STRATEGY

• Strategy is defined as the determination of the basic long-term objectives & goals of an enterprise and the adoption of courses of action and allocation of resources necessary to accomplish these goals.

FORMULATION OF STRATEGY • ww1) Competitor 2) Customer3) Supplier 4) Regulator 5) Social/political

1) Technology know how2) Manufacturing 3) Marketing 4) Distribution network 5) Logistics6) Infrastructure

Opportunities & Threats

Identify Opportunity

Strengths & Weakness

Identify Core Competence

Fit internal competence with external opportunities

Firm’s Strategy

Environment Analysis Internal Analysis

Strategy Level Key strategy issues Strategy options Organization levels involved

Corporate level

Are we in the right mix of industries?

Single industryRelated Diversification Unrelated diversification

Corporate office

Which industries or sub-industries should we be in?

Business unit level

What should be the mission of the business unit?

Build Hold Harvest Divest

Corporate office & business unit manager

How should the business unit compete to realize its mission?

Low cost Differentiation Business unit Manager

CONTROL FOR DIFFERENTIATED

STRATEGIES

CORPORATE LEVEL STRATEGY • Corporate strategy sheds light on how one should manage the business one is

in and intends to be in so as to achieve the target levels of corporate performance.

• Corporate level strategy represents the pattern of entrepreneurial actions & intends underlying the organization’s strategic interests in different business, divisions, product lines, technologies, customer groups & customer needs.

ROLE OF CORPORATE STRATEGY

• Ensures right environmental fit

• Helps to fill the firm’s strategic planning gap, selecting the appropriate strategy route.

• Helps in building competitive advantages.

CONSTITUENTS OF CORPORATE STRATEGY

• Product-Market Posture.

• Competitive Advantage & Synergy

• Corporate Strategy Of A Firm Can Be Stated In Concrete & Precise

• Actual Task Of Formulating The Strategy

IMPLICATIONS OF MANAGEMENT CONTROL

• Any organization, however well aligned its structures is to the chosen strategy, cannot effectively implement its strategies without a consistent management control system.

• While organization structure defines the reporting relationship and responsibilities and authorities of different mangers, it needed an appropriately designed control system to the function effectively.

• Different corporate strategies imply the following differences in the context in which control systems need to be designed:

1. As firms become more diversified, corporate level managers may not have significant knowledge of, or experience in, the activities of the company’s various business unit. If so, corporate level managers for highly diversifies firms cannot expect to control the different business on the basis of intimate knowledge of their activities & performance evaluation tends to be carried out at arm’s length.

2. Single industry & related diversification firms possess corporate wide core competencies on which the business units are based. Communication channels & transfer of competencies across business units. Therefore, are critical in such firms.

In contrast, there are low levels of interdependence among the business units of unrelated diversified firms. This implies that as firm becomes more diversified, it maybe desirables to the change the balance in control system from an emphasis on fostering co-operation to an emphasis on encouraging entrepreneurial spirit.

BUSINESS LEVEL STRATEGY Strategy Options

Goal Applies to SBU Managersapproach

Implication Evaluation Criteria

Build Increase Market share Low Market share in a High growth industry

Sacrifices short term cash flow and earnings

Increases production & additional use of Firm’s resources

On achieving a targeted increase in sales or market share.

Hold Maximize short term cash flow and earnings

High Market share in a Low growth industry

To supplement earnings with other business unit

ROI, EVA.

Harvest Profit oriented High Market share in a High growth industry

Use of accounting & Non-financial measures

Feedback ofcustomers, market share & profit.

Divest Maximize cash flows Low Market share in a Low growth industry

Slow withdrawal or outright sale

End of lifecycle stage

BUSINESS LEVEL STRATEGY Strategy Options

Goal Action Evaluation Criteria

Low Cost Competitive Strategy

Achieve lower costs relative to competitors

Taking advantage of economies of scale, reducing customer service, research & development, advertising etc.

Cost standards, cycle time & inventory turnover.

Differentiation Strategy

To create a unique & exclusive product

Increase Brand loyalty,customer service, product design & technology.

Checking the investments, technology and customers feedback

Focus Strategy Targeting narrow competitive market within an industry segment

Low cost or differentiation strategy

Tailored to the selected objective

Defender Strategy

Stable environment Compete through cost & Quality control

cost & Quality control