Strategic Management

PGDM PHM Term IV

(Batch 2016-18)
Prof. Ulhas Karkhanis
 Strategy
• Strategy word derives from the greek word
stratçgos, which derives from two words:
stratos (army) and ago (ancient greek for
leading).
• Strategos referred to a ‘military commander’
during the age of Athenian Democracy.
 Strategy
• Strategy - originally a military term, in a
business planning context strategy/strategic
means/pertains to why and how the plan will work,
in relation to all factors of influence upon the
business entity and activity,
• particularly including competitors (thus the
use of a military combative term), customers
and demographics, technology and
communications.
 Business Strategy
• Strategy is the determination of the long-term
goals & objectives and the adoption of
courses of action and the allocation of
resources necessary for carrying out these
goals.
• Strategy is management’s game plan for
strengthening the organization’s position,
pleasing customers, and achieving
performance targets.
 Business Strategy
In other words, Business Strategy is all about:
• Direction – long-term
• Markets & scope
• Competitive advantage - internal
• Resources - skills, assets, finance, relationships,
technical competence
• Environment – external
• Stakeholders – value & expectations
 Corporate Level strategy
• Concerned with selection of businesses and with
the business development & coordination
• Reach : goals & integrating businesses
• seeking synergy by sharing staff and other
resources
– managing activities, practices
– addressing competitive context
• Creating value through businesses
• Developing business units to support others in
the portfolio
 Business Level Strategy
• Division, product line or profit centre
independent from other business units
• Developing & sustaining competitive advantage
for the goods/services produced.
– Positioning business against rivals
– Anticipating changes in demands, technologies, and
adjusting the strategy to accommodate them.
– Influencing nature of business such as vertical
integration, merging divisions, products and
customers
– Addressing competitive context
• Michael Porter’s 3 Generic Strategies – Cost
Leadership, Differentiation & Focus
 Functional Level Strategy
• Strategic issues relates to business processes
• Functional levels are
– Marketing, finance, HR, R&D, manufacturing,
commercial etc.
– Executing effectively & efficiently
– Feedback & information on capabilities and
resources to Business & Corporate levels
• Corporate develops, SBUs translates &
Functional level executes
 Strategic Management
• Art and science of formulating, implementing and
evaluating cross-functional decisions that will
enable an organization to achieve its objectives.
• Defined as the process of specifying the
organization’s objectives, developing policies and
plans to achieve these objectives, and allocating
resources to implement the policies.
• Covers cross functional or overall organization.
• Usually, formulated by CEO & his executive team.
• Strategic Management provides overall direction
to the enterprise and is closely related to the field
of organization Studies.
 Strategic Management
Definitions
• “The determination of the basic long-term
goals & objectives of an enterprise and the
adoption of the course of action and the
allocation of resources necessary for carrying
out these goals” – Chandler
• “The dynamic process of formulation,
implementation , evaluation and control of
strategies to realize the organization’s
strategic intent” – Prof Azhar Kazmi
 Strategic Management
• Umbrella concept of management that
comprises marketing, finance and accounting,
human resource and production & operation
into top management discipline.
• Strategic management relates to setting
vision, mission, objectives and strategies that
can be guideline to design functional
strategies.
 Strategic Management
Consists of 4 principal functions :
1. Establishing the strategic intent
- Vision
- Mission
- Business Definition
- Business Model
- Objectives of the business/organization
 Strategic Management
2. Formulating the strategy

- SWOT analysis
- Formulating corporate level strategies
- Formulating business level strategies
- Undertaking strategic analysis
- Objectives of the business/organization
- Preparing the strategic plan
 Strategic Management
3. Implementation of Strategy
• Finalizing strategies
• Project implementation- Setting up of the
organization
• Procedural implementation- Deals with the
different aspects of the regulatory framework
within which the organization has to operate
• Allocating resources - Arranging for the resources
• Designing the corporate structure, systems and
processes - to match the structure to the strategy
 Strategic Management
3. Implementation of Strategy
• Managing the implementation of the strategies w.r.t.
behavioural aspects - leadership styles of senior
managers
• Functional aspects :policies to be formulated in diff
functional departments
• Operational aspects deals with productivity,
processes, people and the speed of implementation
of the strategies
 Strategic Management
4. Evaluation of Strategy
-Monitors the implementation of strategies
-Measures the resultant organizational performance
-Strategies are re-formulated/course correction
 Strategic Management

Definitional
decisions : e.g. defining
business, identifying
customer groups,
functions, technologies

Goalistic
decisions: e.g. Operational
defining corporate decisions :e.g.
& functional strategies, tactics &
objectives & action programmes
technologies
 Concept of Strategic Management
Comprehensively includes…

BUSINESS DEFINITION CORPORATE

______________ BUSINESS MISSION OBJECTIVES
PRODUCTS ----------------------------- ------------------------
MARKETS CORPORATE GROWTH
TECHNOLOGIES PHILOSOPHY PROFITS
COMPETITORS MANAGEMENT SURVIVAL
VALUES IMAGE
IDENTITY

CORPORATE APPRAISAL
--------------------------
STRENGTHS
WEAKNESSES
 Concept of Strategic Management
Comprehensively includes (cont.)…

CORPORATE POLICIES AND IMPLEMENTATION

STRATEGY PROGRAMMES AND REVIEW
______________ ----------------------------- -------------------------
STRATEGIC GAP PROCEDURES EXECUTION
DIRECTIONS TACTICS EVALUATION
TIME SPAN BUDGETS CORRECTION
RESOURCES FUNCTIONAL
 Strategic Planning
• The firm must engage in strategic planning
that clearly defines objectives and assesses
both the internal & external situation to
formulate strategy, evaluate the progress, and
make adjustments as necessary to stay on
track.
• In today’s highly competitive business
environment, budget-oriented planning or
forecast-based planning methods are
insufficient for large corporations to survive &
prosper.
 Strategic Management Process
STRATEGIC INTENT
______________
VISION* STRATEGY
MISSION* IMPLEMENTATION
BUSINESS DEFINITION* STRATEGY -------------------------
BUSINESS MODEL FORMULATION PROJECT, PROCEDURE,
CRITICAL SUCCESS ----------------------------- POLICY, RESOURCE
FACTORS (CSFs) CORPORATE LEVEL ALLOCATION,STRUCTURAL
OBJECTIVES* STRATEGIES BEHAVIOURAL,
BUSINESS LEVEL FUNCTIONAL &
STRATEGIES OPERATIONAL
STRATEGIC ANALYSIS
ENVIRONMENTAL STRATEGIC PLAN
SCANNING – INT* &
EXTERNAL STRATEGIC
-------------------------- EVALUATION &
SWOT ANALYSIS,
CONTROL
STEEPLE,
PORTER’S 5 FORCES
 Some of the emerging market trends that will
continue to drive IPM are
Demand and Supply Trends Changing Business Model
• Brand Building • Mergers and Acquisition
• Chronic disease growing
faster as compared to • Partnership and Alliances
acute
• New Introductions • Reviving product lifecycle
- Expanding Market
– Combinations - OTC (Revital, Gelusil)
• Specialist drs driving - Rx OTC
growth •Field force expansion
• Growth avenues • Digital Marketing
– Hospitals • Franchisee
• Contract Sales Organization
 Strategic Intent
• Organization’s resource potential and core
competencies
• Challenges & opportunities
• Critical Success Factors (CSFs)
 Environmental Scan
• Analysis of the firm - SWOT
• Analysis of the firm’s industry – (micro
environment) Porter’s 5 Forces Model
• Analysis of external macro environment –
– Social
– Technological
– Environmental
– Economical
– Political
– Legal
– ethical
 Strategy Formulation
• Mission – reason for existence of the
organization.
• Objectives – end results of a planned activity.
• Strategies – complex plan for bringing
organization from given ‘posture’ to the
‘desired position’.
• Bridging the performance gap
 Strategy Implementation
• It is the process by which strategy & policies
are put into action through the development
of
– Programs : statement of activities/action plan
– Budgets : costs,
– allocation & utilization of resources
– Procedures : SPOs
 Evaluation & Control
• Define parameters to be measured
• Define target values for these parameters
• Perform measurements
• Compare measured results to the pre-defined
goals
• Course correction
Vision, Mission and Purpose
 Vision statement
• Provides direction and inspiration for
organizational goal setting. It is what the firm or a
person would ultimately like to become.
• Usually, a single statement dream or aspiration,
fine-tuned to reality!
• Typically, a vision has the flavour of ‘being most
admired’, ‘being known for innovation’, ‘Being
largest & the greatest…’, ‘Among the top league’
etc.
• Unlike goals, ‘most profitable’, ‘cheapest’ will not
be part of a vision. It is not measurable; only
palpable.
 Vision statement
• “description of something in the future”
• “mental perception of the kind of
environment an individual, or an organization,
aspires to create within a broad time horizon
and the underlying conditions for the
actualization of this perception”
 Vision statement
• It is symbolic or relates to a cause – to bond
with stakeholders.
• Vision & mission statement should be made
first without being colored by constraints,
capabilities and environment.
• The vision statement is non-negotiable and
drives the organizations to find ways and
means to achieve their vision, by overcoming
constraints of capabilities & resources.
 Vision statement
• Vision is long-term statement and typically
generic & grand. Therefore, vision statement
does not change, unless the company is
getting into a totally different kind of business.
• Should be the horizon of 5-10 years. If shorter,
it becomes tactical. If > 20 years, it is difficult
to for the strategy to relate to vision.
 Vision statement
• The vision should not carry the ‘how’ part. e.g.
‘To be the most admired brand in the Aviation
Industry’ is fine; but it gets spoiled if
expanded as ‘by providing world-class in-flight
services’.
• Why? – The ‘how’ may keep changing with
time!
 Challenges to Vision statement
• Employee engagement
• Through the right culture, policies, strategies,
action plans, employees MUST be able to
connect with Vision & Mission
• Very often employees see a ‘gap’ and
experience the mis-match. This is primarily
because the leaders may be failing to connect
between vision/mission & the day-to-day
work.
 Features of a good Vision statement
• Easy to read and understand
• Compact & crisp… leave something to people’s
imagination.
• Give destination; not the road-map
• Is meaningful & not too open ended & far
fetched
• Provide motivating force. Excite people and
make them get goose-bumps
• Perceived as achievable but challenging,
compelling…stretching beyond comfortable!
 Examples of Vision statement
• BSNL Vision Statement
• “To become the largest telecom service provider
in Asia.”
• Walt Disney vision Statement
• “Make people happy”
• Stokes Eye Clinic, Florence, South Carolina
• “Our vision is to take care of your vision.”
• Infosys
• “To be a globally respected corporation that
provides best-of-breed business solutions,
leveraging technology, delivered by best-in-class
people."
 Mission statement
• The purpose for which the organization exists
• Road to achieve the vision.
• For example, for a luxury products company,
the vision could be ‘To be among the most
admired luxury brand company’ and the
mission could be’ To add style to the lives’
 Mission statement
• Ideally, the mission could provide ‘what it
stands for ’ or WHY it exists!...and not ‘how
and when’.
• Have visible linkage… ‘Add style to people’s
life’ may be good for luxury furnishing
company, if you are in business of mass
product. More suitable could be ‘Help people
build homes’
• In short the mission describes the product,
market and technological areas of emphasis
for the business.
 Mission follows Vision
• Purpose of the organization could change, modify
to achieve its Vision.
• For example, to achieve the Vision of an
insurance company, ‘To be most trusted
insurance company’ the mission could be ‘making
people financially secure’ as the emphasis is on
traditional insurance product.
• Later, the mission could be “Make money work
for people” when they include non-traditional
unit-linked investment products
• Or “Let money come when you stop working” for
a pension fund.
 Mission & Vision - Toyota
• Vision
• Toyota aims to achieve long-term, stable
growth economy, the local communities it
serves, and its shareholders
• Mission
• Toyota seeks to create a more prosperous
society through automotive manufacturing.
 Mission & Vision - IBM
• Vision
– Solution for a small planet
• Mission
– At IBM, we strive to lead in the invention,
development and manufacture of the industry’s
most advanced information technologies,
including computer sysytems, software, storage
systems and microelectronics.
– We translate these advanced technologies into
value for our customers through our professional
solutions, services and consulting business
worldwide.
 Mission & Vision - IBM
• Vision
– Solution for a small planet
• Mission
– At IBM, we strive to lead in the invention,
development and manufacture of the industry’s
most advanced information technologies,
including computer sysytems, software, storage
systems and microelectronics.
– We translate these advanced technologies into
value for our customers through our professional
solutions, services and consulting business
worldwide.
 Mission statements

• Wal-Mart "To give ordinary folk the chance to

buy the same thing as rich people."

• 3M "To solve unsolved problems innovatively"

• Google's mission is “to organize the world's

information and make it universally accessible
and useful.”
 Pfizer mission statement:

• "We dedicate ourselves to humanity's quest for

longer, healthier, happier lives through innovation
in pharmaceutical, consumer and animal health
products".
• Purpose: quest for longer, healthier, happier lives
• Business: pharmaceutical, consumer and animal
health products
• Values: innovation
 Unilever mission statement:

• Our mission is to add Vitality to life. We meet

everyday needs for nutrition, hygiene and
personal care with brands that help people look
good, feel good and get more out of life.
• Purpose: to add Vitality to life
• Business: nutrition, hygiene and personal care
• Values: look good, feel good and get more out of
life.
 McDonald’s mission statement:

• "To provide the fast food prepared in the same high-

quality manner world-wide that is tasty, reasonably-
priced & delivered consistently in a low-key décor and
friendly atmosphere.“
• Key Market: The fast food customer world-wide
• Contribution: tasty and reasonably-priced food
prepared in a high-quality manner
• Distinction: delivered consistently (world-wide) in a
low-key décor and friendly atmosphere.
 Mission
Our global quest is to improve the quality of human life
by enabling people to do more, feel better and live
longer

Lupin’s mission is to become a transnational

pharmaceutical company through the development
and introduction of a wide portfolio of branded and
generic products in key markets

To sustainably avail affordable and efficacious

medicines in order to improve the quantity and quality
of life
 Mission
Mission ::
We commit ourselves to total customer care by delivering
world-class products and services.
Vision ::
To be the leader in the pharmaceutical industry.
Mission
To provide access to the best healthcare
products at affordable prices to everyone,
present anywhere in the world..

Vision
To become a knowledge-driven global
pharmaceutical company with the highest level
of operational excellence in all
 Mission

Vision
To become a globally integrated healthcare solution
provider through relentless pursuit of knowledge,
expertise, quality, service and value addition in every
facet of our business.
Mission
To make quality healthcare easily accessible to all

Vision
To emerge as a leading integrated research –
based global pharmaceutical company
Business Goals & Objectives
 Business
• Business or firm or enterprise is an
organization engaged in trade of goods,
services, or both to consumers. Their primary
objective is to earn profits, growth and wealth
creation. Business owned by multiple
individuals is referred to as company.
 Goals & Objectives
• Objective is where the business wants to go in
the future, it’s aim. e.g. We want to enter
European market could be one goal.
• Objective could be a destination or presence
in terms of - products, therapy, geography,
skill, expertise, dominance, leadership.
• Goals are clearly defined targets. Measurable
and quantifiable/numbers e.g. sales. Market
share, growth, PCPM
 Business, Goals & Objectives
• Turning objectives into measurable goals
facilitates management planning,
implementation, and control.
• To be effective, goals must
– be arranged hierarchically to guide the businesses
in moving from broad to specific objectives for
departments and individuals
– be stated quantitatively whenever possible
– be realistic
– be consistent.
 Corporate Governance
• Earlier, most companies were small, family owned
and family run. The evolution of public ownership
has created a separation between ownership &
management.
• In an attempt to create a corporation, where
stockholders’ interests are looked after, firms have
multi-tier corporate hierarchy.
 Corporate Governance
• Set of mechanisms that influence the
decisions made by managers where there is a
well defined ownership & control.
• Shareholders
• Board of Directors
• Chairman
• Executive Directors
• Non-executive Directors
• Management Team
• CEO, COO, CFO, CTO
 Need for Corporate Governance
• Changing ownership structure
• Social responsibility
• Scams
• Corporate Oligarchy
• Globalization
• Transparency
• Accountability
• Merit based management
 Trends in Corporate Governance
• Boards involved in reviewing, decision making & shaping
organizations
• Institutional investors like banks, FIs, MFs, Insurance
companies have representations on board
• Non-Executive Directors are playing key advisory roles
• Boards are getting smaller, partially because of reduction of
insiders, and being replaced by increasing numbers of new
directors with specialized knowledge & expertise
• As companies become global, international experience is
gaining importance
 Corporate Social Responsibility
• Economic
• Social
• Public