STRATEGY An Introduction

Sandeep Choudhary

Book name - Strategic

Planning Formulation Of
Corporate Strategy
Authors - Ramaswamy &
Namakumari
Publisher - Macmillan India
Limited
(Available in MBA Library)

STRATEGY
To fight and conquer in all your battles
is not supreme excellence; supreme
excellence consists in breaking the
enemys resistance without fighting.
SUN TZU

Why do only some organizations

survive?
Murphy
Polson

Butter
Radio Ceylon
J K Television
Delhi Cloth Mills (DCM)
Presidency Banks

MNCs surviving in India

GOODYEAR 1822
STANCHART 1858
SIEMENS 1867
HUL 1888
GE 1902
CASTROL 1910
NESTLE 1912
PHILIPS 1930
BATA - 1931

Porter: What is Strategy?, 1996

Operational Effectiveness is a necessary but not a

sufficient condition for sustained competitive
advantage

OE means performing similar activities better

than rivals perform them.

Any no. of practices that allow a company to better

utilize its inputs by reducing defects in products or
developing better products faster.
For SCA, company has to strategize!

Effectiveness vs. Efficiency

Effectiveness indicators measure how much your

targets were reached. They relate actual to
expected values.

Typical examples are:

actual to expected sales
saving on budget
project cost

Effectiveness indicators require a plan: you can't

measure effectiveness unless you have a target.

Effectiveness vs. Efficiency

Efficiency indicators, measure how "well" your resources

(like people, machines and money) were to produced output
(like products, services and profit).

Efficiency indicators include traditional financial ratios

(profitability, turnover ...), but non-monetary efficiency
measures are today recognized as a key factor to track causeeffect of business decisions.

Examples of such measures are:

work hours per unit produced

prospect close rate
calls per prospect
visits per prospect
incidents per work-month.

Output vs Outcome

Outputs relate to "what

we do." What pops out
of the end of a process is
an output. Eg. Meal

Outcomes refer to "what

difference is there."
An OUTCOME is a level
of
performance,
or
achievement. Eg.
too hot, or too cold
(Temperature)
too
much to eat
(Quantity)
tasty,
or disgusting
(Customer
Perception)

STRATEGIC MANAGEMENT - Defined

Art & science of formulating, implementing, and
evaluating, cross functional decisions that enable an
organization to achieve its objectives.
In essence, the strategic plan is a companys game plan

Three big strategic Questions: 1. Where are we now?

2. Where do we want to go?

Business(es) to be in and market positions to stake out

Buyer needs and groups to serve

3. How will we get there?

What Business are you in: Coca

Cola

soft drinks?
Competition is Pepsi

beverages?
Competition is tea, coffee,
softdrinks

thirst -quenching?
Competition is water & all liquids!

TWO RETAILERS AT A GLANCE

Sears

Wal-Mart

Year founded

1891

1962

Stores 1980
Stores 2004

864
2026

600
5289

Revenues 1980
Revenues 2004

$25,194 million
$36,100 million

$1,643 million
$285,222 million

Net profits 1980

Net profits 2004

$606 M
$507 M

$55 M
$10,267 M

Market capitalization
1980
Market capitalization
2004

USD 4.8 billion

USD 12.2 billion

USD 1 billion
USD 200.2 billion

FEATURES OF STRATEGY

Strategy is all about winning

Strategy offers broad guidelines

Strategy is forward looking
Strategy life span is limited
Strategy is generally a product of top management thinking
Strategy is a dynamic and flexible program of action
Strategy is an inherently creative process.
14

STRATEGY
Strategy should specify:
What objectives to accomplished
Where industries & product-market to focus
How resources to allocate to meet opportunities
& threats

Competitive Advantage

What are you BEST AT ?

Why do your customers buy from you ?

Core/Essence of the Corporation

Achieve a sustainable competitive advantage

A CA exists when a firm is able to deliver the

same benefits as competitors at a lower cost or
deliver benefits that exceeds those of competing
products. Thus CA enables the firm to create
superior value for its customers & superior profits
for itself.

VOLVO Safety,
HUL Distribution channels,
HONDA Engines & Powertrain,
CANON - optics, imaging, microprocessor
controls,
WALT DISNEY Animation, storytelling &
efficient use of theme parks,
MICROSOFT IT software,
INTEL micro-processors,

Three types of Strategies

Corporate Mission, Goals & objectives
Business

SBU objectives, Competitive

strategy, Deployment of resources

Functional

Marketing,
Operational, Human resources

R&D,

The Strategy Vocabulary

Mission : the reason for existence, fundamental

idea on which the business is built

do we remember ?, is it short ?

does it motivate/inspire?

does it influence decision making ?

Good mission statements are like a unique

signature

Characteristics Short, memorable, Market

focused, inspiring

Mission statements serve a very important

purpose.

they are also the basis for a SWOT analysis

Mission What does mission do? How does it help

the firm?

Lends direction to corporate planning, it directs the

formulation of the growth plan and guides the nature
and pace of growth.

Helps the firm to clarify what its aspirations are and

where exactly it would like to reach and what it would
like itself to be.

Or we can direct entire planning and formulation of all

objectives.

It prevents subsequent steps going topsy-turvy.

05/29/15

SAMPLE MISSION STATEMENT

McDonalds
To offer the fast food customer prepared in the same
high-quality manner world-wide, tasty and reasonably
priced, delivered in a consistent, low-key decor and
friendly atmosphere.

A MISSION STATEMENT should

Set firm apart from others
Arouse strong sense of organizational identity &
business purpose

Eicher Consultancy: To make India an economic

power in the lifetime, about 10 to 15 years, of its
founding senior managers.

Marico Industries: The three Ps of Marico: People,

Products, and Profits

Ranbaxy Laboratories: To become a research based

international pharmaceutical company.

Unit Trust of India: To keep the common man in

sharper focus; to encourage an investment habits
among them . . .

Mission statements
GOOGLE:
To organize the worlds information and make it
universally accessible and useful.
FACEBOOK:

To give people the power to share and make the world

more open and connected.
MICROSOFT:
To help people and businesses throughout the world
realize their full potential.

The Strategy Vocabulary

Vision : what company aspires to become &

achieve, it could be personal dream of the CEO
CEO led Vision Statements

Characteristics:

Future casting 5 years ahead, clear & visible,

audacious (bold) Think Big, descriptive

Disneyland: To be the happiest place on earth.

Question : is the vision

consistent with the mission ?
does it result in consistent objectives and goals ?

The Sail Story

Vision statements
...to be the 3rd largest producer of iron and steel in the
world...
V Krishnamurthy, 1987

...to be the technical leader in the steel industry...

Dr S R Jain, 1990

...focus on customer satisfaction...

M R R Nair, 1993

OBJECTIVES & GOALS

Goals

signifies a general statement of

direction in line with the mission. It may be
qualitative in nature.

Objectives

are the ends that state

specifically how the goals shall be achieved.
They are concrete and specific to goals
which are generalized. In this manner
objectives make the goals operational.

Example
GOAL
Live healthier and lower my cholesterol.
STRATEGY
Better food, less beer and more exercise.
SMART OBJECTIVES
1) Participate in a challenge organized by one of my work colleagues
to lose 10 pounds in 10 weeks starting today, which means having a
maximum weight of 192.4 pounds on March 18.
2) Drink no beer from Sunday to Thursday until Easter.
3) Do exercise at least 3 times per week for a minimum of 30 minutes
each time until June 30.
4) Train for and run the 10K on May 25 during the Ottawa Race
Weekend.
5) Set other (3 to 5) objectives related to my goal by June 30 for the
last 6 months of the year.

TACTICS
Tactics to help achieve Objective 1:
Plan weekly meals each Sunday to minimize the chances of
cooking last minute unhealthy food or ordering restaurant food.
Bring homemade lunches at work (prepare them the night before).
No snacking after supper.
Do a lot of exercise.

Tactics to help achieve Objective 2:

Avoid having cold beers in the fridge from Sunday to Thursday,
that way it will be less tempting to have a cold one after work.
Tactics to help achieve Objective 3 and 4:
Use and take advantage of our brand new Octane Fitness Q35c
elliptical machine.
Vary the exercise to not get bored and make it fun.
Create a playlist of music to listen to during training.

The Strategy Vocabulary

Policy : broad general guidelines/statements

Plans and policies are guides to action. They

indicate how resources are to be allocated
and how tasks assigned to the organization
might be accomplished so that functional
level mangers execute the strategy properly.

Ex.
Employee
conduct
policy,
Equal
Opportunity, Attendance & time off, safety
policy, Performance review etc.

Tactics : short term strategies

Tactics using everyday

Example 1: Planning a Trip

We use strategy and tactics in very simple ways every day without realizing
it. For example, if youre planning a trip from Delhi to Dubai to London, you
need a strategy to get there.

Strategy involves answering many questions, such as: How do you plan to
travel (airplane, ship, road etc.)? What resources do you have? When do you
need to get there?

If you decide to travel by airplane, the tactics of purchasing that plane ticket
can be to:

Call a travel agent

Use the website of a specific airline
Use a website that compares the rates of different airlines.

Tactics using everyday

Example 2: Finding a Job

Your goal is to find a new job as part of a long-term plan for financial
stability. There are several different strategies you can use to find a job,
including:

Using your current skills to find a new job

Becoming an apprentice for a trade

Going to college for a new career.

If you decide on a strategy to use your current skills in a different job, then
your tactics might include:

Updating your rsum

Telling your friends that you want a new job so they can help you

Looking at job postings in newspapers or on the Internet.

In this situation, as in most cases, youll probably use a few different tactics
as part of your strategy to find a job. And in the process, you might decide
that some tactics dont work well so youll abandon them and try new tactics.

The Strategy Vocabulary

Strategy

: response to uncertainty

if an event is dead certain, you don't need a

strategy

good strategist never reduces

uncertainty

he leverages it !

Win

the battle without fighting!

The Strategy Focused

Organization *
Mission:
Why we exist
Core Values:
What we believe in
Vision: What we want to be
Strategy: Our game plan (how to win)
Goals For Implementing Strategy (Metrics):
What we need to do
OUTCOMES
Satisfied
Shareholders

Delighted
Customers

Effective
Process

Motivated and
Prepared
Workforce

* The Strategy Focused Organization, Robert Kaplan, David Notron, Harvard Business School Press, 2001

Organizations
Must

have a visionary, meaningful

mission statement.
Must have a clear and simple strategy.
Must define how to delight customers.
Must be committed to strategic moves
and signal commitment to competitors.
Must continually innovate.

SWOT

STRENGTHS

OPPORTUNITIES

WEAKNESSES

THREATS

SWOT , Vision & Strategy

SWOT

VISION

What am I ?

Where do I want to go?

STRATEGY
How to get there?
(choice)

Some very strange strategies

Cherry

Blossom wanting to get into the

toothpaste market

Ferrari

wanting to produce the most fuel

efficient car in the world

DeBeers

wanting to sell the cheapest

diamonds in the world

Lesson for Survival

Ability

to adapt to different markets,

policies & regulations, different cultures
and ways of doing business.