Strategy

BITS Pilani
Pilani Campus
Strategic Management and

Business Policy
(MM ZG611)
Session - 1
Dr. Jyoti
Course Handout
Course Objective:
The objective of this course is to develop the capacity of the
participants to think strategically about the long term
direction of the organization and its positioning &
capabilities
to
achieve
sustainable
competitive
advantage.
The participants will learn to apply various strategic
management frameworks & tools to analyze, formulate &
implement Strategies; evaluate Strategic Goals Vs Results
by defining processes & metrics to monitor and improve
performance.
Participants will learn to integrate knowledge & experience
to Innovate and Strategize in changing times.
Strategic Management and Business Policy MM ZG611
BITS Pilani, Pilani Campus
Reference Material
Text Book:
Thomas L. Wheelen, and
J. David Hunger,
Concepts in Strategic Management and Business
Policy: Toward Global Sustainability, Pearson
Education, 13th ed., 2013.
Reference Books:
Jhonson Gerry and Scholes Kevan, Exploring
Corporate Strategy, Text and Cases, Pearson 6th
Edition.
Azhar Kazmi, Business Policy and Strategic
Management, Tata McGraw Hill, 2/e
Content Structure
Basic Concepts of Strategic Management

Corporate Governance and Social Responsibility
Environmental Scanning and Industry Analysis
Internal Scanning: Organization Analysis
Strategy Formulation : Situation Analysis and
Business Strategy
Strategy Formulation: Corporate Strategy
Strategy Formulation: Functional Strategy and
Strategic Choice
Strategy Implementation: Organizing for Action
Content Structure
Strategy Implementation: Staffing and Directing
Evaluation and Control
Strategic Issues in Managing Technology and
Innovation
Strategic Issues in Entrepreneurial Ventures and
Small Businesses
Strategic Issues in Entrepreneurial Ventures and
Small Businesses
Strategic Issues in Not-for-Profit Organizations
Suggestions for Case Analysis
Analyzing Real scenario at work place
Learning Outcome
Participants will be able to think Strategically
and take decisions, execute plans & sustain
competitive advantage.
Participants will be able reflect on strategic
frameworks and apply them in practice
situations to analyze, evaluate and create
value for customers.
Evaluation Scheme
Legend: EC = Evaluation Component; AN = After Noon Session; FN = Fore Noon Session
No
Name
Type
EC-1 Quiz-I/ Assignment-I
Duration Weight Day, Date, Session, Time
Online -
5%
Online
5%
Quiz-III/ Assignment-II Online
5%
Quiz-II
EC-2 Mid-Semester Test
Closed 2 hours 35%

Book
EC-3 Comprehensive Exam Open

Book
3 hours 50%
Important Requirement
Active participation
Implementation of concepts in real scenario
at work place
Instructors Details
Dr. Jyoti
Assistant Professor, Department of Management
BITS Pilani
jyoti@pilani.bits-pilani.ac.in
About ITC - History and Evolution..1

ITC was incorporated on August 24, 1910
under the name Imperial Tobacco
Company of India Limited. As the
Company's ownership progressively
Indianised, the name of the Company was
changed from Imperial Tobacco
Company of India Limited to India
Tobacco Company Limited in 1970 and
then to I.T.C. Limited in 1974.
1925: Packaging and Printing: Backward Integration

1975: Entry into the Hospitality Sector - A 'Welcom' Move
1979: Paperboards & Specialty Papers - Development of a Backward Area
1985: Nepal Subsidiary - First Steps beyond National Borders
1990: Paperboards & Specialty Papers - Consolidation and Expansion
1990: Agri Business - Strengthening Farmer Linkages
2002: Education & Stationery Products - Offering the Greenest products
2000: Lifestyle Retailing - Premium Offerings
2000: Information Technology - Business Friendly Solutions
2001: Branded Packaged Foods - Delighting Millions of Households
2002: Agarbattis & Safety Matches - Supporting the Small and Cottage
Sector
2005: Personal Care Products - Expert Solutions for Discerning
Consumers
2010: Expanding the Tobacco Portfolio

The Company's multi-business portfolio
encompassing a wide range of businesses
Fast Moving Consumer Goods comprising Foods,
Personal Care, Cigarettes and Cigars, Branded
Apparel, Education and Stationery Products, Incense
Sticks and Safety Matches,
Hotels
Paperboards & Specialty Papers
Packaging, Agri-Business and Information
Technology
Questions to begin with

What is the vision of our organization?
Where is the organization now?
(Not where do we hope it is!)
If no changes are made, where will the
organization be in one year? Two years? Five
years? 10 years?
Are the answers acceptable?
If the answers are not acceptable, what specific
actions should management undertake? What
are the risks and payoffs involved?
Chapter 1
Basic Concepts of
Strategic Management
Wheelen, Thomas L. and J. David Hunger,

Concepts in Strategic Management and Business Policy,
Pearson Education, 13th ed., 2013.
Learning Objectives
Understand benefits of strategic management
Explain how globalization and environmental
sustainability influence strategic management
Understand basic model of strategic
management and its components
Identify some common triggering events that act
as stimuli for strategic change
Understand strategic decision-making
approaches/modes
Use strategic audit as a method of analyzing
corporate functions and activities
The Study of
Strategic Management: a set of managerial decisions and
actions that determines the long-run performance of a
corporation.
Includes:
Environment scanning: Internal and external

Strategy formulation: Strategic or long-range planning
Strategy implementation
Evaluation and control
Emphasizes the monitoring and evaluating of

external opportunities and threats in light of a
corporations strengths and weaknesses
Phases of
Initially, strategic management was of most use to large corporations
operating in in multiple industries. Increasing risks of error, costly
mistakes, and even economic ruin are causing todays professional
managers in all organizations to take strategic management seriously in
order to keep their companies competitive in an increasingly volatile
environment.
As managers attempt to deal better with changing world, a firm generally
evolves through the following four phases of strategic
management:
Phase 1: Basic financial planning (followings years budget)

Phase 2: Forecast-based planning (more than a years plan)
Phase 3: Externally oriented strategic planning (top
management takes control, seeks to be more responsive to changing markets and
competition)
Phase 4: Strategic management
(People at all levels are involved)
Benefits of
Strategic management emphasizes on Long-term
performance
To be successful in long-run, companies must not only be able to
execute current activities to satisfy an existing market, but
they must also adapt those activities to satisfy new and
changing markets.
Clearer sense of strategic vision for the firm

Sharper focus on what is strategically important
Improved understanding of a rapidly changing
environment
(example: Indian banking sector (Service quality), Airline Industry)
Additional Benefits of
Improved organizational
performance
Achieves a match
between the
organizations
environment and its
strategy, structure and
processes
Important in unstable
environments
Strategic thinking
Organizational learning
Globalization and Environmental

Sustainability: Challenges to Strategic Management
Impact of Globalization:
Globalization: the integrated and internationalization of
markets and corporations, have changed the way
modern corporation do business.
Advancement in IT and Supply-chain logistical
improvements have made companies to locate anywhere
and work with multiple partners to serve any market.
To achieve economies of scale to achieve low costs, and
thus low prices, needed to be competitive, companies are
now going to global markets.
(e.g. Nike and Reebok, IBM in India, R&D centers of various MNCs in India, changing
IPR regime)

Impact of Environmental Sustainability:
Environmental Sustainability: the use of business
practices to reduce a companys impact on the natural,
physical environment.

The effects of climate change on industries and
companies throughout world can be grouped into six
categories of Risks:
Regulatory risk (Kyoto

Protocol, CNG in Delhi)
Supply chain risk (Storms

and floods)
Product and
technology risk
Litigation risk
Reputational risk
Physical risk (droughts,
floods, storms, rising sea level)
Theories of Organizational Adaptation

Various theories have been proposed to account
for how organizations obtain fit with their
environment:
Population ecology: established organizations are
unable to adapt to change
Institution theory: organizations adapt by imitating

successful organizations
Theories of Organizational Adaptation

Strategic choice perspective: organizations adapt to
change and have the ability to reshape their environment
Organizational learning theory: organizations adjusts

defensively to a changing environment and use
knowledge to improve their relationship with the
environment. This perspective expands the strategic
choice perspective to include people at all levels.
Creating a Learning Organization

Corporations must develop strategic flexibility
Strategic flexibility: the ability to shift from one
dominant strategy to another and requires:
Long-term commitment to the development and

nurturing of critical resources
Learning organization
Creating a Learning Organization

Learning organization: an organization skilled at
creating, acquiring, and transferring knowledge and at
modifying its behavior to reflect new knowledge and
insights.
Organizational learning is a critical component of
competitiveness in a dynamic environment.
It is particularly important to innovation and new
product development.
Main activities of a Learning Organization

Solving problems
systematically
Experimenting with new
approaches
Learning from past

experience, history and
experiences of others
Transferring knowledge
quickly and efficiently
throughout the
organization
Basic Model of
Basic Elements of Strategic Management
1.
2.
3.
4.
Environmental scanning
Strategy formulation
Strategy implementation
Evaluation and control
Basic Model of
Environmental Scanning is the monitoring, evaluating
and disseminating of information from the external
and internal environments to key people within the
organization
Purpose is to identify Strategic factors: Internal and
external factors that would determine the
future of the corporation.
SWOT Analysis
Basic Model of
Strategy Formulation: the development of longrange plans for the effective management of environmental
opportunities and threats in light of organizational
strengths and weaknesses (SWOT).
It includes defining the corporate mission,
specifying achievable objectives, developing
strategies, and setting policy guidelines.
Hierarchy of Strategy
Basic Model of
Strategy implementation: the process by which
strategies and policies are put into action through the
development of:
Programs
Budgets
Procedures
Basic Model of
Evaluation and control: the process in which
corporate activities and performance results are
monitored so that actual performance can be
compared to desired performance
Basic Model of
Performance: the end result of organizational activities.
It includes actual outcomes of the strategic
management process.
Feedback/Learning Process: revise or correct

decisions based on performance.
Initiation of Strategy:
Triggering Events
Triggering event: something that acts as a stimulus for
a change in strategy and can include:
New CEO
External intervention: Customers complain about
product
Threat of change of ownership
Performance gap
Strategic inflection point: due to introduction of new
technology, different regulatory environment.
Strategic Decision Making
Strategic decision making focuses on the long-run

future of an entire organization and have following
characteristics:
Rare
Consequential: long term commitment and substantial
resources
Directive
Mintzbergs approaches/Modes
of Strategic Decision Making
Entrepreneurial mode: Strategy is made by one
powerful individual. Focus is on opportunities; problems
are secondary.
Adaptive mode: characterized by reactive solutions to
existing problems.
Planning mode: Systematic approach, includes both
proactive and reactive approach
Logical incrementalism: Synthesis of above three
modes
Strategic
Decision-Making Process
1. Evaluate current
performance results
2. Review corporate
governance
3. Scan and assess the
external environment
4. Scan and assess the
internal corporate
environment
5. Analyze strategic
(SWOT) factors
6. Generate, evaluate and
select the best
alternative strategy
7. Implement selected
strategies
8. Evaluate implemented
strategies
Strategic Audit
The strategic decision-making process is put into action
through a technique known as the strategic audit.
Strategic audit provides a checklist of questions, by

area or issue, that enables a systematic analysis to be
made of various corporate functions and activities.
It is a type of management audit and is extremely
useful as a diagnostic tool to pinpoint corporate
wide problem areas and to highlight
organizational strengths and weaknesses.
A strategic audit can help determine why a certain area
is creating problems for a corporation and help generate
solutions to the problem.
Strategic Management and

Business Policy
(MM ZG611)
Session - 2
Dr. Jyoti
Chapter 2 & 3
Corporate Governance
and
Social responsibility and ethics
in Strategic Management
Wheelen, Thomas L. and J. David Hunger,

Concepts in Strategic Management and Business Policy,
Pearson Education, 12th ed., 2010.
Learning Objectives
The role and responsibilities of the board of directors in
corporate governance
How executive leadership is an important part of strategic
management
Compare and contrast different view of social responsibility
Relationship between social responsibility and corporate
performance
Explain concept of sustainability
Conduct a stakeholder analysis
Explain why people may act unethically
Different views of ethics according to utilitarian, individual
rights, and justice approaches
Role of Board of Directors

A corporation is a mechanism established to allow
different parties to contribute capital, expertise, and
labor for their mutual benefit.
Investor/shareholder participates in the profits of the
enterprise without taking responsibility for the
operations.
Management runs company without being responsible
for personally providing the funds.
To make this possible, laws have been passed that
give shareholders limited liability and,
correspondingly, limited involvement in a corporations
activities.

Shareholders have the right to elect directors
who have a legal duty to represent them and
protect their interests.
As representatives of the shareholders, directors
have both the authority and the responsibility to
establish basic corporate policies and to ensure
that they are followed.

The corporation is fundamentally governed by the
board of directors overseeing top management, with
the concurrence of the shareholder.
The term corporate governance refers to the
relationship among these three groups in
determining the direction and performance of the
corporation.
The general public has not only become more aware
and more critical of many boards apparent lack of
responsibility for corporate activities, it has begun to
push government to demand accountability.

Responsibilities of the Board of Directors
Sets corporate strategy, overall direction, mission, or
vision
Hires and fires the CEO and top management
Controls, monitors, or supervises top management
Reviews and approves the use of resources
Cares for shareholders interests
Assures that the corporation is managed in accordance
with state laws, security regulations and conflict of
interest situations
Role of the Board in

To carry out three basic tasks:
Monitor developments inside and outside the corporation,

bringing to managements attention developments it might
have overlooked. A board should at the minimum carry out
this task.
Evaluate and Influence management proposals,

decisions and actions; agree or disagree with them; give
advice and offer suggestions; and outline alternatives. More
active boards perform this task in addition to monitoring.
Initiate and Determine the corporations mission and

strategies. Only the most active boards take on this task in
addition to the two previous ones.
Board of Directors Continuum

Figure shows the possible degree of involvement (from low to high) in the
strategic management process:

Members of a Board of Directors
Inside Directors are officers or executives employed by
the boards corporation
Outside Directors are executives of other firms but are

not employees of the boards corporation

Nomination and Election of Board Members
Criteria for a good director include:
Willingness to challenge management when necessary

Special expertise that is important to the company
Available for outside meetings to advise management
Expertise on global issues
Understands the firms key technologies and processes
Brings external contacts that are potentially valuable to the firm
Has detailed knowledge of the firms industry
Has high visibility in their field
Is accomplished at representing the firm to stakeholders

Trends in Corporate Governance
Boards shaping company strategy
Institutional investors active on boards
Shareholder demands that directors and top management own
significant stock
More involvement of non-affiliated outside directors
Increased representation of women and minorities
Boards evaluating individual directors
Smaller boards
Splitting the Chairman and CEO positions
Shareholders may begin to nominate board members
Society expects boards to balance profitability with social needs of
society
Role of Top Management

Responsibilities of Top Management
Executive leadership is the directing of activities toward
the accomplishment of corporate objectives. Sets the
tone for the entire corporation
Strategic vision- description of what the company is

capable of becoming

Transformational Leaders provide change and
movement in an organization by providing a vision for that

change.
Characteristics include:
CEO articulates a strategic vision for the corporation

CEO presents a role for others to identify with and to
follow
CEO communicates high performance standards and also
show confidence in the followers abilities to meet these
standards

Managing the Strategic Planning Process
Strategic planning staff- supports both top management
and the business units in the strategic planning process
Major responsibilities include:
Identifying and analyzing company-wide strategic issues,
and suggesting corporate strategic alternatives to top
management
Work as facilitators with business units to guide them
through the strategic planning process
Social responsibilities of
Strategic Decision Makers
Responsibilities of a Business Firm
Social Responsibility: proposes that a private
corporation has responsibilities to society that extend
beyond making a profit
Friedmans traditional view of a business firm:

Argues against the concept of social
responsibility
Primary goal of business is profit maximization not
spending shareholder money for the general social
interest
Carrolls four responsibilities of business: (in order
of priority)
Economic
Legal
Ethical
Discretionary
Carrolls four responsibilities of business:

Social capital refers to the goodwill of key stakeholders
and provides a company with:
The ability to enter local and
international markets
Enhanced reputation
Competitive advantage
Cost savings
The ability to charge premium

prices
Improved relationships with
suppliers and distributors
The ability to attract better
talent
Goodwill in the eyes of public
officials
Access to capital

Characteristics of Sustainability
Environmental
Economic
Social
Corporate Stakeholders
Stakeholders have an interest in the business and affect
or are affected by the achievement of the firms
objectives
Enterprise strategy- articulates the firms ethical

relationship with its stakeholders
Stakeholder Analysis- the identification of corporate

stakeholders in 3 steps:
1. Primary stakeholders have a direct connection with

the corporation and have sufficient bargaining power
to directly affect corporate activities
2. Secondary stakeholders have an indirect stake in

the corporation but are also affected by corporate
activities
3. Estimate the effect on each stakeholder from a

particular strategic decision
Ethical Decision Making

Reasons for Unethical Behavior
Unaware that behavior is questionable

Lack of standards of conduct
Different cultural norms and values
Behavior-based or relationship-based governance
systems
Different values between business people and
stakeholders

Approaches to Ethical Behavior
Utilitarian- actions are judged by consequences
Individual rights- fundamental rights should be
respected
Justice- decisions must be equitable, fair and impartial in

the distribution of costs and benefits to individuals or
groups

Ethics is defined as the consensually accepted
standards of behavior for an occupation, a trade, or
a profession.
Ethics: principles, values, and beliefs that define right and wrong
decisions and behaviour.
Reasons for Unethical Behavior
Unaware that behavior is questionable

Lack of standards of conduct
Different cultural norms and values
Rule-based or relationship-based governance systems
Different values between business people and stakeholders
Factors that determine Ethical

and unethical behaviour
Stage of Moral development

Moderating factors as: Individual
characteristics, structural variables,
organization culture, issue intensity

Kohlbergs Levels of Moral Development
Preconventional level: concern for ones self

Conventional level: considerations for societys laws
and norms
Principled level: guided by an internal code of ethics

Encouraging Ethical Behavior
Code of Ethics- specifies how an organization

expects its employees to behave while on the job.
Guidelines
Basic approached to ethical behaviour
Utilitarian approach: People should behave in a way

that will produce greatest benefit to society and
produce the least harm or lowest cost.
Individual rights approach: takes care of
fundamental rights of others.
Justice approach: decision makers be equitable, fair,
and impartial in the distribution of costs and benefits
to individuals and groups.
SESSION 3
Environmental Scanning
and Industry Analysis
BITS Pilani
Pilani|Dubai|Goa|Hyderabad
Dr. Neetu Yadav-Instructor

Department of Management, BITS Pilani
E-mail: neetu.yadav@pilani.bits-pilani.ac.in
Topics Covered
Environmental scanning.
Monitoring trends in the natural and societal
environments.
Identifying external strategic factors.
Industry analysis, including industry evolution, strategic
groups, and hypercompetition.
Porters Five Forces Model
Multi-domestic and global industries.
Competitive intelligence.
Forecasting techniques
EFAS Table: a technique to summarize factors.
74
Environmental Scanning
Environmental scanning: The monitoring,
evaluation and dissemination of information from
the external and internal environments to key
people within the corporation
Positive correlation between Environmental
Scanning and Profit
75 % executives state-Global, social,
environmental, business trends are increasily
important to corporate strategy (McKinsey &
Company, 2008)
75
Environmental Variables
76
Scanning Natural Environment

Includes physical resources, wildlife, climate
Until 20th century-Perceived to exploit, free resources.
Climate change, global warming, depletion of natural
resources
Regulations to force business corporations to deal with
side effects of their activities.
The concept of sustainability
Scanning market for environment issues-identify
opportunities to fulfill future market demandenvironmental friendly products & Services.
77
Scanning Societal Environment

STEEP Analysis
Sociocultural
Technological
Economic
Ecological
Political-legal
Also known as PESTEL analysis (Political,
Economic, Sociocultural, Technological,
Ecological, Legal Factors)
78
Important Variables in Societal

Environment
79
Scanning the Task Environment
80
Issue Priority Matrix

Identify and analyze developments in
external environment
Step 1: Identify a number of likely trends emerging in
the natural, societal, and task environments (Strategic
environment issues)
Step 2: Assess probability of these trends actually
occurring (low to medium to high)
Step 3: Attempt to ascertain the likely impact (Low to
high) of each of these trends on the corporation being
examined.
81
Identifying External Strategic

Factors
82
Industry Analysis
Industry-Group of firms that produces a
similar product or service.
Eg.-Telecom industry, financial services
Industry Analysis-Examination of
important stakeholder group in a particular
task environment .
83
Porters Approach to Industry

Analysis
84
Threat of New Entrants

Entry barrier-obstruction that makes it
difficult for a company to enter an industry.
Economies of scale
Product differentiation
Capital requirements
Switching costs
Access to distribution channels
Cost disadvantages independent of size
Government policy
85
Rivalry Among Existing Firms
Number of competitors
Rate of industry growth
Product or service characteristics
Amount of fixed costs
Capacity
Height of exit barriers
Diversity of rivals
86
Threat of Substitute Products or

Services
Substitute Product- Products that appear
different but can satisfy the same need as
another product
Tea & coffee
Any other example?
Many substitute products
Are a threat and limit the price that companies in one
industry can charge for their product, and thus
industry profitability
Few or weak close substitutes

Gives the industry the opportunity to raise
87 prices and
Bargaining Power of Buyers

Bargaining power of buyers: Ability of buyers to force prices down,
bargain for higher quality, play competitors against each other.
Large purchases
Backward integration
Alternative suppliers
Low cost to change suppliers
Product represents a high percentage of buyers cost
Buyer earns low profits
Product is unimportant to buyer
88
Bargaining Power of Suppliers

Bargaining power of suppliers: Ability of suppliers to
raise prices or reduce quality.
Industry is dominated by a few companies
Unique product or service
Substitutes are not readily available
Ability to forward integrate
Unimportance of product or service to the industry
89
Sixth Force (Relative Power of

Complementors)
Complementors-companies that produce
closely related products or services
When complementors are important and
their number is increasing
Demand and profits in the industry are
boosted
When complementors are weak

Industry growth can slow and profits can be
limited
90
Industry Evolution
Fragmented industry: No firm has a large market share
and each firm only serves a small piece of the total market
in competition with other firms
Example- Retail Industry
Consolidated industry: Domination by a few large firms,
each struggles to differentiate products from its competition
Example- Telecom Industry
91
Categorizing International
Industries
92
Categorizing International
Industries
Multi-domestic industries are specific to each country or group of
countries
Global industries operate worldwide with multinational companies

making only small adjustments for country-specific circumstances
Regional industries: Multinational companies primarily coordinate

their activities within regions.
93
Strategic Groups
Strategic group: A set of business units or firms
that pursue similar strategies with similar
resources
Some strategic groups in same industry are
more profitable than others.
Mapping of strategic groups:
Select two broad categories that differentiate
companies in an industry
Plot the firms on these two dimensions.
Draw a circle around those companies that are
closest to one another.
94
Mapping of Strategic Groups
95
Mapping of Strategic Groups
Source: Strategic Management, Hills & Jones
96
Strategic Types
Definition: A category of firms based on a common
strategic orientation and a combination of structure, culture
and processes consistent with strategy.
General types (Miles and Snow):
Defenders: Focus on improving efficiency of their
existing operations
Prospectors: Focus on product innovation and market
opportunities
Analyzers: Operate in at-least two different productmarket areas, stable and variable.
Reactors: Lack a consistent strategy-structure-culture
relationship.
97
Hyper competition
Create a condition of constant
disequilibrium and change.
Market stability is threatened by:
Short product life-cycle

Short product design cycle
New technologies
Frequent entry by unexpected outsiders
Repositioning by incumbents
Tactical redefinition of market boundaries
Higher level of uncertainty
98
Discussion Questions
What are the forces driving industry competition
in the FMCG industry?
How can we map strategic groups in FMCG

industry?
(Two dimensions and different groups)
99
Competitive Intelligence
Competitive intelligence (Business intelligence): A
formal program of gathering information on a companys
competitors
Sources of competitive intelligence:
Information brokers
Internet
Industrial espionage
Investigatory services
100
Monitoring Competitors
Competitors: Organizations that offer same,
similar, or substitute products or services in the
business area in which company operates.
To understand competitors:
Why do your competitors exist?

Where do they add customer value?
What is their cost base and liquidity?
Are they less exposed with their suppliers than your firms?
What do they intend to do in the future?
How will they actively affect your strategies?
Who is potential new entrant?
101
Competitive Analysis
Techniques
102
Forecasting
Techniques
Extrapolation: Extension of present trend into
future (Time Series analysis)
Brainstorming
Expert opinion
Delphi technique
Statistical modelling (Regression Analysis,
Econometric methods)
Scenario writing-description of different likely
futures
103
External Factors Analysis Summary
104
EFAS (Steps)
S-1: List Opportunities and Threats in Column 1
S-2: Weight each factor from 1.0 (most important) to 0 (not
important). The total weight must sum to 1.0 (Column 2)
S-3: Rate each factor from 5.0 (outstanding) to 1.0 (Poor)
based on the companys response on that factor (Column
3).
S-4: Multiply each factors weight with its rating to obtain
each factors weighted score (column 4).
S-5: Use column 5 for rationale used for each factor.
S-6: Add individual weighted scores (in column 4) to obtain
total weighted score for company. This tell how well the
company is responding to factors in its external
environment. Strategic Management and Business Policy MM ZG611 105 BITS Pilani, Pilani Campus
Discussion questions
How current political-legal environment is
affecting Indian automobile industry?
How to carry out competitors analysis in
FMCG industry?
106
Session IV
Internal Scanning: Organizational
Analysis
Dr. Neetu
Yadav-Instructor
Department of Management, BITS Pilani
E-mail: neetu.yadav@pilani.bits-pilani.ac.in
BITS Pilani
Pilani|Dubai|Goa|Hyderabad
Topics Covered
The resource-based view of the firm.

Core and distinctive competencies and VRIO framework.
Business models.
Industry and corporate value-chain analysis.
Scanning Functional resources and capabilities
The IFAS Table: a technique to summarize internal factors.
BITS Pilani, Deemed to be University under Section 3 of UGC Act, 1956
Organizational Analysis
Organizational analysis is concerned with identifying and developing an
organizations resources and competencies
To identify internal strategic factors-critical strengths and weaknesses.
Different Approaches:
Resource-Based Approach
Business Models
Value-chain analysis
Source: Barney (1991)
Resource-based Approach
Resources-Organizations assets and basic building blocks

Tangible Assets: Plant, Equipment, Finances, Human Assets
Intangible Assets: Technology, Culture, Reputation
Capabilities- Corporations ability to exploit its resources

Marketing capabilities, HRM capabilities
Dynamic Capabilities- Capabilities that are constantly being

changed and reconfigure to make them more adaptive to
uncertain environment.
Resource-based Approach
Competency- A cross-functional integration and coordination of
capabilities
Core competency- A collection of competencies that cross divisional
boundaries, is wide-spread throughout the corporation and is
something the corporation does exceedingly well
(https://hbr.org/1990/05/the-core-competence-of-the-corporation)
Distinctive competencies- The core competencies that are superior to
those of the competition
VRIO Framework
VRIO framework (Barney)- To evaluate firms competencies:
Value: Does it provide customer value and competitive advantage?
Rareness: Do no other competitors possess it?
Imitability: Is it costly for others to imitate?
Organization: Is the firm organized to exploit the resources?
Barney (1991): Firm resources and sustained competitive advantage
https://business.illinois.edu/josephm/BA545_Fall%202011/S10/Barn
ey%20(1991).pdf
Using Resources to gain COMPETITIVE ADVANTAGE
Grant proposes a five-step approach to strategy analysis1. Identify and classify resources in terms of strengths and weaknesses
2. Combine the firms strengths into specific capabilities and core competencies
3. Appraise profit potential- Are there any distinctive competencies?
4. Select the strategy that best exploits the firms capabilities and competencies
relative to external opportunities
5. Identify resource gaps and invest in upgrading weaknesses
Where do these COMPETENCIES come from?
Asset endowment (Key patents)

Acquired from someone else
Shared with another business unit or alliance partner
Built and accumulated over time
Determining Sustainability of Advantage
Durability: The rate at which a firms underlying resources, capabilities,

or core competencies depreciate or become obsolete
Imitability: The rate at which a firms underlying resources, capabilities,

or core competencies can be duplicated by others
Transparency
Transferability
Replicability
Continuum of Resource Sustainability
BUSINESS MODELS
Business models: A companys method for making money in the
current business environment (Structural & operational characteristics)
Business model includes:

Whom it serves
What it provides
How it makes money
How it differentiates and sustains competitive advantage
How it provides its product/service
Examples
Customer solutions model (Consulting model)

Profit pyramid model
Multi-component system/installed model
Advertising model
Switchboard model
Efficiency model
Blockbuster model
Profit multiplier model
Entrepreneurial model
De Facto industry standard model
Resource based view v/s industrial organizational view
Read about New business model of SmartyPig
Different Business models of taxi aggregators.
Value-chain Analysis
Value chain: A linked set of value creating activities that begin with
basic raw materials coming from suppliers, moving on to a series of
value-added activities involved in producing and marking a product or
service, and ending with distributors getting the final goods into the
hands of the ultimate consumer
Porter Value-chain analysis
Value-chain Analysis
Three steps:
S-1: Examine each product lines value chain in terms of the
various activities involved in producing the product or service
S-2: Examine the linkages within each product lines value
chain
S-3: Examine the potential synergies among the value chains of
different product lines or business units
Basic Organizational Structures

Corporate Culture
Strategic Marketing issues
Strategic Financial issues
Strategic R&D issues
Strategic Operations issues
Strategic HRM issues
Strategic Technology issues
Strategic Marketing Issues

Market position: Who are our customers?
Market Segmentation
Marketing mix: The particular combination of key variables under a

corporations control that can be used to affect demand and to gain
competitive advantage
Product life cycle: Product monetary sales over time from introduction
through growth and maturity to decline
Corporate reputation: A widely held perception of a company by the
general public
Stakeholders perceptions of quality
Corporations prominence in the minds of stakeholders
Strategic Financial Issues

Financial leverage: It is ratio of total debt to total assets
Used to describe how debt is used to increase earnings available
to common shareholders
Capital budgeting: The analysis and ranking of possible investments in
fixed assets in terms of additional outlays and receipts that will result
from each investment
Hurdle point- Rate of return or time to break-even point
Strategic R&D Issues

R&D intensity: Spending on R&D as a percentage of sales revenue
Technology competence: The development and use of innovative technology
Technology transfer: The process of taking new technology from the laboratory to
the marketplace
R&D mix is the mix of:
Basic R&D focuses on theoretical problems
Product R&D concentrates on marketing and is concerned with product or
product packaging improvements
Engineering R&D is concerned with engineering, concentrating on quality
control, and the development of design specifications and improved production
equipment
Strategic R&D Issues

Impact of technological discontinuity on strategy-

Intermittent systems: Item is normally processed sequentially, but the work and
sequence of the process vary
Continuous systems: Work is laid out in lines on which products can be
continuously assembled or processed
Operating leverage: Impact of a specific change in sales volume on net operation
income
Computer assisted design
Computer assisted manufacturing
Economies of scale
Economics of scope

Experience Curve (Learning curve)-Unit production costs
decline by some fixed percentage each time the total
accumulated volume of production units doubles
(The more experience a firm has in producing a particular product, the
lower its costs)
"Building Strategy on the Experience Curve," by Pankaj Ghemawat from the March-April 1985 issue
Harward business review
(https://hbr.org/1985/03/building-strategy-on-the-experience-curve)
The Experience Curve (http://www.economist.com/node/14298944)
Strategic HRM Issues

Virtual teams: Groups of geographically or organizationally dispersed coworkers
that are assembled using a combination of telecommunications and information
technologies to accomplish organizational tasks driven by 5 trends.
Flatter organizational structures
Turbulent environments
Increased employee autonomy
Higher knowledge requirements
Increased globalization
Increased employee decision making
Strategic HRM Issues

Quality of work life includes improvements in:
Introducing participative problem solving
Restructuring work
Introducing innovative reward systems
Improving the work environment
Human diversity: The mix in the workplace of people from different races, cultures
and backgrounds
Provides a sustainable competitive advantage
Strategic Technology Issues

Information systems/technology contributions to performance:
Automation of back office processes
Automation of individual tasks
Enhancement of key business functions
Development of a competitive advantage
Supply chain management: Networks for sourcing raw materials,

manufacturing products or creating services, storing, and distributing
goods, and delivering them to customers and consumers
Internal Factor Analysis Summary
Compare and contrast EFAS and IFAS matrices.

Strategy

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BITS Pilani

Strategic Management and

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

Basic Concepts of Strategic Management

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

Strategic Management and Business Policy MM ZG611

BITS Pilani, Pilani Campus

EC-1 Quiz-I/ Assignment-I

Duration Weight Day, Date, Session, Time

Quiz-III/ Assignment-II Online

EC-2 Mid-Semester Test

Closed 2 hours 35%

EC-3 Comprehensive Exam Open

Strategic Management and Business Policy MM ZG611

BITS Pilani, Pilani Campus

Strategic Management and Business Policy MM ZG611

BITS Pilani, Pilani Campus

Strategic Management and Business Policy MM ZG611

BITS Pilani, Pilani Campus

About ITC - History and Evolution..1

BITS Pilani, Pilani Campus

About ITC - History and Evolution..2

1925: Packaging and Printing: Backward Integration

BITS Pilani, Pilani Campus

About ITC - History and Evolution..1

BITS Pilani, Pilani Campus

Questions to begin with

BITS Pilani, Pilani Campus

Wheelen, Thomas L. and J. David Hunger,

BITS Pilani, Pilani Campus

BITS Pilani, Pilani Campus

Environment scanning: Internal and external

Emphasizes the monitoring and evaluating of

BITS Pilani, Pilani Campus

Phase 1: Basic financial planning (followings years budget)

Phase 4: Strategic management

(People at all levels are involved)

Strategic Management and Business Policy MM ZG611

BITS Pilani, Pilani Campus

Clearer sense of strategic vision for the firm

BITS Pilani, Pilani Campus

Strategic Management and Business Policy MM ZG611

BITS Pilani, Pilani Campus

Globalization and Environmental

BITS Pilani, Pilani Campus

Globalization and Environmental

Strategic Management and Business Policy MM ZG611

BITS Pilani, Pilani Campus

Globalization and Environmental

Regulatory risk (Kyoto

Supply chain risk (Storms

Strategic Management and Business Policy MM ZG611

BITS Pilani, Pilani Campus

Theories of Organizational Adaptation

Institution theory: organizations adapt by imitating

Strategic Management and Business Policy MM ZG611

BITS Pilani, Pilani Campus

Theories of Organizational Adaptation

Organizational learning theory: organizations adjusts

Strategic Management and Business Policy MM ZG611

BITS Pilani, Pilani Campus