1 1

DEFINITION OF STRATAGIC MANAGEMENT

Acc to Glueck, a stream of decisions & actions which lead to the development of an effective strategies to help achieve corporate objectives.
Acc to Sharplin, the formulation & implementation of plans & carrying out of activities relating to the matters which are of vital, continuing importance to the total organization.
2

DEFINITION OF STRATEGY
Acc to Ansoff, the common thread among the organization's activities and product markets. Acc to Porter, developing & communicating the company's unique position, making tradeoffs and forging fit among activities. Acc to Glueck, a unified, comprehensive & integrated plan designed to assure that the basic objectives of the enterprise are achieved.
3

NATURE OF STRATEGY
A plan or course of action or a set of decision rules forming a pattern. The pattern related to the organization's activities which are derived from its policies, objectives & goals. Concerned with the resources necessary for implementing a plan or following a course of action. Related to pursuing those activities which move an organization from its current position to a desired state of future.
4

STRATEGIC DECISION-MAKING
Decision making is the important function of manager and it is of two types. Strategic decision making (which 1 2 adopt) Conventional decision making Both kinds of decision making is essentially the same. The difference lies in the levels at which they operate. Strategic decision making is the prominent task of the senior management. The Conventional process are: Objectives to be achieved are determined, Alternatives ways of achieving the objectives are identified, Each alternative is evaluated in terms of objective-achieving ability , The best alternative is chosen. 5

STRATEGIC MANAGEMENT PROCESS

Strategic intent

SWOT analysis

Strategic alternatives

Strategic Analysis & choice

Strategic Strategy implementation evaluation

Strategic control

LEVELS OF STRATEGY
LEVELS CORPORATE STRUCTURE CORPORATE OFFICE STRATEGY CORPORATE-LEVEL

SBU

SBU A

SBU B

SBU C FINANCE MARKETING OPERATIONS

BUISNESS LEVEL

FUNCTIONAL
PERSONNEL INFORMATION

FUNCTIONAL LEVEL

ROLE OF STRATEGIST
There are nine kinds of strategists:1. ROLE OF BOARD OF DIRECTORS

The board is responsible for the governance of the organization. As directors, the members of the board are responsible for providing guidance & establishing the directives according to which the managers of the organization can operate.
2. ROLE OF CHIEF EXECUTIVE OFFICER

The CEO is responsible for all aspects of strategic management from the formulation to the evaluation of strategy. He plays a major role in strategic decision making. A CEO performs the strategic tasks/ actions which are necessary to provide a direction to the organization to achieve its goals. 8

3. ROLE OF ENTREPRENEUERS

The entrepreneurs has been usually considered as the person who starts a new business, is a venture capitalists, has a high level of achievement-motivation, idealism and independence of thought and action. They provide a sense of direction to the organization & set of objectives and formulate strategies to achieve them.
4. ROLE OF SENIOR MANAGEMENT

These managers are involved in various aspects of strategic management. Some of the members of the senior management acts as directors on the board usually on a rational basis. Senior managers perform a variety of roles by assisting the board and the CEO in the formulation, implementation an devaluation of strategy.
9

5. ROLE OF SBU LEVEL EXECUTIVES

SBU level executives are also known as either profit center heads or divisional heads. SBU is adapted to suit traditions, shared facilities and distribution channels and manpower constraints. The corporate planning department at the head office coordinated the strategic planning exercise at the SBU level .
6. ROLE OF CORPORATE PLANNING STAFF

The corporate planning staff plays a supporting role in strategic management. It assists the management in all aspects of strategy, formulation, implementation and evaluation. Also they are responsible for the preparation & communication of strategic plans and research pertaining of strategic plans. 10

7. ROLE OF CONSULTANTS

Many organizations which do not have a corporate planning department take the help of consultants in strategic management. The main advantages of hiring consultants are:- getting an unbiased opinion from a knowledgeable outsider and the availability of specialists skills.
8. ROLE OF MIDDLE LEVEL MANAGERS

They may be involved as sounding boards for departmental plans, as implementators of the decision takers and followers of policy guidelines. Their importance lies in the fact that they form the catchment areas for developing future strategists for the organization.
11

9. ROLE OF EXECUTIVE ASSISTANT

Its duty is to assist the chief executive in data collection & analysis, suggesting alternatives where required, helping in public relations & coordinating activities with the internal staff and outsiders. Its most important role is of corporate planner.

12

13

DEFINING STRATEGIC INTENT

Strategic intent refers to the purposes the organization strive for. This could be in the form of a vision & mission statement for the organization as a corporate whole & business definition at the business level.

VISION:- vision is forward looking view of what an

organization wishes to become. Acc to kotler, description of something (an organization, corporate culture, a business, a technology, an activity.)

BENEFITS: Good visions are inspiring , exhilarating. Good visions foster risk taking & experimentation. Good visions foster long-term thinking.

14

MISSION:- mission is what organization is and why

it exists. Acc to Thompson essential purpose of organization, concerning particularly why it is in existence, the nature of the business it is in, & the customers it seeks to serve and satisfy.

CHARACTERISTICS: It should be feasible. It should be clear. It should be motivating. It should indicate how objectives are to be accomplished.

15

Strategic Intent
Internally focused, it is the leveraging of a firms resources, capabilities, and core competencies to establish the firms goals in the competitive environment.

Strategic Mission
Externally focused, it is a statement of a firms unique purpose and the scope of its operations in product and market terms.

Together, strategic intent and strategic mission yield the insights required to formulate and implement strategies.

BUSINESS DEFINITION:It defines about the what, who & how? The what of business definition deals with the customer needs. The who refers to customers group that are targeted by a business. The how refers to the alternative technologies used in product & services that satisfy the customers.

DIMENSIONS FOR DEFINING A BUSINESS

CONSUMERS FUNCTIONS CUSTOMERS GROUPS ALTERNATIVE TECHNOLOGIES

17

GOALS AND OBJECTIVES:Goals denote what an organization hopes to accomplish in future period of time. They represent a future outcome of the effort put in a row. Objectives are the ends that state specifically how the goals shall be achieved.

Role of objectives:a) Help an organization to pursue its vision and mission. b) Provides the basis for strategic decision making. c) Provides the standards for performance appraisal.

Characteristics of objectives:a) Understandable , ob should be related to time frame b) Concrete & specific , different ob should correlate with each other , ob should be set within constraints c) Challenging , measurable , controllable
18

19

External Analysis
Identify strategic opportunities and threats in the operating environment.

Immediate (Industry)

Macro environment

National

CONCEPT OF ENVIRONMENT
The environment of any organization is the aggregate of all conditions, events and influences that surround and effect it.

COMPONENTS OF ENVIRONMENT:A) ECONOMIC ENVIRONMENT:It consists of macro-level factors related to the means of production & distribution of wealth which have an impact on the business of an organization. Some factors are:a) The economic stage at which a country exists at a given point of time. b) Economic structure adopted capitalistic, socialistic or mixed economy. c) Economic policies i.e. industrial, monetary & fiscal 21 policies.

B) LEGAL ENVIRONMENT:Existing laws pertaining to business like import export, foreign exchange, international travel, Visa and other regulations etc C) SOCIAL ENVIRONMENT:-

It consists of factors related to human relationships within a society; the development, the functions & behavior of groups of human beings which have a bearing on the business of an organization. Some factors are:a) It concerns such as environmental pollution, its density, corruption, the role of business in society & use of mass media. b) The role & position of men, women, children, adolescence & the aged in family & society.
22

D) POLITICAL ENVIRONMENT It consists of factors related to the management of public affairs & their impact on the business of an organization. Some factors are:a) The political structure, its goals and stability. b) Political philosophy, governments role in business, & its policies and interventions in economic and business development. c) The political system and its features.
E) TECHNOLOGICAL EVIRONMENT:It consists of those factors that are related to the knowledge applied and the materials & machines used in the production of goods and services. Some factors are:a) Sources of technology, like internal & external sources and foreign sources; cost of technology acquisition, transfer of technology.

23

b) Communication and infrastructural technology in management.

ENVIRONMENTAL SCANNING TECHNIQUES:-

ETOP
ENVIRONMENTAL THREAT AND OPPARTUNITY PROFILE

ENVIRONMENTAL FACTOR
Market
Technological

NATURE OF IMPACT

Supplier
Economic Regulatory Political Socio-cultural

International

24

QUEST (Quick environmental scanning technique)

It deals how environmental scanning can be done by strategists. QUEST is a four-step process which uses scenario-writing for scanning the environment and identifying strategic options. They are:1. Strategists make observation major events & trends in industry. 2. Speculation on a wide range of important issues is done that effect the future of the organization. 3. QUEST director prepares report & scenarios summarizing the major issues & their implications. 4. Then the report & scenarios are reviewed by a group of 25 strategists.

SWOT
A strength is a inherent capacity which an organization can use to gain strategic advantage. A weakness is an inherent constraint which creates strategic disadvantages. An opportunity is a favorable condition which enables organization to consolidate & strengthen its position. A threat is an unfavorable condition which creates risk & causes damages in the organization.
26

27

THE INTERNAL ENVIRONMENT

The appraisal of internal environment enables a firm to decide about what it can do. The dynamics of internal environment are understood in terms of the complex interplay of organizational resources and behaviour, strength and weaknesses, synergistic effects and the competencies of the organization.
ORGANISATIONAL CAPABILITIES IN VARIOUS FUNCTIONAL AREAS

Organizational capability is the inherent capacity of an organization to use its strength and overcome its weaknesses in order to exploit opportunities and face threats in its external environment.
28

Its various functional areas are:1. FINANCIAL CAPABILITY:- factors are:- factors related to source of funds borrowing, reserves & surplus - factors related to usage of funds current assets, loans & advances. - factors related to management of funds cash, inflation & credit. 2. MARKETING CAPABILITY:- factors are:- product related factors variety, differentiation, mix quality. - Price related factors pricing objectives, policies, changes. - Place related factors distribution, transportation, marketing channels. 3. OPERTIONS CAPABILITY:- factors are:- Factors related to the production system capacity, location, layout. - Factors related to the operations and control system aggregate production planning, material supply, inventory. - Factors related to R&D system personnel, facilities, product development.
29

4. PERSONNEL CAPABILITY:- factors are:-

-Factors related to the personnel system system for manpower planning, selection, compensation. -Factors related to organizational & employees characteristics quality of managers, staff & workers, working conditions.
5. INFORMATION MANAGEMENT CAPABILITY:- factors are:-

-Factors related to processing & synthesis of information database management, computer system. -Factors related to the retrieval & usage of information availability & appropriateness of information format. 6. GENERAL MANAGEMENT CAPABILITY:- factors are -Factors related to general managers orientation, values, norms. -Factors related to organizational climate organizational culture, use of power, political processes.
30

SWOT and Strategic Choice

Strengths and Weaknesses Opportunities and Threats (SWOT Analysis)

Strategic Choice
Business Functional Global Corporate

1-31

STRATEGIC ADVANTAGE PROFILE

The ultimate goal of organization is to secure strategic advantage. They are the result of organizational activities leading to rewards in terms of financial parameters like, profit or shareholder value and/or non financial parameters like, market share.
In contrast, strategic disadvantages are penalties in the form of financial loss or damage to market share.

32

Four Attributes of Resources and Capabilities (Competitive Advantage)

Valuable Rare Costly to Imitate them Organized to be
Resources and Capabilities allow firm to neutralize threats or exploit opportunities in its external environment possessed by few, if any, current and potential competitors

when other firms either cant obtain them or must obtain at a much higher cost supported by the appropriate structure, controls, and rewards

Exploited
an *

Resources and capabilities

that meet these four criteria become a source of:
Resources and Capabilities

Valuable Rare

Costly to Imitate Organized to be Exploited

2006 by Nelson, a division of Thomson

Core Core Competencies Competencies

an *

1-34

Core Competencies

are the basis for a firms:

Competitive advantage
Strategic competitiveness Ability to earn above-average returns
an *

Core Core Competencies Competencies

METHODS AND TECHNIQUES USED FOR ORGANIZATIONAL APPRAISAL

INTERNAL ANALYSIS

A)
B)

C)

Value chain analysis:- this is a method for assessing the strength & weaknesses of an organization on the basis of an understanding of the series of activities. Quantitative analysis:- relying on numbers is a popular technique for assessing the performance of organization. i. financial analysis:- it assess the liquidity, profitability, leverage & activity aspects of any organization. ii. Non financial quantitative analysis:- quantification of intangibles like, goodwill, employee morale is not desirable to be calculated in monetary terms, here non financial quantitative analysis helps organization in appraisal. Qualitative analysis:- used to measure and compare on a numerical or financial basis. Such an analysis is based on 36 informed opinion, judgement and intuition.

COMPARATIVE ANALYSIS

A) Historical analysis:- it is a good measure of how well or badly or organization has progressed with respect to its own past performance. B) Industry norms:- the industry to which a business belongs is the most obvious choice for comparison with regard of parameters. C) Benchmarking:- the process of benchmarking is aimed at finding the best practices within and outside the industry to which an organization belongs.
COMPREHENSIVE ANALYSIS

A) Balanced scorecard:- used to measure the performance of an organization. Balanced scorecard is considered as a set of measures that gives top managers a fast but comprehensive view of business. B) Key factor rating:- this system is based on rating, depending on a number of key factors, each of which is analyzed on the basis of a series of thoughtful & penetrating questions. 37

IDENTIFICATION OF CRITICAL SUCCESS FACTOR(CSF)

Critical success factors are crucial for organizational success. When strategists consciously look for such factors & take them into consideration for strategic management, they are likely to be more successful, while putting in relatively less efforts. It serves as a charter of aims the organization plans to achieve, is a powerful means to communicating the organization intent down the line and ensures the creation of result-oriented organizational system.

38

39

Corporate-Level Strategies
Vertical integration Diversification Strategic alliances Acquisitions New ventures Business portfolio restructuring
1-40

STABILITY STRATEGY:-

The stability grand strategy is adopted by an organization when it attempts at an incremental Improvements of its functional performance. Stability strategy is adopted because:1. It is less risky, involves fewer changes & people feel comfortable with things. 2. The environment faced is relatively stable. EXPANSION STRATEGY:It is followed when an organization aims at high growth. It is adopted because:1. Increasing size may lead to more control over the market competitors. 2. Advantages from the experience curve and scale of operations may accrue. RETRENCHMENT STARTEGY:It is followed when an organization aims at a contraction of its activities. It is adopted because:1. The management no longer wishes to remain in business either partly or wholly due to continuous losses. 2. The environment faced is threatening. 41

COMBINATION STARTEGY:It is followed when an organization adopts a mixture of stability, expansion and retrenchment. It is adopted because:1. The organization is large and faces a complex environment. 2. The organization is composed of different businessman, each of which lies in a different industry requiring a different response.
Corporate restructuring deals with problems being faced by the firms or to create a more profitable enterprise. The rational for restructuring flows owing to the two reasons of a continual revision of the mental models that drive business, and a correction of the strategic decisions taken in the past that no longer match the environmental realities. Organizational restructuring deals with changes in the structure of the organization, reducing hierarchies, downsizing and altering 42 reporting relationships.

CONCEPT OF SYNERGY
It is the inherent nature of organization that strengths and weakness, like resources and behavior, do not exists individually but combine in a one way or other. Synergy is the idea that the whole is greater or lesser than the sum of its parts. Synergistic effects occur across functional areas. Synergistic effects are an important determinant of the quality and type of the internal environment existing within an organization and may lead to the development of competencies.

MERGERS AND ACQUISITIONS

A merger is a combination of two or more organization in which one acquires the assets and liabilities of the other in exchange for shares or cash or both. REASONS FOR MERGERS:Why the buyer wishes to merge:1. To reduce competition. 43 2. To improve stability of earning and sales.

3. To take advantage of synergy.

Why the seller wishes to merge:1. To increase the growth rate. 2. To benefit from tax legislation. 3. To increase the value of owners stock and investment.

ACQUISTIONS:- The attempt of one firm to acquire

ownership or control over another firm against the wishes of the latters management. HOW TAKEOVERS TAKE PLACE ? 1. Spell out the objective. 2. Indicate how the objective would be achieved. 3. Assess managerial quality. 4. Check the compatibility of business styles. 5. Anticipate and solve problems early. 6. Treat people with dignity and concern.
44

45

Business-Level Strategies
Cost leadership
Attaining, then using the lowest total cost basis as a competitive advantage.

Differentiation
Using product features or services to distinguish the firms offerings from its competitors.

Market niche focus

Concentrating competitively on a specific market segment.
1-46

PORTERS FRAMEWORK OF COMPETITIVE STRATEGIES

C O M P E T I T I V E S C O P E

BROAD TARGET

COST LEADERSHIP
FOCUSED COST LEADERSHIP

DIFFERENTIATION

NARROW TARGET

FOCUSED DIFFERENTIATION

LOW COST PRODUCT/SERVICES

DIFFERNTIATED PRODUCT/SERVICES
47

COMPETITIVE ADVANTAGE

CONDITIONS, RISKS, AND BENEFITS OF COST LEADERSHIPS

CONDITIONS: The product/services is standardized & its consumption takes place in such a manner that differentiation is superfluous. The market for the product/services operate in such a way that price0baesd competition is vigorous making coasts an important factor. BENEFITS: The threat of cheaper substitutes can be offset to some extent by lowering prices. Cost advantage is possibly the best insurance against industry competition. RISKS: Cost advantage does not remain for long as competitors can imitate the cost reduction techniques easily. Cost leadership is not a market-friendly approach. Severe cost reduction can dilute customer focus. 48

CONDITIONS, RISKS, AND BENEFITS OF DIFFERENTATION

CONDITIONS:1.The market is too large to catered to by a few firms offering a standardized product/service. 2. It is possible for the firm to charge a premium price for differentiation that is valued by the customer. BENEFITS:1. Firms distinguish themselves on the basis of differentiation thereby lessening competitive rivalry. 2. Powerful suppliers can negotiate price increases that the firm can absorb to some extent. RISKS: Long term perceived uniqueness is difficult to sustain. Price premiums too have a limit. Charging too high for differentiated features may cause the customers to forego the additional advantage from product/services on the basis of their own cost-benefit analysis.
49

CONDITIONS, RISKS, AND BENEFITS OF FOCUS STRATEGIES.

CONDITIONS:1. There is some type of uniqueness in the segment either in terms of geographical,demographic or based on lifestyle. 2. The niche market is big enough to be profitable for the focused firm. BENEFITS:1. Focused firms buy in small quantities, so powerful may not evince much interest. 2. The competence of the focused firms acts as an effective entry barrier to potential entrants into the niche markets. RISKS:1. Serving niche markets requires the development of distinctive competencies to serve those markets. 2. Rivals in the market may sometimes out focus the focused firms by devising ways to serve the niche markets in better 50 manner.

LOCATION AND TIMING TACTICS

TIMING TACTICS:- A tactic is a sub strategy. It is a specific operating plan detailing how a strategy is to be implemented. When to make a business strategy move is often as important as what move to make. A business strategy of low-cost maybe essentially a right move but only if it is made at the right time. ADVANTAGES TO THE FIRST-MOVER FIRMS:1.Moving first in an industry results in forming early commitments to suppliers of raw-materials, new technology. 2. first- time customers are likely to remain loyal. DISADVANTAGES TO THE FIRST-MOVER FIRMS:1. Late movers can imitate technological advances, skills & marketing approaches easily negating that first movers are likely to have. 2. Technological change is often rapid creating obsolescence for the first movers. Late movers can jump the technological thresholds and use the latest technology available. 51

MARKET LOCATION TACTICS:- The second important aspect of business tactics is market location. This aspect deals with the issue of where to compete. Market location tactics are of four types. A) MARKET LEADERS:1. Expanding the total market through new users, new ideas & more usage. 2. Expanding the market share through the enhancement of operational effectiveness. B) MARKET CHALLENGES:1. Frontal attack involving matching the opponent in terms of the product, price, promotion and distribution. 2. Flank attack involving challenging the opponent's weak geographical areas. C) MARKET FOLLOWERS:1. Cloner strategy involves copying some things from the market leaders like, pricing, , advertising. 2. Adapter strategy involves adapting ones own products to 52 those of the market leader & selling them in different markets.

D) MARKET NICHERS:1. Creating niches involves looking for ways and means by which niches can be created in an industry. 2. Protecting niches involves shielding the niches served from attacks by other firms in the industry.

CORE COMPETENCE:The collective learning in the organization, especially how to coordinate diverse production skills and integrate multiple streams of technologies. The ability of core competence to provide strategic advantage can diminish over time as they do not exist perpetually. Core competence acts as a double-sword edged ; that means an organizations commitment to a particular way of doing business, that is, developing a particular set of resources and capabilities. Core competencies serve as a useful purpose if they are used to develop sustained strategic advantages through building up organizational 53 capability.

Are these strategies relevent in Electronic markets?

Porter's framework of four competitive strategies (cost leadership, market differentiation, innovation differentiation, market focus) is used to compare the market strategies of firms operating solely in an electronic virtual market ("on-line firms") and firms operating concurrently in the traditional and electronic markets. A survey of 123 firms in South Korea found that Porter's competitive strategies are relevant to electronic markets. Depending on their operating model, firms tend to choose different competitive strategies. On-line firms incline to differentiation strategies, whereas click-and-mortar firms prefer strategies based on market focus. Because the strategies firms choose for competitive strength are not necessarily the best ones to improve business performance, firms competing in an electronic market need to reassess their competitive strategies and reallocate their resources to maximize the return on their investment.

55

Strategy Implementation
Designing organizational structure Structure Designing control systems Market and output controls Bureaucratic controls Controls Control through organizational culture Rewards and incentives Matching strategy, structure, Strategy and controls Congruence (fit) among strategy, 1-56 structure, and controls

A) CORPORATE LEVEL ANALYSIS

a) BOSTON COSULTING GROUP (BCG) MATRIX

HIGH
20% 15%

STARS

QUESTION MARKS

INDUSTRY GROWTH RATE

10%

CASH COWS

DOGS

5%

HIGH
RELATIVE MARKET SHARE

LOW
57

BCG growth-share matrix

BCG (Boston Consuting Group ) is a simple way to anayse a firms portfolio of investments , products , or business units. The classification is most attractive, potentially attractive, moderately attractive, and least attractive based on growth rates and market share. They are also called CASH COWS, STARS, QUESTION MARKS, DOGS to describe the above position.

58

BCG matrix ( cont. )

Stars and question marks are businesses that operate in high growth industries. Cash cows and dogs are businesses that operate in low growth industries. Stars are net users of resources but hold potential for future.question marks are also net users of resources but are in high risk categories. A cash cow brings lot of cash to the company. Dogs are weak in market share and also in low growth market.they are a drag on company resources.

59

BCG growth-share matrix

BCG (Boston Consuting Group ) is a simple way to anayse a firms portfolio of investments , products , or business units. The classification is most attractive, potentially attractive, moderately attractive, and least attractive based on growth rates and market share. They are also called CASH COWS, STARS, QUESTION MARKS, DOGS to describe the above position.

60

BCG matrix ( cont. )

Stars and question marks are businesses that operate in high growth industries. Cash cows and dogs are businesses that operate in low growth industries. Stars are net users of resources but hold potential for future.question marks are also net users of resources but are in high risk categories. A cash cow brings lot of cash to the company. Dogs are weak in market share and also in low growth market.they are a drag on company resources.

61

b) GENERAL ELECTRIC NINE-CELL MATRIX

HIGH

INDUSTRY ATTRACTIVENESS
MEDIUM

LOW INVEST/EXPAND

STRONG
SELECT/EARN HARVEST /DIVEST

AVERAGE

WEAK

BUSINESS STRENGTH/ COMPETITIVE POSITION

62

GE multifactor portfolio planning matrix

Different businesses or products are rated based on the following two parameters,
Industry attractiveness &Companies business strength. How attractive is the industry and how strong is the firm in the industry. If both are very strong such businesses needs more investment and allowed to grow. Invest and develop such SUBs. If they are medium the stategy should be selective. If they are low the policy should be harvest / divest

63

d) SHELL DIRECTIONAL POLICY MATRIX

BUSINESS SECTOR PROSPECTS
UNATTRACTIVE AVERAGE ATTRACTIVE

WEAK

DIVESTMENT

IMITATION/ PHASED WITHDRAWAL MAINTENANCE OF POSITION / MARKET PENETRATION

GROWTH / MARKET SEGMENTATION

PHASED WITHDRAWAL / CASH GENERATION EXPANSION / PRODUCT DIFFERENTIATIO N

MARKET LEADERSHIP / INVITATION
64

AVERAGE

PHASED WITHDRAWAL/ MERGER

DIVERSIFICATI ON / CASH GENERATION

STRONG

c) HOFERS PRODUCT/ MARKET EVOLUTION MATRIX

DEVELOPMENT GROWTH SHAKE OUT MATURITY/ SATURATION DECLINE

STRONG AVERAGE

WEAK

COMPETITIVE POSITION
65

B) INDUSTRY LEVEL ANALYSIS

a) PORTERS FIVE FORCES MODEL
POTENTIAL THREATS FROM FIRMS WHICH MAKE SUBSTITUTE PRODUCTS OR SERVICES

SUPPLIERS BARGAINING POWER

FORCES OF COMPETITION CREATED BY RIVALRY

BUYERS BARGAINING POWER

POTENTIAL THREAT FROM ENTRY OF NEW FIRMS

66

QUALITATIVE FACTORS IN STRATEGIC CHOICE

It is defined as, the decision to select from among the grand strategies, the strategy which will best the enterprises objectives. The decision involves focusing on a few alternatives, considering the selection factors, evaluating the alternatives and making the actual choice.
Objective factors, which are based n facts and figures, could be dealt with by the help of analytical models. Subjective factors involves the application of managerial intuition and judgement.
67

68

RESOURCE ALLOCATION
It deals with the procurement and commitment of financial, physical and human resources to strategic tasks for the achievement of organizational objectives.
APPROACHES TO RESOURCE ALLOCATION

The main instrument for resource allocation is a budget. 3 approaches are:- the top-down approach, bottom-up approach and the third is a mix of these two.
MEANS OF RESOURCE ALLOCATION

Means of resource allocation is strategic budgeting. Other means are BCG- based budgeting, PLC based budgeting, capital budgeting, zero base budgeting and the parta system.
FACTORS AFFECTING RESOURCE ALLOCATION

Factors are:- objectives of t he organization, preference of dominant strategists, internal politics and external influences. 69

PROJECTS AND PROCEDURAL ISSUES

PROJECT IMPLEMENTATION

Strategies lead to plans, programmes and projects. The goals or objectives for a project are derived from the plans and programmes which are based on the strategies adopted.

PHASES OF PROJECT:1. Conception phase 2. Definition phase 3. Planning and organizing phase 4. Implementation phase 5. Clean-up phase

70

PROCEDURAL IMPLEMENTATION
Procedural implementation is concerned with the major elements of the governments regulatory framework within which Indian companies operate.
ELEMENTS OF REGULATORY FRAMEWORK 1. Formation of company 2. Licensing procedures 3. SEBI requirements 4. MRTP requirements 5. Foreign collaboration procedures 6. FEMA requirements 7. Import and export requirements 8. Patenting and trademarks requirements 9. Labour legislation requirements 10.Environmental protection and pollution control requirements 11.Consumer protection requirements 12.Procedures for availing benefits from incentives and facilities.
71

LEADERSHIP This approach provides very useful insights into how the complex phenomenon of leadership probably works. Leadership is seminal to the formulation as well implementation of strategy. The chosen strategy has a significant impact on a leadership style & strategists have to adapt their style to suit the requirements of a particular strategy. The development of strategists is the responsibility of the top management.
CORPORATE CULTURE

Corporate culture composed of beliefs and values that the members of an organization share in common. Four approaches to creating a strategy- supportive culture :- to ignore corporate culture, to adapt strategy implementation to suit corporate culture, to change the corporate culture to suit the strategic requirements and to change the strategy to fit the corporate culture.
72

ORGANISATION STRUCTURE AND SYSTEM IN STRATEGY IMPLEMENTATION

ORGANIZATION SYSTEM

Organization has to perform a set of objectives designed to achieve its objectives, a need arises to evolve systems that would bind the different units and positions so that the performance of activities takes place in coordinated manner. These systems collectively referred to as organizational systems. The six organizational systems are:1. Information system 2. Control system 3. Appraisal system 4. Motivation system 5. Development system 6. Planning system
73

ORGANIZATION STRUCTURE

An organization structure is the way in which the tasks and subtasks required to implement a strategy are arranged. There are several types of structures that are found in organizations.

1. Entrepreneurial structure:OWNER MANAGER

EMPLOYEES

Advantages are:a. Quick decision making, as power is centralized b. Informal and simple organization systems. Disadvantages are:a. May divert the attention of owner manager to day to day operational matters and ignore strategic decision.

74

b. Increasingly inadequate for future requirements.

2. Functional structure:CEO PUBLIC RELATIONS LEGAL

FINANCE

MARKETING

PERSONNEL

PRODUCTION

Advantages are:a. Efficient distribution of work through specialization. b. Delegation of day to day operational functions. Disadvantages are:a. Creates difficulty in coordination among different functional areas. 75 b. Leads to functional, and line and staff contacts.

3. Divisional structure:-

CEO CORPORATE FINANCE GENERAL MANAGER

DIVISION B

CORPORATE LEGAL / PR GENERAL MANAGER MARKETING OPERATIONS PERSONNEL

76

DIVISION A

MARKETING

OPERATIONS
PERSONNEL

Advantages are:a. Generate quick response to environmental changes affecting the businesses of different divisions. b. Enables the top management to focus on strategic matters. Disadvantages are:a. Inconsistency arising from the sharing of authority between the corporate and divisional levels. b. Policy inconsistencies between the different divisions.

77

4. Strategic business unit:CEO

GROUP HEAD SBU 1

GROUP HEAD SBU 2

GROUP HEAD SBU 3

Divisions ABC

Divisions DEF

Divisions GHI

78

Advantages are:a. Fixes accountability at the level of distinct business units. b. Establishes coordination between divisions having common strategic interests. Disadvantages are:a. Difficulty in assigning responsibility & defining autonomy for SBU heads. b. Addition of another layer of management between corporate and divisional management.

79

5. Matrix structure:CEO

FINANCE PROJECT MANAGER A PROJECT MANAGER B PROJECT MANAGER C

MARKETING

PERSONNEL

OPERATIONS

Functional specialists

80

Advantages are:a. Fosters creativity because of the pooling of diverse talents. b. Provides good exposure to specialists in general management. Disadvantages are:a. Requires a high level of vertical and horizontal combination. b. Shared authority may create communication problems.

81

6. Network structure:PROJECT GROUP M REGION A FUNCTION X

CORPORATE HEADQUARTER

REGION B PROJECT GROUP N

FUNCTION Y

82

Advantages are:a. Permits concentration on core competencies of the firm. b. Adaptability to cope with rapid environmental change. Disadvantages are:a. Loss of control and lack of coordination as there are several patterns. b. Risks of overspecialization of resources as most tasks are performed by others.

83

VALUES

Personal values refer to a conception of what an individual or groups regards as desirable. They are specially important for strategists as they are custodians of immense economic power vested in business organizations by society.
ETHICS

Ethics is the study of how personal moral norms apply to activities. It is the study of how the business context poses its own unique problems for the moral person who acts as the agent of this system.
SOCIAL RESPONSIBILITY

Social responsibility is a contentious issue and have three different views:- those for and against responsibility and the third view of creating consistency between economic goals and specific performance. Due to combination of internal & external factors business opinion is moving towards a gradual acceptance of social responsibility by the Indian industry. 84

OPERATIONAL AND DERIVED FUNCTIONAL PLAN TO IMPLEMENT STRATEGY

FUNCTIONAL STRATEGY
Functional strategy deals with a relatively restricted plan which provides the objectives for a specific function, for the allocation of resources among different operations within that functional area. Functional strategies are derived from the business and corporate strategies and are implemented through functional and operational implementation. When all the functional areas of marketing, finance, operations, personnel and information management contribute, in their own special ways, to the objectives of the development of a low-cost structure and cost reduction, then the business strategy of cost leadership can be successful.
85

OPERATIONAL STRATEGY
The plans and policies are related to the production system, operational planning and control and R&D.

IMPACT OF STRATEGY ON OPERATIONAL PLANS & POLICIES

STRATEGY FORMULATION

NATURE OF PRODUCT/SERVICES

NATURE OF MARKET TO BE SERVED

MANNER IN WHICH MARKET IS TO BE SERVED

OPERATIONS SYSTEM STRUCTURE

OPERATIONS SYSTEM OBEJECTIVES OPERATIONS PLANS AND POLICIES

86

INTEGRATION OF FUNCTIONAL PLANS

Functional plans are developed to ensure that strategic decisions are implemented by all the parts of a organization, a basis is available for controlling activities and there is coordination across the different functions. Plans are formulated to select a course of action. Functional managers need guidance from the corporate and the business strategies in order to make decision.

NEED FOR FUNCTIONAL PLANS

1. The strategic decisions are implemented by all the parts of an organization. 2. Coordination across the different functions takes place where necessary. 3. There is a basic variable for controlling activities in the different functional areas of a business. 87

Internal Analysis
Identify strengths
Quality and quantity of resources available Distinctive competencies

Identify weaknesses
Inadequate resources Managerial and organizational deficiencies

1-88

89

STRATEGIC CONTROL AND OPERATIONAL CONTROL

ATTRIBUTE 1. BASIC QUESTION 2. AIM STRATEGIC CONTROL Are we moving in the right direction? Continuous questioning of the basic direction of strategy. Steering the organizations future direction. External environment. Long term By top level management through lower level support OPERATIONAL CONTROL How are we performing? Allocation and use of organizational resources. Action control. Internal environment. Short term By executive or middle level management on the direction of top management. Budgets, schedules and MBO. 90

3. MAIN CONCERN 4. FOCUS 5. TIME HORIZON 6. EXERCISE OF CONTROL

7. MAIN TECHNIQUES

Environmental scanning, information gathering.

ORGANIZATIONAL SYSTEMS AND TECHNIQUES OF STRATEGIC EVALUATION

EVALUATION TECHNIQUES FOR STRATEGIC CONTROL

a. Strategic momentum control:- it can be done through responsibility control centers, underlying success factors and generic strategies. b. Strategic leap control:- it can be done through strategic issue management, strategic field analysis, systems modeling and scenarios.
EVALUATION TECHNIQUES FOR OPERATIONAL CONTROL a. Internal analysis:- it can be done through value chain analysis, quantitative analysis, qualitative analysis b. Comparative analysis:- it can be done through historical analysis, industry norms and benchmarking. c. Comprehensive analysis:- it can be done through balanced scorecard and key factor rating.

91