Professional Documents
Culture Documents
&
STRATEGIC MANAGEMENT
STRATEGY
• GREEK WORD STRATEGOS – Science of guiding & Directing
• Strategic issues
• Require top-management decisions
• Require large amounts of the firm’s resources
• Often affect the firm’s long-term prosperity
• Are future oriented
• Usually have multifunctional or multibusiness
consequences
• Require considering the firm’s external
environment
STRATEGIC DECISION MAKING
–ISSUES
• SETTING REALISTIC GOALS: Challenging but achievable
Corporate office
CORPORATE STRATEGY
BUSINESS STRATEGY
FUNCTIONAL
STRATEGY
Mintzberg's 5 Ps for Strategy
• The word "strategy" has been used implicitly in
different ways even if it has traditionally been
defined in only one. Mintzberg provides five
definitions of strategy:
• Plan
• Ploy
• Pattern
• Position
• Perspective.
Some Useful
Some Useful Definitions
Definitions of
of
Strategy
Strategy
❶ Strategy as the determinant of the long-
term goals of the enterprise. - Chandler
❷ Strategy as the pattern of objectives,
purposes, or goals and plans for achieving
these goals. - Andrews
❸ Strategy as the common thread among a
firm’s activities. - Ansoff
The Five
The Five P’s
P’s
Plan
The Five
The Five P’s
P’s
Plan Ploy
The Five
The Five P’s
P’s
Plan Ploy
Pattern
The Five
The Five P’s
P’s
Plan Ploy
Pattern
Position
The Five
The Five P’s
P’s
Plan Ploy
Perspective Pattern
Position
Plan
REVIEW,EVALUATION
Performing Strategic Evaluation, Exercising Strategic
CONTROL Control and Reformulating Strategies
Strategic Management Process
1)Establishing the hierarchy of strategic
intent:
• Creating and communicating a vision.
• Designing a mission statement.
• Defining the business.
• Setting objectives.
Strategic management process
2) Formulation of strategies:
• Performing environmental appraisal.
• Doing organizational appraisal.
• Considering corporate level strategies.
• Considering business level strategies.
• Strategic analysis.
• Formulating strategies.
• Preparing strategic plan.
Strategic management process.
3) Implementation of strategies:
• Activating strategies.
• Designing structures and systems.
• Managing behavioral implementation.
• Managing functional implementation.
• Operationalizing strategies.
Strategic management process
4) Performing strategic evaluation and
control:
STRATEGIC INTENT
STRATEGIC INTENT
VISION OF IOC
Indian Oil aims to achieve international standards of
excellence in all aspects of energy and diversified
business with focus on Customer delight through
quality products & services
MISSION
• It is purpose / reason behind existence of any organization
• Derived from VISION and reflects the corporation’s philosophy , identity,
character and image which helps to achieve the vision.
• When defined explicitly, provides enlightenment to insiders and outsiders
on what the organization stands for.
• Many strategists/consultants contribute to the building up of mission
statements.
• Mission relates to the need of society. Eg- information need - Publisher
• BHEL
To be a leading engineering enterprise providing quality
systems goods and services in the field of Energy,
Transportation , Industry, Infrastructure and other
potential areas
• RANBAXY
To become research based International pharma
company
• UTI
To keep the common man in sharper focus to encourage
savings and investment habits among them.
BUSINESS DEFINITION
• Defined along 3 parameters
CUSTOMER GROUPS: WHO is being satisfied
CUSTOMER FUNCTIONS: WHAT is being satisfied
ALTERNATIVE TECHNOLOGIES: HOW the need is being satisfied
OBJECTIVES:
• Are the ends that state how the goals shall be achieved
• Help org to achieve VISION & MISSION;
• Provide basis for Strategic Decision making;
• Provides standards for performance appraisals,
• OBJECTIVES: GOALS
- Concrete & specific Generalized
Make goals operational
• Understandable
• Concrete & Specific ( Say 10% increase in sales )
• Periodicity :Related to time frame. (Say 10% increase in sales in one year)
• Measurable & Controllable
• Challenging – motivating but not unrealistic
• Diff. Objectives must correlate with each other
• Should be set within constraints – internal and external
EX
Customer
Balanced Business
Financials Scorecard Processes
Learning
& growth
A strategic tool
• Starts with strategy
• Continuous process
• Needs to become
culturally embedded
The story of a scorecard
Our customers are the people who will secure these results for us so we must
offer our customers superior value by .........
To deliver this superior value we must excel in the way we manage the
processes for .......
These processes are operated by our people. We must provide our people
with ....... to achieve excellent performance.
Strategy Map
Max.
Inc. Profit Reduce
Financial Rev. Cost
Perspective Inc. rev New Inc. rev per
Cust Cust
Cust Cust
Customer Acquisition Satisfaction
Perspective
On-time Fast Product
Delivery Service Quality
POLITICAL TECHNOLOGICAL
ECONOMIC SOCIAL
PESTLE MATRIX
POLITICAL
ECONOMIC
CURRENT/FUTURE LEGISLATION
ECONOMY SITUATION & TRENDS
REGULATORY BODIES
TAXATION
GOVT. POLICIES
INTEREST & EXCHANGE RATES
GOVT. TERM & CHANGE
MARKET & TRADE CYCLE
SOCIAL TECHNOLOGICAL
LIFESTYLE TRENDS TECHNOLOGY ACCESS,LICENSING,PATENTS
DEMOGAPHICS MATURITY OF TECHNOLOGY
COMPANY ATTITUDES & OPINIONS REPLACEMENT TECHNOLOGY / SOLUTIONS
BRAND,COMPANY ,TECHNOLOGYIMAGE INNOVATION POTENTIAL
CONSUMER BUYING PATTERNS MANUFACTURING MATURITY & CAPACITY
ETHNIC/RELIGIOUS FACTORS
LEGAL ENVIRONMENTAL
INTERNATIONAL LAW ENVIRONMENTAL IMPACT
EMPLOYMENT LAW ENVIRONMENTAL LEGISLATION
COMPETITIOM LAW ENERGY CONSUMPTION
HEALTH & SAFETY LAW WASTE DISPOSAL
REGIONAL LEGISLATION
Various environmental
components.
1) Market environment: Client’s needs,
preferences, perceptions, attitudes, values,
buying behavior, satisfaction.
Product factors like demand, image, features,
utility, design, life cycle, price, promotion,
distribution, differentiation etc
Competitor factors like different types of
competitors, nature of competition.
Components contd..
2) Technological Environment:
• Rate of change of technology , easy
technology Transfer.
• Technological development, R&D, cost of
technology.
• Effects of technology on environment,
human beings.
• LED and 3d TV’s – change in strategy by
TV manufacturers
Components contd..
3) Supplier environment:
• Cost, availability, and continuity of supply
of raw material, components, parts.
• Infrastructural support and ease of
availability of the different factors of
production.
Components contd..
4) Economic environment:
• Business Cycle
• GDP, Interest rate, exchange rate, Inflation
etc.
• Economic policies, industrial, fiscal,
monetary.
• Per capita income, balance of payments,
Exports imports etc.
• Infra-Structural Investments
Components contd..
5) Regulatory environment:
• Policies related licensing, monopolies,
FDI,
• Policies related to distribution and pricing.
• Policies related to sick industries, public
sector, backward areas, consumer
protection etc.
• Regulation and laws
Components contd..
6) Political environment:
• The political system and its features,
ideological forces, coalition compulsions.
• Political stability.
• Political funding of elections.
• Government’s role in business.
• Government Attitude
• Subsidies & Protection
Components contd..
7) Socio-cultural environment:
• Demographics like population, its density and distribution,
age composition, inter state migration, income distribution
etc.
• Socio-cultural concerns like environmental pollution,
corruption etc.
• Society expectations, beliefs, rituals and attitude, lifestyle etc.
• Literacy Levels
Components contd..
8) International environment:
• Globalization process.
• Global economic forces.
• Global trade and commerce.
• Global financial system.
• Global markets and competitiveness.
• Global communication
• Global technology and quality systems.
SWOT Analysis.
• S: Strengths.
• W: Weaknesses.
• O: Opportunities.
• T: Threats
Strength
• It is an inherent capacity which an
organization can use to gain strategic
advantage.
• E.g. superior r&d skills which can be used
for new product development.
SOURCES OF STRENGTH
• Political instability
• Social activism – Eg. TATA Nano
• Terrorist attacks – Eg. 9/11.
• Import liberalisation – Eg. Dumping from China.
• Foreign Direct Investment (FDI) – Eg. Onida.
• Economic recession – Eg. (2008).
• Natural disaster – Eg. Tsunami, Earth Quake.
• Hostile take-over – Eg. Bajoria – Bombay Dyeing
• Group disintegration – Eg. Reliance.
Environmental scanning
• Monitoring relevant environment to identify
opportunities and threat affecting business for
strategic decision making.
• General environment (Overall Env. )
• Relevant environment (Directly Impacting)
• Approaches to scan
- Systematic
- Ad Hoc
- Processed form
Environmental scanning
• Sources of Information
- Documents, Mass media, Internal, External
agencies, Formal studies, spying etc.
• Factor affecting environmental appraisal
- Strategist related (Age, exp., qual. Etc.)
- Organization related (Age, size, nature of
business etc.)
- Environment itself – A constraint
ETOP
• Stability strategy.
• Expansion strategy.
• Retrenchment strategy.
• Combination strategy.
GRAND STRATEGIES
Corporate Strategy
Horizonta Vertical105
l
EXPANSION STRATEGIES
Most popular corp. strategies as growth is the way of life. All progressive
organizations plan for substantial growth due to increasing economy, markets &
customer needs. Followed when companies aim at high growth, broadening the
scope of its business for improving overall performance.
.
CONCENTRATION STRATEGIES
• Simple 1st level expansion strategy,
• Focus on Intensification / Specialization
• Rely on where you are best at i.e focusing on
limited areas
• Creating a separate niche/ identity in selective
areas by investing money, time, energy & effort
in specific areas
GROWTH - ANSOFF’S MODEL
Market Market
Penetration Development
(+) (++)
Product Diversificatio
Development n (+++)
(++)
Internationalization
- Beyond domestic boundaries
- Factor leading it - Globalization
INTERNATIONAL STRATEGIES
GLOBAL TRANSNATIONAL
PRESSURES STRATEGY STRATEGY
FOR
COST REDUCTION ( LOW COST - OFFERING (Creative approach to
STANDARDISED manage cost and Localization)
PRODUCTS / SERVICES)
INTERNATIONAL MULTIDOMESTIC
STRATEGY STRATEGY
(Std. product for UNDER
DEVELOPED ( SUITING TO NATIONAL
COUNTRIES WHERE CONDITIONS WITH
PRODUCT/SERVICES HIGH COST )
NOT AVAILABLE )
LOW EXPORTING
( Firm produces in home country & markets overseas)
LICENSING
( International co. transfers knowledge, technology
Patent for a limited period of time to an overseas co,
PERCEIVED in return for some form of payment)
RISK FRANCHISING
(Right to use a business format,
usually Brand Name- exchange
programme )
INTERNATIONAL JOINT
VENTURE
WHOLLY
OWNED
HIGH
HIGH
LOW
CONTROL
International strategy
• Which Market to enter?
• Timing of entry?
• Scale of entry?
Competitive Advantage
Cost Leadership Product Differentiation
Broad
Differentiation
Cost Leadership
Scope
Narrow
COST LEADERSHIP
• Vigorous cost reduction programmes and make all possible attempts to achieve the lowest
cost.
• Achieve efficiency at all levels for lowering costs.
• Cumulative cost across the value chain is lower than competitor
• Analyze cost drivers and optimization of costs
• Other initiatives: Accurate Demand Forecasting, Capacity utilization
Economies of scale, Cost saving technologies.
BENEFITS
Threat of cheaper substitutes offset to some extent by lowering price, Effective entry
barrier for potential entrants
RISKS
Competitors imitate cost reduction quickly, Not a market friendly approach if customers
interest is ignored Low cost leadership doesn’t always work;
FOCUS BUSINESS STRATEGY
BENEFITS
Protected from competition from other firms who do not have ability to
cater to niche markets, builds up brand loyalty, specialization- powerful
barrier to new entrants and substitutes.
Industry Analysis
EMERGING INDUSTRY
• Emerging Industry – An industry characterized by
radical environmental changes, technological
innovations, ending in a different cost economics. Eg.
Bio Informatics, Digital photography and printing.
Reasons for emerging –
– Unproven technology.
– High initial costs, followed by steep cost reduction.
– First-time buyers.
– Excessive turbulence in the environment.
– Unknown customer and market profile.
– Business uncertainty is high
GENERIC STRATEGY
Bargainin
Bargainin Competition g Bargainin
power
g power from Existing ofg power
of Players of
Suppliers
Suppliers Customer
s
Threat of Substitutes
PORTERS FIVE FORCES ANALYSIS
• Threat of Substitutes –
– Source of latent competition
– Substitute offering a price advantage and/or
performance improvement
Competitor Analysis
To Know:
Infrastructure
Ad
Support
va
n
Technology Development
ta
ge
Procurement
e
Out Logistics
Service
Operations
iv
In Logistics
Primary
tit
pe
m
Co
VALUE CHAIN ANALYSIS
ending with
distribution of the final goods into the hands of
ultimate customer
• Focus of value chain: To examine corporation in the context of overall chain of value creating activities
High Low
?
Industry Growth
High
Distinctive Capabilities
Strong Medium Weak
High
Market Generate
Strong Growth
Leadership Cash
Try Phased
Custodial
Average Harder Withdrawal
Double
Phased
Or Expand Divest
Withdrawal
Weak Quit