Unit 1

Strategy
 Greek word ‘strategos’ means generalship
 Literally means the art of the general

 “Course of action” in other words is “Strategies”

Points to Consider
 Certain variables are assumed to be constant
(Distorted Reality)
 Rigidity; Committed towards a path but be blindfolded
towards emergent situations
Concept of Strategy -
Evolution of Thought
 A plan or course of action or a set of decision rules
forming a pattern or creating a common thread,
 The pattern or common thread related to the
organization’s activities which are derived from its
policies, objectives and goals,
 Related to pursuing those activities which move an
organization from its current position to a desired
future state,
 Concerned with the resources necessary for
implementing a plan or following a course of action,
Concept of Strategy -
Evolution of Thought
 Connected to the strategic positioning of a firm,
making trade-offs between its different activities, and
creating a fit among these activities and
 The planned or actual coordination of the firm’s major
goals and actions, in time and space that continuously
co-align the firm with its environment.

 In simplified terms, strategy is the means to achieve

objectives.
Strategy as Paradox
 Bob De Wit and Ron Meyer have written in their book
titled ‘Strategy Synthesis’
 “At the heart of every set of strategic issues, a
fundamental tension between apparent opposites can
be identified”
 Eg. Compete or Cooperate; Globalization or
Localization / Transnational strategy
 According to them, strategy emerges as a synthesis out
of the process of intellectual churning of the two
opposing perspectives.
 Different levels of Strategy
 Corporate Level Strategy : Overarching plan of action covers
the various functions performed by different SBUs.
 Deals with objectives of the company,
 allocation of resources and
 coordination of the SBUs for optimal performance.
 SBU Level Strategy : Comprehensive plan
 providing objectives for SBUs,
 allocation of resources among functional areas, and
 coordination between them for making an optimal
contribution to the achievement of corporate level objectives.
Different levels of Strategy
 Functional Level Strategy : Restricted plan
 providing objectives for a specific function,
 allocation of resources among different operations
within that functional area, and
 coordination between them for optimal contribution to
the achievement of SBU and Corporate level objectives
Other Levels
 Societal Strategy : Based on Mission statement, how
the corporation relates itself to society in terms of a
particular need or a set of needs that it strives to fulfill.
 Higher Level than Corporate Level Strategy
 Operations Level Strategy : Highly specific and
narrowly defined area. Eg. Operations area of
marketing could be sales, distribution, pricing,
product and advertising.
 One step down the functional level
 The TVS Group
 Axles India Ltd.
 Brakes India Ltd.
 Delphi - TVS
 Firestone TVS Pvt. Ltd.
 India Japan Lighting
Pvt. Ltd.
 India Motor Parts and
Accessories Ltd.
 India Nippon
Electricals Ltd.
 Irizar TVS Ltd.
 Lucas-TVS Ltd.
 Lucas Indian Service
Ltd.
 Manufacturers
Equipment and Supply
Company
 TV Sundaram Iyengar
& Sons Ltd.
 Southern Roadways  TVS Auto Bangladesh
Ltd.  TVS Automobile
 Sundaram Auto Solutions Ltd.
Components Ltd.  TVS Automotive Europe
 Sundaram Brake Ltd.
Linings Ltd.  TVS Automotive Ltd.
 Sundaram Dynacast  TVS AutoServ
Pvt. Ltd.  TVS Credit Services Ltd.
 Sundaram Fasteners
 TVS Dynamic Global
Ltd. Freight Services Ltd.
 Sundaram Industries
 TVS Electronics Ltd.
Ltd.
 TVS Infrastructure Ltd.
 Sundaram Textiles Ltd.
 TVS Interconnect
 Sundaram-Clayton Ltd.
Systems Ltd.
 Turbo Energy Ltd.
 TVS Motor Company
 TVS America Inc.  TVS Sewing Needles
 TVS Srichakra Ltd.  TVS Supply Chain
 ZF Electronics TVS Solutions
(India) Pvt. Ltd.  Wheels India Ltd., etc….
Issues in Strategic Decision Making
 Criteria for Decision Making
 Maximizing Returns
 Satisfaction
 Incrementalism (continuous evolving)
 Rationality in Decision Making
 Criteria for consideration : Profit Maximization,
Constraints under which decision maker operates,
Bargaining process between different coalition groups in
an organization
 Creativity in Decision Making
 Original and Different, Novel, Untried
 Achieve objectives in an exceptional manner
Issues in Strategic Decision Making
 Variability in Decision Making : Different people reach
different conclusions
 Person-related factors in Decision Making : Age,
Education, Intelligence, Personal Values, Cognitive
Styles, Risk-taking ability, Creativity
 Individual vs. Group Decision Making : Size of
Organization and Complex nature of problem decides
Schools of Thought on Strategy
Formation
The Prescriptive Schools
1. Design School : Process of Conception (late 1950s &
60s)
2. Planning School : Formal Process (1960s ; divided into
substrategies and programs)
3. Positioning School : Analytical Process (1970s & 80s ;
basis of an analysis of competition and the industry)
Schools of Thought on Strategy
Formation
The Descriptive Schools
4. Entrepreneurial School : Visionary Process (1950s)
5. Cognitive School : Mental Process (1940s & 50s)
6. Learning School : Emergent Process (1950s - 90s)
7. Power School : Negotiation Process (1970s & 80s ;
political and cooperative process/pattern)
8. Cultural School : Collective Process (1960s)
9. Environmental School : Reaction Process (late 1960s
& 70s)
Schools of Thought on Strategy
Formation
The Integrative School
10. Configuration School : Process of Transformation
(1960s & 70s ; strategy is viewed in relation to a
specific context and could correspond to any other 9
schools of thought)
Definition
 Strategic Management is the dynamic process of
formulation, implementation, evaluation and control
of strategies to realize the organization’s strategic
intent.
Elements in Strategic Management
Process
A. Establishing the hierarchy of strategic intent
1. Creating and communicating a vision
2. Designing a mission statement
3. Defining the business
4. Adopting the business model
5. Setting objectives
Elements in Strategic Management
Process
B. Formulation of Strategies
6. Performing environmental appraisal
7. Doing organizational appraisal
8. Formulating corporate - level strategies
9. Formulating business - level strategies
10. Undertaking strategic analysis
11. Exercising strategic choice
12. Preparing strategic plan
Elements in Strategic Management
Process
C. Implementation of strategies
13. Activating strategies
14. Designing the structure, systems and processes
15. Managing behavioural implementation
16. Managing functional implementation
17. Operationalising strategies
Elements in Strategic Management
Process
D. Performing strategic evaluation and control
18. Performing strategic evaluation
19. Exercising strategic control
20. Reformulating strategies
Stakeholders in Business
 Individuals and Groups who can affect and are affected
by, the strategic outcomes achieved and who have
enforceable claims on a firm’s performance.
 Two-way relationship
 Stake holders provide support and contribute;
Organization satisfies the expectations and legitimate
claims
 Diversity of stakeholders’ expectations and claims which
varies over period of time under different conditions.
Stakeholders’ Analysis
 Not all stakeholders are equally important to organizations
 Power to influence strategy formulation
 Interest in the affairs of the organization
 Legitimacy they hold to affect the organization
 Limitation on the ability of an organization to satisfy
its stakeholders.
 Not possible to satisfy all stakeholders equally;
expectations and claims are at variance. Eg. Employees
want higher wages; Customers want quality products at
lower prices; Shareholders want higher returns on their
investment.
Stakeholders’ Analysis
 Identify the stakeholders
 Identify the stakeholders’ expectations, interests and
concerns
 Identify the claims stakeholders are likely to make on
the organization
 Identify the stakeholders who are most important
from the organization’s perspective
 Identify the strategic challenges involved in managing
the stakeholder relationship
Stakeholders’ Analysis Mapping
 If there is significant effect and significant power with
a particular stakeholder, then that stakeholder is more
important to the organization.
 Engagement Tactics
 Process of fostering an effective relationship with the
stakeholders is termed as stakeholders’ engagement.
 Higher profitability creates capability and flexibility for
the organization in satisfying multiple stakeholders
simultaneously.
 Specific departments (corporate communications / public
relations) - in Large organizations
 Open, honest, transparent communication builds trust
and fosters cooperation - success of engagement tactics
 Apart from this NGOs (dependent on grants and funds
from external sources) need to have open
communication, invite participation, provide feedback to
donors to generate trust which is a long-term process
Engagement Tactics
 Disseminating information on the website and
through other traditional means such as newsletters,
posters
 Participation in public events, exhibitions,
 Arrangement of corporate events such as seminars and
conferences
 Digitization
Strategic Intent
 Gary Hamel and CK Prahalad - 1989 - HBR Article
 Purposes the organization strives for / Ambition
 Also encompasses an active management process that
includes :
 Focusing the organization’s attention on the essence of
winning,
 Motivating people by communicating the value of the
target,
 Leaving room for individual and team contributions,
 Sustaining enthusiasm by providing new operational
definitions as circumstances change and
 Using intent consistently to guide resource allocations.
 Example
 Reliance Group
 Strategic Intent : Global leader by being low-cost provider
 Achieved by pursuit of scale, vertical integration and
operational effectiveness
 Coca-Cola, strategic intent has been to put a Coke within
“arm’s reach” of every consumer in the world.
 When (construction and mining equipment) Caterpillar
threatened Komatsu in Japan, for example, Komatsu
responded by first improving quality, then driving down
costs, then cultivating export markets, and then
underwriting new product development.
Concepts
 Stretch : Misfit between resources and aspirations
 Leverage : Concentrating, Accumulating,
Complementing, Conserving and Recovering
Resources in such a manner that the meagre resource
base is stretched to meet the aspirations that an
organization dares to have
 Fit : Positioning the firm by matching its
organizational resources to its environment
Strategic Intent - Long Run
 Business Definition : Answers the questions raised by
Peter F.Drucker
 What is our Business?
 What will it be?
 What should it be?
 Understanding business helps in formulation of vision
and mission
 Vision : Forward looking view of what an organization
wishes to become
 Mission : What an organization is and why it exists
 Business Model
Strategic Intent - Medium & Short
Run
 Goals
 Objectives
Vision
 Description of something in the future (Kotter, 1990)
 Mental perception of the kind of environment an
individual , or an organization, aspires to create within
a broad time horizon and the underlying conditions
for the actualization of this perception (El-Namaki,
1992)
Examples
 Henry Ford wished to democratize the automobile
when he visualized that an affordable vehicle must be
available for the masses
 Walt Disney wanted to make people happy
 Jamshetji Tata dreamt of a self-reliant India in steel
making
 Narayana Murthy wants to demonstrate that running a
business is legally and ethically possible in India
through entrepreneurship
Mission
 Role that an organization plays in the society
 Refers to particular needs of the society
 Scope of business activities a firm pursues

 Essential purpose of the organization, concerning

particularly why it is in existence, the nature of the
business(es) it is in and the customers it seeks to serve
and satisfy (Thompson, 1997)
 Purpose or reason for the organization’s existence
(Hunger and Wheelen, 1999)
Mission - Formulation
 Eicher Consultancy : 1991, born with a mission
statement
 HCL : 1991, felt the need because of competition and a
core management team set up
 Marico Industries : 1990, triggered by divestment, CEO
outlined and a 3 day workshop of managers
 Ranbaxy Laboratories : 1993, competition and
expansion for survival, CEO expressed in clear and
definite terms
 Unit Trust of India : 1992, Corporate planning exercise
Mission - Communication
Equally important as Formulation
 Posted on multiple locations within organization
 Annual reports
 Posters / Plaques
 Employee manuals
 Company information kits
 Word-of-mouth publicity
 Seminars and workshops
 Newsletters
 Advertisements
 Reconsider and Reexamine to either change / discard and
evolve a fresh statement when mission becomes unclear
because of growth of the organization/market/technology
Mission - Characteristics
 Feasible
 Precise
 Clear
 Motivating
 Distinctive
 Indicate major components of Strategy
 Indicate how Objectives are to be accomplished
Defining Business
 Understanding business is vital
 Ideas generated while defining and understanding
business can be used to frame vision and mission

 Diversified Company can have a more accurate

business definition at the SBU Level
 If Acquisition, Growth and Diversification are linked
through a business definition, results in synergy.
 Defining Business : Marketing &
Customer Oriented Approach
 Dimensions of
Business Definition
(3 dimensional Who is being
satisfied?
model - Derek Customer
Groups
Abell)
 Customer groups
(Who) Business
Definition
 Customer functions
(What) How are
 Alternate customer What is
needs being being
technologies satisfied? satisfied?
(How) Alternate Customer
Technologie Functions
s
Defining Business : Product /
Service Orientation
 Company assesses the user’s perception of its product or
service
 Examples
 HCL Ltd. Perceived computer not as a sophisticated
machine but as an everyday durable commodity
 Bhadrachalam Paperboards Ltd. recognized paper as a
product and not as a commodity - dealt directly with
customers
 Pearl Polymers visualized using polyethylene terephthalate
containers not just as an industrial product for storing oil
but as containers for modern kitchen creating a huge
market for its Pearl pet bottles and jars
Business Model
 Representation of a firm’s underlying core logic and
strategic choices for creating and capturing value within
a value network
 Companies in same industry can rely on different models
as a matter of strategic choice
 TCS - traditional fixed-price, fixed-time business model,
where payments by clients are based on time related
milestones
 Infosys and Wipro have a time and material business
model where clients pay on an ongoing basis, depending
on the amount of work done rather than the time elapsed.
Goals and Objectives
 Goals : what an organization hopes to accomplish in a
future period of time; Generalized
 Objectives are the ends that state specifically how the
goals shall be achieved; Concrete and Specific
Role of Objectives
 Define the Organization’s Relationship with the
Environment
 Provide basis for Strategic Decision Making
 Helps Organization pursue its vision and mission
 Provide standards for Performance Appraisal
 Characteristics of Objectives
 Understandable  Challenging
 Concrete and Specific  Correlate with each
 Related to Time Frame other
 Measurable and Controllable  Set within constraints
Issues in Objective Setting
 Specificity
 Multiplicity (org. levels, importance, ends, functions
and nature)
 Periodicity
 Verifiability / Measurable
 Reality (Official & Operative)
 Quality (Good : Provide direction and Basis for
Evaluating Performance)
What Objectives are set?
 According to Drucker  Research (in Indian
 Market standing Context)
 Innovation  Profit
 Productivity  Marketing
 Physical and Financial  Growth
Resources
 Employees
 Profitability
 Social Responsibility
 Manager Performance and
Development  Customer expectations
 Worker Performance and
and satisfaction
Attitude  Quality
 Public Responsibility  Product Cost
How Objectives are Formulated?
 Forces in the Environment
 Realities of Enterprise Resources and Internal Power
Relationships
 Value System of the Top Executive
 Awareness by the Management
 Balance Scorecard Model
Critical Success Factors
 Strategic Factors or Key factors for Success
 Rockart - 3 step procedure for determining CSFs
 Generate the success factors
 Refining CSFs into Objectives
 Identifying measures of performance
Key Performance Indicators
 Measures or Metrics in terms of which the critical
success factors are evaluated
 Benefits of KPI
 Define and Measure progress towards obj.
 Give a clear picture of what is important and what they
need to do to accomplish obj.
 Motivate employees
 To gauge business trends
 Enable sophisticated IT based tools such as dashboards
that show organization performance at a glance
 Benchmark performance with self and also with rivals
Corporate Governance
 Governance of an organization that deals with the
relationship of different stakeholders, particularly
shareholders, directors on the board and managers
Key aspects
 Transparency of corporate structures and operations
 The accountability of managers and the boards to
share-holders
 Corporate responsibility towards employees, creditors,
suppliers and local communities where the
corporation operates
Mechanisms used
 Effective Board of Directors
 Fostering transparency through disclosure of information
 Framing code of governance and committing the
organization to its implementation
 Designing sound internal control systems
 Instituting effective auditing and evaluation systems within
the organization
 Having proper risk management procedures
 Encouraging whistle-blowing policies within organization
 Designing fair compensation policies for managers
Social Responsibility
 Strategic Planning provides answers to what an
organization might or can do
 Personal values justify what an organization wants to do
 Social responsibility along with business ethics, tells
what an organization ought to do
 Drivers of CSR in India
 Market based pressures and incentives
 Civil society pressures
 Regulatory environment in India
4 Models of CSR - India
 Gandhian Model : Voluntary commitment to public
welfare based on ethical awareness of social needs
 Nehruvian Model : State-driven policies including
state ownership and extensive regulation and
administration
 Milton-Friedman Model : Corporate responsibility
primarily focused on owner objectives
 Freeman Model : Stakeholder responsiveness which
recognizes direct and indirect stakeholders’ interests
Social Responsiveness
 Level of interest exhibited by an organization in
discharging social responsibility
 Top management takes decisions regarding
 Choice of social concerns to be addressed
 Scope of social responsibility activities
 Resource allocation to social responsibility programs
 Align Social Responsiveness with Strategic
Management
 All phases (Strategic intent, formulation,
implementation and evaluation) will be affected by
social responsiveness
Social Responsibility
 Environmental Appraisal : Help forecast social
concerns and issues
 Organizational Appraisal : Assist in assessing
corporate competencies available for tackling social
problems & in setting priorities for social
responsiveness