Strategy Formulation and Choice
Tools of choice
Formulation matches external opportunity with internal capability. Ansoff's matrix offers market penetration, market development, product development and diversification, in rising order of risk. BCG places business units on market growth and relative market share: stars (high growth, high share), cash cows (low growth, high share), question marks (high growth, low share) and dogs. Porter's generic strategies are cost leadership, differentiation and focus; a firm lacking a clear generic strategy is stuck in the middle. TOWS converts SWOT into options: SO, WO, ST and WT.
Worked example
A unit holds 60% relative share in a market growing at 2%, and generates 40 crore cash on 10 crore investment. BCG classification: cash cow, high share and low growth. It should be milked: fund maintenance capital, not aggressive expansion, and redeploy cash to a question mark or a star. A unit with 15% share in a 20%-growth market is a question mark; it consumes cash, so the choice is invest to build share or divest, an explicit decision, not drift.
Traps
Cost leadership is not simply low price; it is a sustainable low-cost position. Focus is not the same as differentiation: a focused differentiator serves a narrow segment with unique value. Do not label a high-growth, low-share unit a star. Diversification is not synonymous with any new product; relatedness matters. Avoid recommending every option; the exam wants a justified choice.