MASTER LEVEL 1

STRATEGIC MANAGEMENT LECTURE NOTES

An Introduction

Strategic Management is all about identification and description of the strategies that managers can carry
so as to achieve better performance and a competitive advantage for their organization.

An organization is said to have competitive advantage if its profitability is higher than the average
profitability for all companies in its industry.

Strategic management can also be defined as a bundle of decisions and acts which a manager undertakes
and which decides the result of the firm’s performance.

The manager must have a thorough knowledge and analysis of the general and competitive
organizational environment so as to take right decisions.
The managers should conduct a SWOT Analysis (Strengths, Weaknesses, Opportunities, and Threats)
in order to - make the best possible utilization of strengths, minimize the organizational weaknesses,
make use of arising opportunities from the business environment and shouldn’t ignore the threats.

Strategic management is nothing but planning for both predictable as well as unfeasible
contingencies. It is applicable to both small as well as large organizations as even the smallest
organization face competition and, by formulating and implementing appropriate strategies, they can
attain sustainable competitive advantage.

It is a way in which strategists set the objectives and proceed about attaining them.

It deals with making and implementing decisions about future direction of an organization. It helps us to
identify the direction in which an organization is moving.

Strategic management is a continuous process that:

 1. evaluates and controls the business and the industries in which an organization is involved;
2. evaluates its competitors and sets goals and strategies to meet all existing and potential
competitors; and then
3. re-evaluates strategies on a regular basis to determine how it has been implemented and whether
it was successful or does it needs replacement

Strategic Management gives a broader perspective to the employees of an organization and they can
better understand how their job fits into the entire organizational plan and how it is co-related to other
organizational members.

It is nothing but the art of managing employees in a manner which maximizes the ability of achieving
business objectives.

The employees become more trustworthy, more committed and more satisfied as they can co-relate
themselves very well with each organizational task.

They can understand the reaction of environmental changes on the organization and the probable
response of the organization with the help of strategic management.

Thus the employees can judge the impact of such changes on their own job and can effectively face the
changes. The managers and employees must do appropriate things in appropriate manner. They need to
be both effective as well as efficient.

One of the major role of strategic management is to incorporate various functional areas of the
organization completely, as well as, to ensure these functional areas harmonize and get together well.

Another role of strategic management is to keep a continuous eye on the goals and objectives of the
organization.

Strategy - Definition and Features

The word “strategy” is derived from the Greek word “strategos”; stratus (meaning army) and “ago”
(meaning leading/moving).
Strategy is an action that managers take to attain one or more of the organization’s goals.

Strategy can also be defined as “A general direction set for the company and its various components to
achieve a desired state in the future. Strategy results from the detailed strategic planning process”.

A strategy is all about integrating organizational activities and utilizing and allocating the scarce
resources within the organizational environment so as to meet the present objectives.

While planning a strategy it is essential to consider that decisions are not taken in a vaccum and that any
act taken by a firm is likely to be met by a reaction from those affected, competitors, customers,
employees or suppliers.

Strategy can also be defined as knowledge of the goals, the uncertainty of events and the need to take
into consideration the likely or actual behavior of others.

Strategy is the blueprint of decisions in an organization that shows its objectives and goals, reduces
the key policies, and plans for achieving these goals, and defines the business the company is to carry
on, the type of economic and human organization it wants to be, and the contribution it plans to make to
its shareholders, customers and society at large.

Features of Strategy

1. Strategy is Significant because it is not possible to foresee the future. Without a perfect foresight,
the firms must be ready to deal with the uncertain events which constitute the business
environment.
2. Strategy deals with long term developments rather than routine operations, i.e. it deals with
probability of innovations or new products, new methods of productions, or new markets to be
developed in future.
3. Strategy is created to take into account the probable behavior of customers and competitors.
Strategies dealing with employees will predict the employee behavior.

Strategy is a well defined roadmap of an organization. It defines the overall mission, vision and
direction of an organization. The objective of a strategy is to maximize an organization’s strengths and
to minimize the strengths of the competitors.
Strategy, in short, bridges the gap between “where we are” and “where we want to be”.

Components of a Strategy Statement

The strategy statement of a firm sets the firm’s long-term strategic direction and broad policy directions.
It gives the firm a clear sense of direction and a blueprint for the firm’s activities for the upcoming
years. The main constituents of a strategic statement are as follows:

1. Strategic Intent

An organization’s strategic intent is the purpose that it exists and why it will continue to
exist, providing it maintains a competitive advantage. Strategic intent gives a picture about
what an organization must get into immediately in order to achieve the company’s vision. It
motivates the people. It clarifies the vision of the vision of the company.

Strategic intent helps management to emphasize and concentrate on the priorities. Strategic
intent is, nothing but, the influencing of an organization’s resource potential and core
competencies to achieve what at first may seem to be unachievable goals in the competitive
environment.

A well expressed strategic intent should guide/steer the development of strategic intent or the
setting of goals and objectives that require that all of organization’s competencies be controlled
to maximum value.

Strategic intent includes directing organization’s attention on the need of winning; inspiring
people by telling them that the targets are valuable; encouraging individual and team
participation as well as contribution; and utilizing intent to direct allocation of resources.

Strategic intent differs from strategic fit in a way that while strategic fit deals with harmonizing
available resources and potentials to the external environment, strategic intent emphasizes on
building new resources and potentials so as to create and exploit future opportunities.

2. Mission Statement
Mission statement is the statement of the role by which an organization intends to serve it’s
stakeholders. It describes why an organization is operating and thus provides a framework within
which strategies are formulated. It describes what the organization does (i.e., present
capabilities), who all it serves (i.e., stakeholders) and what makes an organization unique (i.e.,
reason for existence).

A mission statement differentiates an organization from others by explaining its broad scope of
activities, its products, and technologies it uses to achieve its goals and objectives. It talks about
an organization’s present (i.e., “about where we are”).

For instance, Microsoft’s mission is to help people and businesses throughout the world to
realize their full potential.

Wal-Mart’s mission is “To give ordinary folk the chance to buy the same thing as rich people.”

Mission statements always exist at top level of an organization, but may also be made for various
organizational levels. Chief executive plays a significant role in formulation of mission
statement. Once the mission statement is formulated, it serves the organization in long run, but it
may become ambiguous with organizational growth and innovations.

In today’s dynamic and competitive environment, mission may need to be redefined. However,
care must be taken that the redefined mission statement should have original
fundamentals/components.

Mission statement has three main components- a statement of mission or vision of the
company, a statement of the core values that shape the acts and behaviour of the employees, and
a statement of the goals and objectives.

Features of a Mission

a. Mission must be feasible and attainable. It should be possible to achieve it.

b. Mission should be clear enough so that any action can be taken.
c. It should be inspiring for the management, staff and society at large.
d. It should be precise enough, i.e., it should be neither too broad nor too narrow.
 e. It should be unique and distinctive to leave an impact in everyone’s mind.
f. It should be analytical,i.e., it should analyze the key components of the strategy.
g. It should be credible, i.e., all stakeholders should be able to believe it.
3. Vision

A vision statement identifies where the organization wants or intends to be in future or where it
should be to best meet the needs of the stakeholders. It describes dreams and aspirations for
future.

For instance, Microsoft’s vision is “to empower people through great software, any time, any
place, or any device.” Wal-Mart’s vision is to become worldwide leader in retailing.

A vision is the potential to view things ahead of themselves. It answers the question “where we
want to be”. It gives us a reminder about what we attempt to develop. A vision statement is for
the organization and it’s members, unlike the mission statement which is for the
customers/clients. It contributes in effective decision making as well as effective business
planning.

It incorporates a shared understanding about the nature and aim of the organization and utilizes
this understanding to direct and guide the organization towards a better purpose. It describes that
on achieving the mission, how the organizational future would appear to be.

An effective vision statement must have following features-

a. It must be unambiguous.
b. It must be clear.
c. It must harmonize with organization’s culture and values.
d. The dreams and aspirations must be rational/realistic.
e. Vision statements should be shorter so that they are easier to memorize.

In order to realize the vision, it must be deeply instilled in the organization, being owned and
shared by everyone involved in the organization.
 4. Goals and Objectives

A goal is a desired future state or objective that an organization tries to achieve. Goals specify in
particular what must be done if an organization is to attain mission or vision. Goals make
mission more prominent and concrete. They co-ordinate and integrate various functional and
departmental areas in an organization. Well made goals have following features-

a. These are precise and measurable.

b. These look after critical and significant issues.
c. These are realistic and challenging.
d. These must be achieved within a specific time frame.
e. These include both financial as well as non-financial components.

Objectives are defined as goals that organization wants to achieve over a period of time. These
are the foundation of planning. Policies are developed in an organization so as to achieve these
objectives. Formulation of objectives is the task of top level management. Effective objectives
have following features-

f. These are not single for an organization, but multiple.

g. Objectives should be both short-term as well as long-term.
h. Objectives must respond and react to changes in environment, i.e., they must be flexible.
These must be feasible, realistic and operational.

Importance of Vision and Mission Statements

One of the first things that any observer of management thought and practice asks is whether a particular
organization has a vision and mission statement. In addition, one of the first things that one learns in a
business school is the importance of vision and mission statements.

This article is intended to elucidate on the reasons why vision and mission statements are
important and the benefits that such statements provide to the organizations.
It has been found in studies that organizations that have lucid, coherent, and meaningful vision and
mission statements return more than double the numbers in shareholder benefits when compared to the
organizations that do not have vision and mission statements. Indeed, the importance of vision and
mission statements is such that it is the first thing that is discussed in management textbooks on strategy.

Some of the benefits of having a vision and mission statement are discussed below:

 Above everything else, vision and mission statements provide unanimity of purpose to
organizations and imbue the employees with a sense of belonging and identity. Indeed, vision
and mission statements are embodiments of organizational identity and carry the organizations
creed and motto. For this purpose, they are also called as statements of creed.
 Vision and mission statements spell out the context in which the organization operates and
provides the employees with a tone that is to be followed in the organizational climate. Since
they define the reason for existence of the organization, they are indicators of the direction in
which the organization must move to actualize the goals in the vision and mission statements.
 The vision and mission statements serve as focal points for individuals to identify themselves
with the organizational processes and to give them a sense of direction while at the same time
deterring those who do not wish to follow them from participating in the organization’s
activities.
 The vision and mission statements help to translate the objectives of the organization into work
structures and to assign tasks to the elements in the organization that are responsible for
actualizing them in practice.
 To specify the core structure on which the organizational edifice stands and to help in the
translation of objectives into actionable cost, performance, and time related measures.
 Finally, vision and mission statements provide a philosophy of existence to the employees,
which is very crucial because as humans, we need meaning from the work to do and the vision
and mission statements provide the necessary meaning for working in a particular organization.
As can be seen from the above, articulate, coherent, and meaningful vision and mission statements go a
long way in setting the base performance and actionable parameters and embody the spirit of the
organization.

In other words, vision and mission statements are as important as the various identities that individuals
have in their everyday lives.

It is for this reason that organizations spend a lot of time in defining their vision and mission statements
and ensure that they come up with the statements that provide meaning instead of being mere sentences
that are devoid of any meaning.

Strategic Management Process - Meaning, Steps and Components

The strategic management process means defining the organization’s strategy. It is also defined as the
process by which managers make a choice of a set of strategies for the organization that will enable it to
achieve better performance.

Strategic management is a continuous process that appraises the business and industries in which the
organization is involved; appraises it’s competitors; and fixes goals to meet all the present and future
competitor’s and then reassesses each strategy.

Strategic management process has following four steps:

1. Environmental Scanning- Environmental scanning refers to a process of collecting, scrutinizing

and providing information for strategic purposes.

It helps in analyzing the internal and external factors influencing an organization.

After executing the environmental analysis process, management should evaluate it on a

continuous basis and strive to improve it.

2. Strategy Formulation- Strategy formulation is the process of deciding best course of action for
accomplishing organizational objectives and hence achieving organizational purpose.
 After conducting environment scanning, managers formulate corporate, business and functional
strategies.

3. Strategy Implementation- Strategy implementation implies making the strategy work as

intended or putting the organization’s chosen strategy into action.

Strategy implementation includes designing the organization’s structure, distributing resources,

developing decision making process, and managing human resources.

4. Strategy Evaluation- Strategy evaluation is the final step of strategy management process.

The key strategy evaluation activities are: appraising internal and external factors that are the
root of present strategies, measuring performance, and taking remedial/corrective actions.

Evaluation makes sure that the organizational strategy as well as it’s implementation meets the
organizational objectives.

These components are steps that are carried, in chronological order, when creating a new strategic
management plan.

Present businesses that have already created a strategic management plan will revert to these steps as per
the situation’s requirement, so as to make essential changes.

Components of Strategic Management Process

Strategic management is an ongoing process. Therefore, it must be realized that each component
interacts with the other components and that this interaction often happens in chorus.

Environmental Scanning - Internal & External Analysis of Environment

Organizational environment consists of both external and internal factors. Environment must be scanned
so as to determine development and forecasts of factors that will influence organizational success.

Environmental scanning refers to possession and utilization of information about occasions,

patterns, trends, and relationships within an organization’s internal and external environment.

It helps the managers to decide the future path of the organization. Scanning must identify the threats
and opportunities existing in the environment.

During strategy formulation, an organization must take advantage of the opportunities and minimize the
threats. A threat for one organization may be an opportunity for another.

Internal analysis of the environment is the first step of environment scanning. Organizations should
observe the internal organizational environment.

This includes employee interaction with other employees, employee interaction with management,
manager interaction with other managers, and management interaction with shareholders, access to
natural resources, brand awareness, organizational structure, main staff, operational potential, etc. Also,
discussions, interviews, and surveys can be used to assess the internal environment.

Analysis of internal environment helps in identifying strengths and weaknesses of an organization.

As business becomes more competitive, and there are rapid changes in the external environment,
information from external environment adds crucial elements to the effectiveness of long-term plans.

As environment is dynamic, it becomes essential to identify competitors’ moves and actions.

Organizations have also to update the core competencies and internal environment as per external
environment.

Environmental factors are infinite, hence, organization should be agile and vigile to accept and adjust
to the environmental changes.

For instance - Monitoring might indicate that an original forecast of the prices of the raw materials that
are involved in the product are no more credible, which could imply the requirement for more focused
scanning, forecasting and analysis to create a more trustworthy prediction about the input costs. In a
similar manner, there can be changes in factors such as competitor’s activities, technology, market tastes
and preferences.

While in external analysis, three correlated environment should be studied and analyzed —

 immediate/industry environment
 national environment
 broader socio-economic environment/macro-environment

Examining the industry environment needs an appraisal of the competitive structure of the
organization’s industry, including the competitive position of a particular organization and it’s main
rivals. Also, an assessment of the nature, stage, dynamics and history of the industry is essential. It also
implies evaluating the effect of globalization on competition within the industry.

Analyzing the national environment needs an appraisal of whether the national framework helps in
achieving competitive advantage in the globalized environment.

Analysis of macro-environment includes exploring macro-economic, social, government, legal,

technological and international factors that may influence the environment. The analysis of
organization’s external environment reveals opportunities and threats for an organization.

Strategic managers must not only recognize the present state of the environment and their industry but
also be able to predict its future positions.

Steps in Strategy Formulation Process

Strategy formulation refers to the process of choosing the most appropriate course of action for the
realization of organizational goals and objectives and thereby achieving the organizational vision.

The process of strategy formulation basically involves six main steps. Though these steps do not
follow a rigid chronological order, however they are very rational and can be easily followed in this
order.
1. Setting Organizations’ objectives - The key component of any strategy statement is to set the
long-term objectives of the organization. It is known that strategy is generally a medium for
realization of organizational objectives.

Objectives stress the state of being there whereas Strategy stresses upon the process of reaching
there.

Strategy includes both the fixation of objectives as well the medium to be used to realize those
objectives. Thus, strategy is a wider term which believes in the manner of deployment of
resources so as to achieve the objectives.

While fixing the organizational objectives, it is essential that the factors which influence the
selection of objectives must be analyzed before the selection of objectives. Once the objectives
and the factors influencing strategic decisions have been determined, it is easy to take strategic
decisions.

2. Evaluating the Organizational Environment - The next step is to evaluate the general
economic and industrial environment in which the organization operates. This includes a review
of the organizations competitive position.

It is essential to conduct a qualitative and quantitative review of an organizations existing

product line. The purpose of such a review is to make sure that the factors important for
competitive success in the market can be discovered so that the management can identify their
own strengths and weaknesses as well as their competitors’ strengths and weaknesses.

After identifying its strengths and weaknesses, an organization must keep a track of competitors’
moves and actions so as to discover probable opportunities of threats to its market or supply
sources.

3. Setting Quantitative Targets - In this step, an organization must practically fix the quantitative
target values for some of the organizational objectives. The idea behind this is to compare with
long term customers, so as to evaluate the contribution that might be made by various product
zones or operating departments.
 4. Aiming in context with the divisional plans - In this step, the contributions made by each
department or division or product category within the organization is identified and accordingly
strategic planning is done for each sub-unit. This requires a careful analysis of macroeconomic
trends.
5. Performance Analysis - Performance analysis includes discovering and analyzing the gap
between the planned or desired performance.

A critical evaluation of the organizations past performance, present condition and the desired
future conditions must be done by the organization.

This critical evaluation identifies the degree of gap that persists between the actual reality and
the long-term aspirations of the organization. An attempt is made by the organization to estimate
its probable future condition if the current trends persist.

6. Choice of Strategy - This is the ultimate step in Strategy Formulation. The best course of action
is actually chosen after considering organizational goals, organizational strengths, potential and
limitations as well as the external opportunities.

STRATEGY IMPLEMENTATION AND ITS STEPS

Strategy implementation is the translation of chosen strategy into organizational action so as to

achieve strategic goals and objectives. Strategy implementation is also defined as the manner in which
an organization should develop, utilize, and amalgamate organizational structure, control systems, and
culture to follow strategies that lead to competitive advantage and a better performance.

Organizational structure allocates special value developing tasks and roles to the employees and states
how these tasks and roles can be correlated so as maximize efficiency, quality, and customer
satisfaction-the pillars of competitive advantage. But, organizational structure is not sufficient in itself to
motivate the employees.

An organizational control system is also required. This control system equips managers with
motivational incentives for employees as well as feedback on employees and organizational
performance. Organizational culture refers to the specialized collection of values, attitudes, norms and
beliefs shared by organizational members and groups.

Following are the main steps in implementing a strategy:

 Developing an organization having potential of carrying out strategy successfully.

 Disbursement of abundant resources to strategy-essential activities.
 Creating strategy-encouraging policies.
 Employing best policies and programs for constant improvement.
 Linking reward structure to accomplishment of results.
 Making use of strategic leadership.

Excellently formulated strategies will fail if they are not properly implemented. Also, it is essential to
note that strategy implementation is not possible unless there is stability between strategy and each
organizational dimension such as organizational structure, reward structure, resource-allocation process,
etc.

Strategy implementation poses a threat to many managers and employees in an organization. New power
relationships are predicted and achieved. New groups (formal as well as informal) are formed whose
values, attitudes, beliefs and concerns may not be known. With the change in power and status roles, the
managers and employees may employ confrontation behaviour.

Strategy Formulation vs Strategy Implementation

Following are the main differences between Strategy Formulation and Strategy Implementation-

Strategy Formulation Strategy Implementation

Strategy Formulation includes planning and Strategy Implementation involves all those means
decision-making involved in developing related to executing the strategic plans.
organization’s strategic goals and plans.

In short, Strategy Formulation is placing the In short, Strategy Implementation is managing

Forces before the action. forces during the action.

Strategy Formulation is an Entrepreneurial Strategic Implementation is mainly an

Activity based on strategic decision-making. Administrative Task based on strategic and
operational decisions.

Strategy Formulation emphasizes on effectiveness. Strategy Implementation emphasizes on efficiency.

Strategy Formulation is a rational process. Strategy Implementation is basically an

operational process.

Strategy Formulation requires co-ordination Strategy Implementation requires co-ordination

among few individuals. among many individuals.

Strategy Formulation requires a great deal of Strategy Implementation requires specific

initiative and logical skills. motivational and leadership traits.

Strategic Formulation precedes Strategy STrategy Implementation follows Strategy

Implementation. Formulation.

Strategy Evaluation Process and its Significance

Strategy Evaluation is as significant as strategy formulation because it throws light on the efficiency and
effectiveness of the comprehensive plans in achieving the desired results.

The managers can also assess the appropriateness of the current strategy in todays dynamic world with
socio-economic, political and technological innovations. Strategic Evaluation is the final phase of
strategic management.

The significance of strategy evaluation lies in its capacity to co-ordinate the task performed by
managers, groups, departments etc, through control of performance.

Strategic Evaluation is significant because of various factors such as - developing inputs for new
strategic planning, the urge for feedback, appraisal and reward, development of the strategic
management process, judging the validity of strategic choice etc.

The process of Strategy Evaluation consists of following steps-

1. Fixing benchmark of performance - While fixing the benchmark, strategists encounter
questions such as - what benchmarks to set, how to set them and how to express them.

In order to determine the benchmark performance to be set, it is essential to discover the special
requirements for performing the main task.

The performance indicator that best identify and express the special requirements might then be
determined to be used for evaluation.

The organization can use both quantitative and qualitative criteria for comprehensive assessment
of performance. Quantitative criteria includes determination of net profit, ROI, earning per share,
cost of production, rate of employee turnover etc.

Among the Qualitative factors are subjective evaluation of factors such as - skills and
competencies, risk taking potential, flexibility etc.

2. Measurement of performance - The standard performance is a bench mark with which the
actual performance is to be compared. The reporting and communication system help in
measuring the performance.

If appropriate means are available for measuring the performance and if the standards are set in
the right manner, strategy evaluation becomes easier. But various factors such as managers
contribution are difficult to measure.

Similarly divisional performance is sometimes difficult to measure as compared to individual

performance. Thus, variable objectives must be created against which measurement of
performance can be done.

The measurement must be done at right time else evaluation will not meet its purpose. For
measuring the performance, financial statements like - balance sheet, profit and loss account
must be prepared on an annual basis.

3. Analyzing Variance - While measuring the actual performance and comparing it with standard
performance there may be variances which must be analyzed.
 The strategists must mention the degree of tolerance limits between which the variance between
actual and standard performance may be accepted.

The positive deviation indicates a better performance but it is quite unusual exceeding the target
always. The negative deviation is an issue of concern because it indicates a shortfall in
performance.

Thus in this case the strategists must discover the causes of deviation and must take corrective
action to overcome it.

4. Taking Corrective Action - Once the deviation in performance is identified, it is essential to

plan for a corrective action.

If the performance is consistently less than the desired performance, the strategists must carry a
detailed analysis of the factors responsible for such performance.

If the strategists discover that the organizational potential does not match with the performance
requirements, then the standards must be lowered.

Another rare and drastic corrective action is reformulating the strategy which requires going
back to the process of strategic management, reframing of plans according to new resource
allocation trend and consequent means going to the beginning point of strategic management
process.

Strategic Decisions - Definition and Characteristics

Strategic decisions are the decisions that are concerned with whole environment in which the firm
operates, the entire resources and the people who form the company and the interface between the two.

Characteristics/Features of Strategic Decisions

a. Strategic decisions have major resource propositions for an organization. These decisions may be
concerned with possessing new resources, organizing others or reallocating others.
 b. Strategic decisions deal with harmonizing organizational resource capabilities with the threats
and opportunities.
c. Strategic decisions deal with the range of organizational activities. It is all about what they want
the organization to be like and to be about.
d. Strategic decisions involve a change of major kind since an organization operates in ever-
changing environment.
e. Strategic decisions are complex in nature.
f. Strategic decisions are at the top most level, are uncertain as they deal with the future, and
involve a lot of risk.
g. Strategic decisions are different from administrative and operational decisions.

Administrative decisions are routine decisions which help or rather facilitate strategic decisions
or operational decisions.

Operational decisions are technical decisions which help execution of strategic decisions.

To reduce cost is a strategic decision which is achieved through operational decision of reducing
the number of employees and how we carry out these reductions will be administrative decision.

The differences between Strategic, Administrative and Operational decisions can be summarized as
follows-

Strategic Decisions Administrative Decisions Operational Decisions

Strategic decisions are long-term Administrative decisions are Operational decisions are not
decisions. taken daily. frequently taken.

These are considered where The These are short-term based These are medium-period
future planning is concerned. Decisions. based decisions.

Strategic decisions are taken in These are taken according to These are taken in accordance
Accordance with organizational strategic and operational with strategic and
mission and vision. Decisions. administrative decision.
 These are related to overall These are related to working These are related to production.
Counter planning of all of employees in an
Organization. Organization.

These deal with organizational These are in welfare of These are related to production
Growth. employees working in an and factory growth.
organization.

Benefits of Strategic Management

There are many benefits of strategic management and they include identification, prioritization,
and exploration of opportunities. For instance, newer products, newer markets, and newer forays into
business lines are only possible if firms indulge in strategic planning.

Next, strategic management allows firms to take an objective view of the activities being done by it and
do a cost benefit analysis as to whether the firm is profitable.

Just to differentiate, by this, we do not mean the financial benefits alone (which would be discussed
below) but also the assessment of profitability that has to do with evaluating whether the business is
strategically aligned to its goals and priorities.

The key point to be noted here is that strategic management allows a firm to orient itself to its market
and consumers and ensure that it is actualizing the right strategy.

Financial Benefits

It has been shown in many studies that firms that engage in strategic management are more profitable
and successful than those that do not have the benefit of strategic planning and strategic management.

When firms engage in forward looking planning and careful evaluation of their priorities, they have
control over the future, which is necessary in the fast changing business landscape of the 21st century.
It has been estimated that more than 100,000 businesses fail in the US every year and most of these
failures are to do with a lack of strategic focus and strategic direction.

Further, high performing firms tend to make more informed decisions because they have considered
both the short term and long-term consequences and hence, have oriented their strategies accordingly.

In contrast, firms that do not engage themselves in meaningful strategic planning are often bogged down
by internal problems and lack of focus that leads to failure.

Non-Financial Benefits

The section above discussed some of the tangible benefits of strategic management. Apart from these
benefits, firms that engage in strategic management are more aware of the external threats, an improved
understanding of competitor strengths and weaknesses and increased employee productivity. They also
have lesser resistance to change and a clear understanding of the link between performance and rewards.

The key aspect of strategic management is that the problem solving and problem preventing capabilities
of the firms are enhanced through strategic management.

Strategic management is essential as it helps firms to rationalize change and actualize change and
communicate the need to change better to its employees. Finally, strategic management helps in bringing
order and discipline to the activities of the firm in its both internal processes and external activities.

Closing Thoughts

In recent years, virtually all firms have realized the importance of strategic management. However, the
key difference between those who succeed and those who fail is that the way in which strategic
management is done and strategic planning is carried out makes the difference between success
and failure.

Of course, there are still firms that do not engage in strategic planning or where the planners do not
receive the support from management. These firms ought to realize the benefits of strategic management
and ensure their longer-term viability and success in the marketplace.
What Is Strategic Analysis?

Strategic analysis is the process of researching and analyzing an organization along with the business
environment in which it operates to formulate an effective strategy. This process of strategy analysis
usually includes defining the internal and external environments, evaluating identified data, and utilizing
strategic analysis tools.

By conducting strategic analysis, companies can gain valuable insights into what's working well and
what areas need improvement. These valuable insights become key inputs for the strategic planning
process, helping businesses make well-informed decisions to thrive and grow.

Types Of Strategic Analysis

When it comes to strategic analysis, businesses employ different approaches to gain insights into their
inner workings and the external factors influencing their operations.

Let's explore two key types of strategic analysis:

Internal strategic analysis

The focus of internal strategic analysis is on diving deep into the organization's core. It involves a
careful examination of the company's strengths, weaknesses, resources, and competencies. By
conducting a thorough assessment of these aspects, businesses can pinpoint areas of competitive
advantage, identify potential bottlenecks, and uncover opportunities for improvement.
This introspective analysis acts as a mirror, reflecting the organization's current standing, and provides
valuable insights to shape the path that will ultimately lead to achieving its mission statement.

External strategic analysis

On the other hand, external strategic analysis zooms out to consider the broader business environment.
This entails conducting market analysis, trend research, and understanding customer behaviors,
regulatory changes, technological advancements, and competitive forces. By understanding these
external dynamics, organizations can anticipate potential threats and uncover opportunities that can
significantly impact their strategic decision-making.
The external strategic analysis acts as a window, offering a view of the ever-changing business
landscape.

Benefits Of Strategic Analysis For Strategy Formulation

The analysis phase sets “the stage” for your strategy formulation.

The strategic analysis informs the activities you undertake in strategic formulation and allows you to
make informed decisions. This phase not only sets the stage for the development of effective business
planning but also plays a crucial role in accurately framing the challenges to be addressed.

These are some benefits of strategic analysis for strategy formulation:

 Holistic View: Gain a comprehensive understanding of internal capabilities, the external

landscape, and potential opportunities and threats.
 Accurate Challenge Framing: Identify and define core challenges accurately, shaping the
strategy development process.‍
 Proactive Adaptation: Anticipate potential bottlenecks and areas for improvement, fostering
proactive adaptability.‍
 Leveraging Strengths: Develop strategies that maximize organizational strengths for a
competitive advantage.

Strategic Analysis Example - Walmart

At the very least, the right framing can improve your understanding of your competitors and, at its best,
revolutionize an industry. For example, everybody thought that the early success of Walmart was due to
Sam Walton breaking the conventional wisdom:
“A full-line discount store needs a population base of at least 100,000.”

But that’s not true.

Sam Walton didn’t break that rule, he redefined the idea of the “store,” replacing it with that of a
“network of stores.” That led to reframing conventional wisdom, developing a coherent strategy, and
revolutionizing an industry.

How To Do A Strategic Analysis: Key Components

Strategy is not a linear process.

Strategy is an iterative process where strategic planning and execution interact with each other
constantly.

First, you plan your strategy, and then you implement it and constantly monitor it. Tracking the progress
of your initiatives and KPIs (key performance indicators) allows you to identify what's working and
what needs to change. This feedback loop guides you to reassess and readjust your strategic plan before
proceeding to implementation again. This iterative approach ensures adaptability and enhances the
strategy's effectiveness in achieving your goals.
Strategic planning includes the strategic analysis process.

The content of your strategic analysis varies, depending on the strategy level at which you're completing
the strategic analysis.

For example, a team involved in undertaking a strategic analysis for a corporation with multiple
businesses will focus on different things compared to a team within a department of an organization.

But no matter the team or organization's nature, whether it's a supply chain company aiming to enhance
its operations or a marketing team at a retail company fine-tuning its marketing strategy, conducting a
strategic analysis built on key components establishes a strong foundation for well-informed and
effective decision-making.

The key components of strategic analysis are:

  Define the strategy level for the analysis
 Complete an internal analysis
 Complete an external analysis
 Unify perspectives & communicate insights

Define the strategy level for the analysis

Strategy comes in different levels depending on where you are in an organization and your
organization's size.

You may be creating a strategy to guide the direction of an entire organization with multiple businesses,
or you may be creating a strategy for your marketing team. As such, the process will differ for each level
as there are different objectives and needs.

The three strategy levels are:

 Corporate Strategy
 Business Strategy
 Functional Strategy

Conduct an internal analysis

As we mentioned earlier, an internal analysis looks inwards at the organization and assesses the
elements that make up the internal environment. Performing an internal analysis allows you to identify
the strengths and weaknesses of your organization.

Let's take a look at the steps involved in completing an internal analysis:

1. Assessment of tools to use

First, you need to decide what tool or framework you will use to conduct the analysis.

You can use many tools to assist you during an internal analysis. We delve into that a bit later in the
article, but to give you an idea, for now, Gap Analysis, Strategy Evaluation, McKinsey 7S Model, and
VRIO are all great analysis techniques that can be used to gain a clear picture of your internal
environment.

2. Research and collect information

Now it’s time to move into research. Once you've selected the tool (or tools) you will use, you will start
researching and collecting data.

The framework you use should give you some structure around what information and data you should
look at and how to draw conclusions.

3. Analyze information

The third step is to process the collected information. After the data research and collection stage, you'll
need to start analyzing the data and information you've gathered.

How will the data and information you've gathered have an impact on your business or a potential
impact on your business? Looking at different scenarios will help you pull out possible impacts.

4. Communicate key findings

The final step of an internal analysis is sharing your conclusions. What is the value of your analysis’
conclusions if nobody knows about them?
You should be communicating your findings to the rest of the team involved in the analysis and go even
further. Share relevant information with the rest of your people to demonstrate that you trust them and
offer context to your decisions.
Once the internal analysis is complete, the organization should have a clear idea of where they're
excelling, where they're doing OK, and where current deficits and gaps lie.

The analysis provides your leadership team with valuable insights to capitalize on strengths and
opportunities effectively. It also empowers them to devise strategies that address potential threats and
counteract identified weaknesses.

Beginning strategy formulation after this analysis will ensure your strategic plan has been crafted to take
advantage of strengths and opportunities and offset or improve weaknesses & threats. This way, the
strategic management process remains focused on the identified priorities, enabling a well-informed and
proactive approach to achieving your organizational goals.

You can then be confident that you're funneling your resources, time, and focus effectively and
efficiently.

Conduct an external analysis

As we stated before, the other type of strategic analysis is the external analysis which looks at an
organization's environment and how those environmental factors currently impact or could impact the
organization.
A key difference between the external and the internal factors lies in the organization's level of control.

Internally, the organization wields complete control and can actively influence these factors. On the
other hand, external components lie beyond the organization's direct control, and the focus is on
scanning and reacting to the environment rather than influencing it.

External factors of the organization include the industry the organization competes in, the political and
legal landscape the organization operates in, and the communities they operate in.

The steps for conducting an external analysis are much the same as an internal analysis:
  Assessment of tools to use
 Research and collect information
 Analyze information
 Communicate key findings

You'll want to use a tool such as SWOT analysis, PESTLE analysis, or Porter's Five Forces to help
you add some structure to your analysis. We’ll dive into the tools in more detail further down this
article!

Unify perspectives & communicate insights

Chances are, you didn't tackle the entire analysis alone. Different team members likely took
responsibility for specific parts, such as the internal gap analysis or external environmental scan. Each
member contributed valuable insights, forming a mosaic of information.

To ensure a comprehensive understanding, gather feedback from all team members involved. Collate all
the data and share the complete picture with relevant stakeholders across your organization.

Much like strategy, this information is useless if not shared with everyone.
Remember: There is no such thing as overcommunication.

If you have to keep only one rule of communication, it’s that one. Acting on the insights and discoveries
distilled from the analysis is what gives them value. Communicating those findings with your employees
and all relevant (internal and external) stakeholders enables acting on them.

Setting up a central location where everyone can access the data should be your first step, but it
shouldn't end there. Organize a meeting to go through all the key findings and ensure everyone is on the
same page regarding the organization's environment.

Strategic Analysis Tools

There are a number of strategic analysis tools at your disposal. We'll show you 8 of the best strategic
analysis tools out there.
The 8 best strategic analysis tools:

 Gap Analysis
 VRIO Analysis
 Four Corners Analysis
 Value Chain Analysis
 SWOT Analysis
 Strategy Evaluation
 Porter's Five Forces
 PESTEL Analysis
Note: Analytical tools rely on historical data and prior situations to infer future assumptions. With this
in mind, caution should always be used when making assumptions based on your strategic analysis
findings.

Gap Analysis

The Gap Analysis is a great internal analysis tool that helps you identify the gaps in your organization,
impeding your progress towards your objectives and vision.

The analysis gives you a process for comparing your organization's current state to its desired future
state to draw out the current gaps, which you can then create a series of actions that will bridge the
identified gap.

The gap analysis approach to strategic planning is one of the best ways to start thinking about your goals
in a structured and meaningful way and focuses on improving a specific process.
VRIO Analysis

The VRIO Analysis is an internal analysis tool for evaluating your resources.

It identifies organizational resources that may potentially create sustainable competitive advantages for
the organization. This analysis framework gives you a process for categorizing the resources in your
organization based on whether they hold certain traits: Valuable, Rare, Inimitable, and Organized.

The framework then encourages you to begin thinking about moving those resources to the “next step''
to ultimately develop those resources into competitive advantages.

Four Corners Analysis

The Four Corners Analysis framework is another internal analysis tool that focuses on your
organization's core competencies.

However, what differentiates this tool from the others is its long-term focus. To clarify, most of the other
tools evaluate the current state of an entity, but the Four Corners Analysis assesses the company’s future
strategy, which is more precise because it makes the corporation one step ahead of its competitors.

By using the Four Corners, you will know your competitors’ motivation and their current strategies
powered by their capabilities. This analysis will aid you in formulating the company’s trend or
predictive course of action.

Value Chain Analysis

Similar to VRIO, the Value Chain Analysis is a great tool to identify and help establish a competitive
advantage for your organization.

The Value Chain framework achieves this by examining the range of activities in the business to
understand the value each brings to the final product or service.

The concept of this strategy tool is that each activity should directly or indirectly add value to the final
product or service. If you are operating efficiently, you should be able to charge more than the total cost
of adding that value.
SWOT

A SWOT analysis is a simple yet ridiculously effective way of conducting a strategic analysis.

It covers both the internal and external perspectives of a business.

When using SWOT, one thing to keep in mind is the importance of using specific and verifiable
statements. Otherwise, you won’t be able to use that information to inform strategic decisions.

Strategy Evaluation

Generally, every company will have a previous strategy that needs to be taken into consideration during
a strategic analysis.

Unless you're a brand new start-up, there will be some form of strategy in the company, whether explicit
or implicit. This is where a strategy evaluation comes into play.

The previous strategy shouldn't be disregarded or abandoned, even if you feel like it wasn't the right
direction or course of action. Analyzing why a certain direction or course of action was decided upon
will inform your choice of direction.

A Strategic Evaluation looks into the strategy previously or currently implemented throughout the
organization and identifies what went well, what didn't go so well, what should not have been there, and
what could be improved upon.

Porter's Five Forces

Complementing an internal analysis should always be an analysis of the external environment, and
Porter's Five Forces is a great tool to help you achieve this.

Porter's Five Forces framework performs an external scan and helps you get a picture of the current
market your organization is playing in by answering questions such as:

 Why does my industry look the way it does today?

 What forces beyond competition shape my industry?
  How can I find a position among my competitors that ensures profitability?
 What strategies can I implement to make this position challenging for them to replicate?

With the answer to the above questions, you'll be able to start drafting a strategy to ensure your
organization can find a profitable position in the industry.

PESTEL Analysis

We might sound repetitive, but external analysis tools are critical to your strategic analysis.

The environment your organization operates in will heavily impact your organization's success. PESTEL
analysis is one of the best external analysis tools you can use due to its broad nature.

The name PESTEL is an acronym for the elements that make up the framework:

 Political
 Economic
 Social
 Technological
 Environmental
 Legal

Basically, the premise of the analysis is to scan each of the elements above to understand the current
status and how they can potentially impact your industry and, thus, your organization.

PESTEL gives you extra focus on certain elements that may have a wide-ranging impact, and a birds-
eye view of the macro-environmental factors.

How To Choose The Right Strategic Analysis Tool

There are as many ways to do strategy as there are organizations. So not every tool is appropriate for
every organization.
These 8 tools are our top picks for giving you a helping hand through your strategic analysis. They're by
no means the whole spectrum. There are many other frameworks and tools out there that could be useful
and provide value to your process.

Choose the tools that fit best with your approach to doing strategy. Don’t limit yourself to one tool if it
doesn’t make sense, don’t be afraid to combine them, mix and match! And, be faithful to each
framework but always as long as it fits your organization’s needs.

The Next Step: From Analysis To Action With Cascade 🚀

Completing the strategic analysis phase is a crucial milestone, but it's only the beginning of a successful
journey. Now comes the vital task of formulating a plan and ensuring its effective execution. This is
where Cascade comes into play, offering a powerful solution to drive your strategy forward.

Cascade is your ultimate partner in strategy execution. With its user-friendly interface and robust
features, it empowers you to translate the strategic insights distilled from your strategic analysis into
actionable plans.

Some key features include:

 Planner: Seamlessly build out your objectives, initiatives, and key performance indicators
(KPIs) while aligning them with the organization's goals. Break down the complexity from high-
level initiative to executable outcomes.‍
 Alignment Map: Visualize how different organizational plans work together and how your
corporate strategy breaks down into operational and functional plans.

BUSINESS POLICY: Definition and Features

Definition of Business Policy

Business Policy defines the scope or spheres within which decisions can be taken by the subordinates
in an organization. It permits the lower level management to deal with the problems and issues without
consulting top level management every time for decisions.
Business policies are the guidelines developed by an organization to govern its actions. They define the
limits within which decisions must be made. Business policy also deals with acquisition of resources
with which organizational goals can be achieved.

Business policy is the study of the roles and responsibilities of top-level management, the significant
issues affecting organizational success and the decisions affecting organization in long-run.

Features of Business Policy

An effective business policy must have following features-

1. Specific- Policy should be specific/definite. If it is uncertain, then the implementation will

become difficult.
2. Clear- Policy must be unambiguous. It should avoid use of jargons and connotations. There
should be no misunderstandings in following the policy.
3. Reliable/Uniform- Policy must be uniform enough so that it can be efficiently followed by the
subordinates.
4. Appropriate- Policy should be appropriate to the present organizational goal.
5. Simple- A policy should be simple and easily understood by all in the organization.
6. Inclusive/Comprehensive- In order to have a wide scope, a policy must be comprehensive.
7. Flexible- Policy should be flexible in operation/application. This does not imply that a policy
should be altered always, but it should be wide in scope so as to ensure that the line managers
use them in repetitive/routine scenarios.
8. Stable- Policy should be stable else it will lead to indecisiveness and uncertainty in minds of
those who look into it for guidance.

Difference between Policy and Strategy

The term “policy” should not be considered as synonymous to the term “strategy”.

The difference between policy and strategy can be summarized as follows-

 1. Policy is a blueprint of the organizational activities which are repetitive/routine in nature. While
strategy is concerned with those organizational decisions which have not been dealt/faced before
in same form.
2. Policy formulation is responsibility of top level management. While strategy formulation is
basically done by middle level management.
3. Policy deals with routine/daily activities essential for effective and efficient running of an
organization. While strategy deals with strategic decisions.
4. Policy is concerned with both thought and actions. While strategy is concerned mostly with
action.
5. A policy is what is, or what is not done. While a strategy is the methodology used to achieve a
target as prescribed by a policy.

BCG Matrix

Boston Consulting Group (BCG) Matrix is a four celled matrix (a 2 * 2 matrix) developed by BCG,
USA. It is the most renowned corporate portfolio analysis tool. It provides a graphic representation for
an organization to examine different businesses in it’s portfolio on the basis of their related market share
and industry growth rates.

It is a two dimensional analysis on management of SBU’s (Strategic Business Units). In other words, it
is a comparative analysis of business potential and the evaluation of environment.

According to this matrix, business could be classified as high or low according to their industry growth
rate and relative market share.

Relative Market Share = SBU Sales this year leading competitors sales this year.

Market Growth Rate = Industry sales this year - Industry Sales last year.

The analysis requires that both measures be calculated for each SBU. The dimension of business
strength, relative market share, will measure comparative advantage indicated by market dominance.
The key theory underlying this is existence of an experience curve and that market share is achieved due
to overall cost leadership.

BCG matrix has four cells, with the horizontal axis representing relative market share and the vertical
axis denoting market growth rate.

The mid-point of relative market share is set at 1.0. if all the SBU’s are in same industry, the average
growth rate of the industry is used. While, if all the SBU’s are located in different industries, then the
mid-point is set at the growth rate for the economy.

Resources are allocated to the business units according to their situation on the grid. The four cells
of this matrix have been called as stars, cash cows, question marks and dogs. Each of these cells
represents a particular type of business.

10 x 1x 0.1 x
Figure: BCG Matrix

1. Stars- Stars represent business units having large market share in a fast growing industry. They
may generate cash but because of fast growing market, stars require huge investments to
maintain their lead.

Net cash flow is usually modest. SBU’s located in this cell are attractive as they are located in
a robust industry and these business units are highly competitive in the industry. If successful, a
star will become a cash cow when the industry matures.
2. Cash Cows- Cash Cows represents business units having a large market share in a mature, slow
growing industry. Cash cows require little investment and generate cash that can be utilized for
investment in other business units.

These SBU’s are the corporation’s key source of cash, and are specifically the core business.
They are the base of an organization. These businesses usually follow stability strategies.
When cash cows loose their appeal and move towards deterioration, then a retrenchment policy
may be pursued.

3. Question Marks- Question marks represent business units having low relative market share and
located in a high growth industry. They require huge amount of cash to maintain or gain market
share. They require attention to determine if the venture can be viable.

Question marks are generally new goods and services which have a good commercial
prospective. There is no specific strategy which can be adopted. If the firm thinks it has
dominant market share, then it can adopt expansion strategy, else retrenchment strategy can be
adopted.

Most businesses start as question marks as the company tries to enter a high growth market in
which there is already a market-share. If ignored, then question marks may become dogs, while
if huge investment is made, then they have potential of becoming stars.

4. Dogs- Dogs represent businesses having weak market shares in low-growth markets. They
neither generate cash nor require huge amount of cash.

Due to low market share, these business units face cost disadvantages. Generally retrenchment
strategies are adopted because these firms can gain market share only at the expense of
competitor’s/rival firms.

These business firms have weak market share because of high costs, poor quality,
ineffective marketing, etc. Unless a dog has some other strategic aim, it should be liquidated if
there is fewer prospects for it to gain market share. Number of dogs should be avoided and
minimized in an organization.
Limitations of BCG Matrix

The BCG Matrix produces a framework for allocating resources among different business units and
makes it possible to compare many business units at a glance. But BCG Matrix is not free from
limitations, such as-

1. BCG matrix classifies businesses as low and high, but generally businesses can be medium also.
Thus, the true nature of business may not be reflected.
2. Market is not clearly defined in this model.
3. High market share does not always leads to high profits. There are high costs also involved with
high market share.
4. Growth rate and relative market share are not the only indicators of profitability. This model
ignores and overlooks other indicators of profitability.
5. At times, dogs may help other businesses in gaining competitive advantage. They can earn even
more than cash cows sometimes.
6. This four-celled approach is considered as to be too simplistic.

SWOT ANALYSIS –

DEFINITION, ADVANTAGES AND LIMITATIONS

SWOT is an acronym for Strengths, Weaknesses, Opportunities and Threats.

By definition, Strengths (S) and Weaknesses (W) are considered to be internal factors over which you
have some measure of control.

Also, by definition, Opportunities (O) and Threats (T) are considered to be external factors over which
you have essentially no control.

SWOT Analysis is the most renowned tool for audit and analysis of the overall strategic position of the
business and its environment.
Its key purpose is to identify the strategies that will create a firm specific business model that will best
align an organization’s resources and capabilities to the requirements of the environment in which the
firm operates.

In other words, it is the foundation for evaluating the internal potential and limitations and the
probable/likely opportunities and threats from the external environment. It views all positive and
negative factors inside and outside the firm that affect the success.

A consistent study of the environment in which the firm operates helps in forecasting/predicting the
changing trends and also helps in including them in the decision-making process of the organization.

An overview of the four factors (Strengths, Weaknesses, Opportunities and Threats) is given below-

1. Strengths - Strengths are the qualities that enable us to accomplish the organization’s mission.
These are the basis on which continued success can be made and continued/sustained.

Strengths can be either tangible or intangible. These are what you are well-versed in or what you
have expertise in, the traits and qualities your employees possess (individually and as a team)
and the distinct features that give your organization its consistency.

Strengths are the beneficial aspects of the organization or the capabilities of an organization,
which includes human competencies, process capabilities, financial resources, products and
services, customer goodwill and brand loyalty.

Examples of organizational strengths are huge financial resources, broad product line, no debt,
committed employees, etc.

2. Weaknesses - Weaknesses are the qualities that prevent us from accomplishing our mission and
achieving our full potential. These weaknesses deteriorate influences on the organizational
success and growth. Weaknesses are the factors which do not meet the standards we feel they
should meet.
 Weaknesses in an organization may be depreciating machinery, insufficient research and
development facilities, narrow product range, poor decision-making, etc. Weaknesses are
controllable. They must be minimized and eliminated.

For instance - to overcome obsolete machinery, new machinery can be purchased. Other
examples of organizational weaknesses are huge debts, high employee turnover, complex
decision making process, narrow product range, large wastage of raw materials, etc.

3. Opportunities - Opportunities are presented by the environment within which our organization
operates. These arise when an organization can take benefit of conditions in its environment to
plan and execute strategies that enable it to become more profitable. Organizations can gain
competitive advantage by making use of opportunities.

Organization should be careful and recognize the opportunities and grasp them whenever they
arise. Selecting the targets that will best serve the clients while getting desired results is a
difficult task.

Opportunities may arise from market, competition, industry/government and technology.

Increasing demand for telecommunications accompanied by deregulation is a great opportunity
for new firms to enter telecom sector and compete with existing firms for revenue.

4. Threats - Threats arise when conditions in external environment jeopardize the reliability and
profitability of the organization’s business. They compound the vulnerability when they relate to
the weaknesses.

Threats are uncontrollable. When a threat comes, the stability and survival can be at stake.
Examples of threats are - unrest among employees; ever changing technology; increasing
competition leading to excess capacity, price wars and reducing industry profits; etc.

Advantages

SWOT Analysis is instrumental in strategy formulation and selection. It is a strong tool, but it involves a
great subjective element.
It is best when used as a guide, and not as a prescription. Successful businesses build on their strengths,
correct their weakness and protect against internal weaknesses and external threats. They also keep a
watch on their overall business environment and recognize and exploit new opportunities faster than its
competitors.

SWOT Analysis helps in strategic planning in following manner-

a. It is a source of information for strategic planning.

b. Builds organization’s strengths.
c. Reverse its weaknesses.
d. Maximize its response to opportunities.
e. Overcome organization’s threats.
f. It helps in identifying core competencies of the firm.
g. It helps in setting of objectives for strategic planning.
h. It helps in knowing past, present and future so that by using past and current data, future plans
can be chalked out.

SWOT Analysis provide information that helps in synchronizing the firm’s resources and capabilities
with the competitive environment in which the firm operates.
SWOT ANALYSIS FRAMEWORK

Limitations
SWOT Analysis is not free from its limitations. It may cause organizations to view circumstances as
very simple because of which the organizations might overlook certain key strategic contact which may
occur. Moreover, categorizing aspects as strengths, weaknesses, opportunities and threats might be very
subjective as there is great degree of uncertainty in market.

SWOT does stress upon the significance of these four aspects, but it does not tell how an organization
can identify these aspects for itself.

There are certain limitations of SWOT Analysis which are not in control of management. These include-

a. Price increase;
b. Inputs/raw materials;
c. Government legislation;
d. Economic environment;
e. Searching a new market for the product which is not having overseas market due to import
restrictions; etc.
Internal limitations may include-

a. Insufficient research and development facilities;

b. Faulty products due to poor quality control;
c. Poor industrial relations;
d. Lack of skilled and efficient labour; etc

SWOT Analysis of Google

Introduction

Google is probably the world’s best-known company for pioneering the search engine revolution and
providing a means for the internet users of the world to search and find information at the click of a
mouse.

Further, Google is also known for its work in organizing information in a concise and precise manner
that has been a game changer for the internet economy and by extension, the global economy because
 corporations, individuals, and consumers can search and access information about anything anywhere
and anytime.

Moreover, Google also goes with the motto of “Do not be Evil” which means that its business
practices are geared towards enhancing information and actualizing best practices that would help
people find and search information. Though its business practices in China and elsewhere where the
company was accused of being complicit with the authoritarian regimes in censoring information were
questionable, on balance, the company has done more good than harm in bringing together
information and organizing it.

Strengths

 Market Leader in Search Engines

Perhaps the biggest strength of Google is that it is the undisputed leader in search engines, which
means that it has a domineering and lion’s share of the internet searches worldwide.

Google has more than 90% of the market share for internet searches and the competitors do
not even come close to anywhere that Google does.

 Ability to Generate User Traffic

Google is a household brand in the world, its ability to drive internet user traffic is legendary,
and this has helped it become one of the most powerful brands in the world. Indeed, Google
averages more than 1.2 Billion hits a month in terms of the unique searches that users perform on
the site. This gives it an unrivaled and unparalleled edge over its competitors in the market.

 Revenue from Advertising and Display

Its revenue model wherein it garners humungous profits through partnerships with third party
sites has held the company in good stead as far as its ability to mop up resources and increase
both its top-line as well as bottom-line is concerned. This is another key strength of the company
that has helped it scale greater heights.
  Introduction of Android and Mobile Technologies

The last of the strengths discussed here relates to its adoption of Android and Mobile
technologies, this has resulted in it becoming a direct competitor of Apple as far as these devices,
and operating systems are concerned.

Weaknesses

 Excessive Reliance on Secrecy

Google does not reveal its algorithm for searches or even its basic formula as far as internet
searches are concerned leading to many experts slamming the company for being opaque and
hiding behind the veneer of secrecy. However, in recent years, Google has taken steps to redress
this by providing a bare bones version of its unique search engine algorithm.

 Falling Ad Rates

In recent years and especially in 2013, the company has been faced with declining revenues from
ads and as a result, the profitability of the company has taken a hit. This is partly due to the
ongoing global economic slowdown and partly because of competitors snapping at its heels in a
more aggressive manner. Indeed, Apple has already taken steps to garner search engine revenues
in its devices and hence, Google must be cognizant of the challenges that lie ahead.

 Overdependence on Advertising

Google’s business model relies heavily on advertising and the numbers reveal that it gets more
than 85% of its revenues from ads alone. This means that any potential dip in revenues would
cost the company dearly (literally as well as metaphorically).

The point here is that Google has to devise a more robust business model that embraces e-
commerce and mobile commerce along with its current business model that is based on ad
revenues alone.

 Lack of Compatibility with next generation devices

 Another weakness for Google is that it is not compatible with many next generation computing
platforms including mobile and tablet computers and this remains an area of concern for the
company.

Opportunities

 Android Operating System

Perhaps the biggest opportunity for Google lies in its pioneering effort in providing the Android
OS (Operating System) which has resulted in its becoming a direct competitor to Apple and
Samsung.

 Diversification into non-Ad Business Models

As discussed earlier, the company has to diversify into non-ad revenues if it has to remain
profitable and current indications are that it is adapting itself to this as can be seen from the push
towards commercial transactions using its numerous sites like Google Books, Google Maps etc.

 Google Glasses and Google Play

The introduction of Google Glasses and Google Play promises to be a game changer for Google
and this is a significant opportunity that the company can exploit. Indeed, this very aspect can
make the company take the next evolutionary leap into the emerging world of nano-computing.

 Cloud Computing

Cloud Computing remains a key opportunity for Google as it is already experienced in providing
storage and cloud solutions. Indeed, if not anything, it can move into the enterprise market using
the cloud-computing paradigm.

Threats

 Competition from Facebook

 The advent of Social Media has seriously threatened Google’s dominance in the internet world
and the company has to pull an ace to deal with the increasing features available on Facebook
and Twitter.

 Mobile Computing

Another threat to Google is from the emerging area of mobile computing that threatens to pass
the company by as newer companies seize the opportunity to ramp up their mobile computing
presence.

SWOT Analysis of Starbucks

Starbucks is a globally recognized coffee and beverages brand that has rapidly made strides into all
major markets of the world. The company has a lead over its nearest competitors including Barista and
other emerging competitors. Indeed, Starbucks is so well known throughout the western hemisphere that
it has become a household name for coffee.

Strengths

 The main strength of Starbucks is its strong financial performance which has resulted in the
company occupying the number one spot among coffee and beverage retailers in the world
 The company is valued at more than $4 Billion which is a key strength when compared to its
competitors
 The intangible strengths of Starbucks include its top of the mind recall among consumers and by
virtue of its brand, which symbolizes excellence, and quality at an affordable rate, the company
enjoys a dominant position in the worldwide market for coffee and beverages.
 The company is the largest coffeehouse in the world and because of its size and high volumes; it
can afford to price its products in the premium as well as the middle tier range to attract more
consumers.
 The company is known for its pioneering people management in an industry where people skills
and soft skills make the difference between success and failure.
 In other words, Starbucks has actualized a positive and welcoming workplace for its employees,
which translates into happier associates serving customers in a superior way leading to all round
benefits for the company.

Weaknesses

 The company is heavily dependent on its main and key input, which is the coffee beans and
hence, is acutely dependent on the price of coffee beans as a determinant of its profitability. This
means that Starbucks is overly price sensitive to the fluctuations in the price of coffee beans and
hence, must diversify its product range to reduce the risk associated with such dependence.
 The company has come under fire in recent times for its procurement practices with many social
and environmental activists pointing to the unethical procurement practices of coffee beans from
impoverished third world farmers. Further, the company has also been accused of violating the
“Fair Coffee Trade” principles that were put in place a few years ago to tackle this precise
problem.
 The company prices its products in the premium to the middle tiers of the market segment which
places its products outside the budgets of many working consumers who prefer to frequent
McDonald’s and other outlets for their coffee instead of Starbucks.
 The company must immediately diversify its product range if it has to compete with full
spectrum competitors like McDonald’s and Burger King in the breakfast segment which is
rapidly growing as a consequence of compressed schedules of consumers who would like to grab
a bite and drink something instead of making it at home.

Opportunities

 The company has an opportunity to expand its supplier network and expand the range of
suppliers from whom it sources in order to diversify its sources of inputs and not be at the mercy
of whimsical suppliers. Further, this would also help the company in becoming less sensitive to
the prices of coffee beans and make it resilient against supply chain risks.
 The company has a huge opportunity waiting for it as far as its expansion into the emerging
markets is concerned. With a billion consumers likely to join the pool of those who want instant
 coffee and breakfast in China and India, the company can expand into these countries and other
emerging markets, which represents a lucrative opportunity for the taking.
 Starbucks also has the opportunity to expand its product offerings to take on the full spectrum
food and beverage retailers like McDonald’s and Burger King as the consumer segment which
these retailers target is expanding leading to more business opportunities for Starbucks to take
advantage of.
 The company can significantly expand its network of retail stores in the United States as part of
its push towards greater market share and more consumer segments. This opportunity ties in with
the other opportunities described above related to the expansion into newer markets, diversifying
into newer consumer segments, and increasing its footprint across the US and globally.

Threats

 The company faces threats from the rising prices of coffee beans and is subject to supply chain
risks related to fluctuations in the prices of this key input. Further, the increase in the prices of
dairy products impacts the company adversely leading to another threat to its profitability.
 The company is beset with trademark and copyright infringements from lesser-known rivals who
wish to piggyback on its success. As with other multinational retailers in the emerging markets,
Starbucks has fought litigation against those misusing its brand and famous logo.
 The company faces intense competition from local coffeehouses and specialty stores that give
the company a run for its money as far as niche consumer segments are concerned.

In other words, the company faces a tough challenge from local stores that are patronized by a
loyal clientele, which is not enamored of big brands.

 Starbucks has to expand into emerging markets as a necessity as the developed markets that it
has traditionally relied on are saturated and given the fact that the ongoing recession has made
the going tough for many retailers, it faces significant threats from this aspect.
 Finally, as mentioned earlier, Starbucks faces significant challenges because of its global supply
chain and is subject to disruptions in the supply chain because of any reason related to either
global or local conditions.

SWOT Analysis of Blackberry

Blackberry, which was the pioneer in mobile-based technologies with its best selling original
Smartphones, has been in the news for all the wrong reasons. First, the company known as Research in
Motion (RIM), which made and marketed the Blackberries, missed the emerging Smartphone revolution
though it was one of the pioneers of mobile computing. Next, the company was unable to read the
market and hence, it lost market share to Apple and Samsung. This resulted in the company nearly going
bankrupt and despite changes in leadership; it could never regain its position. In the past month, the
company has been in the news again because it rejected a buyout offer and rescinded a sale option and
instead, chose to appoint a new CEO along with accepting fresh infusion of capital into the company.

This article discusses the changing strategies of Blackberry through a SWOT Analysis, which would
provide clues into how the company would position itself in the future. The key theme here is that
Blackberry needs to urgently revamp and rejuvenate itself if it has to regain market share and forget
about market leadership, it has to ensure that it stays afloat.

Strengths

 Perhaps the biggest strength of Blackberry is that it enjoys top of the mind recall and has a good
reputation among corporate users of mobiles because of its proprietary technology that scores
over its competitors especially where corporate users are concerned.
 The Blackberry devices can be used with any mobile carriers anywhere in the world and indeed,
this is a key strength for the company as it goes along its business with easy mobility and
portability.
 One of the main strengths of Blackberry is that its devices are more secure than its competitors
and indeed, the security features inherent and embedded in the devices are unmatched by any
other mobile maker including Samsung and Apple. This is the reason why Blackberries are so
popular with corporate users who use it to link it and integrate it with their VPNs or Virtual
Private Networks.
 These strengths have made Blackberry the Smartphone of choice for many governmental
agencies in the United States including the FBI, CIA, The White House, and the State
Department. Given the fact that Blackberries come with an encrypted military grade security
platform makes it the ideal phone of choice for agencies dealing with sensitive information.
Weaknesses

 The key weakness that Blackberry has is that it went on a single-track focus on the corporate
users and enhanced its security features as a USP or a Unique Selling Proposition. While this
aspect held it in good stead as far as the corporate clients are concerned, once Samsung and
Apple came out with Smartphones for the consumers and the everyday usage, Blackberry was
unable to keep up with the competition. Indeed, both Samsung and Apple have cornered the
market share by enhancing the security features in their Smartphones.
 Given the fact that small business owners using Blackberries now had to install expensive
enterprise software, they began to switch to the rivals instead of using Blackberries. Further, the
company lost ground as the proprietary operating system used by Samsung and Apple provided
more benefits to this customer segment leaving Blackberry out of the race.
 As mentioned earlier, Blackberry was essentially a single pony trick with its obsessive focus on
the corporate users. With the large consumer base untouched by it, Samsung and Apple quickly
garnered this segment and by providing an easy to use user interface and apps that were simple
and effective, these companies soon began to take away even the corporate customers of
Blackberry.

Opportunities

 The recent moves by the company are very aggressive as it has rejected a sale offer and a buyout
offer as well as accepted fresh infusion of capital from an Angel Investor. By appointing a new
CEO and revamping its organizational team and structure, Blackberry has signaled that it is
serious and is going all out to reinvent itself.
 The company has a lucrative opportunity as far as leveraging its existing customer base of over
100 Million users is concerned. Given the fact that the company can tap into this customer base
for its future products, there is a significant opportunity waiting for the company.
 By integrating the third party apps and features into its phones, the company can mimic the
strategies followed by Apple and Samsung and the increase in the business partnerships with
third party providers can prove to be a key opportunity for the company as it prepares to take on
Samsung and Apple.
Threats

 Though Blackberries were the original Smartphones, both Apple and Samsung beat it to the race
to build the Smartphone of the future because they provided the flexibility and ease of use that
Blackberries lacked and hence, were able to corner market share and take away its competitors.
 Apart from the threats posed by its competitors, Blackberry has to fight the slack and the gloomy
internal environment, which because of the troubles that the company has been through in recent
years has resulted in lower employee morale and a general lack of direction. Given the fact that
the Smartphone industry thrives on innovation, Blackberry has to rejuvenate itself and reinvent
itself apart from rescuing itself from the sagging momentum and motivation of its employees

Conclusion

the preceding discussion has highlighted the need for Blackberry and its management to take proactive
steps to pull the company from the quagmire it finds itself in.

The recent strategic moves made by the new leadership are to be seen in the light of the company’s drift
away from its profit making and market leadership model to a situation where it is no longer in the
reckoning. In conclusion, Blackberry and its leadership have their task cut out as they gear themselves to
take on the challenges from the Smartphone companies like Apple and Samsung.

Steps in Preparing Personal SWOT Analysis

What to do when listing Strengths and Weaknesses

A personal SWOT Analysis is needed to understand where one stands with respect to one’s career and
life path. A personal SWOT Analysis is usually the first step towards recognizing one’s position in
attempting to deal with life’s challenges and career prospects.
First, one should never overestimate or underestimate one’s strengths. Therefore, a personal SWOT
Analysis must be objective and to the point as far as delineating, one’s strengths are concerned. The
reason we mentioned not to underestimate or overestimate one’s strengths is that while many tend to
overestimate their strengths, there are some who underestimate them as well.

Therefore, the identification of one’s strengths must be done by listing all the attributes one thinks are
the key assets and then penning them down to understand where one’s key personality traits would lead
them.

For instance, many people have superior communication skills, people management skills, and an ability
to crack aptitude tests as strengths. On the other hand, there are many for whom these very skills are
lacking and hence, listing the components of the SWOT would help them in gaining a true picture of
where one stands.

Be Honest with yourself

Listing the strengths along with the weaknesses gives one an opportunity to identify areas of
improvement as well as to note those areas where one need not spend much time on. We have to
remember that time is precious for many of us and hence, understanding where one stands would help us
to ration it better to concentrate on the weaknesses.

For instance, if problem solving is your weakness, then you must spend more time honing your skills in
that regard. Apart from that, if communication skills are your weakness, you must enroll in spoken
English or a communication course that would help you polish your skills.

Once the strengths and weaknesses are listed, you must identify the opportunities that can come your
way and build yourself accordingly to tap into those opportunities.

You must remember that you need to build a door for opportunity to knock on it as well as remember the
fact that success in life depends to a large extent on how well one anticipates the future by observing the
trends of the present and then preparing accordingly for the same.

As the saying goes, chance favors the prepared mind and hence, accurate identification of
opportunities is one critical aspect that would make or mar your chances in career and in life.
Do not fall prey to Blind Spots and Mental Blocks

The last element of the personal SWOT Analysis is the assessment of threats. One should not go into
battle without scanning the environment for potential threats. Hence, one must be cautious about the
direction one wants to take and list down the threats that would contribute to failure.

For instance, if you foresee that in the near future, your finances are likely to be tight, you must plan
accordingly so that you do not go deep into debt. Often, the biggest threat to many individuals is
managing the cash flow situation as well as understanding the blind spots that prevent people from
assessing a situation for what it is.

The blind spots we are referring to are the mental blocks all of us when assessing our personal
SWOT elements and these prevent us from an honest assessment of where we stand and what our
weaknesses are.

One can list down any number of strengths and any number of opportunities. However, the tough part is
to accurately and reliably identify the threats and weaknesses as otherwise we would be blind to them
because of self-love.

The key aspect here is that one must not be caught up in one’s own shadow thinking that one is
invincible. Hence, proper identification of weaknesses and threats goes a long way in ensuring that one
is not caught by surprise.

SWOT Analysis of Amazon

Introduction

Amazon is the world’s leading online retailer and its success has spurred other physical, brick, and
mortar retailers to have an online presence. It is often referred to as the online equivalent of Wal-Mart
because of its reach and global footprint as well as its aggressive pricing strategies.

Amazon can leverage on several opportunities in the emerging markets and can ensure that its global
supply chain of networked warehouses deliver substantial value for itself and its stakeholders.
Further, Amazon has to rethink its business model of operating at close to zero margins and the fact that
the company has not returned a decent profit in the last five years gives it much room for improvement.

Strengths

 Being the world’s leading online retailer, Amazon derives its strengths primarily from a three-
pronged strategic thrust on cost leadership, differentiation, and focus. This strategy has resulted
in the company reaping the gains from this course of action and has helped its shareholders
derive value from the company.
 Amazon primarily derives its competitive advantage from leveraging IT (Information
Technology) and its use of e-Commerce as a scalable and an easy to ramp up platform that
ensures that the company is well ahead of its competitors.
 One of the key strengths of Amazon is that it enjoys top of the mind recall from consumers
globally and this recognition has helped it enter new markets, which were hitherto out of bounds
for many e-Commerce companies.
 Using superior logistics and distribution systems, the company has been able to actualize better
customer fulfillment and this has resulted in Amazon deriving competitive advantage over its
rivals.

Weaknesses

 In recent years, Amazon as part of its diversification strategy has been “spreading itself too thin”
meaning that it has allowed its focus to waver from its core competence of retailing books online
and allowed itself to venture into newer focus areas. While this might be a good strategy from
the risk diversification perspective, Amazon has to be cognizant of losing its strategic advantage
as it moves away from its core competence.
 As Amazon offers free shipping to its customers, it is in the danger of losing its margins and
hence, might not be able to optimize on costs because of this strategy.
 Considering the fact that Amazon is an online only retailer, the single-minded focus on online
retailing might “come in the way” of its expansion plans particularly in emerging markets.
 One of the biggest weaknesses and something that has been oft commented upon by analysts and
industry experts is that Amazon operates in near zero margin business models that have severely
 dented its profitability and even though the company has high volumes and huge revenues, this
has not translated into meaningful profits for the company.

Opportunities

 By rolling out its online payment system, Amazon has the opportunity to scale up considerably
considering the fact that concerns over online shopping as far as security and privacy are
concerned are among the topmost issues on the minds of consumers. Further, this would improve
the company’s margins as it lets it reap the advantages of using its own payment gateway.
 Another opportunity, which Amazon can capitalize on, relates to it rolling out more products
under its own brand instead of being a forwarding site for third party products.

In other words, it can increase the number of products under its own brand instead of merely
selling and stocking products made by its partners.

 Amazon can increase the portfolio of its offerings wherein it stocks more products than the norm
currently which places it in a position of strength and comfort as this can translate into higher
revenues.
 The fourth opportunity, which Amazon has, is in terms of expanding its global footprint and
open more sites in the emerging markets, which would certainly give it an edge in the uber-
competitive online retailing market.

Threats

 One of the biggest threats to Amazon’s success is the increasing concern over online shopping
because of identity theft and hacking which leaves its consumer data exposed. Therefore,
Amazon has to move quickly to allay consumer concerns over its site and ensure that online
privacy and security are guaranteed.
 Because of its aggressive pricing strategies, the company has had to face lawsuits from
publishers and rivals in the retailing industry.
 The obsessive focus on cost leadership that Amazon follows has become a source of trouble for
the company because of the competitors being upset with Amazon taking away the business from
them.

 Finally, Amazon faces significant competition from local online retailers who are more agile and
nimble when compared to its behemoth type of strategy. This means that the company cannot
lose sight of its local market conditions in the pursuit of its global strategy.

Conclusion

Amazon has its task cut out as far as its future strategies are concerned and this SWOT Analysis can
provide a guide and a roadmap that the company can implement going forward.

The key take away from this SWOT Analysis is that Amazon has to focus on profitability and not
volumes alone if it has to be competitive in the future where volumes and market leadership are not
alone to add value to its stock.

SWOT Analysis of Nike

Strengths

 The biggest strength of Nike is that it is an extremely competitive organization with its approach
of “Just Do It” slogan for its brand epitomizing its attitude towards business. The company was
founded on the principle that it would make shoes for anyone who could walk or run and this has
been the guiding philosophy behind Nike. Coupled with its iconic “Swoosh” logo and its equally
catchy tagline, Nike’s strength is that it has emerged as a “Can Do” company.
 Strength of the company is that it has outsourced all aspects of its production to overseas
facilities and thereby, does not have any manufacturing outlet of its own. This has helped the
company focus on higher value adding activities like design and research and development and
at the same time, it has saved the high labor costs that are part of the traditional manufacturing
sector.
  Apart from this, the other big strength of Nike is that it is a globally recognized brand that has
top of the mind recall among consumers and the youth in particular. Further, the Nike brand is
synonymous with quality and resilience as well as endurance and fitness, which makes it the
brand of choice for athletes and anyone who wishes to run.
 Finally, Nike stands to benefit from the current disarray among its competitors because of the
fragmentation of the market wherein Nike with its USP or Unique Selling Proposition can
standalone among them.

Weaknesses

 Nike is almost exclusively driven by its footwear business and therefore, the footwear market
contributes to a lion’s share of its revenues making it dependent on this segment for its survival.
In these recessionary times, it is not a good business practice to be overly dependent on one
segment and hence, Nike ought to diversify horizontally as well as vertically and include apparel
and other accessories.
 Though we have mentioned the fact that it has outsourced its manufacturing aspects completely
as strength, the negative publicity that Nike got because of labor unfriendly conditions in its
overseas outlets has badly dented its brand image. Indeed, the name “Sweatshops” is used to
mockingly describe the abhorrent conditions in its overseas manufacturing facilities.
 The company does its business through retailers who stock other brands as well. This means that
the assiduously cultivated exclusivity is sometimes sacrificed because it has not yet spread its
wings to include exclusive retailer outlets as part of its business strategy.
 Nike is perceived by some consumers as being too premium and a luxury brand. While this is
necessarily not a bad thing, the current market scenario is such that consumers are migrating to
the middle tier of the luxury scale as they are becoming price conscious and quality focused.

Opportunities

 The biggest opportunity for Nike is from the emerging markets of China and India where the
Billion Plus new consumers are now aspiring to western lifestyles which means that they would
be more receptive to brands like Nike. As the company is associated with premium branding and
 segmentation, it can be said that capturing the “emerging market newly affluent consumers’
prize” could well be a game changer for the company.
 In recent years, Nike has begun to diversify into accessories and other premium products apart its
signature footwear segment. This is a step in the right direction and something, which would
stand the company in good stead as it attempts to look for revenues beyond its traditional
offerings.
 The emphasis on design of higher end footwear seems to be paying off for Nike that is
increasingly being seen as a must have product for anyone who walks or runs and as the
company was founded on the principle that it would serve anyone with legs, this strategy seems
to have hit the right notes.
 Nike has the unique advantage of offering value for money and this can be leveraged to the hilt
as the company begins to make inroads into the newer consumer segments, which want quality at
an affordable price.

Threats

 The fact that the company has a global supply chain means that it is subject to the vicissitudes of
international trade practices including labor strikes in its overseas locations, currency
fluctuations that decrease its margins, as well as lack of control over the geopolitical events
happening around the world which have the potential to disrupt its global supply chain.
 Nike must improve on its image wherein it is being seen as resorting to exploitative business
practices in its overseas outlets. Already, it had to pay a heavy price (monetarily as well as
metaphorically) because the emerging generation of consumers are socially and environmentally
conscious which means that they would not like to buy a product that is the result of dubious
business practices.
 The ongoing recession has taken a heavy toll on Nike with consumers becoming more price
conscious and retailers demanding higher margins. The combination of retailing in third party
outlets and competing brands cutting prices has made the going tough for Nike.
 Finally, Nike has to ensure that it does not dilute its focus like some of its competitors who are
now in the doldrums. For instance, Reebok that promised a lot and was intensely competitive
with Nike has seen its fortunes sag and hence, Nike must not go Reebok’s way and instead, must
define its core competence and implement its strategies accordingly.
SWOT Analysis of Microsoft

Introduction

The recent announcement of the change of leadership at the helm of Microsoft has sparked speculation
about possible strategic directional changes as well as kindled hopes that the pioneering company and its
iconic founder who appeared to be floundering in recent years may well be getting their act together.

The ensuing SWOT Analysis places these strategic moves in perspective and appraises the situation,
which the company finds itself in at the moment.

The succeeding discussion must be viewed in the larger context of the match between the internal
dynamics and the external business drivers that affect Microsoft in its quest to regain its market
leadership.

Strengths

 The biggest strength of Microsoft is that it has top of the mind brand recall among all the PC
(personal computer) users in the world.

Indeed, Microsoft and its legendary founder, Bill Gates, are known to anyone who is remotely
acquainted with computing. This has enabled the company to forge ahead of its rivals even
though as we shall discuss later, in recent years, some of the sheen of the Microsoft brand has
been lost.

 The other strength and a key driver of its business and readymade acceptance by the users of its
products is that Microsoft’s software is easy to use which has won it an increasing base of
customers around the world.

It can also be said that Microsoft and Bill Gates have spawned what can be called a “Second
Industrial Revolution” by making computing available to the masses.
  The company has a worldwide network of distributors and also it indulges in co-branding with
hardware makers of computers, which enables it to have strategic depth and a breadth of user
base that is unparalleled.
 Microsoft has consistently beat analyst expectations in terms of profitability and revenues though
it is appearing to be vulnerable to shifting trends like mobile computing in recent years.

Weaknesses

 The biggest weakness of Microsoft is that its fabled team did not anticipate the emergence of the
internet as a phenomenon that would take over the world in addition to reading the market
signals about mobile computing.

In case of the former (internet), Microsoft was slow to respond and even when it did, it was in a
manner that attracted monopolistic charges which in earlier years were the mainstay of the
company.

 As for mobile computing, Microsoft completely missed this wave and indeed, the success of
the other computing revolutionary, Late Steve Jobs and his Apple Company appeared to
blindside Microsoft and Bill Gates so much that it has even now failed to come up with a
compelling Smartphone device or operating system.
 The third weakness relates to the ubiquitous security flaws in its software, which is apparent to
any windows user, and chances are that you would have probably encountered the familiar
crashes of Windows no matter which version you use.

Opportunities

 Though Microsoft failed to read the emergence of the internet and was completely taken aback
by the mobile wave, a ray of hope that is still visible to the company is in the cloud-computing
paradigm, which the company is betting big to take on the competition and regain its leadership
position.
 Indeed, the recent appointment of the Indian born Satya Nadella as the CEO is in line with
its aggressive push towards cloud computing as the game changer for the company and since
 Nadella is thought to be a cloud-computing wizard, it is understood that Microsoft is banking on
him for it to ride the next wave.
 The company has a huge cash hoard which means that if it cannot grow organically (through
normal growth) it can still grow inorganically (through acquisitions) of smaller companies that
have good business prospects.
 This is the manner in which Bill Gates made amends for misreading the internet and bought out
Hotmail created by another Indian, Sameer Bhatia that did give Microsoft some edge for a few
years before Google revolutionized personal email products.

Threats

 As can be inferred from the analysis so far, Microsoft’s biggest threat is that it’s very size which
is an asset otherwise is preventing it from being quick and nimble and seize market opportunities
by proactively reading market signals.
 Further, Microsoft faces a key challenge from Open Source software, which was a force to
reckon with initially seemed to have lost some of its fizz though it is making a comeback again.
 On the commercial front, Microsoft has been exasperated with software piracy especially in Asia
where the pirated copies are more than the original products in China and India.
 Finally, Microsoft has to be both weary and wary of potential lawsuits especially in Europe
where the regulators are not taking kindly to its monopolistic business practic

Conclusion

The preceding analysis has made it clear that Microsoft cannot afford to misread emerging trends
and changing customer preferences anymore. Instead, it must be in a position where it senses and
intuits market moves and prepares to act accordingly.

A possible strategic move would be to focus more on the enterprise segment since most other
technology companies seem to be focusing exclusively on the personal customer segment.

In conclusion, it remains to be seen as to how the recent leadership changes play themselves out with
regards to the future strategic moves by the company.
Competitor Analysis

Meaning, Objectives and Significance

Organizations must operate within a competitive industry environment. They do not exist in vacuum.

Analyzing organization’s competitors helps an organization to discover its weaknesses, to identify

opportunities for and threats to the organization from the industrial environment.

While formulating an organization’s strategy, managers must consider the strategies of organization’s
competitors.

Competitor analysis is a driver of an organization’s strategy and effects on how firms act or react
in their sectors.
The organization does a competitor analysis to measure/assess its standing amongst the competitors.

Competitor analysis begins with identifying present as well as potential competitors. It portrays an
essential appendage to conduct an industry analysis.

An industry analysis gives information regarding probable sources of competition (including all the
possible strategic actions and reactions and effects on profitability for all the organizations competing in
the industry). However, a well-thought competitor analysis permits an organization to concentrate on
those organizations with which it will be in direct competition, and it is especially important when an
organization faces a few potential competitors.

Michael Porter in Porter’s Five Forces Model has assumed that the competitive environment within an
industry depends on five forces:

1. Threat of new potential entrants,

2. Threat of substitute product/services,
3. bargaining power of suppliers,
4. bargaining power of buyers,
5. Rivalry among current competitors.
These five forces should be used as a conceptual background for identifying an organization’s
competitive strengths and weaknesses and threats to and opportunities for the organization from it’s
competitive environment.

The main objectives of doing competitor analysis can be summarized as follows:

 To study the market;

 To predict and forecast organization’s demand and supply;
 To formulate strategy;
 To increase the market share;
 To study the market trend and pattern;
 To develop strategy for organizational growth;
 When the organization is planning for the diversification and expansion plan;
 To study forthcoming trends in the industry;
 Understanding the current strategy strengths and weaknesses of a competitor can suggest
opportunities and threats that will merit a response;
 Insight into future competitor strategies may help in predicting upcoming threats and
opportunities.

Competitors should be analyzed along various dimensions such as their size, growth and profitability,
reputation, objectives, culture, cost structure, strengths and weaknesses, business strategies, exit barriers,
etc.

What is Competitive Advantage in the Field of Strategic Management?

What is Competitive Advantage?

It is a truism that strategic management is all about gaining and maintaining competitive advantage. The
term can be defined to mean “anything that a firm does especially well when compared with rival
firms”. Note the emphasis on comparison with rival firms as competitive advantage is all about how best
to best the rivals and stay competitive in the market.

Competitive advantage accrues to a firm when it does something that the rivals cannot do or owns
something that the rival firms desire. For instance, for some firms, competitive advantage in these
recessionary times can mean a hoard of cash where it can buy out struggling firms and increase its
strategic position. In other cases, competitive advantage can mean that a firm has lesser-fixed assets
when compared to rival firms, which is again a plus in an economic downturn.

What is Sustained Competitive Advantage?

We have defined what competitive advantage is as it relates to strategic management and the sources of
competitive advantage differing from firm to firm. However, a firm can have a source of competitive
advantage for only a certain period because the rival firms imitate and copy the successful firms’
strategies leading to the original firm losing its source of competitive advantage over the longer term.
Hence, it is imperative for firms to develop and nurture sustained competitive advantage.

This can be done by:

 Continually adapting to the changing external business landscape and matching internal strengths
and capabilities by channeling resources and competencies in a fluid manner.
 By formulating, implementing, and evaluating strategies in an effective manner which make use
of the factors described above.

The fact that firms lose their sources of competitive advantage over the longer term is borne out by
statistics that show that the top three broadcast networks in the United States had over 90 percent market
share in 1978 which has now come down to less than 50 percent.

The Advent of the Internet and Competitive Advantage

With the advent of the internet, competitive advantage and the gaining of it has become easier as firms
directly sell to the consumers and interlink the suppliers, customers, creditors, and other stakeholders
into its value chain. Because of the removal of intermediaries, firms can reduce costs and improve
profitability.

Essentially, the internet has changed the rules of the game and hence sources of competitive
advantage in this digital era are now about how well firms utilize the digital platform and social media to
gain advantage over their rivals.

Closing Thoughts

Finally, competitive advantage has to be earned, gained, and defended as the preceding discussion
shows. Hence, those firms that are agile and responsive to changing market conditions and whose
internal capabilities are aligned with the external opportunities are those who would survive in the brutal
business landscape of the 21st century.

As can be seen from the characterization of competitive advantage, it is ethereal and subject to change
and hence firms must always been on the lookout for newer sources of competitive advantage and be
alert for competitors’ moves.

Human, Social, and Intellectual Capital as a Means of Competitive Advantage

Introduction: Why Should Firms and Nations Invest in Human, Social, and Intellectual Capital

We often hear economists and management experts exhorting nations and firms to invest in human,
social, and intellectual capital. these calls range from asking governments to set aside substantial
amounts of money to educate and skill the workforce as well as asking the firms and governments to
create a web of social relationships in addition to moving up the value curve by investing in research and
development. Before we launch into a discussion about how these measures would benefit nations and
firms, we should first define what is meant by human, social, and intellectual capital.

In the same manner in which financial capital and physical infrastructure are the factors of production, a
skilled workforce is a vital component and determinant of a firm’s success. This means that firms need
workers who are educated and skilled and are employable and efficient. Economists and
management experts talk about this human capital.
In the same manner in which an educated and skilled workforce raises the productivity of firms, nations
also benefit from having a ready pool of workers who are skilled and capable. Just as firms need to hire
these workers, it is upon the nation to provide them the basic education and skills both through
subsidized education and through the provision of skills through vocational training or teaming up with
the private sector in a PPP (Public Private Partnership) model to impart education to the workers.

Next, social capital is what is the result of the networks of relationship between individuals,
communities, and the ties that bind them in the broader society. You might ask as to why it is
important for firms and nations to have social capital in addition to human capital. The answer is that
just as the firms need educated and skilled workers, the broader society to be healthy and well
functioning needs workers and individuals to be tightly knit into the fabric of society.

This social capital leads to less crime, more productivity, more efficiency, and the formation of
communities that are self-sustaining and which are incubators of physically, mentally, and emotionally
healthy and intelligent individuals.

Third, just as human capital and social capital lead to better productivity and a workforce that is
efficient, the next evolutionary step for firms and nations once they have actualized human and social
capital is through moving up the value chain by filing patents, encouraging research, and innovating as
well as leading to the creation of an economy that is characterized by these aspects.

Therefore, it is important to note that in addition to human and social capital, intellectual capital is also
needed for firms and nations to forge ahead in the race to deliver and actualize superior economic
value.

As can be seen from the fact that human capital leads to higher productivity and efficiency and social
capital leads to emotionally intelligent workers, intellectual capital leads economies and nations into the
orbit where they can be challenged only by those competitors who have mastered all the three aspects of
evolutionary value creation.

Indeed, one of the reasons (as we shall discuss in detail in the next section) for the relative ascendance of
the west over the east and which continue s to this day is that the former have successfully invested in
these forms of capital whereas the latter are playing catch-up and are now trying to emulate them in their
quest for economic growth.

Trajectories of Firms and Nations That Have Invested in These Capital Aspects

Why do Google and Microsoft in addition to AT&T, 3M, and Apple remain so profitable and
competitive?

Why are some firms such as these more successful in generating patents and innovating better than the
rest of the competition?

Further, why does Facebook generate such valuations and is considered as one of the greatest ideas apart
from the Smartphones and Search Engines and the invention of the Personal Computer?

The answers to all these questions lies in the fact that these firms were able to first invest in their
workforce or the formation and incubation of human capital, next, they were able to leverage the
college like atmosphere and the free flowing ideas generated by their workforce which is the social
capital and third, these firms were able to move up the curve and indeed, continue moving up the curve
to reap the benefits of intellectual capital that follows from the first two forms of capital.

Similarly, why is the United States such a dominant force in the global economy whereas even China
and India that have large populations of educated workers still are unable to challenge its dominance?

The reason for this is that the United States and largely, Europe have substantially invested in
educating and training apart from skilling their populations over the last century and half and hence,
are now reaping the benefits of such investments.

Moreover, by creating a system that encourages creativity and innovation instead of stifling them, these
countries have managed to move up the value curve and stay there.

In addition, whenever they felt that their economic dominance is under threat, these nations have always
found better ideas to become more efficient as can be seen from the Offshoring of manufacturing to
China and back office work to India. In this manner, they have retained their focus on value creation
using the three forms of capital in a way in which the rest of the world is unable to do so even now.
As individuals, we too can ensure that we do our bit to accelerate the formation of these forms of capital
and this is through investing in oneself, forming networks with our peers, coworkers, families, and
communities so that we become more emotionally intelligent, and then by continuously improving and
leaving nothing to chance or becoming complacent thereby being in a creative mode where ideas flow
freely.

Further, we can all become wiling partners in the development of these forms of capital by making
conscious choices that lead us to better outcomes for everyone concerned.

Catch-Up and Moving up the Curve

Having considered the successes of firms that invest in these forms of capital, we now turn to how
competitors and countries in the developing world can catch up the dominant firms and countries.

1. The first step is to provide universal education without discriminating based on class, gender,
or race, as well as through substantially revamping the education system so that instead of rote
learning, innovation and creativity are encouraged.
2. Next, instead of forming clan based and class based relationships alone, there must be an
emphasis on forming networks where class barriers, gender differences, and ethnic and racial
factors are nonexistent meaning that social capital must be incubated that is free from the narrow
constraints imposed by these elements.
3. Third, governments must invest in research and development and encourage highly skilled
scientists and researchers to continue their pioneering work instead of discouraging and
frustrating them, which as often happens, in Asian countries, leads to these individuals seeking
employment and greener pastures in the West.

Though this section sounds like an idealist rant, some of these measures have already been put in place
in China, South East Asia, and to a lesser extent in Latin America. Therefore, it is indeed the case that
the firms and the economies of these nations are emerging as challengers to the Western dominance,
which is not surprising considering the trajectory of value creation.
Further, some Indian companies have also succeeded in actualizing these forms of capital though the
overall record leaves much to be desired. Indeed, it is the case that when India starts building these
assets, it can emerge as a potent force to be reckoned with.

Conclusion

Finally, human, social, and intellectual capital differ from physical and financial capital in the sense that
they can be incubated even by those with less of the latter as hard work, determination, and a culture of
openness can all lead to value creation.

Therefore, the clear conclusion is that we do not need Billions of Dollars in investment and just by
making use of the available resources, firms and nations can indeed prosper in the same manner in
which the Western countries and their peoples have enjoyed a higher standard of living.

Porter’s Five Forces Model of Competition

Michael Porter (Harvard Business School Management Researcher) designed various vital frameworks
for developing an organization’s strategy. One of the most renowned among managers making strategic
decisions is the five competitive forces model that determines industry structure. According to Porter,
the nature of competition in any industry is personified in the following five forces:

i. Threat of new potential entrants

ii. Threat of substitute product/services
iii. Bargaining power of suppliers
iv. Bargaining power of buyers
v. Rivalry among current competitors
FIGURE: Porter’s Five Forces model

The five forces mentioned above are very significant from point of view of strategy formulation. The
potential of these forces differs from industry to industry. These forces jointly determine the profitability
of industry because they shape the prices which can be charged, the costs which can be borne, and the
investment required to compete in the industry. Before making strategic decisions, the managers should
use the five forces framework to determine the competitive structure of industry.

Let’s discuss the five factors of Porter’s model in detail:

1. Risk of entry by potential competitors: Potential competitors refer to the firms which are not
currently competing in the industry but have the potential to do so if given a choice. Entry of
new players increases the industry capacity, begins a competition for market share and lowers
the current costs. The threat of entry by potential competitors is partially a function of extent of
barriers to entry. The various barriers to entry are-
 Economies of scale
 Brand loyalty
 Government Regulation
 Customer Switching Costs
 Absolute Cost Advantage
 Ease in distribution
 Strong Capital base
2. Rivalry among current competitors: Rivalry refers to the competitive struggle for market share
between firms in an industry. Extreme rivalry among established firms poses a strong threat to
profitability. The strength of rivalry among established firms within an industry is a function of
following factors:
 Extent of exit barriers
 Amount of fixed cost
 Competitive structure of industry
 Presence of global customers
 Absence of switching costs
 Growth Rate of industry
 Demand conditions
3. Bargaining Power of Buyers: Buyers refer to the customers who finally consume the product or
the firms who distribute the industry’s product to the final consumers.

Bargaining power of buyers refer to the potential of buyers to bargain down the prices charged
by the firms in the industry or to increase the firms cost in the industry by demanding better
quality and service of product.

Strong buyers can extract profits out of an industry by lowering the prices and increasing the
costs. They purchase in large quantities. They have full information about the product and the
market. They emphasize upon quality products. They pose credible threat of backward
integration. In this way, they are regarded as a threat.

4. Bargaining Power of Suppliers: Suppliers refer to the firms that provide inputs to the industry.

Bargaining power of the suppliers refer to the potential of the suppliers to increase the prices of
inputs( labour, raw materials, services, etc) or the costs of industry in other ways.

Strong suppliers can extract profits out of an industry by increasing costs of firms in the industry.
Suppliers products have a few substitutes. Strong suppliers’ products are unique. They have high
switching cost. Their product is an important input to buyer’s product. They pose credible threat
of forward integration. Buyers are not significant to strong suppliers. In this way, they are
regarded as a threat.
 5. Threat of Substitute products: Substitute products refer to the products having ability of
satisfying customers needs effectively. Substitutes pose a ceiling (upper limit) on the potential
returns of an industry by putting a setting a limit on the price that firms can charge for their
product in an industry.

Lesser the number of close substitutes a product has, greater is the opportunity for the firms in
industry to raise their product prices and earn greater profits (other things being equal).

The power of Porter’s five forces varies from industry to industry. Whatever be the industry, these
five forces influence the profitability as they affect the prices, the costs, and the capital investment
essential for survival and competition in industry.

This five forces model also help in making strategic decisions as it is used by the managers to determine
industry’s competitive structure.

Porter ignored, however, a sixth significant factor- complementaries. This term refers to the reliance that
develops between the companies whose products work is in combination with each other. Strong
complementors might have a strong positive effect on the industry.

Also, the five forces model overlooks the role of innovation as well as the significance of individual firm
differences. It presents a stagnant view of competition.

Porter’s Five Forces Analysis of the Airlines Industry in the United States

Five Forces Analysis

Porter’s Five Forces analysis is a useful methodology and a tool to analyze the external environment in
which any industry operates.

The key aspect about using Porter’s Five Forces for the airline industry in the United States is that the
airline industry has been buffeted by strong headwinds from a host of external factors that include
declining passenger traffic, increasing operating expenses, high fuel prices, and greater landing
and maintenance costs, apart from intense competition from low cost carriers that has led to a cutthroat
price war which has led the industry severely affected.

Indeed, it can be said that the airline industry globally is in a “death spiral” and more so in the United
States where several prominent carriers were either forced into bankruptcy or had to merge with other
airlines just to stay afloat.

Supplier Power

The power of suppliers in the airline industry is immense because of the fact that the three inputs that
airlines have in terms of fuel, aircraft, and labor are all affected by the external environment.

1. For instance, the price of aviation fuel is subject to the fluctuations in the global market for oil,
which can gyrate wildly because of geopolitical and other factors.
2. Similarly, labor is subject to the power of the unions who often bargain and get unreasonable and
costly concessions from the airlines.
3. Third, the airline industry needs aircraft either on outright sale or wet lease basis which means
that the airlines have to depend on the two biggies, Airbus, and Boeing for their aircraft needs.
This is the reason the power of the suppliers in terms of the three inputs needed for them is
categorized as high according to the Porter’s Five Forces framework.

Buyer Power

With the proliferation of online ticketing and distribution systems, fliers no longer have to be at
the mercy of the agents and the intermediaries as well the airlines themselves for their ticketing needs.

Apart from, the entry of low cost carriers and the resultant price wars has greatly benefited the fliers.
Moreover, the tight regulation on the demand side of the airline industry meaning that passengers and
fliers have been protected by the regulators means that the balance of power is tipped in their favor.

All these factors make the airline industry cede power to the consumers and hence, the power of buyers
is moderate to high as per Porter’s Five Forces methodology. Apart from this, the buyers can engage in
“price discovery” meaning that price fluctuations do not deter them as they have multiple channels
through which they can book their tickets
Entry and Exit Barriers

The airline industry needs huge capital investment to enter and even when airlines have to exit the
sector, they need to write down and absorb many losses. This means that the entry and exit barriers
are high for the airline industry.

As entry into the airline industry needs a high infusion of capital, not everybody can enter the
industry, which in addition, needs sophisticated knowledge and expertise on part of the players, which
is a deterrent. The exit barriers are also subject to regulation as regulators in the United States do not let
airlines exit the industry unless they are satisfied that there is a genuine business reason for the same.

Moreover, the airline industry leverages the efficiencies and the synergies from the economies of scale
and hence, the entry barriers are high. Therefore, applying Porter’s Five Forces framework, we find that
the airlines pose significant entry and exit barriers, which means that the impact of this dimension is
quite high.

Threat of Substitutes and Complementarities

The airline industry in the United States is not at threat from substitutes and complementarities as unlike
in the developing world, consumers do not necessarily take the train or the bus for journeys. What this
means is that flying is a natural phenomenon for the consumers and hence, the substitutes in terms of the
train and bus is minimal in its impact.

Of course, many Americans motor down (use their cars for longer travel as well) which means that
there is the threat of this substitute. As for complementarities, the provision of services like free Wi-
Fi, a la carte meals, and passenger amenities offered by the full service airlines does not really translate
into more passengers as in the recent past; fliers have been induced more by lower fares than these
aspects.

Intensity of Competitive Rivalry

As mentioned in the introduction, the airline industry in the United States is extremely competitive
because of a number of reasons which include entry of low cost carriers, the tight regulation of the
industry wherein safety become paramount leading to high operating expenses, and the fact that the
airlines operate according to a business model that is a bit outdated especially in times of rapid turnover
and churn in the industry.

Apart from anything else, the airline industry is regulated on the supply side more than the demand
side, which means that instead of the airlines being free to choose which markets to operate and which
segments to target, it is the fliers who get to be pampered by the regulators. This is the reason why low
cost carriers have literally grounded the full service airlines and when combined with the intense
competition that was always the case in the United States, the result is that the sector is one of the most
competitive in the country.

Porter’s Five Forces Analysis of Samsung

Introduction

Porter’s Five Forces methodology is used in this article to analyze the business strategies of white goods
makers like Samsung.

This tool is a handy method to assess how each of the market drivers impact the companies like
Samsung and then based on the analysis, suitable business strategies can be devised.

Further, companies like Samsung are known to study the markets they want to approach thoroughly and
deeply before they make a move and it is in this perspective that this analysis is undertaken.

Industry Rivalry

This element is especially significant for Samsung as the other White Goods multinationals like LG,
Nokia, and Motorola not to mention Apple are engaged in fierce competitive rivalry.

Indeed, Samsung cannot take its position in the market for granted as all these and other domestic white
goods players operate in a market where margins are tight and the competition is intense.
Apart from this, Samsung faces the equivalent of the “Cola Wars” (the legendary fight for dominance
between Coke and Pepsi) in emerging markets like India where Samsung has to contend and compete
with a multitude of players domestic and global. This has made the impact of this dimension especially
strong for Samsung.

Barriers to Entry and Exit

The White Goods industry is characterized by high barriers to entry and low barriers to exit
especially where global conglomerates like Samsung are concerned. Indeed, it is often very difficult to
enter emerging markets because a host of factors have to be taken into consideration such as setting up
the distribution network and the supply chain.

However, global conglomerates can exit the emerging markets easily as all it takes is to handover and
sell the business to a domestic or a foreign player in the case of declining or falling sales. This means
that Samsung has entered many emerging markets through a step-by-step approach and has also exited
the markets that have been found to be unprofitable. This is the reason why white goods multinationals
like Samsung often do their due diligence before entering emerging markets.

Power of Buyers

The power of buyers for white goods makers like Samsung is somewhat of a mixed bag where though
the buyers have a multitude of options to choose from and at the same time have to stick with the
product since they cannot just dump the product, as it is a high value item.

Further, the buyers would have to necessarily approach the companies for after sales service and for
spare parts. Of course, this does not mean that the buyers are at the mercy of the companies. Far from
that, they do have power over the companies, as most emerging market consumers are known to be
finicky when deciding on the product to buy and explore all the options before reaching a decision. This
means that both the buyers and the companies need each other just like the suppliers and the companies,
as we shall discuss next.
Power of Suppliers

In many markets in which Samsung operates, there are many suppliers who are willing to offer their
services at a discount since the ancillary sectors are very deep. However, this does not mean that the
companies can exert undue force over the suppliers as once the supply chain is established; it takes a lot
to undo it and build a new supply chain afresh. This is the reason why white goods makers like Samsung
invariably study the markets before setting up shop and also take the help of consultancies in arriving at
their decision.

Threat of Substitutes

This element is indeed high as the markets for white goods are flooded with many substitutes and given
the fact that consumer durables are often longer term purchases, companies like Samsung have to be
careful in deciding on the appropriate marketing strategy. This is also the reason why many
multinationals like Samsung often adopt differential pricing so as to attract consumers from across the
income pyramid to wean them away from cheaper substitutes.

Further, this element also means that many emerging market consumers are yet to deepen their
dependence on white goods and instead, prefer to the traditional forms of housework wherein they rely
less on gadgets and appliances. However, this is rapidly changing as more women enter the workforce in
these markets making it necessary for them to use gadgets and appliances.

Stakeholders

This is an added element for analysis as the increasing concern over social and environmentally
conscious business practices means that companies like Samsung have to be careful in how they do
business as well as project themselves to the consumers.

For instance, white goods makers are known to decide after due deliberation on everything from
choosing their brand ambassadors to publicizing their CSR (Corporate Social Responsibility) initiatives.
Conclusion

As the diagram above indicates the relative strengths and the weaknesses of each element, we can now
conclude this analysis with the theme that as the global economy integrates and more emerging markets
open up, companies like Samsung are at an advantage because they have already established themselves
in many markets.

However, it must also be noted that each market is unique and hence, Samsung must not adopt a one
size fits all strategy and instead, must approach each market differently.

In conclusion, Samsung can take pride from the fact that being an Asian conglomerate, it has
managed to break into and hold its own against many western multinationals that have been in
this business for decades.

Porters Five Forces Analysis of China Mobile

Introduction

China Mobile operates in a monopoly like market in the domestic Chinese telecom sector and hence, the
application of the five forces model reveals that it need not yet worry about the external environment,
which is protected and heavily regulated.

Having said that, as the succeeding discussion makes it clear, it cannot take its current comfort zone
for granted, and as the recent strategic moves made by it reveal, it indeed taking steps to ensure that it
continues to thrive and prosper even when the Chinese Telecom market is thrown open to foreign
competition.

However, its status as a SOE or a State Owned Enterprise guarantees it a lead over competitors even in
this scenario, as the Chinese government is known to handhold its SOEs even in the face of competition.

Industry Rivalry
As China Mobile operates in a heavily regulated market where the government limits competition, the
power of this element is not high.

Indeed, it can be said that this element exerts the lowest force, as there are very few domestic or
international competitors for China Mobile. Further, the fact that China Mobile is a monopoly player
coupled with the large market share it has means that it faces little or no competition from existing or as
we shall discuss, new players.

Finally, the large industry size with a sizzling growth rate in the volumes of subscribers means that
China Mobile does not have to worry too much about Industry Rivalry. However, this is set to change in
the future because of the gradual opening up of the Chinese market to foreign firms even in telephony,
which is enough for China Mobile to take it seriously.

As has been mentioned elsewhere, many of the future trends point to China Mobile having to discard its
legacy business model and indeed, current evidence suggests that it is in the process of doing so.

Entry and Exit Barriers

The Telecom sector anywhere in the world has high sunk costs, which means that prospective
firms seeking to enter the market have to invest a lot of capital. This is further exacerbated in the
Chinese market where the need of a strong distribution network given the size of the country coupled
with the lack of advanced technology available to newer players means that this force is medium to low
in its strength.

Apart from this, the Chinese market as mentioned earlier is tightly regulated with a maze of rules and
regulations that govern the market making it difficult for smaller and lesser-known players to enter the
market. Therefore, China Mobile has very few reasons to worry about the threat of new players though
this seems likely to change in the future with the government deciding to open up the Chinese telecom
sector to international competition.

Power of Suppliers
The power of suppliers is virtually nonexistent as there is a single technology standard and given the
lack of technological sophistication of the Chinese telecom market, suppliers cannot exert the power of
technology on China Mobile.

Moreover, as the market is tightly regulated, the suppliers (many of them government owned SOEs or
State Owned Enterprises) have no choice but to do business with China Mobile. Of course, this works
the other around as well since China Mobile has to rely on the few suppliers for its needs though the
government plays the mediating role to ensure that neither side holds the other to ransom.

Power of Buyers

As with the other forces, the power of buyers is limited because of the presence of very few players
in the Chinese Telecom sector.

Coupled with the fact that there is low price sensitivity and low dependency on customization, China
Mobile has a near stranglehold on the market as can be seen from the way it has acquired a large
customer base within the span of a decade. This large customer base also gives China Mobile the power
to set prices though the government intervenes now and then.

Further, because of the premium that the Chinese place on owning a mobile handset and a connection,
they are willing to endure the waiting period and the necessary adjustments, which mean that China
Mobile has the free run of the market.

Threat of Substitutes

Given the fact that China is still a primarily agrarian country where the hinterland continues to languish
though the cities are world class, the substitutes to mobile telephony are very few.

With China being like other emerging markets where the transition from postal communication to
telephony did not go through the landline phase and instead, leapfrogged into the mobile phase, China
Mobile need not bother about landline substitution though the gradual adoption of the internet has made
it wary of potential substitutes from internet telephony.
Apart from this, China Mobile is also actively expanding into the internet based communications so that
it retains its market share in the online realm as well.

Conclusion

The preceding analysis has revealed the theme that China Mobile needs to start preparing for the future
as soon as possible because of the trends like allowing competition, upgrading technology, opening up
to foreign firms, and most importantly, the advent of internet telephony that threatens the cozy market
leadership, which China Mobile has.

In conclusion, the future seems to be arriving faster than expected for China Mobile and hence, it is
the case that it needs to prepare for the future as though it has arrived yesterday.

STRATEGIC LEADERSHIP:

Definition and Qualities of a Strategic Leader

Strategic leadership refers to a manager’s potential to express a strategic vision for the
organization, or a part of the organization, and to motivate and persuade others to acquire that vision.

Strategic leadership can also be defined as utilizing strategy in the management of employees. It is the
potential to influence organizational members and to execute organizational change.

Strategic leaders create organizational structure, allocate resources and express strategic vision. Strategic
leaders work in an ambiguous environment on very difficult issues that influence and are influenced by
occasions and organizations external to their own.

The main objective of strategic leadership is strategic productivity. Another aim of strategic
leadership is to develop an environment in which employees forecast the organization’s needs in context
of their own job. Strategic leaders encourage the employees in an organization to follow their own ideas.

Strategic leaders make greater use of reward and incentive system for encouraging productive and
quality employees to show much better performance for their organization. Functional strategic
leadership is about inventiveness, perception, and planning to assist an individual in realizing his
objectives and goals.

Strategic leadership requires the potential to foresee and comprehend the work environment. It requires
objectivity and potential to look at the broader picture.

A few main traits/characteristics/features/qualities of effective strategic leaders that do lead to

superior performance are as follows:

1. Loyalty- Powerful and effective leaders demonstrate their loyalty to their vision by their words
and actions.
2. Keeping them updated- Efficient and effective leaders keep themselves updated about what is
happening within their organization. They have various formal and informal sources of
information in the organization.
3. Judicious use of power- Strategic leaders makes a very wise use of their power. They must play
the power game skillfully and try to develop consent for their ideas rather than forcing their ideas
upon others. They must push their ideas gradually.
4. Have wider perspective/outlook- Strategic leaders just don’t have skills in their narrow
specialty but they have a little knowledge about a lot of things.
5. Motivation- Strategic leaders must have a zeal for work that goes beyond money and power and
also they should have an inclination to achieve goals with energy and determination.
6. Compassion- Strategic leaders must understand the views and feelings of their subordinates, and
make decisions after considering them.
7. Self-control- Strategic leaders must have the potential to control distracting/disturbing moods
and desires, i.e., they must think before acting.
8. Social skills- Strategic leaders must be friendly and social.
9. Self-awareness- Strategic leaders must have the potential to understand their own moods and
emotions, as well as their impact on others.
10. Readiness to delegate and authorize- Effective leaders are proficient at delegation. They are
well aware of the fact that delegation will avoid overloading of responsibilities on the leaders.
They also recognize the fact that authorizing the subordinates to make decisions will motivate
them a lot.
 11. Articulacy- Strong leaders are articulate enough to communicate the vision(vision of where the
organization should head) to the organizational members in terms that boost those members.
12. Constancy/ Reliability- Strategic leaders constantly convey their vision until it becomes a
component of organizational culture.

To conclude, Strategic leaders can create vision, express vision, passionately possess vision and
persistently drive it to accomplishment.

Some Pitfalls to be Avoided in Strategic Management

It needs to be remembered that strategic management and strategic planning are intricate and complex
processes that take the organization into unchartered territories. Hence, they do not provide a readymade
prescription for success nor do they promise instant solutions to all problems that the organization is
facing. Instead, strategic management and strategic planning are processes that take the organization
through a journey that involves providing a framework for solving problems and addressing questions.

Some of the pitfalls to be avoided in strategic management and strategic planning are listed below:

1. The first and foremost pitfall relates to using strategic management and strategic planning only to
satisfy accreditation and regulatory requirements instead of adding value to the firm’s processes.
2. Getting into solution mode without thinking through the complex problems that 21st century
organizations face. It needs to be remembered that many problems that businesses face need
“slow fixes” rather than quick and easy solutions that are attractive at first glance but fail over
the longer term.
3. When the top managers do not support the strategic management process because of
intraorganizational politics, any strategy however good would fail because of the lack of buy-in
from key interests in the organization.
4. When the planning is delegated to a “planner” instead of all the managers getting involved, there
are issues to do with lack of information and lack of execution, which results in the strategy
going haywire.
5. When firms are bogged down by too many internal problems that sap the energies of the
managers, strategic planning and strategic management become futile, as the managers are
 engrossed in firefighting and solving the internal problems rather than focusing on the external
aspects.
6. One of the pitfalls of strategic planning happens when organizations become so formal and
structured in their approach that they neglect the creative and flexible aspects.

The point to be noted here is that out of the box thinking and non-linearity are important for
firms to succeed in today’s business landscape.

7. On the other hand, too much reliance on intuition can cost firms dear as after all strategy is a
series of steps that need to be actualized and hence, there is a need for a well thought out and
detailed plan.

While these are the some of the pitfalls of strategic planning, there are other aspects like not working to
a plan and being too much bureaucratic.

Since the organizations of the future need to be agile and flexible with the ability to be malleable
according to the changing market conditions and yet at the same time, have a core structure that is
consistent with core competencies, a mix of formal and informal planning is needed for effective
strategic management.

Closing Thoughts

Strategy is formal and emergent at the same time meaning that there needs to be formal planning as well
as elbowroom for spontaneous evolution of the strategic planning process. This is the overriding
imperative that organizations must follow if they are to actualize strategies that make them market
leaders.

CORPORATE GOVERNANCE

Definition, Scope and Benefits

What is Corporate Governance?

Corporate Governance refers to the way a corporation is governed. It is the technique by which
companies are directed and managed. It means carrying the business as per the stakeholders’ desires. It
is actually conducted by the board of Directors and the concerned committees for the company’s
stakeholder’s benefit. It is all about balancing individual and societal goals, as well as, economic and
social goals.

Corporate Governance is the interaction between various participants (shareholders, board of

directors, and company’s management) in shaping corporation’s performance and the way it is
proceeding towards. The relationship between the owners and the managers in an organization must be
healthy and there should be no conflict between the two. The owners must see that individual’s actual
performance is according to the standard performance. These dimensions of corporate governance
should not be overlooked.

Corporate Governance deals with the manner the providers of finance guarantee themselves of getting a
fair return on their investment. Corporate Governance clearly distinguishes between the owners and the
managers. The managers are the deciding authority. In modern corporations, the functions/ tasks of
owners and managers should be clearly defined, rather, harmonizing.

Corporate Governance deals with determining ways to take effective strategic decisions. It gives
ultimate authority and complete responsibility to the Board of Directors.

In today’s market-oriented economy, the need for corporate governance arises. Also, efficiency as well
as globalization are significant factors urging corporate governance. Corporate Governance is essential
to develop added value to the stakeholders.

Corporate Governance ensures transparency which ensures strong and balanced economic
development. This also ensures that the interests of all shareholders (majority as well as minority
shareholders) are safeguarded. It ensures that all shareholders fully exercise their rights and that the
organization fully recognizes their rights.

Corporate Governance has a broad scope. It includes both social and institutional aspects. Corporate
Governance encourages a trustworthy, moral, as well as ethical environment.
Benefits of Corporate Governance

1. Good corporate governance ensures corporate success and economic growth.

2. Strong corporate governance maintains investors’ confidence, as a result of which, company can
raise capital efficiently and effectively.
3. It lowers the capital cost.
4. There is a positive impact on the share price.
5. It provides proper inducement to the owners as well as managers to achieve objectives that are in
interests of the shareholders and the organization.
6. Good corporate governance also minimizes wastages, corruption, risks and mismanagement.
7. It helps in brand formation and development.
8. It ensures organization in managed in a manner that fits the best interests of all.

BUSINESS ETHICS

A Successful way of conducting business

Definition of Business Ethics

Business Ethics refers to carrying business as per self-acknowledged moral standards. It is actually a
structure of moral principles and code of conduct applicable to a business.

Business ethics are applicable not only to the manner the business relates to a customer but also to the
society at large. It is the worth of right and wrong things from business point of view.

Business ethics not only talk about the code of conduct at workplace but also with the clients and
associates. Companies which present factual information, respect everyone and thoroughly adhere to the
rules and regulations are renowned for high ethical standards. Business ethics implies conducting
business in a manner beneficial to the societal as well as business interests.

Every strategic decision has a moral consequence.

The main aim of business ethics is to provide people with the means for dealing with the moral
complications.

Ethical decisions in a business have implications such as satisfied work force, high sales, low regulation
cost, more customers and high goodwill.

Some of ethical issues for business are relation of employees and employers, interaction between
organization and customers, interaction between organization and shareholders, work environment,
environmental issues, bribes, employees rights protection, product safety etc.

Below is a list of some significant ethical principles to be followed for a successful business-

1. Protect the basic rights of the employees/workers.

2. Follow health, safety and environmental standards.
3. Continuously improvise the products, operations and production facilities to optimize the
resource consumption
4. Do not replicate the packaging style so as to mislead the consumers.
5. Indulge in truthful and reliable advertising.
6. Strictly adhere to the product safety standards.
7. Accept new ideas. Encourage feedback from both employees as well as customers.
8. Present factual information. Maintain accurate and true business records.
9. Treat everyone (employees, partners and customers) with respect and integrity.
10. The mission and vision of the company should be very clear to it.
11. Do not get engaged in business relationships that lead to conflicts of interest. Discourage black
marketing, corruption and hoarding.
12. Meet all the commitments and obligations timely.
13. Encourage free and open competition. Do not ruin competitors’ image by fraudulent practices.
14. The policies and procedures of the Company should be updated regularly.
15. Maintain confidentiality of personal data and proprietary records held by the company.
16. Do not accept child labour, forced labour or any other human right abuses.
 SOCIAL RESPONSIBILITIES OF MANAGERS

Social responsibility is defined as the obligation and commitment of managers to take steps for
protecting and improving society’s welfare along with protecting their own interest. The managers must
have social responsibility because of the following reasons:

1. Organizational Resources - An organization has a diverse pool of resources in form of men,

money, competencies and functional expertise. When an organization has these resources in
hand, it is in better position to work for societal goals.
2. Precautionary measure - if an organization lingers on dealing with the social issues now, it
would land up putting out social fires so that no time is left for realizing its goal of producing
goods and services. Practically, it is more cost-efficient to deal with the social issues before they
turn into disaster consuming a large part if managements time.
3. Moral Obligation - The acceptance of managers’ social responsibility has been identified as a
morally appropriate position. It is the moral responsibility of the organization to assist solving or
removing the social problems
4. Efficient and Effective Employees - Recruiting employees becomes easier for socially
responsible organization. Employees are attracted to contribute for more socially responsible
organizations. For instance - Tobacco companies have difficulty recruiting employees with best
skills and competencies.
5. Better Organizational Environment - The organization that is most responsive to the
betterment of social quality of life will consequently have a better society in which it can
perform its business operations. Employee hiring would be easier and employee would of a
superior quality. There would be low rate of employee turnover and absenteeism. Because of all
the social improvements, there will be low crime rate consequently less money would be spent in
form of taxes and for protection of land. Thus, an improved society will create a better business
environment.
But, manager’s social responsibility is not free from some criticisms, such as -

1. High Social Overhead Cost - The cost on social responsibility is a social cost which will not
instantly benefit the organization. The cost of social responsibility can lower the organizational
efficiency and effect to compete in the corporate world.
2. Cost to Society - The costs of social responsibility are transferred on to the society and the
society must bear with them.
3. Lack of Social Skills and Competencies - The managers are best at managing business matters
but they may not have required skills for solving social issues.
4. Profit Maximization - The main objective of many organizations is profit maximization. In such
a scenario the managers decisions are controlled by their desire to maximize profits for the
organizations shareholders while reasonably following the law and social custom.

Social responsibility can promote the development of groups and expand supporting industries.

CORE COMPETENCIES –

AN ESSENTIAL FOR ORGANIZATIONAL SUCCESS

What is Core Competency?

Core competency is a unique skill or technology that creates distinct customer value. For instance, core
competency of Federal express (Fed Ex) is logistics management. The organizational unique capabilities
are mainly personified in the collective knowledge of people as well as the organizational system that
influences the way the employees interact.

As an organization grows, develops and adjusts to the new environment, so do its core competencies
also adjust and change. Thus, core competencies are flexible and developing with time. They do not
remain rigid and fixed. The organization can make maximum utilization of the given resources and
relate them to new opportunities thrown by the environment.
Resources and capabilities are the building blocks upon which an organization create and execute
value-adding strategy so that an organization can earn reasonable returns and achieve strategic
competitiveness.

Figure: Core Competence Decision

Resources are inputs to a firm in the production process. These can be human, financial,
technological, physical or organizational. The more unique, valuable and firm specialized the resources
are, the more possibly the firm will have core competency.

Resources should be used to build on the strengths and remove the firm’s weaknesses. Capabilities refer
to organizational skills at integrating it’s team of resources so that they can be used more efficiently and
effectively.

Organizational capabilities are generally a result of organizational system, processes and control
mechanisms. These are intangible in nature. It might be that a firm has unique and valuable resources,
but if it lacks the capability to utilize those resources productively and effectively, then the firm cannot
create core competency.

The organizational strategies may develop new resources and capabilities or it might make the existing
resources and capabilities stronger, hence building the core competencies of the organization.
Core competencies help an organization to distinguish its products from it’s rivals as well as to reduce
its costs than its competitors and thereby attain a competitive advantage. It helps in creating customer
value. Also, core competencies help in creating and developing new goods and services.

Core competencies decide the future of the organization. These decide the features and structure of
global competitive organization. Core competencies give way to innovations. Using core competencies,
new technologies can be developed. They ensure delivery of quality products and services to the clients.

Core Competency Theory of Strategy

Core Competency Theory

The core competency theory is the theory of strategy that prescribes actions to be taken by firms to
achieve competitive advantage in the marketplace. The concept of core competency states that firms
must play to their strengths or those areas or functions in which they have competencies.

In addition, the theory also defines what forms a core competency and this is to do with it being not easy
for competitors to imitate, it can be reused across the markets that the firm caters to and the products it
makes, and it must add value to the end user or the consumers who get benefit from it.

In other words, companies must orient their strategies to tap into the core competencies and the
core competency is the fundamental basis for the value added by the firm.

Core Competencies and Strategy

The term core competency was coined by the leading management experts, CK Prahalad and Gary
Hamel in an article in the famous Harvard Business Review. By providing a basis for firms to compete
and achieve sustainable competitive advantage, Prahalad and Hamel pioneered the concept and laid the
foundation for companies to follow in practice.

Some core competencies that firms might have include technical superiority, its customer relationship
management, and processes that are vastly efficient.
In other words, each firm has a specific area in which it does well relative to its competitors, this area of
excellence can be reused by the firm in other markets and products, and finally, the area of strength adds
value to the consumer.

The implications for real world practice are that core competencies must be nurtured and the business
model built around them instead of focusing too much on areas where the firm does not have
competency. This is not to say that other competencies must be neglected or ignored. Rather, the idea
behind the concept is that firms must leverage upon their core strengths and play to their advantages.

Some Examples

If we take the examples from real world companies and evaluate their core competencies, we find that
many firms have benefited from the application of this theory and that they have succeeded in attaining
competitive advantage and sustainable strategic advantage.

For instance, the core competencies of Walt Disney Corporation lie in its ability to animate and
design its shows, the art of storytelling that has been perfected by the company, and the operation of its
theme parks that is done in an efficient and productive manner. Hence, Walt Disney Corporation would
be well advised to configure its strategy around these core competencies and build a business model that
complements these competencies.

Closing Thoughts

The important aspect to be noted is that core competencies provide the companies with a framework
wherein they can identify their core strengths and strategize accordingly. Of course, the
identification and evaluation of core competencies must be done as accurately and reliably as possible
since the divestment of non-core areas must not lead to the firm missing key areas of operation and
competitive advantage.

Finally, care must be taken when building the organizational edifice around the core competencies to
avoid the situation where many or too few of the competencies are identified leading to redundancies or
scarcity.
 ANSOFF MATRIX

Introduction

The famous management expert, Igor Ansoff provided a roadmap for firms to grow depending on
whether they are launching new products or entering new markets or a combination of these options.
This roadmap has been presented in the form of a Matrix that has four quadrants with the axes of
products and markets being the determinants of the strategies.

As can be seen from the figure accompanying this section, the combinations of the two axes provide the
firms with options that they can pursue in search of market share.

The four quadrants (which are described in detail subsequently) pertain to increasing market share
through market penetration, venturing into new markets with the existing products or market
development, and launching new products in existing markets with product development, and finally,
diversification when firms seek to enter new markets with new products.
Market Penetration

As can be seen from the figure above, market penetration happens when the existing products are
marketed in a way to increase the market share of the firm. This is a minimal risk strategy as all that a
firm has to do is to increase its marketing efforts and improve on its market share. In other words, the
firm has to ensure that it leverages the current capabilities, resources, and gears towards a growth-
oriented strategy.

However, market penetration has its limitations and these manifest when the market is saturated and
hence, growth diminishes for the products.

Examples of market penetration would include the Television Channels and Media Houses trying to
maintain their existing features in the existing markets and ensuring that they grow because of the
growth in the size of the market or because they have provided a value proposition that is better than
their competitors are.

Market Development

When firms seek to expand into new markets with their existing products, market development happens.
This is suitable for firms that have the capabilities and the resources to enter new markets in pursuit of
growth.

Further, the firm’s core competencies must be aligned with the products rather than the markets and
wherein the firm senses an opportunity in the new markets for its existing products.

Market development is more risky than market penetration as the firm is entering uncharted waters
and therefore, it is in the interests of the firms to do their due diligence before entering new markets.

Examples of market development would be the mobile telephony companies like Vodafone and Nokia
entering African markets where these markets are yet to be tapped and where these firms can leverage
their existing expertise to enter these markets.

Product Development
When firms seek to launch new products in existing markets, product development happens. This
strategy can be successful when the firms have already established themselves in the existing markets
and all that they need to do is to launch new products, which leverage the brand image and the brand
value and meet the expectations of the customers in the existing markets.

For instance, whenever consumer giants like Unilever and Proctor and Gamble (P&G) launch new
products in existing markets, they have the advantage of a strong brand value and top of the mind recall
among the customers about them, which would help them to garner market share.

When compared to the previous two strategies, this strategy is more risky as it is not sure whether the
transfer of customers from the existing products to the new products would happen as seamlessly as the
firms strategists believe.

Diversification

When firms launch new products in new markets, diversification happens which entails both new
products to be developed and new markets to be tapped. This is the most risky of the four quadrant
strategies in the Ansoff Matrix as essentially the firms are not only testing the waters in uncharted
territory but they are also launching new products that may or may not be well received by the
customers.

Indeed, diversification is a high-risk strategy and is only justified when there are chances of high returns
for the firms.

Examples of diversification would include companies like Reliance venturing into mobile telephony and
retail segments where they not only have to move away from their core competencies but also have to
launch new products targeted at the new customer segment.

Management experts recommend diversification only when the firms are sitting on enough cash and
other resources, as the firms need to have deep pockets to stay the course until the time profits are
realized.
Further, they also recommend firms with existing customer loyalty and customer base as the cross
migration from one segment to the other happens only when the customers are assured of receiving
value for their money.

For instance, the TATA group in India is perceived as delivering good value and this helped them to
garner market share when they diversified into new markets and new products.

Conclusion

As can be seen from the preceding discussion, it is imperative for firms to grow as otherwise their
resources would not generate the returns needed for the firms to make profits as well as deliver value to
their shareholders. Moreover, firms need to continually look for ways and means to increase their
market share, which would help them create value for their stakeholders.

This is the reason why the Ansoff Matrix has become so popular because it charts the strategies that the
firms must follow in each option, which again is a combination of the firms’ current capabilities, and the
possibility of new market led growth.

In conclusion, the Ansoff Matrix is very relevant in these recessionary times as it can be applied by
any firm wishing to either expand into newer markets or leverage its existing capabilities.

Routes to Strategic Growth: Organic or Inorganic Growth

Organic Growth

Organic growth in management parlance refers to the growth of a company that occurs naturally.

In other words, if a company grows through increased revenues and increased profitability on its own
without resorting to mergers and acquisitions, then it is known to grow organically. For instance,
companies like Infosys are known to shun mergers and acquisitions and instead, concentrate on growing
through expansion its business.
The main advantage of organic growth is that it helps companies focus on their core competencies and
avoid the traps of cultural clash and differing value systems that happens when two firms merge. Apart
from this, organic growth is natural as mentioned earlier which means that the management of the
company can feel comfortable about the growth prospects by doing what they are good at.

Inorganic Growth

On the other hand, inorganic growth refers to the expansion of the bottom line through mergers and
acquisitions (whether they are friendly takeovers or hostile takeovers). The main advantage of inorganic
growth is that it helps companies with large cash reserves to invest them in productive mergers and
acquisitions that help the bottom line of the company.

Apart from this, companies in distress can benefit through inorganic growth as a more successful
company can bid for it and help both companies in the process. Further, inorganic growth helps in
consolidation of similar strategic imperatives and business drivers. Of course, when a company
grows inorganic it has to go through all the joys and perils that mergers entail in a way that is similar to
how couples go through when they get married.

On a serious note, inorganic growth helps companies beat the downturn as was evident in the recent
merger between American Airlines and US Airways. The merger that was actualized as this article is
being written points to the need for consolidation in the aviation industry, which is leaving many airlines
in the red.

Which is Preferable?

The answer to the question as to which kind of growth is preferable depends on the strategic intent of the
companies involved. If the driver of strategy is increased market share alone, then inorganic growth
makes sense. On the other hand, if operational imperatives are involved, inorganic growth leads to
friction and mismatch between organizational cultures between the two companies.

Apart from this, when the objective is to keep the two companies distinct and the merger is only to
consolidate operations, there is a chance that inorganic growth might work. Finally, organic growth
helps the organizational identity whereas when companies grow inorganically, there is the possibility of
the merged organization losing its identity.

Closing Thoughts

In these recessionary times, the number of mergers and acquisitions are increasing mainly because these
companies believe that size matters and big is better.

Further, the fact that regulators are encouraging mergers and acquisitions is another factor in favor of
inorganic growth. However, there is a word of caution here and that relates to the fact that companies
must think twice before taking the plunge as growing inorganically does not lead to expected increases
in revenues all the time.

Diversification as a Viable Corporate Strategy

Introduction

Diversification is one of the strategies pursued by firms wishing to grow in newer markets and by
launching newer products. Diversification usually entails the firms entering new markets in the
industry in which they are already present by launching newer products. Note the emphasis on new
markets and new products as diversification is not only about entering newer markets but also with
newer products.

For instance, launching detergents and other hygiene based products by firms that already have soaps
and other personal care products is one form of diversification wherein the firms launch an entirely new
product line aimed at targeting newer market segments.

Similarly, innovating and inventing newer products is another way of diversification, which can extend
beyond the existing industry in which the firms operate. The best example of this type of diversification
is launching mobile payment systems by mobile telephony companies wherein they tap newer market
segments with newer product and service lines.

Concentric Diversification
The first type of diversification is concentric diversification wherein the firms ensure that there is a
technological similarity between its existing core competencies and the newer product lines.

Indeed, this type of diversification is aimed at leveraging the existing competencies and expertise
and which is aligned with its resources and capabilities. In this type of diversification, firms typically
launch additions to their product lines and at the same time target newer market segments. The idea here
is to ensure that their brand image and brand loyalty are transferred to the newer products.

Further, this type of diversification is sometimes not done strictly to target newer market segments but
ensure that the untapped market segments are targeted. Examples of this would be launching Tablet
computers by companies like Apple and Samsung, which are already present in the Smartphone market.

Horizontal Diversification

This type of diversification happens when firms tag on to the existing market segments and
leverage the existing customer base though the products that they launch are aimed at sub
segments in the current market. This type of diversification is usually followed when the firms launch
newer products that have some relation to the existing products but at the same time, the firm is entering
a new business.

This new business can be related or unrelated to the current businesses in which the firm operates and
the idea here is to ensure that the existing customers transfer their loyalties to the new product lines. Lest
this sounds confusing, it needs to be noted that horizontal diversification as the name implies is all about
entering newer market segments and launching newer products on the “same plane” horizontally which
means that there is little alignment unlike vertical integration and concentric diversification.

Conglomerate Diversification

The third type of diversification or conglomerate diversification is completely different from the
previously discussed strategies as this type of diversification is a strategy where conglomerates launch
entirely new product lines that have no alignment with their existing resources and capabilities and enter
completely new markets where they do not have a presence.
For instance, Reliance, which ventured into Retail and Mobile Telephony, is an example of a
conglomerate diversification. The sole intention is to leverage the positive brand image and the existing
brand loyalty in its existing market segments as this firm has launched entirely new products unrelated
to its core competencies and entered newer market segments where it has no presence at all.

This type of diversification is the most risky of the three types discussed in this article though if the firm
is successful, then it can aim for further diversification, which is indeed a profitable, and growth
oriented strategy.

Goals of Diversification

There are two broad goals of diversification and they are to ensure that firms profit from diversifying
when their existing products and market segments are saturated or competitors have outwitted them, and
the other goal is when firms use the cash reserves at their disposal to become aggressive and enter new
markets and launch new products as a means of ensuring continued success and profitability.

The first type is known as defensive diversification and the second type is known as offensive
diversification.

Both rationales for diversification hinge on the pivot of the need of the firms to grow and profit when
they either are stagnant or are in an adventurous spree especially when they have the resources to do so.

Indeed, in the contemporary global economy, firms have to diversify as the twin challenges of the death
of demand and the oversupply means that firms cannot be tied down to markets and products for long.

Risks associated with Diversification

As mentioned in the previous section, diversification has become necessary in the current global
economic system wherein firms are forced to look for new markets and launch new products. Having
said that, it must be noted that diversification is a risky strategy as it entails embracing uncertainty and
unfamiliarity.
Further, the firms are entering into uncharted territory and hence, they need to have a good compass of
where they are headed if they are to successfully navigate the choppy and the tricky waters of the new
markets and new products.

As has been emphasized earlier, firms must choose diversification carefully and even Igor Ansoff who
proposed this strategy in his Ansoff Matrix has pointed to diversification being the most risky of the
four types of strategies.

In conclusion, firms must do their due diligence before they diversify and not take things for granted as
diversification entails disruption and creative destruction for which they might or might not be fully
prepared.

Mintzberg’s Five Configurations of Strategic Management

The famous management expert, Henry Mintzberg, proposed a five configurations approach to strategic
management wherein any organization can be broken down into five core elements or parts. The
interactions between these parts determine the strategy of the organization.

The five parts according to Mintzberg are:

1. The Operating Core which consists of those doing the basic work and whose output can be
directly linked to the goods and services that the organization makes and sells. According to
Mintzberg, this part is common to all organizations since the core work must be done and hence,
the operating element has to be put in place.
2. The Strategic Apex, which is composed of senior management and the senior leadership, which
provides the vision, mission, and sense of purpose to the organization. Indeed, it can be said that
this part consists of those men and women who shape and control the destinies of the
organization.
3. The Middle Level Managers who are the “sandwich” layer between the apex and the operating
core. This element is peopled by those who take orders from above and pass them as work to the
operating core and supervise them.
 In other words, they perform the essential function of acting as a buffer between the senior
management and the rank and file employees.

4. The fourth element is the Technostructure that is composed of planners, analysts, and trainers
who perform the intellectual work. This element provides the advice for the other parts and it is
to be noted that they do not do any work but function in an advisory capacity.
5. The final element is the Support Staff who perform supporting roles for the other units and exist
as specialized functions that are responsible for the peripheral services in the organization.

The key aspect about these configurations is that it can be used to predict the organizational structure of
any organization and used to model the strategy that the organization follows as a result of the
interaction between these parts.

For instance, in many service sector companies, the organization structure is very fluid and
interchangeable with the result that the middle managers perform crucial tasks and the apex gets directly
involved in running the organization.

On the other hand, in many manufacturing companies, it is common to find the Technostructure
prevailing as the organizational processes are bureaucratic and have mechanistic characteristics which
makes the organization function like a machine. This is the configuration in many public sector and
governmental organizations as well.

Finally, the startups have a structure that is composed of the strategic apex and the supporting staff in
their initial years of operation as the organization structure is yet to be formalized.

The key implications of Mintzberg’s configurations are that it gives us a useful model to describe how
the organizational structure affects strategy. As many theoretical models depend on external strategy
alone, this model is preferred by those who want to understand how internal dynamics produce strategy.

Role of Planning, Plans and Planners in Mintzberg’s Five Configurations

Role of Planning, Planners, and Plans

The previous article discussed the five configurations of organizational structure that Mintzberg
proposed as part of his theory. This article examines the role of planning, plans, and planners in each of
the configuration. To start with planning is an important element of strategy whenever there is
excessive standardization and where the organizational structure is mechanistic and where the
technocrats are in positions of importance.

For instance, the Department of Defense or the Pentagon in the United States relies extensively on
standardized work processes and planning to carry out its activities. This is the case with large
organizations like GM (General Motors) as well. These organizations rely on “experts” and “planners”
who form an “army of techno structural bureaucrats” who plan and who assist the organization in
carrying out its activities by formalizing plans for the future.

Some Real World Examples

On the other hand, startups in the software industry hardly plan for the longer term when their focus is
on the next year’s results. However, the role of plans in strategy cannot be underestimated because all
organizations need longer-term plans for their survival. Indeed, as the example of the planning
commission in developing countries like India illustrates, longer-term plans are crucial to ensure that
countries and organizations do not lose track of their sense of purpose and mission.

The role of planning is crucial in the machine bureaucracies and the professional organizations that need
a vision and mission to take them forward. As we have discussed, plans, planning, and planners all
contribute to the development of strategy.

Difference between Strategy Formulation and Strategy Implementation

Talking about strategy, there is a crucial difference in the terms strategy formulation and strategy
implementation. Mintzberg and his associates researched extensively and found that in most cases,
strategy formulation and strategy implementation are entirely different aspects. The difference is that
whereas planners plan strategy and formulate it, managers execute strategy and implement it. Hence,
there is the aspect of two different elements of the organizational structure that is involved in planning
and execution of strategy.

Indeed, in many organizations, there exists a creative tension between the planners and the implementers
and the way in which the organizations resolve this aspect makes the difference between organizational
transformation and organizational failure that is at the heart of Mintzberg’s configuration model of
strategy.

Closing Thoughts

Since the contemporary business environment is characterized by rapid pace of change and
unpredictable trends that take everyone by surprise, planners and managers have to ensure that their
strategies take into account these aspects.

For instance, an Army commander follows the strategy to tackle an enemy unit but also must make
changes on the fly to ensure that the situation on the field is amenable to their strategy.

Different organizations strategize differently and it is the nature of longer term planning combined with
the adaptation to shorter-term needs that determines how well an organization performs in the real
world.

Why Some Firms Do Not Do Strategic Planning

Many firms do not engage in strategic planning and some firms do strategic planning that is poor
and ill conceived. Some of the reasons for this sorry state of affairs in these firms are listed below:

1. The first and foremost reason for poor strategy is the lack of experience in strategic management
which is due to the paucity of managers and executives with experience and the presence of
those who do not understand strategic management.
2. The next reason has to do with the poor reward structure in place where success goes unrewarded
and failures are punished. Because of this “double whammy” of no recognition when things have
gone right and blame game when things go wrong, managers are reluctant to engage in strategic
management.
3. Because an organization is always firefighting which means that is so embroiled in its internal
problems, the top management does not have the time or the energy to engage in strategic
management. This is often the case with many firms where the lack of coherence and control in
organizational processes means that most of the time is spent on tackling problems rather than
preempting problems or solving problems.
4. Some firms view strategic planning and strategic management as a waste of time since they are
under the impression that they can handle the longer-term imperatives by doing things that they
have always done in a particular manner. This is the case with firms that have been in business
for generations where the new leaders often think that “if it is not broke, do not fix it”. This
mindset precludes them from approaching the future in a proactive manner instead of a reactive
manner.
5. Continuing in the same vein, many firms, especially those that have been successful see no point
in formulating newer strategies since their position is comfortable and they are content with
success. Success breeds arrogance as the case of Nokia, which went from market leader to the
bottom in a few years time reminds us.
6. With experience, many managers think that they can weather any storm because they “have been
there, done that”. However, this attitude is counterproductive as planning for eventualities is
necessary and formal models of strategy have to be drawn up since experience is not always the
best guide. This is especially the case with the modern era where the advent of the digital age has
changed the rules of the game.
7. Perhaps one of the most important reasons why firms do not engage in strategic management is
that they fear the “unknown”. What they forget is that precisely because of the unknown and the
unpredictable; they have to plan in advance.

Further, the managers might be uncertain of their abilities to learn new skills, of their aptitude
with new systems, and their ability to take on new roles. This happens when organizational
arteries are clogged because of inertia and a general sense of laziness and ostrich like mindsets.

8. Finally, the other important reason why firms and the managers within them do not engage in
strategic management is the lack of consensus and differing ideas as to what a good strategy
ought to be.
Strategic Management to the Millennial Generation

The Rise of the Millennials

The previous articles discussed the various aspects of strategy and how businesses can use different
strategic options to respond to the multifarious needs of the 21st century business landscape.

An aspect that is of crucial importance is the rise of the millennial generation or those born between
1980 and 1995. As this generation enters the workforce and becomes a consumer segment in itself,
businesses have to strategize on ways and means to adapt to this generation. These strategies can involve
targeted marketing, workplace adaptation, and other societal aspects of reaching out to the Millennials.

Marketing to Millennials

If we take the first aspect, marketing to Millennials can be quite challenging as they have attention spans
in the seconds rather than the minutes that earlier generation used to have when viewing advertisements
or making up their minds. This means that marketers have to deal with the concept of packing in as
much information as possible within the 30-second slot for ads and ensure that the message is conveyed.
This also means that marketers have to ensure that their message is not drowned out in the information
overload that the Millennials are exposed to.

The Millennials and the Workforce

The second aspect of making changes in the workplace for the Millennials is that they are much more
tuned to technology and social media in particular and the expertise that they have with technology
means that the organizations have to become high tech themselves if they are to accommodate the
Millennials in their midst.

For instance, it is the case that many organizations use technology largely. However, the crucial aspect
here is that organizations have to start using social media as well extensively if the workplace is to be
challenging to the Millennials.

In other words, the organizations have to move beyond Web 2.0 and mere IT and use tools like virtual
reality to ensure that they are able to attract and retain the Millennials.
The Future is More Jobs!

The third aspect relates to the extremely crucial aspect of societal forces being more amenable to change
and that too at a rapid pace. We have seen how the millennial generation is hitting the streets in protest
across the world when they are not satisfied with a particular outcome whether it is related to business or
politics.

Concentrating on business alone, we find that the Millennials are feeling let down by the lack of job
opportunities and the prevailing gloomy economic scenario. Hence, the task before business leaders and
CEO’s is to create as many jobs as possible for this generation to ensure that their energies are
channelized in a positive manner instead of in a negative manner.

Closing Thoughts

Finally, the Millennials are entering the workforce at a time when a historical shift in the way business
operates is happening. Hence, the implications for businesses are that either they leverage the
opportunities presented by this fundamental transformation or let go of the chance and waste the
opportunity.

Own the Future: Insights from Recent Research into Strategizing for the Future

This article discusses the ten qualities needed for companies to stay ahead of the competition and
win the race for the market in the next decade. With so much of rapid change and accelerating trends,
it is important for companies to be, the biggest and the best or else they run the risk of getting left behind
and becoming also ran companies.

1. Adaptable

The winners of tomorrow will be those companies that are best at identifying and anticipating
market shifts and managing complex and multi-company systems. The need for shorter cycles
and faster reaction time is greater as the pace of change is rapid and only those companies that
can adapt to it will succeed.
2. Global

It is a fact that everybody is competing with everyone from everywhere. This means that the
future markets for growth in Asia would take many business leaders out of their comfort zones.
Hence, what works in Munich might not work in Mumbai and therefore there is a need to
understand the fluid marketplace.

3. Connected

As the world gets smaller because of greater integration and better communications technologies,
there are changes in the realm of strategy, which the business leaders of tomorrow must embrace.
This means that the companies of tomorrow must deal with newer forms of customer behavior
and newer business models.

4. Sustainable

With the ever-looming threat of climate change and environmental catastrophe, businesses need
to pursue growth strategies that are sustainable and ensure that they use limited resources more
efficiently. These strategies lead to all round stakeholder development instead of profits for the
firms alone.

5. Customer First

For companies to achieve greatness, they must develop deep and lasting emotional bonds with
their consumers. They need to transform consumers into repeat buyers and in some cases, they
need the customers to be brand evangelists which means that the customers are the best source of
advertising for the companies.

6. Fit to Win

The art of execution is one of the core drivers of competitive advantage and the truly great
companies strategize in a manner that drives improvement in the critical areas identified for
success. These companies have flat and agile structures that speed up the flows of information,
improve decision-making, and have sophisticated pricing models.
 7. Value-Driven

It is a fact that companies must create value for all their stakeholders, this is something that is
ageless, and timeless which makes the companies and their legacies enduring for all
stakeholders. The value that a company creates has two components, which are earnings and
growth. It is impossible to separate the two and since they work in tandem, the value that the
company creates must be both short-term profits and longer term success.

8. Trusted

Though trust does not appear on a company’s balance sheet, it is the most valuable asset for the
companies. Hard to build and harder to sustain as well as easier to squander, trust reposed by the
customers determines how successful a company is over the longer term. The digital revolution
offers never before opportunities to expand and accelerate reputational aspects of the companies.

9. Bold

If companies do not evolve with the times, they run the risk of becoming redundant. Hence,
companies need to be forward looking and reinvent themselves to keep pace with their
competitors. These companies would not be blindsided and outpaced by competition. This means
that companies must experiment on a continual basis and not be afraid to embrace radical change
from outside and from within.

10. Inspiring

Finally, the business leaders of tomorrow are inspirational figures much in the mold of religious
and mythological figures from history. This means that epic leadership is needed from the
leaders of tomorrow as they go about setting the agenda that their followers can adapt and
emulate, if possible that translates into an inspired workplace as well as external respect.

PESTLE Analysis of the Global Aviation Industry

Introduction
When we think of airlines, we usually think of luxury and opulence as well as comfort and convenience.
However, beneath the veneer, the airlines worldwide are caught in a cycle of higher operating costs,
lower profits, and decreasing margins because of the various factors discussed in this article. Though the
passengers might not notice these aspects, it is the case that once one scratches the surface and does
some research, it is clear that the airline industry is in a mess and only, radical restructuring can help
revive its fortunes.

The PESTLE methodology is a useful tool to analyze the current state of the airline industry.

Political

The political environment in which airlines operate is highly regulated and favors the passengers over
the airlines. This is because of the fact that the global aviation industry operates in an environment
where passenger safety is paramount and where, the earlier tendencies towards monopolistic behavior by
the airlines have made the political establishment weary of the airlines and hence, they have resorted to
tighter regulation of the operations of the airlines.

Further, the global aviation industry is also characterized by deregulation on the supply side meaning
more competition among airlines and regulation on the demand side meaning passengers and fliers are
in a position where they can press for more amenities and low prices.

Economic

The global airline industry never really recovered from the aftermath of the 9/11 attacks. Added to this
was the prolonged recession in the wake of the dotcom bubble bursting.

The other debilitating factor was the fluctuations in the price of oil because of the Second Iraq War and
the subsequent spike in oil prices just before The Great Recession of 2008. This last aspect or the
ongoing global economic slowdown has meant that the already struggling airlines now have to contend
with declining passenger traffic, competition from low cost carriers, high aviation fuel prices, labor
demands, and soaring maintenance and operating costs.

All these factors have made the airlines loss making and prone to bankruptcies and closure because they
can no longer afford to run their operations profitably. Of course, this has also resulted in greater
consolidation among the airlines as they seek to leverage the efficiencies from the economies of scale
and the synergies from the merger with other airlines.

Social

In the recent years, the emergence of the Millennial generation into the consumer class has meant that
the social changes of a generation used to entitlement, instant gratification, and more demanding in
terms of service has resulted in the airlines having to balance their costs with the increasing demands
from this segment. Added to this is the retiring of the Baby Boomer generation that has resulted in the
airlines losing a lucrative source of income.

Next, the profile of the passengers has changed with more economically minded passengers and less
business class passengers who prefer to leverage on the improved communication facilities to conduct
meetings remotely instead of flying down to meet their business partners.

Technological

Though it is a fact that the airline industry uses technology extensively in its operations, they are limited
to the aircraft and the operations of the airlines excluding the ticketing and the distribution aspects. This
has prompted many experts to call on the airlines to make use of the advances in technology for the front
office and the customer facing functions as well.

In other words, the technological changes have to be adapted to include mobile technologies as far as
ticketing, distribution, and customer service are concerned. Further, social media has to be leveraged by
the airlines to ensure that the boarder social and technological changes do not pass by the airline
industry.

Legal

In recent years, the number of lawsuits against airlines from both customers as well as workers has gone
up. Further, the regulators are being stricter with the airlines, which mean that they are now increasingly
wary of their strategies, and actualizing their strategies only after they are fully convinced that they are
not violating any laws.

The “double whammy” of increased regulation and more expensive lawsuits apart from the legal system
becoming intolerant of delays, safety issues, and other aspects has only served to heighten the fears
among the airlines as each and every move of theirs is being scrutinized.

Environmental

With climate change entering the social consciousness, passengers are now counting their carbon
footprint with the result that they are now more environmentally conscious. This has resulted in the
airlines being forced to adopt “green flying” and be more responsive to the concerns of the
environmentalists.

Further, the social responsibility initiatives are becoming more pronounced and more under scrutiny as
consumers and activists turn a critical eye towards the airlines and their corporate social responsibility.

Conclusion: The Airline Death Spiral

The discussion so far leads to the conclusion that the global airline industry is now in a phase where the
“Airline Death Spiral” has taken over. This has resulted in a wave of bankruptcies and closure of airlines
worldwide. Further, the regulators are not lenient with airlines when they ask for more time or ask for
less strict rules and regulations.

Apart from this, the demanding fliers and competition from low cost airlines means that full service
airlines can no longer compete on price or volume. Finally, the increased costs of doing business have
dented the profitability and the viability of the global airline industry.

PESTLE Analysis of Starbucks

Introduction

The macroeconomic environment that Starbucks operates in is characterized by the ongoing global
economic recession, which has dented the purchasing power of the consumers. However, market
research done in the last few months has indicated that consumers have not cut down on their coffee
consumption and instead, are shifting to lower priced options. This means that Starbucks can still
leverage the buying power of the consumers in a manner that would give it a significant advantage over
its rivals by offering cheaper alternatives.

Apart from this, Starbucks has already made some moves to jump on the emerging mobile computing
revolution by tying up with Apple to introduce discounted coupons in the apps used in the iPhones.
Further, this exercise has also been accompanied by co-branding and cross selling which means, that
Starbucks is well placed and poised to reap the benefits of the Smartphone revolution.

Having said that, it must be noted that consumers in the United States are increasingly turning
“Ethical Chic” which means that the products they buy and the brands they consume need to prove that
they are following social and environmental norms in their manufacture. This is the key challenge that
Starbucks faces as it confronts the emerging challenges of the new era of consumer awareness and the
galloping Smartphone revolution.

Political

 The key political imperative that Starbucks faces is the concerns over sourcing of its raw
materials that has attracted the attention of the politicians in the West and in the countries from
where it sources its raw materials. This is the reason why Starbucks is keen on adhering to social
and environmental norms and to follow sourcing strategies that are appropriate and in
conformance to the “Fair Trade” practices that have been agreed upon by global corporations and
the governments of the developing and the developed countries.
 The other political imperative that Starbucks faces is the need to adhere to the laws and
regulations in the countries from where it sources its raw materials. This has been necessitated
because of activism and increased political awareness in the developing countries, which form
the basis for Starbucks’ sourcing strategies.
  The third political imperative, which Starbucks faces, is the regulatory pressures within its home
market in the United States because of greater scrutiny of the business processes that
multinationals based in the US are now subject to.

Economic

 The foremost external economic driver for Starbucks is the ongoing global economic recession,
which as explained in the introduction has dented the profitability of many companies.
 However, studies have shown that consumers instead of cutting down on their coffee
consumption are shifting to lower priced alternatives which is an opportunity for Starbucks.
 Of course, the company still has to contend with rising operational and labor costs as the
inflationary macroeconomic environment coupled with the falling profitability is squeezing the
company from both ends of the spectrum.

Socio-Cultural

 Though Starbucks can offer cheaper alternatives as mentioned previously, it has to do so without
sacrificing the quality and this is the key socio cultural challenge that the company faces as it
expands its consumer base to include the consumers from the lower and the middle tiers of the
income pyramid.
 Apart from this, the “green” and the “ethical chic” consumers who fret about the social and
environmental costs of the brands they consumer means that Starbucks has to be cognizant of
this trend.
 Third, the retiring baby boomer generation means that spending by the older consumers is likely
to taper off and hence, Starbucks would have to lookout for tapping the Gen X and the
Millennials as part of its strategy.

Technological

 Starbucks is well poised to reap the benefits of the emerging mobile wave and as it has tied up
with Apple to introduce app based discount coupons, it can expect to ride the mobile wave with
ease.
  The company has already introduced Wi-Fi capabilities in its outlets so that consumers can surf
the web and do their work while sipping coffee. This is indeed an added value to the Starbucks
brand and something, which enhances the consumer experience.
 It can also introduce mobile payments and this is something that it is already testing out in pilot
locations in the United States.

Legal

 Starbucks has to ensure that it does not run afoul of the laws and regulations in the countries
from which it sources its raw materials as well as the home markets in the United States.

Environmental

 There have been several concerns about the business practices of Starbucks from the activists,
international advocacy groups, and from the consumers themselves. Therefore, Starbucks has to
take into account these concerns if it has to continue holding on to the trust it enjoys with its
consumers.

Conclusion

The preceding analysis proves the point that Starbucks is operating in a relatively stable external
environment. The main reason for this is the fact that it operates in the Food and Beverages space which
means that despite the recession, consumers cut down on the consumption to a certain extent and not
completely. Therefore, the task before Starbucks is to lower costs and increase the value so that it retains
its consumer base and attracts consumer loyalty.

PESTLE Analysis of Samsung

Introduction

Samsung is a global conglomerate that operates in the “White Goods” market or the market for
consumer appliances and gadgets. The company that is a South Korean family owned business has
global aspirations and as the recent expansion into newer markets has shown, Samsung is not content
with operating in some markets in the world but instead, wants to cover as many countries as possible.
Therefore, the focus of this article is on the external environmental drivers of Samsung’s strategy.

Political

In most of the markets where Samsung operates, the political environment is conducive to its operations
and though there are minor irritants in some of the foreign markets like India, overall Samsung can be
said to be operating in markets where the political factors are benign. However, in recent months, it has
faced significant political headwinds in its home country of South Korea because of the country’s
tensions with North Korea wherein the company has had to take into account not only the political
instability but also the threat of war breaking out in the Korean Peninsula.

Apart from this, Samsung faces political pressures in many African and Latin American countries where
the political environment is unstable and prone to frequent changes in the governing structures. Of
course, this is not yet a major cause for worry as the company has more or less factored the political
instability into its strategic calculations.

Economic

This dimension is especially critical for Samsung, as the opening up of many markets in the developing
world has meant that the company can expand its global footprint. However, this dimension is also a
worry since the ongoing global economic crisis has severely dented the purchasing power of consumers
in many developed markets forcing Samsung to seek profitable ventures in the emerging markets.

The key point to note here is that the macroeconomic environment in which Samsung operates globally
is beset with uncertainty and volatility leading to the company having had to reorient its strategies
accordingly. The saving grace for the company is that it has adjusted rather well to the tapering off of
the consumer disposable incomes in the developed world by expanding into the emerging and the
developing markets. Indeed, this is the reason Samsung has begun an aggressive push into the emerging
markets in the hope of making up for lost business from the developed world.

Socio-Cultural
Samsung is primarily a South Korean Chaebol or a family owned multinational. This means that despite
its global footprint it still operates from the core as a Korean company. Therefore, there are several
aspects to its global operations some of which include adapting itself to the local conditions.

In other words, Samsung being a Global company has had to act locally meaning that it has had to adopt
a Glocal strategy in many emerging markets. Apart from this, Samsung has had to tailor its products to
the fast changing consumer preferences in the various markets where it operates.

The key point to note here is that Samsung operates in a market niche that is strongly influenced by the
lifestyle preferences of consumers and given the fact that socio cultural factors are different in each
country; it has had to reorient itself in each market accordingly.

Technological

Samsung can be considered as being among the world’s leading innovative companies. This means that
the company is at an advantage as far as harnessing the power of technology and driving innovation for
sustainable business advantage is concerned. This has translated into an obsessive mission by the
company to be ahead of the technological and innovation curve and a vision to dominate its rivals and
competitors as far being the first to reach the market with its latest products is concerned.

However, as we shall discuss later, this has also resulted in the company cutting corners with its
imitation of the legendary Apple’s product design and this has brought legal and regulatory scrutiny and
troubles for the company. There is a lesson here for other technology driven companies from Samsung’s
experiences and it is that no matter how fast you are to reach the consumer in this age of Big Bang
Disruption, doing the basics right is still the key to success.

Legal

As mentioned in the last section, Samsung has had to face heavy penalties for its alleged imitation of the
Apple’s iPad and iPhone and this has led to the company taking a beating as far as public perceptions
and consumer approval of its strategies are concerned. It remains to be seen as to how the company
would wriggle out of the legal maze that it finds itself in the developed markets because of the various
lawsuits.
Environmental

With the rise of the ethical consumer who wants his or her brands to source and make the products in a
socially and environmentally responsible manner, Samsung has to be aware of the need to make its
products to satiate the ethical chic consumer. This means that it has to ensure that it does not
compromise on the working conditions or the wages it pays to its labor who are engaged in making the
final product.

Conclusion

The preceding analysis clearly indicates that Samsung has its task cut out for itself as it navigates the
treacherous global consumer market landmine. Indeed, as the company prepares to expand its global
footprint, the stakes could not have been higher in a recessionary era and an uber competitive
technological market landscape.

SWOT Analysis of Unilever

Introduction

Unilever operates in nearly 190 countries around the world and has been a traditional paragon of
excellence and quality in the Fast Moving Consumer Goods sector. The company derives its competitive
advantage from its global footprint and its track record of enhancing value for the consumers around the
world. Even in the current recessionary environment, it has managed to grow at a respectable pace
though as we shall discuss latter, Unilever cannot afford to ignore the emerging threats from a wide
range of global, regional, and local players. Apart from this, as the succeeding SWOT Analysis makes it
clear, the battle for the emerging markets is likely to escalate into a no holds barred competition with a
race to the bottom ensuing between the global giants like Unilever and Proctor and Gamble and a array
of local players.

Strengths

 Unilever operates in nearly 190 countries around the world and hence, has a global footprint
combined with top of the mind brand recall among consumers worldwide.
  It has a deep and broad portfolio of brands and a diversified product range, which makes it
uniquely, positioned to tap into the changing consumer preferences across the world.
 Its Research and Development initiatives are heavily funded and manage to bring to the market
innovative and cutting edge products in tune and in line with consumer preferences.
 Unilever has a distinct competitive advantage over its nearest competitor, Proctor and Gamble
because of its flexible pricing and expertise in distribution channels that manage to reach the
nook and the corner of the globe.
 The company finds its strengths in leveraging the economies of scale arising from its breadth of
operations as well as synergies between its many manufacturing facilities, which totaled 270
locations around the world at last count.
 Unilever combines global thinking with local execution, which means that it pursues Glocal
strategies that let it win the hearts and minds of consumers who would like to use its products
that are globally famous yet retain a distinct local flavor.

Weaknesses

 The biggest weakness that Unilever faces is that it operates in an uber competitive market where
the other global giants like P&G and Nestle in addition to a host of local players challenge its
dominance at every turn and raise the stakes in the Trillion Dollar FMCG (Fast Moving
Consumer Goods) space.
 The other weakness is that its products can easily be replaced with substitutes especially in the
emerging markets in Africa and Asia where the rural consumers in the hinterland often use
traditional and natural alternatives to the products that Unilever markets.

Opportunities

 With the advent of globalization and the proliferation of global media, consumers in the
emerging markets are aspiring to western lifestyles and this means that Unilever has a
tremendous opportunity waiting for it as it taps into this large and diversified consumer base that
wants to join the league of westerners in taste and preferences for consumer goods.
  Apart from that, capturing the “Newly Affluent Trillion Dollar Consumers” in China and India
means that it has a golden opportunity to leverage this huge and growing consumer base, which
often tries to imitate and mimic the consumerist preferences of the material west.
 The emergence of the health conscious consumer in the developed world means that Unilever
can seize the opportunity to market to this segment with its existing and yet to be launched
product range that is specially geared for the health conscious consumer.
 Unilever has a good track record of social and environment responsibility and with the
emergence of the ethical chic consumer who like to buy and consume products and brands that
are responsibly made and sustainably complete.

Threats

 The ongoing global economic crisis has severely dented the profitability of many FMCG
companies and Unilever is no exception. With the shrinking of the disposable incomes of the
global consumer, they are buying less and insisting on more value for their money or “more bang
for the buck”. This means that Unilever faces the threat of diminished revenues and increasing
costs, which is like a “Double Whammy” to its top-line, and bottom-line.
 Though we had mentioned that Unilever succeeds and scores over P&G in the CSR or the
Corporate Social Responsibility aspect, the increased awareness among the global consumers has
turned the harsh glare into each and every strategic move that the company makes. Some
practices of the company have been criticized which means that Unilever has to ensure that it
sustains and maintains its focus especially when the spotlight is on it.
 As mentioned earlier, Unilever operates in a market segment where local products and
alternatives to its brands proliferate especially in the emerging markets and hence, it faces a
threat from smaller and more nimble local upstarts who can provide more value for lesser money
without the associated costs that global giants like Unilever incur.
 The entry of Asian multinationals into the global arena has upped the ante for Unilever and
raised the stakes in the global game for dominance in the FMCG market segment. This means
that Unilever faces the prospect of having to battle not only the recessionary blues but also
emerging threats from this new age and new breed of competition from Asian conglomerates that
are beginning to spread their wings internationally.
Conclusion

Unilever has been in the business of consumer fulfillment for many decades and hence, we are confident
that it can tide over the present gloomy conditions in the FMCG segment. Having said that, we conclude
the article with a cautionary note of not taking the threat from the Asian FMCG majors lightly as they
understand the continent better and at the same time are mastering the intricacies of the global
marketplace.

Business Strategies to Beat the Downturn

Introduction: The Effect of the Downturn and How Companies Can Cope

The ongoing global economic crisis has impacted most of the companies in the world as they have to not
only reckon with falling sales, stagnating demand, oversupply, and inflation all at the same time mean
that businesses are operating in “chaotic” and “uncertain” environments.

Further, with globalization making it possible to produce where it is cheapest and sell where the profits
are more, western as well as eastern companies are realizing that it is an entirely new ball game
altogether. Therefore, they need to put in place strategies that would enable them to compete on fair
basis with firms from all over the world.

The typical response of businesses during recessions is to lay off workers, accumulate cash and retain
liquidity, and put off expansion plans until the business environment improves. While these are certainly
understandable strategies, our contention here is that these strategies are counterproductive.

For instance, downsizing might seem attractive because it enables businesses to cut costs. However, the
companies have to realize that once they downsize, the best along with the worst of the employees leave
the company. The latter because they are laid off and the former because they see that in future they
might be the targets. Of course, the companies can retain the best performers by increasing their
compensation but this strategy is pointless when the whole objective is to cut costs.

Next, research has shown that American companies are sitting on a cash hoard, which means that they
have accumulated enough cash reserves just in case they face a liquidity problem in the same manner in
which banks found themselves in the aftermath of the Great Recession of 2007 when liquidity dried up
and nobody was lending to anybody. Again, this is legitimate as long as the companies do not keep cash
without making use of it productively.

In other words, if the firm is simply having lots of cash in hand, it is akin to individuals keeping money
without generating returns. Moreover, this strategy also means that recovery is delayed and no matter
how hard the government tries, businesses simply do not want to spend cash.

Third, putting off expansion plans is a good idea as the uncertainty in the external environment means
that businesses should wait for a sunnier day. However, in cases where the company has to enter new
markets, putting off expansion might be a bad idea as nimble and agile competitors can steal a march on
them.

Moreover, with so much of emphasis being placed on innovation and inventiveness, putting off
expansion might backfire as competitors and startups with innovative and game changing ideas might
outperform the market and which leads to folding up of existing firms.

Therefore, it is the case that businesses must rethink their strategies during economic downturns. A
possible solution for them would be to ramp up their IT infrastructure and invest more in cutting
edge technology so that they leverage the synergies from the integration of disparate and discrete
business processes as well as actualize the advantages from the economies of scale.

For instance, when IT is leveraged to the fullest, the result is often an increase in productivity as well as
a benefit that accrues because of more efficiency.

Further, IT enables companies to produce more and ramp up the volumes as it is obvious that machines
can do more than humans do and at the same time, work tirelessly.

Of course, one might point out that this strategy leads to obsolescence of workers and entails
downsizing. We consider this inevitable as the processes of creative destruction that are inherent to
capitalism means that the old changes into the new and that the only constant in the world is change
which is relentless and hence, IT and innovation are the buzzwords for any actualization of business
strategies during downturns.
Synergies, Integration, Ocean Strategy, and Cost Cutting

We have discussed how IT and innovation can help businesses during downturns. Similarly, through the
use of these game changers, businesses can also integrate vertically and horizontally as well as venture
into new markets (or oceans that are blue meaning that they are yet to be fished in contrast to red oceans
that are already saturated).

As cost cutting has been touched upon briefly, we return it to point out that IT and innovation along with
integration and expansion save costs from the holistic approach that we suggest here.

The point here is that businesses must think out of the box to deal with economic downturns and this
means that they cannot rely on old models and discarded theories in their endeavor to remain profitable
during bad times as well as good times.

Vertical integration refers to the integration of the entire value chain from procurement to after sales and
including processing of raw materials, producing finished products, marketing them, enabling customer
service, and closing the feedback loop.

An example of a global conglomerate that is vertically integrated would be the Reliance group in
India that owns all the steps in the oil and gas value chain right from exploration and drilling, to refining
and processing, and ending with retail outlets which sell the product.

Horizontal integration refers to integrating breadth wise meaning that businesses can venture into blue
oceans through merging their core competencies with that of aligned businesses.

For instance, the TATA group in India has ventured into disparate and discrete businesses as varied as
IT and steel, which means that using the core competency of sustainable and profitable business
strategies, their aim, is to ensure that they make profits even during economic downturns by following
their business philosophy.

The point here is that instead of just sitting on hoards of cash waiting for the business environment to
improve, businesses can proactively actualize strategies that are in line with the points made above.
The key aspect to note here is that businesses ought to shed their conservative mindset especially during
recessions and only by recognizing the fact that the world waits for none that they can ensure that they
are not left behind. Moreover, the other imperative here is that for businesses to remain competitive
during downturns, they need to embrace the chaos instead of running away from it.

Ride the Recession: The Way Ahead for Businesses

We have discussed the various strategies that businesses can employ during economic downturns. Of all
the strategies discussed, the common theme around them is innovation.

Therefore, by recruiting visionaries and game changers, businesses can ensure that they keep ahead of
the competition and they can also ensure that their existing employees are sufficiently motivated to self
actualize themselves. To do this, they need to have innovative HR (Human Resource) policies that
encourage out of the box thinking, make their employees become inventors, and innovators in their own
right, and make the companies get ahead of the curve.

Further, by hiring the best in the field and linking their compensation to performance, companies can
ensure that their employees are a source of sustainable competitive advantage. As recent trends in
HRM show, companies that invest in their people during downturns are more likely to be
profitable when compared to those that simply downsize just for cost cutting reasons alone.

This means that companies must ride the recession instead of waiting for someone or something to pick
them up and even if it means that they ride alone in terms of being the early movers, there are benefits
from this as the saying that the early bird catches the worm is very apt metaphor here. Apart from this,
even if they have to take the slow route initially, they must remember that once they conserve the
energy, building momentum later on becomes easy, and hence, once the green light is on as the market
improves; they are in the driver’s seat, which means that they can accelerate easily.

Conclusion

As the risk of being repetitive, we cannot but overemphasize the importance of innovation and
inventiveness. These qualities or traits of successful companies indicate that those with the right mindset
win and those whose arteries are clogged because of inertia and apathy find that they cannot walk fast
enough let alone run to outpace the competition.

In concluding this article, it is the case that economic downturns are temporary whereas businesses
are permanent. Therefore, if businesses suffer setbacks due to temporary reasons instead of outliving
their peers, they have only themselves to blame.

Analysis of Amazon’s Corporate Strategy

Introduction

Amazon is the world’s largest online retailer and is indeed a pioneer in the online retailing space.
Though it started as an online bookstore, its success in its venture spurred it to diversify into selling
anything that can be sold online.

Further, Amazon has also expanded globally and now operates around the world through a combination
of localized portals and globalized delivery and logistics platforms.

The way in which Amazon has leveraged technology as a source of competitive advantage and reaped
the benefits of the economies of scale in addition to leveraging the synergies between its internal
resources and external drivers has spawned many rivals who aim to imitate and better its business
model.

Apart from this, the key themes in this article are that the strategic alternatives that have been presented
and recommended must follow the principle of them being complementary and supplementary to its core
competencies.

Finally, this article also suggests that Amazon must target the growing mobile commerce segment if it
has to maintain its market leadership position.

Evaluation of Current Strategy

Amazon’s generic corporate strategy can be described as concentric diversification. This strategy is
based on leveraging technological capabilities for business success and following a cost leadership
strategy aimed at offering the maximum value for its customers at the lowest price in addition to
wrapping its business around the customers wherein they find Amazon to be the go-to portal for their
online shopping needs.

Indeed, this strategy has paid off well as can be seen from the fact that it is the world’s largest online
retailer and has consistently been the leader in the market segments in which it operates. Having said
that, it must also be noted that cost leadership can follow the law of diminishing returns wherein firms
following this strategy find that they are unable to sustain growth or increase profitability once the “low-
hanging fruit” are plucked.

Continuing the discussion, the generic business strategy followed by Amazon can be explained using
The Ansoff matrix as represented pictorially in the figure above. Amazon is placed in the Overall Cost
Leadership quadrant and its relentless focus on costs is the key to understanding its overall strategy.

The specific measures taken by Amazon in pursuit of this strategy include steep discounts for is regular
members through the Amazon Prime program, ensuring timely and even express delivery and at times,
waiving off the shipping charges, passing on the benefits of avoiding state taxes to the customers
thereby lowering the price even further, and an overall strategy based on making the customer
experience as seamless and as smooth as possible.

Apart from this, Amazon’s strategy is driven by its sources of competitive advantage wherein it is
focus on technology, actualizing the benefits of economies of scale, and leveraging the efficiencies from
the synergies between its external drivers and internal resources have been the cornerstones of its
business model.

Further, Amazon uses Big Data Analytics as a tool to map consumer behavior. Indeed, Big Data has
been embraced to such an extent by the company that it is now in a position to market this as another
service offering.
Anyone who has shopped on Amazon encounters a list of recommended products that are picked
according to the browsing history and the mapping of their purchases with that of likely purchases in the
future. This has meant that Amazon can sense and intuit what consumers want and tailor its strategies
accordingly.

As mentioned throughout this article, Amazon uses technology to the fullest, which is not surprising
considering it is after all an internet-based company.

However, Amazon’s overall cost leadership with little product differentiation means that its business
model has been copied by “me-too” competitors in a cutthroat price war that has left everyone bruised.

Further, its focus on cost reduction at the expense of product differentiation means that its products are
available on other portals as well and there is no product line that is exclusive or unique to it.

Apart from this, Amazon does not stock products that appeal to the need for “instant gratification”
wherein consumers make impulsive purchases and who are impatient and need quick fixes. For instance,
except for its movies and other digital items, the other product lines are all not in the category of those
that provide this gratification to the customers.

Having said that, it must be noted that Amazon’s current strategy is also built around the convenience
aspect wherein customers need not go to a physical bookstore or even wait for their purchases to arrive
after some time as it has introduced same day delivery in many countries and is even toying with the
idea of using Drones for near instantaneous delivery.

Apart from that, its focus on non-retail product lines such as cloud based services means that it is
addressing the issue of differentiation as well as its overreliance on cost leadership.

Conclusion

Amazon has popularized “one-click” selling wherein customers can buy anything and everything that is
for sale on its portal with just a click of the mouse. Going by the rate at it, which Amazon is growing, it
is indeed the case that its business model is “clicking” with its customers. Having said that, the need of
the hour for Amazon is to sustain its growth rates and maintain the momentum.
Further, a worrying factor for the company is that it has not made profits in many of the quarters over
the last three years. A possible reason for this can be its excessive focus on cost leadership, which means
that in the “race to the bottom” its bottom line is being impacted.

Finally, Amazon needs to adopt a Glocal approach in its international markets wherein it adapts its
Global business model with that of its Local delivery and logistics supply chain. This would indeed
create a globalized business value chain wherein anyone anywhere can buy products anytime and every
time.

In conclusion, the future looks bright for Amazon and if it continues to focus on its core competencies
and at the same time expands its global value chain, there is no reason why it cannot maintain its market
leadership.

How Amazon Can Improve its Corporate Strategy

Drivers of Corporate Strategy

Any choice of strategic options must necessarily be in tune with the drivers of corporate strategy.

For the purposes of this article, 5 drivers of corporate strategy have been identified. They are:

1. The growth imperative or the need to grow

2. Consistency with the firm’s internal strengths and resources
3. Being geared towards leveraging and targeting the marketplace strategies
4. Aligning the strategies with that of its sources of competitive advantage
5. Taking into account the longer term as well as the shorter term profitability aspects

Identify Core Competencies and Refocus

As the preceding discussion makes it clear, Amazon has its task cut out in terms of the next five to ten
years. It has established a market leadership position worldwide and hence, it must now turn its attention
to the next evolutionary step.
Indeed, its very success can be its undoing as in the quest for market dominance; it is diversifying too
much and expanding without a clear and articulated strategy.

Therefore, it must now identify its core competencies and target them ruthlessly. For instance, its
foray into the Tablet computer market with its Kindle Fire device has been a failure and hence, it must
now move to eliminate this and other kinds of non-core diversifications.

The rule of thumb for any firm is whether its various strategies including market entry, product ranges,
and services offered are complementing and supplementing its core competencies.

In other words, firms must ensure that when they diversify or integrate, such forays complement and
supplement their core business strengths. This means that Amazon must identify its raison d’être of
existence and refocus its strategies accordingly.

Diversify into Cloud based Services

Perhaps there can be no better strategic option than expanding and diversifying into the cloud based
business. As cloud, computing is set to emerge as the hottest trend of this decade and along with the
other trend of the increasing usage of Big Data by marketers, Amazon can clearly establish itself in these
segments and attain market leadership positions.

As mentioned earlier, any strategic alternative or option must satisfy the complementary and
supplementary imperatives. Considering the fact that Amazon is built on the online platform, cloud
based services would be an extension of its core competency and would be complementary to its
existing business model.

Indeed, Amazon is following this strategy through its AWS or Amazon Web Services wherein it offers a
suite and portfolio of services to the SMEs (Small and Medium Enterprises) that include data
management, storage space, hosting services, and other cloud based services.

The expansion of AWS would be in tune with the drivers of the corporate strategy as identified earlier
including the growth imperative, expansion of the customer base through diversification, consistency
with its internal resources, and entering a market segment that is recording shattering growth rates.
However, there are some drawbacks to this strategy as well and they include entering an untried and
untested market, basing its strategy on technological trends that have a shorter life span, and
sustaining returns from an initiative that is high on capital investments.

Having said that, it must also be noted that Amazon can also develop a complementary Big Data
service wherein it offers firms and companies access to its Big Data mining and analytical tools. This
can be in addition to the expansion of AWS and these strategies can serve as buffers for each other in
case either fails.

Expand Globally

1. In order to grow quickly and actualize economies of scale as well as leverage synergies, Amazon
needs to expand globally. Though in its current business model, it does indeed cater to a global
audience, it must also setup local portals in the countries in which it wishes to enter.

For instance, Amazon now has dedicated portals in many countries including India and this
model can be followed in other countries as well.

Further, it needs to adopt a Glocal approach wherein its core global delivery model is adapted to
the local conditions thereby actualizing a merging of the global and local or Glocal.

2. Next, the specific regions that it can target and expand into are the Scandinavian countries
where the populace in those countries are highly connected as well as have high incomes. The
twin combination of high rates of penetration of the internet and the high disposable incomes is a
sure way of garnering more business.
3. Third, it must target both the BRICS (Brazil, Russia, India, China, and South Africa) markets as
well as the MINTs (Mexico, Indonesia, Nigeria, and Turkey) markets as part of its global
expansion strategies. As the former have already arrived on the global stage and the latter are
being touted as the next emerging frontier for western businesses, it makes sense for Amazon to
aggressively target these markets.

Conclusion
Therefore, following the points made in the preceding discussion, Amazon needs to diversify into areas
that are higher margin ones.

A possible strategy would be to ramp up the cloud-based offerings that it has with its AWS . Of
course, as this article suggested earlier, such diversification must not result in strategic blunders such as
its introduction of Kindle Fire. Therefore, it must diversify for growth and profitability and at the same
time not lose focus over its core competencies.

Apart from this, Amazon can tap into the increasing sales from mobile commerce as well as focus more
on its Kindle eBooks segment.

Considering the fact that sales from its Kindle division were for the first time higher than that from its
other divisions in the recent few quarters, this makes for sound business strategy. Complementing this
with mobile commerce would drive its profitability in the future.

Cutting Costs Strategically

The business environment today has become extremely competitive. Companies are not only facing
competition from their local competitors but also from global ones. Different economic and geopolitical
factors make global supply chains necessary.

The problem with having global supply chains is that operations become broad and complex. It is much
easier to manage operations located in the same geography rather than those located in multiple
countries.

Rising costs and increasing competitiveness are making it mandatory for companies to cut costs.
Corporations also agree that up to 25% of their expenditures are wasteful in nature and could be
eliminated. The problem is that they do not know which 25%?

Cutting the wrong kind of costs can lead to a decline in quality or customer service, both of which are
sure to reflect as declining sales in the near future. In this article, we will understand the concept of
strategic cost cutting and how it adds value, especially to global supply chains.
The Problem with Cost Cutting

Cost cutting can be very ugly if proper attention is not paid to how it is done. For instance, cost-cutting
can lead to job losses. It can also lead to suppliers not being paid on time and so on.

The common link in ugly cost cutting is that the company tries to benefit by undermining somebody
else’s interest. In the short-run, it might appear that every dollar saved will directly add to the bottom
line. However, in the long-run, one will see the quality of products and services dropping drastically.

Thus, cost cutting if done incorrectly can cause the revenue of the company to fall. The damage done
could be severe if the company begins to lose loyal customers. The cost of acquiring loyal customers is
increasingly high nowadays!

Competency Based Approach

Costs should not be blindly cut. Instead, cost cutting should follow a strategy. That means that every
single cost reduction must be a step towards achieving a larger goal. The common goal that most
successful companies pursue is when they decide to align with their competencies.

Large multinational companies do a lot of things. For instance, consider a company like Nike. It is in the
business of marketing sportswear. However, the company does not manufacture any of the products it
sells. The company identifies itself as a marketing company. All the other functions which do not align
with this competency are outsourced.

The key thing to note is that Nike keeps its marketing department extremely well-funded. The core
competencies are provided the resources to be the best in the global marketplace.

Other less strategic tasks are outsourced to cut costs. This enables Nike to cut costs where things matter
less and to redirect the financial muscle to future investments that will allow the business to thrive and to
grow even faster.

What is a Competency?
A competency is a difficult thing to define. The difficulty is due to the wide nature of qualities that can
be included in the competency. It could be related to people, technology, know-how or processes!

It is something that the company excels at relative to its peers. Every company must necessarily have
a competency. It is not possible to survive in this cut-throat marketplace without having some core
competency.

It must be recognized that competencies are all about focus. Companies can have a handful of
competencies at most. If you have a list of competencies, then you probably have not defined your
competencies right!

The Tradeoffs

Strategic cost cutting means that the companies can differentiate between the costs that they need to
incur to survive. This would companies can identify mundane expenses like electricity, fuel, accounting
costs, regulatory costs, etc. and contrast it with costs related to competencies.

The idea is to funnel all the money towards competency building and be as lean as possible in other
expenses. Overheads must be identified, and incessant cost-cutting must be undertaken in those fields.
However, at the same time, the competencies that allow the company to outmaneuver the competition
should be developed over the long term regardless of the costs.

Disadvantages of Strategic Cost Cutting

Higher Management Buy In

Strategic cost cutting is a decision that needs to be made by the entire organization. The top management
has to be involved in this approach.

The middle management can execute this strategy on their own to some extent. However, they will have
to interact with the other areas of the organization which is not within their control. This is where
strategic cost cutting would fail.
An AVP or a VP cannot implement this strategy by themselves. Instead, this strategy would only
work if the decisions are driven from the top i.e. from the CEO or the board of directors themselves.
Getting a buy-in at that level is not very easy. Hence relatively fewer companies indulge in this activity.

Time Frame

Strategic cost cutting does not work overnight. It takes years to build competencies that outmaneuver the
competition. The problem is that most companies run with the short term in mind. They are only focused
on their quarterly or annual results. If immediate cost reduction is the objective, there are huge
limitations as to what this approach can achieve.

To sum it up, organizations must never cut costs in their core areas. They must identify
administrative and non-critical areas and make the organization as lean as possible by focusing on those
areas.

Actualizing Business as Usual Strategies for Mission Critical Organizations and Functions

What are BAU or Business As Usual Strategies and how do they Work?

Business as Usual or BAU strategies and action plans are meant to keep vital organizational functions
and processes up and running even in times of extreme events that disrupt the other functions.

This is especially the case when such functions and processes are mission critical meaning that without
them, the organizations would not be able to fulfill their mandate.

Indeed, whichever sector one looks at, whether it is businesses in the private sector, institutions in the
governmental sector, or even individuals and startups as well as SMEs or Small and Medium
Enterprises, they all need a viable and workable BAU plan in case things beyond their control such as
external extreme events and even, within their control go down due to intentional or unintentional acts.

For example, BPOs or Business Processing Organizations need to keep their Customer Service lines and
the Financial Processing Units running even when extreme events such as Earthquakes, Floods, Terrorist
Attacks, or Civil Disturbances take place.
Similarly, the governmental departments tasked with maintaining public law and order, public utilities,
and the administration (whether civic or regional) all have to have a BAU plan in case there are
disruptions to the normal way of life.

When Should a BAU Plan be activated?

Typically, a BAU plan would have to be activated immediately in case of such extreme events and in
this context, it is worth noting that the fallback plans and options to continue business operations have to
be actualized within an hour or so of the first intimation of the extreme event.

While some firms and governmental agencies can take up to a day or less to activate such plans, the key
decision makers are vested with the authority to activate such plans as and when reliable and accurate
information is available with them.

Indeed, the key phrases here are reliable and accurate information since in these days of Fake News and
Post Truth, more often than not, some of the news about extreme events are often found to be false or at
best misleading after some time.

This is the reason why many leading firms subscribe to Global Security and Consulting Firms who often
send out Security Alerts and timely and Relevant Information about Extreme Events to their clients.
Even individuals would be well advised to take help of credible firms to alert them of impending and
happening extreme events in real time so as to have relevant information with them.

Need for Accurate and Reliable Information

The reason we are stressing on the need to have accurate and timely information is that corporates
worldwide now operate in environments where news travels at the speed of light thanks to the multiple
channels of news media including the web, mobile, television, and the very real aspect of WhatsApp
groups and Facebook and Twitter updates.

Indeed, the proliferation and profusion of such sources of information mean that corporates have to
access to the actual ground realities instead of relying on untrustworthy sources of information.
This is where the Risk Mitigation Department and the Risk Management Units of corporates come into
play as all of them usually have their own methods of assessing and reacting to such extreme events.

Indeed, in times when even governments often fail to assess the situations arising out of extreme events,
some corporations with the necessary resources seem to be abreast of the fallout from extreme events
more than the former.

While the debate about whether this is a good thing or a bad thing is out of the scope of the present
article, what we wish to emphasize is that it is better for any entity, private or public to have good risk
assessment and mitigation strategies in place.

Examples of How Corporates Fail to Assess and Prevent Extreme Events

Having said that, it is also the case that despite having all the resources at their disposal, some corporates
are found wanting when extreme events happen. For instance, the recent shooting at the YouTube office
in the Bay Area of the Silicon Valley is proof of the fact that early warnings were ignored and potential
signs of such an event were not taken seriously.

Thus, the fact remains that the Risk and Corporate Security Functions need to get their act together and
ensure that they are on top of things to both prevent and respond to extreme events.

This is where some leading corporates insist on BAU plans that are activated in real time as they feel
that any time spent in risk assessment as the extreme event is unfolding would only lead to the impact
from such events becoming more intense.

Hence, it is our view that key personnel in the organizations be entrusted with the responsibility to
activate BAU plans based on the available information. Further, there must be backup personnel for
such decision makers as well to ensure that disruptions are minimized.

Conclusion
Lastly, in the present times, the impact of any events, minor or extreme, is usually amplified by the
media and the very human responses of the stakeholders to jump to conclusions and rush to judgments
about the events.

Thus, sometimes, even minor events can seem to be extreme and this is the reason we want to emphasize
the fact that it is better for the decision makers to be stable and not panic when the BAU plans are
activated.

To conclude, while the risk of extreme events is always a possibility, more often than not, it is the way
in which we respond that can make the difference to the actual impact.

Why Indian Firms Must Strive for Strategic Autonomy in Their Geoeconomic Strategies

Geopolitics, Economics, and Geoeconomics

In the evolving global trading and economic system, firms and corporates are impacted as much by the
economic policies of nations as they are by the geopolitical and foreign policies.

In other words, any global firm wishing to do business in the international sphere has to be
cognizant of both the economic policies of the target countries and the origin countries as they
must be towards the geopolitical strategies.

This is especially the case in the post 911 world where geopolitics and economics combine to form what
is known as Geoeconomics or the practice of diplomacy and foreign affairs keeping in mind the
economic forces at work.

For instance, Iran has been the subject of sanctions from the United States in recent months and the US
has barred firms from transacting business with it.

However, this has not deterred the Indian Firms, particularly the Indian Oil Companies wherein they
have chosen to exert their independence and neutrality to circumvent the sanctions and continue
operating there.
Thus, it is the contention in this article that Indian firms must aim for strategic autonomy and position
themselves in such a manner where they are equidistant from the strategies of other international powers
and consequently, pursue business strategies that are governed by a strong streak of autonomy.

Why Indian Firms Must Pursue Strategic Autonomy

Continuing the discussion, it is worthwhile to note that Strategic Autonomy as far as Geoeconomics is
concerned cannot be conducted in a Vacuum or be independent of the governmental actions and
policies.

Indeed, considering the fact that Geoeconomics means that geopolitics too needs to be taken into
account, it is the case that Indian firms must choose to act in concert with the Indian government.

This can be seen in the way the Indian Defense Ministry and Foreign Affairs Ministry have chosen to do
business with Russia irrespective of some sanctions on it by the US.

Indeed, given the close linkages between Russia and India, especially where arms purchases are
concerned, it goes without saying that the Indian government is encouraging the Indian firms to be
independent in their approach and put the interests of the country and theirs as well before
considerations about what and how their business interests elsewhere are impacted.

In other words, the Indian government is actually telling Indian firms to balance their commitments with
the US and other great powers so that they do not lose out in the bargain.

Need to Balance Economic Interests Worldwide

This is illustrated by the examples of some Indian Firms have chosen to desist transacting business with
Russia and Iran due to the risk of jeopardizing their business interests with the US.

Indeed, given the fact that Indian Firms do have significant operations around the world, they do need to
take a call on prioritizing which comes first when they transact commercially.

Moreover, the latest round of trade wars is another example why India and Indian Firms ought to pursue
Strategic Autonomy.
With the US and China engaged in a “no holds barred” contest of levying tariffs and penalties against
each other, India should avoid getting caught in the crossfire. On the other hand, it cannot sit idly by
while its exports dwindle and its imports increase.

This is the reason the Indian Government in recent days has levied tariffs on some goods imported from
the US without engaging in Rhetoric and striking a balance between the interests of staying aligned to
the US and China at the same time.

What all this means is that Indian firms must take the lead here and follow the example of many
emerging and even developed nations where their firms often ensure that they remain committed to their
business and national interests.

Non Alignment, Closeness to the US, and the Way Ahead

In times when the global economic system is characterized as being fragmented and where both the US
and China are engaged in a power contest with Russia and the EU in between, it makes sense for
emerging market economies such as India to play their cards well.

While in earlier decades, the principles of Non Alignment meant that India pursued this strategy, though
in reality it was close to Russia, in recent decades, it has drawn closer to the US mainly due to the
Geoeconomic imperatives.

On the other hand, it has also maintained good relations with the other powers and given the interlinked
and interconnected global economy, it must continue to pursue a foreign policy shaped as much by high
sounding principles as it must according to the economic objectives.

With nations around the world choosing to put more emphasis on Geoeconomics, it is high time Indian
Corporates nudged the Indian government to include their concerns in its foreign policy objectives and
pursue policies accordingly.

This is already happening to some extent as can be seen from the way in which business delegations
often accompany officials on visits abroad.

Conclusion
Lastly, Strategic Autonomy is also important mainly due to the fact that Indian being a culturally diverse
country has to keep in mind domestic interests in its global policies.

The same goes for Indian firms that often are dispersed across the country and hence, they too have to
keep diversity and the need for inclusivity in mind when they transact business abroad.

In other words, domestic compulsions play a part as well and hence, taken together, the points discussed
so far indicate how India and its businesses would be well served to actualize strategies that take into
account all these factors.