Strategic management (SM)

Strategic Management Introduction

What is strategy ?

over the long term

which

achieves advantage in a
is changing environment
the direction & scope of an
Strategy
organisation
through
its configuration of
resources and
competences
with the aim

of fulfilling stakeholder
expectation
Characteristics of Strategic Decisions

1. Strategy is likely to be concerned with the long-term direction of an organisation

2. Strategic decisions are concerned with the scope of the organisation’s activities

3. Strategic decisions are normally taken trying to achieve some advantage for the
organisation over competition

4. Strategy is the search for a strategic fit with the business environment

5. Strategy is creating opportunities by building on organisation’s resources and

competences

6. Strategy of an organisation is also affected by the values and expectations of those who
have power within and around the organisation
The long term direction of The scope of organisations
the organisation activities

Strategy &
Gaining advantage over Addressing changes in the
Strategic
competitors business environment
Decisions

Building on resources and Values and expectation of

competences (capability) stakeholder
Characteristic No.1

Strategy is likely to be concerned with the long term direction of the organisation
Havells India
Introduction

❑ Havell’s India Limited - an electrical and power distribution equipment manufacturer

❑ Entered the premium domestic appliances market with iron, toasters, oven toaster grillers
and rice cookers in 2011 – 2012

❑ The small home appliances industry in India was around Rs. 5000 crore
❑ the premium segment, was around Rs.1,000 crore which was showing high growth

❑ The company had a reach of around 60,000 retailers and around 120 exclusive outlets for
its products
Distribution
❑ Havell’s created new outlets under the name of Havell’s Galaxy

❑ This was done by the company for the customers to provide them with its range of electrical products
manufactured by Havells

❑ To facilitate them with personalised services and support

❑ The small home appliances were to be sold through the Galaxies and around 4000 retailers in the country

❑ It had plans to expand Galaxies to 200 doors by the end of 2012

❑ The products were designed at the company’s R&D facility in China

❑ Almost 50 per cent of the manufacturing was outsourced from countries like China, Taiwan, Korea and
Malaysia, while the rest of the manufacturing was done in India
In 2017

❑ In 2017

❑ The company decided to extend its range of products of small domestic appliances by
adding personal grooming products

❑ These personal grooming products included Trimmers, Shavers, Hair dryer, Epilator,
Straightener etc.

❑ This was done for the domestic market only

Characteristic No.2

Strategic decisions are concerned with the scope of the organisation’s activities
Characteristic No. 2

Does (and should) the organisation

concentrate on one area of activity ?

Scope of Organisation’s
activities

Or should it have many ?

• Scope of activity is fundamental to strategy

• It concerns the way in which the responsible people conceive the organisation’s boundaries
• Which could include decisions about product range or geographical spread or reach
Characteristic No. 2

❑ Paras Pharmaceutical Co.’s brands in 1999 – 2000 enjoyed over 95% penetration in
chemist outlets and more than 40% penetration in general stores, grocers, etc.

❑ The distribution of Paras extended to over 2.5 lac counters across the country and was
growing at a rapid growth of over 30%

❑ The Co. was predominantly having brands that were seasonal in nature, so strategies
were thought of to launch brands that could have year round sales

❑ And launch brands that could increase penetration in non – chemist outlets
Characteristics No.3

Strategic decisions are normally taken trying to achieve some advantage for the organisation
over competition
V Guard
Introduction

❑ V-Guard Industries, an electrical appliances manufacturing company was founded in

1977

❑ Its bestselling product, the iconic stabiliser, was unchallenged in Kerala

❑ It had a dominant position in South India

❑ The company, which was growing at a steady rate, had always been profitable and had
zero debt
The reality
❑ The decision of coming out with an IPO brought out the reality check

❑ Two key weaknesses were : Competition (companies like Finolex, Havells) was almost 10
times bigger than V-Guard

❑ V Guard had revenues less than Rs 200 crore

❑ V Guard was overly dependent on stabilisers, which accounted for

❑ 50 percent of its revenues
❑ 80 percent of profits
The IPO journey

❑ None of the top merchant bankers were ready to handle the Rs 60-crore IPO

❑ It opened in early 2008, it failed to attract any institutional investors

❑ A few banks known to the promoters and a family friend subscribed for the institutional
investors quota

❑ The retail side offering was oversubscribed 4.5 times

❑ The company stock had an offer price of Rs 82 and opened on the BSE at Rs 60

❑ In January 2009, the share was trading at about Rs 40

The challenge

❑ The Company realised that if they wanted to bring the stock price back to Rs 80

❑ They would need to grow by more than 25 percent quarter-on-quarter and year-on-year

❑ They did that, and more. from Rs 300 crore in 2008-2009

❑ V-Guard’s revenues was Rs 1,350 crore in 2012-2013, profits had grown four-fold to Rs 60 crore

❑ The share of stabilisers was less than 30 percent of revenue while wires, cables and pump verticals
were becoming equally important
Street smart approach -1

❑ They took the help of self –help groups to do the job assembling of stabilisers in Kerala

❑ There were 22 self-help group (SHG) units that assembled stabilisers for V-Guard in Kerala
There were 40 more spread across South India

❑ The SHG units were run only by women— they assembled 250 stabilisers a day

❑ With a maximum of 50 women per unit, there was no room for union leaders

❑ The units in Kerala and other southern states continued to manufacture stabilisers till a few years back

❑ When the company diversified into other products, it moved the production to nearby states and later to
northern India
Street smart approach -2

❑ All company functions were overhauled

❑ The most important initiatives were taken in sales and marketing

❑ Executives were responsible for selling all the products

❑ Each executive specialised in just one product. “Everyone would focus on stabilisers as it
was easier to sell ”

❑ Special business units (SBUs) were created, and the market divided into sales regions.
Street smart approach -3

❑ In the beginning the advertisements were informative in nature

❑ They made it aggressive, premium and clutter-breaking

❑ A new range of products, different from those sold through the traditional channels of
distributors and dealers, were introduced for retail chains in Chennai

❑ From near-zero the company started grossing Rs 100 crore from the city
In 2013

❑ Sensing an opportunity the Company launched mixer – grinder in 2013

❑ It was hoping the new product will pave V-Guard’s way into kitchens

❑ The target was to make its presence felt in the overcrowded markets of Tamilnadu

❑ For the Company the launch would be a success if 75 % revenue gets generated from
northern markets

❑ V-Guard had increased its marketing budget to build brand awareness in the North

❑ It had become strong in the stabilisers segment, it faced stiff competition in products like
cables (from Havells) and inverters (from Luminous)
In 2016

❑ V-Guard’s portfolio consisted of 16 products spread across nine categories

❑ That include voltage stabilisers, inverters and inverter batteries, solar power systems,
electric and solar water heaters, domestic switch gears, power and control cables fans,
mixer grinders, induction cook tops and pumps.
In 2016 -17

❑ V-Guard was supported by over 1,900 employees, 600 distributors, 190 service centres, 29
branches and 20,000 retailers

❑ The company attributed some of company’s reach to a revamp of the company’s brand
communications as well as — advertising in league with established national brands

❑ And by advertising in large impact properties like IPL to drive momentum for the brand in
new markets

❑ In 2017 V-Guard Industries Ltd. picked up a majority stake in Hyderabad based domestic
switch gears and current transformers maker GUTS Electro-Mech Ltd.
2019

The company had over 500 distributors, 40,000 retailers and 31 branches across India as on March 2019
Today
Characteristic no.4

Strategy is the search for a strategic fit with the business environment
Reckitt Benckiser
Product portfolio in 2010

❑ Home Care - Harpic, Lizol, Colin, Mortein, Vanish, Easy Off Bang, Air Wick and Finish

❑ OTC - Disprin, (Clearasil and Strepsils) acquired from Boots in 2006

❑ Personal Care – Veet

❑ Shoe Care – Cherry Blossom

❑ It had a strong presence in the toilet soaps, liquid antiseptic, household cleaning,
household insecticides, air freshener, and detergents
In 2011

❑ It decided to acquire Paras Pharmaceuticals for Rs.3260 Cr. (at 8 times its sale of Rs.401.4
Cr.)

❑ Paras had a strong presence in personal care and healthcare segments

❑ It sold over-the-counter healthcare products such as pain relief ointment Moov, heel care
cream / lotion Krack, cold remedy D’Cold, prickly heat treatment Dermicool and fungal
creams Itch Guard and Ring Guard

❑ Its personal care brands included Recova, Livon, Set Wet, Zatak and Borosoft
Reason for acquisition

❑ “Reckitt was hell-bent on driving growth in emerging markets like India”

❑ It gave a direct entry into fast-growing personal care categories such as deodorants,
haircare products, anti-ageing creams and over-the-counter health care products

❑ “It’s the OTC portfolio that Reckitt is keen to grow in India

❑ For Paras, the healthcare portfolio will have more traction compared to its personal care
or consumer brands

❑ Its brands – Moov, D’Cold and Krack -- have been category breakers – said an analyst
Reason for acquisition

❑ Reckitt Benckiser India had a turnover of Rs 2,000 crore, of which Dettol, its liquid
antiseptic and toilet soaps brand, contributed Rs 1,000 crore

❑ “Considering Reckitt derives 50% of its revenues from a category that is growing at less
than 10% (volume), the acquisition made complete sense
Company’s take

❑ “The acquisition of Paras is another step forward in our growth strategy in consumer
healthcare.

❑ It creates a material healthcare business in India, one of the most promising healthcare
markets in the world, with the addition of number of strong and leading brands,” -
said Reckitt Benckiser CEO Bart Becht
Characteristic No.5

Strategy is creating opportunities by building on organisation’s resources and competences

Reckitt Benckiser
In 2015

❑ The personal care business of Paras which consisted of brands

❑ Set Wet (male grooming brand in India, particularly in hair gel and deodorant categories)
❑ Livon (specialty hair care brand with a strong position in the hair serum category, along with
hair gain tonic addressing both hair fall and hair growth)
❑ Zatak (deodorants, cooling talc and hair gels)
❑ Eclipse (deodorants and beauty talc for women)
❑ Recova (age-defying and fairness skin cream)
❑ Dr Lips (medicated lip balm)

❑ Was sold to Marico for a consideration of Rs.493.6 Cr.

Characteristic no.6

Strategy of an organisation is also affected by the values and expectations of those who
have power within and around the organisation
Focus and consolidation

❑ Reckitt Benckiser wanted to focus on OTC healthcare business so sold off the personal
care brands to Marico

❑ Chemist outlet penetration were saturated by RB through its brands like Dettol

❑ As a strategic decision the company concentrated on OTC products of Paras

❑ Which could utilise the penetration / reach of RB, to get better revenues
The strategic decisions are likely to :

▪ Be complex in nature

▪ Be made in situations of uncertainty

▪ Affect operational decisions

▪ Require an integrated approach (both inside and outside the Co.)

▪ Involve considerable change

Levels of Strategy

Corporate – level
strategy

Business – level
strategy

Operational
Strategies
Strategy

❑ Strategy is a well defined roadmap of an organization

❑ It defines the overall mission, vision and direction of an organization

❑ The objective of a strategy is to maximize an organization’s strengths and to minimize the

strengths of the competitors

❑ Strategy, in short, bridges the gap between “where we are” and “where we want to be”
Features of strategy

❑ Strategy is significant because it is not possible to foresee the future

❑ Without a perfect foresight, the firms must be ready to deal with the uncertain events which
constitute the business environment

❑ Strategy deals with long term developments rather than routine operations, i.e. it deals with
probability of innovations or new products, new methods of productions, or new markets to be
developed in future

❑ Strategy is created to take into account the probable behaviour of customers and
competitors

❑ Strategies dealing with employees will predict the employee behaviour

Definition of strategic management

❑ Strategic management is a continuous process that evaluates and controls the business
and the industries in which an organisation is involved

❑ It evaluates the competitors / market and sets goals and strategies to meet all existing
and potential competitors

❑ Also re-evaluates strategies on a regular basis to determine how it has been

implemented

❑ And whether the strategy was successful or does it need replacement or any course
correction
 Strategic
management
Check whether its
successful – needs Evaluates the market/
replacement or course Competition
correction

Evaluates and
controls the
business of the
Co.

Sets goals and

Re- evaluate strategy
strategies to meet all
regularly to determine
existing and potential
how its implemented
Strategic competitors
management
Definition

❑ Strategic management can be defined as the art and science of formulating,

implementing and evaluating…….
…….cross functional decisions that …….
…………enable an organisation to achieve its objectives

❑ It focuses on integrating management, marketing, finance and accounting, production

and operation, research and development, and information systems to achieve
organisational / company’s success

❑ Strategic Management is also sometimes referred to as Strategic Planning

 By Integrating

Management

Marketing

To Achieve
Art & Formulating
Finance & Accounting

Strategic Implementing Organisational

Management Evaluating Success
Production &
Science Operation
of
Research &
Development

Information systems
How is strategic management different?
How is strategic management different?

❑ Strategic management is different in nature from other aspects of management

❑ It is concerned with the complexities arising out of not clear, undecided and non- routine
situations

❑ Which has wider organisation specific implication rather than operation specific implication

❑ The manager who manages / influences strategy needs to develop a capability to take an
overview…..

❑ ……To conceive the whole aspect of situation facing an organisation rather than just parts of
the situation
 The
Strategic
Position

Strategic Strategy
Choices into action
 Strategic
capability Expectatio
The ns &
Environme purposes
nt

The
Strategic
Position

Organising

Business
level
Strategies Strategic Strategy
Choices into
action

Enabling

Corporate
Level &
Internation
al Developm
Managing
ent
Change
Direction &
methods
Understanding strategic management

❑ Strategic management includes understanding the strategic position of an organisation

❑ Strategic choices for the future

❑ Turning strategy into action

❑ Elements of strategic management do not take a linear form – they are interlinked and
inform each other
 The
Environm
ent

The
Strategic
Position

Strategic
Capability

Expectatio
ns &
Purposes
Strategic position

❑ It is concerned with identifying the impact of strategy on external environment

❑ An organisation’s strategic capability (resources & competences)

❑ The expectation and influence of stakeholders

The environment
❑ An organisation exists in a complex political, economic, social, technological,
environmental and legal world

❑ This environment changes and is more complex for some organisations

❑ How this affects the organisation could include an understanding of historical and
environmental effects

❑ Expected or potential changes in environmental variables

❑ Variables will give rise to opportunities or threats or both to the organisation

❑ It is necessary to distil out this complexity, a view of key environmental impacts on the
organisation (GST)
Strategic capability

❑ The strategic capability of the organisation – made up of resources and competences

❑ Strategic capability of an organisation is to consider its strengths and weaknesses (to

check whether it is at a competitive advantage or disadvantage)

❑ This is to form a view of the internal influences and constraints on strategic choices for the
future

❑ A combination of resources and high levels of competence in particular activities that

provide advantages

❑ Which competitors find difficult to imitate

Expectations & purposes
❑ Who should the organisation primarily serve and how should managers be held
responsible for this?

❑ Expectations of a variety of different stakeholders all affect purposes

❑ Cultural influences from within the organisation and from the world around it also
influence the strategy an organisation follows

❑ The reason for understanding the strategic position is to form a view of the key influences
on the present and future of an organisation

❑ What opportunities and threats are created by the environment

❑ The capabilities of the organisation and expectations of the stakeholders

 Business
Level
Strategies

Strategic
Choices

Corporate
Level &
Internationa
l

Developme
nt
Directions &
Methods
Strategic choices

❑ Strategic choices involve understanding the underlying bases for future strategy for both
the business units and corporate levels

❑ The options for developing strategy in terms of both the directions in which strategy
might move and the methods of development
Business level strategies

❑ Strategic choices in terms of how the organisation seeks to compete at the business level

❑ Which requires identification of competitive advantage

❑ Stemming out from an understanding of both markets and customers and strategic
capability of the organisation
Corporate level & international

❑ At the highest level in the organisation there are issues of corporate – level strategy

❑ Which are concerned with the scope of an organisation’s strategies

❑ This includes decisions about the portfolio of products and / or businesses and the spread of
markets

❑ For many organisations international strategies are a key part of corporate level strategy

❑ Corporate level strategy is also concerned with the relationship between the separate parts
of the business

❑ How the corporate ‘parent’ adds value to these various parts?

Development directions & methods

❑ Strategy may develop in the future in different directions

❑ A co. might move from a narrow product base and narrow customer base by extending
both its product range and target markets

❑ Co. could use development method – which could be one of internal development (organic
growth)

❑ Some Co.’s could look at mergers / acquisitions and / or strategic alliances with other
organisations

❑ These options for development directions and methods are important and need careful
consideration
 Organising

Enabling

Strategy
into action
Managing
Change
Strategy into action

❑ Strategy into action is concerned with ensuring that strategies are working in practice
Organising

❑ Structuring an organisation to support successful performance

❑ Which includes organisational structures, processes and relationships (interaction between

these elements)

❑ A co. can structure its existing business and manufacturing units

❑ Success of a strategy depended on an ability to coordinate the activities of these

separate units
Enabling

❑ Enabling success through the way in which separate resource areas (people, information
, finance and technology) of an organisation support strategies

❑ Co.’s develop new business models to transform business done in the existing sector that
they operate in
Managing change

❑ Managing strategy very often involves change

❑ Which includes the need to understand how the context of an organisation should
influence the approach to change

❑ The different types of roles for people in managing change

❑ It also looks at the styles that can be adopted for managing change and the levers by
which change can be effected
Role of strategic management

❑ One of the major role of strategic management is to incorporate various functional areas
of the organisation completely

❑ To ensure these functional areas harmonize and get together well

❑ To keep a continuous eye on the goals and objectives of the organisation

The purpose

❑ The purpose of strategic management is to exploit and create new and different
opportunities for tomorrow

❑ Strategic Management gives a broader perspective to the employees of an organisation

❑ So that they can understand how their job fits into the entire organisational plan

❑ How it is co-related to other organizational members

❑ It is the art of managing employees in a manner which maximizes the ability of achieving
business objectives
How does strategy help employees?
How does it help the employees?

❑ The employees become more trustworthy, more committed and more satisfied

❑ Since, they can co-relate themselves very well with each organizational task

❑ They can understand the reaction of environmental changes on the organisation

❑ Can look at probable responses with the help of strategic management

❑ The employees can judge the impact of such changes on their own job and can
effectively face the changes and challenges arising out of it
 Trustworthy
Committed

Satisfied

Co. Task

Employees

Environ-
mental
Changes

Impact
Face
Changes
Face
Challenges
Strategic development process
Strategy development processes

❑ Strategy development processes are the ways in which strategy develops in

organisations

❑ It considers different explanations of how strategies develop within the strategic context

❑ These processes can be grouped into two main types

 Intended Strategies

Strategic
Development
Processes

Emergent Strategies
Intended & emergent strategies

❑ Intended Strategy :
❑ Strategy development as a deliberate management intent

❑ Emergent Strategy :
❑ It places more emphasis on emergence of strategy from the social and political processes that
exist in and around all organisations
Strategic management process
Strategic management process

• Components of a strategic management process

Environment Strategy Strategy Strategy

Scanning Formulation Implementation Evaluation
Strategic management process

Environmental Scanning

❑ Environmental scanning refers to a process of collecting, scrutinizing and providing

information for strategic purposes

❑ It helps in analysing the internal and external factors influencing an organization

❑ After executing this process, management should evaluate it on a continuous basis and
strive to improve it
Strategic management process

Strategy Formulation

❑ Strategy formulation is the process of deciding best course of action for accomplishing
organizational objectives

❑ After conducting environment scanning, managers formulate corporate, business and

functional strategies
 Refers
to Providing
Environmental Scanning
a process
Collecting + Scrutinizing + information
of
Evaluate on a continuous basis

Analysing External
Factors
For
Strive to improve it

Strategic Purpose

+
Analysing Internal
Factors

Formulate Corporate
Business Strategies
Implement

Formulate Functional
Influencing the organisation
Strategies

Measuring performance on a regular basis

Strategic management process

Strategy Implementation

❑ Strategy implementation implies making the strategy work as intended or putting the
organization’s chosen strategy into action

❑ Strategy implementation includes designing the organization’s structure, distributing

resources, developing decision making process, and managing human resources
 Designing Organisation
Structure

Distributing Resources

Strategic
Implementation
Developing Decision
Making Process

Managing Human
Resources
Strategic management process

Strategy Evaluation

❑ Strategy evaluation is the final step of strategy management process

❑ The key strategy evaluation activities are: appraising internal and external factors that
are the root of present strategies, measuring performance, and taking remedial /
corrective actions

❑ Evaluation makes sure that the organizational strategy as well as it’s implementation
meets the organizational objectives
 Small Business
Context

Voluntary &
Multinational
Not-for- profit
Corporation
Sectors

Strategic
Management
in different
contexts

Manufacturing
Strategy in
& Service
Public Sector
organisations
Strategic management in different contexts

❑ Organisation has to understand the following

❑ Rapidly developing technology
❑ Develop new products
❑ Exploit new market

❑ Within the organisation, different units may face different market conditions

❑ It would be wrong to assume that all aspects of strategic management are equally
important in all circumstances
Small business context

❑ They are likely to operate in a single market or a limited number of markets

❑ Probably with limited range of products or services

❑ The scope of operation is likely to be less of strategic issue in comparison to larger

organisations

❑ It is less likely to have a central service departments to undertake complex analysis and
market research
Small business context

❑ In small business, the senior manager / founder of the firm have direct contact with the
market place

❑ Its their experience which is very influential

❑ At times the values and expectations of the senior executives, who are in the ownership
position are likely to be important, even if they are not the owners

❑ Small firms will have to find opportunities that are well suited to particular resources and
competences of the firm
Multinational corporation

❑ The organisation is likely to be diverse in terms of products and geographical markets

❑ It may have range of different types of business in the form of subsidiary co.’s or divisions

❑ Issues of structure and control at the corporate level and the relationships between businesses and
corporate parent are major strategic issues for MNC

❑ One of the major issues for an MNC is allocation and coordination of resources among different,
competing businesses

❑ Coordination of operational logistics across different business units and different countries may
become important

❑ Such operations are immense, require sophisticated control systems and management skills which
may not be possible for a smaller firm
Manufacturing and service organisations
Organisation Offering Competitive advantage

Service Organisation For eg., insurance, management
consultancy and professional
service
▪ The extent to which customers value less tangible
features
▪ The soundness of advice given
▪ The attitude of staff
▪ The ambience of offices
▪ The swiftness of service etc.,

Manufacturing Physical product and services as ▪ Physical products are often perceived by
Organisation support customers as similar
▪ Other features like service or brand image are
important in achieving competitive advantage
Strategy in public sector

❑ Many parts of the public sector provide services to the paying customers like a commercial
organisation – Indian Railways, BSNL

❑ There is likely to be a good deal of direct or indirect control or influence exercised from
outside the organisation by government in particular

❑ Which leads to planning determined more by political than by market conditions

❑ It also has constraints on investment capital and source of finance

❑ Strategic priorities tend to be dictated by the provider of funds rather than the user of the
service
The voluntary and not-for-profit sectors

❑ In the voluntary sector it is likely that the underlying values and ideology will be of central
strategic significance

❑ It plays an important part in the development of strategy

❑ For organisations viz., charities, churches, private schools, foundations etc., the source of
funds may be diverse

❑ Quite likely not to be direct beneficiaries of the services offered – in the form of grants

❑ It is likely that underlying values and ideology will play an important part in the development
of a strategy
The voluntary and not-for-profit sectors

❑ The fact that multiple sources of funding are likely to exist

❑ Linked to different objectives and expectations of the funding bodies

❑ Might also lead to high incidence of political lobbying

❑ Difficulties in clear strategic planning

❑ Requirement to hold decision making and responsibility at the centre

❑ Where it is answerable to external sources rather than delegate it within the organisation
Challenges of strategic management
Challenges of strategic management

❑ Requires the manager to develop strategies that are appropriate to the specific circumstances of
an organisation

❑ But these circumstances will change over time

❑ It also requires clarity on which issues are more important than others - list issues – with priority and
clarity

❑ An ability to reconcile the conflicting pressures from the market -

❑ Clarity on organisations strategic capability and the expectations of stakeholders (own strengths /
acquired strength)

❑ Managers should know how to address the 3 challenges that they face in relation to their
organisation’s strategies for the future
Three sets of challenges

Where strategies progressively fail to address the strategic

Preventing Strategic drift
position of the organisation and performance deteriorates

Understand & address ▪ Internationalisation ▪ Changing purposes

contemporary issues ▪ E- commerce ▪ Knowledge - learning

Benefit of viewing strategy in

Four strategy lenses – Design, Experience, Ideas & Discourse
more than one way
Strategic Position

❑ Strategic position is seen from organisations perspective - its resources

❑ Resources viz., internal capability, internal analysis or strategic standing strength (SSS)

❑ Or power that the organisation has in respect of the major environmental challenges it faces

❑ Strategic position is the assessment of the position of the company in its market, its
performance with reference to its competitors

❑ Strategic position is about the company’s plan about how to adjust to changes in technology
or consumer behaviour tastes, styles, values, expectations etc.
Strategic drift
Strategic drift

❑ Strategic drift is where strategies progressively fail to address the strategic position of the
organisation and performance deteriorates
Strategic drift

❑ Strategic drift throws up two challenges

❑ How managers can stand sufficiently apart from their own experiences and their
organisation’s culture to be able to understand the strategic issues they face
(baggage / preconceived ideas and actions undertaken in the past – organisations
and personal)

❑ It relates to management of strategic change

❑ New strategies may require actions that are outside the scope of the existing
culture
❑ Which requires the managers of the organisation to change substantially their core
assumptions and ways of doing things
Strategic drift

Understand the strategic issues

Strategic Drift

Management of strategic change

Strategic drift
Strategic drift
❑ Past studies of pattern of strategy development
and change of organisations have shown that,
typically, organisations go through long periods
of relative continuity

❑ During which period established strategy

remains largely unchanged or changes
incrementally

❑ This can go on for considerable period of time in

some organisations

❑ But these processes tend to create strategic drift

❑ Where strategies progressively fail to address the

strategic position of the organisation and
performance deteriorates
Strategic drift
❑ This is followed by a period of flux in which
strategies change in no clear direction

❑ There may then be transformational change in

strategic direction though this is infrequent

❑ This pattern is know as punctuated equilibrium

❑ It highlights the potential complexity and

uncertainty of the strategic issues that managers
face

❑ Faced with such circumstances managers try to

minimise the uncertainty by looking for solutions
on the basis of current ways of doing things that
are a part of the existing organisation culture
Strategic drift

❑ For eg., faced with drop in sales enquiries

advertising is increased, or when competitors
drop prices they are matched etc.,

❑ However there are dangers – environmental

change may not be gradual enough for
incremental change to keep pace

❑ In such cases if incremental change lags behind

environmental change, then the organisation
will get out of line with its environment

❑ And in time, need more fundamental or

transformational, change
Strategic drift

❑ Transformational change tends to occur when

performance has declined significantly

❑ For some organisations such changes may be

inadequate or too late and the organisation fails

❑ Another danger is organisations may be reactive

to their environment

❑ They may fail to question or challenge what is

happening around them

❑ Or innovate to create new opportunities, they

become complacent
Understand and address cotemporary issues
Internationalisation

❑ It is a factor affecting many organisations in a wide variety of ways

❑ Internationalisation can extend both the size of the market and the range of competitors

❑ It can raise issues of relationships with potential partners overseas and organisation of
activities across national boundaries

❑ Large, small and public sector organisations confront opportunities and challenges of
internationalisation

❑ It is possible to outsource back office operation / functions to cheaper locations around the
world (call centres in India)
Internationalisation

❑ Internationalisation can affect strategy

❑ Different countries vary widely in their institutional and cultural orientation to strategic
management

❑ Many cultures give less emphasis to simple profit maximisation – which is found mostly in North
America

❑ Long term survival and collective interests of the organisation as a whole are given
weightage in some European and Asian cultures
Internationalisation

❑ Capital markets are highly competitive in North America and the United Kingdom

❑ Competitive capital markets make it dangerous for managers to deviate from simple profit
maximisation strategies

❑ Because dissatisfied shareholders can easily permit a hostile takeover by another firm
promising better results

❑ What contributes to performance also differs according to institutional environments of

various countries

❑ It makes sense to have a diversified conglomerate strategies and adopt loose holding capital
structures in countries where capital and labour markets are not highly efficient than in
countries where markets work well
E- commerce

❑ The speed at which data can be analysed and communications can be done has been
transformed through the development of cheap and powerful information and
communications technology (ICT)

❑ This is likely to impact lot of organisations making the managers accept considerable
uncertainty about the direction and speed of those changes

❑ In order to reduce the uncertainty managers need to assess the impact on their current
and future strategic positions
E- commerce

❑ Understanding how the business environment is getting changed by these developments

❑ The extent to which expectations of customers are changing in relation to product features

❑ How they do business with suppliers

❑ In e – commerce transactions buyers have much easier access to information about

competitive offerings

❑ It is important to understand whether the organisation has the strategic capability to

compete through e-commerce
E- commerce

❑ Or whether it should improve performance within its traditional business model to remain
attractive to customers

❑ Expectations of other stakeholders is likely to change on account of e- commerce

❑ Ability to service small market segments and wider geography may be facilitated by e-
commerce – especially for service organisations

❑ As business units become more competent and self- sufficient through their ICT systems –
raises a question on their dependence and support needed from corporate centre
Changing purposes

❑ There used to be a clear distinction between private sector and not- for – profit sector and
public sector organisations

❑ Private sector was profit – driven organisations working in the best interest of the shareholders

❑ The others were mission driven organisations working to improve quality of life for a particular
section of the society or a community group

❑ The distinctions are getting blurred with the private sector also facing pressures
❑ To develop stronger framework of business ethics
❑ Corporate social responsibility (CSR)
❑ Emphasis on creating increased shareholder value as their primary responsibility
Changing purposes

❑ Not -so-profit organisations and public sector is under constant threat of being
dominated by the purposes of the funders

❑ Who are more concerned about the resource efficiency than service effectiveness

❑ This has lead to these organisations having business like approach having prominent roles
for financial targets and strategies

❑ Having major emphasis on improving the quality of service to the beneficiaries (better
managed hospitals giving better service to patients)
Knowledge & Learning

❑ There are many organisations that claim to depend substantially on innovation for strategic
success

❑ This can occur only if an organisation is able to generate and integrate knowledge from both
inside and around the organisation to develop

❑ And deliver new product or service features

❑ Constant improvement and change become essential to survival and success

❑ Ability to manage learning is also vital

Knowledge & Learning

❑ Innovation is seen as an the ability to ‘change the rules of the game’

❑ Developments in the information technology have thrown up opportunities for

organisations to do business in new ways

❑ Success of these innovatory organisations is likely to be built on a willingness to challenge

the status quo in an industry or a market

❑ Awareness of how the organisation’s resources and competences can be stretched to

create new opportunities
Knowledge & Learning

❑ The need to see and act strategically against very short time horizons is another key for
innovative approach
❑ It is likely to affect the type and quality of the people
❑ Source of knowledge in the organisation
❑ Extent to which the prevailing culture encourages transfer of knowledge
❑ Questioning of what is taken for granted

❑ Innovation will also be influenced by how people are managed and how they interact

❑ Organisation structure that encourages interaction and integration rather the former
division of responsibility may encourage innovation
Exploring strategy through different ‘strategy lenses’
Exploring strategy through different ‘strategy lenses’

❑ Exploring means looking for new and different things

❑ Exploring strategy involves searching for new angles on strategic problems

❑ A comprehensive assessment of an organisation’s strategy needs more than one

perspective
Strategy lenses

❑ There have been many different views on how a strategy should be understood,
developed and implemented in an organisation

❑ The strategy lenses are ways of looking at strategy issues differently in order to generate
additional insights

❑ They help strategists think through problems and issues

❑ So as to challenge, question and inform decision making

The strategy lenses

❑ It is important to understand how the experience of people, culture of organisations inform

and constrain the development of strategies

❑ And how they can be resolved

❑ Experience and culture-driven change are particularly important in an organisation

❑ There is much to be learned from understanding how new ideas may emerge in an
organisation from variety of experiences and behaviours found across organisations

❑ It is unrealistic to believe that all such ideas can be planned from the top
Strategy as Strategy as
design experience

The
Strategy
Lenses

Strategy as
Strategy as
ideas /
discourse
variety
Strategy as design

❑ Strategy development can be a logical process

❑ In which the forces and constraints on an organisation are weighed carefully

❑ Through systematic, analytic and logical approaches

❑ To establish clear strategic direction

❑ Create conditions in which carefully planned implementation of strategy should occur

Strategy as experience

❑ The view is that future strategies of an organisation is based on the adaptations of the
past strategies

❑ Influenced by the experience of managers and others in the organisation

❑ This is strongly driven by the taken for granted assumptions and ways of doing things
embedded in the culture of an organisation
Strategy as experience

❑ If different views and expectation exists they will be resolved not just through rational
analytic processes but also through the process of bargaining and negotiation

❑ Strategy is likely to be built on rules of thumb, appeals to precedent, standard fixes, biases
and routines of decision – makers
Strategy as ideas / variety

❑ It emphasises on the importance of variety and diversity in and around organisations

❑ Which can potentially generate genuinely new ideas

❑ Strategy is not seen as much as planned from the top

❑ It is seen as emergent from within and around the organisation

Strategy as ideas / variety

❑ As people cope with an uncertain and changing environment in their day-to-day

activities

❑ Top managers are the creators of the context and conditions in which this can happen

❑ They should be able to recognise patterns in the emergence of said ideas that form the
future strategy of their organisations
Strategy as discourse

❑ It focuses attention on the way managers use language to frame strategic problems,
make strategy proposals, debate issues and then communicate strategic decisions

❑ Strategy discourse becomes a tool for managers to shape ‘objective’ strategic analyses
in their favour and gain influence, power and legitimacy
Levels of strategy
Levels of strategy

❑ Corporate-level strategy :

❑ CLS is concerned with the overall scope of an organisation and how value is added to
the various businesses of the organisational as a whole

❑ Corporate-level strategy issues include

❑ Geographical scope,

❑ Diversity of products or services,

❑ Acquisitions of new businesses,

❑ And how resources are allocated between the different elements of the organisation
Levels of strategy

❑ Corporate-level strategy:

❑ Being clear about CLS is important :

❑ determining the range of businesses to include is the basis of other strategic decisions such as
acquisition and alliances
Levels of strategy

❑ Corporate-level strategy:
❑ Corporate level strategy is fundamentally concerned with the
❑ selection of businesses that the organisation should compete….
❑ ……and with the development and coordination of that portfolio of business

❑ It includes all the objectives and scope of the organisation to satisfy stakeholder’s
expectation

❑ CLS is essential since it is affected by investors in the business and acts to guide strategic
decisions across the organisation
Levels of strategy

❑ Business-level strategy

❑ BLS is about how the individual businesses should compete in their particular markets

❑ At this level competitive strategy is usually formulated

❑ These are strategic decisions on

❑ the choice of products,

❑ satisfying customer needs,

❑ gain an advantage over competitors,

❑ exploiting or creating new opportunities, etc.

Levels of strategy

❑ Functional strategies : (Departmental Level or Operational Strategy)

❑ FS are concerned with

❑ how the components of an organisation deliver effectively the corporate- and business-level
strategies in terms of resources, processes and people

❑ It focuses on how every part of business is organized to present the corporate and also business-
unit level strategic path
Levels of strategy

❑ Functional strategies : (Departmental Level or Operational Strategy)

❑ FS are concerned with
❑ Strategy of the functional areas like marketing, financial, productive and human resources are
based on the functional capabilities of an organization

❑ For each functional area,

❑ first major sub-areas are identified and

❑ then for each of these sub functional areas, functional content strategies, important factors, and its
importance in the process of implementing the strategy is identified.
Thank you