UNIT IV
Once all the possible strategies for corporate and business level have been identified, the next step in strategy
formulation is to select the most suitable strategy for the organization or business unit, based on existing external and
internal environment situation. This step is called the Strategic Choice and Analysis.
It is the process of choosing from all the available strategies, and is thus, a decision making process. This decision must
always be taken bearing in mind the following:
a. The external environment factors and current situation
b. The internal environment factors and current situation
c. Alignment with organization’s vision, mission, goals and objectives
Process of strategic choice and decision making
It involves 4 steps:
1. Focusing on strategic alternatives
2. Analysing the strategic alternatives
3. Evaluating the strategic alternatives
4. Final selection
1. Focusing
It involves visualizing the future state of the firm, and working backwards from that vision.
The future state is compared to the current state to identify the gap, and then a set of possible strategies are identified
that best suit to fill the gap. So, the applicable strategies’ list is narrowed down here.
(Gap here means difference between what the firm is today and what it wants to be in the future.)
For example, if the gap in current and future state is high, and the performance of the firm is also good, the preferred
strategies would be growth strategies. If the gap is low, and the performance is average, stability strategy is most
suitable. If the gap is very high while the performance is very low, then retrenchment from that business may be the
alternative.
2. Analysing
This is the phase where a study of all alternatives is done based on selection factors. The selection is based on certain
factors that constitute the criteria of evaluation. There are two types of factors:
Subjective – based on perception of leaders and stakeholders. They are intuitive, and cannot be measured.
Objective – based on analytical techniques, hard facts and data which is generally measurable
3. Evaluating
This step involves bringing together the results of analysis to compare the alternatives. Both subjective and objective
factors are considered here. There are multiple methods or approaches to do this evaluation.
4. Final Selection (Choosing)
This is the final selection of one or two strategies that will be implemented. A blue print is created around the chosen
strategy, its description and operational conditions. This blue print is called the Strategic Plan.
This step also involves creation of contingency strategies, which is like a back-up plan in case things do not go as
planned.
The subjective factors mentioned above may include the following:
i. Government policies
ii. Organizational culture
, iii. Quality of leadership – Is it ambitious? Is it risk prone or risk averse?
iv. Political stability in the operational country
v. Timing with respect to competitors
vi. Strategies that were adopted previously with their results and success/failure rate
vii. Pressure from stakeholders etc.
The objective factors that constitute the selection criteria may include the following:
i. Market size
ii. Market size growth rate
iii. Market share
iv. Market share growth rate
v. Profitability ratios
vi. Performance ratios etc.
For each subjective and objective factor, a detailed analysis is required before making the correct strategic choices.
There are multiple models that have been devised by industry specialists that help the organizations to study the
factors that need to be analysed before taking any major decisions. Some of these models are:
1. Corporate Portfolio Analysis – Study of all SBUs
2. Environmental analysis – SWOT
3. Experience Curve analysis – study of evolution of organization with increase in experience
4. Life cycle analysis – Study of product, firm and industry life cycle
5. Industry analysis – Porter’s 5 forces model
6. Competitor analysis
Corporate Portfolio analysis
1. Used by diversified organizations
2. Aims to create a balanced portfolio with respect to four aspects – profitability, cash flow, growth, risk
3. Can be done using experience curve or PLC concept or BCG matrix or GE 9 cell matrix, product market
evaluation matrix, DPM and Profit Impact of Marketing Strategies
I. BCG Model or BCG Growth Share matrix
1. Given by Henderson of Boston Consulting Group
2. Objective factors used are Market growth rate and market share into a 2X2 matrix
3. Cash cows, stars, Question marks and dogs
4. Growth in star, retrenchment in dogs, stability or growth in question marks, combination in cash cows
Once all the possible strategies for corporate and business level have been identified, the next step in strategy
formulation is to select the most suitable strategy for the organization or business unit, based on existing external and
internal environment situation. This step is called the Strategic Choice and Analysis.
It is the process of choosing from all the available strategies, and is thus, a decision making process. This decision must
always be taken bearing in mind the following:
a. The external environment factors and current situation
b. The internal environment factors and current situation
c. Alignment with organization’s vision, mission, goals and objectives
Process of strategic choice and decision making
It involves 4 steps:
1. Focusing on strategic alternatives
2. Analysing the strategic alternatives
3. Evaluating the strategic alternatives
4. Final selection
1. Focusing
It involves visualizing the future state of the firm, and working backwards from that vision.
The future state is compared to the current state to identify the gap, and then a set of possible strategies are identified
that best suit to fill the gap. So, the applicable strategies’ list is narrowed down here.
(Gap here means difference between what the firm is today and what it wants to be in the future.)
For example, if the gap in current and future state is high, and the performance of the firm is also good, the preferred
strategies would be growth strategies. If the gap is low, and the performance is average, stability strategy is most
suitable. If the gap is very high while the performance is very low, then retrenchment from that business may be the
alternative.
2. Analysing
This is the phase where a study of all alternatives is done based on selection factors. The selection is based on certain
factors that constitute the criteria of evaluation. There are two types of factors:
Subjective – based on perception of leaders and stakeholders. They are intuitive, and cannot be measured.
Objective – based on analytical techniques, hard facts and data which is generally measurable
3. Evaluating
This step involves bringing together the results of analysis to compare the alternatives. Both subjective and objective
factors are considered here. There are multiple methods or approaches to do this evaluation.
4. Final Selection (Choosing)
This is the final selection of one or two strategies that will be implemented. A blue print is created around the chosen
strategy, its description and operational conditions. This blue print is called the Strategic Plan.
This step also involves creation of contingency strategies, which is like a back-up plan in case things do not go as
planned.
The subjective factors mentioned above may include the following:
i. Government policies
ii. Organizational culture
, iii. Quality of leadership – Is it ambitious? Is it risk prone or risk averse?
iv. Political stability in the operational country
v. Timing with respect to competitors
vi. Strategies that were adopted previously with their results and success/failure rate
vii. Pressure from stakeholders etc.
The objective factors that constitute the selection criteria may include the following:
i. Market size
ii. Market size growth rate
iii. Market share
iv. Market share growth rate
v. Profitability ratios
vi. Performance ratios etc.
For each subjective and objective factor, a detailed analysis is required before making the correct strategic choices.
There are multiple models that have been devised by industry specialists that help the organizations to study the
factors that need to be analysed before taking any major decisions. Some of these models are:
1. Corporate Portfolio Analysis – Study of all SBUs
2. Environmental analysis – SWOT
3. Experience Curve analysis – study of evolution of organization with increase in experience
4. Life cycle analysis – Study of product, firm and industry life cycle
5. Industry analysis – Porter’s 5 forces model
6. Competitor analysis
Corporate Portfolio analysis
1. Used by diversified organizations
2. Aims to create a balanced portfolio with respect to four aspects – profitability, cash flow, growth, risk
3. Can be done using experience curve or PLC concept or BCG matrix or GE 9 cell matrix, product market
evaluation matrix, DPM and Profit Impact of Marketing Strategies
I. BCG Model or BCG Growth Share matrix
1. Given by Henderson of Boston Consulting Group
2. Objective factors used are Market growth rate and market share into a 2X2 matrix
3. Cash cows, stars, Question marks and dogs
4. Growth in star, retrenchment in dogs, stability or growth in question marks, combination in cash cows
