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Strategic Management

Post Graduate Diploma in Agri-business Management


(PGDABM)
August 16 - 20, 2019

Dr. V K Arora
https://www.linkedin.com/in/vkarora/

CCS National Institute of Agricultural Marketing (NIAM) JAIPUR


1
Please Note (Important)

These slides of Business Entrepreneurship may not


cover the entire syllabus.

You are required to refer all the class notes, examples


and case studies (covered in the classroom) along with
these slides for complete coverage and in view of
examination.

2
S.No. Topics to be covered
1. Environmental Analysis: Challenges for Top Management
Known-unknown…..History, Surprises, Mega, Macro and Micro, Power Sector – Global, National and your
Discom, General / Immediate-nature of external environment, Environmental scanning – frame work,
Profile of the environment, SAP / ETOP, CORE COMPETENCY / KSFs

2. Strategic Planning Process


Enterprise level planning process, Corporate Planning, Strategic Planning process, Component of Strategic
Management process, Recent Initiatives
3. Strategic Planning Formulation
Vision, Mission and values, SWOT Analysis, Strategic Choices: BCG Competitive forces: 3 and 5 forces

4. Strategy Implementation
Organisational Structure and Design, Resource allocation and control
5. Strategic Leadership for Managing Change
Understanding Leadership, Leadership Effectiveness, Leadership through spiritual intelligence, Strategic
for managing dynamic change, Group Exercise – Strategic thinking

6. Benchmarking
Types of benchmarking, Identifying relevant benchmarking practices – case study
7. Balanced Scorecard
Importance of BSC in the changing scenario Preparation of BSC – Group exercise
Performance Management System

8. Problem Solving and Action Plan


9. Strategic Planning in Uncertain Environment (Scenario Planning)
10. Strategy for a Networked World (Collaborative Business Models) 3
Goal

the object of a person's ambition or effort; an aim or


desired result.

Why do we set Goal(s) ?

Being Focused | Motivated and |Way to final Destination

Where we are? To Where we desire to reach?


helps in lacunas …

Is Gap sufficient in Corporate World?

4
SMART Goal (adding FIVE to Goal)
Objective(s) and Mission(s) are SMART Goal

Which is most important in these Five – Measurable (why)

Goal Objective
(SMART Goal)
Increase Profitability Increase profit by 10 %

Declare dividend Dividend 60 %

Win the match Win the match by at


least 2 goals
Anyway (resource,
reputation, survival) Smartly

6
VMO Formulation and Impact of Values/ Commitments

Vision Mission
Values

Objective (s)

Strategic Intent Commitment(s)

7
Main Components of Strategic Intent

Vision – to keep organization moving forward. (Motivation) (Never ending END)


‘what do we want to become’

Mission – Purpose or Reasons for the organization's existence.


‘what is our business’

It contains,
1. Who are we?
2. What we do?
3. What we like to become?

Objective – End result of planned activities.

8
Vision

• Kotter “ description of something (an organization, corporate culture, a


business, a technology, an activity) in the future.

• Miller and Dess defined vision as the “ category of intentions that are
broad, all inclusive and forward thinking”

• Vision is forward thinking process.

EXAMPLES OF CORPORATE VISION STATEMENT

• BHEL : “ A world class innovative , competitive and profitable engineering


enterprise providing total business solutions”.

• Colgate – Palmolive : “ To be the company of first choice in oral and


personal hygiene by continuously caring for consumers and partners”.

9
Mission

• Organizations are founded for a purpose, the reason for the


organization's existence, that is, the organization's mission.
Describes the organization's values, aspirations and reason for
being.
• According to Thompson, ‘The mission reflects the essential purpose
of the organization, concerning particularly why it is in existence,
the nature of the businesses it is in, and the customers it seeks to
serve and satisfy’.
• The mission is an enduring statement of purpose that distinguishes
one business from other similar firms. It identifies the scope of its
operation in product and market terms. It implies the image the
firm seeks to project and reflects the values and priorities of the
firm’s strategic decision makers.
• For different verticals, mission could be in number of pillars; say 3
or 4.
10
Examples of Mission Statements

a) Bharat Heavy Electricals Ltd. (BHEL) :- To achieve and maintain a leading


position as suppliers of quality equipment, system and service to serve
the national and international market in the field of energy. The areas of
interest would be the conversion, transmission, utilisation and
conservation of energy for applications in the power, industrial and
transportation fields, to strive for technological excellence and market
leadership in these areas.
b) Oil and Natural Gas Commission (ONGC) : To stimulate, continue and
accelerate efforts to develop and maximize the contribution of the energy
sector to the economy of the country”.
c) Cadbury India : “ To attain leadership position in the confectionery market
and achieve a strong national presence in the food drinks sector”
d) Ranbaxy Laboratories :” To become a research-based international
pharmaceutical company”

11
Note: Values

Values manifest; what organization does as a group and how it


operates.

In group: we have business ethics associated as ethics


combined as a group

M Values

12
VMO and Placement of Strategies/ Policies and Plans

Vision Mission
Values

Objective (s)

Commitment(s)
Strategies

Policies

Plan
13
Starting of Strategy and How it supports Objectives

Starting of Strategy

______________________

Strategy – Art of General

“the way a General moves and dispose his force in war”

“the art of employment of battles as a means to gain the objective of war”

Clausewitz – Father of Strategy (Military) not the father of strategic management

14
Strategy ………………….. from WAR to ECONOMY

i.e. Art of WAR to Plan of Action

Note:

1. Strategy is a strategy : May be good or bad, right or wrong (later


issues)
2. May not get impacted with Values (but Strategic Intent)
3. May not be shared with all the stake holders
4. Ultimate Aim is to support Mission
5. Strategies are the backbone of USP

15
Art of War Plan of Action

What we want? Mission Mission

What we have? Analysis of country’s Analysis of companies internal


condition and capabilities conditions and capacities
What enemies have? War environment External environment
Both (general and enemies) Both (general and competitive)
What options we have? Analyze war options Analyze company’s options by
What we have and how it will matching a) its resources and b)
work!! external environment
Choice of best option Identify most workable Identify most desirable option with
option company’s mission
What to be done? Make Grand Strategies Select a set of objectives and Grand
Strategies
What to do now? Make short Strategies Frame-out short strategies compatible
to Grand Strategies
Do it now! Strategic Choice (select) Implement the Strategic Choice
Budget, Task, People, Structure,
Technology, Rewards, Others
Learn what not to repeat Evaluate and Learn Evaluate it’s success for future
decision making
16
Management

‘Comprises planning, organizing, staffing, directing,


and controlling’.

Note: 3 terms out of six given by Henri Fayol


(forecasting, planning, organizing, commanding,
coordinating and controlling) in early 1900s.

17
Strategic Management

Set of managerial decisions and actions that determines


the long term performance of a corporation.

It includes environment scanning (both external and internal),


strategic formations, strategic implementation, execution,
control and feedback for continuous improvement.

18
Other definitions

A continuous, iterative process aimed at keeping an


organization as a whole appropriately matched to its
environment (Certo and Peter)

Strategic management consists of the analysis, decisions, and


actions an organization undertakes (continuously) in order to
create and sustain competitive advantages.

Keeping the business in tune with management and marketing


forces both outside and inside the firm

Strategic management is the study of why some firms


outperform others i) How to compete in order to create
competitive advantages in the marketplace, ii) How to create
competitive advantages in the market place, iii) Unique and
valuable and iv) Difficult for competitors to copy or substitute

19
Note: Strategic management is set of managerial decisions and actions
that determines the long-run performance of an organization.

It is Important because,

1. It results in higher organizational performance.

2. It requires that managers examine and adapt to business environment


changes.

3. It coordinates diverse organizational units, helping them focus on


organizational goals.

4. It is very much involved in the managerial decision-making process.

20
Strategic Intent (VMO and Business Model)

• The foundation for the strategic management is laid by


the hierarchy of strategic intent.

• The concept of strategic intent makes clear ‘What An


Organization Stands For?’, Harvard Business Review, 1989
described the concept in its infancy (early years).

• Hamed and Prahalad coined the term strategic intent.

21
Note: Difference between Strategy and Policy

Strategy

TATA sold Tomco and Lakme to HLL (now HUL)


and bought Corus (UK) and Ritz Carlton (Boston)

Policy

Intel – Cannibalize your product line with better products


before a competitor does it.

22
Benefits of Strategic Management

• Establish the mission


• Formulate philosophy
• Establish policies
• Establish procedures
• Setting objectives
• Provide facilities
• Developing strategy
• Provide capital
• Plan the organizational
• Set standards
structure
• Establish programs and plans
• Provide personnel
• Control information
• Activate people

23
Remember!!! Key attributes of strategic management

– Directs the organization toward overall goals and objectives.

– Includes multiple stakeholders in decision making.

– Needs to incorporate short-term and long-term perspectives.

– Recognizes trade-offs between efficiency and effectiveness.

24
Environment Analysis is required

Due to

CHANGE

Change in ? ? ?

Before we proceed,

Just Ponder few major changes…


(Organizational Adaptation)

25
Population Ecology: Change with new environment is the requirement
otherwise
other company with suited environment will have an edge.

Institutional Theory: Change the strategies by learning from other companies,


which have adapted better suited condition.

Strategic Choice Perspective: Not only adapts but reshapes their environment.

Organizational Learning Theory: People of all levels are involved to provide


inputs into strategic decisions.

Organizational Learning Theory comprises towards Learning Organization i.e.


Need of Hour
26
Creating a Learning Organization
(i.e. More interactive, with horizontal communication)

Flexibility Responsibility

Get together Learning Sessions

Experimental No Criticism

No Misuse Feeling of Belongingness

Discussion in the Classroom

27
Important Note

On the part of Organizational Adaptation, one has to track:

1. Political/ legal
2. Economy/ financials
3. Social/ culture
4. Technologies/ R&D

5. Local Environment
6. Foreign Environment

i.e. P E S T on both Local and Foreign Environment

28
Environment Concern for a firm

Micro Environment Macro Environment


Internal Environment External Environment
Little difference

International Environment

29
PEST Environment for International Business

Political-Legal
Economical
Social-Culture
Technology

National Vs Group Countries Vs Global

30
Why and How Environment Changes
Strategic Intent

and the entire

Corporate Culture
Organizational Behavior
Strategies/ Tactics (later)

And Visa Versa with recent cases


(i.e. Values changes environment)

31
Time Factor with MOSP

e.g. Bajaj Family

Bachchraj
|
Ramdhan Das
|
Jamnalal (Marwari Community)
(follower of Mahatma Gandhi & Congress Party along with Ghanshyam Das Birla)

Kamalnayan Ramkrishna

Rahul Shishir Shekhar Madhu Niraj

Rajiv Sanjiv Kushagra Apoorv Anant Neelima Nimisha Nirav

32
Khadi

Cotton

Sugar

Electrical

Auto

Three Wheeler

Casting Steel

Insurance

Corporate Mission – As an Organization competing on a global basis.


We focus our resources on continuous enhancing customer satisfaction with our product & services.

33
29th Nov 1945: Bajaj Auto was started as trading company.
1948: Started importing from Italy’s Piaggio & Co.
1959: Indian Govt. granted a license to manufacture.
1960: Entered in Technology Collaboration with Piaggio.
(first plant at Kurla, second at Akurti)
1971: Agreement expired with Piaggio
1975: Manufacturing with the help of Maharastra Govt.
1981: First motor cycle with Kawasaki Heavy Industry of Japan.
1999: Bajaj Auto became largest company in Bajaj Group

1982 (Society) 1997 (Business Today)

34
My marketing department? I don’t require it. I have a dispatch department.
I do not have to go from house to house to sell.

Whatever products or services a company offers,


it must meet the customer’s wants in the most satisfactory manner.
That should be the aim of the company.

35
Before 1990’s
When there was no internet, it was easy to frame strategies as products were
limited to sell in particular area. Competition was nearly negligible.

After Opening our economy, we faced Globalization and soon many issues
were associated in strategy building.
E-com: Stocks, Dotcom, Retail, Survey, Books, Data, Consultancy, Banking,
Billing and even News.

Domestic Strategies
Market

International Global Strategies

36
Note 1. What is Synergy?

Cooperation of two agents (or more) to produce new or


enhanced effect (compare to individuals)

Synergetic Strategy

Plan of action by two or more Business Players.

37
Note 2. Strategy verses Tactics

Strategy Tactics
Grand Limited
Broad Focused Narrow Focused
On going Specific/ situational
Adaptable Fluid
Before action During Action
Long Term Short Term
Time Based Immediate Results

Discussion : Whether Tactics are the part of Strategy

38
Let’s Start

Proceeding of Business

What We Have

Vision - Mission - Objective (s)

39
External Internal

Constraints
Societal |
Strategic
| Resources Choice
Industry |
| Competence
Competitor |
Value Chain

BusIness Policy
O T S W Functional
EFAS IFAS Strategy

S W O T
SFAS Corporate
Strategy
TOWS

Review of
Strategy Business
Mission &
Formation Strategy
Objective (s)

40
Analysis of External Factors

41
Analysis of Societal
Environment

Economical

Technological

Political – Legal

Socio-Cultural

Global

42
1. Economical

Economic Development Climate GDP & GDP Trend


Unemployment Level Per-capita Monitory Policy
Currency convertibility Wage levels Fiscal Policy
Regional Economic Association and Nature of Competition

2. Technological

Regulations on technology transfer Energy Availability


Energy cost Natural Gas Availability Transportation Network
Automation Skills & Workforce IPR Protection
ISO/ZED IT/ Internet/ Tele-fax Infrastructure
GIX Promotion towards Innovations

43
3. Political – Legal

Central Government State Governments Opposition(s)


Form of Govt. Political Ideology Tax Law
Stability of Govt. Govt. attitude towards Foreign Country
MFN Govt. attitude towards particular company
Legal System Regulation for foreign/ particular companies
Foreign Policy Terrorist Activity Local Administration

4. Socio-Cultural

Norms Values Beliefs


Motivation Demographics Customs
Language Life expectations Life Style
Social Institutions Human Rights Influences
Literacy Level Attitude towards foreigners/ other states
Ethics Acceptance of Change Parenting

44
5. Global

Characteristics of Global Market Characteristics of Regional Market


International Political event US/ Japan/ European Economy
Threats from BRICS WTO/ WHO
International Logistics World Bank/ IMF
BOT/ BOP Export/ Manufacturing Clusters
War/ Conflicts Citizen Loves towards Nation
Unethical Practices Other facilitations/ influences

45
Porter Industry Environment Analysis

Through Competitive Strategies (1980)

Prior to the Porter, strategic management rested on


SWOT framework. This framework lacked an analytical
foundation. Although other approaches were Chandler’s
strategy and structure framework (how a firm’s strategy
and structure responds to the changes in the external
environment; which supplemented SWOT.

46
Porter’s competitive strategies transformed strategic management in six ways

First: Applies microeconomics and industrial organization concepts to access the


attractiveness of an industry and firms’ positions within an industry.

Second: Identify barriers (at internal level, through conduct and performance
approach) that reduces competition at the industry levels.

Third: Extend the analysis of competitive forces to new five factors.

Fourth: Outline set of generic strategies that could create a long run position
with superior returns within a given industry.

Fifth: Proposed five generic industry environment- fragmented, emerging,


mature, decline and global (stages of industry life cycle) to shape competitive
forces and strategies.

Sixth: Existence of strategic group within an industry and their implications;


showing that there are more than one way to be profitable in a heterogeneous
industry structure.
47
Porter’s Industry Analysis

Other Stack-holders
(Relative power of
Stack holders)
Government, Union,
Share Holders

48
I. Rivalry among Existing Players

A. Numbers of Competitors B. Rate of Industry Growth


C. Product Characteristics D. Short term – fixed cost
E. High Exit Barrier F. Diversity of Rivals and likewise …

Competitive rivalry may be higher when:

• Similar sized companies operate in one market


• These companies have similar strategies
• Products on offer have similar features and offer the same benefits
• Growth in the industry is slow
• There are high barriers to exit or low barriers to entry

49
II. Potential Entrants

A. Economy of Scale
1. Existing Players – are flexible to set prices.
2. New Entrants – Limited flexibility
B. Product Differentiation
1. Existing Players – Loyalty, USP, Brand and Unique Products
2. New Entrants – Many limitations
C. Capital Requirement
D. Switching Cost and therefore Portfolio Management
E. High switching cost for consumers
F. Difficulty in accessing raw materials
G. Access to Supply Base New Existing
H. Distribution Channels Entrants Player(s)
I. Patents and proprietary knowledge
Undo Design
J. Govt. Policies/ Govt. driven obstacles

50
III. Suppliers (Bargaining Power)

a. Outsourcing

i. One Supplier ii. Two Supplier iii. Many Supplier

b. Making

i. Fully ii. Partial iii. Over

When do suppliers have power?

Supplier may enjoy more power if there are less of them. Costs of
switching to an alternate are high, or there are no alternates. A supplier
may also be the only provider of a certain raw material. This may be the
case in instances where a supplier holds a patent or have proprietary
knowledge. Because of a lack of alternates, they may be able to withhold
quantities or increase prices without losing sales.

51
IV. Buyers (Bargaining Power)

a. Present Buyers
b. Past Buyers
c. Future Buyers

When is buyer power high?

Buyers tend to have power over an industry if they are important to the
company, this may be if the industry is such that buyers either buy in bulk, or
can easily switch to another supplier. A limited number of strong buyers may
be able to exert significant control over a seller. In addition, if a product is
similar to its competitor with little or no differentiation, then there are chances
that the company may need to let the supplier dictate terms in order to avoid
losing the customer.

52
How shifting is possible for both cheap and expensive products

V. Substitute

a. Continuous Improvement
b. Offering and Discounts

When is there a threat from substitutes?

The threat of substitutes is affected by factors such as brand loyalty,


switching costs, relative prices, as well as trends and craze.

A high threat of substitutes will impact a company’s ability to set


prices that it wants. If a substitute is priced lower or fulfills a need
better than it may end up attracting consumers towards it and
reduce sales for existing companies.

53
Criticism

A number of debates have surrounded the five forces analysis

i. Whether it omits other relevant forces (like Government, union


and people)
ii. Whether it matters how industry boundaries are drown
iii. Whether it continues to be relevant in innovative and highly
internationalized competitive environment
iv. ‘Complementors’ products and/ or services within the industry like
fuel service stations for automobiles or software development for
video game consoles.

But porter himself objected to add any other force (s)

In his views, all other factors that act through the original fives forces.

54
Competitors Analysis
(No set rule)

1. Competitors Strengths and Weaknesses


2. Competitors Assumptions/ Values
3. Competitors Current Strategies
4. Competitors future objectives/ Plans

Compare with Yourself

Plan Accordingly

55
ETOP Study - ETOP Framework
(External Threads and Opportunities )

• External factors analysis summery (EFAS)


• (similarly) Internal factors analysis summery (IFAS)

In EFAS two factors are Threats and opportunities

Analysis is done in headings, factors, weight, rating (in scale 1 to 5, say), weight
score and comments (time frame inclusive)

Total weight of all the factors relating threats and opportunities should be ONE.

Like in IFAS, weight of strengths and weaknesses should be ONE.

Together EFAS and IFAS generate SFAS (Strategic factors analysis summery)

56
Preparation of EFAS (format)

External Factor Weight Rating Weight Scale Comment

I. Opportunity

A.

B.

C.

Total 0.5 1 to 5 Weight × Rating for review

II. Threats

A.

B.

C.

Total 0.5 1 to 5 Weight × Rating for review

57
Analysis of Internal Factors

58
I. Analysis of Constraints

A. What are the constraints in your business and how does it effect the strategy building.
1. (HH) cannot work with (RR) but (HH+RR) can give desired output.
2. XY will not supply materials to us.

B. Why it is important to study?


1. These are not available at present.
2. Keep in mind that these options are possible in future.

C. Tactics to convert constraints to your strength


1. Calculate Uncertainty
2. SDDB (from Ravan Sanghita)

I. Uncertainty II. Complexity III. Conflict


IV. Kick-backs V. Influences VI. Personal Interest

59
II. Resources Analysis

Tangible – Assets that can be seen and quantifies (building)

Financial – Firms ability to generate internal fund


Organizational – Ownership, Structure & Pattern, Formal reporting
Physical – Location, Machines, Raw materials
Technology – TM, Copyright, Patent

Intangible – Not Physically; rooted deeply with firms history (brand)

HR – Knowledge, Trust, Organizational routines


Innovative – Ideas, Scientific capacity
Reputations – Brand, Quality, Durability, No pending payments
Interaction – Learning Organization, Get together, Belongingness

60
III. Competence Analysis

R&D Marketing

Manufacturing Quality Inspection

MIS Logistics

HR IR

Brand Network

Customer Services Governance

61
IV. Value Chain Analysis

Competitive Advantage (Porter 1985)

It is the second major work by M E Porter; focusing in the


firm’s value chain. There is appropriate scope of the firm
with primary and secondary activities (should be done
internally) which should shared with other linked
organizations for developing and maintaining firm’s
competitive advantage. These activities are deemed
centrally and needed to be owned by the focal firm.

62
The Value Chain

A framework for identifying core competencies

A. Inside the firm


B. In the supply chain

Can be used to

- Identify strengths and weaknesses


- Identify sources of competitive advantage
- Identify market opportunities

63
Firm Infrastructure

Human Resource Management


Supporting
Activities

Technological Development

Procurement

Inbound Operations Outbound Marketing Service


Logistics Logistics & Sales

Relationship with Suppliers Relationship with Buyers

Elapsed Time - Value added time cost


64
Primary Activities in the Value Chain
• Inbound Logistics
– Materials handling, warehousing, inventory control used to receive, store and
disseminate inputs to a product
– Fertilizer and chemical storage, delivery of inputs, application of inputs
• Operations
– Take inputs from inbound logistics and convert to final products
– Plowing, planting, spraying, harvesting, feeding, medicating, weighing, etc.
• Outbound Logistics
– Collecting, Storing, and physical distribution of the final product.
– Crop storage, finished hog handling, Processing and determining delivery dates,
delivery to the packer or elevator etc.
• Marketing and Sales
– Provide means through which customers can purchase products and to induce
them to do so
– Advertising, communicating with buyers, developing customer relationships,
pricing products (futures, hedging, forward contracting, etc.), delivery scheduling
• Service
– Activities designed to enhance or maintain a product’s value
– Timely delivery, identity preservation, ISO9000, certifying as organic, etc.
65
Supporting Activities in the Value Chain
• Procurement
– Activities to purchase the inputs needed to produce products
– Negotiating with suppliers, standard timing of replenishing parts and tools, setting
up buying groups, etc.
• Technological Development
– Activities that improve the firm’s products and/or processes
– Volunteering for test plots, being a part of feeding trials, attending technology
seminars/field days, designing equipment to make specific production tasks more
efficient, etc.
• Human Resources
– Recruiting, hiring, training, developing, and compensating all personnel
• Firm Infrastructure
– General Management, planning, finance, accounting, legal support, governmental
relations, etc.
– Establishment of accounting practices, management information systems,
compliance with environmental regulations, tracking and reporting for government
programs, etc.
– Where strategy development takes place identifying opportunities and threats,
resources and capabilities, and support of core competencies 66
The Result of the Value Chain

• Margins
– Capture the value from performing value-creating activities as
cheaply as possible
– The basic idea is that the consumer is willing to pay a certain
amount for the value you create. This is depicted as the size of the
overall pentagon.
– The size of the individual activity boxes represents the cost of
performing those particular activities.
– Thus, the smaller the size of the individual activity boxes relative to
the value the consumer is willing to pay, the greater the MARGIN
will be for the firm.

67
Remember!!!

1. A firm’s value chain must be compared to competitors’ value


chains to determine where competitive advantages exist.

2. To be a source of competitive advantage a resource or capability


must allow a firm to:

– Perform an activity in a manner that is superior to


competitor’s performances
– Perform a value-creating activity that competitors cannot
complete

68
Linkages within the Value Chain

• Optimization and coordination of activities in the value chain

• Linkages exist between support activities and primary activities and


between separate primary activities

• Generic causes for linkages


– Same function can be performed in different ways
– Efforts in indirect activities
– Activities performed inside the firm reduce the need for activities
in the field
– Quality Assurance can be performed in different ways

69
Value Chain Linkages in the Supply Chain

Buyer Chain

Supplier
Chain

Firm Chain Buyer Chain

Supplier
Chain

Buyer Chain

70
Linkages with Suppliers Value Chain

• Linkages between suppliers’ value chains and a firms chain provide


opportunities for the firm to enhance competitive advantage.
• Division of benefits between firm and its suppliers is a function of
supplier’s bargaining power and reflecting in supplier’s margins.
• Both coordination with suppliers and hard bargaining are important to
competitive advantage.

Linkages with Buyers Value Chain

• A firm’s differentiation stems from how its value chain relates to its
buyer’s chain.
• Differentiation derives fundamentally from creating value for the
buyer through a firm’s impact on the buyer’s value chain.
• Value is created when a firm creates a competitive advantage for its
buyer.
• The buyer must perceive the value to pay a premium price.
71
• Internal Factor Analysis Summary (IFAS) Table

72
Strategic Factors Analysis Summary (SFAS) Matrix
summarizes a corporation’s strategic factors by combining the external factors
from the EFAS table with the internal factors from the IFAS table.

73
Situational Analysis

SFAS

SWOT

Initials of TOWS Matrix

Review of Mission (s) and Objectives

74
SWOT Analysis/ TOWS Matrix

• SWOT analysis is a tool for helping assess the current situation for the
firm.

• However, we need to be able to combine the information in the SWOT


analysis in a meaningful way to generate alternative strategies that we
might pursue.

• The TOWS matrix is a tool designed to match external opportunities and


threats with our internal strengths and weaknesses

75
Strengths Weaknesses
Internal 1. 1.
2. 2.
Environment 3. 3.

Opportunities Threats
External 1. 1.
2. 2.
Environment 3. 3.

76
• SWOT Analysis
– Identifies Organization’s Strengths, Weaknesses, Opportunities, and Threats
• Core Competency
– A special strength that gives an organization a competitive advantage

77
Environmental Scanning
Converting Analysis into Action

Strengths
Weaknesses
Opportunities
Threats Turning
Opportunities and
Weaknesses into
Strengths

Environment Strategy
Scanning Building

78
from Environmental Scanning
to Employing the TOWS Matrix

SO WO
ST WT

SO strategies – using strengths to take advantage of


opportunities
WO strategies – seizing opportunities to overcome
weaknesses
ST strategies – considering strengths as a way to avoid
potential threats
WT strategies – defensive acts to minimize weaknesses and avoid
threats
79
Matching Key External and Internal Factors to Formulate Alternative Strategies

Key Internal Factor Key External Factor Resultant Strategy

Excess working 20% annual growth in the


Acquired
capacity (an internal + cablevision industry (an =
Visioncable
strength) external opportunity)

Insufficient capacity Exit of two major foreign Pursue horizontal


(an internal + competitors from the = integration by
weakness) industry (an external buying competitors’
opportunity facilities
Strong R & D Decreasing numbers of Develop new
expertise (an + young adults (an external products for older
internal strength) threat) =
adults

Poor employee Strong union activity (an Develop a new


+ =
morale (an internal external threat) employee-benefits
weakness) package
80
TOWS Matrix

Technique used in strategy formulation for combining

– External analysis

• Opportunities
• Threats

– Internal analysis

• Strengths
• Weaknesses

81
The TOWS Matrix

STRENGTHS - S WEAKNESSES - W

List strengths List weaknesses

OPPORTUNITIES - O SO STRATEGIES WO STRATEGIES

List opportunities Use strengths to take Overcome weaknesses


advantage of by taking advantage of
opportunities opportunities

THREATS - T ST STRATEGIES WT STRATEGIES

List threats Use strengths to avoid Minimize weaknesses


threats and avoid threats
82
From External Analysis (EFAS)

Opportunities: Threats:
1. 1.
2. 2.
3. 3.
From ST Strategies
Strengths: SO Strategies
Internal Analysis Take advantage of
(IFAS) 1. Use strengths to
Strengths to
2. take advantage
avoid
3. of opportunities
threats
WT Strategies
Weaknesses:
WO Strategies Defensive strategies
1.
Use Opportunities to to minimize
2.
overcome weaknesses weaknesses and
3.
avoid threats

83
TOWS Matrix illustrates how the external opportunities and threats facing a
particular corporation can be matched with that company’s internal strengths and
weaknesses to result in four sets of possible strategic alternatives.

Strengths
Weakness

Opportunities

Threats

84
Environmental Threat and Opportunity Profile (ЕТОР)

Due to complexity in environmental factors, for a Strategy Maker, it becomes


difficult to interpret sometimes between opportunities (O) and threats (T).

A matrix of comparison is drawn where one item or factor is compared with


other items after which the scores arrived at are added and ranked for each
factor and total weight age score calculated for prioritizing each of the factors.

Notes:

1. This is achieved by brainstorming. And finally the Strategy Maker uses his
judgment to place various environmental issues in clear perspective (O or
T) to create the environmental threat and opportunity profile.
2. It should be clearly understood that each sector is not exclusive of the
other. If required each of the major factors pertaining to a particular sector
of environment may be divided into sub-sectors and their effects studied.
3. The field force analysis goes hand in glove with ETOP, as here also the
contribution with regard to opportunities and threats posed by the
environment is also a necessary part of study.
85
Environmental Nature/ Impact of Weighage Conditions/ Logic
Factor (depending Each Factor (May be time/ future
upon Industry/ Sector) dependent)
(O or T)
Social (1) ↑ ↓ ↔ ǁ
Social (2) ↑ ↓ ↔ ǁ
Political ↑ ↓ ↔ ǁ
Economic (1) ↑ ↓ ↔ ǁ
Economic (2) ↑ ↓ ↔ ǁ
Technological ↑ ↓ ↔ ǁ
Regulatory ↑ ↓ ↔ ǁ
Suppliers ↑ ↓ ↔ ǁ
Government ↑ ↓ ↔ ǁ
Promotional
Market ↑ ↓ ↔ ǁ
International ↑ ↓ ↔ ǁ
Natural Calamity ↑ ↓ ↔ ǁ
Recession ↑ ↓ ↔ ǁ
86
Organizational Capability Profile

Capability Factor Scale Authority Time Frame


(Weakness to
Strength)
-5 to +5
Marketing
Financial
\
\
\
\
\

87
Strategic Advantages Profile (STP)

Capability Factor Nature/ Impact of Competitive Conditions/ Logic


Each Factor Strengths and/or
Weaknesses
Marketing ↑ ↓ ↔ ǁ
Financial ↑ ↓ ↔ ǁ
Operations ↑ ↓ ↔ ǁ
MIS ↑ ↓ ↔ ǁ
HR ↑ ↓ ↔ ǁ
\ ↑ ↓ ↔ ǁ
\ ↑ ↓ ↔ ǁ

88
KPI – Key performance Indicator

KSF – Key Success Factor(s)

KRA – Key Result Areas

(Discussion in the classroom)

89
Flow : To be understood meticulously
(Basic Model of Strategic Management)

Mission Environmental Review Strategy Strategy Evaluation


Vision Scanning (Carefully) Formulation Implementation (Performance
Values (Both Internal & (Program, Budget & Feedback)
External) & Procedure)

90
Types of Strategies

(On many Classifications)

Based upon Organizational Structure is Important

A. Corporate Strategy (Follows Corporate Objectives)


B. Business Strategy (Follows Business Objectives)
C. Functional Strategy (Follows Departmental Objectives)

91
Corporate Level Strategy

At the corporate level, strategies are formulated according to organization


wise policies. These are value oriented, conceptual and less concrete than
decisions at the other two levels. These are characterized by greater risk,
cost and profit potential as well as flexibility. Mostly, corporate level
strategies are futuristic, innovative and pervasive in nature. They occupy
the highest level of strategic decisions making and cover the actions
dealing with the objectives of the organization. Such decisions are made
by top management of the firm.

The example of such strategies includes acquisition decision,


diversification, structural redesigning etc. The Board of director and the
Chief Executive officer are the primary groups involved in this level of
strategy making. In small an family owned businesses, the entrepreneur is
both the general manager and chief strategic manager.
92
Business Level Strategy

The strategies formulated by each SBU to make best use of its resources
given the environment it faces, come under the gamut of business level
strategies. At such a level, strategy is a comprehensive plan providing
objectives for SBUs, allocation of resources among functional areas and
coordination between them for achievement of corporate level objectives.
These strategies operate within the overall organizational strategies i.e.
within the broad constraints and polices and long-term objectives set by
the corporate strategy. The SBU managers are involved in this level of
strategy. The strategies are related with a unit within the organization. The
SBU operates within the defined scope of operations by the corporate level
strategy and is limited by the assignment of resources by the corporate
level. However, corporate strategy is not the sum total of business
strategies of the organization. Business strategy relates with the “how”
and the corporate strategy relates with the “what”. Business strategy
defines the choice of product or service and market of individual business
within the firm. The corporate strategy has impact on business strategy.
93
Functional Level Strategy

This strategy relates to a single functional operation and the activities


involved therein. This level is at the operating end of the organization.
The decisions at this level within the organization are described as
tactical.

The strategies are concerned with how different functions of the


enterprise like marketing, finance, manufacturing etc. contribute to the
strategy of other levels. Functional strategy deals with a relatively
restricted plan-providing objective for specific function, allocation of
resources among different operations within the functional area and
coordination between them for achievement of SBU and corporate level
objectives.

94
Strategic Decision at Different Levels

Dimensions Levels

Corporate Business Functional

Impact Significant Major Insignificant

Risk Involved High Medium Low

Profit Potential High Medium Low

Time Horizon Long Medium Low

Flexibility High Medium Low

Adaptability Insignificant Medium Significant

95
from

Situational Analysis

to

Strategy Formation

96
Situational Analysis

Firm Based Deptt Based Industry/ Business House Based

Review Review Review

Business Strategy Functional Strategy Corporate Strategy

Policy Making (B) Policy Making (F) Policy Making (C)

97
Strategic Management Process

98
Strategic Thinking (view of top strategies level)

It is a process of developing or examining


the assumptions about the future upon which the
organization's mission, goals, objectives and strategies
are based to evaluate; whether they still reflect
and realistic the organizational focus.

Business is more an Art than Science

Market competition demonstrates characteristics of both art


and science. Owing to the vagaries of human behavior and the
countless other intangible factors which contribute to it, there
is far more to the conduct of market competition than can be
explained by science…We thus conclude that the conduct of it
is ultimately an art, an activity of human creativity, psychology
and intuition powered by the human will.
99
“It may be hard for an egg
To turn into a bird:
it would be a jolly sight harder
for it to learn to fly
while remaining an egg.
We are like eggs at present.
and you cannot go on indefinitely
Being just an ordinary decent egg.
We must be hatched or go bad.”
--C.S. Lewis

100
where
we
are

??? Soaring

In The
Box
Of
Mediocrity

Poor trying
to become Faltering
good

Strategic Thinking

101
Seeking new strategic opportunities

Collection of hard data Collection of soft data


(the scientific skills) (the perceptual skills)

The Intuitive
The Rational

Accumulation of facts and Accumulation of uncertainties


evaluation of probabilities and ambiguities

Use of analytical models to Use of intuition to define


define the opportunities the opportunities

Unique interpretation
of the strategic opportunity

Making choices about the future on inadequate information


102
Technology Readiness Levels (TRLs)
and
S – Curve

103
Technology Readiness Levels (TRLs)

TRLs is a method of estimating technology maturity of Critical


Technology Elements (CTE) of a program during the acquisition
process. They are determined during a Technology Readiness
Assessment (TRA) that examines program concepts, technology
requirements, and demonstrated technology capabilities.

TRL are based on a scale from 1 to 9 with 9 being the most mature
technology. The use of TRLs enables consistent, uniform discussions
of technical maturity across different types of technology.

A comprehensive approach and discussion about TRLs has been


published by the European Association of Research and Technology
Organisations (EARTO). Extensive criticism of the adoption of TRL
scale by the European Union was published in The Innovation Journal.

104
Technology
Description
Readiness Level
TRL 1. basic principles observed
TRL 2. technology concept formulated
TRL 3. experimental proof of concept
TRL 4. technology validated in lab
technology validated in relevant environment (industrially
TRL 5. relevant environment in the case of key enabling
technologies)
technology demonstrated in relevant environment
TRL 6. (industrially relevant environment in the case of key
enabling technologies)
system prototype demonstration in operational
TRL 7.
environment
TRL 8. system complete and qualified
actual system proven in operational environment
TRL 9. (competitive manufacturing in the case of key enabling
technologies; or in space)
105
Note: S – Curve

What the S-Curves Reveal

Mature
Technology

Product New
Performance Technology

Research Effort/Expenditure

106
National Diamond
Competitive advantage of Nations (Porter 1990)

Model covers

- Innovation an industry needed to compete


internationally.
- Whereas Government had been a background factor.
- Matter of change.
- It has four key components (1. firms rivalry based on
strategy and structure, 2. related and supporting
industries, 3. input factor condition and 4. demand
condition)

107
Porter’s Diamond of National Competitive Advantage

Firm Strategy, Structure and Rivalry – the condition in the


nation governing how companies are created, organized and
managed as well as the nature of domestic rivalry

Demand Condition – the nature of home market demand for


the industry’s product and services.

Factor Condition – the nation’s position in the factors of


production such as skilled labor, or infrastructure, necessary
to complete in a given industry.

Related and Supporting Industry – the presence and absence


in the nation of supplier industries and other related
industries that are internationally competitive.

108
Government’s steps in
improving all four factors

Government

Chance (and time) enters


into the original factor
condition or into timing of
innovations

Chance

109
Companies in the cluster,

Firm Strategy, Structure and Rivalry: The world is dominated by dynamic


conditions and it has direct competition that impels firms to work for increase in
productivity and innovations.

Demand Condition: The more demanding the customers in an economy, the


greater the presence facing firms to constantly improve their competition via
innovative products through high quality.

Related and Supporting Industry : Exchange of information and promotes


continuous change of idea and innovations.

Factor Condition: Key factors (like skilled labor, capital and infrastructure) of
production are created and are not inherited. Non-key factors (unskilled labor,
raw materials etc.) are general use factors.

1. Government acting as catalyst or changer for any/all the above factors.


2. Chance can play important change.

110
Free Vs. Crony Capitalization

Free market capitalism can be defined as "a system wherein individuals are free to
pursue their own interests, make voluntary exchanges, and hold private property rights
in goods and services." Allowing consumers and producers to trade at mutually agreed
upon prices, free market capitalism is a system characterized by voluntary rather than
coercive exchange. In such a system, the role of government is
limited: protecting individuals' basic rights as applicable.

Whereas crony is a description of capitalist society as being based on the close


relationships between businessmen and the government. Especially in communist or
socialist states.
Instead of success being determined by a free market and the rule of law, the success
of a business is dependent on the favoritism that is shown to it by the ruling
government in the form of tax breaks, government grants and other incentives.

Crony Capitalism Index


The Economist benchmarks countries based on a ‘Crony Capitalism Index’ calculated via
how much economic activity occurs in industries prone to cronyism. Its 2014 Crony
Capitalism Index ranking listed Hong Kong, Russia and Malaysia in the top 3 spots.

Compassionated capitalization: Feeling or showing compassion i.e. sympathetic.


111
There are good chances that crony capitalization may augment corruption.

Now to handle such corruption; state go for corruption outsourcing.

Lobby based and logic based bribery system.

Lobby groups or advocacy groups, pressure groups, campaign groups, interest groups,
or special interest groups (motives for such action may be political, religious, moral
and/or commercial)

Note: When we talk about ethics or compliance; we must understand that We can
improve our compliance only if we see value in it , not under pressure to integrate into
international supply chains because they are concern for quality and price (may be
apparently compliance) and are not concerned about our compliances.

Evidence

1)Tirupur factories were considered as fully compliant by Wall mart s , Ikea s , H and M s
etc. until the supreme court ordered their closure for mass violation of pollution
treatment norms
2) All Bangladesh factories were considered Compliant by the same International retail
chains until a few came crashing down and exposed total lack of safety exits and other
base minimum factory safety standards. 112
Note: VCs/ Angels and Entrepreneur in MARKET

Market Angel Investor(s) Entrepreneur

Strategies

113
Corporate Strategy

114
Outcome of Situational Analysis
(Industry/ Business House Based)

Directional Strategy Portfolio Analysis/ Strategy Parenting Strategy


-BCG Matrix
-GE Business Screen

Growth Stability Retrenchment

Concentration Diversification

Vertical Horizontal Concentric Conglomerate

Recommendation after Logical Extract

Policy Making 115


Growth Strategy

Concentration (look at next slide)

A. Vertical – 1. Forward (Arvind Mills)


2. Backward (Asian Paints; purchasing Pentasia Chemicals)
B. Horizontal – IBM (purchasing Daksh), Shehnaz, Habib, Lorel etc

Diversification (look at next to next slide)

A. Concentric – Related (Amul)


B. Conglomerate – Unrelated (ITC)

Discussion in the Classroom

116
Concentration

Nature, Beyond Control


A

D1 D2 D D3 D4

G
Consumer, End Customer

117
Diversification

I -2 I -1 I -3
F1
F1’ F3 F1”
F2

F1 (+ F2+ F3) F1 (+ F1’ + F1”)

118
Outcome of Situational Analysis
(Industry/ Business House Based)

Directional Strategy Portfolio Analysis/ Strategy Parenting Strategy


-BCG Matrix
-GE Business Screen

Growth Stability Retrenchment

Pause/ Proceed with Caution No Change Strategy Profit Strategy

Recommendation after Logical Extract

Policy Making 119


Stability Strategy
a) To prolong growth and maturity phase
b) To prolong cash cow phase
c) To minimize risk at cost leadership/ product differentiation
d) To maximize the profit at niche market/ short term

Proceed/ Pause with Caution Strategy (look at next slide)

A. Sudden increase in growth – Firms cannot handle properly


B. Starting of decline phase – Firm cannot cut cost/ manpower suddenly

No Change Strategy

A. Growth is limited and fix & no need to spend


(innovation stage; as market is not booming)
B. Let the business Phase Change and wait for the opportunity

Profit Strategy

A. Temporary Strategy to give artificial support to get profit anyhow


by reducing investment
B. It should be used for very short time & if used for longer run;;
may proven to be dangerous

Discussion in the Classroom


120
Proceed/ Pause with Caution Strategy

A. Sudden increase in growth – Firms cannot handle properly


B. Starting of decline phase – Firm cannot cut cost/ manpower suddenly

Pause Look Understand

Entrepreneurial
Result Exercise

Proceed Sample Test Calculate Risk

121
Outcome of Situational Analysis
(Industry/ Business House Based)

Directional Strategy Portfolio Analysis/ Strategy Parenting Strategy


-BCG Matrix
-GE Business Screen

Growth Stability Retrenchment

Turn Around Captive Company Sellout/ Divestment Bankruptcy/ Liquidation

Contraction Consolidation

Recommendation after Logical Extract

Policy Making 122


Retrenchment Strategy
May be required when,,,

Poor Management, Fund Problems, Making, Obsolescence, Unfeasible improvements,


Level of Competition, Local Environment etc.

Turnaround

A. Contraction – Stop the Bleeding


B. Consolidation – Minimize Overheads
(Admin, Factory, WH, SR and Transportation)

Captive
to become captive company to other profit making companies

Sellout/ Divestment
Fully/ Partially

Bankruptcy/ Liquidation
Role of SICA/ BIFR

Discussion in the Classroom


123
Directional Strategies are done through

A. Exporting
B. Licensing
C. Franchising
D. Joint Venture
E. Acquisitions
F. Wholly Own Subsidiaries
G. OEM/ Contract Manufacturing
H. Greenfield Development
I. Production Sharing
J. Turnkey Projects
K. BOT (Build – Operate – Transfer)
L. Management Contract
M. Government Stakes

124
Portfolio Analysis/ Strategy

- BCG Matrix (created by Bruce D. Henderson for


the Boston Consulting Group in late 1960s
approx. 1969)

- GE Business Screen (created by Mc Kinsey with


GE in the early 1970s approx. 1971)

125
The BCG Matrix

Invest
???
STAR PROBLEM
High
Market Growth Rate

>10% CHILD
Reinvest
No
Invest

Low
<10% Divest

Cash Flow
CASH COW DOG

Tool 10 1 0
Relative Market Share

126
22%
(say)
Stars ?
Some cash use High cash use
Future cash cow ? Is to build or not

Market Growth 10%


Rate
Cash Cows Dogs
Generate cash for Low or no cash use
?, Stars When to divest

0%
10x 1.0x 0.1x (log scale)

Relative Market Share


(??)

127
Management Strategies

22%
(say) Stars ?
Growth or
Growth Retrenchment
Strategy Strategy
Market Growth 10%
Rate Cash Cows Dogs

Modest Growth Retrenchment


or Stability Strategy Strategy
0%
10x 1.0x 0.1x (log scale)

Relative Market Share


(??)

128
Limitations

1. High Market Share is not the only Success Factor


2. Market Growth is not the only indicator for attraction of a market
3. ‘?’ is not very clear at different situations
4. Sometimes ‘Dogs’ can generate more cash than ‘Cash Cow’
5. It’s a 2 * 2 matrix with four factors

129
The General Electric Model

High
MARKET ATTRACTIVENESS

3.33
Medium

1.67
Low

0
5 Strong 3.33 Medium 1.67 Weak 0

BUSINESS STRENGTH

130
How to Evaluate Market Attractiveness and Business Strength
(know the attributes)

Overall Rating
Weight Rating Value
Market Attribute 1 Sales Volume 0.4 3 1.2
Attractiveness Attribute 2 Market Growth Rate 0.2 5 1.0
Attribute 3 Competitive Intensity 0.4 4 1.6
3.8
Overall Rating
Weight Rating Value
Business Attribute 1 Market Share 0.2 5 1.0
Strength Attribute 2 Brand Reputation 0.3 5 1.5
Attribute 3 Distribution Coverage 0.1 4 0.4
Attribute 4 Unit Cost 0.4 3 1.2
4.1

131
5

High
MARKET ATTRACTIVENESS
3.33
Medium

1.67
Low

0
5 Strong 3.33 Medium 1.67 Weak 0

BUSINESS STRENGTH

132
Management Strategies

5
Protect Invest Build
High
MARKET ATTRACTIVENESS

Position to Build Selectively


3.33
Medium

Selectivity/ Limited
Build
Manage for Expansion
Selectively
Earnings or Harvest
1.67

Protect and Manage for


Low

Divest
Refocus Earnings
0
5 Strong 3.33 Medium 1.67 Weak 0

BUSINESS STRENGTH

133
Parenting Strategy

Patenting Strategies
Firm
Parent Company XYZ
Pulling Company

Firm’s Strategy

134
Outcome of TOWS Matrix
(SWOT Strategies)
|
Competitive Analysis
(a) Cost Leadership
(b) Differentiation
(c) Cost Focus
(d) Differentiation Focus
|
Cooperative Strategy
(a) Synergy
(b) Alliance
(c) JV
(d) Mutual Agreements
|
Strategic Alternatives
|
Recommended Strategies
|
Policy Making

135
Business Strategy
Ansoff product/market matrix
Porter’s Competitive Strategies

136
Ansoff product/market matrix

Note:

H. Igor Ansoff (December 12, 1918 – July 14, 2002) was


a Russian American applied mathematician and business
manager. He is known as the
father of strategic management.

137
Ansoff product/market matrix (first given in a paper 1957 and then in his
book ‘Corporate Strategy’ in 1965)
The output from the Ansoff product/market matrix is a series of suggested
growth strategies that set the direction for the business strategy.

138
Market penetration
Market penetration is the name given to a growth strategy where the business
focuses on selling existing products into existing markets. Market penetration seeks
to achieve four main objectives:

• Maintain or increase the market share of current products – this can be achieved
by a combination of competitive pricing strategies, advertising, sales promotion
and perhaps more resources dedicated to personal selling

• Secure dominance of growth markets

• Restructure a mature market by driving out competitors; this would require a


much more aggressive promotional campaign, supported by a pricing strategy
designed to make the market unattractive for competitors

• Increase usage by existing customers – for example by introducing loyalty


schemes
A market penetration (marketing strategy) is very much about “business as usual”. The business is
focusing on markets and products it knows well. It is likely to have good information on competitors and
on customer needs. It is unlikely, therefore, that this strategy will require much investment in new
market research. 139
Market development

Market development is the name given to a growth strategy where


the business seeks to sell its existing products into new markets.
There are many possible ways of approaching this strategy, including:

• New geographical markets; for example exporting the product to a


new country

• New product dimensions or packaging: for example

• New distribution channels

• Different pricing policies to attract different customers or create


new market segments

140
Product development

• Product development is the name given to a growth strategy where


a business aims to introduce new products into existing markets.
This strategy may require the development of new competencies
and requires the business to develop modified products which can
appeal to existing markets.

Diversification

• Diversification is the name given to the growth strategy where a


business markets new products in new markets.
• This is an inherently more risk strategy because the business is
moving into markets in which it has little or no experience.
• For a business to adopt a diversification strategy, therefore, it must
have a clear idea about what it expects to gain from the strategy
and an honest assessment of the risks.

141
Porter’s Competitive Strategies

142
What is Competitive Advantage?

There are two basic types of competitive advantage

1. Cost leadership (Seeks to operate at lower costs than competitors) and


2. Differentiation (Offers products and services that are uniquely different from the
competition)

(Done by i. making, ii. maintaining and iii. exploiting competitive advantages)


by means of core competencies (capabilities and resources)

A third one is generated in being narrow for either cost leadership or differentiation
or amalgamation of both (low cost and high differentiation).

3 (a). Focused Cost Leadership Strategy (Uses cost leadership and target needs of a
special market)
3 (b). Focused Differentiation Strategy (Offers a unique product to a special market
segment)

143
What is Competitive Scope?

Demand-Side Supply-Side
dimension and dimension
looks at the size Strategic Competitive Strategic and looks at
Scope Scope Strength the strength
and composition
of the market or core
you intend to competency
target. of the firm.

Amalgamation of Both (by any ratio will give special edge)

i.e. Low Cost + High Differentiation

i.e. low cost competency + uniqueness competency


(through Technology + Investing Surpluses)

144
Decision & Action necessary
to (within a given product market)

Maintaining Exploiting Competitive


Gaining Competitive Competitive Advantage (By finding
Advantage (an edge Advantage ways to use resources
over competitors) (maintaining the and capabilities better
edge) than competitors)

Competitive Advantage
Lower Cost Differentiation

1. Cost 2. Differentiation
Broad Target
(total market) Leadership
Competitive
Scope 3 (a) 3 (b)
Narrow Target
(niche market) Cost Focus Differentiation
Focus

145
Differentiation

Niche Markets
Rising Costs

The Death Zone


(Risk-Associated)

Cost Leadership

146
Risks Associated

(i) Risk in Cost Leadership

a. Competitors Intimated (specially by late entrants; who


have advantage of late/ last movers)

b. Technology Transfer (Technological change that erases


past investments and outdates past learning)

c. Lack of attention to the needs and preferences of


customer due to excessive concerns for cost
minimization.

d. Unexpected inflation in costs that reduces the firm’s


ability to offset product differentiation through cost.

e. Dumping from Other countries

f. Others

147
(ii) Risk in Differentiation

a. Increased cost differential between low cost producers and


the differentiating firm will motivate brand loyalty
customers to switch brands. (Thus, buyers would sacrifice
some additional features and image for huge savings in
cost)

b. If a differentiating firm lags behind too much, a low cost


firm may take over the market of the differentiating firm.

c. Not for long time (Imitation might narrow down the


perceived difference)

d. If differentiation is not unique, it will bring negligible effect.

e. Others

148
(iii) Risk in being Focused

a. Increasing cost differentiated may turn the


customers towards firms that offer a broad
range of products.

b. Perceived or actual differences between


products and services might disappear.

c. Other firms might find submarkets within the


target market of the focus firm and out focus
the focuser.

149
Competitive strategies with five industry forces
(depending upon industry)

Industry: ………………………… Competitive strategies


Firm: ……………………………..
Products: ………………………. Cost leadership Differentiation Focused

Entry Barrier
Five industry forces

Buyers’ Power

Suppliers’ Power

Thread of substitute

Competitive Rivalry

150
Cooperative Strategy

1. Synergy

2. Alliance

3. JV

4. Mutual Agreements

151
Synergetic Strategies for competitive forces

1. A = X+Y+Z (if Y > X, Y > Z then A > Y)


2. A = X+Y+Z (for all condition A > X + Y + Z)
3. A = X+Y+Z (exactly A = X + Y + Z)
4. A=P (when X ≠ P, Y ≠ P, Z ≠ P)

1. Barrier to new entrant


2. Bargaining Power of Suppliers
3. Bargaining Power of Buyers
4. Threats from the Substitute Products

152
Functional Strategy

153
Outcome of TOWS Matrix
(SWOT Strategies)
|
A. Financial Strategy
B. Marketing Strategy
C. HR Strategy
D. Purchasing Strategy
E. Operational Strategy
F. Logistics Strategy
G. Information System Strategy
H. Service Strategy
I. R&D Strategy
|
Strategic Choice
|
Recommended Strategies
|
Policy Making

154
Note. Gap Analysis

Gap Analysis is a strategic planning tool that helps a company to


compare its actual performance with its potential performance.

"Where are we?" "Where do we want to be?"

If a company or organization is not making the best use of its


current resources or is forgoing investment in capital or
technology, then it may be producing or performing at a level
below its potential.

Once the general expectation of performance in the industry is


understood, it is possible to compare that expectation with the
company's current level of performance

155
Usage Gap = Market Potential – Existing Usage

Data from Marketing Research

Formulating Marketing Strategies

Other important Gaps are 1. Product Gap 2. Competitive Gap

and tools are Segmentation, Positioning, Feedback

156
Profit Gap Analysis

A profit gap analysis is a tool for establishing where a


business stands relative to target profits. It is intended to do
three things: establish profit goals, identify current profits
and determine the gap between the two.
Goals.

A profit gap analysis begins with the establishment of a set


of profit goals. Profit goals can include things like gross
profit, profit margin or return on investment. These goals
should be specific figures, such as a goal of having an annual
profit of INR 5,000,000.

157
Current State

A profit gap analysis measures the current


performance levels of a company with respect to
profit. The metrics measured in the current state are
the same metrics that are used for the goals; they
should also be specific figures.

Gap

The most important part of a gap analysis is the


establishment of a gap. A gap is established by
measuring the difference between the goal profits and
the current profits. For example, if you have a target
profit of INR 1,000,000 and current profits of INR
100,000, then there is a gap of INR 900,000.

158
Sales Gap – Product wise

Break-even Analysis
Margin of Safety

Risk Gap – Risk wise

159
Different Functional Strategies

Discussion in the classroom

160
Strategy Implementation

For a new firm

For an existing firm

161
Steps,

1. Program, Budget and Procedure


2. Corporate Development Structure (04 stages)
3. Organization Life Cycle (05 stages)
4. Work Force (04 Items)
5. Culture and Values
6. Motivation
7. Evaluation and Control

162
Program

1. Present Strategies are running in the organization


2. New strategies are to be implemented
3. Common Strategies are to be sorted out
4. Strategies which have common purpose should be sorted out
5. Final Strategies are to be framed
6. Priorities is to be given
7. Gradually strategies are induced
8. Company’s alignment should be maintained
9. Work on the strategies to be ruled out or deferred or diluted

163
Program, Budget & Procedure

Lets Understand from four notes

164
Note

A. If we compare the strategies we have three classification at particular time

1. Complementary Practices +
2. Interfering Practices –
3. No Interaction Practices ‘Blank’ or ‘Dot’ (.)

B. Scale of Strategic Importance

+2 +1 0 -1 -2
Very Somewhat Irrelevant Sometimes Significantly
Important Important Interfering Interfering

165
C. Table of Strategies (whether existing or new)

Strategy Existing/ New Strategies or Practices Importance

Main Strategy 1 ------------------------------------------------- +2


------------------------------------------------- -1
Main Strategy 2 ------------------------------------------------- 0
+ ------------------------------------------------- +2
-
------------------------------------------------- +1
Main Strategy 3 ------------------------------------------------- 0
Main Strategy 4 ------------------------------------------------- 0
------------------------------------------------- -2

166
D. Matrix of Change

1. Frame 2. Priorities
3. Budget 4. Structure (04*)
5. Procedure (Action Plan)

* Next Slide

167
Structure

1. One Man (Proprietor or with Other Sleeping Partners)


2. SBU
3. SBUs
4. Beyond SBUs

168
Organization Life Cycle

1. Old Organization Design Vs New Organization Design


2. Organizational Life Cycle
3. Other linked life cycles

169
Structure Characteristics of Modern Corporation

(Note that these are also dependent upon type of industries/ product)

S. No. Old Organization Design New Organization Design


1 One large Corporation Multi Business Corporation
2 Vertical Communication Horizontal Communication
3 Centralized Decision Making Decentralized
4 Vertical Communication Out Sourcing
5 Work Quality Team Autonomous Work Team
6 Functional Work Team Cross Functional
7 Minimal Training Extensive Training
8 Individual Focused Value Chain Focused

170
Organizational Life Cycle
Structure

Stage Stage Stage Stage Stage


I II III IV V

Time
171
Organizational Life Cycle

Birth Growth Maturity Decline Death

Niche Horizontal Concentric & Profit Liquidation


& Vertical Conglomerate
Entrepreneur Functional Entrepreneur Structure Dismemberment
Dominated Management Dominated Surgery of Structure

172
Evolution and Revolution as Organizations Grow

Greiner’s 4 Stages of Organizational Structure

1. Crisis of Leadership
2. Crisis of Autonomy
3. Crisis of Control
4. Pressure Cooker Crisis (Internal growth crisis or red-tape crisis)

Note:
Larry E. Greiner originally proposed this model in 1972 with four stages
(five phases) of growth.
In 1998, he added a sixth phase in an updated version of his original
article.

5. Crisis of Growth (specially at times of merger, acquisition,


outsourcing etc.)

173
Functions Stage I Stage II Stage III Stage IV
Simple Functional Divisional Matrix
Structure Structure Structure Structure
Sizing Up Survival & Growth & Diversification, Merger,
Growth Expansion Action at Decision at
divisional level corporate
level
Objectives Subjective Meeting ROI, Profit, Multi-business
Functionally EPS etc
Strategy Implicit & One Product Diversification
Personal
Structure One Man One Unit Multi-unit Multi-purpose
show
Communicatio Daily & Direct Structured Complex
n Control Formal System
System
Control Direct Direct & Functional & Reporting
Functional Informal Officer (s)
Reward & Informal More By ‘Due
Punishment Structured Process’
174
Stage I Stage II Stage III Stage IV Stage V
Simple Functional Divisional Matrix Complex
Structure Structure Structure Structure Matrix
Expansion Expansion Expansion Expansion Expansion
through through through through through
Creativity Direction Delegation Co-ordination Collaboration

Crisis of Crisis of Crisis of Pressure- Growth Crisis


Leadership Autonomy Control Cooker Crisis

Greiner’s Five Stages of Organizational Structure

175
Growth &
Renewal crisis

Collaboration phase
Red-tape crisis

Coordination phase
Control crisis

Autonomy Delegation phase


crisis

Leadership Directional phase


crisis

Creativity &
Entrepreneurial phase
176
177
Organization’s Name
Risk and opportunities Assessment Form

Date:

Data to be filled by Heads/ Stake holders

TABLE (Next Slide)

178
Risk No.
Process Title

Risk Description/

Note:-
Identification
Risk Identification

Consequence of Risk (CoR)

Likelihood Rating of Risk (X)


(1- VU, 2-U, 3- P, 4-L, 5-VL)
Impact Rating of Risk (Y)
(1- I, 2-L, 3-M, 4-H, 5-VH)
Risk Rating (RR)
RR = X * Y
Evaluation

Risk Significance
Risk Assessment and

(R=1 to 4 Low, R = 5 to 12
Medium, R = 15 to 25 High)
Action decided to be taken to
X – VU (Very Unlikely), P (Possible) and VL (Very Likely) reduce Risk Significance
Activity I/C for taking action
Possible
Opportunities

Action(s) to be taken w.e.f.


Risk Treatment/

Y – I (Insignificance), L (Low), M (Medium), H (High) and VH (Very High)

(Date)

What Monitoring is Reqd


179

Comments (if any)


Detailed discussion in the Class Room

Exercise is Required

180
Leadership

Phenomenon – Socio-political

Human Resource

181
3000 BC The Age of Philosophers (Aristotle. Plato)
2000 BC Political Turmoil (Papyrus)
1000 BC Age of Learning (Palm leaf manuscripts)
1000 AD Theosophy (Parchment and block printing)
1700 AD Industrial Revolution
1950 AD Management by Objective
1960 AD Centralization and decentralization
1970 AD Automation
1980 AD Downsizing
1990 AD Market Valuation
2000 AD Knowledge Management

182
Adam Smith, Political- Father of economics Looked at techniques of pin manufacturing
Economist to illustrate how the division of labor can
(1723-1790, Scottish) produce economic efficiency
Karl Marx, Philosopher- One of the founders of Given theory of capital in 1867.
Economist (1818-1883) sociology.
Max Weber, Sociologist Given theory of Types of Authority: Traditional: inherited |
(1864-1920) bureaucracy and types of Charismatic: attraction | Rational-Legal:
authority technical abilities
Frederick Winslow Taylor, Father of scientific mgmt: Developed work standards, uniform work
Engineer applied to maximize the methods, order-of-work sequences,
(1856-1915) benefits to employees, methods of placing workers, methods of
employers, and society. supervision, and incentive schemes.
Henri Fayol, Engineer, CEO, Developed administrative 3 terms out of six given by Henri Fayol
Administrative Theorist principles (forecasting, planning, organizing,
(1841-1925) commanding, coordinating and controlling)
in the year 1990 are in definition of
management.
Luther H. Gulick, Developed a science of Defined the work of the chief executive
Administrative Theorist administration through POSDCoRB i.e. Planning,
(1892-1992) Organizing, Staffing, Directing,
Coordinating, Reporting, Budgeting

183
What is Human Resource Management (formerly personnel management)

The process of hiring and developing employees so that they become more
valuable to the organization.

Human Resource Management includes

conducting job analyses, planning personnel needs, recruiting the right people
for the job, orienting and training. Managing wages and salaries, providing
benefits and incentives, evaluating performance, resolving disputes, and
communicating with all employees at all levels.

Examples of core qualities of HR management are extensive knowledge of


the industry, leadership, and effective negotiation skills.

184
The ‘universalistic perspective approach’ suggests that a specified set
of HR practices (the so-called ‘best practices’) will always produce
superior results whatever the accompanying circumstances. It
emphasise that ‘internal fit’ or ‘horizontal fit’ or ‘alignment of HR
practices’ helps to significantly improve an organisation’s
performance.

The ‘contingency approach’ suggests that an organisation’s set of


HRM policies and practices will be effective if it is consistent with
other organisational strategies i.e. ‘External fit’ matters.

The ‘configurational approach’ or ‘HRM as bundles’ model argues


that to claim a strategy’s success turns on combining internal and
external fit. This approach makes use of the so-called ‘bundles’ of HR
practices, which implies the existence of specific combinations or
configurations of HR practices depending on corresponding
organisational contexts, where the key is to determine which are the
most effective in terms of leading to higher business performance.

185
What is Charismatic Leadership? Max Weber, a sociologist, was the first scholar
to discuss charismatic leadership. More than a century ago, he defined charisma
(from the Greek for “gift”) as “a certain quality of an individual personality, by
virtue of which one is set apart from ordinary people.

These are not accessible to the ordinary person, but are regarded as of divine
origin or as exemplary, an on the basis of them the individual concerned is
treated as a leader.” Weber argued that charismatic leadership was one of several
ideal types of authority.

Key Characteristics of Charismatic Leaders

Vision and articulation. Has a vision- expressed as an idealized goal- that


proposes a future better than the status quo; and is able to clarify the
importance of the vision in terms that are understandable to others.
Personal risk. Willing to take on high personal risk, incur high costs are engage in
self-sacrifice to achieve the vision.
Sensitivity to follower needs. Perceptive of others’ ability and responsive to their
needs and feelings.
Unconventional behavior. Engages in behaviors that are perceived as novel and
counter to norms.
186
Leadership from last 100 years
1900’s the great man it’s an innate ability; who is born to lead?
theories
1930’s group theory how leadership emerges and develops in small
groups.
1940’s-50’s trait theory what universal traits (qualities/ characteristics/
personalities) are common to all leaders.
1950’s- 60’s behavior theory what key behavioral patterns result in leadership.
1960’s-70’s contingency/ establish which leadership behaviors succeeded in
situational specific situations.
1978 MacGregor Burns introduced the concept of Transformational
leadership in his book Leadership, during his study of political
leadership; later the same term used in organizational psychology as
well.
1980’s excellence what interaction of traits, behaviors, key
onward situations, and group facilitation allows people to
lead organizations to excellence?

187
What is Knowledge?

The Old Pyramid

- Data

- Information

- Knowledge

- wisdom

188
From Facts to Wisdom
(Haeckel & Nolan, 1993)
one example of the hierarchy

Volume Less is Value


Completeness More Structure
Objectivity Wisdom Subjectivity

Knowledge

Intelligence

Information
Facts

189
What is Knowledge?

1. Knowledge is intangible, dynamic, and difficult to


measure, but without it no organization can survive.

2. Information that changes something or somebody—


becoming grounds for action by making an
individual, or institution capable of different, more
effective action

Knowledge from Intra to Inter: Learning organization

190
The Learning and Communication Process Model

• Innovation is a way of life


• Flexibility and the ability to act quickly is
necessary in a changing environment
• New projects can benefit from alliances and
learning from in-house experts and creative
thinkers.

191
So…what is knowledge management?
• “Knowledge management (KM) is an effort to
increase useful knowledge within the
organization. Ways to do this include
encouraging communication, offering
opportunities to learn, and promoting the
sharing of appropriate knowledge artifacts.”

McInerney, C. (2002). Knowledge


management and the dynamic nature
of knowledge. JASIST, 53 (2).

192
From “Leadership” Burns (1978)

• Transactional leadership: occurs when one person takes the initiative in making
contact with others for the purpose of an exchange of valued things.
In other words it motivate followers by appealing to their own self-interest.
Transactional leaders use conventional reward and punishment to gain compliance
from their followers.

• Do as I say and you will get a raise.


• Meet this quota or you will get fired.

• Transformational leadership: occurs when one or more persons engage with


others in such a way that leaders and followers raise one another to higher levels
of motivation and morality.”

In Maslow’s hierarchy of Needs, Transformational Leadership would fit into


the higher levels, as it requires a high level of authenticity, self esteem and self
actualization to successfully be a Transformational Leader.

193
Transactional Leader

Contingent Reward: Contracts exchange of rewards for effort, promises rewards for
good performance, recognizes accomplishments.
Management by Exception (active): Watches and searches for deviations from rules
and standards, takes correct action.
Management by Exception (Passive): Intervenes only if standards are not met.
Laissez-Faire: Abdicates responsibilities, avoids making decisions.

Transformational Leader

Idealized Influence: Provides vision and sense of mission, instills (gradually but
firmly establish) pride, gains respect and trust.
Inspirational Motivation: Communication high expectations, uses symbols to focus
efforts, expresses important purposes in simple ways.
Intellectual Stimulations: Promotes intelligence, rationality, and careful problem
solving.
Individualized Consideration: Gives personal attention, treats each employee
individually, coaches, advises.

194
How do leaders develop the bonds necessary to make TF leadership possible?

Bernard Bass has four interrelated components (4 I) that he views as essential for
leaders to move followers into the transformational style.

First is idealized influence. Genuine trust must be build between leaders and followers.
“If the leadership is truly transformational, its charisma or idealized influence is
characterized by high moral and ethical standards.”

The second component is inspirational motivation. “Its inspirational motivation


provides followers with challenges and meaning for engaging in shared goals for all to
move forward.

Next, is intellectual stimulation, It helps followers to question assumptions and to


generate more creative solutions to problems. The leader’s vision provides the
framework for followers to see how they connect to the leader, the organization, each
other, and the goal.

Lastly, is individual consideration, Individual consideration treats each follower as an


individual and provides coaching, mentoring and growth opportunities. This approach
not only educates the next generation of leaders, but also fulfills the individuals need
for self-actualization, self-fulfillment, and self-worth.
195
Idealized Influence Moral & Ethics

Inspirational Motivation Vision & Motivation


Transformational
Leadership
Creative Problem Solving &
Intellectual Stimulation
Emotional Intelligence

Individual Consideration Training & Growth

196
Leadership through spiritual intelligence

197
Discussion in the classroom

198
What is Benchmarking?

Benchmarking is the process of measuring an organization’s


internal processes then identifying, understanding, and adapting
outstanding practices from other organizations considered to be
best-in-class.

Learning from others what they do right and then imitating it to


avoid “reinventing the wheel”.

Bottom Line: Measuring yourself against the “best in class”


199
Origins

The term 'benchmarking' was first adapted to business


practices by Xerox in 1979.

Xerox’s aim was to evaluate itself, to identify its strengths and


weaknesses and adapt to constantly changing market
conditions.

Benchmarking allows you to discover the gaps in your


performance when compared with someone else.

200
Type of benchmarking

• There are several different types of


benchmarking in which a organization can
engage.

• They may come in different forms and names


depending on individual perspectives.

• The type of benchmarking selected depends


on the measures needed and the methods
used to collect the data.

201
Some main types of benchmarking
1. Internal good practice benchmarking
2. Competitive benchmarking
3. Functional benchmarking
4. Generic benchmarking
5. Strategic benchmarking
6. Performance benchmarking
7. Process benchmarking
8. External benchmarking
9. International benchmarking
202
Basic Steps
Data
Planning
1. Planning Gathering and
Analysis

2. Analysis

3. Integration Action and


Monitoring
Integration

Benchmarking Process
4. Action and Monitoring

203
Discussion in the classroom

204
Problem Solving

Something happens which creates a problem. For eg. performance drops.

We need to find out what caused the problem


and then figure out ways to fix the problem.

The objective is to get performance back to where it should be.

For Example: A production line has an established run rate of 1000


books per hour. All of a sudden the run rate drops to 839 books per hour.
Something happened, we don't know what problem caused the production
rate to drop
by 161 books per hour. We need to find out and fix the problem
so we can get back to producing 1000 books per hour.

Problem solving is focused on closing this performance gap.

205
Creative Problem Solving

The objective is to find ways to create new levels of performance


that we haven't reached before.

For Example: We routinely produce 1000 books per hour on our


production line. In this example creative problem solving could be directed at:

finding ways to produce 1500 books per hour;


finding other ways to use the production line;
finding ways to reduce the cost to run the production line, etc.

206
Problem | Problem Solving | Creative Problem Solving

Problem

Creativity

Innovation

Idea Generation Creative Problem Solving

Do you know: what is 1) Problem Solving and 2) Creative Problem Solving

Problem Solving + Something = Creative Problem Solving

Something ► Idea

207
Target Setting
(Objectives)

for

Demonstration
Research
Advertisement
Distribution
(Strategies)
Sales
After Sales
Feedback

208
e.g. Target Setting for Sales

Goal Setting

MBO

Objective
Revised Objective
Sub-objective (with time duration)
Review
Reward

209
Monitoring Mechanism

Daily Lower Management (Report)

Weekly

Fortnight

Monthly

Quarterly

Half Yearly

Annual Higher Management (Report + Presentation)

Discussion : Format of the reports

210
Format of the Report/ Presentation

1. Objective of the Marketing Department

2. Regions for marketing

3. Environmental factors to be considered (considering 2)

4. Strategies adapted for Marketing (considering 2 & 3)

5. Target and Achievements (for sales and profit)

6. Margin of Safety

7. Special Team Efforts (if any, for recognition)

8. Gap Analysis

9. What’s Next (next strategy formulation and implementation)


211
Action Plan

Sales Team IX: RK International, East Delhi Division


Team Leader: Mr Amit Sharma
Team Members: ……, ……, ……., …….., …….., ………, ………

Program Objective
Activities 1.
2.
3.
S. No. Steps Responsibility Start - End
1.1
1.2
|
2.1
|
|
14.7
212
Balanced Scorecard (developed in 1992 by Robert Kaplan and David Norton)

Question:
How can a complex organizations achieve best possible results in middle or even short
periods of time?

Answer:
Alignment

Means:
1. The Balanced Scorecard process allows an organization to align and focus all its
resources on its strategy.
2. The Balance Scorecard is required to implement business strategies in the best
possible result oriented way.
3. The Balanced Scorecard provides a system for measuring and managing all aspects
of an organization’s performance across different perspectives.
4. A Good Balanced Scorecard Tells the Story of Your Strategy.

213
Perspectives:
Four different but linked, are derived from the organization’s strategy

Financial (Finance)
Customer (Marketing)
Internal (Supply chain)
Learning & Growth (Human Resource)

Existence:
The Balanced Scorecard is just one of three levels in the business
management process:

Top level (Corporate Level) : Company-wide Strategy maps


Middle Level (Business Level) : Balanced Scorecard
Bottom Level (Functional Level) : Initiatives

214
Connecting the Four Perspectives of an organization through BSC

A strategy map provides a visual representation of the linkages in the four perspectives

Financial Return on Investment Measure of financial success


Perspective
Repeated/ expanded sales
from existing customers, as
Customer Customer Loyalty one driver of this financial
Perspective measure

On-Time Delivery Short cycle times and high-


Internal quality production processes
are two drivers of on-time
Perspective
delivery
Process Quality Cycle Time

Learning &
Employees’ Process Improvement Skills Skilled, well trained & capable
Growth production workers
Perspective
215
Early BSC (O M T I)

Before determining the objectives and measures, an organization should already


have a vision and mission statement. High-level statements that can then be
translated into detailed objectives and measures.
216
1. Objectives:

• Concise statements that articulate what the organization hopes to


accomplish
• Action phrases
• Tell the story of the strategy through the cause-and-effect
relationships
• Extensive (3-5 sentence) description of each objective
• Typical objectives found in each of the four BSC perspectives
include:

 Increase revenues through expanded sales to existing


customers (Financial perspective)
 Become service oriented (Customer perspective)
 Achieve excellence in order fulfillment through continuous
process improvements (Internal perspective)
 Align employee incentives and rewards with the strategy
(Learning & Growth perspective)

217
2. Measures:

• Provide specificity and reduce the ambiguity that is inherent in


word statements
• Specifying exactly how an objective is measured will give employees
a clear focus for their improvement efforts
• Once the objectives have been translated into measures, managers
select targets for each measure

3. Targets establish the level of performance or rate of improvement


required for a measure

• Should be set to represent excellent performance


• Should, if achieved, place the company as one of the best
performers in its industry

4. Initiatives are the short-term programs and action plans that will
help achieve the stretch targets established for its measures.

218
New BSC

219
220
The Problem: Most of Today’s Feedback Systems Are “Controls”
Oriented means;
1. Variance deducted
2. Feedback and control loop
3. Correction applied through Management (which may not be
permanent solution)

Introduction of Balanced Scorecard is a step in the right direction…


1. Variance deducted
2. Strategic focus
3. Strategic learning (refer next slide)

corrections Balance Scorecard result

Performance

Initiatives & Programs


input output

221
Strategic Learning

The Strategy
Improve
Returns
Financial
Improve Perspective

FOLLOW-UP
Broaden Operating
Revenue Mix Efficiency

Increase Customer
Confidence in Our
Financial Advice
Increase
Customer
Satisfaction Through
Superior Execution
Customer
Perspective ACTION
Internal
“Closing the loop”
Perspective

Understand Develop New Cross-Sell the Shift to Provide


Minimize
Customer Products Product Line Appropriate Rapid
Problems
Segments Channel Response

update Increase
Employee
Productivity
Learning
Perspective
THE
the Develop
Strategic
Skills
Access to
Strategic
Information
Align
Personal
Goals MANAGEMENT
strategy strategic learning MEETING
loop “Team Problem
Pioneer’s Balanced Scorecard Solving”
FINANCIAL

Strategic Objectives Strategic Measures

 Financially Strong  Return on Capital Employed


 Delight the Consumer  Mystery Shopper Rating
CUST

 Win-Win Relationship  Dealer / Pioneer Gross Profit Split


 Safe & Reliable  Manufacturing Reliability Index
 Days Away from Work Rate
INTERNAL

 Competitive Supplier  Laid Down Cost vs. Best


Competitive Ratable Supply
results
 Good Neighbor  Environmental Index INSIGHT
 Quality  Quality Index
 Motivated & Prepared  Strategic Competency Availability HARVESTING
L&G

reallocate “Testing hypotheses


and capturing
priorities operational control loop learning”

Performance dialog

Initiatives & Programs

222
Shortcomings of BSC

1. Design factors can lead to problems when applying the BSC


• Too few measures in the scorecard to provide:
- A complete picture of the company’s strategy
- A balance between desired outcomes and the performance drivers of those
outcomes
• Too many measures:
- Attention is diffused, and insufficient attention is given to those few
measures that make the greatest impact
• The drivers in the Internal and Learning & Growth perspectives don't link to the
desired outcomes in the Financial and Customer perspective
2. The biggest threat is a poor organizational process for developing and implementing
the scorecard:
• Senior management is not committed, and the BSC project is delegated to
middle management
• One senior manager builds the scorecard alone
• Senior executives feel that only they need to know and understand the
strategy, and BSC responsibilities don't filter down
• The BSC is treated as a one-time event that requires the perfect scorecard for
implementation
• The BSC is treated as a systems project rather than as a management project
223
Business intelligence (BI) is defined as the ability for an
organization to take all its capabilities and convert them into
knowledge, ultimately, getting the right information to the right
people, at the right time, via the right channel.

Strategic Excellence Position - The Right Products at the Right


Place at the Right Time

BI System is DSS – Decision Support System

224
Strategies planning in the environment of uncertainties

Discussion on
Risk Management

225
Strategy for a Networked World

(Collaborative Business Models)

226
Multinational Vs. Transnational

227
Multinational Vs. Transnational

MNC (Multinational Company) TNC (Transnational Company)


These enterprises have their operational These enterprises own or control
headquarters in one country with several production or service facilities outside
other operating branches in different the country in which they are based.
countries.
The country where the head quarter is
located is called the home country
The other countries with operational
branches are called the host countries
MNC have an international identity as Transnational corporations are more or
belonging to a particular home country less borderless in this regard as they do
where they are headquartered not consider a particular country as their
base
MNC’s have branches in other countries TNC’s have subsidiaries
MNC have investment in other countries, TNC invested in foreign operations, have
but do not have coordinated product a central corporate facility but give
offerings in each country. It is more decision-making, R&D and marketing
focused on adapting their products and powers to each individual foreign market
service to each individual local market.
228
MNC (Multinational Company) TNC (Transnational Company)
MNC’s offer their product in local market TNC’s offer customized products in
of different countries accordance with local responsiveness
MNC’s have investment in other countries TNC’s have invested in foreign operations,
but do not have coordinated product have a central corporate facility but give
offerings in each country decision making, R & D and marketing
powers to each individual foreign market
MNCs make decisions about market-entry The individual company will make
strategy; ownership of foreign operations; decision according to the requirements
and production, marketing, and financial and needs of that particular company not
activities with an eye to what is best for as a whole
the corporation as a whole
The true multinational corporation The TNC’s focus on individual
emphasizes group performance rather performance rather than whole
than the performance of its individual
parts
Multi means many and national means Transnational corporations also operate in
the state. Many states mean that these many countries,
types of companies operate in more than And there isn’t a centralized management
one country at the same time. system.
229
MNC (Multinational Company) TNC (Transnational Company)
A company may start in one country, and These companies might start in one
may spread to other foreign countries, country, and later on they might expand
expanding their investments. Thus, a to other nations as well. However, they do
national industry becomes a multinational
not have a home company to manage
company. them and will start as a new company
The other foreign corporations will be A transnational company may take
subsidiaries of the home company decisions suitable to the operating
context as there is no centralized
management system
They consist of well known MNC’s mostly Most of them come from petroleum, IT
consumer goods manufacturers and quick consultancy, pharmaceutical industry, etc
service restraunts
Eg: Unilever, P & G, Mc Donald’s, etc. Eg: Shell, Accenture, Deloitte, Glaxo Smith
Klein and Roche

230
Cases of JVs & Collaborative Business Models

Discussion in the Classroom

231
Discussion of Business Examples

232
Thanks & Good Luck

Slides prepared and presented by

Dr. V K Arora
Trainer, Mentor, Advisor
Entrepreneurship, Startups, Business Incubators and Accelerators
Faculty – Strategic Management and all Functional Areas

Contact Number: + 91 98 11 59 30 59
Email: vkarora@manasso.com
Web: www.vkarora.com

233