Strategic Management: From Analysis to Defensible Choice
What the exam tests
Strategic Management questions require you to move from analysis to choice to implementation. Marks are earned for explicit linkage between evidence and recommendation, not for listing frameworks.
Core rules
- Strategy operates at three levels: corporate (scope and portfolio), business (how to compete), and functional (marketing, operations, HR).
- External analysis uses PESTEL and Porter's Five Forces to judge industry attractiveness; internal analysis uses the value chain and VRIO to judge advantage.
- VRIO: a resource must be Valuable, Rare, costly to Imitate and supported by Organisation to give sustained advantage. Valuable and rare but imitable resources give only temporary advantage.
- Porter's generic strategies are cost leadership, differentiation and focus. Trying to combine them without a clear trade-off risks being "stuck in the middle".
- The Ansoff matrix orders options by risk: market penetration, product development, market development, then diversification.
Worked example
A division has sales of ₹80 crore in a market growing at 12%. The largest competitor holds 40% share; the division holds 20%. Relative market share is 20/40 = 0.5. High growth (above 10%) with relative share below 1.0 makes the unit a question mark under the BCG matrix. It consumes cash, so the choice is selective investment to build share or divest. VRIO analysis then tests whether a defensible capability exists to justify the investment.
Traps
- Using absolute market share instead of share relative to the largest competitor.
- Describing frameworks without making a recommendation.
- Confusing cost leadership (lowest cost base) with low price alone.
- Ignoring implementation: structure, culture, incentives and change management.
- Treating diversification as lower risk than it is.