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Strategic Management
Deepak Sundrani
Allocation of sessions
Professor Sundrani : 10 sessions
Military origin
Strategos in Greek , which means General
Thus it is the art of Generals
In Business,
Senior Management makes strategies
Evolution of the course
Harvard started MBA program in 1908.
In 1911 started Integrative course on General
Management.
1) Expansion
2) Diversification
3) Focus
4) Turnaround
5) Stability
6) Divestment
These course of actions are called
STRATEGIES
The concept of Strategy
In simplified terms , a strategy is the means to
achieve objectives.
Strategic control
Elements in
Strategic Management Process
I) Establishing the hierarchy of strategic intent
(1) Creating and communicating a vision
(2) Designing a mission statement
(3) Defining the Business
(4) Adopting business model
(5) Setting objectives
Continued Elements in Strategic Management Process
The Vision Statement has been inspired by the global infrastructure development needs of tomorrow, with
the Customer as the central focus. It was developed after conducting a series of in-house workshops.
Senior Leaders within the organization are actively involved in developing and maintaining an effective
and efficient management system to disseminate the Vision across HCC in order to achieve"Customer
Delight".
L&T : Vision
Gammon India : Vision
To be the leaders in innovative engineering and
timely delivery of our quality construction
services, upholding our tradition of being
Builders to the nation
MISSION
Peter Drucker raised important questions:
What is your business?
What will it be?
What it should be?
Formal definition :
Representation of a firms underlying core
logic and strategic choices for creating and
capturing value within a value network
Business model : examples
1) Newspaper sold for Rs. 2
Cost of paper + printing + Salaries +
electricity, etc = Rs. 5
So how does it make profit?
Internal External
Environment Environment
(S&W) (O&T)
SWOT Analysis
Strengths:
1) Strong brand image
2) High quality products
3) Excellent distribution network
4) Good inventory management
5) Strong R & D
6) Economies of scale
7) Latest technology contd
Strengths contd
9) Poor reserves
10) Lower credit rating
11) Poor receivables Management
12) Excess manpower
13) Hostile industrial relations climate
14) Poor morale
15) Inefficient Board
16) Inaccessible location
17) Absence of strong USP
Opportunities
Opportunities Threats
Benefits of SWOT Analysis
1) Simple to use
2) Low cost
3) Flexible and can be adapted to varying
situations
4) Leads to clarification of issues
5) Development of goal-oriented alternatives
6) Useful as a starting point for strategic
analysis.
Four phases in
Strategic Management process
Strategic control
II) Strategy Formulation
1) Environmental appraisal
2) Organisational Appraisal
3) Corporate level Strategies
4) Business Level Strategies
5) Strategic Analysis and Choice
General versus
Relevant Environment
Organisation
Relevant
Environment
General Environment
Environmental Sectors
(in alphabetical order)
8 ) Technological 2) International
environment Environment
7) Supplier 3) Market
Company
environment environment
6) Socio-
4) Political
Cultural
environment
environment
5) Regulatory
environment
1) Economic Environment
Macro level factors
(i) Economic stage
(ii) Economic structure ( Capitalist/Socialist/mixed
economy)
(iii) Economic policies Industrial, Monetary, fiscal
(iv) Economic planning 5 year plans, annual budgets
(v) Economic indices growth of GDP, etc
(vi) Infrastructural factors Financial Institutions,
Banks, Communication facilities, etc
2) International Environment
(i) Globalisation, its process, content and
direction
(ii) Global economic forces, organisations,
blocks and forums
(iii) Global trade and commerce
(iv) Global financial systems
(v) Geopolitical situation
(vi) Global demographic patterns and shifts
(vii) Global HR
(viii) Global Information systems
(ix) Global Technological and quality systems
and standards
(x) Global markets and competitiveness
(xi) Global legal system
(xii) Globalisation of Management
Session 3
26 October 2015
3) Market environment
Consists of factors related to the groups and
other organisations that compete with and
have an impact on an organisations markets
and businesses.
(i) Customer factors needs, preferences, etc.
(ii) Product factors Demand, image, features,
price, promotion, substitutes
(iii) Market intermediary factors
(iv) Competitor related factors
4) Political environment
Factors related to management of public affairs
(i) Political system
(ii) The political structure
(iii) Political processes like operation of party
system, elections, funding, etc.
(iv) Political philosophy, governments role in
business, etc
5) Regulatory environment
Regulation by Government
(i) Constitutional framework
(ii) Policies relating to licensing, monopolies
(iii) Policies related to distribution and pricing
and their control
(iv) Policies related to imports and exports
(v) Other policies related to the public sector,
small scale industries, sick industries,
pollution (natural environment), etc.
6) Socio-cultural environment
Analysis
Environmental Scanning
Process by which the organisations monitor
their relevant environment to identify
opportunities and threats affecting their
businesses for the purpose of taking strategic
decisions
Factors to be Considered for
Environmental Scanning
1) Events specific occurrences
2) Trends general tendencies
3) Issues concerns
4) Expectations - demands
Sources of information
for Environmental Scanning
1) Secondary sources (Documents)
2) Mass media
3) Internal sources
4) External agencies
5) Formal studies
6) Spying and surveillance
Identifying the
environmental factors
Impact on business
High
Critical High priority Low priority
Probability
Of
Impact
Medium High priority High priority Low priority
1 Economic
2 Market
3 International
4 Political
5 Regulatory
6 Social
7 Supplier
8 Technological
Organisational
Appraisal
(to find Strength and Weaknesses, etc)
So that the Co. knows what it CAN do
Framework for development of Strategic advantage by an organisation
Strategic
Advantage
Organisational
capability
Competencies
Synergistic
effects
Strengths and
weaknesses
Organisational Organisational
Resources + Behaviour
Dynamics of
Internal Environment
Organisational resources formal systems and
structures as well as informal relations among
groups.
Organisational Behaviour manifestation of
various forces and influences operating in the
internal environment of an organisation that
create the ability for, or place constraints on,
the usage of resources. ( quality of leadership, management
philosophy, shared values and culture, quality of work environment and
organisational climate, organisational politics, use of power , etc)
Strength an inherent capability which an
organisation can use to gain strategic
advantage.
Weakness inherent limitation or constraint
which creates a strategic disadvantage for an
organisation.
Synergistic effects : 2+2=5 or 2+2=3
Purpose :
To determine the organisational capability in
terms of strengths and weaknesses that lie in
different functional areas.
Why is it necessary ?
Because strengths and weaknesses have to be
matched with the environmental
opportunities and threats for strategy
formulation to take place.
Methods and techniques used for
Organisational appraisal
Organisational
Appraisal
a) b) c)
Internal Analysis Comparitive Comprehensive
Analysis analysis
a) Internal b) Comparitive c) Comprehensive
Analysis Analysis Analysis
1) VRIO 1)Historical 1) Key factor rating
framework analysis 2) Business
2) Value chain 2) Industry Intelligence
analysis norms systems
3) Quantitative 3) Bench 3) Balanced
analysis scorecard
marking
4) Qualitative
analysis
a) Internal Analysis
1) VRIO framework Valuable, Rare, Inimitable,
Organised for usage
Are the Are the Are the Are the Are the
capabilities capabilities capabilities capabilities capabilities
valuable ? rare? costly to organised for strengths or
imitate ? usage? weaknesses ?
No No Weakness
1) Financial capability
2) Marketing capability
3) Operations capability
4) Personnel Capability
5) Information Management capability
6) General Management capability
Financial
Factors related to sources of funds
Factors related to usage of funds
Factors related to management of funds
Marketing
Product related factors
Price related factors
Place related factors
Promotion related factors
Integrative and systemic factors
Operations
Factors related to production system
Factors related to operations and control system
Factors related to R & D system
Personnel
Factors related to personnel system
Factors related to organisational and employee characteristics
Factors related to industrial relations
Information Management capability
Factors related to acquisition and retention of info
Factors related to processing and synthesis of info
Factors related to retrieval of info
Factors related to transmission and dissemination
Integrative, systemic and supportive factors
General Management capability
Factors related to general management system
Factors related to General Managers
Factors relating to external relationships
Factors related to organisational climate
2) Business Intelligence system
Use Information Technology
Marketing
Product related factors
Price related factors
Place related factors
Promotion related factors
Integrative and systemic factors
Operations
Factors related to production system
Factors related to operations and control
system
Factors related to R & D system
OCP (Organisational capability profile)
Capability factors Weakness, Normal, Strength
-5 0 +5
Personnel
Factors related to personnel system
Factors related to organisational and employee
characteristics
Factors related to industrial relations
Information Management capability
Factors related to acquisition and retention of info
Factors related to processing and synthesis of info
Factors related to retrieval of info
Factors related to transmission and dissemination
Integrative, systemic and supportive factors
OCP is detailed.
SAP is Concise
SAP
Sr.No. Capability factor Competitive Nature of
strengths or impact
weaknesses S/W
1 Finance
2 Marketing
3 Operations
4 Personnel
5 Information
6 General management
II) Strategy Formulation
1) Environmental appraisal
2) Organisational Appraisal
3) Corporate level Strategies
4) Business Level Strategies
5) Strategic Analysis and Choice
Different levels of Strategy
Corporate
office
Marketing oriented
A) Expansion strategies
When an organisation aims at a higher growth
by substantially broadening the scope of one or
more of its businesses in terms of their
respective
customer groups,
customer functions and
alternative technologies
Business definition
Abells 3 dimensions for defining business
Customer functions (what)
Marketing oriented
B) Stability strategies
When an organisation attempts at
incremental improvement of its performance
by marginally changing one or more of its
businesses in terms of their respective
customer groups,
customer functions and
alternative technologies
C) Retrenchment strategies
When an organisation aims at contraction /
reduction of its activities through a substantial
reduction or elimination of the scope of one or
more of its businesses in terms of their
respective
customer groups,
customer functions and
alternative technologies,
(Naiknavare Construction)
A2) Integration strategies continued
2 Integration strategies
(i) Horizontal integration (lateral integration)
( acquisition & mergers)
(ii) Vertical Integration
a) Backward / Downward integration -
move towards raw material.
Make or Buy : Make
b) Forward / Upward integration -
move towards customer
Horizontal Integration / lateral integration : increase
size of company by same type of products
( Buying competitors business)
Tata Steel bought Corus
Tata Motors acquired Jaguar and Land Rover
Adidas acquired Reebok in 2006
Kraft and Hershey & Nestle trying to buy out Cadbury.
Session 7
23 July 2013
Deepak Sundrani
A 4) Internationalisation Strategies
Market their products or services beyond the
domestic (national) market.
Porters Model of
Competitive advantage of nations
Types of International strategies
International Multidomestic
Low
strategy strategy
Low High
Pressure for local responsiveness
Entry modes
Scale of entry
Timing of entry
into
Which International into
International
Markets to enter International
markets
markets
Advantages of expansion through
Internationalisation
1) Realising economies of scale
2) Expansion and extension of markets
3) Realising location economies
4) Access to resources overseas (natural,
financial or HR)
Disadvantages of expansion through
Internationalisation
1) Higher risks due to uncertainty (economic
and political environment)
2) Difficulty in managing cultural diversity
3) High bureaucratic costs ( of coordination and
communication)
4) High distribution costs
5) Trade barriers
A 5) Cooperative strategy
Co-opetition : Simultaneous Competition and
cooperation among rival firms for mutual
benefit.
Cooperative Strategies
a) Mergers and Acquisition
b) Joint ventures
c) Strategic alliances
(a) Mergers and Acquisitions : For the organisation
which acquires another it is an acquisition.
For the organisation which is acquired it is a merger.
Marketing oriented
Call centres
Medical transcription
CRM
Automation of ordering
Allow customers to make online payments
Speed up processes
Reduce costs
Real estate brokers, portals ( Magicbricks, etc),
Naukri .com, Jeevansathi.com
Indian Railways
Airlines
Banks ATM, Online Banking,
Insurance : policies
Bar coding
Filing IT returns
MSEB electric bill
Land records digitalised
Transparency : Tenders online
Use of IT in functional areas
B) Stability Strategies
Stability strategies result from attempts by an
organisation at incremental improvement of
functional performance.
B) Stability Strategies
Relevant for an organisation operating in
reasonably certain and predictable
environment.
Usually followed by small and medium
businesses. Can be useful in the short run
when such organisations are satisfied with
current performance
B 1) No change strategy
It is a Temporary strategy.
Multipronged strategy
Example : Aditya Birla Group, HUL, Thermax
Business Level
Strategies
(Generic Business
Strategies)
Different levels of Strategy
Corporate
office
Industry structure
Positioning of
(dependent on
Company
5 forces)
Competitive Competitive
advantage scope
1) Lower cost
2) Differentiation
(ii) Competitive scope
The breadth of the organisations target
within its industry
Breadth means :
range of products, distribution channels, types
of buyers, geographic areas served and the
array of related industries in which the firm
would also compete
Porters Generic Strategies
Broad
target Cost Differentiation
COMPETITIVE
leadership
SCOPE
Branding
Achieving Differentiation
1) Incorporate features that :
offer utility for customer , raise performance,
increase buyer satisfaction,
enable buyer to claim distinctiveness and
enhance status,
2) Special product attributes, Value for money,
superior after-sales service,
Engineering design, etc.
Benefits of differentiation
1) Customer Brand loyalty acts as safeguard
against competitors. Brand loyal customers are
less price-sensitive
2) Price increase in raw materials can be absorbed
3) Buyers cannot negotiate price as few options
4) Differentiation is a formidable entry option
Risks faced
under differentiation strategy
When Where
(Timing) (Market location )
1) Market leaders
- Expand Total market
- Defend market share
- Expand market share
2) Market challengers
- Frontal attack
- Flank attack
- Encirclement attack
- Bypass attack
- Guerrillaattack
3) Market followers
- Counterfeiter strategy duplicating
- Cloner strategy
- Imitator strategy
- Adapter strategy
4) Market nichers
(similar to focus strategy)
- Creating niches
- Expanding niches
- Protecting niches
Four phases in
Strategic Management process
Strategic control
II) Strategy Formulation
1) Environmental appraisal
2) Organisational Appraisal
3) Corporate level Strategies
4) Business Level Strategies
5) Strategic Analysis and Choice
5) Strategic Analysis
and choice
Strategic Choice
The decision to select among the grand
strategies considered, the strategy which will
best meet the enterprises objectives.
Process of strategic choice
Step 1 Focussing on strategic alternatives
(narrow down choice of strategies)*
Desired Performance
Time
T1 T2
Focussing on strategic analysis
(Gap Analysis)
Gap Strategies
Narrow Stability Strategies
Large Expansion
due to expected opportunities strategies
Large Retrenchment
Due to past and expected bad strategies
performance
Complex scenario Combination
Multiple reasons strategies
Strategic Analysis
Is the investigation of the objective factors being
considered in the process of strategic choice.
Financial strength
Environmental stability
Financial strength (FS)
1) Return on investment
2) Leverage
3) Liquidity
4) Working capital
5) Cash flow
6) Risk involved in business
Competitive advantage (CA)
1) Market share
2) Product quality
3) Customer loyalty
4) Competitions capacity utilisation
5) Technological know how
6) Control over suppliers and distributors
Environmental stability (ES)
1) Technological changes
2) Rate of inflation
3) Demand variability
4) Price range of competing products
5) Barriers to entry into market
6) Competitive pressure
7) Price elasticity of demand
Industry strength (IS)
1) Growth potential
2) Profit potential
3) Financial stability
4) Technological know how
5) Resource utilisation
6) Ease of entry into market
7) Productivity, capacity utilisation
SPACE
SPACE
SPACE
SPACE
Example
Other techniques
(ii) SWOT Analysis
Consolidated ETOP ( Environmental Threat
and opportunity Profile) and SAP (Strategic
Advantages profile)
(iii) Experience curve analysis
(iv) Life cycle analysis*
(v) Industry Analysis (Porter)*
(vi) Competitor Analysis
Life cycle
Industry Analysis
(Porters 5 force model)
Strategic Plan
Is a document which provides information
regarding the different elements of strategic
management and the manner in which an
organisation and its strategists propose to put
the strategies into action.
Four phases in
Strategic Management process
Strategic control
III) Implementation of Strategies
Strategy implementation concerns the
managerial exercise of putting a freshly
chosen strategy into place
Continued Elements in Strategic Management Process
S trateg y
P lans
P rogrammes
P rojects
B udgets
6) Staff : Co. has hired able people, trained them well and assigned
them right jobs
determines
STRUCTURE
STRATEGY
affects
Why is structural implementation needed ?
Financial Operational
plans plans
Integration
of functional
plans
Marketing
plans Personnel
plans
Info
Management
plans
5) Operational implementation
is the approach adopted by an organisation to
achieve operational effectiveness.
Action.
Hoshin Kanri System of Deployment
HOSHIN KANRI
HO means direction, SHIN means needle
So Hoshin means Direction needle ( compass)
Act Plan
Check Do
Comparision of
Hoshin Kanri Planning and MBO
Element Hoshin Kanri MBO
Vision Long term Short term
Focus Processes Targets
Implementation Prioritize Troubleshoot
Measures Realistic Incentives
Review Improvement Failure
Communication Deployment of Job evaluation
targets
Feedback Top-down and Top-down
bottom up
Benefits of Hoshin Kanri
1) Integration of strategic objectives with
tactical daily management
2) Application of Plan-do-check-act circle
3) Company wide approach
4) Improvements in communication
5) Increased consensus and buy-in to goal
setting and cross-functional management
integration.
IV) Strategic Evaluation & Control
Process of determining the effectiveness of a
given strategy in achieving the organisational
objectives and taking corrective action
wherever required
Importance of Strategic evaluation
1)Ability to coordinate the tasks performed by
individual managers, groups, divisions, through
control of performance.
2) Need for feedback, Appraisal and Reward
3) Check on validity of Strategic choice
4) Congruence between decisions and intended
strategy
5) Successful culmination of strategic management
process
6) Creating inputs for New Strategic Planning
Strategic Control
The 4 basic types of strategic controls are :
Scanning system.
(iv) Special alert control
Contingencies.