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Strategic Management - An Introduction

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STRATEGIC MANAGEMENT
STRATEGY FORMULATION/ALTERNATIVES
Strategic management process comprises four phases: environmental scanning, strategy
formulation, strategy implementation and strategy evaluation and control. Strategic
management is an ongoing process to develop and revise future-oriented strategies that
allow an organization to achieve its objectives, considering its capabilities, constraints, and
the environment in which it operates.
Once the environmental scanning is done the next step is strategy formulation. Formulation
produces a clear set of recommendations, with supporting justification, that revise as
necessary the mission and objectives of the organization, and supply the strategies for
accomplishing them. In formulation, we are trying to modify the current objectives and
strategies in ways to make the organization more successful. This includes trying to create
"sustainable" competitive advantages -- although most competitive advantages are eroded
steadily by the efforts of competitors.
THREE LEVELS OF STRATEGY FORMULATION
The following three aspects or levels of strategy formulation, each with a different focus,
need to be dealt with in the formulation phase of strategic management. The three sets of
recommendations must be internally consistent and fit together in a mutually supportive
manner that forms an integrated hierarchy of strategy, in the order given.
Corporate Level Strategy: In this aspect of strategy, we are concerned with broad
decisions about the total organization's scope and direction. Basically, we consider what
changes should be made in our growth objective and strategy for achieving it, the lines of
business we are in, and how these lines of business fit together. It is useful to think of three
components of corporate level strategy: (a) growth or directional strategy (what should be
our growth objective, ranging from retrenchment through stability to varying degrees of
growth - and how do we accomplish this), (b) portfolio strategy (what should be our
portfolio of lines of business, which implicitly requires reconsidering how much
concentration or diversification we should have), and (c) parenting strategy (how we
allocate resources and manage capabilities and activities across the portfolio -- where do
we put special emphasis, and how much do we integrate our various lines of business).
Business Level Strategy (often called Competitive Strategy): This involves deciding
how the company will compete within each line of business (LOB) or strategic business
unit (SBU).
Functional Strategy: These more localized and shorter-horizon strategies deal with how
each functional area and unit will carry out its functional activities to be effective and
maximize resource productivity.

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CORPORATE LEVEL STRATEGIES
Corporate level strategies are basically about the choice of direction that a firm adopts in
order to achieve its objectives. They are basically about decisions related to allocating
resources among the different businesses of a firm, transferring resources from one set of
businesses to others, and managing and nurturing a portfolio of businesses in such a way
that the overall corporate objectives are achieved.
Major types of grand strategies:
Expansion (Growth) Strategies
Stability Strategies
Retrenchment Strategies
Combination Strategies
GROWTH STRATEGIES
Growth is a way of life. Almost all organizations plan to expand. This strategy is followed
when an organization aims at higher growth by broadening its one or more of its business
in terms of their respective customer groups, customers functions, and alternative
technologies singly or jointly in order to improve its overall performance.
E.g.: A chocolate manufacturer expands its customer groups to include middle aged and
old persons among its existing customers comprising of children and adolescents.
There are five types of expansion (Growth) strategies
Expansion through concentration
Expansion through integration
Expansion through diversification
Expansion through cooperation
Expansion through concentration
It involves converging resources in one or more of firms businesses in terms of their
respective customer needs, customer functions, or alternative technologies either singly or
jointly, in such a manner that it results in expansions. A firm that is familiar with an
industry would naturally like to invest more in known business rather than unknown
business. Concentration can be done through
Market Penetration: It involves selling more products to the same market by focusing
intensely on existing markets with its present products, increasing usage by existing
customers and increasing market share and restructures a mature market by driving out
competitors E.g.: Low pricing strategies
Market Development: It involves selling the same products to new markets by attracting
new users to its existing products. Market development can be geographic wise and

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STRATEGIC MANAGEMENT STRATEGY FORMULATION/ALTERNATIVES Strategic management process comprises four phases: environmental scanning, strategy formulation, strategy implementation and strategy evaluation and control. Strategic management is an ongoing process to develop and revise future-oriented strategies that allow an organization to achieve its objectives, considering its capabilities, constraints, and the environment in which it operates. Once the environmental scanning is done the next step is strategy formulation. Formulation produces a clear set of recommendations, with supporting justification, that revise as necessary the mission and objectives of the organization, and supply the strategies for accomplishing them. In formulation, we are trying to modify the current objectives and strategies in ways to make the organization more successful. This includes trying to create "sustainable" competitive advantages -- although most competitive advantages are eroded steadily by the efforts of competitors. THREE LEVELS OF STRATEGY FORMULATION The following three aspects or levels of strategy formulation, each with a different focus, need to be dealt with in the formulation phase of strategic management. The three sets of recommendations must be internally consistent and fit together in a mutually supportive manner that forms an integrated hierarchy of strategy, in the order given. Corporate Level Strategy: In this aspect of strategy, we are concerned with broad de ...
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