Professional Documents
Culture Documents
Nature of Strategic Management: Concept of Strategy; Vision Mission, Goals and Objectives; External Environmental Analysis; Analyzing Companies Resource in Competitive Position; Mintzbergs 5Ps of Strategy; Strategic Management Process, Corporate Governance (10 Hours)
UNIT 2
Strategy Formulation: External Environmental Analysis; Analyzing Companies Resource in Competitive Position- Concept of Stretch, Leverage and Fit; Strategic Analysis and Choice, Porters Five Forces Model, Concept of Value Chain, Grand Strategies; Porters Generic Strategies; Strategies for Competing in Global Markets. (10 Hours)
UNIT 3
Corporate-Level Strategies: Diversification Strategies: Creating Corporate Value and the Issue of Relatedness, Vertical Integration: Coordinating the Value Chain, The Growth of the Firm: Internal Development, Mergers & Acquisitions, and Strategic Alliances Restructuring Strategies: Reducing the Scope of the Firm. (12 Hours)
UNIT 4
Strategy Implementation and Evaluation : Structural Considerations and Organizational Design; Leadership and Corporate Culture; Strategy Evaluation: Importance and Nature of Strategic Evaluation; Strategic and Operational Control, Need for Balanced Scorecard. (10 Hours)
Books
Text Books 1. Thomas L. Wheelen, J. David Hunger (2010). Strategic Management and Business Policy, Pearson/Prentice Hall. 2. Arthur, A, Thomson and Strickland, A. J. (2002). Strategic Management Concept and Cases. Tata McGraw Hill, New Delhi. R eference Books 1. Kark Rajneesh (2008). Competing with the Best: Strategic Management of Indian Companies in a Globalizing Arena Penguin Books.
2. Azhar Kazmi (2004). Business Policy and Strategic Management. Tata McGraw Hill, New Delhi.
Books
3. Hitt Michael A., Ireland R.D. and Robert E Hoskisson. Strategic Management: Competitiveness & Globalization, Concepts and Cases, Addison Wesley. 4. Fred David (2008) Strategic Management : Concepts and Cases , 12th Edition Prentice hall of India
NATURE OF STRATEGY
Concept, Vision, Mission, Goals, Objectives
STRATEGIC MANAGEMENT
The art and science of formulating, implementing and evaluating crossfunctional decisions that enable an organization to achieve its objectives ( as per vision, mission and goals)- focuses on integrating management , marketing, finance/accounting, research, IT to achieve organizational success.
STRATEGY
Means by which long term objectives can be achieved. Potential actions that require top management decisions and allocation of resources- are future oriented; have multifunctional and multi divisional consequences, require consideration of external and internal factors
ADVANTAGES
Identification, prioritization and exploitation of opportunities Objective view of problem Framework of coordination and control Minimizes effects of adverse conditions and change Major decisions to support objectives
ADVANTAGES
Allocation of time and resources Fewer errors Framework for internal communication Integrate behaviour of individual Clarifies individual responsibilities Encourages forward thinking Co operative integrated and enthusiastic approach
ADVANTAGES
Creates favourable attitude towards change Gives degree of discipline and formality to management of a business
WHY FIRMS AVOIDE STRATEGIC PLANNING Lack of knowledge and planning Poor reward structure Fire-fighting Waste of time Too expensive Laziness Content with success
PITFALLS
Use for gaining control Window dressing- to satisfying the regulators Tearing hurry to move from mission to strategy planning Not to share the strategy Propensity for intuition Lack of support from top management
PITFALLS
Fail to use plan for standards of performance Dedicated planners Failing to involve key employees Failing to create collaborating climate View planning un necessary and un important Being do formal in planning that flexibility and creativity are stifled
VISION
Would answer the question: what do we want to become An articulation of a simple criterion or characterization- what the company must become ( time frame)
VISION
Graphic. Paints a picture- market position Directional. Forward looking- product, market, customer technology Focused. Specific to help decision making and resource allocation Flexible. Is not a once and for all time statement. Course correction would be required based on circumstances
VISION
Feasible. With in the realm of capability which the company can achieve with in a given time frame Desirable. Indicates why the chosen path makes good business sense Easy to communicate. Is explainable in five to ten minutes- simple memorable slogans
MISSION
Answer to the question: what is our business. The purpose.
Customers Products or services Markets. Where to compete Technology. Technologically current? Philosophy. Beliefs, values, ethical practices, aspirations Self Concept. Distinctive competence
MISSION
Concern for public image. Responsiveness to social, community environmental concerns Concern for employees. Are employees valuable assets
GOALS
Survival. Most basic but generally neglected Profitability. Needs to be long term. Growth. Closely linked with survival and profitability. Number of markets served, product range, technologies used
The Firm
EXTERNAL ENVIRONMENT
Everything outside an organization that might affect it is external environment It is much more difficult to understand than internal environment because the external forces are large in number, difficult to assess and predict
ECONOMICAL ENVIRONMENT
The economic state and the business cycle of the organization at present GDP rate and per capita income Savings and investment rates Payment balances and changes in foreign exchanges reserves Money supply and inflation rate Industrial and agricultural production trend Differences in the distribution of the income and wealth
POLITICAL ENVIRONMENT
Government instability Interference of international power Internal conflict with in the ruling party Strength of parliamentary opposition party Political principles
LEGAL ENVIRONMENT
Market condition in India is much more inclined towards the central, state and local governments. The government rules and policies must to be followed for existing in the market
TECHNOLGICAL ENVIRONMENT
It determine the development of an organization by increasing the efficiency, production, and competitiveness
Effectiveness of infrastructure (roads, ports, airport, rolling stock, hospitals, education, healthcare and communication) Productivity of the organization New manufacturing processes
New technology that could impact the company New products and services of supply chain partners Cost and accessibility of resources such as electrical power, water supply, fuel etc
Economic forces
Import / export factors Demand shifts for different categories of goods and services Income differences by region and consumer groups Price fluctuations Export of labor and capital Monetary policies Fiscal policies Tax rates International monitory and trade related policies The economic state and the business cycle of the organization at present GDP rate and per capita income Savings and investment rates Payment balances and changes in foreign exchanges reserves Money supply and inflation rate Industrial and agricultural production trend Differences in the distribution of the income and wealth
Population Age groups Literacy Joint or nuclear family Eating habits Caste system Population movement Reaction to terrorism Inter caste conflict Gender base Availability and spread of natural resumes.
Attitudes toward authorities Population changes by city , country , state , and region Value placed on lager time Regional changes in taste and preferences Number of women and minority workers Number of high school and colleges graduates by geographic areas Recycling Air pollution Water pollution Ozone depletion
Endangered species
Government regulations or deregulations Change in tax law Special tariffs Political action committees Voter participation rates Number ,severity , and location of government protests Number of patents Change in patent laws Level of defense expenditures Legislation on equal employment Level of government subsidies Antitrust legislation
Sino-American relationships Russian - American relationships European American relationships African - American relationships Import export regulation Government fiscal and monetary policy change. Political conditions in foreign countries Special local , state , and federal laws Lobbying activities Size of government budgets World oil , currency , and labor markets Location and severity of terrorist activities Local , state , and national election
Wt
.26 .25
Rating
3 4
Weighted Score
.78 .75
.25
.06 .05 .03
3
3 3 4
.75
.18 .15 .12
.02
.02 .02 .04
3
2 1 2
.06
.04 .02 .08 2.93
West to East
corporate
Dennis Kozlowski, the then CEO of Tyco International, apologized to investors for a $1.9 billion loss and layoffs of 7,100. Soon after his apology he was indicted for alleged sales tax evasion and use of company funds.
Merrill Lynch in May issued a public apology for e mails from its analysts that may have appeared inconsistent with Merrills published recommendation, adding ;that the statement constituted "neither evidence nor admission of wrongdoing or liability.
Hank Paulson, chairman of Goldman Sachs, gave a speech in which he said recent criticisms of the business community were deserved and then went on to suggest ways companies like his could help restore investor confidence. Citigroups former CEO Sandy Weill apologized for certain activities "that do not reflect the way we believe business should be done
James Rohr, chairman and CEO of PNC Financial Services Group, apologized for accounting irregularities that happened during his tenure. Finally, McDonalds apologized to Hindus, vegetarians and others for mislabeling French fries and hash browns as vegetarian. The fast food
Corporate Governance
A nations system of corporate governance can be seen, (according to North, 1991) as an institutional matrix that structures the relations among owners, boards, and top managers, and determines the goals pursued by the corporation.
Definition of Corporate
Governance
OECD and the Cadbury Committee, UK, defined corporate governance as: A system by which business corporations are directed and controlled CII Desirable Corporate Governance Code defines thus: Corporate Governance deals with laws, procedures, practices and implicit rules that determine a companys ability to take informed managerial decisions vis-a-vis claimants- in particular its shareholders, creditors, customers, the State and employees. There is a global consensus about the objective of good corporate governance: maximizing long-term shareholder value.
> External
Auditors
Governance Creditors - Government - Grievance Association - National > Share holders - Foundation for - Institutional Corporate - Large Private Investors Governance - Minority Investors > Self Regulators - Large Debt Providers (Nominee Directors) - Representatives of Large Debt providers
CORPORATE GOVERNANCE
Deals with laws, procedures, practices rules etc. relating to corporate functioning: Companies Act 1956 Monopolies and restrictive trade practices Act 1969 Foreign Exchange regulation Act 1973 (now FEMA) Sick industries companies Act 1985 Security and Exchange Board of India Act 1992
CORPORATE GOVERNANCE
Security Contract Regulation Act 1956 Listing Agreement of Stock Exchange The depository Act Consumer Forum Arbitration and Conciliation Act Codes prescribed by Chambers SEBI Code on Corporate governance
Board of directors to have optimum combination of executive and non executive directors. In case company has non executive chairman fifty percent of the directors to be non executive Non executive chairman has an office and paid allowances so that she/ he can perform the duties
A qualified empowered audit committee to be set up Remuneration committee to be set up for deciding on the compensations Board meeting at least four time in a year A director can not be a member in more than ten companies Need to give consolidated accounts of all its subsidiaries and segmented accounts of different lines business
Board committee under the chairmanship of non executive director to be formed to look into the complaints of all the shareholders Power of share transfer should be delegated to an officer or a committee or to registrar and transfer agents Should obtain certificates from the auditors on adherence to the tenets of corporate governance. These to be sent to the stock exchange.
Significant labour problems and their proposed solutions Sale of material nature , of investment subsidiaries assets which is not in normal course of business Quarterly details of foreign exchange exposures Non compliance of any regulatory, statutory nature or listing requirements and share holders service.
EMERGENT STRATEGIES
Implementation of strategies before clearly articulating mission, goals, objectives and then SWOT analysis. Involves allocating of resources even before choosing particular strategy Generally the organization adopt the emergent and deliberate strategy concept
INTERNAL ANALYSIS/AUDIT
SWOT, RBV, VCA, COMPETITVE ANALYSIS
ENVIRONMENTAL APPRAISAL
INTERNAL ENVIRONMENT
SWOT Analysis. Resource based view. Value chain analysis Organizational analysis
BASIC QUESTIONS
How well the current strategy working? What use made of our resources? Are all departments working to optimum levels? Are all activities optimized?
SWOT Analysis
Quick Overview of a companys strategic situation. Internal strengths and weaknesses with external opportunities and threats. Strength a resource or capability- advantage relative to the competitors in meeting customers needs Weaknesses. Limitations.. Opportunities. Favorable situation in firms environment
Opportunities
Cell 1: Aggressive Strategy Strengths
Organizational Resources
Structure Planning process Information System, patents, trademark, data base, copy right
Appropriability. Who actually gets the profit created by the resource Sustainability. How rapidly will the resource depreciate
VCA
Divide companys activities in to specific business processes. Group these in to primary and support activities.
The primary activities include: Inbound logistics Operations Outbound logistics Marketing and sales Services
PRIMARY ACTVITIES
Inbound logistics. Fuel, energy, raw materials, parts/components, merchandise and consumable items from the vendors. Receiving , storing and disseminating inputs from suppliers, inspection and inventory management Operations. Converting input in to final products- production, assembly, packaging maintenance, quality assurance, environmental protection
PRIMARY ACTVITIES
Outbound logistics. Distributing, warehousing, order processing, order picking, packing shipping delivery vehicle operation. Marketing and sales. Sales force effort, advertising and promotion, market research and planning, dealer distributor support Service. Assistance to buyer( installation, spare parts delivery, maintenance and repair, technical assistance, buyers enquiry and complaints
SUPPORT ACTIVITIES
General Administration. Accounting and finance, legal and regulatory affairs, safety and security, MIS and other overhead functions HRM. Development of knowledge based skills, recruitment, compensation management, training and development Research, technology and systems development. Equipment design, software development, telecommunication systems, CAD/CAM Procurement. Supplies, services, outsourcing
ALLOCATE COSTS
Each activity in the value chain incurs cost and ties up time and assets Traditional cost accounting of purchase department, would include: Wages and salaries Employees benefits Supplies Travel Depreciation Miscellaneous operating expenses
ALLOCATE COSTS
Activity based cost accountancy(purchase department) would include
Evaluate suppliers capabilities Process purchase orders Expedite suppliers delivery Expedite internal processing Check quality of items purchased Resolve problems Internal administration
Examining the value chain brings out several sources of differentiation advantage relative to competitors. The firm can concentrate on these sources of differentiation advantages to gain competitive advantages. Alternatively the firm can analyse the entire value chain.
Wt .20 .10
Rating
1 4
Price
Management Financial Position Cust Loyalty Market Share
Tech Leadership
.10
.10 .15 .10 .05 .20
3
4 4 4 4 2
.30
.40 .60 .40 .20 .40 2.90
Total
NEW ENTRANTS
FIXED COST / VALUE ADDED INTERMITTENT OVERCAPACITY PRODUCT DIFFERENCES BRAND IDENTITY SWITCHING COSTS CONCETRATION AND BALANCE INFORMATIONAL COMPLEXITY DIVERSITY OF COMPETITORS CORPORATE STAKES
BRAND IDENTITY
SWITCHING COST CAPITAL REQUIREMENTS ACCESS TO DISTRIBUTION ABSOLUTE COST ADVANTAGES PROPRIETARY LOW- COST PRODUCT DESIGN EXPECTED RETALIATION
SUPPLIERS
INDUSTRY COMPITITOR
BUYERS
EXIT BARRIERS
DIFFERENTATION OF INPUTS SWITCHING COST OF SUPPLIERS AND FIRM S IN THE INDUSTRY PRESENCE OF SUBSITITUTE INPUTS SUPPLIER CONCENTRATION IMPORTANCE OF VOLUME TO SUPPLIER
SU BSTITUTES
Determinant Of Buyer Power Concentration (Buyer / Firms) Volume Switching Costs Information Ability To Backward Integrate Substitute Product Pull Through
Type1. Cost leader ship low cost Type 2. Cost leader ship Best value
Type 3
Type 3
Differentiation Strategies
Successful differentiation greater product flexibility, compatibility, lower cost, improved services, less maintenance, greater convenience, more features etc. The risk in adopting differentiation can be customer do not perceive the differentiation as propagated and are not ready to pay higher prices. Then costs have to be lowered.
Differentiation Strategies
When many ways available and customers value these factors When buyers needs and uses are diverse Few rival firms following the method Fast technological changes.
Focus Strategies
Industry segment of sufficient size and has good growth potential Market penetration, market development offer good focus strategies When rival firms are not attempting the same Should be tried in conjunction with differentiation
Focus Strategies
Niche target market and growing fast Industry leaders not keen to follow the niche Industry leaders find it difficult expensive to customize/specialize. Many niches and segments When few competitors targeting the same segment
Once a valuable positioning achieved the competitors will imitate. If the position is to be sustained must look at
Inconsistencies Inflexibilities Limits of internal coordination
FIT
A perfect fit in a competitive environment can only be sustained by constantly working on the value chain so that the most critical links are the strongest in the chain. A less efficient approach will leave a slack between the goals and achievement
Concept of Stretch
The concept of stretch is based on aspiration creating a chasm between ambition and resources. This is done by design. Every single step to the future is not predetermined Leadership can not be entirely planned for neither does it occur in the absence of a clearly articulated and widely shared aspiration The gap between resources and aspiration is filled by leveraging the resources
Strategy as Leverage
This strategy is based on the concept of doing more with less. The American and European firms spend more on R&D as compared to the corresponding Japanese competitors. But the Japanese achieve more with less resources( GM Vs Honda, Phillips Vs Sony) This is the concept of leveraging the resources. The stretch goals can be achieved by leveraging the resources
GRAND STRATEGIES
A master long term plan that provides basic direction for major actions directed towards achieving long term business objectives Also indicate a time period over which the long term objectives are to be achieved: A comprehensive general approach that guide a firms actions
Quadrant- II
Quadrant-I
Quadrant-III
Quadrant-IV
QUARDRANT-1
Rapid growth, strong competitive advantage. When in possession of excessive resources should go for backward, forward and horizontal integration. If too heavily committed to single product then diversification should be the strategy. Can take risks aggressively when it is necessary. Never shift focus from established competitive advantages.
QUARDRANT-2
Rapid growth weak competitive advantage. Must concentrate on finding reasons as to why the firm lacks the competitive advantage. Prefer horizontal integration. As a last resort divestiture or liquidation should be considered. Funds so acquired can be used to acquire other business or buy back stock
QUARDRANT-3
Slow Market growth, weak competitive position.
Must make some drastic changes quickly to avoid further decline and possible liquidation. Pursue extentive cost and asset reduction. Diversify Liquidate, divestiture.
QUARDRANT-4
Slow market growth, strong competitive advantage .
Since there is high cash flow level can launch diversified products . Can pursue joint venture .
GRAND STRATEGIES
Concentrated growth Market Development Product Development Turn around Divestiture Liquidation Bankruptcy Joint Venture
GRAND STRATEGIES
Strategic Alliance Consortia Innovation Horizontal Integration Vertical Integration Concentric Diversification Conglomerate Diversification
Concentrated Growth
Resistant to technology (Risk) Resistance to Changes (Risk) Distinctive Inputs stable in price and quantity Stable markets Efficient production & distribution channels
Market Development
Marketing present products often with only cosmetic modifications to customers in related market areas
Additional geographic markets
Attracting Other market segments
This forms the stage 3 of the strategy formulation analytical frame work. It objectively indicates which alternative strategies are the best. The QSPM uses results from stage 1 and stage-2 of strategy formulation and matches these to obtain the information for the stage-3 i.e. the QSPM. This technique requires good intuitive judgments. The matrix is formed as under:Key Factor Weight S 1. S 2. S 3. The top rout consist of alternative strategies determined in stage 2 from SWOT, SPACE, BSC and IE matrices. The alternative should not be extremes.
Diversification
Concentric(related), conglomerate ( unrelated) diversification .
STABILITY STRATEGY
Pause/ proceed with caution. Typically a temporary strategy adopted as time out till the environment become suitable or consolidate the gains No change. Decision to do nothing since no change in the situation ( opportunity, threat). Future expected to be an extension of the present. Profit. Artificially support profits when sales are declining.
RETRENCHMENT STRATEGIS
Turnaround. Problems pervasive but not critical. Emphasis on improving operational performance Captive Company. Giving up independence and offer to be captive to the needs of one of the big customers. Sell out/ divestment. Bankruptcy/ liquidation
Customize to suit local market or Standardized product Employ same competitive strategy in all countries or modify strategy country by country. Where to locate production, distribution and customer services. Transfer of resource strength and Capabilities from one country to another to ensure competitive advantage -------
APPRAISAL PROCESS
Gather, assimilate and evaluate information on firms operations. Identify Critical Success Factors. Prioritize Critical Success Factors List 10 to 20 factors in order of priority. Involve Maximum members- shared view. Coordinate for inter department relationship. Conduct financial ratio analysis
ORGANIZATIONAL APPRAISAL
The strategic advantage in terms of organizational capabilities depends on a number of organization related factors.
Organizational resources. Organizational Behavior These create strengths and weaknesses Synergy Competencies Strategic advantages
Strategic Advantages
Capabilities
Competencies Synergy
Organizational Resources
Behavior
Resources Behavior Strengths and weaknesses Synergy Competencies Capability Strategic and Competitive advantage
Timeliness and accuracy of information about sales, operations , cash, and suppliers Relevance of information for tactical decisions Information to manage quality issues: customer service Ability of people to use the information that is provided. Linkages to suppliers and customers
FINANCIAL RATIOS
The hard facts: In God we trust for rest we need data, facts
Liquidity Ratios
Current Ratio The extent to which a firm can meet its short-term obligations Quick Ratio- The extent to which a firm can meet its short-term obligations without relying upon the sale of its inventories
Leverage Ratios
Debt-to-Total-Assets Ratio- The percentage of total funds that are provided by creditors Debt-to-Equity Ratio- The percentage of total funds provided by creditors versus by owners Long-term Debt-to-Equity Ratio- The balance between debt and equity in a firms long term capital structure > Time-Interest-Earned Ratio- The extent to which earnings can decline without the firm becoming unable to meet its annual interest costs.
Activity Ratios
Inventory Turnover- Whether a firm holds excessive stocks of inventories and whether a firm is slowly selling its inventories compared to the industry average. Fixed Assets Turnover- Sales productivity and plant and equipment utilization Total Assets Turnover- Whether a firm is generating a sufficient volume of business for the size of its assets investment Accounts Receivable Turnover- The average length of time it takes a firm to collect credit sales (in percentage terms) Average Collection Period- The average length of time it takes a firm to collect on credit sales(in days)
Profitability Ratios
Gross Profit Margin- The total margin available to cover operating expenses and yield a profit Operating Profit Margin- Profitability without concern for taxes and interest. Net Profit Margin- After-tax profits per unit of sales
Profitability Ratios
Return on Total Assets-(ROA)- After-tax profit per dollar of assets; this ratio is also called return on investment(ROI) Return on Stockholders Equity(ROE)- After-tax profits per dollar of stockholders investment in the firm. Earnings per Share(EPS)- Earnings available to the owners of common stock Price- Earnings Ratio- Attractiveness of Firm on equity markets.
Growth Ratios
Sales- Firms growth rate in sales Net Income- Firms growth rate in profits Earnings per share- Firms growth rate in EPS Dividends Per Share- Firms growth rate in dividends per share
NON FINANCIAL QUANTITATIVE METHODS Aspects such as employees turnover, absenteeism, market ranking, rate of advertising recall, total cycle time of production, inventory units used per period, service call rate, number of patents, registered per period are some of the examples. These non- financial aspects at times become much more important
GROWTH OF A FIRM
Survival, Growth and profitability are primary concerns of a firm Growth orientation needs to be over long term The profits that are generated from operations are ultimate source of funds for growth Growth is multidimensional: profitability, number of markets served, variety of products and technologies
NATURE OF GROWTH
Growth can be through concentration ( vertical and horizontal integration) or through diversification ( concentric or conglomerate diversification) Related diversifications are considered to be better options than pure concentration strategies
NATURE OF GROWTH
Relationship between Relatedness and performance. If a new business is very similar to that of the acquiring firm very little value is added to the corporation as compared to acquisition of new resources and capabilities in a different but similar business. Firms growing internally perform better than those which grow from external means ( acquisition, mergers, alliances
NATURE OF GROWTH
A combination of internal and external growth can be adopted. While considering external growth through acquisitions a suitable candidate for take over: Must be relatively small Must be comparable in organizational culture Must be physically close to one of the affiliates
MERGER
Merger is transaction involving two corporations in which stock is exchanged but only one corporation survives Occurs between firms of similar size and is friendly Resulting firm derives the name from its composite firms
ACQUISITION
Purchase of a company that is completely absorbed as an operating subsidiary or division of the acquiring corporation. Generally between firms of different sizes can be friendly or hostile Hostile acquisitions are called takeovers
Cost effective operations Expand geographic coverage Expand in to new product categories Access to technologies or other resources
STRATEGIC ALLIANCES
It is a formal agreement between two or more separate companies joint contribution of resources, shared risks, shared control and mutual dependence Generally involve joint marketing, sales, distribution, production , design collaboration, joint research or technology development
STRATEGIC ALLIANCES
Relationship can be contractual or merely collaborative. Stops short of ownership and control. Factors for strategic alliance: Achievement of important objectives. Build , sustain core competence. Block a competitive threat Open up new market opportunities Mitigates significant risks
STRATEGIC ALLIANCES
Get in to critical country market Gain inside knowledge about unfamiliar markets and cultures through alliance with local partners Access valuable skills and competencies Establish stronger beachhead Master new technologies Open up broader opportunities
Picking a good partner Being sensitive to cultural differences Alliance must benefit both sides Live up to respective commitments Structure the decision making so that action can be taken swiftly Managing the learning process and then adjusting the alliance agreement over time to fit new circumstances
RESTRUCTURING STRATEGY
Involves divesting some businesses and acquiring others to change the companys line up Redesigning an organizational structure with the intent of emphasizing and enabling activities most critical to a firms strategy to function at maximum effectiveness.
RESTRUCTURING STRATEGY
Too many businesses in slow growth, declining, low margin or otherwise un attractive industries Too many competitively weak businesses On going declines in market shares of one or more major business units that are falling prey to competitors
RESTRUCTURING STRATEGY
Excessive debt burden Ill chosen acquisition that have not lived up to expectations Emergence of new technologies Special circumstance when a very big acquisition is to be affected To find a strategic fit
Types of Benchmarking
Performance Benchmarking Process Benchmarking Strategic Benchmarking Internal Benchmarking:Competitive Benchmarking Functional Benchmarking Generic Benchmarking
STRATEGY IMPLEMENTATION
FROM PLANNING THE WORK TO WORKING THE PLAN, STRATEGIC THOUGHT TO ACTION
Execution of Strategy
Identify short term objective Initiate specific functional tactics Outsource non essential functions Communicate policies that empower people in the organization Design effective rewards
Functional Tactics
Detailed statement of means or activities that will be used by the company to achieve short term objectives and establish competitive advantage These are under taken in functional areas marketing, finance, production, R&D and HR Every value chain activity executes functional tactics
Out Sourcing
Acquiring an activity or service or product necessary to provide a companys product or services from outside the people or operations controlled by the acquiring company Initially out sourcing seen as cost cutting activity. Modern trend- outsourcing to gain and sustain competitive advantage
Reward
Stock Options Restricted Stock Plans Golden Handcuff Golden Parachute Cash Based on internal business performance using financial measures
55
48
Info
Info
32
32 32 32 29
Decision
Info Mot Mot Decision
29
Structure
23
Structure
19
Structure
If the firm has bad year the division performing well still gets the bonus
13
Mot
10
Mot
STRATEGY IMPLEMENTATION
.
Formulation Vs Implementation
FORMULATION IMPLEMENTATION
Positioning of Forces > Managing of Forces Effectiveness > Efficiency Intellectual Process > Operational Process Intuitive, Analytical Skills Motivational and Leadership Skills Coordination among many Coordination among few Same tools small and large org Diff tools small & large org
POLICIES
Refer to specific guidelines, methods, procedures, rules, forms and administrative practices established to support and encourage work towards stated goals. Set boundaries, constraints and limits on the kinds of administrative action which can be taken to reward and sanction behavior
What can and cannot be done Who can do Expectation from the Employees Delegation of decision making.
RESOURCE ALLOCATION
This is based on the priorities established in the annual objectives. The resources includes Physical Human Financial Technological
MANAGING CONFLICT
Avoidance: Ignore Diffusion: Play down differences high light positive Confrontation: Exchange members of conflicting partners
Primarily involves reducing the number of employees, number of division or units and number of hierarchical levels in an organizational. Intended to improve efficiency and effectiveness. Done to cater for share holders interest .
Re-Engineering
The process of re-engineering primarily focuses on break8ing the stero-types beurocartic culture which sets in almost all the companies over-time. The focus of employees become functions and departments rather than process, products and outputs. Corner stone of reengineering and decentralization, delegation , reciprocal interdependence and information sharing. In fact the modern trend in re-engineering is not only to dismantle the internal walls and barriers but to dismantle the external walls and barriers. This opens the way for interaction with other firms.
Re-Engineering
For employees and customer will being. Process related management, redesign or innovation . Characterized by many short term tactical business function specific decision. Six sigma is one of the re-engineering techniques.
PRODUCTION CONCERNS
Strategy implementation aspects depend to a large extent on the production related issues.
Plant size, location, product design, choice of equipment, kind of tooling, size of inventory, inventory and quality control use of standards , job specifications, employees training, equipment and resources utilization , technology innovation, supplychain. JIT Concepts For high technology firms flexibility is more important because major product designs changes may be needed.
HRM ISSUES
The issues that arise from implementation of strategies pertaining to HRM are: Disruption of social and political structure Failure to match individual aptitude with implementation of tasks. Inadequate top management support for implementations activities. The best way to overcome these problems is to generate a shared view of the strategy to be implemented. As many managers as possible strategy is to be implemented.
ESOPS Balancing Work life and Home Life. A Diverse Workforce: There is growing trends for diverse workforce. Some of the benefits of having diverse workforce are: Improve corporate Culture
HRM ISSUES
Employee Morale Higher Retention Easier Recruitments Increases creativity Decision inter personal conflicts Improve Client relations Increases productivity improves the bottom line. Maximizes brand identity Reduces Training Cost.
Marketing Issues
Marketing decisions that may require policies for implementation are: Distribution Channels , multiple or exclusive dealership TV advertisement, heavy , light or nil. Share of business with single customer? To be a price leader or price follower Complete or limited warranty Mode of reward to sales persons
SEGMENTATION
Geographic. Region, province size, city size, density, climate Demographic. Age, gender, family size, income, occupation, education, religion, nationality. Psychographic. Social class, personality. Behavioral. Use occasion, benefits sought, user status, usage rate, loyalty status, readiness state, attitude towards product
PRODUCT POSITIONING
Select key criterion that effectively differentiate product or services in the industry. Plot a two dimensional product positioning map. Plot products of major competitors on the map. Identify areas where the company products or services can be most competitive Develop a marketing plan accordingly
PRODUCT POSITIONING
Look for vacant niche Do not position between segments Do not serve two segments with same strategy Do not position in the middle of the map
Lease or buy fixed assets Determine appropriate dividend pay out ratio Extension in time of account receivable Percentage discount on accounts with specified period of time
MIS
Gather Information. Sources and their tasking Assimilate. Screen the relevant Evaluate. Information in to intelligence. Help in decision making Decide. Choosing the course of action, strategy
MIS
The benefits of MIS are
Flexi timings Possibility of working from home.
While exploiting IT care must be taken to safeguard IT network from hackers, leakage and theft
LEADERSHIP MANIFESTATION
TO TELL TO SEE TO DO TO BE
Leadership
Leaders must build organization
Ensuring common understanding about organizational understanding Clarifying responsibilities among managers and organizational units Empowering newer managers and pushing authority lower down the chain Facilitate coordination and communication Gaining personal commitment Remain closely connected to the internal and external environment
Change
1
Synergistic focus on re enforcing culture
4
Manage around the culture
2
Few
3
Compatibility Low
High
STRATEGY EVALUATION
Examine underlying bases of a firms strategy Compare expected results with actual results Taking corrective action to ensure that performance conforms to plan
CONSISTENCY
Problems continue despite changes in personnel, these are issue based rather than people based Success of one department is taken as failiure of another department If problem and issues continue to be brought to the top for resolution
Consonance
Needs for examining sets of trends as well as individual trends Strategy needs to represent an adaptive response to external environment and critical changes occurring within There are a series of interdependent factors that bring about waves of change
Feasibility
Neither overtax available resources nor leave unsolvable sub problems Most easily the financial resources can be checked. Need for innovative uses of resources ( leveraging) must need to be remembered
Advantage
Competitive advantage based on
Resources Skills Position
Once gained the position is defensible For sustaining positional advantages internal factors need to remain the same Position also related to size
Yes
Yes
Yes Yes Yes No No No
Yes
Yes No No Yes Yes No
Yes
No Yes No Yes No Yes
Yes
Yes Yes Yes Yes Yes No
IFE COMPARISON
EFE COMPARISON
Significant changes
No
Measure Organizational Performance
No differences
Differn ces
ROI ROE Profit Margin Market Share Debt to Equity EPS Sales Growth Assets Growth
CORRECTIVE ACTIONS
Structure Individual Business Division Vision/mission Objectives Strategies Policies Performance Incentives
CORRECTIVE ACTIONS(CONTD)
Raise capital with stock or debt Add or terminate sales persons, managers , employees Allocate resources differently Out source or rein in business functions
Learning and Growth. To achieve our vision how will we sustain our ability to change and improve
SPACE MATRIX
This is second stage matching tool. Financial strength and Competitive advantage are the internal parameters. Environmental Stability and industrial strength are the external factors The factors used in IFE and EFE should be used for the SPACE matrix Should be tailor made to the organization.
SPACE MATRIX
Financial Strength
Conservative
IS
BCG MATRIX
Firms with number of divisions competing in different industries need separate strategy for business. This multi division firm need to formulate strategies for each division based on
Relative market share Industry growth rate in terms of sales
BCG MATRIX
Relative Market Share
Stars.
B,F,H Integration Market Penetration Market, product development Divestiture
Cash Cows
BCG MATRIX
Question marks. Low market share, competing in high growth industries. Pump heavy investment or sell off Stars. High relative market share and high industry growth. Increase investment. Cash Cows. High relative market share, low industry growth. Maintain position, re investment cash else where Dogs. Low relative market share and low industry growth. Sell off.
IE MATRIX
4 1
1.99 3
3 4 5 6
EFE
1.99 7
IE MATRIX
Cell number 1, 2, 4. Grow and build Backward, forward or horizontal integration( Integrative strategies) Market penetration, development and product development(intensive strategies)
IE MATRIX
Cell No-3,5 and 7. These cells are managed by holds and maintain strategies. This market penetration and product development are the preferred action. CELL No- 6,8 and 9. Harvest or Divest ,Retrenchment and divestiture
CASE STUDIES
Focus on key strategic issues Do not overlook exhibits Draw on all knowledge of the business Examine the company website Analyze the case avoid repeating the words and phrases given in the case Use headings Be specific in your assumptions and recommendations
CASE STUDIES
Use your own words Rehearse your presentations Use visual aids Be prepared to handle questions While working as a team
Equitable division of work Plan and structure team meetings Communicate with other members