Faculty : Module : Term :

Dr. Debajyoti Majumder BP & CS Term III

Session :

Session 1

Topics to be covered in this session:

Strategic Management Concepts

Session Learning Objectives

At the end of this session you should be able to understand: 1. Strategy, Strategic Management Process, Strategic Competitiveness, Competitive Advantage, Above Average Returns, 2. The 21st century competitive landscape, Globalization and Technological Changes 3. The Input Output model 4. Strategic Intent: Vision, Mission and Value 5. Stakeholders and their ability to influence organizations

Few definitions
A strategy is a long-term view of an organizations commitments and actions to gain competitive advantage using core competencies The Strategic Management Process involves decisions to achieve strategic competitiveness Strategic competitiveness depends on a firms ability to formulate and implement a value creating strategy to earn above-average returns. Competitive advantage is the ability of a firm to outperform in cost or quality or productivity over its competitors Above average returns are returns more than comparable investment at similar risks

What does Strategy Involve? It involves knowing where we were, where we are and where we want to go & how? IT should be different from competition Should be responsive to true market needs & have significant impact in the marketplace Should be visionary & yet focused so as to capture the imagination & commitment of the workforce and the other stakeholders It is not tactical steps like TQM, BPR or Benchmarking

Evolution Of Strategy

The word strategy has been derived from the Greek word STRATOS (army) and AGEIN to (lead ) Chinese military theorist Sun Tzu( Circa 500BC) stated that the supreme art of war is to subdue the army without fighting In recent times, F.W. Taylor (1900s) separated planning from doing while Henry Fayol talked about administration in 1920s.

The Strategic management process involves:

1. Strategic Inputs- Understanding external and internal environment and deciding the vision and mission. 2. Strategic Actions- Strategy formulation, business level strategy, competitive dynamics, corporate level strategy, acquisition and restructuring strategies, international strategy, strategy implementation, organizational structure and control, strategic leadership, strategic entrepreneurship 3. Strategic outcomes- strategic competitiveness, above average returns

The 21st century competitive landscape

Global EconomyAsian Tigers- Singapore, Hong Kong, South Korea, Taiwan Chindia BRIC- Brazil, Russia, India, China The European Union Tripod- USA, Japan, Europe Toyota, Wal-Mart, McDonalds', GE

The Input-Output (I/O) model for above-average returns

Inputs
Man, Money, Material

Process

Output

Goods

Services
Internal Climate Feedback

Cost + Profit

External Environment (PESTEL)

Illustrations of I-O model

Study the external environment of the industry using PESTEL Study the Internal Climate- Strengths and Weaknesses Identify the inputs and their sources Develop and acquire skills and assets needed to implement the chosen strategy The Process : Strategy Implementation and controlSelect strategic action and control After the delivery of goods/ services ; collect and review feedback from stakeholders to generate better inputs in next cycle Plan-Do-Control-Re-plan PDCRsuperior returns

Steps to achieve Above- average returns

Resources Capability Competitive Advantage An Attractive Industry Strategy Implementation Above Average Returns

Resources and capabilities: Physical- Factors of production (land, raw

materials, machines, finance)

Human- Employee skills, talented managers Organizational- Goodwill, patents, processes, Intellectual property

Strategic Intent
Strategic Intent is the leveraging of a firms internal resources, capabilities and core competencies to accomplish the firms goals in a competitive environment. Vision- The passion and big picture of the organization ExamplesInfosys- "To be a globally respected corporation that provides bestof-breed business solutions, leveraging technology, delivered by best-in-class people." Tata Steel - We aspire to be the global steel industry benchmark for Value Creation and Corporate Citizenship.

Definitions, Contd.
Mission: Statement of the firms reason for existence; its unique purpose and the scope of its operations. ExamplesInfosys - "To achieve our objectives in an environment of fairness,
honesty, and courtesy towards our clients, employees, vendors and society at large."

Tata Steel strives to strengthen India's industrial base through the

effective utilization of staff and materials. The means envisaged to achieve this are high technology and productivity, consistent with modern management practices. It recognizes that while honesty and integrity are the essential ingredients of a strong and stable enterprise, profitability provides the main spark for economic activity. The Company seeks to scale the heights of excellence in all that it does in an atmosphere free from fear, and thereby reaffirms its faith in democratic values.

Definitions, Contd. Valuestatements about how the organization will value customers, suppliers, and the internal community. Value statements describe actions which are the living enactment of the fundamental values held by most individuals within the organization. They represent an organizations highest priorities and deeply held driving forces.

Infosys -

We believe that the softest pillow is a clear conscience. The values that drive us underscore our commitment to: Customer Delight: To surpass customer expectations consistently Leadership by Example: To set standards in our business and transactions and be an exemplar for the industry and ourselves Integrity and Transparency: To be ethical, sincere and open in all our transactions Fairness: To be objective and transaction-oriented, and thereby earn trust and respect Pursuit of Excellence: To strive relentlessly, constantly improve ourselves, our teams, our services and products to become the best

Definitions, Contd. ValueTata Steel

Our PEOPLE, by fostering team work, nurturing talent, enhancing leadership capability and acting with pace, pride and passion. Our OFFER, by becoming the supplier of choice, delivering premium products and services and creating value with our customers. Our INNOVATIVE APPROACH, by developing leading edge solution in technology, process and products. Our CONDUCT, by providing a safe working place respecting the environment, caring for our communities and demonstrating high ethical standards.

Stakeholders:
Stakeholders are individuals and groups who can affect and get affected by the strategic outcomes achieved by the firm; and who have an enforceable claim on firms performance. Capital market stakeholdersSuppliers of capital goods Product Market stakeholdersSuppliers of revenue goods Organizational stakeholdersemployees, managers, non-managers

Strategy Vs Tactics

Strategy focuses essentially on deciding on what the organization is trying to do, what it is trying to become within its business environment. Changing strategy is difficult and often causes problems. Tactic is the implementation of the strategy. It is the set of management decisions focused on how to achieve the strategic objectives. Example: once the organization decides that it wants to be a car manufacturer, there are many decisions that must be made about how to profitably manufacture cars.

Nature of Business Policy They tend to serve as precedents and thus reduce the repetitive rethinking of all the factors of individual decisions which save time Policies aid in coordination, if a member of individuals are guided by the same policies they can predict more accurately the actions and decisions of others Policy provides the stability in the organization and reduces frustration of members Policies clearly specify routes towards the related goals of the organization

THANK YOU