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1. Strategic Management Strategic Management by Azhar Kazmi, McGraw Hill, 5 th edition

2. Introduction and Strategic Intent Introduction to Strategic Management & Business Policy Strategic Intent Vision Mission Business definition Business model Objectives Case : Dabur India Ltd. – Forming the Strategic Intent

3. Introduction Historical GLOBAL perspective : History is full of military strategists who were successful in wars. Then state/revolution strategist started forming modern day countries about 300-400 yrs ago; UK, USA, France, Germany, Japan, Russia, China,… Business strategists  Many large companies formed >100 yrs ago are still going strong; like – GM, Ford, GE, Barclays bank, HSBC bank, ThyssenKrupp, Nestle, Unilever,… in 1911, Harvard Business School introduced the subject “Business Policy”. In 1969, the subject was made compulsory by the American Assembly of Collegiate Schools of Business. In early 80s, the subject name added “Strategic Management” in order to differentiate from General Management.

4. Introduction Historical INDIAN perspective : Ancient Indian texts includes many “narratives of strategy” for kings, spiritual seekers, business man, common man, etc. Unlike West, ancient Indian strategy for kings consisted mostly about state-welfare and not regarding military !!! Business >100 yrs old and going strong & possible only due to good STRATEGY : Family groups like – Tata, Birla, Wadia, Godrej, Bajaj, TVS,… Early MNCs – Unilever, Nestle, ITC, L&T,… Many banks – SBI, Bank of Allahabad, PNB, Canara, BOI,… IIMs started in 60s and eventually included subject Strategy Management or Corporate Strategy or Business Strategy.

5. Why Strategy? Why New Business? Introduction

6. Planning New Business: Introduction

7. Planning New Business: INTENSIVE GROWTH INTEGRATIVE GROWTH DIVERSIFICATION GROWTH Market penetration Backward integration Concentric diversification Market development Forward integration Horizontal diversification Product development Horizontal integration Conglomerate diversification Product – improvisation Market – new areas or countries Acquiring other Companies within same Industry. Backward – Supplier Forward – Customer Horizontal – Competitor Related diversification: 1.Concentric – Similar Technology/ Synergy Product to new Customers. 2.Horizontal – New Product for existing Customers. Conglomerate: Un-related diversification Introduction

8. Management  is Art & Science of getting things done from others for a business through use of resources effectively & efficiently i.e. optimum utilization. Strategy  is a long-term plan of action designed to achieve basic objectives of business. Others  Organisation employees Resources (5M)  Men, Material, Money, Machinery & Market Objectives  Vision i.e. long term goals Introduction

9. Strategic Management (def.) : is the dynamic process of formulation, implementation, evaluation, and control of strategies to realise the organisation’s strategic intent. Four phases in Strategic Management Process: 1. Establishment of strategic intent 2. Formulation of strategies 3. Implementation of strategies 4. Strategic evaluation Introduction

10. Strategic Management Process in four phases : Introduction

11. Strategic Management Process comprehensive model: Introduction

12. Introduction Strategic Decision-Making : It is the process of selecting a course of action from among many alternatives. Decision making is a complex process : Objectives to be determined. Alternative ways of achieving the objectives are identified. Each alternative is analysed for suitability & pros/cons. The best alternative is chosen. In Strategic management choices have to be made regarding : Mission : What is our business? What it should be? Objectives : How to measure performance? Formulation: What further strategy? What details?

13. Organisations are complex entities ! Introduction

14. Organisations are complex entities ! Introduction S.no. Level Issues handled 1 Corporate What business to do? How to structure Company formation? Funds raising? Resource allocation among SBUs? Start new business or Close non-performing business ! 2 Business Positioning of the firm within the Industry in terms of COST & QUALITY, Product development, Market development, Deriving Competitive strategy – Cost leadership, Differentiation, Focus ! 3 Function Finance, Marketing, Operations, HRM, IT.

15. Strategic Intent Strategic Intent: is something specially prepared to indicate the purpose the organisation strives for. It differs from Corporate/Business philosophy which naturally sets in due to the way the entrepreneur/promoter shapes up the business. It points to what a firm should set out to achieve. Gary Hamel & C.K. Prahalad coined the term ‘Strategic Intent’ in 1989. Considering the Strategic Intent in broader sense in decreasing hierarchy: Vision Mission Business definition Objectives Goals Eg. Tata Steel – Vision, Mission, Objectives.

16. Vision Vision (def.) : is the position the Company would like to attain in distant future and is the basic strategic intent. Vision is more of a dream or an aspiration aimed to achieve tangible results in 10-15 years horizon! Though it is hazy and vague imagination of the entrepreneur/promoter, it is a powerful motivator!! Henry Ford’s vision “an affordable vehicle must be available for the masses”. Walt Disney probably wanted “to make people happy”. Jamshetji Tata dreamt of “a self-reliant India in steel making”. Narayan Murthy wants to demonstrate that “running a business enterprise legally and ethically is possible in India”.

17. Vision Benefits of having a good Vision : Visions are inspiring and exhilarating. Visions represent a discontinuity, a step function and a jump ahead so that the Company knows what it is to be. Help in creation of a common identity and a shared sense of purpose. Create sense of competition for the marketplace. Foster long-term thinking. Represent integrity; are truly genuine and for the benefit of people.

18. Vision Vision should be: Vision should not be: An Organisational charter of core values and principles. A ‘high funda concept’ statement, motto, literature or an advertising slogan. The ultimate source of our priorities, plans and goals. A strategy or plan and a view from the top. A puller (not pusher) into the future. A history of our proud past. A determination and publication of what makes us unique. A ‘soft’ business issue. A declaration of independence. Passionless.

19. Vision of Tata Steel We aspire to be the global steel industry benchmark for Value Creation and Corporate Citizenship. Our People: Fostering teamwork, nurturing talent, enhancing leadership capability and acting with pace, pride and passion Our Offerings: Becoming the supplier of choice, delivering premium products and services, and creating value for our customers Our Conduct: Providing a safe workplace, respecting the environment, caring for our communities and demonstrating high ethical standards Our Policies: In adherence to the Tata Code of Conduct, Tata Steel’s policies pertain to active sets of principles in different areas of operation that help bring uniformity in processes by clearly defining the company’s approach Our Innovative Approach: Developing leading-edge solutions in technology, processes and products

20. Values of Tata Steel (an extension of Vision) Integrity : We will be fair, honest, transparent and ethical in our conduct; everything we do must stand the test of public scrutiny. Excellence : We will be passionate about achieving the highest standards of quality, always promoting meritocracy. Unity : We will invest in our people and partners, enable continuous learning, and build caring and collaborative relationships based on trust and mutual respect. Responsibility : We will integrate environmental and social principles in our businesses, ensuring that what comes from the people goes back to the people many times over. Pioneering : We will be bold and agile, courageously taking on challenges, using deep customer insight to develop innovative solutions.

21. Mission Mission (def.) : is the essential purpose of the organisation, concerning why it is in existence, the nature of their business and the customer it seeks to serve and satisfy. While Vision is a forward-looking view of what an organisation wishes to become, Mission is what an organisation is and why it exists. Mission is more specific than Vision ! Entrepreneurs / Promoters / Consultants word out the Mission statement for the company during early growth phase as a “guiding light”. Eg. For Scientific Instruments Co. Ltd. – “to be a vibrant organisation set on contributing to the scientific and technical progress of the country; keeping its customers and employees satisfied in terms of service and work reward; giving adequate returns on investment to the shareholders”.

22. Mission Communication of the Mission statement is very important; since creates positive impact on the human resources! Companies make the Mission statements highly visible to employees and other stakeholders; on multiple locations like – posters, plaques, employees manuals & magazines, newsletters, Annual reports, etc. Usually the Mission statement lasts for few years. During the course the Company adds/removes businesses or products, changes markets or technology; as such there arises a need to re-formulate the Mission statement.

23. Mission Characteristics of the Mission statement: Should be feasible Should be precise Should be clear Should be motivating Should be distinctive Should include major components of strategy Should include how objectives are to be accomplished

24. Mission of Tata Steel Consistent with the vision and values of the founder Jamshetji Tata, Tata Steel strives to strengthen India’s industrial base through effective utilization of staff and materials. The means envisaged to achieve this are cutting edge technology and high productivity, consistent with modern management practices. Tata Steel recognizes that while honesty and integrity are essential ingredients of a strong and stable enterprise, profitability provides the main spark for economic activity. Overall, the Company seeks to scale the heights of excellence in all it does in an atmosphere free from fear, and thereby reaffirms its faith in democratic values.

25. Business Definition Very important to raise basic questions – What is our business? What will it be? What it should be? HMT watches Titan High-end brands Wrist watch with only one function – to display the time. Wrist watch displaying time is a very basic function. Positioned wrist watch as fashion accessory, statement for personality & status. Few foreign brands like Rolex, Tag Heur , Longines , Cartier, etc. have positioned watches as luxury or pieces of art !

26. Business Definition Abell’s 3-dimensions for defining the business

27. Business Definition X-axis : Customer groups (men/women/children; Earning segment Low-end/Middle class/Upper-end/Ultra-rich; Nations Undeveloped/Developing/Developed; etc.) Y-axis : Alternative technologies (for watches: Mechanical / Electric / Quartz analogue / Quartz digital / Smart) Z-axis : Customer functions (Utility / Sports / Fashion / Ornamental / Art) Abell’s 3-dimensions for defining the business; (Abell & Hammond, 1979)

28. Business Definition Company manufactures a product with certain intention of customer need, utility and technology trend. However User’s perception may be different and therefore should be assessed. this perception is based on the extent to which the product/service satisfies the need of the customer! Eg.: Motorola was first to imagine mobile phone handset as not just to ‘talk’ but also as a – calculator, electronic diary, clock, messenger, camera, photo album, etc. Hewlett Packard first realized computer not as an awe-inspiring hi-fi machine but for everyday utility for the masses as desktop. Product/Service concept

29. Business Model This is to answer basic question – how does the organisation make money? Meaning = creation and marketing of value It’s the most basic description of the business when entrepreneurs start the activity i.e. much before strategy / Vision / Mission ! however needs review as Companies grow, technology changes and different business get added/removed. Each business has a model; a corporate having multiple businesses/SBUs shall have as many models! Eg.: Bharti Airtel has strategic alliance with Nortel to manage its back end technical aspects like operations and maintenance. So that Airtel could focus on marketing and front-end customer service.

30. Objectives Goals : denote what an organisation hopes to accomplish in a future period of time. Objectives : are the end-results that state specifically how the goals shall be achieved. Objectives succeed Vision & Mission. Goals Objectives Broad and general Concrete and specific Represent the future state Goal + how to achieve it Qualitative Quantitative Used as synonym of Objectives Preferred by Strategists !

31. Objectives To ensure adequate return on the capital employed and maintain a reasonable annual dividend on equity capital. To ensure maximum economy in expenditure. To manage and operate all facilities in an efficient manner so as to generate adequate internal resources to meet revenue cost and requirements for project investment, without budgetary support. To develop long-term corporate plans to provide for adequate growth of the Corporation’s business. To reduce the cost of production of petroleum products by means of systematic cost control measures and thereby sustain market leadership through cost competitiveness. To complete all planned projects within the scheduled time and approved cost. Financial Objectives of IOCL:

32. Objectives Why are Objectives required ? Objectives define the Organisation’s relationship with stakeholders and environment. Objectives help the Organisation pursue its Vision and Mission. Objectives provide the basis of Strategic decision making. Objectives provide the Standards for Performance appraisal.

33. Objectives Objectives are mostly formed in the following areas and parameters : S. no. Area Parameter 1 Profit ROI, ROC, NP/Sales 2 Marketing %↑Sales, Market development, New products, %↓Marketing cost, Improving customer service 3 Growth Output, Sales turnover, Investment 4 Employees Industrial relations, Welfare, HR development 5 Social responsibility Community service, Rural development, Auxiliary industry development, Family welfare

34. Case study : Dabur India Ltd. – Forming the Strategic Intent Analyse the Vision & Mission statements. Compare with the latest versions if any amendments. What are their strategic plans ?