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L123: Introduction to Strategic Management

Two broad objectives for learning the subject called as STRATEGIC MANAGEMENT I.

II.

Why this subject . ??? A 5 pointer 1. Improve decision making 2. Thoughtful reasoning and analysis 3. Build skills in long run relations 4. Develop the ability to analyze a complex business situation, identify key issues, and develop recommended strategies and actions necessary for implementation. 5. Improve ability to communicate clearly, cogently, and effectively. (Justifying your stance)

Notes by Gautam Chitanis

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Some Realities of the World we are living in

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3 "Revolutions we have seen . Oxford defines "Revolution" as "a drastic and far-reaching change in ways of thinking and behaving." Industrial Revolution The Industrial Revolution (IR) began in the 18th century, and marked the point when the growth of mechanical work began outpacing the growth of manual work. The technologies that shaped IR were the steam engine, iron founding and textile manufacturing. The business model was centralized, patent-based monetization, where few were granted IP rights, and they built huge economic machines. Resulting innovations in transportation (rail, ship, automobile) caused the effects of the industrial revolution to go global, albeit over a generation or three. Information Revolution The Information Revolution (IR2) began in the mid-20th century. It was marked by the connection of easily-stored content to widely-available distribution. The technologies that shaped this time were reduction in storage prices, improved data transmission through telephony, TCP/IP for networking, the massively widespread use of PCs, and the invention of the World Wide Web and Internet (thanks to Al Gore of course). The business model shifted from big to small, from centralized to decentralized, and most critically away from just Western centers of power. Moreover, banking had evolved to the point where people almost anywhere in the world were able to buy things from anywhere else, thereby monetizing their content. The proliferation of PCs combined with the availability of phone lines that could handle data (via modems to start) made this revolution go global in a matter of decades. Communication Revolution The next revolution (which we are now at the beginning of) is the Communication Revolution (CR). It is marked by the proliferation of mobile telephony; search engines (which is really the transition between IR2 and CR); and non-verbal communication modes (SMS, data, email, etc.) and Internet access via cell phones. v Facebook v Twitter v Other Social Networking Sites

Notes by Gautam Chitanis

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Business Basics .

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Core components of business model How do you: v Create value? v Select customers? v Do it better than anyone else? v Differentiate your solution? v Make a profit? v Grow your business?

A Major Shift. . . . . . from financial capital to intellectual capital. v Human v Systems v Customer

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Case of IBM:

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Strategy & Strategic Management Defined What is strategy? In simplest terms an action a company takes to attain superior performance.

In other words Strategy is .. ..a unified, comprehensive and integrated game plan that relates the strategic advantages of the firm to the challenges of the environment and that is designed to ensure that the basic objectives of the enterprise are achieved through proper execution by the organisation.

Notes by Gautam Chitanis

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Benefits of strategic management: 1. Establish the mission deciding on the business or businesses that the company or division should engage in and other fundamentals that will guide and characterize the business, such as continuous growth. The companys mission is usually timeless. In other words, it should not be changed every year. It should, however, guide the changes in the companys objectives and strategies. 2. Formulate philosophy establish the beliefs, values, attitudes, and unwritten guidelines that add up to the way we do things around here. This is what makes one company different from other companies. 3. Establish policies deciding on the plans of action to guide the performance of major activities in carrying out strategy in accordance with company philosophy 4. Setting objectives deciding on achievement targets within a defined time range. Objectives are narrower in scope than the mission, and are designed to aid in making operational plans for carrying out strategy. 5. Develop strategy developing concepts, ideas, and plans for achieving objectives successfully and meeting and beathing the competition. Strategic planning is part of the total planning process that includes management, marketing, and operational planning. 6. Planning the organizational structure developing the plan of orgaization and the activities that help people work together to perform activities in accordance with strategy, philosophy, and policies. 7. Provide personnel recruiting, selecting, and developing people to fill the positions in the organizational plan. 8. Establish procedures determining and prescribing how all important and current activities will be carried out. 9. Provide facilities providing the plant, equipment, and other physical facilities required to carry on the business.

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10. Provide capital making sure the business has the money and credit needed for working capital (money to operate on) and physical facilities. 11. Set standards establishing measures of performance that will enable business to best achieve its long-term objectives successfully. 12. Establish management programs and operational plans developing programs and plans governing activities and the use of resources that, when carried out with accordance with established strategy, policies, procedures, and standards, will enable people to achieve particular objectives. These are phases of the total palnning process, which includes strategic planning. 13. Provide control information supplying facts and figures to help people follow the strategies, policies, procedures, and programs; to keep alert to forces at work inside and outside the business; to measure overall company performance against established plans and standards. 14. Activate people commanding and motivating people to act in accordance with philosophy, policies, procedures, and standards in carrying out the plans of the company.

Notes by Gautam Chitanis

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Two Cases:

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March 10, 2013; GCPL plans to expand its international market presence through this strategic move, with a focus on Asia, Africa and South America/Latin America Godrej Consumer Products Ltd (GCPL) has chalked out a new plan for focusing on the international market. It is concentrating on a 3x3 strategy to penetrate deeper into Asia, Africa and South America/Latin America, with three product segmentspersonal wash, hair care and insecticides. It (the 3x3 strategy) is part of our globalisation strategy where we are concentrating on three categories and three continents. We are focussing on these continents to understand the market better. Our strategy always has been to focus on developing countries, because they have high populations. Even consumption of our products is high in these places, said Hoshedar K Press, vice chairman, GCPL. The company spent Rs100 crore-Rs125 crore to acquire Tura, a Nigerian beauty products company. This is the companys third acquisition in Africa. In April 2010, GCPL acquired Megasaria leading consumer products company in Indonesia, which has notched up revenues of $120 million in the past fiscal with estimated profit-after-tax margins of 11%-12%. It is also the second-largest player in the insecticides market, enjoying 35% market share of Indonesias household insecticides market (with a total size of $150 million, growing at 20%). It also has 45% market share (of a total $68 million market, growing at 45%) in the air-care segment and 80% market share of the $21-million wipes market (growing at 45%). Megasari has 15% share of the breakfast cereals market. Earlier in October 2005, GCPL had acquired UK-based Keyline for approximately 13 million. During the same year in September, it acquired the South African business of British company Rapidol for Rs50 crore. South Africa-based Kinky Group was bought out for around $34 million in April 2008. Last year, GCPL acquired a 49% stake in Godrej Sara Lee and is looking to buy out the remaining stake. It has passed an enabling resolution to raise Rs30 billion in order to fund inorganic growth (India and other emerging markets would be key focus areas). Notes by Gautam Chitanis Pg 11

All the big players in the FMCG market are now eyeing Africa. Marico Ltd acquired the Fiancee hair care brand owned by Egypt-based Ready Group; Emami is looking at buying an FMCG firm in Egypt. Emami is also looking at buying several other personal care firms in the region and the company is almost certain of having its first manufacturing facility up and running in Africa this year. Emami also has plans to set up three more manufacturing bases in Africa over the next two-three years.

Assignment as discussed in the class..

Notes by Gautam Chitanis

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