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Understanding

Strategies

INTRODUCTION

MCS are tools to implement strategies.


Strategies differ between organizations, and controls
should be tailored to the requirements of specific
strategies.
Different strategies require different task priorities;
different key success factor; and different skills,
perspectives, and behaviors.
Strategies are plans to achieve organization goals.

GOALS
Goals are the AIMS, MISSION of the
organsiation.
Corporate Goals are determined by
CEO with the advice of other senior
members of Management and this is
ratified by the Board of Directors.
Sometimes Goals set by the Founders

Goals
Profitability
Maximising Shareholders Value
Minimising Risk

Strategy

A companys strategy consists of the competitive


moves, internal operating approaches, and action
plans devised by management to produce successful
performance.

Strategy is managements game plan for running


the business.

Managers need strategies to guide HOW the


organizations business will be conducted and HOW
performance targets will be achieved.
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Strategy Formulation

According to Andrews, Strategy


Formulation is a process that senior
executives use to evaluate a company
strengths and weakness in light of the
opportunities and threats present in the
environment and then to decide on
strategies that fit the companys core
competencies with environmental
opportunities.
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Role of Strategies in Business

1. Minimize Business Risk


2. Decision Making
3. Achieve Objectives
4. Facilitate Organizing
5. Control
6. Motivation
7. Optimum use of Resources
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Levels of Strategy

Levels of Strategy
1.

Corporate-level Strategy
The set of strategic alternatives that an organization
chooses from as it manages its operations
simultaneously across several industries and several
markets.

2. Business-level Strategy
How the organization conducts business in a particular
industry.
3.

Functional-level Strategy
Strategy developed for specific functional areas
such as marketing, finance, and so forth.
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Levels of Strategy-Making
Corporate
Strategy

Business
Strategies

Functional
Strategies
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Corporate Level Strategy

Corporate strategy is about being in the right


mix of business. Thus corporate strategy is
concerned more with the question where to
complete that with how to compete in
particular industry.
At the Corporate Level issues are
1) The definition of business in which firm will
participate and
2) The deployment of resources among those
businesses.
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Corporatewide strategic analysis results


in decisions involving Business to
i) ADD
ii) RETAIN
iii) EMPHASIZE
iv) DEEMPHASIZE
v) DIVEST

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Corporate Level Strategy varies based on the


categories of Business.
I) Single Industry Firm
Competes in only one Industry
II) Related Diversified Firm
Sharing of Core Competencies across the
Business.
III) Unrelated Diversified Firm
Totally autonomous business in very different
markets
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Business Unit Strategies

Business Unit Strategies deals with how to


create and maintain competitive advantage in
each of the industry in which a company has
chosen to participate.
The Strategy of the business unit depends
upon its
i) Mission
ii) Competitive Advantage
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Mission for Business Unit


i) BUILD
II) HOLD
III) HARVEST
IV) DIVEST

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BCG Matrix*
Market Growth Rate

High
Stars

Cash
Cows

Question
Marks

Dogs

Low
High

Relative Market Share

Low
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BCG Market Share/Market Growth Matrix

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Business Unit Competitive


Advantage
Micheal Porter has developed two
approaches for this
I) Industry Analysis
II) Value Chain Analysis

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Five Forces Model of


Competition
Substitute Products
(of firms in
other industries)

Suppliers
of Key
Inputs

Rivalry
Among
Competing
Sellers

Potential
New
Entrants

Buyers

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Porters Five Competitive


Forces

1. Threat of new entrants


2. Competitive rivalry

3. Threat of substitute products


4. Power of buyers
5. Power of suppliers
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Generic Strategies

Porters Generic Strategies


1. Differentiation strategy
An organization seeks to distinguish itself from
competitors through the quality of its products or
services. Developing an image perceived as unique

2. Overall cost leadership strategy


An organization attempts to gain competitive
advantage by reducing its costs below the costs of
competing firms.

3. Focus strategy
An organization concentrates on a specific regional
market, product line, or group of buyers.

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