WELCOME TO COURSE ON STRATEGIC MANAGEMENT

Session 1 S G Raja Sekharan

Introductions
 S G Raja Sekharan  B. Tech in Chemical Engineering (1984) and PGDBM from XLRI (1989)  Worked in SPIC, HCL, WIPRO, SRF, Ramco Systems, SAP and Keane. Also managed my own company for 2 years in IT industry.  Last assignment - was heading HR for Keane in India till April 2010. Prior to this, was managing the business for Keane in Asia, Middle east and Africa.  Visiting faculty in CUIM now.  Desirous of sharing my experiences and learning with all of you

Introductions - I want to know you better

Roll number Name Your last degree and overall score. Any work experience? What industry you want to join What is your dream company give one name What is your dream role in this company post training Expectations from this course?

Broad plan for the next 30 hours

Course lectures from me -15 hours Team presentations 12 hours Sharing of experiences from visiting executives - 3 hours

I believe
A majority of our learning happens through our experiences and the stories of others Formal learning in classroom environment has a low recall after a few years I do not remember most of what I learned in class in XLRI I intend to share this subject of Strategic management in a story/ case format I want help from you as researchers and co-faculty for specific sessions so that we as a group learn about Strategic management.

Direct Objectives of the course

To introduce to you concepts and management practices at a strategic level. To give you all a hands on experience of strategic level thinking that senior managers do everyday.

Indirect Objectives of the course

To improve your learn_ability skills To make you think To improve your team interaction skills To build you up for success in life

Strategic management course plan

Session 1 Session 2/3 Session 4 Session 5

Introduction to SM - Vision, Mission, Values External and Internal environment and team presentations Building SCA though functional value chains Growth through Integration, Diversification, Outsourcing and M&A Change management Corporate HR and Marketing strategies Strategy Implementation and control Some current issues and wrap up

Session 6 Session 7 Session 8/9 Session 10

SESSION 1

Todays agenda
Introduction to concept of Strategy Introduce the idea of Vision, Mission and Values and explain why it is important Explain how strategy gets formulated in companies Form student groups that represent various industries and discuss the group task

Industries/Groups that I want the class to study

Toyota Motors(Global) LG (Global) HUL Bharti Group (Airtel) Reliance Industries Apollo Hospitals TCS Dabur ITC HDFC

You will need to work on one of these companies through this course

Lets take the Bike market in India

y-o-y growth as of April 2011 Hero Honda -39% Bajaj Auto -16.71% TVS Motors 14% HMSI 0% Yamaha 38% Suzuki - 42% Mahindra two wheelers -6%

Lets take the Bike market in India

Anil Dua, senior vice-president (Marketing and Sales), Hero Honda Motors  It is extremely heartening to begin the new fiscal year with our best-ever monthly sales. This has been possible due to our all-round growth across territories and across segments,  Our company has set a target to sell 6.15 million units of both motorcycles and scooters in 2011-12. The company has expanded its capacity to 6.15 million units with initial investment of Rs. 3 billion. The company is running at its optimum capacity to satisfied demand. As expected the companys has started selling 5 lakh plus units from the last month

Lets take the Bike market in India

Market Cap.
(Rs. cr.)

Sales Turnover

Net Profit

Total Assets

Bajaj Auto Hero Honda TVS Motor

39,899.37 16,608.93 3,339.73 4,266.92 37,171.83 19,401.15 1,927.90 3,531.05 2,572.60 6,289.31 192.58 1,868.67

Market share, revenue, growth Hero Honda is No 1 Net Profit, market cap and assets Bajaj is No. 1 TVS is a far number 3 in all counts

EVERY INDUSTRY HAS A LEADER, A FEW FOLLOWERS AND MANY NICHE PLAYERS WHY DO ORGANIZATIONS IN THE SAME INDUSTRY PERFORM DIFFERENTLY?

What is strategy
Strategy is a set of related actions that managers
take to increase their companys performance.

Competitive Advantage
Results when a companys strategies lead to superior performance compared to competitors

Strategy is a choice on how to compete.

- Michael Porter

To get the strategy right the company needs to focus on three tasks
 Strategic Leadership
Task of most effectively managing a companys strategy-making process

 Strategy Formulation
Task of determining and selecting strategies

 Strategy Implementation
Task of putting strategies into action to improve a companys efficiency and effectiveness

Chairman and Chief Executive Officer, PepsiCo

Indra K. Nooyi

PepsiCo has the worlds largest portfolio of billion-dollar food and beverage brands, including 19 different product lines that each generate more than $1 billion in annual retail sales

Chairman and Chief Executive Officer, PepsiCo

Indra K. Nooyi

. PepsiCos operates in more than 200 countries with approximately $60 billion in revenue and employing nearly 300,000 people worldwide.

Chairman and Chief Executive Officer, PepsiCo

 Over the last decade she has led PepsiCos restructuring, including
the divestiture of its restaurants into the YUM! Brands, Inc. in 1997 the acquisition of Tropicana in 1998 the merger with Quaker Oats that brought the vital Quaker and Gatorade businesses in 2001 the merger with PepsiCos anchor NA bottlers in 2009 Took majority stake in Wimm-BillDann Foods - a Russian food company which produces milk, yogurt, fruit juices and dairy products.

Indra K. Nooyi

Chairman and Chief Executive Officer, PepsiCo

Indra K. Nooyi

Mrs. Nooyi is the chief architect of PepsiCos multi-year growth strategy, Performance with Purpose, which is focused on delivering sustainable growth by investing in a healthier future for people and our planet.

Chairman and Chief Executive Officer, PepsiCo

Indra K. Nooyi

Delivering sustainable growth by investing in a healthier future for people and our planet

Chairman and Chief Executive Officer, PepsiCo

Indra K. Nooyi

Performance with Purpose encompasses PepsiCos commitment to

continue to build a portfolio of enjoyable and wholesome foods and beverages, find innovative ways to reduce the use of energy, water and packaging and provide a great workplace for PepsiCos employees.

Chairman and Chief Executive Officer, PepsiCo

Examples of delivering sustainable growth by investing in a healthier future for people and our planet  removing trans-fats from PepsiCo snacks  categorization of its snacks into three categories named
fun for you, good for you, and better for you

Indra K. Nooyi

 Making the Pepsi plants use less water  aggressive expansion into the emerging markets of Brazil, Russia, China, and India  Productivity improvement programme through product and process simplification across the organization

Chairman and Chief Executive Officer, PepsiCo

Examples of delivering sustainable growth by investing in a healthier future for people and our planet  No outstation meeting allowed on Monday so that executives do not have to travel on Sunday.  Managers allowed to take a year off with benefits like car & health insurance.  Annual appraisal has a parameter for describing in what way employees manage work-life balance.  Indra Nooyi writes letter to her employees once in every two weeks.  She also sends letters to parents/ spouses of employees.

Indra K. Nooyi

Chairman and Chief Executive Officer, PepsiCo

Financial results  Between 1996 and 2001, PepsiCos revenue increased from $20.3 B to $26.3 B and net profit doubled from $1.14 B to $2.66 B in this period she was the SVP strategy  By 2006, the revenue of PepsiCo had increased to $35.13 B - in this period she was the CFO and President sales  In 2010, the revenue of PepsiCo had increased to $60 B - in this period she was the Chairman (since May 2007) and CEO of PepsiCo (since Oct 2006).  For comparison, between 2006 and 2010, The Coca Cola Company grew its revenues from $24 B to $35 B

Indra K. Nooyi

Chairman and Chief Executive Officer, PepsiCo

Financial results  In December 2005, PepsiCo surpassed The Coca-Cola Company in market value for the first time in 112 years since both companies began to compete.  While Coca-Cola was in the carbonated soft drink market, PepsiCo had shifted to include a broader product base, including foods, snacks and beverages.

Indra K. Nooyi

To get the strategy right the company needs to focus on three tasks
 Strategic Leadership
Task of most effectively managing a companys strategy-making process

 Strategy Formulation
Task of determining and selecting strategies

 Strategy Implementation
Task of putting strategies into action to improve a companys efficiency and effectiveness

Competitive advantage
When a companys strategies lead to superior performance compared to competitors

Sustainable Competitive Advantage

When a companys strategies enable it to maintain above average profitability for a number of years

Measure of Superior Performance

 Superior Performance
One companys profitability relative to that of other companies in the same or similar business or industry Maximizing shareholder value is the ultimate goal of profit making companies

ROIC (Profitability) = Return On Invested Capital ROIC

Net profit Capital invested

Net income after tax Equity + Debt to creditors

Determinants of Shareholder Value

To increase shareholder value, managers must pursue strategies that increase the profitability of the company and grow the profits.

Superior performance depends on Companys Business Model

A business model encompasses how the company will: Select its customers Define and differentiate its product offerings Create value for its customers Acquire and keep customers Produce goods or services Deliver those goods and services to the market Organize activities within the company Configure its resources Achieve and sustain a high level of profitability Grow the business over time

Every industry has a few commonly used business models

Performance in Nonprofit Enterprises

Nonprofit entities such as government agencies, universities, and charities:
Are not in business to make a profit Should use their resources efficiently and effectively Set performance goals unique to the organization Set strategies to achieve goals and compete with other nonprofits for scarce resources

A successful strategy gives potential donors a compelling message as to why they should contribute.

Levels of Strategic Management

Levels of Strategic Managers

 Corporate Level Managers
Oversee the development of strategies for the whole organization The CEO is the principle general manager who consults with other senior executives

 General Managers
Responsible for overall company, business unit, or divisional performance

 Functional Managers
Responsible for supervising a particular task or operation
e.g. marketing, operations, accounting, human resources

The Five Steps of the Strategy Making Process

M Select the corporate vision, mission, and values N O
and the major corporate goals and objectives. Analyze the external competitive environment to identify opportunities and threats. Analyze the organizations internal environment to identify its strengths and weaknesses. Select strategies that:
Build on the organizations strengths and correct its weaknesses in order to take advantage of external opportunities and counter external threats Are consistent with organizations vision, mission, and values and major goals and objectives Are congruent and constitute a viable business model

Implement the strategies. strat

M Crafting the Organizations

Mission Statement
Provides a framework or context within which strategies are formulated, including:  Mission
The reason for existence what an organization does

 Vision
A statement of some desired future state

 Values
A statement of key values that an organization is committed to

 Major Goals
The measurable desired future state that an organization attempts to realize

The Mission
The mission is a statement of a companys
raison detre, its reason for existence today.

 What is it that the company does?  What is the companies business?

Who is being satisfied (what customer groups)? What is being satisfied (what customer needs)? How customer needs are being satisfied (by what skills, knowledge, or distinctive competencies)?

A companys mission is best approached from a customer-oriented business definition.

The Mission statement for PepsiCo

The mission is a statement of a companys
raison detre, its reason for existence today.
Our mission is to be the world's premier consumer products company focused on convenient foods and beverages. We seek to produce financial rewards to investors as we provide opportunities for growth and enrichment to our employees, our business partners and the communities in which we operate. And in everything we do, we strive for honesty, fairness and integrity.

The Mission statement for Biocon

The mission is a statement of a companys
raison detre, its reason for existence today.
 To be an integrated biotechnology enterprise of global distinction. Essential to this mission is excellence in:
- Intellectual asset creation through discovery, research and development - State-of-the-art manufacturing capabilities - Internationally benchmarked quality and regulatory systems - New medical insight through disease specific clinical research - Customer relationship through outstanding products and services - Human resource development through training, mentoring and empowering - Management of research and business partnerships

M Crafting the Organizations

Mission Statement
Provides a framework or context within which strategies are formulated, including:  Mission
The reason for existence what an organization does

 Vision
A statement of some desired future state

 Values
A statement of key values that an organization is committed to

 Major Goals
The measurable desired future state that an organization attempts to realize

Abells Framework for Defining the Business

Source: D. F. Abell, Defining the Business: The Starting Point of Strategic Planning (Englewood Cliffs, Prentice Hall, 1980), p. 7.

The Vision
What would the company like to achieve?
A good vision is meant to stretch a company by articulating an ambitious but attainable future state.

Copyright Houghton Mifflin Company. All rights reserved.

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The Vision
What would the company like to achieve?
A good vision is meant to stretch a company by articulating an ambitious but attainable future state.
PepsiCo's responsibility is to continually improve all aspects of the world in which we operate - environment, social, economic creating a better tomorrow than today.Our vision is put into action through programs and a focus on environmental stewardship, activities to benefit society, and a commitment to build shareholder value by making PepsiCo a truly sustainable company

The Vision
What would the company like to achieve?
A good vision is meant to stretch a company by articulating an ambitious but attainable future state.
 To be an integrated biotechnology enterprise of global distinction. Essential to this mission is excellence in:
- Intellectual asset creation through discovery, research and development - State-of-the-art manufacturing capabilities - Internationally benchmarked quality and regulatory systems - New medical insight through disease specific clinical research - Customer relationship through outstanding products and services - Human resource development through training, mentoring and empowering - Management of research and business partnerships

The Vision
What would the company like to achieve?
A good vision is meant to stretch a company by articulating an ambitious but attainable future state.

Christ University is a nurturing ground for an individuals holistic development to make effective contribution to the society in a dynamic environment."

The Vision
What would the company like to achieve?
A good vision is meant to stretch a company by articulating an ambitious but attainable future state.

Christ University is a nurturing ground for an individuals holistic development to make effective contribution to the society in a dynamic environment."

M Crafting the Organizations

Mission Statement
Provides a framework or context within which strategies are formulated, including:  Mission
The reason for existence what an organization does

 Vision
A statement of some desired future state

 Values
A statement of key values that an organization is committed to

 Major Goals
The measurable desired future state that an organization attempts to realize

Values
The values of a company should state:
 How managers and employees should conduct themselves  How they should do business  What kind of organization they need to build to help achieve the companys mission  Organizational culture
The set of values, norms, and standards that control how employees work to achieve an organizations mission and goals Often seen as an important source of competitive advantage

In high-performance organizations, values respect the interests of key stakeholders.

Values
Our Values & Philosophy are a reflection of the socially and environmentally responsible company we aspire to be. They are the foundation for every business decision we make. We uphold our commitment with six guiding principles. 1. Care for our customers, our consumers and the world we live in. 2. Sell only products we can be proud of. 3. Speak with truth and candor. 4. Balance short term and long term 5. Win with diversity and inclusion 6. Respect others and succeed together.

WITH A VIEW TO UNDERSTAND THIS AT A PERSONAL LEVEL LETS JUST GO THROUGH THIS SCENARIO

Relationship

Character/ contribution / achievements

Father/ Friend

WHAT YOU JUST WROTE IS YOUR PERSONAL MISSION STATEMENT

M Crafting the Organizations

Mission Statement
Provides a framework or context within which strategies are formulated, including:  Mission
The reason for existence what an organization does

 Vision
A statement of some desired future state

 Values
A statement of key values that an organization is committed to

 Major Goals
The measurable desired future state that an organization attempts to realize

Major Goals
A goal is a precise and measurable desired future state that a company must realize if it is to attain its vision or mission.
Key characteristics of well-constructed goals:
1. 2. 3. 4. Precise and measurable to provide a
yardstick or standard to judge performance Address crucial issues with a limited number of key goals that help to maintain focus Challenging but realistic to provide employees with incentive for improving Specify a time period to motivate and inject a sense of urgency into goal attainment

The Five Steps of the Strategy Making Process

M Select the corporate vision, mission, and values N O
and the major corporate goals and objectives. Analyze the external competitive environment to identify opportunities and threats. Analyze the organizations internal environment to identify its strengths and weaknesses. Select strategies that:
Build on the organizations strengths and correct its weaknesses in order to take advantage of external opportunities and counter external threats Are consistent with organizations vision, mission, and values and major goals and objectives Are congruent and constitute a viable business model

Implement the strategies. strat

In preparing for battle I have always found that plans are useless, but planning is indispensable.
- Dwight D. Eisenhower

STRATEGIES ARE MADE FOR LONG TERM AND ARE CONTINUOUSLY REVISITED EVERY YEAR EVERY QUARTER.

THERE WILL BE GAPS BETWEEN WHAT WAS ENVISAGED AND WHAT WAS ACHIEVED

Intended, Emergent & Realized Strategies

 Intended or Planned Strategies
Strategies an organization plans to put into action Typically the result of a formal planning process Unrealized strategies are the result of unprecedented changes and unplanned events after the formal planning is completed

 Emergent Strategies
Unplanned responses to unforeseen circumstances Serendipitous discoveries and events may emerge that can open up new unplanned opportunities Must assess whether the emergent strategy fits the companys needs and capabilities

 Realized Strategies
The product of whatever intended strategies are actually put into action and of any emergent strategies that evolve

MOST COMPANIES ADOPT POOR STRATEGIES WHICH RESULTS IN THEIR POOR PERFORMANCE

Reasons for poor strategic choices

 Cognitive biases:
Rules of thumb or heuristics resulting in systematic errors
Prior hypothesis bias Escalating commitment Reasoning by analogy Representativeness Illusion of control

 Groupthink:
Decision makers embark on a course of action without questioning the underlying assumptions
Group coalesces around a person or policy Decisions based on an emotional rather than an objective assessment of the correct course of action

IN GOD WE TRUST FOR EVERYTHING ELSE- WE NEED DATA

Attributes of good strategic leadership

Good leaders of the strategy-making process have a number of key attributes:
     

Vision, eloquence, and consistency Commitment Being well informed Willingness to delegate and empower The astute use of power Emotional intelligence
Self-awareness Self-regulation Motivation Empathy Social skills

If you dont have a strategy, you will be . . . part of somebody elses strategy.
- Alvin Toffler

The essence of strategy lies in creating tomorrows competitive advantage faster than competitors mimic the ones you possess today.
- Gary Hamel &
C. K. Prahalad

GROUP FORMATION & TASK BEFORE THE NEXT SESSION

Industries/Groups that I want the class to study

Toyota Motors (Global) LG (Global) HUL Bharti Group (Airtel) Reliance Industries Apollo Hospitals TCS Dabur ITC HDFC

Industries/Groups that I want the class to study

As we go through the sessions, most session there will be team presentations /discussions. Next session please come with a 5-6 slide ppt sharing with the class the story of how the company came into existence and its mission, vision and values.

Strategic management course plan

Session 1 Session 2/3 Session 4 Session 5

Introduction to SM - Vision, Mission, Values External and Internal environment and team presentations Building SCA though functional value chains Growth through Integration, Diversification, Outsourcing and M&A Change management Corporate HR and Marketing strategies Strategy Implementation and control Some current issues and wrap up

Session 6 Session 7 Session 8/9 Session 10

THANK YOU