Introduction toSTRATEGIC MANAGEMENT:The word strategy is derived
from the Greek word stratgos; stratus (meaning army) andago
(meaning leading/moving)Strategy is an action that managers take to
attain one or more of the organi!ation"s goals #trategy can also $e
defined as % general direction set for the com&any and its
various com&onents to achieve a desired state in the future
#trategy results from the detailed strategic &lanning
&rocess#trategy is the direction and sco&e of an
organisation over the long term' ideally( which matches its
resources to its changing environment( and &articular its
markets( consumers or clients so as to meet stakeholder
e)&ectationsStrategic management involves the formulation and
im&lementation of the ma*or goals and initiatives taken $y a
com&any+s to& management on $ehalf of owners( $ased on
considerationof resources and an assessment of the internal and
e)ternal environments in which the organi!ation com&etesTask of
strategy management'#trategy formulation #trategy
Im&lementation #trategy ,valuation#T-%T,GI. /%0%G,/,0T The art
and science of formulating( im&lementing( and evaluating
cross1functional decisions that ena$le an organi!ation to achieve
its o$*ectivesStrategic Management - An Introduction#trategic
/anagement is all a$out identification and descri&tion of the
strategies that managers can carry so as to achieve $etter
&erformance and a com&etitive advantage for their
organi!ation %n organi!ation is said to have com&etitive
advantage if its &rofita$ility is higher than the average
&rofita$ility for all com&anies in its industry#trategic
management can also $e defined as a $undle of decisions and acts
which a manager undertakes and which decides the result of the
firm"s &erformance The manager must have a thorough knowledge
and analysis of the general and com&etitive organi!ational
environment so as to take right decisions They should conduct a
#23T %nalysis (#trengths( 2eaknesses( 3&&ortunities( and
Threats)( ie( they should make $est &ossi$le utili!ation of
strengths( minimi!e the organi!ational weaknesses( make use of
arising o&&ortunities from the $usiness environment and
shouldn"t ignore the threats #trategic management is nothing $ut
&lanning for $oth &redicta$le as well as unfeasi$le
contingencies It is a&&lica$le to $oth small as well as
large organi!ations as even the smallest organi!ation face
com&etition and( $y formulating and im&lementing
a&&ro&riate strategies( they can attain sustaina$le
com&etitive advantageIt is a way in which strategists set the
o$*ectives and &roceed a$out attaining them It deals with
making and im&lementing decisions a$out future direction of an
organi!ation It hel&s usto identify the direction in which an
organi!ation is moving#trategic management is a continuous
&rocess that evaluates and controls the $usiness and
theindustries in which an organi!ation is involved; evaluates its
com&etitors and sets goals and strategies to meet all e)isting
and &otential com&etitors; and then reevaluates strategies
on a regular $asis to determine how it has $een im&lemented and
whether it was successful or does it needs re&lacementStrategic
Management gives a broader perspective to the empoyees o! an
organi"ation and they can better understand ho# their $ob !its into
the entire organi"ationa pan andho# it is co-reated to other
organi"ationa members It is nothing $ut the art of managing
em&loyees in a manner which ma)imi!es the a$ility of achieving
$usiness o$*ectives The em&loyees $ecome more trustworthy( more
committed and more satisfied as they can co1relate themselves very
well with each organi!ational task They can understand the reaction
of environmental changes on the organi!ation and the &ro$a$le
res&onse of the organi!ation with the hel& of strategic
management Thus the em&loyees can *udge the im&act of such
changes on their own *o$ and can effectively face the changes The
managers and em&loyees must do a&&ro&riate things
in a&&ro&riate manner They need to $e $oth effective as
well as efficient3ne of the ma*or role of strategic management is
to incor&orate various functional areas of the organi!ation
com&letely( as well as( to ensure these functional areas
harmoni!e and get together well %nother role of strategic
management is to kee& a continuous eye on the goals and
o$*ectives of the organi!ation#trategic $usiness unit'In $usiness(
a (#45) is a &rofit center which focuses on &roduct
offering and market segment#45s ty&ically have a discrete
marketing &lan( analysis of com&etition( and marketing
cam&aign( even though they may $e &art of a larger $usiness
entity%n #45 may $e a $usiness unit within a larger
cor&oration( or it may $e a $usiness into itself or a $ranch
.or&orations may $e com&osed of multi&le #45s( each of
which is res&onsi$le for its own &rofita$ility General
,lectric is an e)am&le of a com&any with this sort of
$usiness organi!ation #45s are a$le to affect most factors which
influence their &erformance /anaged as se&arate $usinesses(
they are res&onsi$le to a &arent cor&oration General
,lectric has 67 #45s8citation needed9.om&anies today often use
the word segmentation or division when referring to #45s or an
aggregation of #45s that share such commonalities:efinition%
strategic business unit is a fully functional and distinct unit of
the $usiness that develo&s their own strategic vision and
direction 2ithin large com&anies there are smaller
s&eciali!ed divisions that work towards s&ecific
&ro*ects and goals( and we see this organi!ational setu&
fre;uently in glo$al com&anies The strategic $usiness unit(
often referred to as an #45( remains an im&ortant com&onent
of the com&any and must re&ort $ack through head;uarters
a$out their o&erational status Ty&ically they will
o&erate as an inde&endent organi!ation witha s&ecific
focus on target markets and are large enough to maintain internal
divisions such as finance( /oller has a lengthy list of #45+s( such
as marine shi&&ing( marine terminals( trucking( ?rd
&arty logistics(energy( and oil e)&loration %nother widely
recogni!ed com&any is General ,lectric( which has 67 #45+s in
such markets as a&&liances( aeros&ace( electronics( and
so on @G o&erates along the same lines with #45+s com&eting
in electronics and a&&liances among others #o why do each
of these #45+s differentiate from each other and still $elong to
the same organi!ationA The answer is that &rofita$ility of your
com&any and a&&eal within the industryare directly tied
together In the case of %> /oller( the com&any has
se&arated each industry into a strategic $usiness unit to
ma)imi!e &otential:efinition% se&arately managed division
or unit of an enter&rise with strategic o$*ectives that is $oth
distinct from the &arent unit and integral to the overall
&erformance of the enter&rise %n #45is ty&ically
created to target a s&ecific market or $usiness concern which
re;uires a &roduction or management s&ecialty not contained
within the &arent organi!ation.or&orate strategy'The
cor&orate strategy was develo&ed to communicated the
vision( mission( and goals as wellas the strategy.or&orate
#trategy:evelo&ing a strategic direction( su&&orted $y
the necessary reallocation of resources and coordinated $usiness
unit &lans( and designing a sustaina$le strategy
develo&ment &rocess%e!initionThe overarching strategy of a
com&any develo&ed $y its leadershi& that reflects its
mission and core values in its goals and underlying $usiness
strategies for achieving them The cor&orate strategy
&rovides clear direction for all the $usiness units working in
concert to meet shareholder e)&ectations while &roviding
value to their customers and em&loyees%ccording to 2illiam
Glueck and @awrence Bauch( strategic alternatives can $e considered
infour generic ways These are '&'STA(I)IT* STRATEG*: 3ne of the
im&ortant goals of a $usiness enter&rise is sta$ility C to
safeguard its e)isting interests and strengths( to &ursue well
esta$lished o$*ectives( to continue in the chosen $usiness
&ath( to maintain o&erational efficiency on a sustained
$asis( to consolidate the commanding &osition already reached(
and to o&timise returns on the resources committed in the
$usiness+' E,-ANSI.N or gro#th STRATEG*:,)&ansion is a
&romising and &o&ular strategy that tends to $e e;uated
with dynamism( vigour( &romise and success It is often
characterised $y significant reformulation of goals( ma*or
initiatives and moves involving investments( e)&loration into
new &roducts( new technology and new markets( action
&rogrammes and so on ,)&ansion also includes diversifying(
ac;uiring and merging $usinesses/' RETRENCHMENT STRATEGY: %
$usiness organi!ation can redefine its $usiness $y divesting a
ma*or &roduct line or market -etrenchment or retreat $ecomes
necessary for co&ing with &articularly hostile situations
in the environment -etreat is not always a $ad &ro&osition
to save the enter&rise+s vital interests( to minimise the
adverse effects of advancing forces( or even to regrou& and
recou& the resources $efore a fresh assault and ascent on the
growth ladder is launched0 COMBINATION STRATEGIES: The a$ove
strategies are not mutually e)clusive It is &ossi$le mi) the
a$ove strategies $ased on situations %n enter&rise may seek
sta$ility in some areas of activity( e)&ansion in some and
retrenchment in the others -etrenchment of ailing &roducts
followed $y sta$ility and ca&&ed $y e)&ansion in some
situations may $e thought ofDintegration strategies'Integration is
the act of $ringing together smaller com&onents into a single
system that functions as oneIntegration strategies as means o!
e1pansion strategiesTour wholesaler or tour o&erator can
strengthen their market &osition $y integration Integration
takes &lace when com&anies merge or one com&any $uys
another %s it was outlined in .ha&ter E already( there are two
main forms of integration'1. Vertical integrationIt takes &lace
when two com&anies of different levels on the distri$ution
chain merge ,)am&les could $e( when a su&&lier merges
with a wholesaler/tour o&erator or a tour wholesaler merges
with a retail agent 2e s&eak of $ackward vertical integration(
when a wholesaler merges with or $uys an airline or with a hotel
2ith this move a greater control over the source of su&&ly
is desired 2e s&eak of forward vertical integration( when a
tour wholesaler merges or $uys a travel agency In this case greater
control over the distri$ution network is wanted(@u$$e FGGG)2.
Horizontal integrationIt means that tour wholesalers/ tour
o&erator merges on the same level of distri$ution =or
e)am&le a tour wholesaler $uys another tour wholesaler to
im&rove their market share and reduce com&etition In
general( hori!ontal integration always leads to economics of scale(
in functions such as human resources( &urchasing( and thus to
cost savings and &rice reductionsThrough cost savings an
organisation may $ecome more cost effective( allowing them to
develo& a $etter range of &roducts and to achieve $etter
;uality control(@u$$e FGGG)Hinternationali!ation strategy'E %n
internationa strategy means that internationally scattered
su$sidiaries act inde&endently and o&erate as if they were
local com&anies( with minimum coordination from the &arent
com&any Glo$alstrategy leads to a wide variety of $usiness
strategies( and a high level of ada&tation to the local
$usiness environment4cg'What Is a BCG Matrix?If you're the owner of
an established company, you may wonder how best to deploy resources
to enhance your prospects. Since 1968, the BC matri!, also "nown as
the Boston or #rowth$share matri!, has helped companies answer that
%uestion by pro&idin# them a way to analy'e product lines in
search of #rowth opportunities.(amed for its creator, the Boston
Consultin# roup, the BC matri! aims to identify hi#h$#rowth
prospects by cate#ori'in# the company's products accordin# to
#rowth rate and mar"etshare. By optimi'in# positi&e cash )ows
in hi#h$potential products, a company can capitali'e on
mar"et$share #rowth opportunities.*ee&es +artin, senior partner
and mana#in# director of Boston Consultin# roup, said that nearly
,- years after its inception, the BC matri! remains a &aluable
tool for helpin# companies understand their potential../he concept
of BC's #rowth$share matri!, central nowadays to business schools'
curriculum on strate#y ... pro&ided companies with a
disciplined and systematic tool for portfolio mana#ement,. +artin
told Business (ews0aily. .*ecently, 1ar&ard Business *e&iew
named BC's matri! one of 2&e'framewor"s that chan#ed the
world.'.Understanding the matrix/o create a BC matri!, businesses
#ather mar"et$share and #rowth$rate data on their business units or
products. 3ne lar#e s%uare is drawn and is di&ided into four
e%ual %uadrants. 4lon# the top of the bo!, a mar"et share or cash
#eneration is written, and a #rowth rate or cash use is written
down the left side. 3n the top left is hi#h mar"et share, and low
mar"et share is on the left. 3n the left$hand side, hi#h cash use
is at the top and low cash use or #rowth rate is at the
bottom.upper$ri#ht s%uare. 4t the bottom, .cash cows. #o on the
left, and .do#s. are placed on the ri#ht. /he dia#ram &isually
shows that stars ha&e hi#h mar"et share and a hi#h #rowth rate,
while %uestion mar"s ha&e low mar"et share and a hi#h #rowth
rate. 3n the bottom, cash cows 5ithin thedia#ram, .stars. #o in the
upper$left %uadrant, and .%uestion mar"s. are put in the ha&e a
low #rowth rate but a hi#h mar"et share, and do#s ha&e a low
mar"et share and a low #rowth rate./he followin# ideas apply to
each %uadrant of the matri!6Stars: /he business units or products
that ha&e the best mar"et share and #enerate the most cash are
considered stars. +onopolies and 2rst$to$mar"et products are
fre%uently termed stars. 1owe&er, because of their hi#h #rowth
rate, stars also consume lar#e amounts of cash. /his #enerally
results in the same amount of money comin# in that is #oin# out.
Stars can e&entually become cash cows if they sustain their
success until a time when the mar"et #rowth rate declines.
Companies are ad&isedto in&est in stars.Cash cows: Cash
cows are the leaders in the mar"etplace and #enerate more cash than
they consume. /hese are business units or products that ha&e a
hi#h mar"et share, but low #rowth prospects. 4ccordin# to (et+B4,
cash cows pro&ide the cash re%uired to turn%uestion mar"s into
mar"et leaders, to co&er the administrati&e costs of the
company, to fund research and de&elopment, to ser&ice the
corporate debt, and to pay di&idends to shareholders. Companies
are ad&ised to in&est in cash cows to maintain the current
le&el of producti&ity, or to .mil". the #ains
passi&ely.Dogs: 4lso "nown as pets, do#s are units or products
that ha&e both a low mar"et share and a low #rowth rate./hey
fre%uently brea" e&en, neither earnin# nor consumin# a #reat
deal of cash. 0o#s are #enerally considered cash traps because
businesses ha&e money tied up in them, e&en thou#h they are
brin#in# bac" basically nothin# in return. /hese business units are
prime candidates for di&estiture.Question marks: /hese parts of
a business ha&e hi#h #rowth prospects but a low mar"et share.
/hey are consumin# a lot of cash but are brin#in# little in return.
In the end, %uestion mar"s, also "nown as problem children, lose
money. 1owe&er, since these business units are #rowin# rapidly,
they do ha&e the potential to turn into stars. Companies are
ad&ised to in&est in %uestion mar"s if the product has
potential for #rowth, or to sell if it does not.4s BC founder Bruce
1enderson wrote in 1968, .all products e&entually become either
cash cows or pets 7do#s8. /he &alue of a productis completely
dependent upon obtainin# a leadin# share of its mar"et before the
#rowth slows..What Is a BCG Matrix?By Katherine Arline, Business
News DailyContributor February 3, 2015 01:14 pm EST9:6 ;9 69 ,<
< +3*=If you're the owner of an established company, you may
wonder how best to deploy resources to enhance your prospects.
Since 1968, the BC matri!, also "nown as the Boston or #rowth$share
matri!, has helped companies answer that %uestion by pro&idin#
them a way to analy'e product lines in search of #rowth
opportunities.(amed for its creator, the Boston Consultin# roup,
the BC matri! aims to identify hi#h$#rowth prospects by
cate#ori'in# the company's products accordin# to #rowth rate and
mar"etshare. By optimi'in# positi&e cash )ows in hi#h$potential
products, a company can capitali'e on mar"et$share #rowth
opportunities.*ee&es +artin, senior partner and mana#in#
director of Boston Consultin# roup, said that nearly ,- years after
its inception, the BC matri! remains a &aluable tool for
helpin# companies understand their potential../he concept of BC's
#rowth$share matri!, central nowadays to business schools'
curriculum on strate#y ... pro&ided companies with a
disciplined and systematic tool for portfolio mana#ement,. +artin
told Business (ews0aily. .*ecently, 1ar&ard Business *e&iew
named BC's matri! one of 2&e'framewor"s that chan#ed the
world.'.Understanding the matrix/o create a BC matri!, businesses
#ather mar"et$share and #rowth$rate data on their business units or
products. 3ne lar#e s%uare is drawn and is di&ided into four
e%ual %uadrants. 4lon# the top of the bo!, a mar"et share or cash
#eneration is written, and a #rowth rate or cash use is written
down the left side. 3n the top left is hi#h mar"et share, and low
mar"et share is on the left. 3n the left$hand side, hi#h cash use
is at the top and low cash use or #rowth rate is at the
bottom.5ithin the dia#ram, .stars. #o in the upper$left %uadrant,
and .%uestion mar"s. are put in the upper$ri#ht s%uare. 4t the
bottom, .cash cows. #o on the left, and .do#s. are placed on the
ri#ht. /he dia#ram &isually showsthat stars ha&e hi#h
mar"et share and a hi#h #rowth rate, while %uestion mar"s ha&e
low mar"et share and a hi#h #rowth rate. 3n the bottom, cashcows
ha&e a low #rowth rate but a hi#h mar"et share, and do#s
ha&e a low mar"et share and a low #rowth rate./he followin#
ideas apply to each %uadrant of the matri!6Stars: /he business
units or products that ha&e the best mar"et share and #enerate
the most cash are considered stars. +onopolies and 2rst$to$mar"et
products are fre%uently termed stars. 1owe&er, because of their
hi#h #rowth rate, stars also consume lar#e amounts of cash. /his
#enerally results in the same amount of money comin# in that is
#oin# out. Stars can e&entually become cash cows if they
sustain their success until a time when the mar"et #rowth rate
declines. Companies are ad&isedto in&est in stars.Cash
cows: Cash cows are the leaders in the mar"etplace and #enerate
more cash than they consume. /hese are business units or products
that ha&e a hi#h mar"et share, but low #rowth prospects.
4ccordin# to (et+B4, cash cows pro&ide the cash re%uired to
turn%uestion mar"s into mar"et leaders, to co&er the
administrati&e costs of the company, to fund research and
de&elopment, to ser&ice the corporate debt, and to pay
di&idends to shareholders. Companies are ad&ised to
in&est in cash cows to maintain the current le&el of
producti&ity, or to .mil". the #ains passi&ely.Dogs: 4lso
"nown as pets, do#s are units or products that ha&e both a low
mar"et share and a low #rowth rate./hey fre%uently brea" e&en,
neither earnin# nor consumin# a #reat deal of cash. 0o#s are
#enerally considered cash traps because businesses ha&e money
tied up in them, e&en thou#h they are brin#in# bac" basically
nothin# in return. /hese business units are prime candidates for
di&estiture.Question marks: /hese parts of a business ha&e
hi#h #rowth prospects but a low mar"et share. /hey are consumin# a
lot of cash but are brin#in# little in return. In the end, %uestion
mar"s, also "nown as problem children, lose money. 1owe&er,
since these business units are #rowin# rapidly, they do ha&e
the potential to turn into stars. Companies are ad&ised to
in&est in %uestion mar"s if the product has potential for
#rowth, or to sell if it does not.4s BC founder Bruce 1enderson
wrote in 1968, .all products e&entually become either cash cows
or pets 7do#s8. /he &alue of a productis completely dependent
upon obtainin# a leadin# share of its mar"et before the #rowth
slows.. Ge matri)'Thismatri) was develo&ed in E7IGs $y the
General ,lectric.om&anywiththeassistanceoftheconsultingfirm(
/cJinseyK.o( 5#% This is alsocalledG,multifactor
&ortfoliomatri)The G, matri) has $een develo&ed to overcome
the o$viouslimitations of 4.Gmatri) This matri) consists of nine
cells (?L?) $ased on two keyvaria$les'i)$usiness
strengthii)industry attractivenessThe hori!ontal a)is
re&resents $usiness strengthandthe verticala)is re&resent
industryattractivenessThe $usiness strength is measured $y
considering such factors as'relative market shareM &rofit
marginsMa$ility to com&ete on &rice and ;ualityMknowledge
of customer and marketMcom&etitive strengths and
weaknessesMtechnological ca&acityMcali$er of managementIndustry
attractiveness is measured considering such factors as 'Mmarket
si!e and growth rateMindustry &rofit marginMcom&etitive
intensityMeconomies of scaleMtechnologyMsocial( environmental(
legal and human as&ectsThe industry &roduct1lines or
$usiness units are &lotted as circlesThe area of each circle
is&ro&ortionate to industry sales The &iewithin the
circles re&resents the market share of the&roduct line
or$usinessunitThe nine cells of the G, matri) re&resent various
degrees of industry attractiveness (high( medium or low) and
$usinessstrength (strong( average and weak) %fter &lotting
each&roductline or $usiness unit on the nine cell matri)(
strategic choices aremade de&ending ontheir &osition in the
matri)#&otlight #trategyG, matri) is also called #to&light
strategymatri) $ecause thethree !ones are like green( yellow and
red of traffic lights E)Green indicates invest/e)&and N if the
&roduct falls ingreen!one( the $usiness strength is strong and
industry is at leastmedium in attractiveness( the strategic
decision should $e toe)&and( to invest and to growF)Oellow
indicates select/earn N if the &roduct falls in yellow!one( the
$usinessstrengthislow$ut industry attractiveness is high( it
needscaution and managerial discretion for making thestrategic
choice?)-edindicatesharvest/divestNifthe&roduct
fallsinthered!one(the$usinessstrengthisaverage or weak and
attractiveness is alsolow or medium( the a&&ro&riate
strategy should $edivestment
