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Invitation to Strategic Management

Objectives:
What is the SM process? Why SM takes place in modern business?

How SM takes place in modern business?


Strategic decision-making process! How SM is practiced in not-for-profit and public sectors?

Invitation to Strategic Management


SM is a stream of decisions and actions which leads to the development of an effective strategy or strategies to help achieve corporate objectives. The Strategic Management process is the way in which strategists determine objectives and marked strategic decisions.

Strategic Decisions: are means to achieve ends. These decisions encompass the definition of business, products and markets to be served function to be performed and major polices needed for the Organization to execute these decisions to achieve objectives.

Invitation to Strategic Management


Plans and policies are guides to action. They indicate how resources are to be allocated and how tasks assigned to the organisation might be accomplished so that the function level managers execute the strategy properly Strategic Business Unit (SBU) is an operating direction of firm, which serves a distinct product portfolio market segment or a well defined set of customers or a geographic area. The SBU is given the authority to make to its own strategic decision within corporate guidelines as long as to meets corporate objectives.

Compulsion: Environmental Changes


Changes in technology Proliferation of Products Faster Commercialisation of products Overreaching technologies Socio political changes Governments bargain Emergence of Global Markets, Firms and Brands The New consumer
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Compulsion: New Demands


Strategically alert Future Oriented Able to take risks in tapping opportunities Insulated against threats Develop competence Respond effectively and economically Generate Large resources Gain expertise in technology, marketing and decision
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The Strategic Planning Process


Clarifying the Mission of the Corporation Defining the Business Surveying the environment Internal Appraisal of the firm Setting the Corporate Objectives Formulating the Corporate Strategy Monitoring the Strategy
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A Model of Strategic Management


To determine mission goals and values of firm and key direction makes To Search the Environment and diagnose the impact of threats and opportunities Enterprise Strategists Mission and Objectives

The General Environment

The Industry & International Environment To Examine and diagnose the firms Strength & Weakness Internal Factors

Analysis and Diagnosis

S M

Generise Strategy Alternatives To consider various alternatives and assure that the appropriate strategy is chosen

P
Strategy Variations Strategy Choice Choice

R O C E

To match plans, policies, resources, structure and administrative style with strategy

Resources & Structure Policies, Plan and Administration

Implementation

S S

To ensure strategy of Implementation will meet objectives. Evaluation and Control

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Feedback

A model of Strategic Management

Corporate Strategy

Corporate

SBU

SBU

SBU

Top

Marketing

Finance

Personal

Accounts

Resource

Mid

What is Strategy?
A Strategy is a unified, comprehensive and integrated plan that relates the strategic advantage of the firm to the challenges of the environment. It is designed to ensure that the basic objectives of the enterprise are achieved through proper

execution by the organization.


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Strategic Management allows the firm to anticipate challenges and provide clear cut objectives and direction for employees.
Components of Strategic Decision Process
Analytical Rational Intuitive Emotional

Political Behaviour

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Strategic Gap Analysis


The gap between existing to expected, to executed Questions: 1. 2. 3. What business were we in? What business we would be? Why are we in business?

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Factors Affecting The Formulation or Objectives.


Forces in the Environment Stake Holders Internal Sources & Power

Set of Future Objective/Mission

Values of Top Management

Post Development of The Firm


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Why do firms have objectives?


1.
2. 3. 4.

Objectives help define the organization in its environment.


Objectives help in coordinating decision and decision makers. Objectives provide standards for assessing organization performance. Objectives are more tangible targets than mission statements. 13

How missions and objectives are formulated?

1. 2.

The forces of environment. The realities of the enterprise resources and internal power relationship.

3.
4.

Value system of top executives.


Awareness by management on the past development of the firm.
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Discussions on translation of objectives of Corporate to SBU, which are quantified. eg. Improve profits ----- to 20%.

A mission statement defines the basic reason for existence of an management and helps legalise to function is society. The business definition clarifies the nature of existing products markets and functions the firm presently provides. Objectives are those ends which the organisation seek to achieve through its existence operations.

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Elements of Strategic Management


1. 2. 3. Action in process Starting point of Strategic Management process. Discussions on how to derive Vision, Mission, Objectives of organization. 1. Case-1: 2.Case-2: 3.Case-3: 4.Case-4:

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Value Chain
This is an Analytical Tool that describes all activities that make up the economic performance and capabilities of the firm; used to analyse and examine activities that create value for the firm Comprises of: Primary activities Support Activities Upstream Activities
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Primary Activities
Economic Activities that relate directly to the actual creation, manufacture, distribution and sale of a product or service to the firms customer.
Inbound Logistics Operations Outbound Logistics Marketing Sales Service
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Support Activities
Economic Activities that assist the firms primary activities
Infrastructure Human resource development Technology Development Procurement

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Upstream Activities
Economic Activities that occur close to the firms suppliers but far away from the consumer

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The Value Chain

Infrastructure

SUPPORT ACTIVITIES

Human Resource Management

Technology Development

Procurement

PRIMARY ACTIVITIES
Inbound Logistics Operations Outbound Logistics Marketing/ Sales Service 21

Pizza Restaurant Industry Value Chain


Infrastructure
Acquire capital, perform accounting, legal and administrative tasks for each activity

SUPPORT ACTIVITIES

Human Resource Management

Supervise warehouse or facilities / shipping personnel Improve supply chain to lower cost for ingredients

Supervise kitchen personnel/ training

Supervise drivers/ ensure safety Develop new ordering systems to serve customs; improve delivery time

Oversee marketing personnel

Oversee service personnel/ waiters

Technology Development

Develop new menu items; improve oven design

Develop new promotional materials/ media

Develop new restaurant formats/ layouts

Procurement

Lease space for restaurants or delivery facilities Transport ingredients to restaurants and delivery facilities

Purchase ingredients and other supplies

Purchase or lease telephone or online ordering systems


Deliver pizzas to ordering customers

Buy TV time

Purchase furniture/ tableware

PRIMARY ACTIVITIES

Prepare pizzas, salads, other food times

Develop advertising copy, programs, promotions

Serve food in restaurants

Inbound Logistics

Operations

Outbound Logistics

Marketing/ Sales

Service

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Automobile Industry Value Chain


Infrastructure
Acquire capital, perform accounting, legal and administrative tasks for each activity Oversee Warehouse and transport personnel Work with suppliers to develop more efficient means of transporting parts Negotiate with suppliers to lower costs and improve quality Transport Components to assembly facilities Oversee warehouse and transport personnel Work with distributors and logistics firms to improve delivery Negotiate with distributors to lower costs and improve quality Oversee advertising and sales personnel Improve marketing programs and dealership relations

SUPPORT ACTIVITIES

Human Resource Management

Supervise workforce, union relations Improve product design and manufacturing processes; quality programs Purchase components and factory equipment; ensure supplier quality Make and assemble components into autos

Supervise maintenance personnel

Technology Development

Improve auto service procedures

Procurement

Hire advertising agency; buy media time

Purchase tools for maintenance personnel

PRIMARY ACTIVITIES

Transport autos to dealers

Advertise, promote, and sell autos

Maintain and repair autos

Inbound Logistics

Operations

Outbound Logistics

Marketing/ Sales

Service

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General Motors Business System


Infrastructure
Administrative, legal and accounting tasks managed systemwide Oversee personnel involved in supplier management tasks Streamline turnaround time with suppliers to ship parts Develop new virtual teams; union relations; oversee workers Invest in new engine designs, car models; develop new factories and tooling Oversee personnel involved in managing distribution

SUPPORT ACTIVITIES

Human Resource Management

Oversee Marketing personnel

Technology Development

Streamline shipping time; webbased inventory tracking

Work with dealers to improve selling and product mix

No direct service to customers

Procurement

Streamline documentation and ordering systems Adopt faster means to order and receive parts/ components

Source parts and components; partner with key suppliers


Make and assemble components into autos

Purchase capacity on railroads/ trucks

Buy media time; work with advertisers Advertise to promote product to public, work with dealerships

PRIMARY ACTIVITIES

Ship to dealers using railroads/ trucks, deliver vehicles

Inbound Logistics

Operations

Outbound Logistics

Marketing/ Sales

Service

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Pharmaceutical
Infrastructure
Acquire land for manufacturing facility, legal formalities like drug licenses, GMP, setting up research labs, pellet machines, etc.

SUPPORT ACTIVITIES

Human Resource Management

Hiring of pharmacist, scientists.

Managing employee relationships

Chemists, distributors

MRs, Agents, Improving relationships with doctors, health organizations

Employee benefits, T&D for R&D personnel's, MRs

Technology Development

Liaison with chemical suppliers to develop and enhance transport of raw material
Negotiation with chemical suppliers, R&D labs to procure low cost high quality ingredients.

Developing SAD & medicine manufacturing process, quality control

Works with distributors & logistics firms to improve delivery

Improve marketing program with Drs, retailers, hospitals.

Molecule development (insulin), Drug research and patents

Procurement

Purchase lab accessories, injection & pellet machines, vials, and factory equipments. Medicine manufacturing process, cutting lead time, packaging, labeling and storing

Negotiate with C&F Agents to lower cost.

Tie ups with health journals, hospitals, CDRI, IMA, Doctors.

Purchase tools for lab personnel's, safety gears for those in manufacturing facility

PRIMARY ACTIVITIES

Transport component to labs and factory set up

Delivery to C&F Agents, export, hospitals

Promote with doctors, conferences, health journals, WHO

CRM feedback from doctors, pharmacists and researchers

Inbound Logistics

Operations

Outbound Logistics

Marketing/ Sales

Service

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Reliance Broad Band


Infrastructure
Acquire land for facility, legal formalities like Increasing Bandwidth, setting up servers room, machines, etc.

SUPPORT ACTIVITIES

Human Resource Management

Hiring of Data Engineers, RF Engineers

Training of Engineers By LUCENT TECh.

R-WORLD distributors

Appointing Sales force

Customers Benefit & More Advance software

Technology Development

Improve The Rate of Data Transferring, By increasing the Bandwidth & Frequency
Assembling of components and various Routers brought from CISCO in NHQ Mumbai

Installing of WMAX & Wi-Fi,

Works with RWorld and BTC houses

Improve marketing program by CISCO, and Other telecom industry for joint venture

Decreasing Network Traffic & congestion

Procurement

Purchasing of routers ,Switches ,modem & other equipments

Negotiate with Cisco, Junifer & Lucent For their Mutual Coordination

Advertising , Media planning

Setting of Firewalls , & Data Security

PRIMARY ACTIVITIES

All the Equipments and Power supply and rotation of COWS

Installation and lay down of wires in the city.

Delivery to the Retail Out lets And R-world Offices

Promote to Corporate Houses

CRM feedback from customers & Corporate Houses

Inbound Logistics

Operations

Outbound Logistics

Marketing/ Sales

Service

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Taj Group of Hotels


Infrastructure
Oversee personnel involved in supplier management tasks Administrative, legal and accounting tasks managed system wide Develop new virtual teams;; oversee workers,manager s,waiters,Housekeeping personnel

SUPPORT ACTIVITIES

Human Resource Management

Oversee drivers, chauffers

Oversee Marketing personnel

Technology Development

Streamline turnaround time with supplierseSCM,

Invest in ePOS, eCRM ,Customer/Client DBMS

Real-time online ticket booking; webbased inventory tracking,Cost/Fuel efficient automobiles Purchase taxis, buses, Lease Online Room/flight booking

Work with eadvertisers,

Latest spa,saloon etc.

Procurement

Streamline documentation and ordering systems

Procure Billing machines, ATM, Wi-Fi,Interior Designers,Purcha se supplies

Buy media time; advertisers,space buying in magazines/ newspapers,Corp orate tie-ups, and sponsorship, Promotional campaigns in association with Tourism Ministry,Corporate Meets, Food Fest,Exhibitions,

Hire ancillary services

PRIMARY ACTIVITIES

Transport Supplies (Linen,Furniture,A C,Toiletteries, Cutlery, Food Raw Ingredients,)

Process Mgmt(Billing, Booking of Rooms,Preparing Food, Managing Laundry

Taxi service for Sight-seeing, Airport Pick and drop facility,

Spa,Naturopathy, Taxi services, Gym,Saloon, Medical facilities,Room service,Security, provision for Seminars, Banquet halls

Inbound Logistics

Operations

Outbound Logistics

Marketing/ Sales

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Service

Matching firm Capabilities with Opportunities


Six Ingredients of Strategy Vision Competency
Vision, Mission, Goals & Objectives

Value Creation Competency


Customer focus, Competitor Focus

Planning & Administrative Competency


Fitting :Activity, Corporate, Alliance, People, Rewards, Communications

Global Awareness Competency


Opportunities & Threats, Different Business Practices, Cultural Awareness

Leveraging Technology Competency


Innovations, Small Companies act big and vice versa

Stakeholder Competency
Shareholders, Customers, Employees, Communities, Senior Managers
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Capability Drivers
The basic economic and strategic means by which a firm builds an underlying source of competitive advantage in its market or industry
First Mover Advantage Economies of Scale Experience Effects Interrelationship among Business Units

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Common First Mover Advantage


The benefits that firms enjoy from being the first or earliest to compete in an industry
Patents License Location Channel Access Supply Access Reputation
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Major Contributors to Economies of Scale Specialisation Fixed-Cost Spreading Purchase Discounts Vertical Integration

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Economies of Experience
Employee Learning Product Redesign Process Improvement

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First Mover Advantages


Infrastructure

SUPPORT ACTIVITIES

Human Resource Management

Hiring Creative Persons Patent protection, license, innovative design

Reputation

Technology Development

Creative marketing

Procurement

Supply access
Proprietary processes, patent protection, license Inbound Logistics Operations

PRIMARY ACTIVITIES

license

Location, channel access, reputation Marketing/ Sales

Reputation, license

Outbound Logistics

Service

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Pizza Huts Sources of Competitive Advantage

Infrastructure

SUPPORT ACTIVITIES

Human Resource Management

Technology Development

Procurement

Procurement of Food

Procurement of TV Time

PRIMARY ACTIVITIES
Inbound Logistics Operations Outbound Logistics

Reputation, Advertising

Marketing/ Sales

Service

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Comparative Financial Ratios


This evaluates the condition of the Firms financial capabilities (using ratio analysis) Return on Assets
Net Income divided by Total Assets

Return on Equity
Net Income divided by Shareholders Equity

Return on Capital
Net Income divided by Total Capital

Return on Investment
Net Income divided by total Investment

Liquidity
The ability of the firm or business to pay or meet in obligations ( for example debt payments, accounts payable) as they come due. The more liquid the firm the easier its ability to meet these obligations
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