CHAPTER – 8

STRATEGIC ALTERNATIVES

CONTENTS
8.01 Nature Of Strategic Decisions

8.02 Approaches to Strategy formulation

8.03 Major Strategies/ Strategic Alternatives

8.04 Stability Strategy

8.05 Growth Strategy

8.06 Combination Strategy

8.07 Retrenchment Strategy

8.08 Other Strategies / Strategic Alternatives

8.09 References

8.10 Exercise
8.0 STRATEGIC ALTERNATIVES

The strategy outlines the fundamental steps of corporation it- has a tendency to take to be
able to gain a fixed of objectives. Management develops a method by way of evaluating
options available to the organization and selecting one or extra of the alternatives. Strategies
exist at specific levels in a company and are categorized consistent with the scope of their
coverage.

A. Corporate strategies: strategies that deal with what companies and business enterprise will
be in and the how resources can be allocated among those organizations are known as
company strategies. Corporate techniques are installed at the highest levels of the agency and
involve a long-term horizon.

B. Business unit strategies: Business unit strategies focus on the way to compete in a given
enterprise. The scope of a commercial enterprise approach is narrower than a corporate
method and typically applies to a strategic commercial enterprise unit (SBU).

C. Functional strategies: a third level of approach is functional strategies, which might be

narrower in scope than enterprise strategies. Functional strategies are involved with the sports
of the exclusive purposeful areas, which include manufacturing, marketing, and personnel
normally functional strategies are for a rather short time commonly one year or much less.

D. Functional area strategies: Functional area strategies, that are designed to improve the
internal operations or circumstance of an organisation, regularly keep the key to achievement
for longer-range company strategies. As an instance, a useful facts structures approach that is
designed to link all retail shops with crucial shopping and inventory manage might be the
necessary precursor for sizeable growth. Purposeful techniques are used not simplest to help
corporate and enterprise unit strategies but additionally to improve strengths and to eliminate
weaknesses.

The Alternatives Corporate and Business Unit Strategy In choosing corporate and business
unit strategies, most organizations have a wide variety of options. The alternatives available
to most organizations. As can be seen, corporate strategy options fall into one of five basic
categories: (1) stable growth, (2) growth, (3) harvesting, (4) defensive, or (5) a combination

The previous four. Business unit strategy options fall into three Basic categories, these are:
(1) Overall cost leadership, (2) differentiation of product/service, or (3) focus of
product/service. Each of these strategy options is described in greater detail in the following
sections.

Examples of Strategic Alternatives

Price Focus
Price focus is a niche market area of strategy where an organization competes on cost. This
strategy targets a small client segment and the corporation wishes to have a low-cost structure
compared to competitors. This strategy is effective when a business is new, it cannot pursue a
larger market, customer segments are exceptional, or while no other competitor is focusing
on the targeted section.

Differentiation
In instances wherein opposition is stiff due to the proliferation of comparable merchandise,
an organisation can provide you with capabilities that differentiate their products or services
from the ones of competitors. The differentiating functions want to be precious to clients so
that they are geared up to pay premiums for them, and difficult for competitors to replicate.
While introducing new functions, executives want to make sure that the product is affordable
and that it enhances customers wishes.

Diversification

Diversification is a sort of growth strategy wherein an enterprise develops new merchandise

for existing or new markets. This strategy is particularly powerful wherein a corporation can
now not benefit competitive benefit through product differentiation. Other than gaining a
competitive advantage, diversification can assist an organisation to higher use its assets,
increase sales and decrease the risk associated with marketplace upheavals that have an effect
on a selected product.

Adjacent Businesses

The adjacent corporation's strategy includes entry into a niche where a core enterprise is
running at its complete or close to complete capability and producing surplus cash. The
business makes a speciality of present customer preferences to are seeking growth
opportunities. While making an adjacency pass, an employer can introduce new merchandise
or broaden new distribution channels. To make a success adjacency move, a company wishes
to have discipline and conduct an in-depth analysis of client preferences and financial
abilities. (Carey Jeffrey 2009)

(A) Corporate Strategy Alternatives

1. Stable Growth Strategy

2. Growth Strategy

i. Concentration Strategy

 Market Development
 Product Development
 Horizontal Integration

ii. Vertical Integration

iii. Diversification

 Concentric Diversification
 Conglomerate Diversification

3. Harvesting Strategies

4. Defensive Strategies

 Turnaround
 Divestment
 Liquidation
 Filing for Bankruptcy
 Becoming a Captive

5. Combination Strategies

 Simultaneous
 Combination

(B). Business Unit Strategy Alternatives

1. Overall Cost Leadership

2. Differentiation of Product/Service

3. Focus of Product/Service

(http://www.bizstudyportal.com/content/b/i/z/S/t/u/D/y/MGT/STRMGT/2/24MGT2012STR
MGT0916170628.pdf )

1. Strategic Decisions

A decision is described “as a selected commitment to action” while a decision system is “a

hard and fast of actions and dynamic factors that begin with identity of a stimulus for action
and ends with the unique dedication to movement” (Mintzberg et al. 1976, p. 246).

decision-making, being part of organisational life, is considered via the diverse theoretical
views which are applied to studying organisations (Burrell & Morgan 1979).

Theories of organisational decision making can be labelled into major classes: normative
theories and behavioural theories. Normative theories of decision making generally describe
what is expected to occur or what need to be occurring, on the way to meet sure assumed
ends, at the same time as behavioural theories searching for to know how a decision certainly
takes place (Cyert & March 1963).

Simon (1960) outstanding programmed from the non-programmed decision. Programmed

decision are visible as repetitive and routine, while non programmed are characterised as the
novel, unstructured and sequential (Simon 1960).

The latter can also be called strategic decision. Many researchers have tried to locate some
not unusual characteristics for the character of strategic decision. Those decisions had been
described as unfastened, novel, unstructured and having an extended-term impact at the
company (Mintzberg et al. 1976; Northcott 1992; Butler et al. 1993). As Pennings (1985, p.6)
8.01 NATURE OF STRATEGIC DECISIONS

1. Strategic decisions have fundamental resource propositions for a company. Those

decisions may be worried with owning new resources, organizing others or reallocating
others.

2. Strategic decisions address harmonizing organizational resource abilities with the threats
and opportunities.

3. Strategic decisions address the variety of organized activities. It is all approximately,

what they want the organisation to be like and to be about.

4. Strategic decisions involve a trade of foremost kind seeing that an organization operates
in an ever-converting environment.

5. Strategic decisions are complex in nature.

6. Strategic decisions are at the top maximum degree, are unsure as they cope with the
future, and involve a variety of threat.

7. Strategic decisions are extraordinary in administrative and operational decisions.

Administrative decisions are recurring decisions that help or alternatively facilitate strategic
decisions or operational decisions. Operational decisions are technical decisions which help
execution of strategic decisions. To lessen cost is a strategic decision which is accomplished
through operational decision of lowering the variety of personnel and how we carry out these
reductions may be administrative decisions.

8.02. APPROACHES TO STRATEGY FORMULATION

Background

Strategic alliance turned into identified as a management fad via Byrne (1986). He had, but
said that fads can turn out to be techniques if they are incorporated into a comprehensive
system of management with an actual commitment to managerial excellence. As quoted by
means of Byrne (1986) Peter F. Drucker had said that the fads alternate about each 2 1/2
years. By using the take a look at of those parameters strategic alliance now cannot be called
a fad.
The strategic alliance is rising as and proving to be an effective management
device/technique in business management, specifically inside the era of globalisation of
commercial business. but unlike different management gear or techniques, the strategic
alliance can also damage the interest of commercial business or maybe make the managers of
the business lose their enterprise altogether. Consequently, a strategic alliance may be called
a double-edged sward that facilitates business conquer new regions of business if treated
properly and if now not damages the business interest to a volume that possibly no different
gear or techniques can. Merriam-Webster's Collegiate Dictionary, 1/3 version, defines
alliance as "an association or union formed for the furtherance of 'the common pursuits and
goals of the members". A strategic alliance associates two or more corporations every
wanting to advantage manifested as well as unmanifested via linking particular elements in
their companies. it is hard to discover a definition of a strategic alliance as maximum writers
remain bendy and suggest the strategic alliance to be any form of interfirm hyperlinks
consisting of mergers and licensing. The complete definition has been furnished with the aid
of Yoshino and Pangan (1995) in “Strategic Alliance an Entrepreneurial method to
Globalisation", the primary and possibly the most effective book to treat the new alliances
comprehensively as instruments of long-term competitive gain as opposed to as brief-term
protecting manoeuvres.

(http://shodhganga.inflibnet.ac.in/bitstream/10603/48474/13/13_chapter%208.pdf )

STRATEGY FORMULATION

Where do we
Where are
Strategy want to be?
we now?

Organisation’s
Current Strategic Strategic Decisions
Position Vision, Mission and
Objectives
Strategy formulation is the process by the way, in which an agency chooses the most
appropriate courses of action to reap its defined goals. This process is critical to an
organization’s success, as it provides a framework for the actions so as to cause the expected
results. Strategic plans should be communicated to all personnel in order that they are privy
to the organization’s goals, undertaking, and purpose. Strategy formulation forces an
organisation to cautiously examine the changing environment and to be prepared for the
viable adjustments that could occur. A strategic plan additionally enables an employer to
assess its assets, allocate budgets, and determine the best plan for maximizing ROI (go back
on investment). An enterprise that has now not taken the time to develop a strategic plan will
now not be capable of offer its personnel with path or focus. instead of being proactive in the
face of enterprise conditions, a business enterprise that doesn't have a set method will locate
that it is being reactive; the organisation might be addressing unanticipated pressures as they
rise up, and the organisation will be at a competitive downside.

(https://www.saylor.org/site/wp-content/uploads/2013/09/Saylor.orgs-Strategy-
Formulation.pdf )

8.03. MAJOR STRATEGIES/ STRATEGIC ALTERNATIVES

Strategic alternatives are developed to units course in which human and cloth assets of a
commercial enterprise can be implemented for more danger of reaching selected goals.

The strategy is a complete concept and, for that reason, it is frequently utilized in unique
approaches. But this distinction creates a prime problem while some writers cognizance on
each the end factors (task, desires, targets) and the approach of accomplishing them (policies
and plans), however the others emphasis the way most effective in preference to the ends in
the strategic process.

Strategy, as has already been stated, refers to the dedication of the purpose or mission and the
primary basic long-term objectives of an employer, and the adoption of courses of movement
and allocation of assets necessary to gain those targets. Consequently, objectives discussed
earlier are a part of strategy formulation.

Policies are general statements which guide managers’ questioning to take decision. They
offer a large boundary inside which decision ought to fall. Consequently the essence of
coverage is discretion. Strategy, but, concerns the route wherein human and material
resources can be implemented with a purpose to increasing the threat of achieving selected
goals. The important thing feature of strategies and rules is to unify and deliver route to plans.
However if one in every of them stands alone, can hardly ever ensure that an organization
will attain its goal.

Apparently strategic planning appears to be an easy exercising; analyses the present day and
anticipated destiny future, decides the course of the company, and develops way for
achieving the goal.

Four Major Types of Competitive Strategies

Cost Leadership

The cost leadership strategy is commonly simplest hired by large agencies which can reap
products cheaply through economies of scale. They flip around and sell these cheaply
purchased merchandises to consumers, adding a minimum markup to preserve the price low.
The concept behind this method is to be the cheapest issuer of a very good or service --
making it tough to your competition to compete with you. Due to the fact this strategy
requires for economies of scale, it's poorly perfect for maximum small businesses.

Differentiation

Businesses that use the differentiation strategy provide unique products or services. Having a
completely unique presenting offers agencies an advantage over their competition because
their competitors actually cannot offer what they're offering. To develop precise services and
products, organizations often invest closely in research and development -- something that
many small companies honestly cannot manage to pay for. Organizations relying on
differentiation want to be careful to now not increase without problems imitated services
because that can break the uniqueness.

Low-Cost Focus

The low-cost focus strategy is much like the cost leadership strategy except that it makes a
speciality of a niche market. Rather than marketing a product to the complete populace it's far
advertised to a specific segment of the populace. The intention of the strategy is to then be the
cheapest company in that section. For example, an electronics store might focus its market on
a single town; its purpose might then be the most inexpensive in the city but not necessarily
the most inexpensive overall.

Differentiation Focus

The differentiation strategy, like the low-cost focus strategy, additionally specializes in a
specific subset of the market. But as opposed to marketing a products or services as the most
inexpensive, it is advertised as being specific in some manner. For instance, a company may
broaden a product that is particularly made for left-handed people. Via that specialize in a
slender market phase, a company can focus its efforts which can also require fewer assets
than developing a product for the vast market.

Types of Strategic Alternatives

Most businesses today also develop strategies at two distinct levels. The two general levels
are

Business-level strategy

Business-level strategy is the set of strategic alternatives from which a corporation chooses as
it conducts business in a particular industry or market. Such options assist the organisation to
recognition its efforts for each industry or market in a targeted style.

Source: http://slideplayer.com/slide/3602316/
 Corporate-level strategy

The corporate-level strategy is the set of strategic options from which a business enterprise
chooses because it manages its operations concurrently across several industries and several
markets. Companies today compete in a ramification of industries and markets. Therefore; as
they develop business-level strategies for each industry or market, in addition, they develop a
standard strategy that allows outlining the mix of industries and markets which can be of
interest to the company. Those levels offer companies a rich combination of strategic
alternatives.

(https://iedunote.com/strategic-alternatives )

8.04. Stability Strategy

Definition: the Stability strategy is followed while the organization tries to hold its current
position and focuses simplest at the incremental improvement by means of merely converting
one or greater of its business operations within the attitude of consumer corporations,
purchaser functions and technology alternatives, both individually or collectively.

Stability Strategies could be of three types:

( http://businessjargons.com/stability-strategy.html )

1. No-Change Strategy
2. Profit Strategy
3. Pause/Proceed with Caution Strategy

To have a better understanding of Stability Strategy go through the following examples in the
context of customer groups, customer functions and technology alternatives.

1. The publication house gives special services to the instructional establishments other
than its client sale via the market intermediaries, with the intention to facilitate a bulk buying.

2. The electronics enterprise provides higher after-income services to its customers to

make the consumer happy and improve its product image.

3. The biscuit production business enterprise improves its present era to have the green
productivity. In all the above examples, the groups are not making any sizeable modifications
in their operations, they may be serving the equal customers with the same merchandise the
usage of the identical era. (http://businessjargons.com/balance-method.html)

A solid method arises out of a basic belief by means of the management that the firm ought to
focus on the use of its gift assets for developing its aggressive electricity especially
marketplace areas. In easy words, stability strategy refers to the agency’s policy of continuing
the identical business and with the identical targets.

When a product is properly widely widespread and has a brand value in the market, the
company would want to enlarge its market base in that precise product section to win over its
competitors. For example, ‘antique Cinthol’ from Godrej, continues to be the depended on
the desire of maximum clients and one of the top most brands in soaps. Especially in rural
areas, human beings opt for Cinthol, which comes in extraordinary sizes in lieu of purchaser
preference. (http://www.managementguru.net/what-is-stability-strategy/ )

8.05. Growth Strategy

Organizations pursuing a growth strategy can be described as follows:

1. They do now not necessarily grow faster than the economy as a whole, however, do
develop quicker than the markets wherein their products are sold.

2. They generally tend to have large-than-common income margins.

3. They try to postpone or maybe cast off the risk of price competition of their industry.
4. They often broaden new products, new markets, new procedures, and new makes use of for
antique merchandise.

5. Rather than adapting to adjustments in the outside world, they tend to conform the outside
global to themselves to the aid of creating something or a demand for something that did now
not exist earlier than.

Organizations pursuing growth strategies, but, are not constrained to increase industries. They
may be discovered in industries with fantastically constant markets and installed product lines

https://courses.lumenlearning.com/marketing-spring2016/chapter/reading-strategic-
opportunity-matrix/

1. Market Penetration: focus on current products and current markets with the aim of
increasing market proportion
2. Marketplace Development: use present merchandise to seize new markets
3. Product Development: create new merchandise that can be sold in present markets
 4. Diversification: create completely new opportunities by way of growing new
merchandise to be able to be added in new markets

Every strategy includes a distinct stage of risk. Market penetration has the bottom risk since it
emphasizes recognised markets and existing merchandise. Diversification has the very best
chance because it entails the improvement of new merchandise and taking them to new
markets. The company has to do not forget whether it is able to achieve the preferred returns
without risking a move into new markets or introducing new products. Regularly, even
though, better risk leads to a higher returns.

Reasons of Growth strategy:

Why does an organization decide to pursue a growth strategy? While there is no single
reason, several different possibilities exist:

1. Growth has been ingrained in Americans as "the path of success." because formative years,
many people have held the dream of beginning and growing their very own businesses. This
has constantly been and nevertheless is, regarded because the quickest manner to get wealthy.

2 Managers are frequently given bonuses, salary increases, and persevered employment for
achieving growth in sales and profits. For instance, it isn't always unusual for a bonus based
totally on increase in profits to be written right into a top-level supervisor's employment
agreement.

3 Managers who did not begin, and won't even own, a massive interest in the business
enterprise need to be remembered as having made widespread contributions to the
organization. Greater regularly than now not, making "big contributions" is interpreted as
having elevated the organisation.

4 Pressures from investors and others with a financial interest in the company pressure
growth. Stockholders, protection analysts, and bankers want to put money into and support
growth-oriented corporations.

5. A perception exists that the business enterprise needs to grow if it is to live on. In positive
volatile industries, an enterprise does not have the option of remaining stable if it is to
survive.
(http://www.bizstudyportal.com/content/b/i/z/S/t/u/D/y/MGT/STRMGT/2/24MGT2012STR
MGT0916170628.pdf )

8.06. Combination Strategy

Definition: The Combination strategy means making the use of other grand strategies
(stability, growth or retrenchment) concurrently. without a doubt, the Combination of any
grand strategy utilized by a business enterprise in distinct corporations at the same time or in
the identical enterprise at distinctive times with an intention to enhance its efficiency is
referred to as a Combination strategy.

Such strategy is accompanied when a business enterprise is huge and complicated and
consists of numerous corporations that lie in different industries, serving exclusive functions.
Undergo the following example to have a higher understanding of the combination strategy:

* A baby diaper production company augments its imparting of diapers for the infants to have
a huge range of its products (balance) and at the equal time, it additionally manufactures the
diapers for vintage age people, thereby masking the other market segment (enlargement).
That allows you to recognition extra on the diapers department, the company plans to close
down its baby wipes division and allocate its assets to the most worthwhile division
(Retrenchment).
Source: http://slideplayer.com/slide/5134416/

Inside the above example, the organisation is following all the three grand strategies with the
goal of enhancing its overall performance. The strategist needs to be very cautious whilst
selecting the combination strategy because it includes the scrutiny of the surroundings and
the demanding situations each enterprise operation faces. The mixture strategy can be
observed either simultaneously or in the sequence. (http://businessjargons.com/combination-
strategy.html#ixzz4z4bx5hb2 )

8.07. Retrenchment Strategy

A strategy utilized by organizations to reduce the variety or the general length of the
operations of the organization. This approach is frequently used in an effort to cut expenses
with the purpose of becoming an extra monetary strong commercial enterprise. Usually, the
strategy includes withdrawing from certain markets or the discontinuation of promoting
positive merchandise or service so one can make a useful turnaround.
(http://www.businessdictionary.com/definition/retrenchment-strategy.html)
Source: https://businessjargons.com/retrenchment-strategy.html

8.08. Other Strategies / Strategic Alternatives

Some other important strategies, which are used in by business managers, are as follows :

(1) Focused or Market Niche Strategy

The implementation of organisation competition approach may be based on the use of

differentiated, recognition, or niche strategies. This chapter analyzes strategic desire
associated with differentiated, cognizance, an area of interest based totally sources of
competitive benefit. It comments on the specification and management of the value chain to
attain those resources of competitive advantage.

It describes enterprise strategies which are centred intently on serving phase-specific or area
of interest markets. Commercial enterprise strategy may also as a substitute be based on the
technique of products or services differentiation across a number markets and market
segments. Each kind of approach is in comparison and contrast.
Market Segmentation

Market segmentation becomes described in because the evaluation of a particular market or

sector demand for into its constituent elements, so that units of shoppers or customers may be
differentiated. Those units of purchasers or users may also then be used as goals inside the
product-market towards which appropriate services or products may be specified and placed
to meet segment customer demand. Market segmentation could be wanted as a key
information input in order to narrate the needs of customers or clients to the business
enterprise.

Undifferentiated Product-Market Strategies

Organizations for example within the business, healthcare, and public sectors will not be
market-oriented. They may be “inward searching” or “production orientated”. They will not
be sensitive to the desires of their clients or customers. As an example, public sector,
healthcare, or public carrier institutions may also still perceive their role in the conventional
phrases of “administering” services to clients or clients. The views or concerns of these
“recipients” are not visible as applicable to strategy formulation or decision-making in the
company.

Those kinds of an agency may consequently make little attempt to closely relate their service
or product offer to the wishes or expectations of customers or consumers. And where there
may be a loss of competition, as an instance inside the public or healthcare zone, no attempt
can be made to distinguish the service or product from that of any other issuer. Customers or
users will simply be placed up with whatever service is notion through others to be suitable
for them.

The “strategy” being followed through such organizations can be described as

undifferentiated. In the public or healthcare sectors, for example, it could result from a lack of
effective incentive or a lack of competition among vendors, players, and relative consumer
powerlessness to do something about the situation. In the business sector, it is able to result
from the product or customer familiarity, and the length of time for which the organization
has been trading in the marketplace; on client inertia; on a monopoly role; or on a loss of
effective incentive or competition. Companies will make what they assume they can promote.
they may have big experience of the market, but the lack of market research and market
analysis will bring about an ineffective (or non-existent) market segmentation enter to the
business planning activity. And wherein there is a lack of market segmentation analysis,
products or services won't properly be differentiated and placed consistent with particular
segment requirements.

There are several disadvantages attaching to such an undifferentiated product-market

strategy. These include:

 Success rates may be unpredictable since the business enterprise has restricted its use
of market evaluation within the business planning process. Its preference of strategies
may also in component depend on good fortune, beyond recognition, or past glory for
their achievement.
 Maximizing new product or process development risk – ineffective market analysis
and product positioning is a major cause of new product or process failure.
 Volume-commodity business – corporations marketing undifferentiated products can
be forced into the sort of excessive quantity and low margin competition defined.
 the manufacture of own brands – companies who have been unable to place successfully
differentiated products on in reality identified target segments may be compelled to
undertake the manufacture of distributor or store own-brands. This includes a excessive
danger of loss of agency identification and control, and the likelihood of depressed
trading margins. ( Morden Tony 1993 )

A marketing approach for a very good or service with functions that attraction to a
selected minority market subgroup. a typical product advertised the usage of a gap
strategy can be without difficulty outstanding from other merchandise, and it's going to
additionally be produced and sold for specialized uses inside its corresponding niche
market.

( http://www.businessdictionary.com/definition/niche-strategy.html )

(2) Benchmarking

Benchmarking is the process of identifying quality practices in an enterprise and thereby

placing goals to emulate them to the organisation. Benchmarking is defined as a look for the
high-quality enterprise practices that, while put into effect, will lead to advanced
merchandise, techniques and offerings. Benchmarking is a continuous structured process that
ends in superior performance and a competitive gain. The scope is to set hard and
conceivable dreams to come to be exceptional of the best. Analyzing, investigating and
incorporating exceptional enterprise practices result in profitable returns.

INTRODUCTION

Benchmarking is an ever-increasing management prerequisite for enforcing meaningful

positive adjustments in an organisation. Benchmarking has proved to be a powerful tool for
accomplishing business objectives. On the grounds that no one has time or resources to
reinvent solutions, businesses benchmark for brand new thoughts, new insights and
exceptional practices to give them the competitive side. For an organization to create their
own successful future, they have to examine from their surroundings - from the excellent and
brightest competitors, markets, products and techniques of their enterprise. Benchmarking
has been performed within the beyond under the call competitive analysis. Benchmarking has
been around for the reason that early 1980's and is broadly practised throughout the United
States, and has been swiftly growing in Europe, Australia and Asia. In India, despite the fact
that Benchmarking has been extensively pointed out, handiest few corporations have
effectively carried out it.

DEFINING BENCHMARKING

1. American productivity quality center (APQC) defines benchmarking as "the process of

identifying, understanding and adapting outstanding practices and processes from
organizations anywhere in the world to help your organization to improve its performance”.

2. Robert. C. Camp defines benchmarking as the continuous process of measuring the

products, services and practices against the toughest competitors or those companies
recognized as the industry leaders.

3. According to professor Malcom Rimmor of Deakin University, benchmarking is

"intelligent copying to improve business"

BASED ON PARTNERS

1. Internal Benchmarking

It is far evaluation between units within one organization. It permits agencies to attain
immediately profits by figuring out their great internal practices and shifting the ones to other
components of the organization. However, the potential for the real performance
breakthroughs is instead small, as you seek statistics within your own, already widely
recognized environment.

2. Competitive Benchmarking

It implies evaluation together with your competitors. The goal is to compare organizations
inside the same market that have competing services or products eg. Coca-Cola Vs Pepsi,
Bajaj vs. Hero Honda. The advantage of competitive benchmarking is that you could see
what your associated overall performance is.

3. Generic Benchmarking

Benchmarking a technique in a single or several companies, that are in unrelated business, is

referred to as generic benchmarking. This type of benchmarking specializes in excellent work
strategies rather than on the commercial enterprise practices of a selected organization or
enterprise. A few commercial enterprise capabilities are the equal irrespective of
dissimilarities of the industries. It has the capability of disclosing the satisfactory of best
practices.

BASED ON SUBJECT

It is very a good deal comparing performance levels towards "the satisfactory". The point of
interest may be at the entire company or components of it. Overall performance
benchmarking calls for the least useful resource help because it relies on the analysis of data
from database searches and surveys that may be performed with the aid of an experienced
librarian or a market research expert.

2. Strategic Benchmarking

In strategic benchmarking, the point of interest goes beyond the overall performance
leadership and it is far more about comparing strategic, corporate decisions. This could be an
important statistics to the groups own strategic planning. Strategic benchmarking has come to
be increasingly popular as it calls for simplest a restricted investment and a small expert
team.

3. Process Benchmarking

It method looking for the best practices through face to face research and observation of key
business strategies irrespective of who the pleasant practice candidate can be. Process
benchmarking requires the participation of subject professionals, the owner of a process and
process work team.

BENCHMARKING PROCESS STEPS

Benchmarking is done in four phases and these four phases are divided into ten process steps
to obtain good results. The four phases of benchmarking process are:

1. Planning: Identify what is to be benchmarked, Identify comparative candidates, Determine

data collection method and collect data,

2. Analysis: Determine the current performance gap, Project future performance levels,

3. Integration: Communicate benchmark findings and gain acceptance, Establish functional

goals,

4. Action: Develop action plans, Implement specific actions and monitor progress and
Recalibrate benchmark

OBJECTIVES OF FOUR PHASES

1. Planning - The objective of this phase is to prepare a plan for selecting factors for
comparing, method of data collection and identifying the competitors for benchmarking

2. Analysis - The phase will assist companies to understand competitors strengths and to
assess their performance against these strengths

3. Integration - The objective of this phase i s to use the data gathered to define the goals
necessary to gain or maintain superiority and to incorporate these goals into company’s
formal planning processes.

4. Action - During this stage the strategies and action plans established through the
benchmarking process are implemented and periodically assessed (Recalibrated), with reports
of company’s progress in achieving them.

( http://shodhganga.inflibnet.ac.in/bitstream/10603/10170/15/16_chapter%207.pdf )
Types of Benchmarking

• Internal benchmarking
• Competitive benchmarking
• Industry or Functional benchmarking
• Process or Generic benchmarking

Internal Benchmarking

• Similar activities in different locations, departments etc

• Advantages:

 “Sharing” - Communication
 Data easy to get
 Good results, immediate benefit
 Good practice

• Disadvantages:

 Limited focus
 Internal bias
 “Miss the boat”

Competitive Benchmarking

• Direct Competitors, same customer base

• Advantages:

 Directly relevant
 Comparable practices & technologies
 History of information

• Disadvantages

 Data collection difficulties

 Ethical issues
 Antagonism
Industry or Functional Benchmarking

• Leaders in Similar Industry

• Advantages

o Willing partners
o Readily Transferable
o Disadvantages
o Cost

Process or Generic Benchmarking

• State of the art Processes/products/services

• Break the company into generic functions

• Advantages

 Breakthrough ideas
 Network development
 High potential for innovation

• Disadvantages:

o Hard to do
o Transferring practices (learning!)
o Some information not transferable
o Time consuming

(https://www.stat.auckland.ac.nz/~mullins/quality/Benchmark )
9. REFERENCES

Mintzberg, H., Raisinghani, D., & Theoret, A. (1976), “The structure of „unstructured‟
decision process”, Administrative Science Quarterly, 21, pp. 246-275.

Burrell, G. and Morgan, G. (1979), Sociological Paradigms and Organisational Analysis,

London, Heinemann.

Cyert, R.M. & March, J.G. (1963), A Behavioural Theory of the Firm, Engelwood Clifs,
NJ, Prentice-Hall.

Simon, H. A. (1960), The new science of management decision, New York,

Harper.

Northcott, D. (1992), Capital Investment Decision-Making, London, Academic Press.

Butler, R. J., Davies, L., Pike, R. & Sharp, J. (1993), Strategic Investment Decisions:
Theory, Practice and Process, London, Routledge.

Pennings, J.M. (1985), “Introduction: On the Nature and Theory of Strategic Decisions”, in
Pennings, J.M. (ed.) & Associates (1985) Organisational Strategy and Change, San
Francisco, Jossey-Bass Ltd.

Jeffrey Carey ( 2009 ) : Examples of Strategic Alternatives ;

http://smallbusiness.chron.com/examples-strategic-alternatives-77129.html

Morden, A.R. (1993) Elements of Marketing, DP Publications, London.

(http://www.gpmfirst.com/books/principles-strategic-management/differentiated-focus-and-
niche-strategies)
 Exercise

Q1. Explain the information needed for proper formulation

of strategy.

Q2. What are the advantages and disadvantages of being a first

mover in an industry? Give some examples of first mover and later
mover firms. Were they successful?

Q3. What do you understand by Grand Strategies? Discuss the types

of Grand Strategies?