Strategic Management

Prasanna Salvi
List course objectives – Student
view
Introduction to Strategic
Management
 Strategy vs Plan
• How are the 2 different from each other?

Look for words Long term and Short Term

 Long term or Short Term
• What is important ?
 Strategic Planning

…is the managerial process of developing

and maintaining a strategic fit between
the organization's objectives and
resources within its changing market
opportunities.

Org Objectives Strategic Fit Resources

Changing Environment
 Strategy v/s Execution
• What is important Strategy or Execution?
• How many in favour of STRATEGY
• How many in favour of EXECUTION
 Strategic Management
• Peter Druckers said “ Aim of Business is to
create a Customer”
• A&M Magazine = Advertising and Marketing
Magazine slogan
“ Business is Marketing”
 Strategic Management
• Peter Drucker said “ Aim of Business is to
create a Customer”
• A&M Magazine = Advertising and Marketing
Magazine slogan
“ Business is Marketing”
 Strategic Management
• Peter Drucker said “ Aim of Business is to
create a Customer”
• A&M Magazine = Advertising and Marketing
Magazine slogan
“ Business is Marketing”
• How is Marketing Strategy different from
Marketing Strategy ?
 Difference
• Strategic Management
• Strategic Marketing
• Strategic Financial Management
• Strategic Human Resources Management
• Strategic Operations & Supply Chain
Management
• Strategic Information Management
• Strategic Design Management
Making a plan (deciding on a course of action) so that your customer
needs are met giving him maximum satisfaction and with optimum
returns to you such that he feels that you are the only best person to do
so and so making him keep returning to you again and again for a long
period of time.

DEFINITION : STRATEGIC
MARKETING PLANNING
Making a plan (deciding on a course of action) so that your customer
needs are met giving him maximum satisfaction and with optimum
returns to you such that he feels that you are the only best person to do
so and so making him keep returning to you again and again for a long
period of time.

DEFINITION : STRATEGIC
MANAGEMENT
 Where do we start ?
• Where do we start ?

Who does Strategic Management ?

• Cost Center, Profit Center, SBU ?

Management Control Systems

Who does Strategic Planning?
 In Structure?

Next Succession to RATAN TATA

CORPORATE STRATEGY

Successor to Xerxes Desai

BUSINESS STRATEGY
STRATEGIC MARKETING
PLANNING
No Matter at what level a
Manager joins, Strategic
Marketing Planning OR simply
Strategic Planning is as essential
exercise.

It could vary with size of the

corporation but its importance
cannot be forgotten.
 Difference
• Marketing Strategy
• Business Strategy

Delve into the Complexity

 Arthur D Little
• SBU or Strategy Center is a Business Area with
an external marketplace for goods and
services, for which management can
determine objectives and execute strategies
independent of other business areas. It is a
business that could standalone if divested.
SBUs are natural or homogenous business of a
corporation. Independent B/S and P&L.
CONCEPTS required for OBJECTIVE
• MISSION
• VISION
• STRATEGIC INTENT
 Mission – 2 views
• Mission for some is ‘What is our business and
What should it be?
• Mission for others in the cultural glue why we
work together or which binds us together.
• For us Mission means culture and strategy.
• A mission exists when culture and strategy are
mutually supportive. An organisation has a
mission when its culture fits with its strategy.
• Mission is an organization's CHARACTER,
IDENTITY & REASON FOR EXISTANCE
 Mission
?
b e in g
on is in STRATEGY=
n is ati
rg a Nature of business,
Why o Desired positioning vs
SE =
P O others
PUR BEHAVIOR STANDARDS =
Source of competitive
Norms or Rules of ‘WAY
advantage
WE DO THINGS HERE’
formulated by Founding
Dynasty or Dominant
VALUES = Management Team. in?
Beliefs & Moral n g put
rt be i
Principles that lie
is e ffo
behind Behavior a ll th
Standards n efit is
eb e
os
Fo r wh
=
P OSE
PUR
 Mission & Vision

VISION =
NECESSARY ATTRIBUTE OF
A LEADER WHO CAN
ARTICULATE AN
g? ATTRACTIVE
in bein
tio n is STRATEGY=
o r ganisa Nature of business, FUTURE FOR THE
W hy Desired positioning vs
R POSE
=
others
ORGANISATION
P U BEHAVIOR STANDARDS =
Norms or Rules of ‘WAY
Source of competitive THAT WILL MOTIVATE
advantage
WE DO THINGS HERE’ ITS MEMBERS TO SEEK ITS
formulated by Founding
Dynasty or Dominant ACHIEVEMENT.
VALUES = ?
Management Team.
g p ut in
Beliefs & Moral
t be i n
Principles that lie ffor
his e
behind Behavior all t
t is
Standards nefi
o se be
w h
For
E=
UR POS
P
VISION can shift
 Mission & Vision

MISSION = Way of
Behaving

VISION = Goal
Komatsu = Encircle Caterpiller
HONDA = Be Second Ford
Canon = Beat Xerox
Practice of Mission Statement
 Mission Statement in practice
• Mary Klemm, Stuart Sanderson & George
Luffman 1989 tried to study Mission statement
• 59 of Times 1000 companies 70%
60% Frm
• No identical definition but common 4 steps‘85
1.Statement 1 MISSION
2.Statement 2 Strategic Objectives
3.Statement 3 Quantified Planning Targets
4.Statement 4 The Business Definition
80%
 STRATEGIC OBJECTIVES
A statement of the long-term
Strategic Objectives outlining
desired direction & performance in
broad terms
QUANTIFIED PLANNING TARGETS
Objectives in the form of
quantified planning targets over a
specified period.
 THE BUSINESS DEFINITION
A Statement outlining scope and
activities of the company in terms
of industry and geographical
spread.
Formulating OBJECTIVES
 OBJECTIVES
• According to Igor Ansoff, Objective is a measure
of the efficiency of the resource conversion
process.
• It contains 3 elements =
1. The particular attribute chosen to measure efficiency
2. The yardstick of scale by which the efficiency will be
measured
3. The goal (the value on the scale) which is to be
achieved.
Peter Drucker identifies 7 objectives which
deserve explicit consideration
1. Desired standing of existing products in turnover & % Market
share measured against direct and indirect competition.
2. Desired standing of existing products in new markets measured
as in 1
3. The existing products that should be phased out and ultimately
abandoned and the future product mix.
4. The new products needed in existing markets, the number,
their properties and the share targets
5. The new markets that the new products will help develop, in
size and share.
6. The distribution organisation needed to accomplish the
marketing goals and the pricing policy appropriate to them.
7. A service objective, measuring how well the customer should
be supplied with what he considers value.
 McKay identifies 3 Marketing
Objectives with strategies for each
1. Enlarge Market
I. Innovation or Product Development (increase use)
II. Innovation or Market Development (develpo end use or new end use)
2. Increase Market Share
I. Product Development & product improvement (performance, quality, features)
II. Persuasion effort for competitive adv
III. (advertising & SP or Sales and distribution)
IV. Customer Service Activities
V. (ready availability, order handling, delivery service OR credit and collection OR After
sales service)
3. Improve profitability
I. Sales Volume increase
II. Eliminate Unprofitable activities

SMAR
III. Emphasize price improvement
IV. Emphasize cost reduction
Strategy Formulation
 Strategy formulation
• External Analysis
– Customer
– Environment changes
– Competitors
• Internal Analysis
– Competencies
• SWOT Analysis
 Strategy Selection
• Generic Strategies (Porter)
– Cost Leadership
– Differentiation
– Focus
• Tracey
– Operational Excellence
– Innovation
– Customer Intimacy
 Steps in Strategy Selection
Mission Strategy
Past Results Vision Inputs
Culture SWOT
Objectives
1
Prepare Scenario 6,10,12 Prepare
2 Does it meet 3 if no Is this the 1st 4 if yes alternate scenario
based on based on
no change objective? iteration SWOT, Customer,
Environment etc.
in strategy
3 if yes 6,10,12 5
4 if no
Next Step
Is this the 2nd
9 iteration
Prepare
alternate scenario
11 Change the
7 if no 7 if yes
Marketing
based on
Objectives
Change in Review all SWOT
Generic Need based on Generic
8 Need
Program Formulation &
Implementation
Feedback & Control
(Marketing Audit)
Usefulness in Corporate Strategy
 3 broad goals
1. Reconciliation of internal & external inputs
2. Assessment of implication of strategies
selected in terms of re-vectoring
3. Allocation of resources
 1. Reconciliation
• Looking at SMP – SWOT
• Looking at SMP – Marketing Audit report
 2. Re-vectoring
• Putting all the SBUs of a corporate into a
framework (BCG/PIMS/GE/ADL/Shell)
• Checking if :
– Natural Development
– Selective Development
– Turnaround
– Abandonment
• Cash generation character of the portfolio =
RONA graph (like the Boston Box)
 2. Re-vectoring
• Assessment of new business opportunities with the
Ansoff Gap Analysis
• Next is the development of the Corporate Risk
Portfolio with 8 factors :
1. Industry maturity
2. Competitive Position
3. Inherent industry risk
4. Unit objectives
5. Unit assumptions
6. Unit strategies
7. Past unit performance
8. Management Record
 2. Re-vectoring
• Then there is generation of Corporate risk
profile by repeating same procedure with
external uncertainties and likelihood of their
affecting each of SBU . This is called exposure.
This = CORPORATE RISK PROFILE
 2. Re-vectoring & 3. Allocations of
resources
• Next the qualitative and quantitative
assessment of corporate management
resources
• Determination of the corporate financial
resources and obligations
 Corporate Plan
• Corporate Goals and Objectives are drawn
• Time table for their achievement is made
Then why was America taken over
by Japanese business houses
 Focus
&
Flexibility
Focus to ascertain needs served &
what we do presently
 Flexibility to adapt to change by
adapting skill or investment
internally
OR
acquiring skill or investment newly.
Marketing Orientation becomes all
pervasive
‘Customer Pull’
as well as
‘Technology Push’.
Conclusion
Planning is not a mindless ritual
designed to propriate unknown
forces, it is a conscious effort to
achieve desired objectives to
maximum effect.
External Analaysis
 External Analysis
• Environment Analysis
• Industry Analysis
– Consumer Analysis
– Competitor Analysis
 E.1 Environment Analysis
• Growth rate of economy
• Interest Rates
– Consumption vs Investment
– Cost of capital
• Currency Exchange Valuation
• Inflation rate
 E.1 Environment Analysis
• Technological Forces
• Ecological forces
• Political forces
• Social Forces
• Legal Forces
 E.2 Industry Analysis
• Micheal Porter = 5 Industry Forces
• Andrew Grove (Intel CEO) = 6th Force

Industry
• Industry – How does one define industry
• Industry vs sector
• Industry vs Market Segment
• Boundaries
E.2 Industry Forces
 E.2 Industry Forces
1. Barriers to Entry / threat of potential
competitors
1. Absolute cost advantage
2. Brand Loyalty
3. Economies of scale
4. Customer Switching costs
5. Government regulation
 E.2 Industry Forces
2. Industry Rivalry amongst competitors
1. Industry competitive structure
2. Demand Consitions
3. High Exit barriers ( Economic, Strategic,
Emotional)
3. Bargaining power of buys
1. Increase cost
2. Reduce price
 E.2 Industry Forces
4. Bargaining power of suppliers
5. Substitute Products
 6 Force : Complimentors
th

• Complimentors = Things that enhance of

increase use of product.
– Software for Computers
– Same for Mobiles
– Social Networking ideas
– Pay sites on mobile
– Games
– Music
– TV
 Strategic Groups within industries
• Direct Substitutes
– Innovators
– Cost Advantage Developers
• Approach to opportunities and threats
• Mobility Barriers
• Caught in the middle syndrome
The SWOT Grid
 SWOT Grid
POSITION Trend 1 Trend 2 Trend 3 Trend 4

STRENGTH

WEAKNESS
 Next
Internal Analysis