STRATEGIC MANAGEMENT

START-UP CHALLENGE

Think Big Start Small

Scale-up

PROGRESS CHALLENGE

Forget Borrow

Learn

Evaluation of Management Concerns

Focus Concern

Operation Efficiency

Resources

Conception Performance

Change Renewal Innovation

Risk Long Range Planning Phase-II 1960s & 1970s

Position Strategy

Execution Excellence in Execution Phase-IV 1990s

Budgeting Response &

Procedures

Phase-I 1950s

Phase-III 1980s

Phase-V 2000 onwards

The Evolution of Strategic Management Principle Concepts & Techniques

1950s
Financial Budgeting. Investment Planning. Project Appraisal

1960s
Early Mid 1970s Late 1970s & Early 1980s

Business Forecasting, Investment Planning Models Synergy, Strategic Business Units, Portfolio Planning Matrices
Experience Curve and returns to market share. Analysis of Industry Structure. Competitor Analysis. PIMS Analysis

Late 1980s & Early 1990s Late 1990s & Early 2000s

Resource Analysis. Analysis of Core Competencies

Organizational flexibility and speed of Response. Knowledge of Management and organizational learning. Competing for standards. Early-mover

The Evolution of Strategic Management Organizational Implications

1950s 1960s
Financial Management the Key Rise of Corporate Planning Departments and Medium-term Formal Planning Diversification. Multidivisional Structures. Quest for global market share

Early Mid 1970s Greater Industry and market selectivity. Late 1970s & Early 1980s Industry Restructuring. Active Asset Late 1980s & Early 1990s Late 1990s & Early 2000s
Management Corporate Restructuring and Business Process Re-Engineering. Refocusing & Outsourcing

The Virtual Organization. The Knowledge-based Firm. Alliances and Networks. The quest for Critical Mass

SOME DEFINITIONS OF STRATEGY

Strategy, the art of war, is especially the planning of movement of troops and ships, into favorable positions; plan of action or policy in business or policies Oxford Pocket Dictionary

SOME DEFINITIONS OF STRATEGY

Strategy is determination of long term goals and objectives of an enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out these goals Alfred Chandler Strategy & Structure

SOME DEFINITIONS OF STRATEGY

Strategy is a set of managerial decisions and actions involved in making a major market-creating business offering W. Chan Kim INSEAD Faculty

SOME DEFINITIONS OF STRATEGY

What Business Strategy is all about is, in one word Competitive Advantage. The sole objective of Strategic Planning is to enable a company to gain, as efficiently as possible, a sustainable edge over its competitors. Corporate Strategy thus implies an attempt to alter a companys strength relative to that of its competitors in the most efficient way
Kenichi Ohmae

The Mind of the Strategist

 STRATEGY IS DEFINED AS THOSE ACTIONS THAT A COMPANY PLANS, IN RESPONSE TO, OR IN ANTICIPATION OF, CHANGES IN ITS EXTERNAL ENVIRONMENT, ITS CUSTOMERS AND ITS COMPETITORS.

STRATEGY IS A WAY COMPANY AIMS TO IMPROVE ITS POSITION VIS--VIS COMPETITION.

Strategy narrowly defined as the art of general (Greek StratAgos).

It defines what we want to achieve & chart out course action, to survive & sustain growth in changing environments. Strategy is a set of Key decisions made to meet Objectives. Strategy is the determination of the basic long term goal of an enterprise, and the adoption of courses of action and allocation of resources necessary for carrying out goals.

VOCABULARY OF STRATEGIC MANAGEMENT

VISION : Desired future state; the aspiration of the Organization

What are our Dreams and Aspirations?

Where do we want to go?

What do we want to look like in 5, 10, 15 years?

VOCABULARY OF STRATEGIC MANAGEMENT

MISSION :It is the unique purpose or reason for organizations existence. Overriding purpose in line with the values or expectations of the stakeholders

Who are we? What business are we in?

Good Mission Statements

Focus on limited number of goals Stress major policies and values Define major competitive spheres within which the company will operate by defining the:
Industry. Products and applications. Competence. Market-segment Geographical Vertical limit

eBay
We help people trade anything on earth.
We will continue to enhance the online trading experiences of all collectors, dealers, small businesses, unique item seekers, bargain hunters, opportunity sellers, and browsers.

VOCABULARY OF STRATEGIC MANAGEMENT

OBJECTIVE : Quantification or more precise statement of objective
Definable: It should defined to compare the performance Quantifiable: It should be expressed in terms of Value Or Market share
( Avoid Vague terms such as increase, improve or maximize)

Achievable:

e.g.
To increase sales of product globally by 30% in real terms within 5yrs. To increase market share for the product in the India from 10%-15% over 2yrs

VOCABULARY OF STRATEGIC MANAGEMENT

GOAL: General statement of Aim or Purpose. It is an open ended statement of what one wishes to accomplish with no quantification and no time frame for completion.

GOAL

OBJECTIVE

STRATEGY
i) ii) Increase product promotion Design product pricing Penetration New market development Product-Service mix Quality improvement

To be No. 1 in the market

Increase market share by 15% in three years

iii) iv) v)
vi)

VOCABULARY OF STRATEGIC MANAGEMENT

CORE COMPETENCE : Resources, Processes, Skills and Experience, which provide superior Competitive Advantage : Long Term Direction

STRATEGY

STRATEGIC : Combination of Resources, ARCHITECTURE Processes and Competencies to put strategy in action

VOCABULARY OF STRATEGIC MANAGEMENT

CONTROL : Monitoring of Action Steps to : (a) Assess effectiveness of Strategies & Action (b) Modify Strategies & Action as necessary

Strategy Types
Broadly Classified as Corporate Strategy. Business Strategy. Functional Strategy.

Corporate Strategy.
Over all attitude of corporation towards its various businesses and product lines in terms of Stability growth & management. e.g.. Corporate Strategy of growth diversifying base in retailing into delivery business.

Business Strategy.
Usually occurs at business unit & product level. It is composed of Competitive & Cooperative Strategies e.g.. Differentiation Competitive that emphasizes innovative products with creative design. Cooperative Strategies promotes alliance, technical collaborations, etc.

Functional Strategy
It is the approach taken by a functional area, such as Marketing or R&D to achieve corporate and business unit Objectives & strategies by maximizing recourse productivity.. e.g.. Dell directly selling Computers to consumers to reduce distribution cost & increase customer service.

NINE COMPLEX AND INTERRELATED ELEMENTS OF STRATEGY

1. VISION

What are our Dreams and Aspirations? Where do we want to go?

What do we want to look like in 5, 10, 15 years?

NINE COMPLEX AND INTERRELATED ELEMENTS OF STRATEGY

2. MISSION

Who are we? What business are we in?

NINE COMPLEX AND INTERRELATED ELEMENTS OF STRATEGY

3. VALUES

What do we prize? What drives our business?

What are our criteria for making ethical decisions?

NINE COMPLEX AND INTERRELATED ELEMENTS OF STRATEGY

4. MARKETS

Which markets should we be in? Which markets do we need to create?

What should be our basic Customer Orientation?

NINE COMPLEX AND INTERRELATED ELEMENTS OF STRATEGY

5. CORE COMPETENCIES

What are we good at? What do we need to be good at?

How can we leverage our competencies into products and services for market we serve?

NINE COMPLEX AND INTERRELATED ELEMENTS OF STRATEGY

6. PRODUCTS & SERVICES

What kinds of products and services should we provide for the markets we serve?

How do we use these products to carve out a market niche?

NINE COMPLEX AND INTERRELATED ELEMENTS OF STRATEGY

7. BUSINESS ENVIRONMENT

What Threats and Opportunities do we face from Environmental Factors? How do we track Key Environmental Activities and Trends?

NINE COMPLEX AND INTERRELATED ELEMENTS OF STRATEGY

8. STAKEHOLDERS

Which group of individuals are affected by the way we do business? How do we establish win-win relationship with our stakeholders?

NINE COMPLEX AND INTERRELATED ELEMENTS OF STRATEGY

9. CRITICAL RESOURCES

Which are the Critical Resources do we need to do business? What should we do to ensure a steady supply of these Resources?

ECONOMIC PERFORMANCE IS THE FUNDAMENTAL REASON FOR ANY ORGANISATION TO EXIST

CONSTITUENTS OF ECONOMIC PERFORMANCE ARE :

To make present business effective; To identify potential and realise it; To make different business for a different future.

CORPORATE OBJECTIVE : ECONOMIC PERFORMANCE

TO MAKE PRESENT BUSINESS EFFECTIVE

Maximizing Opportunities
Maximizing Resources Maximizing Results

CORPORATE OBJECTIVE : ECONOMIC PERFORMANCE

TO IDENTIFY POTENTIAL AND REALISE IT

Environment Scanning
SWOT Analysis Turning obstacles into opportunities

CORPORATE OBJECTIVE : ECONOMIC PERFORMANCE

TO MAKE A DIFFERENT BUSINESS FOR A DIFFERENT FUTURE

Focus on Core Competencies

Creation of Learning Organization Redrawing Industry Boundaries

STRATEGIC MANAGEMENT PROCESS

STRATEGIC ANALYSIS

STRATEGIC CHOICE

STRATEGIC IMPLEMENTATION

THE STRATEGIC PROCESS

Establish Vision, Mission, Goals & Objectives Identify Strategic Alternatives Secure Acceptance of Decision

Analyze External Environment

Evaluate Strategic Alternatives

Select Best Alternative/s

Implement Selected Strategies

Evaluate Strategies

Analyze Internal Environment

LEGAL
ECONOMIC

TECHNICAL
COMPETITION

POLITICAL

EXTERNAL ENVIRONMENT
PURPOSE VALUE VISION MISSION STRATEGY

SOCIAL & CULTURAL

OTHER RESOURCES

STRUCTURE, SYSTEM, STYLES, SKILLS

R E S U L T

INTERNAL CULTURE

Characteristics of Strategic Management and General Management

Strategic Management Fundamental General Management Routinised Short Term Implications Operationally Specific

Long Term Implications Complex

Ambiguous Organization Wide

HIERARCHY OF STRATEGY
Functional Strategy supports Business Strategy which in turn supports the Corporate Strategy

CORPORATE STRATEGY:
Overall Direction of Company and Management of Businesses

BUSINESS STRATEGY:
Competitive & Cooperative Strategies
It occurs at Business unit or Product level. It emphasizes on improvement of competitive

position of Corporations product & services

FUNCTIONAL STRATEGY:
Maximize Resource Productivity
It is concerned with developing & nurturing a distinctive competence to provide a company or business unit with a competitive advantage

ORGANIZATIONAL STRUCTURE & LEVELS OF STRATEGY

Corporate Strategy

Corporate Head Office

Business Strategy Functional Strategy

Div-A

Div-B

Div-C

Prod.

HR

Fin.

Marketing

BUSINESS AND CORPORATE STRATEGIES Industry Attractiveness

Corporate Strategy

Rate of Return above the Cost of Capital How do we make money?

Which Industry should we be in?

Competitive Advantage How Should we Compete?

Business Strategy

Corporate Strategy.
Over all attitude of corporation towards its various businesses and product lines in terms of Stability growth & management. e.g.. Big Bazaars Corporate Strategy of growth diversifying base in retailing into delivery business.

I.

Directional Strategy:

CORPORATE STRATEGIE

A.
1. a. i. ii. b.

Growth Strategies:
Concentration: Vertical Growth: Back Ward Integration: Forward Integration: Amount of Vertical Integration Full Integration Taper Integration Outsourcing Horizontal Growth:
b. Horizontal Growth:
Popular methods to horizontal growth internationally.

To expand companys activities

Growth potential & concentration of resources on current product lines. Taking over Suppliers/Distributors Function Take over suppliers fn.

Take over Distributors fn.

Internally 100%own key supplies & distribution

Internally less than 50% own key supplies Long term contract for key supplies & distribution

Exporting Licensing Franchising Joint Ventures Acquisitions Green Field Development Production Sharing Turnkey operations Management contracts Build, Operate, Transfer (BOT)

Expanding in the geographical location & increasing Product & Services in current markets

Corporate Strategy.
I. DIRECTIONAL STRATEGY: A. Growth Strategies: 2. Diversification:
Less growth potential in current product lines

a. Concentric

Diversifying in related product or services.the search for synergy, the concept for two business can generate more profits together than separately. The point may be similar technology, customer usage, distribution, managerial skills, or product similarity . Diversifying in unrelated product or services. It is concerned primarily with financial considerations of cash flow or risk reduction. To transfer its excellent management system into less well managed acquired firm.

b. Conglomerate

Corporate Strategy.
B. Stability: Make no changes in companys activities 1. Pause Strategy: 2. No Change Strategy: 3. Profit Strategy: C. Retrenchment Strategy: 1. Turn around:
Contraction Stop the Bleeding Cut back Size & Cost. Consolidation: Stream Line the company IBM Computer Service Provider

2. Captive company:
Company becomes another companys sole Supplier or Distributor.

3. Sell out/ Divestment:

hotmail, Ranbaxy etc.

4. Bankruptcy / Liquidation:

Corporate Strategy.
II. Portfolio Strategy
How individual product lines & business units can gain competitive advantage in the marketplace by using competitive & cooperative Strategies.

III. Parenting Strategy:

Mgt. Coordinates activities & transfers resources & cultivates capability among product lines & business units.

Business Strategy.
Usually occurs at business unit & product level. It is composed of Competitive & Cooperative Strategies e.g.. Apple uses computer Differentiation Competitive Strategy that emphasizes innovative products with creative design. Cooperative Strategies promotes alliance, technical collaborations, etc.

Business Strategy is concerned with how the firm competes within a particular industry or market. To prosper within an industry, the firm must establish competitive advantage over its rivals

BUSINESS LEVEL STRATEGY

FACTORS
FIRMS INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT PROCUREMENT VALUE-CHAIN

BUSINESS LEVEL STRATEGY

BASED ON
COMPETITIVE ADVANTAGE MARKET FOCUS MARKET LIFE-CYCLE AND COMPETITIVE ADVANTAGE

BUSINESS POSITION FACTORS

Level of Differentiation.

Cost Position.
Response Time.

Financial Strength.
Human Assets. Corporate Image.

STRATEGIC MANAGEMENT PROCESS

STRATEGIC ANALYSIS

STRATEGIC CHOICE

STRATEGIC IMPLEMENTATION

ELEMENTS OF STRATEGIC MANAGEMENT

EXTERNAL ENVIRONMENT PURPOSE & EXPECTATIONS RESOURCES, COMPETENCIES

STRATEGIC ANALYSIS
STRATEGIC CHOICE
BASIS OF STRATEGIC CHOICE STRATEGY OPTIONS

STRATEGIC IMPLEMENTATION
STRATEGY, EVALUATION & SELECTION RESOURCE ALLOCATION & CONTROL MANAGING STRATEGIC CHANGE

COMMON ELEMENTS IN A SUCCESSFUL STRATEGY Long Term Objectives Profound Understanding of Business Environment Objective Appraisal of Resources

Evolution of Strategy

Effective Implementation

RESOURCES, BUSINESSES AND PROFITABILITY

Business Opportunity

Resources

Profitability

Corporate Strategy