STRATEGIC MANAGEMENT

M.COM SEMESTER II 2010

 MAKERS OF TOBLERONE CHOCOLATE AND NABISCO COOKIES WILL BECOME MARKET LEADER IN INDIA HAPPENS AFTER 4 MONTHS OF BOARD ROOM BATTLE AFTER SEVERAL UNSUCCESSFUL ATTEMPTS INCLUDING TANG MANUFACTURED IN HYDERABAD

KRAFT FOODS (U.S.) TAKEOVER CADBURY PLC. (U.K.)

CADBURY OWNS 70% SHARE IN CHOCOLATE MARKET IN INDIA

KRAFT INDIA CAN NOW REACH EVERY NOOK AND CORNER OF THE COUNTRY THROUGH CADBURYS DISTRIBUTION NETWORK OF ESTIMATED 1.2 MILLION OUTLETS CADBURY-KRAFT COMBINE TO BE 2ND LARGEST CHOCOLATE AND GUMS CO. IN THE WORLD AFTER THE MARSWRIGLEY COMBINE

SANJAY KHOSLA HEAD OF INTERNATIONAL BUSINESS

IDENTIFIED 4 GROWTH ENGINES CHINA, BRAZIL, RUSSIA, SOUTH-EAST ASIA, NOW INDIA BEING ADDED TO THAT.

Strategy
Derived from the Greek word STRATEGOS stratos means the army ago meaning to lead the art of leading the army

Strategic Management

SM is the art and science of formulating, implementing and evaluating cross-functional decisions that enable an organisation to achieve its objectives :Fred David

Strategic management vs. Operational management

Long-term implications Fundamental Organisation-wide Complex Ambiguous/ uncertain Short-term
Operationally specific Routinised

Johnson & Scholes define

SM includes understanding the strategic position of an organisation, strategic choices for the future and turning strategy into action

STAGES OF STRATEGIC MANAGEMENT

STRATEGY FORMULATION STRATEGY IMPLEMENTATION STRATEGY EVALUATION

STRATEGY FORMULATION
DEVELOPING A VISION & MISSION SWOT ANALYSIS ESTABLISHING LONG-TERM OBJECTIVES GENERATING ALTERNATIVE STRATEGIES CHOOSING PARTICULAR STRATEGIES TO PURSUE

STRATEGY IMPLEMENTATION
ESTABLISH ANNUAL OBJECTIVES DEVISE POLICIES MOTIVATING EMPLOYEES ALLOCATE RESOURCES DEVELOPING STRATEGY-SUPPORTIVE CULTURE CREATING EFFECTIVE ORGANISATIONAL STRUCTURE REDIRECTING MARKETING EFFORTS PREPARING BUDGETS

STRATEGY EVALUATION
REVIEWING EXTERNAL & INTERNAL FACTORS MEASURING PERFORMANCE TAKING CORRECTIVE ACTIONS

INTEGRATING INTUITION WITH ANALYTICAL DECISIONMAKING

MANAGEMENT BY INTUITION OR MANAGEMENT BY IGNORANCE??

PETER DRUCKER
I BELIEVE IN INTUITION ONLY IF YOU DISCIPLINE IT IMAGINATION IS MORE IMPORTANT THAN KNOWLEDGE, BECAUSE KNOWLEDGE IS LIMITED, WHEREAS IMAGINATION EMBRACES THE ENTIRE WORLD Albert Einstein

ADAPTING TO CHANGE
IN TODAYS BUSINESS ENVIRONMENT, MORE THAN ANY PRECEDING ERA, THE ONLY CONSTANT IS CHANGE : Waterman

A FEW KEY TERMS IN STRATEGIC MANAGEMENT

COMPETITIVE ADVANTAGE STRATEGISTS VISION & MISSION STATEMENTS EXTERNAL OPPORTUNITIES & THREATS INTERNAL STRENGTH & WEAKNESSES LONG-TERM OBJECTIVES SHORT-TERM OBJECTIVES POLICIES

THE STRATEGIC MANAGEMENT MODEL

BY Fred R. David

COMPARING BUSINESS & MILITARY STRATEGY

See the MAHABHARATA ppt.

Strategists
All strategists have to be chief learning officers. if our leaders not highly adaptive and great models during this period of change, then our companies wont adapt either , because ultimately leadership is about being a role model - Jay Conger, London Business School

Benefits of strategic management ?

 Allows to be proactive Exert control over its own destiny Communication, involvement, understanding, commitment Dialogue & participation Empowerment: initiative, creative, imagination Decentralisation

Pitfalls in strategic planning !!

Only to satisfy accreditation/regulation!! Hasty movement!! Failing in communication!! Improper evaluation & reward mechanism!! Delegating planning to a planner!! Failure to create a collaborative environment! Too formal a work culture!!

Vision & Mission Statements

What do we want to become? & What is our business?

VISION STATEMENT
WHAT DO WE WANT TO BECOME? WE WANT TO BE THE LEADER IN PROVIDING THE HIGHEST LEVEL OF SERVICES TO THE STAKEHOLDERS

Mission Statement
A statement of purpose A statement of philosophy A statement of beliefs A statement of defining our business THE FOUNDATION OF PRIORITIES, STRATEGIES, PLANS, AND WORK ASSIGNMENTS

MISSION STATEMENT
1. 2. 3. 4. 5. 6. WHAT IS OUR BUSINESS ?

TO TAKE CARE OF THE CUSTOMERS TO PROVIDE QUALITY SERVICES TO ABIDE BY THE GOVT. REGULATIONS TO PROTECT OUR HUMAN RESOURCES TO SAVE THE EARTH FROM POLLUTION TO CREATE VALUE FOR THE SHAREHOLDERS

A FASHION OR A REAL COMMITMENT??

JOHNSON & JOHNSON

DEVELOP & SYSTEMATICALLY REVISIT THE STATEMENTS, TREATING THEM AS LIVING DOCUMENTS AND AN INTEGRAL PART OF THE FIRMS CULTURE REVIEW, REWORD & REAFFIRM

EXTERNAL ENVIRONMENT AUDIT: The PESTEL Framework

Political: govt. stability, social welfare policies, taxation
policies, foreign trade regulations

Economic: business cycle, growth rate, interest rate,

inflation, unemployment, income distribution

Sociocultural: population demographics, lifestyle

changes, education, attitude to work & leisure, consumerism

Technological:
consumption

govt. spending on research, industry focus on technology, new discoveries, developments

Environmental: laws, waste disposal, energy Legal: monopolies legislation, employment laws, foreign
exchange regulations

THE FIVE-FORCE FRAMEWORK Michael Porter ( 1980)

the concept of competitive strategy which is the search for a favorable competitive position in an industry, the fundamental arena in which competition occurs

Profit potential in an industry

judged by the combined strength of the following forces: Competitive Rivalry Potential Entrants (threat of entrants) Buyers (bargaining power) Suppliers (bargaining power) Substitutes (threat of substitutes)

scenarios
Is a detailed and plausible view of how the business environment of an organisation might develop in the future based on groupings of key environmental influences and drivers of change about which there is a high level of uncertainty: Johnson & Scholes

Three key ingredients

1. building of scenarios around the key drivers 2. development of strategies or contingency plans for each scenario 3. monitoring the environment to see how it is unfolding actually and adjusting strategies accordingly.

Assumptions about the key drivers in the business environment are essential
Should be kept at minimum; otherwise complexities in drawing up scenarios will grow proportionately

The industrial organisation (I/O) view to competitive advantage

External (industry) factors are more important than internal factors in a firm Michael Porter : Competitive advantage determined by competitive positioning within an industry Research conducted during the period 1960 1980

THE RESOURCE-BASED VIEW (RBV)

Since 1990s - till date Three categories of internal resources: 1. physical: land, building, plant 2. human: employees training, experience, intelligence, knowledge, skills, abilities 3.organizational: firm structure, planning process, information system, patents, copyrights, databases

INTERNAL AUDIT
IDENTIFYING AND EVALUATION FIRMS STRENGTHS AND WEAKNESSES IN THE FUNCTIONAL AREAS OF BUSINESS

KEY INTERNAL FORCES

Production/operations Marketing: sub-areas include customer service, pricing, branding, advertising, packaging etc. Accounting/finance MIS Different in case of an university / hospital

Strength an attribute which enhances the cos competitiveness

A skill or expertise: low-cost manufacturing capabilities Valuable physical assets: state of the art plant & equipment Valuable human assets: cutting-edge knowledge & intellectual capital Valuable organisational assets: strong credit rating Valuable intangible assets: a powerful brand :Thompson & Strickland

DISTINCTIVE COMPETENCIES

A firms strength that cannot be easily matched or imitated by competitors

The process of internal audit

Managers and employees throughout the firm to be involved Gathering and assimilating information Key factors to be prioritized Opportunity for participants to jointly discuss Forum for improving communication Transition from single function focus to multifunction focus

Sustainable Competitive Advantage

Developing and exploiting a firms unique resources and capabilities Continuous maintaining and strengthening those resources

Sustainable Competitive Advantage

When other firms are unable to duplicate a particular strategy. For this, the resource must be Rare, Hard to imitate, Not easily substitutable

STRATEGIC CAPABILITY
The capability to perform at the level that is required for success New opportunities may be created by stretching & exploiting organisations capability To be innovative in order to exploit the capabilities fit and stretch perspectives :Johnson & Scholes

GOOD BUSINESS ETHICS IS A PRE-REQUISITE FOR STRATEGIC MANAGEMENT