opportunitiestowinnewbusiness
arelimitedandtheimportanceofretainingexistingbusiness
maybeunderlined.
MERGERSANDACQUISITIONS
Dr. Parveen Kaur Nagpal

84. 5.Focusonretainingkeypeople
Duringamerger,seniormanagementmustalsofocuson
retainingkeystaff,especiallyinsectorssuchasinvestment
bankingwherethevalueofthebusinessisheavilylinkedto
keypeople.Asignificantproportionofthevalueofthedeal
couldbelostifkeyindividualsarelostearlyinthemerger
process.
MERGERSANDACQUISITIONS
Dr. Parveen Kaur Nagpal

85. 1.StrategicManagement-FredR.David,Publishedby
PrenticeHallInternational.
2.BusinessPolicyandStrategicManagement-Dr.Azhar
Kazmi,publishedbyTataMcGrawHillPublications
3.Nagpal,Sharma:StrategicManagement,SYBMS(Sem.
3),ShethPublishers
4.Nagpal,Shelankar,Sharma:StrategicManagement,
M.Com(Sem.3),ShethPublishers
REFERENCES
Dr. Parveen Kaur Nagpal

86. THANK YOU
Dr. Parveen Nagpal
www.linkedin.com/in/dr-parveen-kaur-nagpal-82965b15
Dr. Parveen Kaur Nagpal