1.

STRATEGIC MANAGEMENT
PROCESS

‘The only thing that we know about the

future is that it is going to be different’
(Drucker, 1973). Steve Ballmer.mp4
CASE STUDY: NOKIA
Case Study: Microsoft’s take-over of Nokia
 Microsoft acquired Nokia's smartphone business, a $7.6 billion mistake in
Sept 2013
 Contentious deal, leading to a shouting match during an internal meeting
inside Microsoft
 Nadella and founder Bill Gates spoke out against the deal, but Steve Ballmer
managed to get his way
 Could have been a reasonable move in 2011, when Nokia first abandoned its
homegrown platforms and decided to adopt Windows Phone exclusively
 But by 2013, it was pretty clear that Windows Phone was an no-win platform
 The Nokia deal did help it cross 10% market share in some European
countries by November 2013, but its overall global market share was still
stuck below 5%
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 Tiny market share = developers were slow to build Windows Phone
apps, which in turn kept people from buying the phones, which in turn
kept developers away, and so on
 Nokia's smartphone business was a disaster — between the time the
Nokia deal was signed in February 2011 and the acquisition
announcement in September 2013, Nokia's global market share of
handsets fell from about 25% to less than 5%
 Ballmer persuaded Microsoft to dole out $7 billion on a "declining asset”
 Later, Nadella undid Ballmer’s strategic mistake. It was a sad day for the
up to 7,800 people — mostly former Nokia employees — losing their
jobs, but it's the right thing for Microsoft

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Oldest Companies

1812 Citicorp
1911 Bombay Bakery
1837 Procter & Gamble
1947 English Boot House
1847 Philip Morris
1948 Kohinoor Textiles
1850 American Express
1948 Millat Fans
1886 Johnson & Johnson
1948 Hamdard
1891 Merck
1949 Snowhite Dry Cleaners
1892 General Electric
1950 Pakola
1902 3 M
1953 Pakistan Cables
1903 Ford
1953 Gul Ahmed Textiles
1911 IBM
1955 PIA
1938 HP
1957 Engro Corp
1945 Sony
1966 EBM
1945 Wal-Mart 5
Intriguing Questions
 How did P & G continue to thrive over 150 years after its founding
while most companies are lucky to strive even 15 years?

 How has Apple remained healthy and vibrant even after Steve Jobs
left, while Texas Instruments, scoring high at Wall Street, almost self
destructed after Pat Haggarty stepped aside?

 Why PIA (1955), which was amongst world’s 10 top most airlines has
gone into bankruptcy? (almost sure now)

 What happened to Pakistan Steel Mills (1968)?

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How did Apple progress from Apple-1, in April 1976 to I-7 in 2016 ?

While Xerox’s ALTO (1970) never

progressed to anything substantial
like Apple products?

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 Where does Dentonic (1963) stand today as the product in the eyes of
customers? Why?
 Where has Abdul Khaliq Sweets, a 500 years old sweetmeat company
gone?
 Why has Bundu Khan (1948) stagnated while Barbecue Tonight and
Kolaachi have become the industry leaders?
 How has Unilever’s Fair & Lovely beaten Tibet Snow (1956)

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WHAT IS STRATEGY & WHY CHANGE ?
 Failure to adapt to change demise of numerous
organizations over the past 15 years
 Survivors which withstood test of time adapted their
business and strategy to fit the external forces shaping their
markets
 Organizations must understand their environments
 stimulating new ideas, which ultimately produce economic value

 Strategy achieving success, (allowing organizations to focus on what really

matters), driving performance
 Strategy is the fundamental core of whether an organization wins or loses

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 Create unique and differentiated propositions made up of different activities
 Strategy is about doing things differently or doing different things from the
competition
 Unstable Business environment strategy has become less about
detailed plans and more about direction
 Strategy is:
 planning the capabilities needed
 new potential markets in order to create room to maneuver
 creating strategic options that can be utilized when the time is right
 Constant focus:
 to ensure consistency between internal strategy
 external environment in order to stay relevant and respond to customers’ needs and
wants

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Flawed Concepts of Strategy
 Strategy as action
 – “Our strategy is to merge…”
 – “… internationalize…”
 – “… consolidate the industry…”
 – “… outsource…”
 – “…double our R&D budget…”
• Strategy as aspiration
 – “Our strategy is to be #1 or #2…”
 – “Our strategy is to grow…”
 – “Our strategy is to be the world leader…”
 – “Our strategy is to provide superior returns to our
shareholders…” 12
What is Strategy ?

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Setting the right goals……

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Economic Performance Vs Share Holder Value

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Economic Foundations of Competition

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Determinants of Relative Performance

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Achieving Superior Performance
Operational effectiveness is not a strategy

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Five Tests of a Good Strategy
1. A unique value proposition compared to other organizations
2. A different, tailored value chain
3. Clear tradeoffs, and choosing what not to do
4. Activities that fit together and reinforce each other
5. Strategic continuity with continual improvement in realizing the
strategy

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Defining the Value Proposition

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Strategic Positioning
IKEA, Sweden

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Strategic Tradeoffs
 Tradeoffs occur when strategic positions are incompatible – need for a
choice
Sources of Tradeoffs
 Incompatible product / service features or attributes
 Differences in the best configuration of activities in the value chain to deliver the
chosen value proposition
 Inconsistencies in image or reputation across positions
 Limits on internal coordination, measurement, motivation, and control
 Tradeoffs make a strategy sustainable against imitation by established
rivals

An essential part of strategy is choosing what not to do

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Strategic Trade Offs
IKEA, Sweden

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Mutually Reinforcing Activities …….IKEA

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Thinking Strategically: 3 Big Strategic Questions
Strategy.mp4
Indian Rail

1. What’s the company’s present situation?

2. Where does the company need to go from here?
 Business(es) to be in and market positions to stake out
 Buyer needs and groups to serve
 Direction to head
3. How should it get there?
 A company’s answer to “how will we get there?” is its strategy

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 Strategy involves:
 Competitive moves and business approaches used by managers to
run the company
 Management’s “action plan” to:
o Grow the business
o Attract and please customers
o Compete successfully
o Conduct operations
o Achieve the targeted levels of
organizational performance
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Defining Strategy
Systematic analysis of the factors
associated with customers and competitors (the external
environment)
and the organization itself (the internal environment)
to provide the basis for re-thinking
the current management practices.
Its objective is to achieve better alignment
of corporate policies and strategic priorities

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The Concept
Managerial process of forming:
 a strategic vision,
 setting objectives,
 crafting, implementing and executing the strategy,
 and then over time initiating whatever corrective adjustments in
the vision, objectives, strategy, and execution are deemed
appropriate.

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FIVE TASKS: Strategy Making, Strategy Executing
Process

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Who performs the 5 tasks?
 CEO: most visible and important strategy manager
 chief direction setter,
 chief objective setter,
 chief strategy maker and
 implementer for the whole organization
 Ultimate responsibility rests with the CEO:
 hammers out a consensus strategy
 coordinates various aspects of executing the strategy

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 Role of Leaders in Strategy

 Drive operational improvement but clearly distinguish it from strategy

 Lead the process of choosing the company’s unique position
– The CEO is the chief strategist
– The choice of strategy cannot be entirely democratic
 Communicate the strategy relentlessly to all constituencies
– Harness the moral purpose of strategy
 Maintain discipline around the strategy, in the face of many distractions.

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 Decide which industry changes, technologies, and customer
needs to respond to, and how the response can be tailored to the
company’s strategy
 Measure progress using tailored metrics that capture the
implications of the strategy for serving customers and performing
particular activities
 Sell the company’s strategy and how to evaluate progress against
the strategy to the financial markets

Commitment to strategy is tested every day

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Role of Board of Directors
 To exercise oversight and see that Five Tasks of Strategic
management are done in a manner that benefits share holders
 To approve company’s strategic plans; but should not play a
hands-on role in formulating or implementing strategy
 To be supportive critics, asking perceptive & incisive questions
 To express their concerns about the eroding profits & validity of
the strategy
 To evaluate senior executives’ strategy-making / implementing
skills

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MISSION & VISION
MISSION STATEMENT ---- A STARTING POINT FOR FORMING
A STRATEGIC VISION:
 Mission Statement answers the question “WHAT IS OUR
BUSINESS”. Conveys the essence of “WHO WE ARE, WHAT WE
DO, and WHERE WE ARE NOW”

 Vision Statement answers the question “WHAT DO WE WANT TO

BECOME”---- a possible and desirable future state of an
organization

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COMPONENTS OF A MISSION STATEMENT:

1. Customers----who are the firm’s customers?

2. Product or Services-----what are the firm’s major products or
services?
3. Markets----geographically where does the firm compete?
4. Technology----is the firm technologically current?
5. Concern for survival, growth, and profitability-----is the firm
committed to growth and financial soundness?

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6. Philosophy----what are the basic beliefs, values, aspirations and
ethical priorities of the firm?
7. Self-concept-----what is the firm’s distinctive competence or
major competitive advantage?
8. Concern for public image----is the firm responsive to social,
community and environmental concerns?
9. Concern for employees----are employees a valuable asset of
the firm?

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Good Vision Statement

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Common Shortcomings : Vision Statement

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Process of developing Mission & Vision
 Involve as many managers as possible; commitment
 Opportunity for strategists enlist support
 A facilitator or committee of top managers to short list one single
draft
 Hire out-side consultants, experts ?
 Communicate the final mission statement, down the line
 Process should create an “emotional bond” and “sense of
mission”.

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Importance: Mission & Vision
 To ensure unanimity of purpose within the organization
 To provide a basis or standard for allocating resources
 To establish organizational climate
 To serve as a focal point to identify with organization’s purpose and direction
 To facilitate the translation of objectives into a work structure
 To specify organizational purpose and then translate it into objectives in
such a way that cost, time and performance controlledparameters can be
assessed and
 Firms with a formalized mission statement have twice the average return on
shareholder’s equity ----Rarick & Vitton
 Firms using mission statements have a 30 % higher return on financial
measures than those without such statements ----Business Week40
6 paths leading to Mission & Vision

1. Changes in the market , and their implications for the company’s

direction?
2. Customer needs to be satisfied?
3. Different buyer segments to concentrate on?
4. New geographic or product markets to be pursued?
5. Company’s business make up in five years?
6. What kind of company should we be trying to become?
Good entrepreneurship essential in addressing these 6 questions

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INFLECTION POINTS
 Many successful organizations need to change direction not only
to survive but to maintain success-----STRATEGIC INFLECTION
POINTS
 When a company reaches a strategic inflection point some tough
decisions are required:
about changing a company’s course,
to sustain company’s success, not just to avoid possible disaster
May radically change a company’s prospects and require a radical
revision of its strategic course; E.g.
Engro Corp
PIA’s Route strategy
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Communicating Mission & Vision
 Down the line to lower level managers so that it grabs attention
and provokes excitement
 Should convey a larger sense of purpose so that employees see
themselves as “building” rather than “laying stones”
 Should be inspirational for people, to “live” in the business instead
of just coming to work. E.g. Starbucks’ mission statement :
“To inspire and nurture the human spirit--- one person, one cup,
one neighborhood at a time”
 BREAKING DOWN RESISTANCE :
 Must provide a rationale for a new strategic vision
 REINFORCEMENT on every occasion
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Corporate Social Responsibility
 Critical consideration: Mission Statement must express how the company
intends to contribute to the societies that sustain it
 Business exists to serve, depends upon its environment, and therefore, has a
responsibility to ensure its well being
 Environment is represented by stake holders
 Pollution, disposal of solid and liquid waste, and the conservation of natural
resources should be principal considerations in strategic decision making
 Adoption of 4Es:
Make it Easy for consumer to be green
Empower consumer with solutions
Enlist the support of consumer
Establish credibility with public to avoid backlash
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 Conduct & publish annual social audits from the perspective of social
responsibility e.g. Abbot, Dow Chemicals, Exxon & Bank of America
FOUR TYPES OF SOCIAL COMMITMENTS / RESPONSIBILITIES:
1. ECONOMIC
2. LEGAL
3. ETHICAL
4. DISCRETIONARY
CSR COSTS ARE MORE THAN OFFSET IN THE LONG RUN BY AN
IMPROVED COMPANY IMAGE AND INCREASED COMMUNITY
GOODWILL

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Crafting a Strategy
 Chief Architect Approach: Single owner or the CEO, assumes the
role of chief strategist and chief entrepreneur, single handedly
shaping strategy, e.g.
 Michael Dell at Dell Computers, Bill Gates at Microsoft, Howard
Shultz at Starbucks, Zeelaf Munir at EBM, Hussain Dawood or
Samad Dawood at Engro Corp., Khalid Awan at TCS, Babar Ali or
Haider Ali at Packages
 Delegation Approach: E.g. Most Pakistani Banks
 Team Approach: E.g. Shaukat Khanum
 Corporate Intrapreneur Approach:

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Strategy-Making Hierarchy

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Understanding a Company’s Strategy

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From Thinking Strategically to Choosing a Strategy

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BCG Growth-Share Matrix

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