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Businesspolicystrategicmanagement Notes 2011-12-111001044206 Phpapp02
Businesspolicystrategicmanagement Notes 2011-12-111001044206 Phpapp02
(301) BUSINESS POLICY & STRATEGIC MANAGEMENT 1. Strategy and the Quest for Competitive Advantage: Military origins of strategy Evolution Concept and Characteristics of strategic management Defining strategy Mintzbergs 5 Ps of strategy Corporate, Business Levels of strategy Strategic Management Process. (4) -------------------------------------------------------------Ulhas D. Wadivkar. B.E. (Elect), PGDIM, MBA (Finance) Management Consultant, Retired Vice President (Works), Graphite India Limited. Nashik & Bangalore. 1st August 2011
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Business Policy is the study of the function and responsibilities of Senior Management, the crucial problems that affect success in the total enterprise, and the decisions that determine the directions of the organisation and shape of its future. The problems of policy in the business, like those of policy in public affairs, have to do with choice of purposes, the moulding of organisational identity and character, the continuous definition of what needs to be done, and the mobilisation of resources for the attainment of organisational Goals in the face of competition or adverse circumstance.
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Evolution of Business Policy has undergone four Paradigms Paradigm Two Integrated Policy Formulation. 1930 - 1940: Changes in Technology, Turbulence in Political environment, Emergence of new industries, Demand for novelty products even at higher costs, Product Differentiation, Market segmentation in increasingly competitive and changing markets. These all made investment decisions increasingly difficult. This was era of integrating all functional areas and framing policies to guide managerial actions. Paradigm Three The Concept of Strategy. 1940 - 1960: Planned policy became irrelevant due to increasingly complex and accelerating changes. Firms had to anticipate environmental changes. A strategy needed to be formed with critical look at basic concept of Business and its relationship to the existing environment then. Ulhas D Wadivkar
Paradigm Four The Strategic Management. 1980 & onwards: The focus of Strategic Management is on the strategic process of business firms and responsibilities of general management. Everything out side the four walls is changing rapidly and this phenomenon is called as Discontinuity by Mr. Peter Drucker. Past experiences are no guarantee for future, as science and technology is moving faster. The future is no more extension of the past or the present. The world is substantially compressed and managing the External & Internal environment becomes crucial function. What to produce, where to market, which new business to enter, which one to quit and how to get internally stronger and resourceful are the new stakes. Strategic Planning is required to be done to endow the enterprise with certain fundamental competencies / distinctive strengths which could take care of eventualities resulting from unexpected environmental changes.
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Till 1980 : Pre-liberalisation Stage: Strategic management on Government fringes. Entwining enterprise objectives into the national Planning framework. Grabbing opportunities, high diversification, noncompetitive scales, and weak technology. Secretive & one man Strategic Management Process. 1980 - 2000 : Liberalisation Stage: Foreign Complex governed strategy. Strategy of focus on rationalisation and operations improvement. Strategy of growth through acquisitions, internationalisation and product market expansion. Employing international consulting firms in Strategic Management.
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2000- Onwards: Post Liberalisation Stage: Global maverick mindset & Acquire professional skills in Strategic Management and synergise entrepreneurial flair. Portfolio rationalisation, entry into emerging sectors. Mobilise resources and ensure adequate growth through existing business. De-merge businesses as independent companies and improve market capabilities. Development of Technology capabilities Decentralise organisations, develop institutionalised control mechanism.
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Strategy According to B. H. Liddell Hart In his book, Strategy, Liddell Hart examines wars and battles from the time of the ancient Greeks through World War II. He concludes that Clausewitz definition of strategy as "the art of the employment of battles as a means to gain the object of war" is seriously flawed in that this view of strategy intrudes upon policy and makes battle the only means of achieving strategic ends. Wiser definition of strategy could be "the practical adaptation of the means placed at a Generals disposal to the attainment of the object in view." Thus, military strategy is clearly a means to political ends. Concluding his review of wars, policy, strategy and tactics, Liddell Hart arrives at this short definition of strategy: "The art of distributing and applying military means to fulfil the ends of policy."
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Strategy According to George Steiner George Steiner, a professor of management and one of the founders of The California Management Review. His book, Strategic Planning, is close to being a bible on the subject. Steiner points out in his notes that there is very little agreement as to the meaning of strategy in the business world. Some of the definitions in use to which Steiner pointed include the following: Strategy is that which top management does that is of great importance to the organization. Strategy refers to basic directional decisions, that is, to purposes and missions. Strategy consists of the important actions necessary to realize these directions. Strategy answers the question: What should the organization be doing? Strategy answers the question: What are the ends we seek and how should we achieve them?
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Alfred D Chandler(1962) : The determination of basic longterm goals and the adoption of courses or the courses of action and the allocation of resources necessary for carrying out these goals
Alfred D Chandler(1984) : Basically, a strategy is a set of decisions-making rules for the guidance of organisational behaviour
Kenneth Andrews(1965) : The pattern of objectives, purpose, goals, and the major policies and plans for achieving these goals stated in such a way so as to define what business the company is in or is to be and the kind of company it is or to be
Kenneth Andrews (1965) : Business Strategy is a method of describing the future position of the company, its objectives, purposes, goals, policies, and plans that may be required for guiding the company from its existing position to where it desires to be. Ulhas D Wadivkar 13
Defining Strategy and Concept of Strategic Management Igor Ansoff(1965) : The common thread among the organisations activities and product-marketsthat defines the essential nature of business that the organisation was or planned to be in future
William F Gleueck(1972) : A unified, comprehensive and integrated plan that relates the Strategic advantage of the firm to the challenges of the environment and is designed to ensure that the basic objectives of the enterprise are achieved through proper implementation process
Henry Mintzberg(1987) : Strategy is Organisations pattern of response to its environment over a period of time to achieve its goals and mission.
Michael E Porter(1996) : Creation of a unique and valued position involving a different set of activities. The company that is strategically positioned performs different activities from rivals or performs similar activities in different ways
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A plan or course of action or a set of decisions rules forming pattern or creating a common thread. The pattern or common thread related to the organisations activities which move an organisation from its current position to a desired to a desired future stage Concerned with the resources necessary for implementing a plan or following a course of action and, Connected to the strategic positioning of a firm, making trade-offs between its different activities, and creating a fit among these activities.
Essence Of Strategy
Strategy includes the determination and evaluation of alternative paths to an already established Mission and Objectives of enterprise and choosing the alternative to be adapted. Four important aspects of Strategy are: 1. Long Term Objectives: It emphasises on long term growth and development. These Objectives give direction for implementing Strategy. 2. Competitive Advantages: The external environment is continuously monitored & Strategy is made to have the firm a continuous Competitive Advantage. 3. Vector: is a Direction with Force. Series of actions are to be taken & they should have same direction for whole organisation. 4. Synergy: Once a series of decisions are taken to accomplish the objectives in same direction, there will be synergy. Synergy can happen due to Competitive Advantages and Growth Vector. The Objectives need be measurable and could be : ROI, Sales Ulhas D Wadivkar 16 Growth Rate,
Three types of actions are involved in Strategy: 1. Determination of Long Term Goals & Objectives. 2. Adoption of courses of action. 3. Allocation of resources. Therefore, Strategy is Creation of unique & valued position involving a different set of activities. The Company that is strategically positioned performs different activities from rivals or performs similar activities in different ways Michael Porter. Thus Nature of Strategy is: Strategy is a major course of action through which organisation relates itself to its environment. (External) Strategy is blend of internal & external factors. Face opportunities & threats provided by external factors, Ulhas D Wadivkarfactors are matched with them. 17 internal
Strategic actions are different for different situations. Strategy is combination of actions to solve a certain problem to achieve a desirable end. Strategy may involve contradictory actions simultaneously or with a gap of time like closing down some operations and expanding some at same time. Strategy is future oriented. New situations, which have not arisen in past will require revised Strategic Actions.
Strategy requires some systems and norms for its efficient adoption in any organisation. Strategy provides overall framework for guiding enterprise thinking and action.
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Strategies are concerned with the direction in which human and physical resources are deployed to maximise the chances of achieving organisational objectives in face of variable environment. Strategies are specific actions suggested to achieve objectives. Strategy is action oriented and empowers concerned to implement them. Strategy cannot be delegated downwards. Strategy is rule for making decision and Policy is contingent decision.
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Strategic Management : Definition Strategic management is the process of systematically analysing various opportunities and threats vis--vis organisational strengths and weaknesses, formulating, and arriving at strategic choices through critical evaluation of alternatives and implementing them to meet the set objectives of the organisation. Definition Strategic Management is concerned with making decisions about an organisations future direction and implementing those decisions. - By Lloyd L Byras.
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Through analytical process aspect, involved in Strategic Planning, corporation understands where its core competencies are, identifies the competitive advantages, pinpoints the gaps, formulate steps to bridge them. Main aspects of Strategic Planning are Future, Growth, Environment, basket of businesses of the firm for additions and deletions, Strategy and not day to day routine matters, creation of core competency and competitiveness and finally integration. It views the organisation / business in its totality and not a particular function. Thus Strategic Planning is Corporate Strategy. Strategic Planning differs from other operative and administrative functions of management. Strategic Planning provides objective strategy design: A) Growth Objective Performance levels, Profitability target, B) Product Market scope, its penetration, C) Growth Vector Product Market posture, development or diversification, D) Competitive Advantages, E) Synergy, strength obtained from new product-market selections.
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1. 2. 3.
4.
5.
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Henry Mintzberg (pictured above,) Bruce Ahlstrand and Joseph Lampell, in their 2005 book Strategy Bites Back, present 5 "P's" as a way to define strategy. Each "P" shines a spotlight on what strategy is / means / encompasses from a different angle, to provide a comprehensive overview that is probably more useful than definitions that try to fit all into a couple of sentences.
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The 5 "P's," adjusted where necessary to fit into the professional services / Industrial firms, are as follows: 1. Strategy is a PLAN To almost anyone you care to ask, strategy is a plan - some sort of consciously intended course of action, a guideline (or set of guidelines) to deal with a situation. A kid has a "strategy" to get over a fence; a firm has one to dominate a market for a particular service or practice area. By this definition, strategies have two essential characteristics: they are developed consciously and purposefully.
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2. Strategy as a PLOY: Strategy can be a ploy, too, which is really just a specific "manoeuvre" intended to outwit an opponent or competitor. The kid may use the fence as a ploy to draw a bully into his yard, where his Doberman Pincher awaits intruders. Likewise, a firm may threaten to establish a new practice area in order to discourage a competitor from trying to do the same. Here the real strategy (as plan, that is, the real intention) is the threat, not the new practice area itself, and as such is a ploy. Threatened litigation often falls into this category. 3. Strategy is a PATTERN: Strategy (whether as general plans or specific ploys) is pointless if it cannot be realized. In other words, defining strategy as a plan or ploy is not sufficient; we also need a definition that encompasses the resulting behaviour. Thus, strategy is also a pattern specifically, a pattern in a stream of actions. By this definition, strategy is consistent in behaviour, whether or not intended. The outcome of strategy does not derive from the design, or plan, but from the action that is taken as a result.
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4. Strategy is a POSITION: Strategy is also a position; specifically a means of locating a firm in its environment. In ecological terms: strategy becomes that firm's "niche." In management terms: a "domain" consisting of a particular combination of services, clients and markets. Position is often defined competitively (literally so in the military, where it becomes the site of a battle.) 5. Strategy is a PERSPECTIVE: While position is outwardly focused, perspective looks inward into the firm; even into the heads of the strategists themselves. Strategy in terms of this definition becomes an ingrained way of perceiving the world. Some firms are aggressive pacesetters; others build protective shells around themselves. Almost every profession has about it unique perspectives, that indelibly flavour the strategies that firms practicing those professions craft for themselves. A law firm's view of their business is fundamentally different to that of an accounting firm, and engineering firm or a graphic design studio, yet all are staffed Ulhas D Wadivkar 33 by professionals.
The Plan provides the roadmap by which the firm intends to achieve its goals. Ploys add a dimension of feint and manoeuvre, where one firm's gain is another's loss and competitive advantage is critical. Pattern emphasizes that strategy is not a once-off event but a constant stream of decisions and resultant actions that drive the firm forward, over time, towards its goal. Position adds that different firms have different mixes of markets, clients and services that they provide to those clients. Finally Perspective provides an insight onto how the firm and its strategists are informed by their own professions, their perceptions of business, and the Ulhas D Wadivkar 34 unique characteristics of each firms own "world."
What Is Strategy? - 1 What, then, is strategy? Is it a plan? Does it refer to how we will obtain the ends we seek? Is it a position taken? Just as military forces might take the high ground prior to engaging the enemy; might a business take the position of low-cost provider? Or does strategy refer to perspective, to the view one takes of matters, and to the purposes, directions, decisions and actions stemming from this view? Lastly, does strategy refer to a pattern in our decisions and actions? For example, does repeatedly copying a competitors new product offerings signal a "me too" strategy? Just what is strategy? Strategy is all theseit is perspective, position, plan, ploy and pattern. Strategy is the bridge between policy or high-order goals on the one hand and tactics or concrete actions on the other. Strategy and tactics together straddle the gap between ends means. Ulhasand D Wadivkar 35
What Is Strategy? - 2 In short, strategy is a term that refers to a complex web of thoughts, ideas, insights, experiences, goals, expertise, memories, perceptions, and expectations that provides general guidance for specific actions in pursuit of particular ends. Strategy, then, has no existence apart from the ends sought. It is a general framework that provides guidance for actions to be taken and, at the same time, is shaped by the actions taken. The ends to be obtained are determined through discussions and debates regarding the company's future in light of its current situation. A SWOT analysis (an assessment of Strengths, Weaknesses, Opportunities and Threats) is conducted based on current perceptions.
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A Companys Situation External Factors: Industry & Competitive conditions. Buyer Preferences PESTEL Political, Economical, Socio-cultural, Technological, Environmental & legal factors Internal Factors like Resources, Competitive strengths & Capabilities, Weaknesses & Threats.
New Initiatives & Ongoing Strategy Features continued from prior periods
Companys Strategy
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Strategy
It is a simple and undeniably relevant matter for managers to periodically ask the following questions of the employees reporting to them:
What have you done to improve customer service? What have you done to improve customer satisfaction? What have you done to reduce costs? What have you done to increase productivity? What have you done to increase revenues from new products and services?
Some Fundamental Questions Regardless of the definition of strategy, or the many factors affecting the choice of corporate or competitive strategy, there are some fundamental questions to be asked and answered. These include the following:
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1.Who are we? 2.What do we do? 3.Why are we here? 4.What kind of company are we? 5.What kind of company do we want to become? 6.What kind of company must we become?
Related to Corporate Strategy 1.What is the current strategy, implicit or explicit? 2.What assumptions have to hold for the current strategy to be viable? 3.What is happening in the larger, social and educational environments? 4.What are our growth, size, and profitability goals? 5.In which markets will we compete? 6.In which businesses? 7.In which geographic areas? Ulhas D Wadivkar 39
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1.What assumptions have to hold for the current strategy to be viable? 2.What is happening in the industry, with our competitors, and in general? 3.What is the current strategy, implicit or explicit? 4.What are our growth, size, and profitability goals? 5.What products and services will we offer? 6.To what customers or users? 7.How will the selling/buying decisions be made? 8.How will we distribute our products and services? 9.What technologies will we employ? 10.What capabilities and capacities will we require? 11.Which ones are core competencies? 12.What will we make, what will we buy, and what will we acquire through alliance? 13.What are our options? 14.On what basis will we compete?
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Some Concluding Remarks -1 1. Strategy has been borrowed from the military and adapted for business use. In truth, very little adaptation is required. 2. Strategy is about means. It is about the attainment of ends, not their specification. The specification of ends is a matter of stating those future conditions and circumstances toward which effort is to be devoted until such time as those ends are obtained. 3. Strategy is concerned with how you will achieve your aims, not with what those aims are or ought to be, or how they are established. If strategy has any meaning at all, it is only in relation to some aim or end in view. 4. Strategy is one element in a four- part structure. First are the ends to be obtained. Second are the strategies for obtaining them, the ways in which resources will be deployed. Third are tactics, the ways in which resources that have been deployed are actually used or employed. Fourth and last are the resources themselves, the means at our disposal. Thus it is that strategy and tactics bridge the gap between ends and Ulhas D Wadivkar 41 means.
Some Concluding Remarks -2 5. Establishing the aims or ends of an enterprise is a matter of policy and the root words there are both Greek: politeia and politesthe state and the people. Determining the ends of an enterprise is mainly a matter of governance not management and, conversely, achieving them is mostly a matter of management not governance.
6.
Those who govern are responsible for seeing to it that the ends of the enterprise are clear to the people who manages that enterprise and that these ends are legitimate, ethical and that they benefit the enterprise and its members.
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Some Concluding Remarks - 3 7. Strategy is the joint province of those who govern and those who manage. Tactics belong to those who manage. Means or resources are jointly controlled. Those who govern and manage are jointly responsible for the deployment of resources. Those who manage are responsible for the employment of those resourcesbut always in the context of the ends sought and the strategy for their achievement. 8 Over the time, the employment of resources yields actual results and these, in light of intended results, shape the future deployment of resources. Thus it is that "realized" strategy emerges from the pattern of actions and decisions. And thus it is that strategy is an adaptive, evolving view of what is required to obtain the ends in view.
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A)
B)
C) Concentration on what will make the enterprise superior in power, D) Flexibility must be built in use of resources, buffers, reserved capabilities, manoeuvrability and repositioning, E) F) Coordinated and committed leadership, Surprise the opponent by use of speed, secrecy and intelligence,
G) Security: the organisation should secure & develop resources required, securely maintain all vital operating points for the enterprise, an effective intelligence system to prevent effects of surprise by the competitors.
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Importance of Strategy Modern era witnesses the tremendous increase in the External Threats. Companies must have clear Strategies & must implement them effectively so as to survive. We can see some companies like Jessops, Martin Burn have become extinct and some companies like Reliance, Infosys have become market leaders. The basic factor responsible is not the Government or infrastructure or labour relations, but the Strategic thinking that different companies have shown in conducting the business. 1. Strategy helps an organisation to take decisions on long range forecasts. 2. It allows the firm to deal with a new trend and meet competition in the effective manner. 3. With the help of strategy, management develops capacity to be flexible to meet unanticipated changes. 4. Efficient strategy formation and implementation result into financial benefits to the organisation in the form of Ulhas D Wadivkar 45 increased profits.
Importance of Strategy -2 5. Strategy provides focus in terms of organisational objectives and provides clarity of direction for achieving the objectives. 6. Strategy contributes towards organisational effectiveness by providing satisfaction to the personnel. 7. It gets managers into habit of thinking, makes them proactive and more conscious of their environment. 8. It provides motivation to employees as they can shape their work in the context of shared corporate goals and make them work for achieving these goals. 9. Strategy formulation & implementation gives opportunity to the management to involve different of management in the process. 10. It improves Corporate communication, coordination and Ulhas D Wadivkarof resources. allocation
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Identifying a Companys Strategy What to look For: Actions to gain sales & Market share via lower prices, more performance features, more appealing design, better quality or customer service, wider production selection etc.
Actions to diversify the Companys revenue & earnings by entering into new business
The Pattern of Actions & Business Approaches that define a Companys Strategy
Actions & approaches that define how the company manages, research & development, production, sales & marketing, finance & other key activities
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Efforts to pursue new market opportunities & defend against threats to the Companys well-being
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The Strategy Hierarchy In most (large) corporations there are several levels of strategy. Strategic management is the highest in the sense that it is the broadest, applying to all parts of the firm. It gives direction to corporate values, corporate culture, corporate goals, and corporate missions. Under this broad corporate strategy there are often functional or business unit strategies
Different Levels of Strategy
Levels Corporate Structure Strategy Corporate Level
Corporate Office
SBU
SBU - A
SBU - B
SBU - C
Business level
Functional Level
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Information
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Corporate Strategy: The companywide game plan for managing a set of businesses. The levels involved are CEO and other Senior Executives. Business & Corporate Strategy Business strategy, which refers to the aggregated operational strategies of single business firm or that of an SBU in a diversified corporation, refers to the way in which a firm competes in its chosen arenas. Corporate strategy, then, refers to the overarching strategy of the diversified firm. Such corporate strategy answers the questions of "in which businesses should we compete?" and "how does being in one business add to the competitive advantage of another portfolio firm, as well as the competitive advantage of the corporation as a whole Business Strategy for Strategic Business Units: One for each business, the company has diversified into. Actions to build competitive capabilities and strengthen market position. Executed by General Mangers, Plant Heads, Division heads of each business with inputs from Corporate and Functional levels. Many companies feel that a functional organizational structure is not an efficient way to organize activities so they have re engineered according to processes or strategic business units (called SBUs). A Strategic Business Unit is a semi-autonomous unit within an organization. It is usually responsible for its own budgeting, new product decisions, hiring decisions, and price setting. An SBU is treated as an internal profit centre by corporate headquarters. Each SBU is responsible for developing its business strategies, strategies that must be in tune with broader corporate Ulhas D Wadivkar 49 strategies
Functional Strategies Functional strategies include Marketing Strategies, New product development strategies, Human resource strategies, Financial strategies, Legal strategies, Supply-chain strategies, and Information technology management strategies. The emphasis is on short and medium term plans and is limited to the domain of each departments functional responsibility and is executed by Functional heads. Each functional department attempts to do its part in meeting overall corporate objectives, and hence to some extent their strategies are derived from broader Corporate & Business strategies. Operational Strategy The lowest level of strategy is operational strategy. At this level, detailing is done to add completeness to Business & Functional Strategies. It is very narrow in focus and deals with day-to-day operational activities such as scheduling criteria. It must operate within a budget but is not at liberty to adjust or create that budget. Operational level strategy was encouraged by Peter Drucker in his theory of Management By Objectives (MBO). Operational level strategies are informed to business level strategies which, in turn, are informed to corporate level strategies. These strategies are executed by Brand Managers, Operating Managers, Plant managers. Important activities like Advertising, Web site operations, distributions are involved at this level. Ulhas D Wadivkar 50
Dynamic Strategy Since the turn of the millennium, there has been a tendency in some firms to revert to a simpler strategic structure. This is being driven by information technology. It is felt that Knowledge Management Systems should be used to share information and create common goals. Strategic divisions are thought to hamper this process. Most recently, this notion of strategy has been captured under the rubric of Dynamic Strategy, popularized by the strategic management textbook authored by Carpenter and Sanders. This work builds on that of Brown and Eisenhart as well as Christensen and portrays firm strategy, both business and corporate, as necessarily embracing ongoing strategic change, and the seamless integration of strategy formulation and implementation. Such change and implementation are usually built into the strategy through the staging and pacing facets. Strategists - Their Roles & Levels: Strategists are individuals or groups who are primarily involved in the formulation, implementation, and evaluation of Strategy. In a limited sense, all managers are Strategists. But we may have outside agencies involved in various aspects of Strategic Management, who are Ulhas Strategists. D Wadivkar 51 also
Board of Directors:- Board is an ultimate legal authority of an organisation. Board is responsible to owners, share holders, government, controlling agencies, and financial institutes. They get elected and appointed by holding or parent company. Board is requires to direct and is involved in reviewing and screening executive decisions in light of their environmental, business and organisational implications. Role of Board of Directors is to guide the senior management in setting and accomplishing objectives, reviewing and evaluating organisational performance, and appointing senior executives. Board is involved in setting strategic direction, establishing objectives & strategy, monitoring and reviewing achievement. Chief Executive Officer:- is responsible for all aspects of strategic management from the formulation to evaluation of strategy. CEO plays a pivotal role in setting mission, objectives and goals. He formulates and implements strategy and ensures that organisation does not deviate from a predetermined path. CEO is primarily responsible for strategic management of the organisation Entrepreneur:- is the person who starts a new business, is a venture capitalist. He has to play a proactive role to provide sense of direction, set objectives and formulate strategies. He is different from formal system and plays all strategic roles simultaneously.
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Senior management:- consists of higher management level starting from CEO to functional managers and profit centre or SBU heads. They are responsible for implementing the strategies and plans and for a periodic evaluation of their performance. Organisationally they come together in the form of committees, task forces, work groups, think tanks and play a very important role in Strategic management. SBU level Executives:- SBUs are formed with each business having a clearly defined product market segment and a unique strategy. They are CEOs for their SBUs and hence SBU level strategy formulation and implementation is their main role. Corporate Planning:- It assists management in all aspects of strategy formulation, implementation and evaluation. They are responsible for preparation and communication of strategic plans, provides administrative support and plays a measurement and controlling role. They do not from strategy and do not initiate a process on their own. Consultants:- in absence of a Corporate planning many organisation take an outside help in the form of a consultants or consulting companies. Besides providing corporate strategy and strategic planning, they are specialist, knowledgeable, outsider, unbiased and provide objective evaluation. E.g. AF Ferguson, PWC, KPMG, Billimoria, Mckinsey etc.
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Middle Level Managers:- They relate to operational matters and are seldom play active role in Strategic Management. They form departmental / functional plan in light of broad objectives and goals of organisation provided in vision, mission, goals and objective statements of the organisation. They are implementers, followers of guide lines, receivers of communication about strategic plans. They are basically involved in in the implementation of functional strategies. Executive Assistant:- An executive assistant is a person who assists the chief executive in the performance of his duties like data collection and analysis, suggesting alternatives. He prepares brief for various plans, proposals, and projects. He helps in public relations and liaison functions. He coordinates activities with the internal staff and outsiders. He is a corporate planner for CEO. Generally, he orients from finance background ensuring and opining on ROI and strategic positioning of the organisation.
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We will now look at a framework developed by Richard Rumlet for evaluating alternative strategies. It is described in a series of tests: Consistency: The strategy must not present mutually inconsistent goals and policies. Consonance: The strategy must represent an adaptive response to the external environment and to the critical changes occurring within it. Advantage: The strategy must provide for the creation and/or maintenance of a competitive advantage in the selected area of activity. Feasibility: The strategy must neither overtax available resources nor create unsolvable sub-problems We shall now look into the advantages and disadvantages of the strategy:
Strategy sets direction, but can also serve as a set of blinders to hide potential dangers. Strategy focuses efforts, there may be no peripheral vision and can become heavily embedded into the fabric of the organization. Strategy defines the organization, but defining it too sharply results in the rich complexity of the system being lost. Strategy provides consistency, but could hinder creativity.
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Kinds of Corporate Strategy -1 There are four Grand Strategic alternatives: a) Stability Strategy: Main aim here is Stabilising and improving Functional Performance. a.1) No Change Strategy. a.2) Profit Strategy. a.3) Pause / Proceed with caution Strategy. b) Expansion Strategy: Main aim is here High Growth. b.1) Concentration. b.2) Integration. b.3) Diversification. b.4) Cooperation. b.5) Internationalisation. Mergers, Takeovers, Joint Ventures, Strategic Alliances, Global Strategy, Trans-national Strategy, International Strategy, Multi-domestic Strategy. Ulhas D Wadivkar 56
c) Retrenchment Strategy: Main aim here is contraction of its activities. It is done through Turnaround, divestment and liquidation in modes like c.1) Compulsory winding up. c.2) Voluntary winding up. c.3) Winding up under supervision of Court. d) Combination Strategies: It is combination of all above three policies simultaneously in different businesses or at different times. e.g.: i) Merger of TTK Chemicals with TTK pharma. ii) TT industries and Textiles Ltd. expanded through JV. iii) TTK Ltd., diversified into cooking utensils. iv) TTK maps and publications into the general publishing business after a turn-around. Ulhas D Wadivkar 57
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Strategic Management Process - an Overview Definition of Strategic Management: Strategic management is defined as the dynamic process of formulation, implementation, evaluation and control of strategies to realise the Organisations Strategic intent. Strategic Management is a continual, evolving, iterative process. It is not rigid, stepwise activities arranged in a sequential order. It is repeated over time as situation demands.
Establish Strategic Intent Formulation of Strategies Implementation of Strategies
Strategic Evaluation
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Syllabus
2. Strategic Intent & Strategy Formulation: Vision, mission and purpose Business definition, objectives and goals Stakeholders in business and their roles in strategic management Corporate Social Responsibility, Ethical and Social considerations in Strategy
(4) --------------------------------------------------------------
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Strategic Intent
Strategic Intent is combination of four levels in the Management. It involves discussions of Vision, Mission, Business Definition & Goals and Objectives. Strategic Intent refers to the purposes the Organisation strives for. Strategic Intent lays down the frame work within which firms would operate, adopt a predetermined direction, and attempt to achieve the Goals. Hamel & Prahalad considered Strategic Intent as an obsession with an Organisation. Strategic Intent envisions a desired leadership positioning and establishes the criterion the Organisation will use for charting its progress. In addition to ambitions of the Organisation; it encompasses active Management Process that includes focussing the organisations attention on winning. It covers motivating the people by communicating the values, targets. The intent encourages individual and team contributions and attempts sustaining enthusiasm by providing new operational definitions. The Strategic Intent guides the organisation through changing circumstances and guides use of resource allocations.
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The vision of a company is a direction for action for employees. The essence of a vision is forward looking view of what an organisation wishes to become.
Kotter(1990) defines Vision as a description of an enterprise. (an organisation, corporate culture, a business, a technology, an activity) in future. El-namaki(1992) defines vision as a mental perception of the kind of environment an individual, or an organisation, aspires to create within a broad time horizon and underlying conditions for the actualisation of this perception Miller and Dess(1996) defines vision as category of intentions that are broad, all inclusive, and forward thinking
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A vision is a statement about what your organization wants to become. It should resonate with all members of the organization and help them feel proud, excited, and part of something much bigger than themselves. A vision should stretch the organizations capabilities and image of itself. It gives shape and direction to the organizations future. Visions range in length from a couple of words to several pages. Shorter vision statements is recommended because people will tend to remember their shorter organizational vision.
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Vision Statement
Vision Statement Samples: "Year after year, Westin and its people will be regarded as the best and most sought after hotel and resort management group in North America." (Westin Hotels) "To be recognized and respected as one of the premier associations of HR Professionals." (HR Association of Greater Detroit) Vision Statement of TATA STEEL TATA Steel enters the new millennium with the confidence of learning, knowledge based and happy organisation. We will establish ourselves as a supplier of choice by delighting our customers with our service and products. In the coming decade, we will become the most cost competitive steel plant and so serve the community and the nation. Vision Statement of Farm Fresh Produce We help the families of Main Town live happier and healthier lives by providing the freshest, tastiest and most nutritious local produce: From local farms to your table in under 24 hours.
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Strategic Vision
Strategic Vision is a road map showing the route a company intends to take in developing and strengthening the business. It defines Companys destination and provides rational for going there. It culminates in to a Mission Statement. Strategic Vision points an Organisation in a particular direction, charts a strategic path to follow for future and moulds the organisations identity. Strategic Vision is different from Mission Statement: Strategic Vision deals with where we are going, where as Mission Statement deals with Companys present business scope and purpose. A company Mission is guided by the buyers needs it seeks to satisfy, the customer groups and market segments it is endeavouring to serve, and the resources and technologies that it is deploying in trying to please customers and achieve a Market and Industry position.
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Mission Thompson(1997) defines Mission as the essential purpose of the organisation, concerning particularly, why it is in existence, the nature of businesses it is in, and the customers it seeks to serve and satisfy Hunger and Wheelen(1999) say that mission is the purpose and reason for the organisations existence
Mission statements could be formulated on the basis of vision that an entrepreneur decides on in the initial stages.
A business mission helps to evolve an executive action.
Mission of organisation is what it is and why it exists. It represents common purpose which the entire organisation shares and pursues. It is a guiding principle.
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Mission Statement
Mission
Characteristics of a Mission Statement
1. It should be feasible, achievable & It should be precise. 2. It should be clear & It should be distinctive. 3. It should be motivating. 4. It should be indicative of major component of strategy &
Objectives.
5. It should be indicative of how objectives are to be accomplished. 6. It should be indicative of how Policies will be achieved. 7. It should focus Market Rather than Product.
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3.
4.
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Mission Statements
5. Consider any changes that may be needed in wording of the mission statement because of any new suggested strategies during a recent strategic planning process. Ensure that wording of the mission is to the extent that management and employees can infer some order of priorities in how products and services are delivered. When refining the mission, a useful exercise is to add or delete a word from the mission to realize the change in scope of the mission statement and assess how concise is its wording. Does the mission statement include sufficient description that the statement clearly separates the mission of the organization from other organizations?
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Mission Statement of Ranabaxy To become a $ 1 Billion research based global (International) pharmaceutical company Mission Statement of Graphite India Limited To be within top three companies in the world by achieving 1,00,000 MT Production of Graphite Electrodes before 2012 The mission statement of Farm Fresh Produce is: To become the number one produce store in Main Street by selling the highest quality, freshest farm produce, from farm to customer in under 24 hours on 75% of our range and with 98% customer satisfaction. "Our goal is simply stated. We want to be the best service organization in the world." (IBM) "To give ordinary folk the chance to buy the same thing as rich people." (Wal-Mart)
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Mission Statements "FedEx is committed to our People-Service-Profit Philosophy. We will produce outstanding financial returns by providing totally reliable, competitively superior, global, air-ground transportation of high-priority goods and documents that require rapid, time-certain delivery." (Federal Express) "Our mission is to earn the loyalty of Saturn owners and grow our family by developing and marketing U.S.-manufactured vehicles that are world leaders in quality, cost, and customer enthusiasm through the integration of people, technology, and business systems." (Saturn) "In order to realize our Vision, our Mission must be to exceed the expectations of our customers, whom we define as guests, partners, and fellow employees. (mission) We will accomplish this by committing to our shared values and by achieving the highest levels of customer satisfaction, with extraordinary emphasis on the creation of value. (strategy) In this way we will ensure that our profit, quality and growth Ulhas D Wadivkar 79 goals are met." (Westin Hotels and Resorts)
Values
Values are traits or qualities that are considered worthwhile; they represent an individuals highest priorities and deeply held driving forces. (Values are also known as core values and as governing values; they all refer to the same sentiment.) Value statements are grounded in values and define how people want to behave with each other in the organization. They are statements about how the organization will value customers, suppliers, and the internal community. Value statements describe actions which are the living enactment of the fundamental values held by most individuals within the organization.
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Values
The values of each of the individuals in your workplace, along with their experience, upbringing, and so on, held together to form your corporate culture. The values of your senior leaders are especially important in the development of your culture. These leaders have a lot of power in your organization to set the course and environment and they have selected the staff for your workplace. If you think about your own life, your values form the cornerstones for all you do and accomplish. They define where you spend your time, if you are truly living your values. Each of you makes choices in life according to your most important top ten values. It is necessary to take the time to identify what is most important to you and to your organization.
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Developing a Values Statement Values represent the core priorities in the organizations culture, including what drives members priorities and how they truly act in the organization, etc. Values are increasingly important in strategic planning. They often drive the intent and direction for organic planners. Developing a values statement can be quick culturespecific, i.e., participants may use methods ranging from highly analytical and rational to highly creative and divergent, e.g., focused discussions, divergent experiences around daydreams, sharing stories, etc. Therefore, visit with the participants how they might like to arrive at description of their organizational values.
Establish four to six core values from which the organization would like to operate. Consider values of customers, shareholders, employees and the community.
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Goals, Objectives and Action Plans After you have developed the key strategies, turn your attention to developing several goals that will enable you to accomplish each of your strategies. Goals should be S M A R T : Specific, Measurable, Achievable, Realistic and Time-based. Once you have enabled strategy accomplishment through setting SMART Goals, you will want to develop action plans to accomplish each goal. You will need to follow an action plan: Establish a cross section of professionals as a committee and meet to plan the sessions. Determine budget. Select topics based on member needs assessment. Plan advertising strategies, and so forth. Make action plans as detailed as you need them to be and integrate the individual steps into your planning system. An effective planning system, whether it uses a personal computer, a paper and pen system, a handheld computer or a Palm, will keep your goals and action plans on track and on target.
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Areas of Objectives
Objectives represent managerial commitment to achieve specific results in specific period of time. Objectives could be : Profitability : Markets : Productivity : Innovation : Product : Financial Resources : Physical facilities : Organisation Structure & Activities : Manager Performance & Development : Employee performance & Activities. : Customer Service 86 Ulhas D Wadivkar : Social Responsibility.
Some Business definitions: Modi Zerox : Focus as a service organisation rather than vendor of zerox machines. Customer focus: Office Communication with high priced and low priced equipments, marketing services of maintenance and per copy price. Customer Function: Availability of spares, Drums, Toner, good after sales service. Technology: Collaboration with Rank Zerox Helen Curtice: We are in beauty enriching business. We will pursue ideas that would generate products enhancing beauty and youthfulness of men and women. Intel: We are in the business of computing technology and to consistently develop the artifice/building blocks of computing technology for the entire computer industry of the world is our business.
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Attributes of a good business definition: It must be related to human needs which the product seeks to satisfy and should not be limited to just the product. It must be related to basic benefits the product offers. It should not be narrow. A wrong and or narrow concept could reduce the life span of organisation. It must be related to the functions performed by the product and not limited to just the product. It must encompass in its fold, as many related function / benefits as possible. It must go beyond the immediate product, beyond the immediate competitors, beyond the immediate market boundaries. It must be wide enough to embrace new opportunities. It must be wide enough to give a vision of latent sources of competition from say, substitute products. Business boundaries keep changing and defining Business is a dynamic situation and becomes an exacting exercise and it needs to be re-casted over time again and again. 90 Ulhas D Wadivkar
Social Responsibility
Scope of Social Responsibility is defined in terms of Social concern. Business organisation depending on its nature, size, and breadth of activity, could extend social responsiveness to the problems of the whole world, nation, local community, industry and to itself. Business organisations could also classify Social Responsibilities in terms of relatedness to its own activities.
Like any other strategic functions, for successful implementation, Organisations need to allocate resources, create Organisations Structure and evaluate its effectiveness. But all said and done, the society in large remains a major stake holder and we cannot escape our dues to society and towards social responsibility.
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Corporate Governance : Social Responsibility Business provides goods & services to Society for which it receives the price. Society provides goods and services to Business for which it receives the price. Business rewards to society for its inputs by paying wages/profits/dividends Society and Business are interdependent. Their growth & welfare is dependent on this mutuality. Business owes responsibility towards society. A firm carrying very positive image in society has very strong probability of lasting growth.
Society
Business
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Corporate Governance : Social Responsibility Sole aim of a business is and should be maximisation of Shareholders value, as stated by Milton Friedman, does not hold good anymore. All modern large corporate have attained their present size due to support of society in terms of shareholders, suppliers, lenders, employees, government, local community and society at large. Every business unit of the country must aim at becoming good corporate citizen of the country and the world as whole. World Class Quality of goods and services, reasonable prices is minimum requirement. With this companies would enjoy excellent image within area, country and world. Indian examples are Tatas, Birlas, Reliance, Bajaj, L&T, Hero Honda, HDFC, Dr. Reddy Laboratories. TCS, etc. Industrial Corporate Citizens are trustees and should utilise their wealth for the welfare of the society / community. Trusteeship invokes code of discipline, ethical behaviour and strong principle of accountability. Capital and Labour have to have mutual, peaceful co-existence. Ulhas D Wadivkar 95
Corporate Governance : Social Responsibility Capital and labour should supplement and assist each other. Capital being trustees should look after welfare of labour not only material but also moral welfare. Principle of mutually cherishing each other should be developed. Capital should look after the workers and workers should look after productivity and profit of the organisation. Presently, capital has been replaced by knowledge in newer industries like IT & Pharma. Knowledge workers (professionals) like Bill Gates, Narayan Murthy are paving the way towards social responsibilities. Social Responsibilities have foundation of Business Ethics, the moral principles of good & bad, right & wrong or Just & unjust. Peter Drucker has stated that there are no separate ethics of business. What is unethical and immoral in society is also applicable to business. The trick is to put your-self in shoes of those, against whom a particular action is being planned / taken, which is known as empathy. Corporate ethics refers to set of rules, code of conduct acceptable to society at large without any reservations. The concept of Business ethics is global phenomenon and is recognised 97 Ulhas D Wadivkar throughout the world.
c)
Stakeholder Definition Stakeholders are defined as "those groups without whose support the organization would cease to exist. A corporate stakeholder is a party that affects or can be affected by the actions of the business as a whole. Person, Group, or Organization that has direct or indirect Stake in an organization because it can affect or be affected by the Organisations actions, Objectives, and Policies. Key stakeholders in a Business Organization include Creditors, Customers, Directors, Employees, Government (and its Agencies) Owners, Shareholders, Suppliers, Unions, and the Community from which the business draws its Resources. Although stake-holding is usually self-legitimizing (those who Judge themselves to be stakeholders are de facto so), all stakeholders are not equal and different stakeholders are entitled to different Considerations. For example, a firm's customers are entitled to fair trading practices but they are not entitled to the same consideration as the firm's employees. Ulhas D Wadivkar 99
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Stakeholders Any individual, group or business with a vested interest (a stake) in the success of an organization is considered to be a Stakeholder. A Stakeholder is typically concerned with an organization delivering intended results and meeting its financial objectives. In general, a Stakeholder can be one of two types: internal (from within an organization) or external (outside of an organization). Examples of a Stakeholder are an owner, manager, Shareholder, Investor, employee, customer, partner and/or supplier, among others. A Stakeholder may contribute directly or indirectly to an organizations business activities. Other than traditional business, a Stakeholder may also be concerned with the outcome of a specific project, effort or activity, such as a community development project or the delivery of local health services. A Stakeholder usually stands to gain or lose depending on the decisions taken or policies implemented.
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Types of stakeholders
People who will be affected by an endeavour and can influence it but who are not directly involved with doing the work. In the Private Sector,*People who are (or might be) affected by any action taken by an organization or group. Examples are parents, children, customers, owners, employees, associates, partners, contractors, suppliers, people that are related or located near by. Any group or individual who can affect or who is affected by achievement of a group's objectives. An individual or group with an interest in a group's or an organization's success in delivering intended results and in maintaining the viability of the group or the organization's product and/or service. Stakeholders influence programs, products, and services. Any organization, governmental entity, or individual that has a stake in or may be impacted by a given approach to environmental regulation, pollution prevention, energy conservation, etc. A participant in a community mobilization effort, representing a particular segment of society. School board members, environmental organizations, elected officials, chamber of commerce representatives, neighbourhood advisory council members, and religious leaders are all examples of local stakeholders
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Trade Unions
Customers Creditors Local Community
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Distinctive Competence
A Distinctive Competence is a competitively valuable activity that Company performs better than its rivals. It is Competitive superiority in performing Core activity generating competitively superior resource strength. A strength that is superior / distinctive to competition is competitive advantage. Competitive advantage is a back-up for strategy without which strategy will not work. Competitive advantage finally results in either cost advantage or differentiation advantage. Creating entry barrier is also a way to built up competitive advantage. Building Competitive advantage is a conscious and long term process. Preparing Competitive Advantage Profile for the organisation is based on internal appraisal and industrycompetition.
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Core Competency
An enduring competency that cannot be easily duplicated by imitation is Core Competency. Core Competency lies at the root of products. Techniques used are
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: SWOT Analysis : Bench marking : Value chain analysis : Value to customers Competitive approach : Competitive strength assessment.
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2.
3.
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Main Functions:
Check what strategic issues need managerial attention. Find out gaps and take remedial actions. Conduct Industry analysis and competitive situation analysis and prepare a worry list. Good company situation analysis, good industry & competitive analysis are valuable precondition for good strategy making.
Marketing: Market growth, market share of the firm and its competitors, Production capacity and GAP between market potential, brand equity, Products life cycle and estimating safe period. Customers perception for the product and level of satisfaction there of. Synergy of the product-mix, Prices, margins, new product capability, Advertising, Sales promotion,
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Main Functions:
Marketing audit: Market share analysis, Price-volume relationship, Cost analysis, Product line wise profits, Consumer satisfaction index, Brand monitoring surveys. Finance: Level of financial performance profitability and productivity, analysis of Assets & Costs, DSCR (debt service coverage ratio), analysis & efficiency of Cash flow, liquidity, Appreciation of long term financial plans as per Cost of capital, adequacy of Capital Expenditures, Tax administration, dynamism in Tax planning, payback, IRR & BE analysis, earning ratios like EPS, etc. Manufacturing/Operations: Appropriateness of manufacturing processes, skills, facilities for future requirements of product trend. Management in planning and manufacturing controls. Operating efficiency w.r.t industry standards, Industrial Engineering capability for improving product and methods. Value engineering to simplify the product. Analysis of capacity utilisation, maintenance, breakdowns, inventory analysis, cost of Ulhas D Wadivkar analysis. 113 product
Main Functions:
R & D: Commitment to R&D, nature & depth of R & D outfit, Allocation of resources, Speed of R & D, New product development-its records and adequacy, R & D and market needs, Analysis of patents generated, new product commercialisation, R & D expenses v/s new product launch. Allocation of resources and Corporate Functions: chief characteristics of Top Management Image as dynamic? Confident? Aggressive? Timid? Reticent? Change-stability oriented? Future oriented? Coping up with future challenges? Creative? Realistic? Innovation record? Organisation Culture & Structure Traditional? Modern? Rigid? Centralised? Flexible? Flat? Use of information Technology? Quality of strategic planning? Executive turnover? Directors Ulhas D Wadivkar Dummy? Active? Effective Policy makers? 114
Confronted with competitive dis-advantages. Losing ground to rival firms. Below average growth in revenues. Short on financial resources. A slipping reputation with customers. Trailing in product development. In a strategic group destined to lose ground. Weak in areas where there is most market potential. A higher cost producer. Too small to be a major market force or in marketplace. Not in good position to deal with emerging threats. Weak product quality. Lacking skills and capabilities in key areas.
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Organisational Behaviour
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Competencies OR & OB develop S & W, which when combined with Synergistic Effects manifest themselves in terms of Competencies. This helps Organisations to withstand pressures of competition. This is ability to compete with rivals. Organisational Capability Organisational Capability is inherent capacity or potential of an organisation to use its Strengths and overcome Weaknesses to exploit Opportunities & face Threats. It is a skill for coordinating resources and putting them to productive use. Without capability, resources, even though valuable & unique, will be worthless. Organisational Capability, though measurable, remains a subjective attribute. Ulhas D Wadivkar 120
Strategic Advantage
Strategic Advantage is result of Organisational Capabilities. The advantages can be measured in terms of Profit, Market Share, Growth etc. Negative results indicate Strategic Disadvantages. When compared with known identified rivals, the Strategic Advantage is also known as Competitive Advantage. In an abundantly profit making company, Competitive Advantage is used as stimulus.
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Capability Factor Strength & Weaknesses Finance: High cost of capital. Reserves & Surplus position is unsatisfactory. High Rate of Profit Credit worthiness is favourable for raising Loans Low rate of Dividend
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Syllabus
4. Analyzing Companys External Environment: Environmental appraisal Scenario Planning Preparing an Environmental Threat and Opportunity Profile - (ETOP) Industry Analysis Porters Five Forces Model of competition. (4)
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Corrective Action
Visions Missions, Objectives, Goals, BusinessDefinition Strategy Systems Structures Targets Processes Planning Manufacturing Inspection Packing
Feedback
Input Resources : 5 Ms
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O P ML O P ML O P ML GDP
CPI
SALES FOREX PLR
Expnsn
Div. Profits EPS
ROI
ROE Others
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Scenario Planning
Scenarios are tools for strategists to express their views about alternative future environment for which todays decisions are framed. Scenarios resemble a set of stories, built around carefully constructed plots. The stories express multiple view points, paradigms on complex events taking place in world. Scenarios present alternative future images, instead of extrapolating current trends. Creating scenarios requires decision makers to question their broadest assumptions about the way the world works to foresee a decision, which could have been missed or denied For an organisation, scenarios provide a common vocabulary giving effective basis for communicating complex conditions and options. By recognising the warning signals, the threats & opportunities of future, one can avoid surprises, adapt and Ulhas Wadivkar 135 act D effectively.
High
A. Can be Discarded B. Keep a close watch
UnCertainty
Impact
High
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Select the best Strategy & Business Model for the Company
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5. 6.
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Scope of Survey - 1
Macro- environmental factors Demographic Environment Size of population, age distribution, literacy levels, religious composition, composition of workforce, household patterns, regional characteristics, population shifts. Socio-cultural, Environment Culture-languageeducation, traditions, beliefs, values, lifestyle, social class, Economic Environment General Economic conditions and conditions for the targeted population segment, purchasing power, consumer spending pattern, rate of growth of economy and the growth of economy of targeted sector, rate of inflation, interest rates, tax rates, price of materials and energy, labour scene cost, skill, availability. Political Environment Regulating legislation, stability of the government, media, social and religious organisations, pressure groups-lobbies,
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Scope of Survey - 2
Natural Environment ecology, climate, endowment of natural resources, raw material, energy, Technology Environment Technology options available, their cost effectiveness, technology at International level. Govt. approach in respect of technology, technology selection. Legal- Business legislation Corporate affairs, Consumer protection, Employee protection, Corporate protection, Regulation on products, controls on trade practices, protecting national firms. Government Policies Organisations have to understand govt. policies while setting and operating units, especially MNCs who operate in various countries. For example, many MNCs prefer India over China due to Indias legal environment.
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The Industry & competition Knowledge of Industry and competition is a fundamental requirement in developing strategy and industry analysis. The study of demand, consumer, industry and competition is normally a ongoing activity. Government Policies More important in regulated economies but even in free economy, Govt. plays role as large purchaser, offers subsidies, protect home producers, ban fresh entry, ban products. Some time Govt. itself is large supplier and regulates the market. Govt. policies have a great effect on socio-economic conditions. The Supplier related factors Suppliers as a group have their own bargaining power and can influence cost. Scarcity of raw materials can affect output and deliveries. Supplier becoming manufacturer is always a threat. Monitoring supplier environment helps in making aDdecision of integrating or outsourcing. Ulhas Wadivkar 145
Industry Competitors
Rivalry among existing firms
Substitutes
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Rivalry amongst existing firms and jockeying for position - i.e. competition
1. Industry members undertake more aggressive and more frequent actions to boost their market standing & performance. This makes rivalry stronger. 2. Rivalry is stronger in slow growing markets. 3. More nos. of competitors and competitors who are equal in size and capability makes rivalry stronger. 4. Rivalry increases as products of rival competitor becomes more standardised giving good reliability. 5. Rivalry increases as it becomes less costly for buyers to switch the brand. 6. Rivalry increases as competitors play a price war and other competitive weapons to boost their market share. 7. Rivalry is strong when nos. of competitors are less than five.
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8. Rivalry increases when strong companies outside the industry acquire weak firm in the industry and launch well-funded, aggressive moves to transform the acquired company in to a major contender. 9. Rivalry is weak in fast growing markets. 10. Rivalry is weak when, there are so many rivals, that impact of ones action is thin on spread over span.
Typical weapons to combat rivalry are: 1. Lower Prices. 2. More or different features. 3. Better product performance with higher Quality. 4. Stronger Brand image & appeal. 5. Wider selection to customers to choose from Models & styles. 6. Better & bigger dealer network. 7. Better Customer service capabilities.
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4.
When substitutes are readily available & attractively priced. When buyer view substitute products at par in terms of quality, performance & other attributes. When costs are low to end users to switch to substitutes.
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SWOT Analysis:
Identify Company Resource Strengths and Competitive capabilities. Identify Company Resource Weaknesses and Competitive deficiencies. Identify Companys Market Opportunities. Identify External Threats to the Companys future well being. Next step will be to draw conclusions concerning the Companys overall business situation. Rank all factors from exceptionally weak to exceptional strong scale and find out business attractiveness. Identify attractive and non-attractive aspects of the Companys situation. Ulhas D Wadivkar 156
SWOT Analysis:
Third step will be to plan actions to improve Company Strategy.
Use Companys Strengths & Capabilities to lessen the impacts of important external threats.
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Deficiencies.
No clear Strategic Direction. Resources not matching KSFs Lack of Core & Distinctive competencies. Weak balance Sheet / heavy debt / low resources. Too narrow product line compared to rivals. Weak Brand image. Weaker dealer network. Low product Quality, lack of R&D and Technological know-how. Lack of Management depth. Loosing market share because Behind rivals in e-commerce capabilities. Internal operation problems / obsolete facilities. Underutilised Plant capacity.
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Internal Factors
Strengths Technological Skills Leading Brands Distribution Channels Consumer Loyalty Production Quality Scale Management
Weaknesses Absence of important skills Weak Brands Peer access to distribution Low Customer retention Unreliable Product / Service Sub-scale Management Threats Changing customer tastes Geographical Closures Technological advances Government Policies changes Lower personal Taxes Population age structure New Distribution Channels
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External Factors
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Opportunities Changing customer tastes Geographical Liberalisation Technological advances Government Policies changes Lower personal Taxes Population age structure New Distribution Channels Positive
Negative
Syllabus
5. Corporate Portfolio Analysis: Business Portfolio Analysis Synergy and Dysergy BCG Matrix GE 9 Cell Model Concept of Stretch, Leverage and fit (3)
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Business Portfolio Management enable strategic planners to select the optimal strategies for the individual products whilst achieving overall corporate objectives (McNamee, 1985)
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When a Business Portfolio comprises of Multi-business Units and / or operating at multi-location, then the Strategist often ask two questions to take a decision on Business Strategy. How much of our time and money should we spend on our best products to ensure that they continue to be successful? How much of our time and money should we spend developing new costly products, most of which could never be successful? Examples of Portfolios: Unilever: ice cream, tea, spreads, Proctor & Gamble: Detergents, nappies, Gillette: batteries, Shaving products Virgin : trains, planes, cola, music stores, mobiles Wipro : Computers, Vanaspati, Veg. Oils, Soaps, 167 Ulhas D Wadivkar ITC : Tobacco, Soaps, Biscuits
Portfolio Analysis is an analysis of the Corporation as a portfolio of different businesses with the objective of managing it for optimum return on its resources. Portfolio analysis looks at the corporate investments in different products or industries under common corporate jurisdiction. It involves, analysing future implications of presents resource allocation and continuously deciding, adding, curtailing or disposing, operations or products, so that overall portfolio balance is maintained or improved. Portfolio analysis takes into considerations aspects such as Companies Competitive Strength, Resource Allocation Pattern & Industry Characteristics. All businesses have to balance, three basic aspects of running the business : 1. Net Cash Flow. 2. State of Development. 168 3. Ulhas D Wadivkar Risk.
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1.
2.
Different businesses which forms the Business Portfolio can be characterised by two parameters: Companys Relative Market share for the business, representing the firms competitive position and The overall growth rate of the business. For each activity in the portfolio, a separate strategy must be developed depending upon its position in 2 X 2 matrix. Higher Market share will mean, higher profits and higher cash flows. Relative market share is defined as the market share of the relevant business divided by the market share of its largest competitor. i.e. A = 10%, B = 20% & C = 60%, then, As relative market share is 1/6 & Cs share is 3. Higher Growth rate will mean profitable investment / expansion opportunities and easier to increase market share. Earned Cash can be ploughed back to enhance ROI.
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1. 2. 3.
4. 5.
Step-by-step procedure to develop the business portfolio matrix and identify appropriate strategies for different businesses: Classify various activities of the Company into different business segments or SBUs. (Strategic Business Units) For each business segment, determine the growth rate of the market. Plot it on linear scale. Compile assets employed for each business segment and determine the relative size of the business within the company. Estimate the relative market shares for the different business segments. This is done on logarithmic scale. Plot the position of each business on a matrix of business growth rate and relative market share.
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14
12 10 CASH COWS DOGS
8
6 4 2 2 0.1 X
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4X
1.5 X
1X
0.5 X
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Strategies as per Product Life Cycle-1 Expansion Strategy : Stars are the businesses
which have high growth rate & high market share. At times they are not self sufficient in cash flow, but need to be supported in view of their potential. This is Growth phase of Product Life Cycle (PLC). Such businesses generate as well as use large amount of cash. The Star generate high profits and represent the best investment opportunities for growth. We need to reaffirm the Companys Competitive Edge at this phase by sufficient doses of resources for expansion. The best strategy regarding stars is to make necessary investments and consolidate the companys high relative competitive position. e.g. Tiles, Electronics & Communications, Pharmaceuticals, Ulhas D Wadivkar 174 are Star industries.
Build Strategy Question Mark : The Businesses with high industry growth but low market share are Question Marks. In the business. These Question Mark opportunities need investment in order to grow and gain market share. Because of their high growth, the cash requirement is high, but due to their low market share cash generation is low. These are sometimes known as Problem Child as someone with huge potential, but not clicking. Here, a large amount of Cash inflow is required to stabilise and enter into Star phase. Companies must obtain early lead to strengthen the business and capture growth opportunities. A question Mark business can either become a Star or can go to Dogs depending upon funds & competitive edge.
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Strategies as per Product Life Cycle - 4 The business is called Dogs, if business growth rate is low and the companys relative market share is also low. The lower market share means poor profits and as market growth is low, any investment is prohibitive as cash demanded will exceed the cash generation, causing negative cash flow. Under such circumstances, the Strategic solution is to either liquidate, or if possible harvest or divest the DOG business. Harvest Strategy : To develop short term cash flow irrespective of the long term damaging effect to the product or business. This strategy is appropriate for any weak products where disposal in the form of a sale is unavailable or not preferred due to high exit barriers Divest Strategy : To change the capital of the business and allow resources to be used elsewhere of industries that have a very slow or negative market growth rate and where a company has low market share. These are products in late maturity or declining stage as mostly substitutes start taking over these products. They stop generating large amount of Cash and face a cost disadvantage owing to low market share. Sometimes to reduce the high costs involved, a Ulhas D Wadivkar 177 Retrenchment Strategy is also adopted.
DOG
Less
More
More
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Strong **********
Medium **********
Weak
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Invest / Grow
Winners
B
High
Question Marks
D
Winners
E
Average Businesses
F
Medium
Losers
Losers
G
Low
Losers Weak
Circle denotes the size of Industry , while blue colour portion corresponds to Market Ulhas D Wadivkar 182 Share.
20%
10% 10% 15% 20% 20% 5% 100%
7
7 5 6 7 8 8
1.4
0.7 0.5 0.9 1.4 1.6 0.4 185 6.9
Grow & Build Strategy for upper left three cells as Industry Attractiveness & Competitive Position are high. Top investment priority to be given to businesses in these cells. The three diagonal cells from lower left to upper right gets medium priority. Steady investments to protect and maintain their industry position. i.e. Stability / Hold Strategy. The businesses in lower right corner do not receive any investment decisions. Harvest or Divest Strategy may be employed. Strengths: GE Nine Cell allows intermediate ranking between high & low and between Strong and weak. It incorporates much wider variety of strategically relevant variables, where as BCG Matrix is based on only two considerations Industry Growth & Relative Market Share.
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Strengths: GE Nine cell stresses channelling Corporate resources to businesses with greatest probability of achieving competitive advantage and superior performance. Weaknesses: The nine cell matrix provides no real guidance on the specific business strategy. The matrix suggests general strategy like Aggressive Expansion, Fortify and Defend or Harvest Divest. These strategies do not address the issue of strategic coordination between businesses, specific competitive approaches and Strategies to be adapted at business level.
Weakness: The GE Nine Cells method tend to obscure business that are about to become winners because their industries are entering the take off stage.
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Gap Analysis
Desired Performance
Gap
Performance Achieved Performance
Time -1
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Gap analysis -2
Gap analysis is done for focussing on strategic alternatives. On dimension of time various alternatives are evaluated in different phases to get a clear picture for selection of strategies. What is the result of the present strategy? What should be new strategy? What should be methodology of implementation? If the gap is narrow, policy is to stabilise the strategies. If the gap is due to consistent past bad performance; which is also expected in future, then retrenchment / withdrawal strategies may be more suitable.
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Gap Analysis - 3
First step is to identify alternatives. Companies find it difficult to change their strategies because strategic thinking is not the core competency of managers. Hence lot of brain storming, situational analysis need to be done. A correct definition of the problem is the Second step. A hypothesis is developed after brain storming and situation analysis. This hypothesis must be tested to developing clear understanding of the forces that actually work. Next step is to formulate the strategy and address the driving forces in a cause and effect relationship. Find the 80:20 Pareto Principle and attack the most important one. Prioritise the strategies and a plan for the projects to implement strategies on time scale is created for future guidance and analysis.
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Horizontal Fit is operational implementation. It is an approach adopted by organisation to achieve operational effectiveness. All functions operate optimally by performing value creating activities. This is also a value chain. To support value chain activities various staff function departments are involved and put along operations. For e.g. Procurement Department is placed along with Operations department. Horizontal fit means integration of all operational activities undertaken to provide a product or service to customer. Strategy & Structure for Generating Results in Organizations : The traditional strategic planning seeks a fit between resources and aspirations. You set realistic goals based on what you think you can achieve with the resources at hand and then construct strategies and tactics to achieve them. Fit means positioning the firm by matching its resources to its environments as per SWOT analysis. It could be a compromise formula with regards to Firms objectives and Competitive posture of the Company. Ulhas D Wadivkar 192
Strategy as Stretch and Leverage Hamel and Prahalads (1993) assertion that competitiveness is born in the gap between a companys resources and its managers goals has entered the mainstream of strategy thinking. This is one of the concepts of Stretch. Hamel and Prahalad began their deconstruction of conventional wisdom by challenging common understandings of the meaning of strategy. Hamel and Prahalad added duel concept of Stretch and Leverage to Strategic Intent. Stretch is a gap between resources and aspirations. Stretch is diametrically opposite to Fit. Since Fit means positioning the firm to match its resources to its environment. The concept of Leverage is concentrating, accumulating, complementing, conserving and recovering resources in such a manner that the meagre resources (Gap or Stretch) stretched to meet the aspirations that organisation has envisaged. The idea of Stretch & Leverage belongs to Learning School of Strategy. Capabilities are not seen as constraints to achieving. Environment is not seen as given but something Ulhas D Wadivkar 193 which can be created and moulded.
Hamel and Prahalad considered that many managers understood strategy to mean: " fit, or the relationship between the company and its competitive environment; the allocation of resources among competing investment opportunities; and a long-term perspective in which resource money figures prominently. They stressed that being strategic implies a willingness to take the long view, and strategic investments mean betting bigger and betting earlier.
This view obscures the merits of alternatives in which the ideas of Stretch, Leverage, and Consistency of effort feature. Creating stretch, " a misfit between resources and aspirations is the single most important task Senior Manager. Under Fit, Strategic intent would seem more realistic; under Stretch & Leverage Strategic Intent is more idealistic. In both cases it is essentially a desired aim to be achieved.
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Porter on Strategy
- "What is strategy? It is, he wrote " the creation of a unique and valuable position, involving a different set of activities." But choosing a unique position is not enough to guarantee a sustainable advantage. Sustainability requires trade-offs with other possible positions - for three reasons: 1. To eliminate or minimise inconsistencies. 2. To maximise and concentrate the benefits of a chosen position. 3. To recognise and accept the limits of coordination and control. The essence of strategy is choosing what not to do. "Without trade-offs there would be no need for choice, and thus no need for strategy."
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Thus defined, strategic fit is fundamental not only to competitive advantage, but also to the sustainability of that advantage, and the more an organisations positioning rests on activity systems with second- and third-order fit, the more sustainable its advantage will be. The definition of strategy then becomes Creating fit among a companys activities." The success of a strategy depends on doing many things and integrating them. The strategic agenda is defining a unique position, making clear trade-offs, and tightening fit. The strategic agenda demands discipline and continuity.
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For challenges of this sort to be effective, top management has to: A) Create a sense of urgency. B) Develop a competitor focus at every level through widespread use of competitor intelligence. C) Provide employees with the skills they need to work effectively. D) Give the organisation time to digest one challenge
-------------------------------------------------------- Syllabus 6. Generic Competitive Strategies: Low cost, Differentiation, Focus (3) --------------------------------------------------------Ulhas D Wadivkar 199
Competitive Strategy
Competitive Strategy is about being different. It means deliberately choosing to perform activities differently or to perform different activities than rivals to deliver unique mix of value Michael F Porter. Competitive Strategy is about analysing and then experimenting, trying, learning, and experimenting some more. Ian C. McMillan & Rita Gunther Mcgrath. The essence of Competitive Strategy lies in creating tomorrows competitive advantages faster than the competitors mimic the one you posses today. Gary Hammel & C K Prahalad. A Competitive Strategy concerns the specifics of management game plan for competing successfully and achieving a competitive edge over rivals.
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Primary Activities.
Inbound Logistics: Here goods are received from a company's suppliers. They are stored until they are needed on the production/assembly line. Goods are moved around the organisation. Operations: This is where goods are manufactured or assembled. Individual operations could include room service in a hotel, packing of books/videos/games by an online retailer, or the final tune for a new car's engine. Outbound Logistics: The goods are now finished, and they need to be sent along the supply chain to wholesalers, retailers or the final consumer. Marketing and Sales: In true customer orientated fashion, at this stage the organisation prepares the offering to meet the needs of targeted customers. This area focuses strongly upon marketing communications and the promotions mix. Service: This includes all areas of service such as installation, after-sales service, complaints handling, training and so on.
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Support Activities -2. Human Resource Management (HRM). Employees are an expensive and vital resource. An organisation would manage recruitment and selection, training and development, and rewards and remuneration. The mission and objectives of the organisation would be driving force behind the HRM strategy. Firm Infrastructure. This activity includes and is driven by corporate or strategic planning. It includes the Management Information System (MIS), and other mechanisms for planning and control such as the accounting department.
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Overall Low Cost Provider Strategy Best Cost Provider Strategy Focussed Low Cost Strategy
S h a r e
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Price competition is very high. Products are identical and are easily available. Product differentiation is low & cannot be achieved. Most buyers use the product in the same way. Cost of switching brand is low for customer. Buyers are large and have power to bargain. Newcomers can come with low price and attract buyers.
However, a Low Cost provider must always contain enough attributes to be attractive to prospective buyers. Low price by itself, is not appealing to buyers.
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3. Product quality with superior manufacturing abilities. 5. Comprehensive customer service, 6. Unique competitive capability 7. Superior supply-chain activities. 8. Maintaining the cost of differentiation in line.
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Factors of Differentiation Strategy The Product can be differentiated in many ways and buyers perceive these differences as having value. Buyers needs and uses are diverse. There is less head to head competition. Few rival firms are following differentiation approach. Technological change is fast paced and competition revolves around evolving product features. Any differentiation that works well gets imitated and there is need for constant up gradation. Differentiating something that does not lower buyers cost or improves perceived value is a mistake. Over differentiating increasing service needs or usage constraints is a mistake. Trying to charge a too high a premium price. Being timid & not striving to open up about competitors defect and differentiating that is not visible to buyers is a pitfall. 215 Ulhas D Wadivkar
Production emphasis Continuous cost reduction without sacrificing attributes Marketing emphasis Keys to sustain strategy
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Make virtue of product features with low cost Economical prices, good value, low cost year after year.
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Broad Differentiation
Strategic Target Basis of competitive advantage Product Line A broad cross section of the market Ability to offer something attractively different. Many Product, wide selection, with differentiating features.
Production emphasis Production superiority with differentiating features buyers are willing to pay Marketing emphasis Keys to sustain strategy Ulhas D Wadivkar Advertise features, charge a premium for differentiation Constant innovation to stay ahead, Few key differentiators. 219
Production emphasis Items with appealing & assorted upscale attributes with lower costs
Marketing emphasis
Keys to sustain strategy
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Attributes that appeal specifically to niche members. A product tailored to tastes & requirements of niche market.
Custom made products that match the tastes & requirements of niche market.
Communicate how product features does the best of meeting niche market requirements.
Stay committed to serving niche market at better differentiation. Do not loose focus by entering other markets Economical prices, 222 good value, low cost year after year.
7. Syllabus
----------------------------------------------------------------7. Grand Strategies: Stability, Growth, (Diversification Strategies, Vertical Integration Strategies, Mergers, Acquisition & Takeover Strategies, Strategic Alliances & Collaborative Partnerships), Retrenchment, Outsourcing Strategies. ----------------------------------------------------------------(8)
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Broad Differentiation
Focussed Differentiation
EXPANSION / GOWTH
RETRENCHMENT
COMBINITION
Complimentary Strategic options: 1. Strategic Alliances & Collaborative Partnerships ? 2. Merge with or acquire other companies? 3. Integrate backward or Foreword? 4. Outsourcing? 5. Initiate offensive Strategies? 6. Defensive Strategic moves? 7. Using Internet as Distribution Channel, if so, to what extent? Functional Strategies to support above Strategic Choices: 1. R & D, Engineering. 2. Production. 3. Marketing & Sales. 4. Human Resources. 5. Finance Timing the Companys Strategic move in marketplace: a) First Mover, b) Fast Mover? And/or c) Late Mover. Ulhas D Wadivkar 224
Grand Strategies
Having settled on one of the Competitive Generic Strategy, we now need to decide on other Strategic Actions to complement on the choice basic Competitive Strategy chosen. Grand Strategies are Corporate Level Strategies, Setting a choice of Direction that a firm should adopt. It could be a small entrepreneur firm with single location and single business or a corporate conglomerate with multi-location, diversified several different businesses. The Corporate Strategy in both cases is about setting the basic direction of the firm as a whole. Corporate Strategies are basic decisions about allocating & transferring resources among different businesses and managing & nurturing portfolios to achieve overall corporate objectives.
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Business Dimensions
Any Business is defined along three dimensions and combinations thereof. These three dimensions are: Customer Group Customer Functions and Alternative Technologies. As the organisations becomes large & diversified, the business definition also becomes complex. According to Glueck, there are four Grand Strategies, which are used as alternatives and in a combined way. These Strategies are: Stability Strategies. Expansion Strategies. Retrenchment Strategies. Combination Strategies. These Strategies are pure and depending upon various dimensions of the businesses, many mixed strategies do take place. Glueck has described four dimensions, such as: Ulhas D Wadivkar 226
1. a)
b)
Internal / External Dimensions: When the Organisation is an independent entity, it is operating under Internal Dimensions and When the Organisation adopts a strategy in association with another entity, it operates under External Dimension. Related / unrelated Dimensions: When organisation adopts a Strategy related to its existing Business Definition, the Related Dimension operates and
When organisation adopts a Strategy that is un-related to its existing business either in terms of Customer Groups, Customer functions or alternative Technology; the unrelated dimension operates.
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2. a)
b)
3. a)
b)
4. a) b)
Business Dimensions 3 & 4 Horizontal / Vertical Dimensions: The horizontal dimensions operates when an organisation adopts a strategy which results in serving additional customer groups and/or satisfying other customer functions in such a way that they compliment the existing business definition of one or more of its business. The vertical dimension operates when an organisation adopts a strategy which results in the expansion or contraction of the existing business definition of one or more businesses in terms of the utilisation of alternative technologies. Active / Passive Dimensions: The active dimension operates when an organisation adopts an offensive strategy in anticipation of environmental threats and opportunities. The passive dimension operates when an organisation adopts a defensive strategy as a reaction to environmental threats and opportunities.
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Thus combination of Four Grand Strategies, four Dimensions and two types in each dimension give rise to 32 possible mixed Strategies and if we consider three dimensions of Business Definition, these possibilities should be 32 x 3 = 96 and if we consider weight-ages for each factor the Strategic alternatives could be mind boggling. However, all alternatives are not feasible or possible and we narrow down the choice of few major strategic alternatives.
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1. Stability Strategies:
1.a) No-Change Policy: It is a conscious decision of not doing anything new and continue with present business definition. When environment is stable and predictable with no new significant threats & opportunities in the environment, it may not be worthwhile to alter strategy in present situation. Also no new strengths have been generated and no new weaknesses have been developed. No new threat of substitutes and new entrants. However, this should be a conscious decision and should not arise out of in-activity and owing to inertia. It is dangerous to be complacent. 1.b) Profit Strategy: No change policy cannot sustain for long and situations keep changing. However if company believes that the changes like economic recession, govt. rules, industry downturn, competitive pressures are Ulhas D Wadivkar 230 temporary and will turn favourable after some time,
then firm opts for maintain profit policy by artificial measures like cut costs, hold investments / replacements, raise prices, increase productivity and some such measures to tide over the difficult days. However, if the problems are not temporary, the company position deteriorates.
Pause / Proceed with caution Strategy is a temporary strategy like profit strategy and is used for consolidation. It is used to test the ground before going ahead with fullfledged Grand Strategy. Sometimes after a major expansion firms need to stabilise, allow strategic change to percolate through organisation structure and allowing existing systems to adopt the strategy and the move for further expansions. It is also used to bide the time for more opportune time and move on with rapid strides again.
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2. Expansion Strategies
1. If organisation is not moving ahead, it is actually going backwards. Companies aim for substantial growth to take advantage of Growing economy, liberalisation, burgeoning markets, globalisation, Emerging technologies etc.
2.
Expansion Strategies are of 5 types. 2.a) Expansion through Concentration: 2.b) Expansion through Integration: 2.c) Expansion through Diversification: 2.d) Expansion through Co-operation: 2.e) Expansion through Internationalisation:
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2.a) Expansion through Concentration: Firms tend to rely on doing what they know they are best at doing. Concentration Strategy involves investment of resources in a product line for an identified market. The firm has proven technology, market has high potential for growth and industry is sufficiently attractive for concentration to take place. The firm should also have financial strength to sustain expansion. This is a first preference strategy of firm doing what they are doing already and would like to invest more in known business. (Bajaj, Maruti)
Concentration strategy involves minimal organisation changes, improves competitive advantage due to in depth knowledge & expertise.
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The limitations of Concentration Strategies are putting all resources at one project, it is industry dependent and adverse condition in industry can affect. In the Recession time, it is too difficult for concentrated firms to withdraw. Product obsolescence is another threat for the heavy investment. 2.b) Expansion through Integration: When firms use their existing base to expand in the direction of their raw material or the ultimate consumer or acquire adjacent businesses; expansion through Integration takes place. This is exploring Vertical and Horizontal dimensions of Business. Expansions are pivoted around present base of customers. Scope of business definition is widened. Alternative technologies are used for backward or forward integration. The firm moves up or down the value chain. The firm aims at cost economics. It is also one type of Make or Buy decision. All integration strategies require Trade-offs. There are two types of Integrations.
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Vertical Integration: When an organisation start making new products that serve its own need or is for self consumption. Backward Integration means retreating to source of raw materials while Forward integration moves the organisation to its ultimate customers. Horizontal Integration: When an organisation takes up the same type of products at the same level for production or for marketing. Many a times Horizontal Integration is a merger of like industries. Integration strategy gives more control on Value chain but carry a risk as industry is set to serve same customer group and in case product fails or becomes obsolete. 2.c) Expansion through Diversification: Several firms diversify to reduce the risk of dependence on product and same set of customers. Diversification involves all dimensions of Strategic Alternatives. It could be internal or external, related or unrelated, horizontal or vertical, Ulhas D Wadivkar 235 technological etc. It changes business definition.
Concentric Diversification: The activity is related to existing business definition either in businesses, customer groups & functions and /or alternative technology. It could be market
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3. Retrenchment Strategies.
Retrenchment Strategy is followed when an organisation substantially reduces scope of its activities. The organisation need to find out problem areas and diagnose the causes of the Problems, accordingly, various types of Retrenchment Strategies are adopted. External Developments, Government Policies, Substitute Products, Changing Customer needs, Wrong Strategies, Obsolete Products, could be reasons for decline. Symptoms are noticed in poor performance, declining profits, dwindling Cash flow, falling sales, Shrinking markets, Shrinking market share, increasing debt. The organisation with proper monitoring controls can sense impending danger and position itself to find alternatives.
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3.a) Retrenchment Strategies: Turnaround Strategies: 3.a.1.: If CEO has credibility with Banks and Financial Institutions and if a qualified Consultant is available, then management team handles the entire turn-around strategy with support of advisory specialist external consultant. 3.a.2: In another situation, Turnaround specialist is employed to do the job and existing team is temporarily withdrawn. The person could be deputed by banks. 3.a.3: Replacement of existing team, especially CEO and / or merging sick unit with a healthy one. Possible actions could be: Analysis of Product, market, production processes, competition, market segment positioning, production logic, Target setting, feedback, remedial actions.
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3.b) Retrenchment Strategies : Divestment Strategies: 3.b.1: Divestment is done due to negative cash flows, mismatch of business with the company, project feared to be non-viable in long range, severe competition, Technological up-gradation asking for funds which are not available, Selling a part of company for survival of organisation, a better alternative is available for investment, Divestment as a part of merger plan of mutual exchange, Divestment is done in two ways : A part of company is divested or firm may sell a unit outright to a buyer, who finds the purchase as a strategic fit.
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3.c) Retrenchment Strategies : Liquidation Strategies: This is most un-attractive strategy, where company shuts down and tries to sell its assets. It is a last resort. Liquidation is difficult due to various legal constraints and protection given to employees in labour law.
Liquidation may be inevitable in spite of best efforts of the entrepreneur. In case of Textile Mills of Mumbai, writing was on wall as Mills did not invest in to new technology for more than 50 years. Secondly, it could be a planned liquidation, in view of prices of real estate in Mumbai. The neglect may have been deliberate. Some times liquidation can happen through court order for compulsory winding up and sometimes winding up can be voluntary. Ulhas D Wadivkar 242
Combination Strategies
Combination Strategies are mixture of Stability, Expansion and Retrenchment strategies. They are either followed simultaneously or in a sequential way. It is very difficult in the business environment to follow a single pure Strategy. Situation is Complex and business demands different strategies to suit the situational demands made upon the organisation.
As an example, we observe Asian Paints Ltd company following three strategies together. Addition of new variety of Decorative paint for widening customer base, (Stability), and Adding an entirely new product like Automotive Paint with new set of customers & functions (Expansion), while eliminating or closing the contract division, which used to take Painting Contracts (Retrenchment).
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Timing Tactics the Companys Strategic move in marketplace: a) First Mover, b) Fast Mover? And/or c) Late Mover.
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1. Strategic Alliances & Collaborative Partnerships? In the present era of Privatisation & Globalisation, Industries have to face altogether different challenges not faced hitherto. Rapid advances in technology, free economy, new markets in developed & under developed countries, and invasion of foreign companies are forcing Industries to enter into race of building Global presence and into race of adopting new technologies. Industries also find that they do not have expertise for running the race of Global leadership. The global environment requires diverse & expensive skills, resources, technological skills. The fastest & surest way to fill up the gap is Alliances with enterprises having desired strengths. Strategic Alliances are collaborative partnerships where two or more companies join forces to achieve mutually beneficial strategic outcomes. These alliances are more than company to company give & take dealings but fall short of Merger or JV. These alliances are mainly for bridging gap of resources and technology. Ulhas D Wadivkar 246
Advantages of Alliance: Alliance is basically between equals, but alliances are also done with suppliers, distributors as partners by many big business houses. These alliances are mostly done with Value chain contributors. It is now common for companies to pursue their strategies in collaboration with suppliers, distributors, makers of complimentary product and some select companies. e.g. IBM & DELL. Advantages of Alliance: Get into critical country markets quickly. Gain, in-side information & knowledge about unknown / unfamiliar markets & cultures. Access valuable skills & competencies. Get a handle to participate in target technology or industry. Master new technology; build new expertise & competencies faster. Ulhas D Wadivkar 247 Open up broader opportunities.
Stability of Alliances:
Alliances have a very high rate of divorce. In US only about 39% of Alliances are found to be stable. Others are either outright failures or are limping along. Alliances to be successful should have partners working together. Stability of alliances depend upon their success in adopting to changing internal & external conditions, willingness to bargain on issues, real collaboration and not merely arm length exchange of ideas. Each partner must bring in high value allied skills, resources and contributions and respect each other. They should have co-operative arrangements working for win-win solutions. Causes for failures of alliances could be, diverging objectives and priorities, inability to work together, changing conditions which make initial reason for alliance as obsolete, more attractive technologies and / or rivalry at marketplace. Alliance partners should guard themselves from undue dependence. Over a period the partners must learn skills and technology. To be a market leader companies must develop their own capabilities or alliance will ultimately lead to Merger or Acquisition.
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M & A have not produced hoped-for results on many instances. Resistance of rank and file employees of two large companies is some times too formidable to resolve. Conflicts of management styles and difference in Corporate Cultures create problems in integration. Cost savings, expertise sharing, and enhanced competitive capabilities take substantially long time to materialise in view of above problems. Pros & Cons of M & A: 1) M&A ensures management accountability, 2) offer easy growth, 3) create mobility of resources, 4) avoid gestation period & hurdles involved in new projects, 5) offers a chance to sick units to revive, have possible selective divestment, 6) venture into new business & markets, 7) increase market share & 8) decrease competition. As against; in takeovers, 1) money power takes over professionalism. 2) Takeovers do not create any real assets for Society, 3) are detrimental to national economy, 4) reduces competition, 5) facilitate monopolistic, oligopolistic tendencies, 6) reduces employments, 7) affects cultural integration.
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2. 3. 4. 5.
6.
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Outsourcing Strategies:
Unlike Integration; outsourcing is narrowing boundaries of the business. Integration has problems of mismatch of capacities, as economic size for individual items in value chain could be different and hence such specialised skilled processes or items in value chain could be outsourced to specialists.
Advantages of Outsourcing:
1. Cost reduction An activity can be performed more cheaply by outside specialists. 2. A particular skilled activity can be performed better by outside specialist. 3. The activity not connected with core competence and not crucial to firms ability to achieve sustainable competitive advantage and will not affect the technical Know-how can be outsourced to advantage. 4. Outsourcing reduces companys risk due to changes in technology and/ or change in buyer preferences. 5. Outsourcing streamlines the Company operations in ways that cut time it takes to get the newly developed product in to the market. 6. Outsourcing allows the company to concentrate on strengthening and leveraging its core competencies.
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Offensive Strategy
Offensive Strategic moves include yielding a cost advantage, a differentiation advantage, a resource advantage. These advantages, when used with initiative are termed as Offensive Strategy giving Competitive advantage to the initiator. However, competent, resourceful rivals wont take lightly and exert pressure to overcome the disadvantage they are facing because of initiative taken by one of their associates. The initiator of the Offensive Strategy has to come up follow-up offensive & defensive moves to sustain the initially won competitive advantage.
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Options could be going after rival whose product lag in quality & features, or making special sales campaign, Service camps where rival lacks in service department,
or Win away customers with your strong brand appeal over his weak brand, or take advantage of geographic reasons, where rival has weak presence in market, or paying special attention to market segment which your rival is neglecting.
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actions,
Such offensive may include, price cuts, increased advertising, additional performance features, new models
4.
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End-run offensives: involves going around competitors instead of taking them head on and change rules of game & competition. This may include, introducing new products that redefine the market & terms of competition, e.g. digital camera, wireless communication. It could also include launching initiative in geographic area where competitors have not yet reached or introduce products in new market segments for selected buyers with different attributes & performance features, e.g. sport-utility-vehicles of Honda Accura or ford Lexus. Taking a jump ahead- leapfrogging by using next generation technology, which support existing business & technology such as 3 G hand sets, blackberries, i-phone, LCD screens
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a) b) c)
d) e) f) g)
Types of Offensive Strategies - 6 Pre-emptive strikes: This is one of a kind offensive move. Whosoever is first gains maximum competitive advantage! Pre-emptive strategies involve being first to secure an advantageous position, where rivals are kept away and cannot duplicate and then strike competitors by May be securing a big renowned distributor, New geographic area, new shopping mall, Good location for to cheap transportation & raw materials, etc, Choose which rivals to attack. It could be leaders, who are always vulnerable or Second run firm with weaknesses, here the challenger must be strong to strike weak company, Struggling enterprises who are on the verge of going under, Small local & regional firms with limited capabilities. The pre-emptive strikes are done on the basis of core competency of challenger, where they are best in areas like Resource strengths and competitive capabilities, otherwise chance of success are dim.
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Defensive Strategies:
In competitive environment every successful company has to face the threat of challenges from rivals and new entrants. The defensive strategies are used to lower the risk of being attacked and weakening the impact of attack. The defensive strategies do not improve competitive edge but they help to fortify companys competitive position, protect valuable resources and prevent possibilities of imitation. Two forms of Defensive Strategies are: 1. Blocking the avenues open to Challengers: Defender can participate in alternative Technology to reduce attack of better Technology which may be offered by rivals. New Products, new features, broaden the product range, close vacant niches,
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2.
Have economy priced product range to ward off price wars. Lengthening warranty periods, free service training or camps. Developing capability to provide spare parts. Providing free coupons, give away samples, sponsoring gift hampers, Search & appoint creditable distributors & book them with volume discounts & other finance terms so as to discourage them from trying other suppliers. Signalling Challengers that retaliation is likely & let challengers know that the battle will cost more than its worth. Publicly announcing managements commitment to maintain the firms present share. Publicly committing the company to match competitors terms & prices. Maintaining a war chest & marketable securities. Making an occasional strong reaction on moves of weak competitor to enhance the companys image of tough defender.
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Strategies for Using Internet as distribution channel The internet era has brought second wave of Internet entrepreneurship. Companies need to address how best to make internet as part of the business to use as distribution channel. How much emphasis to be placed for use of internet? Managers must decide how to use the Internet in positioning the company in marketplace? Using Internet Just to Disseminate Product Information: and use internet to direct customers to distribution channel partners for sales transaction or indicate locations retail stores. This is to avoid conflict with already existing distribution channel partners. Direct sale on net will indicate weakening commitment to distributors. Dealers are considered better positioned to deal with brick & click Strategy for Company products / services. Company considers that strong support and goodwill of dealer network is essential. Web is considered in partnership with dealers and not in competition. Ulhas D Wadivkar 264
Using Internet as Minor Distribution Channel: Here, the strategy is to use Internet to gain online sale experience, doing market research, testing product, getting feed back from web surfers and create sufficient interest about Companys Product and Services in web community. e.g. Nike selling some footwear on line, giving buyers option for colour & features so as to gain more & first hand knowledge about customers choices.
First movers customers are likely to retain brand loyalty giving him firm footage in market. However, first mover has to have good financial resources, important competencies, competitive capabilities and high quality management.
The first move cannot be for name sake. First mover must time his product entry with precise combination of features, customer value & sound revenue cost profit economics to sustain the edge over rivals and maintain market leadership.
Being the first mover need competency and cost. It may be cheaper to copy. If the product life cycle is long, the initial advantages of first mover can be nullified over a time and with safety. A follower and late mover assume that first mover to be slow in learning and updating his products.
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First mover risks obsolescence due to technological advancements, smart late mover can turn apple cart & beat first mover. Sometime fence sitter moves in by fine tuning on mistakes of first mover Being a Fast follower and late starter can also be an advantageous move with wait and see policy. It may be
Syllabus
=============================== 8. Tailoring strategy to fit specific industry: Life Cycle Analysis Emerging, Growing, Mature & Declining Industries. (4) ===============================
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Strategies for : Competing in Emerging Industries: 1. Strategy deals with risks & opportunities. 2. Try for winning early race to Industry leadership, Risk taking entrepreneurship. 3. Broad or focussed differentiation Strategy with technological superiority. 4. Strategy to go all out for perfecting the Technology, improved product quality with additional performance features. 5. Form strategic alliance with key suppliers for gaining technological expertise, specialised skills, and critical material component. 6. Pursue new customer groups, new user applications, new geographical areas. 7. Acquire, merge, form JVs with companies having complementary technology. 8. Make it easy & cheap for first time buyers for them to experience industrys first generation product.
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Velocity Markets
The Strategy could be offensive or defensive, depending upon where you react to change or you lead the change. A middle path is anticipating change. Strategies to invest aggressively in R & D for leading edge of technical know how. Develop quick response capability. Have strategic partnerships with suppliers making tie in products. Initiate fresh actions regularly in every few moths without waiting for situations compelling change, thereby keep companys product & services fresh & exciting to withstand changing environment.
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Strategies for : Competing in Mature Industries: At matured stage, check your portfolio and prune added products & models being in list for name sake. Concentrate on Value Chain, trim costs, & do not allow Fat additions. Concentrate on increased sales to present customers.. Acquire rival firms. Expand Internationally. Build new or more flexible capabilities. Strategies for : Firms in Stagnant or Declining Industries: Concentrate on Value chain, drive down your costs and strategise to become industry leader as low cost provider. Even in declining industry, some segments are growing. Know the needs of buyers in that segment & fulfil them. Concentrate on product differentiation with quality & innovation. Ulhas Dimprovement Wadivkar 274
Strategies for: Runner-Up Firms: These are second tier companies with lesser market share than the leader. These are also up-coming market challengers. Offensive Strategy to build market share. Strategy to grow through acquisition. Strategy to fill up vacant niche. Strategy to be a specialist, or to have superior product or to have a distinct image (Differentiation) Strategy to be a content follower no trendsetting moves but steal customers aggressively by copying and with special privileges. Strategies for: Weak and Crisis-Ridden Businesses. These are Retrenchment & Turn around strategies. Selling off Assets. Revising the existing Strategy. Launching efforts to boost revenues. Pursuing cost reduction. Ulhas Using a combination of these efforts. D Wadivkar 278
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Take a long term view for Companys Competitive position and take those Strategic moves on top priority. Be alert about unmet customer needs, buyers wishes for something better, emerging technological alternatives and be prompt in adapting to changing market conditions. Be alert needs of non consumers, which is a very large share of the Market.( e.g.- Wall Mart at 14%) Invest in creating sustainable competitive advantage. Do not assume most optimistic circumstances while forming Strategies. Avoid Strategies which can be successful only in optimistic circumstances. (if not, then what?) Do not under-estimate rivals in their reactions or commitment to do better. Attacking competitive weakness is always safer and profitable than attacking competitive strength.
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Syllabus
9. New Business Models and strategies for Internet Economy: Shaping characteristics of E-Commerce environment E-Commerce Business Model and Strategies Internet Strategies for Traditional Business Key success factors in E-Commerce Virtual Value Chain. (6)
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What is E-commerce?
E-Commerce from Communication point of view: It is the ability to deliver products, services, information, payments via network like internet. E-commerce from Interface point of view means information and transaction exchange: Business to Business (B2B), Business-to-Consumer (B2C), Consumer to Consumer (C2C) and Business to Government (B2G). E- Commerce as Business Process means activities that support commerce electronically by networked connections, for example, business process like manufacturing and inventory and business to business process like supply chain management are managed by the same networks as business to consumer processes. E-Commerce as Online process: E-commerce is an electronic environment that allows sellers to buy and sell products / services and information on the internet. The products may be physical, like cars or services like news or consulting.
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What is E-commerce? E-Commerce-Structure: E-commerce deals various media: data, text, web pages, internet telephony, and internet desktop video. E-Commerce Market: E-commerce is a worldwide network. A local store can open a web storefront and find that the world is at its door step customers, suppliers, competitors, and payment services along with advertisement presence. E-commerce is selling goods and services on the retail level with anyone, anywhere, via internet. It includes new business opportunities that result in greater efficiency and more effective exchange of good and services. Every transaction is blocks of information exchanged between E-merchant and a customer via the corporate Web site. Examples : www.amazon.com, www.ebay.com, www.crutchfield.com,
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What is E-business?
E-business is conducting critical business systems and constituencies directly via internet, extranets and intranets. E-business is the conduct of business on the internet, in supply-chain planning, tracking, fulfilment, invoicing and payment. It includes buying, selling as well as servicing customers and collaborating with business partners. E-business has various Goals: Reach new markets. Create new products or services. Build customer loyalty. Enrich human capital. Make the best use of existing and emerging technologies. Achieve market leadership and competitive advantage. Example: SAP: Provider of Business Software used for ERP. Online banking services is one more example.
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By reducing customers' search costs, the Internet makes price comparison easy for customers, and thus increases price competition and shifts bargaining power of customers new promotion venues. The Internet creates new substitution threats by enabling new approaches to meeting customer needs and performing business functions (Porter 2001). World Wide Web (www) technology itself has produced new promotion venues. The Internet also facilitates an electronic integration of the supply chain activities, achieving efficient distribution and delivery. It also facilitates partnerships or strategic alliances by networking partners or allies.
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E-Business Strategies for Competitive Advantage: Product, Price, Promotion, and Place Strategies
Product Price Promotion Place
Threat of Differentiation, Price Customer New Discrimination, centric Entrant Promotion, Innovation or Cost Performance Niche Product leadership, based Appeal, Value added
Products Revenue Sharing
Outsourcing
Strategic Alliance, Click & Mortar Strategy
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Product
Price
Promotion
Place
Threat of Product Substitutes Differentiation like bundling Innovation and or Niche Product Customer centric strategy
Rivalries among Existing firms
Product Price differentiation discrimination Innovation and or Niche Product Cost leadership. Value added products
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Promotion
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Value added Customer products / Centric services Promotion Performance based Brand appeal Revenue Sharing
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However, if you want to benefit from this new Internet economy, you will need to apply technology and electronic media to improve two basic aspects of your operation. You must: Differentiate your products and servicesand improve your market share. Enhance your efficiencya move that will lead to improved profitability To see how these efforts can lead to greater levels of competitive success, refer to the following graphic. In this graphic, the four quadrants represent overall characteristics of value propositionsfor individual products, services or entire companies in any industry. In the top right quadrant, companies successfully differentiate their products and services to capture increased market share, while at the same time leveraging the power of technology to slash the cost of sales and operations and generate market-leading profitability, which in turn finances ongoing reinvestment. In the top left quadrant, companies are often fighting a multitude of new combatants within a commoditized market, where price competition is acute. In this situation, technology must be maximally leveraged to maintain even modest profits.
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In the bottom right quadrant, companiesusually inheriting their market differentiation from their legacystill enjoy acceptable profit margins but are at extreme risk of new market entrants inventing new ways to leverage technology to deliver the same or superior value to their customers less expensively and more rapidly. In the lower left quadrant are usually the enterprises that offer customers products or services that are not differentiated from less expensive options, and that are generally trailing the pack in leveraging IT. They lose market share and ultimately risk failure. The underlying canvas of this diagramthe market itself is constantly being pulled down and to the left by new competitors with innovative ideas and new technologies that make those ideas less expensive to realize. Moving up and to the right, maintaining market leadership requires a disciplined focus on continual improvement along both dimensions. Following strategies are required to be employed to accomplish continual improvement in both market share and profitability.
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1. Market Share: Through Increased Differentiation:1: Customers from anywhere can reach out to merchants anywhereand vice versathey can evaluate their options with a few clicks of a mouse button. In this environment, it has become difficult to differentiate products and services. If you are to remain competitive, you will need to set yourself apart from your competition.
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a.3) Distribution channels are more important then ever a.4) Make sure your value proposition, as expressed on the Internet, is real and understandable, and you have a strong differentiation strategy to drive profitability and you've constructed a distribution strategy that leverages new intermediaries. Then continually improve all of the above.
a.5) Understand the information dynamics of your marketplace as it changes with the Internet, evaluate the activities of your competitors, try to develop breakthrough ideas, keep your plans confidential until they're ready to launch and continually improve every aspect of your electronic value proposition and operations. And move quickly.
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c) Customer Service Re-engineering and Optimization c.1) Customer support is one of the most powerful differentiators in the online world. Assess where selfservice Web sites can be implemented, integrate them with your existing support knowledge systems, build communities among customers and adapt the systems to the patterns of customer behaviour d) Brand Strategy and Development : d.1) Brand loyalty has become one of the most powerful differentiators in e-commerce. Brand gets embodied through set of thoughts and emotions. Greater the depth of these impressions, the stronger the brandin a positive or negative direction. d.2) In the online world, impressions can be transmitted in seconds to millions of people, therefore, the process of managing publicityboth good and badis as important as ever. Recognize the power of online opinion, a material market advantage might get lost and a new and an undesirable brand attribute might get attached
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d.3) Understand that your online brand must be differentiated from competitors, that it must be developed within a disciplined and planned program.
e) Audience Development e.1) On the Internet, it is easier than ever to actually communicate a message to large numbers of people. However, in many cases, it's much harder for your message to be heard. Successful online marketing program boils down to the same objective as in the physical world: developing an audience or "Audience Development" is preferred phrase for online marketing, e.2) To succeed in any marketing endeavour, you must have an audience. Create an Audience Development.
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f.1) Users expect a Web site, Intranet or Extranet to present information in an intuitive, compelling and efficient manner, and leverage the interactivity of computing. This is part of the process of creating a powerful user experience.
f.2) Optimal user experience blends several common objectives into a seamless visual and interactive experience: the personality of the brand, the purpose of the interaction, the ease of comprehension and the speed of the results. f.3) Critical success factors for any Internet application are usability, interactivity and efficiency. These factors should be integrated into a user experience plan aligned with brand, audience and purpose, and then measured for optimization
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Once the IT infrastructure model is ready as above, following business processes are to be used. E-commerce, both business-to-business and business-toconsumer. Value chain integration. Human resources benefits administration, recruiting and stock administration. Sales force automation. Inventory and configuration management. Customer support. Distribution and service channel automation. Document management and workflow. Knowledge management. Financial reporting, analysis and EIS. Ulhas Point-to-point, conference and broadcast communication. D Wadivkar 312
Manheim Auctions recognized that selling used cars is a difficult, "dog-eat-dog" business that makes many potential customers uncomfortable. This company found a way to propel the used-car business into the '90s with new and innovative ways of selling that eliminated the need for high-pressure sales tactics on a car lot. The company reports that it has generated sales from more than 4,000 dealers subscribing to its online used-car auction site. Amazon.com saw a huge market of people who prefer to browse the Web rather than browse through bookshelves in a retail store. As a result of its early innovation, the company has quickly created a large and growing Internet-based business. Amazon.com realizes all its revenues from the Internet.
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But many are taking a haphazard approach, resulting in wasted time, effort, money and, more significantly, lost opportunity. For example, Forrester Research found that one of the most common mistakes companies make when implementing an Internet project is not having a clear vision or purpose for the solution. Integrating Internet technology successfully into a business involves fundamental considerations. Companies must rethink their business strategies and plans in light of the oncoming Internet wave, using it to their advantage. Internet is a relatively new arena that will have a far-reaching impact; many companies have not yet developed the necessary skills and technology expertise in-house to create solutions that tap the full potential of the Internet. That's why it is important to partner with companies such as Dynamic Net, Inc. that have the breadth of expertise, experience and resources necessary for developing new strategies and improving business processes using Internet-based technologies. By partnering with a strategic firm such as Dynamic Net Inc., PWC, to help you accomplish these objectives, you can ride the Internet Ulhas D Wadivkar 316 wave to new levels of success.
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Syllabus
10. Strategy Implementation: Project Implementation Procedural Implementation Resource Allocation Organization Structure Matching structure and strategy. (3)
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Issues in implementation:
Project Implementation. Procedural Implementation. Resource Allocation. Structural Implementation. Behavioural Implementation. Functional & Operational Implementation.
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Strategy Implementation
Strategy Implementation is managerial exercise of putting freshly chosen Strategy into place. Action orientation: Strategy implementation entails action, it is putting formulated Strategies into action through the management processes. Strategy Implementation is comprehensive in scope. It includes everything that is included in the discipline of management studies. Strategist must have somebody with a wide range of knowledge, skills, attitudes and Attributes for Implementation. Actual Implementation demands varied Skills Wide range of involvement. Along with CEO every employee is involved in Strategy implementation. The various tasks in strategy cannot stand alone. They are interrelated. Each task performed is related to other and thus create an interconnected network.
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Adopting a clear model of Strategy Implementation: A Clear unambiguous Strategy, Clear Responsibilities & Accountabilities, Comprehending, how various elements are interconnected. Effective management of change in complex situations: Behavioural changes, leadership style changes, Strategy Implementation is Activating Strategies, preparing ground for managerial tasks & activities. ( Project implementation, Procedural Implementation & Resource Allocation) The core of strategy implementation is Managing Change. (Structural Implementation, Leadership Implementation and Behavioural Implementation). It involves Degree of change, Timing of change & Activity areas of the change. The outcome of Strategy Implementation is to Achieve Effectiveness through Functional and Operational Implementation. Goal Model, Resource based Model, Internal process Model and the Conflicting Values Model. (Attempt to consolidate different view points & using diverse indicators of performance)
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Formulated Strategy
Implemented Strategy
Intended Strategy
Deliberate Strategy
Realised Strategy
Unrealised Strategy
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Emergent Strategy
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Budgets
Policies, Procedures, Rules & Regulations
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Strategies F u n c t io n al Pl a n B r o a d
O bj e ct I v e s
Corporate
Corporate Plan
A n n u al O p e r a t I o n
B u d g e ts
Sector Plan
Business sector
Divisional Plan
Division
Product Level
Long Term / Medium Term Objectives : Market Share, ROI, ROE, New Markets. These are integrated and coordinated, consistent, prioritised and measurable objectives.
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1. Project Implementation:
Strategic Management Process
Strategy Implementation
Project Objectives
Control Measures
Initiating
Planning
Executing
Controlling
Closing
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1. Project Implementation:
Conception Phase: Extension of Strategy Formulation Phase. Prioritising projects conceived.
Definition Phase: Preparation of Detailed Project Report considering marketing, technical, financial (eligible for scrutiny by financial institutes, economic and ecological aspects), feasibility study, Organisation, location, whether new or Modernisation or expansion or diversification, backward integration, nature of Industry, nature of products. Project promoters & Financial details of the company.
Economic considerations like competition, economic benefits to country or region, contribution to development, ancillaries etc. Environment aspect Govt. consents like licence, capital goods, foreign Exchange, technical collaboration permission etc.
Planning and organising phase: Designs, budgets, finance, schedules, manpower, systems and procedures. Implementation Phase : detailed engineering, order placement, testing, trial and commissioning of the project. Clean up phase : disbanding the project set up and handing over of the facility to operation.
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2. Procedural Implementation
Formation of the company Licensing procedures SEBI requirements MRTP requirements Foreign collaborations procedures FEMA requirements Import and Export Licences / requirements Patenting and trade mark requirement Labour legislation requirement Environmental requirement and Pollution board requirements Consumer protection requirements Procedures for availing Incentives and facilities to get benefits.
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3. Resource Allocation
Resource allocation deals with procurement and commitment of financial, physical and human resources to strategic tasks. Project related resources are generally one time requirements and for on-going concern the resources are required on continuous basis. Finance is primary resource. It is required for creation and maintenance of other resources. Long term resources are required for creation of capital assets and short term finance is required for working capital. Resources could be internal or external. Internal resources are retained earnings, depreciation provisions, other reserves etc. External resources are equity and long term loans. Also money market resources such as bank credits, hire purchase debt, instalment credit and fixed deposits. Resource allocation : This could be top down where resources are allocated by top level to all other levels of organisation based on budgets. In a bottom up scenario budgets are drawn by operation group as required. However Strategic Budgeting is a mix of both and is dynamic. It involves to and fro communications and actions between all levels of management based on strategic decisions. Ulhas D Wadivkar 338
Resources availability
Top management
Strategic budget
Minimising gaps
P R O P O S A L S
Executive Management
Operating Management
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Stars 15%
Question Marks
SBUs / Multidivisions / Multidepartments are identified for Resource allocations for Investment.
10%
Dogs
Low 340
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4. Structural Implementation
Entrepreneurial:
Owner - Manager Employees
Functional
Production
CEO
Public Relations
Finance
Marktg.
Personnel
Legal
Divisional / Product
Corporate Finance
CEO
Legal / PR
Division
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SBU Based
CEO
Head SBU 1 Head SBU 2 Head SBU 3
Div. A,B,C
Div. D,E,F
Div. G,H,K
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Matrix
Corporate
Finance
CEO
Operations
Personnel
Marketing
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Network
Region A Project M Function X
Corporate HQ
Region B
Project N
Function Y
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Product based Structures: In large volume scenario it makes a sense to have a separate organisation dedicated to a product. This enables optimum use of specialised skills. Product separation helps organisation in addition /deletion decisions. Customer based Structures: Assuming that sales volume justifies the need of separate setup; it enables organisation to concentrate on specific customer group and provide exclusive attention required for that particular product / services. It helps in creating specialised skills and timely response to changing needs of the customers. Geographic Structures: Set ups at different sites sometimes evolve due to expansions and mergers. It also offers advantage of nearness to raw materials or to markets / customers. It helps in fair degree of decentralisation. It needs a very good top level coordination and communication amongst all locations and corporate office.
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Intrapreneurial Structure: This is a cluster of various owner driven set-ups. It encourages entrepreneurial abilities of its employees. Employees as entrepreneurs with support of parent organisation can apply its full attention to his part of business for development of new ideas for products and services. There are also Horizontal Organisations and Delaminated matrices. In horizontal type; the structure corresponds to process of providing products or services directly served to customer thereby eliminating special corporate functions like marketing, finance etc. Executives have to be multifunctional in such a case as the core process is managed by cross functional teams. Delaminated Matrices are combination of Horizontal organisations with a Functional structure. The firm employs both process oriented horizontal teams and functional departments. These two layers of matrix organisation are separated providing depth of expertise and capabilities to the Ulhas organisation. D Wadivkar 348
Organisational Design: Structural Dimensions: Formalisation: Written Documents, Procedures, Job Descriptions, Regulations & Policy Manuals. Specialisation: Specialised tasks are subdivided into separate groups. Hierarchy of Authority: Span of Control of Managers, Reporting structure, Nos. of Sub-ordinates. Centralisation: Decision making process, Delegation of decision making authority. Professionalism: Formal Education & Training requirements. Personnel Ratios: Deployment of people to various functions & Departments, Administrative Ratio, Clerical Ratio, Indirect v/s Direct labour Ratio. Contextual Dimensions: Environment, Goals & Strategy, Culture, Technology and size of Organisation are factors that influence the shape the structural dimensions.
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Organisations are structured to implement strategic plan in best possible way. All functions and activities that are critical from strategy view point are required to be considered. Thus key activities performed to achieve Objectives and realise the Mission are required to be considered in Organisational design. Identification of key activities necessary to be performed for achieving Objectives and realising the Mission through the formulated strategy. The activities which are similar in nature and skills are grouped together. Different groups of activities are accommodated in the structure. Creation of Departments, Divisions; Regions and so on to which the group of activities are assigned. Design establishes an interrelationship between these different departments for the purpose of coordination and communications.
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Traditional Organisations
Emerging Organisations
Organisational Systems
Control Systems The measurement and correction of the performance of activities of all the people in structure in order to make sure that enterprise objectives and plan devised to achieve the same is accomplished.
Establish Standards
Measure Performance
Organisational Systems
Information Systems The Organisational Arrangements that provides information to managers to perform their tasks and relate their works to others. This is also known as MIS Appraisal Systems Evaluating managerial performance. Appraisals are used for salary fixation, awards, incentives, management development, etc. Motivation Systems to enforce desirable behaviour. Motivation can be monetary such as Salary, Bonus, Rewards and non monetary such as recognition, designation, perks
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Organisational Systems
Planning Systems Planning is basically formulating strategy. Planning can be centralised or decentralised depending upon Organisational Character. Plans are provided as packaged plan for implementation in centralised planning by planning committee. In decentralised planning corporate strategy performs a directive role for divisions, who in turn does planning taking environment into consideration.
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Development systems is a process of gradual, systematic improvement in knowledge, skills and performance of mangers to enable them to perform their duties.
The process of management Development Organisational Characteristics Training & Education, New Experiences
Individual Characteristics
Managerial behaviour
Performance
Experience
Learning
5. Behavioural Implementation.
Behaviour of the strategist has a huge impact on implementing the chosen strategy. Implementation of
Corporate Culture.
Corporate Politics. Use of Power. Personal Values and Business Ethics.
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Leadership in Implementation:1: Leadership plays a critical role in the success and failure of an enterprise. It is one of the most important elements affecting Organisational performance. Leaders have Personality traits and Qualities. Leaders Influence relationship between individuals. Behaviour of leader lead to actions around. Situation in which leader has to operate decides the mettle of a leader. Subordinates and situation at times show dependence on a leader. This generates Contingency behaviour within the leader. Leader transacts with sub-ordinates and indicates Role differentiation. Leader with absence of a real concepts provides anti leadership. Leadership thrives on entire organisational Culture. Leader uses his influence and creates intrinsic motivation and bring about Transformation of the organisation Risk Taking Leader: Willingness to take high risks. This is required at times depending on the strategy which involves high returns. Ulhas D Wadivkar 357
Leadership in Implementation:2:
Technocracy: Optimum decisions based on technical needs Organicity: The flexibility and adaptability in changing requirements is required to satisfy an agile operating staffs. Participation: Inviting participation at all levels in the decision-making, Process and strategy implementation. Coercion involves domination, authoritarianism by top management complied with wishes given in Mission and adjectives. Key role of Leaders: CEO: Identifying Strategy and implement. He remains accountable for success or failures. He should identify changes in environment and should operate a trigger. He should have interpersonal skills and creativity to Mobilise people. CEO should develop and choose future strategists. Their career planning and establish a succession plans. Normally a promotion within, is useful for moral of the organisation. Ulhas D Wadivkar 358
Corporate Culture
Corporate Culture is a set of important assumptionsoften un-stated but most members share in common. Something like people at top do not understand or Whether you work or dont work, you will get salary, there is stagnation at Top or Turnover is important. Thus shared things like uniforms, Shared sayings, shared actions like service oriented approach, shared feelings like hard work is not rewarded here creates a Corporate culture.
Strategists have four approaches to create a strategy related supportive culture. This depends on strategyculture relationship.
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Ignore corporate culture: Changes required are very high and compatibility of change is low, then
To adapt strategy implementation to suit corporate culture. Changes required are very high and compatibility of change is also high, then To change corporate culture to suit strategic requirements :Changes required are very low and compatibility of change is high, then
To change strategy to fit corporate culture Changes required are very low and compatibility of change is also low, then
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Corporate Politics and Power: Power is an ability to influence others and politics is carrying out activities though not prescribed by any Policy to gain advantages and influence distribution. Corporate politics is not good or bad but it creates divisiveness which is not good.
Sources of Power : Reward Power ability of Manager to reward people of his choice. Coercive Power Ability to penalise negative results. Legitimate Power Ability of Mangers to influence behaviour of sub ordinates. Referent Power is Managers to create liking among subordinates due to charisma or knowledge. Expert Power is due to competence, knowledge and experience of Managers.
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Functional Strategy deals with limited restricted plan which provides objectives for a specific function.
Resources are allocated function wise for their optimal contribution to the achievement of Business and Corporate level Objectives.
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4. 5.
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Nature of market
Syllabus
11. Behavioural issues in implementation: Corporate culture Mc Kinseys 7s Framework Concepts of Learning Organization (3)
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The Seven Elements Hard Elements Strategy Structure Systems Soft Elements Shared Values Skills Style Staff
"Hard" elements are easier to define or identify and management can directly influence them: These are strategy statements; organization charts and reporting lines; and formal processes and IT systems. "Soft" elements, on the other hand, can be more difficult to describe, and are less tangible and more influenced by culture. However, these soft elements are as important as the hard elements if the organization is going to be successful. Ulhas D Wadivkar 371
The way the model is presented in Figure depicts the interdependency of the elements and indicates how a change in one affects all the others. Placing Shared Values in the middle of the model emphasizes that these values are central to the development of all the other critical elements. The company's structure, strategy, systems, style, staff and skills all stem from why the organization was originally created, and what it stands for. The original vision of the company was formed from the values of the creators. As the values change, so do all the other elements
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How to Use the Model The model is based on the theory that, for an organization to perform well, these seven elements need to be aligned and mutually reinforcing. So, the model can be used to help identify what needs to be realigned to improve performance, or to maintain alignment (and performance) during other types of change. Whatever the type of change - restructuring, new processes, organizational merger, new systems, change of leadership, and so on - the model can be used to understand how the organizational elements are interrelated, and so ensure that the wider impact of changes made in one area is taken into consideration. You can use the 7S model to help analyze the current situation (Point A), a proposed future situation (Point B) and to identify gaps and inconsistencies between them. It's then a question of adjusting and tuning the elements of the 7S model to ensure that your organization works effectively and well once you reach the desired endpoint.
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However, it is not simple. Changing your organization probably will not be simple at all! Whole books and methodologies are dedicated to analyzing organizational strategy, improving performance and managing change. The 7S model is a good framework to help you ask the right questions - but it won't give you all the answers. For that you'll need to bring together the right knowledge, skills and experience. When it comes to asking the right questions, we've developed a Mind Tools checklist and a matrix to keep track of how the seven elements align with each other. Supplement these with your own questions, based on your organization's specific circumstances and accumulated wisdom.
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7S Checklist Questions
Here are some of the questions that you'll need to explore to help you understand your situation in terms of the 7S framework. Use them to analyze your current (Point A) situation first, and then repeat the exercise for your proposed situation (Point B). Strategy: What is our strategy? How to we intend to achieve our objectives? How do we deal with competitive pressure? How are changes in customer demands dealt with? How is strategy adjusted for environmental issues? Structure: How is the company/team divided? What is the hierarchy? How do the various departments coordinate activities? How do the team members organize and align themselves? Is decision making and controlling centralized or decentralized? Is this as it should be, given what we're doing? Ulhas D Wadivkar Where are the lines of communication? Explicit and implicit?375
Systems:
What are the main systems that run the organization? Consider financial and HR systems as well as communications and document storage. Where are the controls and how are they monitored and evaluated? What internal rules and processes does the team use to keep on track? Shared Values: What are the core values? What is the corporate/team culture? How strong are the values? What are the fundamental values that the company/team was built on? Style: How participative is the management/leadership style? How effective is that leadership? Do employees/team members tend to be competitive or cooperative? D Wadivkar 376 Ulhas Are there real teams functioning within the organization or are they just nominal groups?
Staff: What positions or specializations are represented within the team? What positions need to be filled? Are there gaps in required competencies? Skills: What are the strongest skills represented within the company / team? Are there any skills gaps? What is the company / team known for doing well? Do the current employees/team members have the ability to do the job? How are skills monitored and assessed?
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7S Matrix questions
Using the information you have gathered, now examine where there are gaps and inconsistencies between elements. Remember you can use this to look at either your current or your desired organization. Check off alignment between each of the elements as you go through the following steps: Start with your Shared Values: Are they consistent with your structure, strategy, and systems? If not, what needs to change? Then look at the hard elements. How well does each one support the others? Identify where changes need to be made. Next look at the other soft elements. Do they support the desired hard elements? Do they support one another? If not, what needs to change? As you adjust and align the elements, you'll need to use an iterative (and often time consuming) process of making adjustments, and then re-analyzing how that impacts other elements and their alignment. The end result of better Ulhas D Wadivkar 378 performance will be worth it.
Key points: The McKinsey 7Ss model is one that can be applied to almost any organizational or team effectiveness issue.
If something within your organization or team isn't working, chances are there is inconsistency between some of the elements identified by this classic model. Once these inconsistencies are revealed, you can work to align the internal elements to make sure they are all contributing to the shared goals and values. The process of analyzing where you are right now in terms of these elements is worthwhile in and of itself. But by taking this analysis to the next level and determining the ultimate state for each of the factors, you can really move your organization or team forward. Ulhas D Wadivkar 379
A Learning Organization is the term given to a company that facilitates the learning of its members and continuously transforms itself. Learning Organizations develop as a result of the pressures facing modern organizations and enables them to remain competitive in the business environment. A Learning Organization has five main features; systems thinking, personal mastery, mental models, shared vision and team learning. Donald Schon. He provided a theoretical framework linking the experience of living in a situation of an increasing change with the need for learning. The loss of the stable state means that our society and all of its institutions are in continuous processes of transformation. We cannot expect new stable states that will endure for our own lifetimes. We must learn to understand, guide, influence and manage these transformations. We must make the capacity for undertaking them integral to ourselves and to our institutions. We must, in other words, become adept at learning. We must become able not only to transform our institutions, in response to changing situations and requirements; we must invent and develop institutions which are learning systems, that is to say, systems capable of bringing about their own continuing transformation. Ulhas D Wadivkar 381 (Schon 1973: 28)
Subsequently, we have seen very significant changes in the nature and organization of production and services. Companies, organizations and governments and we have to operate in a global environment and that has altered its character in significant ways. Productivity and competitiveness are, by and large, a function of knowledge generation and information processing. Firms and Territories are organized in networks of production, management and distribution. The core economic activities are global that is they have the capacity to work as a unit in real time, or chosen time, on a planetary scale. (Castells 2001: 52) A failure to attend to the learning of groups and individuals in the organization spells disaster in this context. As Leadbeater (2000: 70) has argued, companies need to invest not just in new machinery to make production more efficient, but in the flow of knowhow that will sustain their business. Organizations need to be good at knowledge generation, appropriation and exploitation
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Focus
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Practices
Continuous Improvement
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Culture
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Organisation learning is the process by which the organisation constantly questions existing product, process and system, identify strategic position, apply various modes of learning, and achieve sustained competitive advantage
Facilitation of learning and knowledge creation; focus on creative quality and value innovation
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Problems / issues that may be encountered in a Learning Organisation: Even within a Learning Organisation, problems may be encountered that stall the process of learning or cause it to regress. Most of the problems arise from an Organisation not fully embracing all the facets outlined above that are necessary in a Learning Organisation. If these problems can be identified, work can begin on improving them. Organisational barriers to learning: Some organisations can find it hard to embrace personal mastery because as a concept it is intangible and the benefits cannot be quantified. Additionally, personal mastery can be seen as a threat to the organisation.
This threat can be real, as Senge points out, that to empower people in an unaligned organisation can be counterproductive.
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Syllabus
===================================== 12. Functional issues: Functional plans and policies Financial, Marketing, Operations, Personnel, IT, (2) ======================================
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5. Dividend decisions, 6. Relationship with Shareholders, Usage of Funds relates to efficiencies & effectiveness of resource utilisation in the process of Strategy Implementation. Management of Funds: 1. System of Finance, 2. Accounting & Budgeting, 3. Management Control Systems, 4. Cash, Credit and Risk Management, 5. Cost control, cost reduction and Tax planning 6. Aiming at Conservation and Optimum utilisation of Funds. Organisations which implement business strategies of Cost leadership must practice proper management of Funds. Good management of funds often creates the difference Between strategically successful or unsuccessful Company.
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Integrative & Systematic Factors: This part of the plans & policies related to Marketing Management. (Marketing mix, Segmentation, Targeting, Positioning, Market Standing, Company Image, Marketing Organisation, Marketing System, Marketing Management Information System)
Acquisition and Retention of Information: Sources, Quantity, Quality, and timeliness of Information, retention capacity and security of information. Processing and Synthesis of Information: Database management, Computer Systems, Software capability and ability to synthesise information. Retrieval & Usage of Information: Availability and appropriateness of Information formats and the capacity to assimilate and use information. Transmission & Dissemination of Information: speed, scope, width & depth of coverage of information with willingness to accept the information. Integrative, Systematic and Supportive Factors: availability of IT infrastructure and its relevance, compatibility to organisational needs, up gradation facilities, investing in state of art systems, Computer professionals, top management support.
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Syllabus
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13. Strategy Evaluation: Operations Control and Strategic Control Symptoms of malfunctioning of strategy Balanced Scorecard. (2)
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Organizations must also control those factors which influences the financial outputs, such as, process performance, market share / penetration, long term learning and skills development, and so on. Organisations cannot directly influence Financial Outcomes as they relate to past. There is a "lag" between actions and Financial Outcome. Also to use of financial measures alone for the strategic control of the firm is unwise. Organizations should also measure those areas where direct management intervention is possible. Balanced Scorecard helps organizations achieve a degree of "balance" in selection of performance measures. Scorecards achieve this balance by selecting measures from three additional categories or perspectives: "Customer," "Internal Business Processes" and "Learning and Growth." Phrase Balanced Scorecard" was coined in the early 1990s. In 1992, by Dr. Robert Kaplan and David P Norton. They added another innovation, the Strategy Map. This new tool, which provided a visual way to craft business strategies.
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1. 2.
3. 4.
Balanced Score Cards helps managers, in focussing their attention on strategic issues and the management of the implementation of strategy, it is important to remember that the balanced scorecard itself has no role in the formation of strategy. In fact, balanced scorecards comfortably co-exist with strategic planning systems and other tools. Implementing Balanced Scorecards typically includes four processes: Translating the vision into operational goals; Communicating the vision and link it to individual performance; Business planning; index setting; Feedback and Learning, and adjusting the Strategy accordingly
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Measures are selected based on a set of "strategic objectives" plotted on a "strategic linkage model" or Strategy Map". The strategic objectives are distributed across the four measurement perspectives, so as to "connect the dots" to form a visual presentation of strategy and measures. To develop a Strategy Map, managers select a few strategic objectives within each of the perspectives, and then define the cause-effect chain among these objectives by drawing links between them. A balanced scorecard of strategic performance measures is then derived directly from the strategic objectives. This type of approach provides greater contextual justification for the measures chosen, and is generally easier for managers to work through. Strategy Mapping:A strategy map is a visual representation of the strategy of an organization. It illustrates how the organization plans to achieve its mission and vision by means of a linked chain of continuous Ulhas D Wadivkar 410 improvements.
Strategy Mapping
For a commercial business, the strategy map illustrates the long-term game plan or competitive strategy to achieve increased profitability. For a non-profit or governmental organization, it illustrates the plan by which the organization intends to improve performance of its mission. In either case it illustrates the cause-and-effect relationships between different strategic objectives and their measures, or Key Performance Indicators (KPIs) that are included in a Balanced Score Card. Strategy maps are communication tools used to tell a story of how value is created for the organization. They show a logical, step-by-step connection between strategic objectives (shown as ovals on the map) in the form of a cause-andeffect chain. Generally speaking, improving performance in the objectives found in the Learning & Growth perspective (the bottom row) enables the organization to improve its Internal Process perspective Objectives (the next row up), which in turn enables the organization to create desirable results in the Customer and Financial perspectives (the top Ulhas Wadivkar 411 twoDrows).
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Kaplan and Norton found that companies are using Balanced Scorecards to: Drive strategy execution; Clarify strategy and make strategy operational; Identify and align strategic initiatives; Link budget with strategy; Align the organization with strategy; Conduct periodic strategic performance reviews to learn about and improve strategy.
The four perspectives Financial perspective; Customer perspective; Internal process perspective; Innovation and learning perspective.
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The Internal Process Perspective is concerned with the processes that create and deliver the customer value proposition. It focuses on all the activities and key processes required in order for the company to excel at providing the value expected by the customers both productively and efficiently. These can include both short-term and long-term objectives as well as incorporating innovative process development in order to stimulate improvement. Operations management - (by improving asset utilization, supply chain management, etc), Customer management - (by expanding and deepening relations - CSI), Innovation - (by new products and services) Continual Improvement - KPI and Regulatory & Social - (by establishing good relations with the external stakeholders). KPIs Opportunity Success rate, Accident Ratios, Environment Ulhas D Wadivkar 416 Compatibility, Operational Equipment Effectiveness OEE.
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5. Customer Dissatisfaction: Customer Complaints non-specific to Quality, Repeated Customer complaints for same cause, Loss of key account Customers or loss of customers in general, Very few repeat orders. Delayed deliveries, missing commitments, 6. Loss of Market Share: Lack of Innovation, Lack of Up-Gradation, Unable to sustain market competition, Unable to manage competition, 7. Poor Work Climate in Organisation: Organisation developing unsustainable work practices. Quality taking second place lagging behind practice prevailing over law, Ulhas D Wadivkar 423 Resulting into decreased Quality in all spheres of Operation.
Symptoms of Mal-functioning for a CEO: 1. Are you attending too many meetings, and ones which are discussing the wrong things? 2. Do subordinates consult you too often before taking action? 3. Do you learn about things only after theyve already happened? 4. Are your subordinates apparently trying to anticipate your likes and dislikes - and forming their opinions accordingly? 5. Are you unclear about where you stand with your boss or bosses? 6. Are your incentives disproportionately dependent on the share price? 7. Do you have few, if any, activities which are not connected to the company? All these personal behaviours are symptoms of a corporate disease - and that illness is as common as the cold. The disease is chronic mismanagement. All seven of the symptoms show that you and others in the corporation are being hampered in managing effectively by faults which manifests to failure or poor Ulhas D Wadivkar 424 performance.
6. Propose comprehensive plan for Strategy Implementation considering resources and manageability of implementation. 7. Evaluate you proposal. State quantitative & qualitative criteria, you assumptions for arriving at your conclusion. 8. Keep the written analysis simple, but do not overlook major issues. 9. Adopt nice style of writing. Do not copy word to word from Case. Use headings,, Labels, Topic issues. Present whole written structure to be in one logical & integrated way. 10. Include analysis based on techniques like ETOP, SWOT, SAP, Value Chain, Industry analysis, competitive analysis. 11. Specifically state you assumptions when making recommendations. Provide supporting evidence and benchmarks used for evaluation. 12. Provide a summary, in a page, for major issues and recommendations made by you.
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