Strategic Management for Masters in Business Administration

Strategic Management

1. SEMESTER 1V STRATEGIC MANAGEMENT: INDIAN GLOBAL CONTEXT

2. UNIT 1 INTRODUCTION TO STRATEGIC PLANNING

3. UNIT 1 - SYLLABUS Corporate Strategic Planning- Mission & Vision of a Firm – Development, maintananace & Role of the leader- Hierarchial Levels of Planning- Strategic Planning Process- Strategic Management Practice in India- Competitive advantage of nations & its implications on Indian Business.

4. Meaning & Definition of Strategy The term ‘strategy’ comes from the greek word ‘ strategos ’ which means ‘military general’(generalship) that combines ‘ stratus ’(the army) & ‘ ago ’(to lead). The word ‘ strategy’literally means the ‘art of the general’. Strategy is a general plan to achieve one or more long term or overall goals under conditions of uncertainity . Strategy is an action that managers take to attain one or more of the organization’s goals. According to A lfred D Chandler, “Strategy is the determination of the basic long term purpose and objectives of an enterprise and the adoption of courses of action and allocation of resources necessary for carryingout these goals.” According to W illiam F Glueck “Strategy is a unified, comprehensiveand integrated plan designed to assure that the basic objectives of the enterprise are achieved”

5. ELEMENTS OF STRATEGY GOALS Long term goals . SCOPE K ind of products, markers & areas of activity. . COMPETITIVE ADVANTAGE A firm performs an activity that is different from its rivals. . LOGIC Tool to distinguish between true & false, logic is considered as science as well as the art of reasoning.

6. IMPORTANCE OF STRATEGY Provide Direction & Action plans. Identify Trends & Opportunities. Define Accountabilities. Improve Communication. Allocation of Resources. Framework for Decision Making. Competitive Advantage.

7. STRATEGIC MANAGEMENT S.M involves the analysis of internal capabilities and external environment of a firm inorder to use the resources efficiently and effectively to meet organisational objectives. According to Lloyd L Byars ,”Strategic Management is concerned with making decisions about organization’s future direction and implementing those decisions.”

8. CHARACTERISTICS OF STRATEGIC MANAGEMENT Strategic Issues warrant Top Management Decisions. Strategic issues involve the allocation of large amount of resources. Strategic issues are likely to have impinging impact on the long term prosperity of the firm. Strategic issues are future oriented. Strategic issues have consequences of multi business. Strategic issues warrant due weightage to firm’s external environment. Strategic Management is a process. Strategic management stresses both Efficiency & Effectiveness.

9. NEED FOR S.M Rapidly changing business environment. Establishes Guidelines. Systematize decision. Research & Development. Resource Allocation. Severe competition among market players. Enhanced Technologies. Profit Motive.

10. STRATEGIC MANAGEMENT PROCESS SM process consists of 4 phases . 1.Strategic Intent. 2.Strategy Formulation. 3. Strategy Implementation. 4. Strategic Evaluation.

11. STRATEGIC INTENT(ELEMENTS) Vision – states what the organization wishes to achieve in the long run. Mission – relates the organization to the society. Business Definition – explains the businesses of the organization in terms of customer needs, customer groups and alternative technologies. Business Model – clarifies how the organization creates revenue. Objectives – states what is to be achieved in a given time period. Objectives serves as yardsticks & benchmarks for measuring organisational performance.

12. STRATEGY FORMULATION(ELEMENTS) Environmental & O rganisational Appraisal – Deals with identifying the opportunities & Threats and Strenghts & Weaknesses of the organization.( SWOT Analysis). Corporate level Strategies – relate to the strategic decisions regarding the management of portfolio of business. Business l evel Strategies – aim at developing a competitive advantage in the individual business that the company has in its portfolio. Strategic Analysis & choice strategic plan- the end result of this set of elements is a strategic plan to be implemented.

13. STRATEGY IMPLEMENTATION (ELEMENTS) Project Implementation. Procedural Implementation. Resource Allocation Implementation. Structural Implementation. Behavioural Implementation. Functional & Procedural Implementation.

14. STRATEGIC EVALUATION & CONTROL The last phase of SM appraises the implementation of strategies & measures organisational performance. The feedback from SE is meant to exercise strategic control over the SM Process.

15. BENEFITS OF SM Strategic decisions are Futurustic . Strategies have multi-functional & multi business effect. Strategies are defined based on study of environment. Allocation of resources & improve co-ordination. Framework for operational planning. Clarity in direction of activities. Increase organisational effectiveness. Personnel Satisfaction.

16. LIMITATIONS OF STRATEGIC MANAGEMENT Lack of Accuracy Danger to Rigidity Internal Resistance Difficult Exercise Costly Exercise Ineffective to overcome Current Crises Complex & Dynamic Environment Inadequate Appreciation of Strategic Management. Limitations in Implementation

17. STRATEGIC MANAGEMENT PRACTICE IN INDIA SM Practices in India is a way of guiding the long term future of enterprises. The essential component of SM is Process Evaluation, is itself a sophisticated re-statement of Problem solving. After the economic liberalisation announced in India in 1991, SM has gained greater relevance. The companies owned by domestic promoters ,investors, institutions & govt have shared the Indian context in the past & will do so in the future. The Economic & Regulatory framework & the socio-cultural environment had a considerable impact on the path of evolution of Indian Companies till now.

18. GROWING RELEVANCE OF SM IN INDIA The environmental changes that have increased the relevance of Strategic Management : The abolition of public sector monopoly or dominanace in a number of industries enourmously increased business opportunities. The delicensing has removed not only an important entry & growth barrier but also a consumption barrier. The liberalisation of policy towards foreign capital & technology ,imports & accessing foreign capital markets provides companies opportunities for enhancing their strength to exploit the opportunities. The liberalisation in other countries , the expanding foreign markets, the growing competition in India , the new policy environment etc increase the importance of foreign markets & SM.

19. CORPORATE STRATEGIC PLANNING MEANING & DEFINITION OF CSP CSP is a systematic process of determining the goals to be achieved in the forseeable future . CSP is the managerial process of developing & monitoring & maintaining viable fit between the organisation’s objectives,skills & resources & its changing opportunities. The aim of strategic planning is to shape the company’s businesses, products, services & messages so that they achieve targeted profits & growth. A good SP Process shares the “vision” of the organization with the employees & creates a strong organisational culture. The strategic plan gives shape to the philosophy & culture of the organization. According to Peter Drucker “CSP is the continuous process of making risk taking decisions systematically and with the greatest knowledge of their futurity-organizing efforts needed to carry out these decisions & measuring the results of these decisions against the expectations through organization’s systematic feedback.

20. ELEMENTS OF CSP Management’s fundamental assumptions about the future economic, technological & competitive environments. Setting of goals to be achieved within a specified time frame. Performance of SWOT Analysis. Selecting main & alternative strategies to achieve the goals. Formulating, implementing & monitoring the operational or tactical plans to achieve interim objectives.

21. NATURE & SCOPE OF CSP Serves as a route map for the organization. Lends a framework for systematic handling of corporate decisions. Lays down growth objectives of the firm & also provides strategies needed to achieve them. Ensures that the firm’s businesses, products & markets are chosen wisely. Ensures the best utilisation of the firm’s resources among the product-market opportunities. Provides the best possible fit between the firm & the external environment.

22. REASONS FOR THE GROWTH OF CSP Increasing Rate of Technological Change. Long – term business plan orientation. Increasing complexity of external environment. Uncertainity & Change. Focus attention on objectives . Increase organisational Effectiveness. Meet the challenges. Provides better basis for making judgements . Continuous process.

23. HIERARCHIAL LEVELS OF PLANNING Corporate Level Strategy Business Level Strategy Functional Level Strategy

24. CORPORATE LEVEL STRATEGY Strategy at the corporate level is designated as Corporate Strategy. CLS is the top management’s plan to direct & run the organization as a whole. CLS represents the pattern of entrepreneurial actions & intents underlying the organization’s strategic interests in different businesses, divisions, product lines, technologies, customer groups & customer needs.

25. ROLE OF CLS IN FIRM Ensures Right Environmental Fit. Helps to fill the firm’s strategic planning gap, & selecting the appropriate strategic route. Helps to build competitive advantages.

26. CONSTITUENTS OF CLS Product-Market Posture. Competitive Advantage Corporate strategy of a firm can be stated in concrete & precise terms. Actual Task of formulating the Strategy.

27. BUSINESS LEVEL STRATEGY Business strategy is the managerial plan for directing & running a particular business unit. The fundamental concept in BLS is to identify the discrete independent product/market segments served by an organization. eg ; Reliance Industries BLS deals with the issues of organization’s intend to compete in a specific business, key functional areas which contributes to the success of the business & the allocation of resources within the business unit.

28. FUNCTIONAL LEVEL STRATEGY Functional strategy is the plan to manage a principal subordinate activity within a business. There is a functional area support strategy for the production of business, marketing, finance, human resources, R & D etc for every major support of the whole business. Responsibility for formulating functional strategy lies with those , who are charged with managing the functional area. The functional managers establish performance objectives& strategies that will promote accomplishment of business level objective & strategy.

29. CHARACTERISTICS OF CORPORATE, BUSINESS & FUNCTIONAL LEVEL STRATEGIES CHARACTERISTIC / BASIS CORPORATE LEVEL BUSINESS UNIT LEVEL FUNCTIONAL LEVEL NATURE Conceptual Conceptual but related to business Totally operational MEASURABILITY Non-measurable Measurable to some extent Quantifiable FREQUENCY Large spans 5-10 yrs Periodic Annually ADAPTABILITY CHARACTER Poor Innovative & Creative Average Action- oriented High Totally Action -oriented RISK High Moderate Low PROFIT Large Moderate Low FLEXIBILITY High Moderate Low TIME Long-range Medium range Short range COSTS INVOLVED High Medium Low CO-OPERATION NEEDED High Medium Low

30. CORPORATE STRATEGIC PLANNING PROCESS The Strategic Planning process consists of developing the company’s mission, objectives & goals, business portfolio & functional plans. It consists of developing a sound mission statement, market-oriented, feasible, motivating & specific in the direction of the firm & its best opportunities.

31. CSP PROCESS Establishing Verifiable Goals or Set of goals to be achieved. Establishing Planning Premises. 1. Internal & External Premises. Internal premises include sales forecasts, policies & programs of the organization , capital investment, managerial competency, HR Skills & other organisational resources. External premises include general business & economic environment , technological changes, govt policies & regulations, population growth, political stability & social factors. 2. Tangible & Intangible Premises. The premises which are quantifiable are called Tangible premises. Eg : population growth, product demand, past sales, capital invested etc. The premises which cannot be measured quantitatively are called Intangible premises. Eg : political factors, social factors, technological factors, natural factors etc. 3. Controllable & Non-controllable Premises C ontrallable premises include company’s labour policy, investment policy, advertising policy, level of technology, availability of financial resources, quality of human resouces etc. Uncontrollable Premises include strikes, lockouts, Wars, Natural calamities, emergency situations etc.

32. CSP PROCESS Deciding the Planning period. The plan of the period should be based on the nature of the business & the vision & mission of the company. Finding Alternative Courses o f Action. eg : availability of altrnative technologies, alternative sources of capital, highly skilled employees board etc. Evaluating the alternative plans& selecting a course of action.(SWOT Analysis) Developing Derivative Plans. Implementation of the Business Plans. Measuring & Controlling.

33. BENEFITS OF CSP Framework for developing the operating Budget. Management Development Tool. Mechanism to Force Managers to think Long Term. Help in alligning managers with Corporate Strategies. Framework for Short run Actions.

34. LIMITATIONS OF CSP Managements fail to Monitor. Reluctant to Formulate Objectives. Afraid of Failure. Fail to I ntegrate plans. Unskilled Managers. Mislead Forecast. Inefficient Planning. Inter-group Conflicts.

35. STRATEGIC MANAGEMENT Vs CORPORATE STRATEGIC PLANNING SM CSP 1. It is the process which deals with the fundamental organisational renewal & growth. 1. It is the process of long range planning that focuses on the organization as a whole. 2. It is about Strategy. 2. It is not about Strategy. It is about planning after the strategies are made. 3. It is a substitute for the exercise of judgement by leadership. 3. It is not a substitute for the exercise of judgement by leadership. 4. It is about Strategic thinking. 4. It is about System thinking. 5. It is a management Process. 5. It is a Planning Process. 6. It is disciplined & flexible. 6. It is disciplined & rigid. 7. It focuses on the people. 7. It focuses on the Plan. 8. It involves in present environment, & the decisions are made in the present. 8. It involves anticipating the future environment, but the decisions are made in present.

36. STRATEGIC INTENT The concept of Strategic Intent was popularised by Gary Hamel & C.K. Prahalad . The Strategic Intent of the firm represents the organization’s beliefs about its state of future. Strategic Intent is the guiding principle of a business’s long –term strategy. S.I defines the company’s objectives & how it plans to achieve them. It is important to realize that achieving the narrow intentions is a necessary condition towards achieving the broader intentions , and therefore there needs to be a careful alignment between these various levels of intentions.

37. HIERARCHY OF STRATEGIC INTENT

38. VISION OF THE FIRM Vision is what the firm or a person would ultimately like to become. The vision of the firm is the formulation of where the firm wants to be ultimately & what it wants to achieve. According to Kotter , “ Vision is a description of something (an organization, corporate culture , a business , a technology or an activity) in the future. According to Miller & Dess “ Vision is the category of intentions that are broad , all inclusive , and forward thinking.”

39. FEATURES OF STRATEGIC VISION Mental Exercise. Selects the Target Market. Constitutes Organization’s Objectives & Focus. Reflects Future Plans. Dynamic & Flexible. Comprehensive. Time–Bound. Anticipates Future. Simple & Concise. Effective. Pervasive. Objective. Well – Defined. Orientation.

40. PROCESS OF FORMULATING VISION (7 STEP PROCESS) 1. Understand the Organization 2.Conduct a Vision Audit. 3.Target the Vision. 4.Set the Vision Context. 5.Develop Future Scenarios. 6.Generate A lternative Visions. 7. Choose the Final Vision.

41. DEVELOPMENT & MAINTANANCE OF VISION Learn everything about organisation . Bring the organisation’s major Constituencies into the visioning process. Keep an open mind as to explore the options for a new vision. Encourage Input from Colleagues & Subordinates. Understand & Appreciate the existing Vision.

42. R0LE OF LEADERS IN VISION DEVELOPMENT Defining Vision. Formulating the Vision. a. Gather Information. b. P rocess the Information. c. Conceptualise the vision. d. Evaluate the Vision. Promoting Commitment to the Vision. Implementation of the Vision. a. Structuring b. Selecting, training & acculturating employees. c. Motivating Employees. d.Managing Information. e. Team Building . f. Promoting Change.

43. BENEFITS OF VISION Good visions are inspiring & exhilarating. Good visions help in the creation of a common identity and a shared sense of purpose. Good visions are competitive, original & unique. Good visions foster risk-taking & experimentation. Good visions foster long-term thinking. Good visions represents integrity.

44. MISSION Mission is what an organization is & why it exists. Mission is “a statement which defines the role that an organization plays in a society.” According to Thompson , Mission is the essential purpose of the organization, concerni ng particularly why it is in existence , the nature of the business it is in, and the customers it seeks to serve & satisfy.” According to Hunger & Wheelen ,”Mission is the purpose or reason for the organization’s existence.”

45. CHARACTERISTICS OF MISSION Feasibility. Precision. Clarity. Motivation. Distinctiveness. Reflection of major strategy. Formulating a Business Mission Statement.

46. NEED FOR MISSION STATEMENT Gives a unified direction to the company’s growth. Allocation of resources is based on the mission statement. Tends to buildup a professional climate for maintananace & improvement of the company’s status in any desired area. Outlines a framework for organisational planning , assigning definite tasks & responsibilities to each business unit. Helps to set-up & develops a control mechanism for achievement of Objectives. Helps to prevent people falling into an Activity trap.

47. COMPONENTS OF MISSION STATEMENT Customers. Products /Services. Markets. Technology. Concern for Survival , Growth, & Profitability. Philosophy. Self-Concept. Concern for Public Image. Concern for Employees.

48. DEVELOPMENT & MAINTANANCE OF MISSION

49. ROLE OF LEADERS IN MISSION DEVELOPMENT Making a commitment to the people & to the mission they lead. Taking responsibility for the accomplishment of the mission . Creating a vision & a strategy for the company. Communicating the Vision/Strategy. Effective leadership makes a business organization successful.

50. BUSINESS DEFINITION A Business Definition is a clear statement of the business the firm is engaged in or is planning to enter. B.D prescribes the boundaries of firm’s business, products & markets. Clarifying the mission and defining the business are the starting point of strategic planning. B.D provides the blueprint for choice of product market & changes thereof B.D Serves as the reference point for product market choices & corporate strategy of the firm.

51. GOALS Goals are the short-term objectives whose attainment is desired within a specified time period covered by the plan. Goals provide the fundamental standard for measuring performance to attain the end objective. Goals are the quantified objectives expressed in a specific dimension.

52. FEATURES OF GOALS Goal Addresses. Realistic & Challenging. Specific Time Period.

53. TYPES OF GOALS Official Goals. Operative Goals. Operational Goals.

54. OBJECTIVES Objectives refer to the ultimate end results which are to be accomplished by the overeall plan over a specified period of time. Objectives represents the desired results the organization wishes to attain through its operations. Organisational objectives are defined as ends which the organization seeks to achieve by its existence and operation. Objectives indicate specific sphere of aims ,activities and accomplishments. According to H.Igor Ansoff , “Objectives are decision rules which enable management to guide & measure the firm’s performance towards its purpose.”

55. CHARACTERISTICS OF OBJECTIVES Objectives should be understandable. Objectives should be concrete & specific. Objectives should be related to a time frame. Objectives should be measurable & controllable. Objectives should be challenging. Different Objectives should correlate with each other. Objectives should be set within constraints. Objectives have Hierarchy. Social sanction. Organisational Objectives can be changed.

56. DIFFERENCE BETWEEN GOALS & OBJECTIVES Basis of Difference Goals Objectives Nature/ Purpose Goals establish the overall desired outcome/vision. Objectives outline the actions or steps that are necessary to achieve the goal. Time Frame Goals are timeless, enduring & unending. Objectives are temporal, time phased, and intended by subsequent objectives. Specificity Goals are stated in broad general terms dealing with matters of image, style & perception. Objectives are much more specific. Focus Goals focus on external environment of the organization. Objectives focus on internal environment of the organization. Measurement Quantitative goals are set in relative terms. Quantitative objectives are set in absolute terms.

57. CLASSIFICATION OF OBJECTIVES Primary objectives Secondary objectives Short-Term objectives Long-Term objectives Equilibrium objectives Improvement objectives Individual objectives Social objectives Performance objectives a. Routine objectives b.Innovative objectives c. Problem-Solving objectives. Official goals.

58. FUNCTIONS & CONTRIBUTIONS OF OBJECTIVES Defining an organization Directions for decision making Performance standards Basis for Decentralisation Integrating organization, Group & Individual.

59. SIGNIFICANCE OF OBJECTIVES Serve the process of revival Ensure growth Act as base for business decisions Provide base for decentralisation Defines the organization’s relationship with its environment. Helps an organization to pursue its vision & mission. Provide the standards for Performance Appraisal Legitimacy Direction Co-ordination Benchmarks for success Motivation

60. FACTORS GOVERNING SETTING OF OBJECTIVES Vision & Value system of Top management Objectives of the past External environment & the power relations. Internal resources & power relations.

61. ISSUES IN OBJECTIVE SETTING Specificity Multiplicity Periodicity Verifiability Reality Quality

62. DEVELOPING ORGANISATIONAL OBJECTIVES Forces in the Environment Realities of enterprise’s resources & internal power relationships. Value system of the top executive Awareness by Top management.

63. STRATEGIC LEADERSHIP S.L is the ability to influence others to voluntarily make decisions that enhance prospects for the organization’s long term success. S.L establishes the firm’s direction by developing & communicating a vision of the future and inspires organization members to move in that direction. S.L is the process of transforming an organization with the help of its people so as to put it in a unique position.

64. IMPORTANCE OF SL Deals with vision-keeping , the mission insight & with effectiveness & results. Emphasizes transformational aspect . Inspires & motivates people to work together with a commom vision & purpose. Has external focus rather than internal focus.

65. ROLE / FUNCTIONS OF LEADERS Strategic Vision Pragmatism Structure & policies Communication network Culture Managing change a. Recognize the need for change b. Create a shared Vision c. Institutionalize the Change. Governance & Management.

66. GUIDELINES FOR SL Share Privilege Information Deal consciously with superficiality Sharing the job. See the comprehensive picture in terms of its details. Recognizing the influence inherent in general manager positions & using it effectively. Dealing with coalitions Using technical help effectively.

67. COMPETITIVE ADVANTAGE OF NATIONS The home nation influences the ability of its firms to succeed in particular industries, with the success or failure of thousands of struggles in many industries determining the state of a nation’s economy & its ability to progress. Nations do not compete in the market place –business firms do, and the performance of individual companies in particular industries in where C.A is either won or lost.

68. PORTER’S NATIONAL COMPETITIVE ADVANTAGE THEORY It is also called Porter’s Diamond Model. Michael Porter proposed the theory of Competitive Advantage in 1985. The Porter Diamond Theory of Advantage , is a theory that describes the competitive advantage that nations or groups possess based on factors available to them. The theory explains how governments can act to improve a country’s position in a globally competitive economic environment. The C.A Theory suggests that states & businesses should pursue policies that create high-quality goods to sell at high prices in the market. Porter emphasizes ‘productivity growth’as the focus of national strategies.

69. COMPONENTS OF PORTER’S DIAMOND MODEL

70. COMPONENTS OF PDM 1. Factor Conditions : Skilled labour , infrastructure, factors of production ,location etc.. 2. Demand Conditions : The nature of home demand for the industry’s product/services. 3. Related & Supporting Industries: The presence of international competitiveness in supplier/related industries. 4. Firm strategy structure & Rivalry : The conditions how companies are created, organized , managed , and the nature of domestic rivalry in the nation.

71. PORTER’S STAGES OF NATIONAL COMPETITIVE DEVELOPMENT(4 STAGE DEVELOPMENT PROCESS) DRIVER OF DEVELOPMENT SOURCE OF COMPETITIVE ADVANTAGE EXAMPLES Factor Conditions Basic Factors of Production(natural resources, geographical location, unskilled labour etc..) Canada, Australia, Singapore, South Korea before 1980. Investment Investment in capital equipment & transfer of technology from overseas. Japan during 1960’s , South Korea during 1980’s. Innovation All four determinants of national advantage interact to drive the creation of new technology. Japan since late 1980’s, Italy since early 1970’s, Sweden & Germany during the post war period. Wealth Emphasis on managing existing wealth causes, investment in advanced factors & individual motivation. UK during post-war period , US, Switzerland, Sweden & Germany since 1980.

72. LIMITATIONS OF PORTER’S DIAMOND THEORY There is no analysis of business. It’s purely external. There are no actions out of this framework. It’s a short term analysis where the information can rapidly change. It’s a high level view on the market place. This model/theory doesn’t provide any quantitative analysis of the impact of each force. It does not account for technological change. It doesnot consider Cultural Factors. It does not consider Social Media. It does not consider Customer Loyalty. It does not consider Rivalries between companies.

73. IMPLICATIONS OF COMPETITIVE ADVANTAGE OF NATIONS ON INDIAN BUSINESS 1. Moving toward Comparative to Competitiveness. 2. Approaching towards Global Market. 3. Adopting different Strategies for Overseas Market. 4. R ealization of customer to customer needs. 5. Requirements are enlarged. 6. Needed more focused Leadership. 7. Address multiple issues in order to sustain. 8.Dealing with rising Competition.