strategic mgmt

strategic mgmt

1. tksabarwal 1
WHY DO GREAT COMPANIES FAILWHY DO GREAT COMPANIES FAIL
UNPARALLED
TRACK RECORD
OF SUCCESS
NO GAP
BETWEEN EXPEC-
TATIONS & PERFOR
MANCE
ACCUMULATION
OF ABUNDANT
RESOURCES
OPTIMISED
BUSINESS
SYSTEM
SUCCESS
CONFIRMS
STRATEGY
A VIEW THAT
RESOURCES WILL
WIN OUT
DEEPLY ETCHED
RECEPIES
MOMENTUM
IS MISTAKEN
FOR
LEADERSHIP
CONTENTMENT
WITH CURRENT
PERFORMANCE
RESOURCES
SUBSTITUTE FOR
CREATIVITY
VULNERABILITY
TO NEW
RULES
FAILURE TO
“REINVENT”
LEADERSHIP
INABILITY TO ESCAPE
THE PAST
INABILITY TO INVENT
THE FUTURE

2. tksabarwal 2
Successful
Business
strategy
Competitiveness
Growth and profits
Managers begin
To believe
They are best
Build layers
of staff
To cope with
growth
External
arrogance
And internal
focus
On control
Decline into
Satisfactory
Under
performance
Initiative and
Innovation stifled
Dynamics of satisfactory
underperformance

3. tksabarwal 3
AVERAGE ANNUAL INCREASE
IN
STOCK PRICE- 1977-1988
6.5
Company
‘A’
13.6
Company
‘ B’
45.5
Company
‘C’
10%

20%
30%

50%
40%
Corp profileCorp profile

4. tksabarwal 4
EFFORT AUDITEFFORT AUDIT
0
1
2
3
4
5
6
7
Company ACompany BCompany C
C
E
O
None
E
F
F
O
R
T
V.HIG
H

5. tksabarwal 5
THE VIRTUOUS CIRCLE
SUPERIOR
DDTS/
SERVICE
CUSTOMER
SATISFACTIO
N
FEWER CUSTOMER
DEFECTIONS
HIGH
PROFITS
GROWTH
INVESTMENT TO
ENHANCE
PRODUCTIVITY
INVESTMENT
IN HR
EMPLOYEE
SATISFACTION
DEDICATED
WORK TEAM

6. tksabarwal 6
THREE KINDS OF THINKING PROCESSTHREE KINDS OF THINKING PROCESS
MECHANICAL
SYSTEMS HINKING
PROBLEM
PROTOTYPE
INTUTIO
N
STRATEGIC
THINKING
.

SOLUTION
PROCESS
OF
THOUGHT
REARRANGEMENT
OF ELEMENTS
LOCAL OPTIMIZATION
OR SEEING TREE
NOT THE FOREST
TRANSFORMATIO
N
OR CHANGED
CONFIGURATION
ANALYSIS OF
ESSENCE

7. tksabarwal 7
A HABIT CHARACTER
SOW A
THOUGHT
AN ACTION A HABIT CHARACTER
DESTINY
SOW REAP SOW SOWREAP
REAP
REAP
AN ACTION

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Strategic management—refers to the managerial process of forming a
strategic vision,setting objectives, crafting a strategy; implementing and
executing the strategy,and then over time initiating whatever corrective
adjustments in the vision, objective, strategy, and execution are deemed
appropriate.
Strategic vision—is a road map of a company’s future—providing specifics
about technology and customer focus,the geographic and the product
markets to be pursued, the capabilities it plans to develop and the kind of
company that management is trying to create.
Mission statement– is typically focused on its present business scope—”who
we are and what we do;”mission statement broadly describe an
organization’s present capabilities, customer focus, activities, and business
makeup.
Objectives—are an organization's performance targets—the results and
outcomes it want to achieve. They function as yardsticks for tracking an
organization’s performance and progress.
Strategic objectives—relate to outcomes that strengthen an organization’s
overall business position and competitive vitality
Basic definitionsBasic definitions

9. tksabarwal 9
THE INDIVIDUAL MUST
BE RESPECTED
EXCELLENCE & SUPERIOR
PERFORMANCE MUST BE
PURSUED
Mission statement-IBMMission statement-IBM
THE CUSTOMER MUST
BE GIVEN THE BEST
POSSIBLE SERVICE

10. tksabarwal 10
Tasks of strategic managementTasks of strategic management
SETTING
OBJECTIVES
STRATEGY TO
ACHIEVE
OBJECTIVES
IMPLEMENTING
AND
EXECUTI;NG
STRATEGY
EVALUATION
AND
CONTROL
DEVELOPING
STRATEGIC
VISION AND
MISSION
REVISE AS
NEEDED
REVISE AS
NEEDED
IMPROVE/
CHANGE AS
NEEDED
IMPROVE/
CHANGE AS
NEEDED
RECYCLE TO
TASKS 1,2,3.4
AS NEEDED
TASK -
1
TASK -2
TASK-4TASK-
3
TASK-5

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Economic
Societal
Political
Regulatory &
Community
considerations
Competitive
Conditions and
Overall industry
attractiveness
Company
Opportunities &
Threats to the
Company’s
Well-being
The mix of considerations that
Determine a company’s strategic situation
Company
resources
Strengths/weakne
sses
Competencies
And
Competitive
capabilities
Personal ambitions
Business
Philosophies &
Ethical principals
To key
executives
Shared values
And
Company culture
Identification
Evaluation
Of
Strategy
alternatives
Conclusions
About
Factors On
Implications
For
strategy
Crafting
Strategy
That fits
The
Overall
situation
Strategy factors internal/Strategy factors internal/externalexternal
Internal
factors
External
factors

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Jobs and
structure
Management and
measurement system
Business
Process
Values
and
beliefs
The Business System The Business System
DiamondDiamond

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ENVISIONING THE OPPURTUNITIESENVISIONING THE OPPURTUNITIES
CREATE A VISION
OF THE FUTURE
ASSES THE FIRM’S
FUTURE
ENVIRONMENT
DEFINE THE
SCOPE OF
INNOVATION
SET STRATEGIC
DIRECTIONS &
PRIORITIES
TO
SEEDING
STAGE
CREATING A
VISION
1. WHAT DO WE WANT TO STAND FOR AS A COPRPORATION.
2. WHAT KINDS OF PRODUCTS DO WE WANT TO OFFER.
3. WHAT KIND OF CUSTOMERS DO WE WANT TO SERVE
4. WHAT DO WE WANT OUR PRODUCTS TO MEAN TO OUR
CUSTOMERS.

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IDENTIFYING OPPURTUNITIESIDENTIFYING OPPURTUNITIES
OPPUR-
TUNITIES
COMPTT
TECHNOLOGIES
MARKET
• FAST GROWING SEGMENTS
• NEW TRADE/ CONSUMER
GROUPS
• NEW
COMPONENTS
• NEW MATERIALS
• NEW PROCESSES
• NEW STANDARDS
• UNMET/ ILL MET NEEDS
• NEW/ EMERGING NEEDS
• SCOPE AND FOCUS
• WEAKNESS/ GAPS
• SUBSTITUTION POTS
• EMERGING COMPTT

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SWOT Analysis
Formal framework for identifying
growth opportunities.
Helps focus the matching process.
Goes beyond just developing lists.

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Examples of Strengths
Reputation/brand image
Distribution channels
Research and development skills
Experienced management talent
Experienced sales force
***Note that all of the above are “sustainable”
strengths.

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Examples of Weaknesses
Includes the lack of the previousIncludes the lack of the previous
High debtHigh debt
Lack of manufacturing Lack of manufacturing
capacity/capabilitycapacity/capability

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Examples of Opportunities
Upturn in consumer confidence
Trends in consumer needs/wants
Demographic trends
Changes in distribution patterns/consumer
shopping behavior

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Formulating Product/Market
Strategies






DiversificationNew offering
development
Market
development
Market
penetration
MARKETSMARKETS
ExistingExisting NewNew
OFFERINGSOFFERINGS
ExistingExisting
NewNew

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Selecting Product/Market Strategies
Is the strategy consistent with organization mission, goal, Is the strategy consistent with organization mission, goal,
and capabilities.and capabilities.
What are the costs and benefits of alternative strategies What are the costs and benefits of alternative strategies
and their probabilities of success?and their probabilities of success?
Includes an analysis of competitive structure, market Includes an analysis of competitive structure, market
growth or decline factors, and opportunity costs.growth or decline factors, and opportunity costs.

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Developing Product/Market Strategies
Selecting Target Markets
Determining the Marketing Mix
Product/Service
Price
Promotion/Communication
Place/Distribution

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Budgeting for the Strategy
Formal, quantitative expression of the
organization’s plan in financial terms. What will
it cost???
Important so that organization goals are
attained.

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Developing Reformulation and Recovery Developing Reformulation and Recovery
StrategiesStrategies
Plans seldom go exactly as expected since they Plans seldom go exactly as expected since they
are based on assumptions regarding consumer are based on assumptions regarding consumer
response, competitive reaction, and response, competitive reaction, and
environmental factors.environmental factors.
Important to periodically conduct marketing Important to periodically conduct marketing
audits to determine problem areas.audits to determine problem areas.
Preplanning of reformulation/recovery strategies Preplanning of reformulation/recovery strategies
allows faster response times in determining allows faster response times in determining
remedial action (contingency plans).remedial action (contingency plans).

24. tksabarwal 24
Levels of StrategyLevels of Strategy
Business Strategy (competitive strategy) is Business Strategy (competitive strategy) is
concerned with concerned with howhow a firm competes within a firm competes within
a particular marketa particular market
Corporate strategy is concerned with Corporate strategy is concerned with wherewhere
a firm competesa firm competes

25. tksabarwal 25
Levels of Strategy (cont’d)Levels of Strategy (cont’d)

Business-Level Strategy (competitve strategy)Business-Level Strategy (competitve strategy)
How to create competitive advantage in each busness in which the How to create competitive advantage in each busness in which the
company competes:company competes:
low cost leadershiplow cost leadership
differentiationdifferentiation
focus low cost/ focus differentiationfocus low cost/ focus differentiation
Business (or Competitive) Strategy is concerned with the use of Business (or Competitive) Strategy is concerned with the use of
resources and capabilities to create competitive advantages in each resources and capabilities to create competitive advantages in each
of businesses or industries in which a company competesof businesses or industries in which a company competes
Corporate-Level Strategy (companywide strategy)Corporate-Level Strategy (companywide strategy)
Corporate (or Company-wide) Strategy is the overall plan for a multi-Corporate (or Company-wide) Strategy is the overall plan for a multi-
business unit company.business unit company.
Corporate strategy is what makes the corporate whole add up to Corporate strategy is what makes the corporate whole add up to
more than the sum of its business unit partsmore than the sum of its business unit parts

26. tksabarwal 26
Premises of Corporate Premises of Corporate
StrategyStrategy
Competition occurs at the business unit levelCompetition occurs at the business unit level
•corporations don’t compete; only their business units docorporations don’t compete; only their business units do
•value is created at the business unit level, it is only added at the corporate value is created at the business unit level, it is only added at the corporate
levellevel
•Successful corporate strategy must grow out of and reinforce competitive Successful corporate strategy must grow out of and reinforce competitive
strategystrategy
Corporate Strategy inevitably adds costs and Corporate Strategy inevitably adds costs and
constraints to business unitsconstraints to business units
•Corporate overhead and costs of communication between HQ and SBUsCorporate overhead and costs of communication between HQ and SBUs
•bureaucratic costs, costs of coordination, costs of monitoringbureaucratic costs, costs of coordination, costs of monitoring
Shareholders can readily diversify themselvesShareholders can readily diversify themselves
•Shareholders can diversify their own portfolios of stocks, and they can Shareholders can diversify their own portfolios of stocks, and they can
often do it more cheaply with less risk than corporationsoften do it more cheaply with less risk than corporations
•Shareholders can buy shares at market prices and avoid paying large Shareholders can buy shares at market prices and avoid paying large
acquisition premiumsacquisition premiums

27. tksabarwal 27
Implications from these Implications from these
PremisesPremises
Corporate Strategy cannot succeed unless it truly Corporate Strategy cannot succeed unless it truly
adds value to business units:adds value to business units:
by providing tangible benefits that offset costs of lost by providing tangible benefits that offset costs of lost
independenceindependence
economies of scope in operationseconomies of scope in operations
economies of scale in administration and internal financingeconomies of scale in administration and internal financing
add value to shareholders in a way that shareholders could not add value to shareholders in a way that shareholders could not
replicate by themselvesreplicate by themselves

28. tksabarwal 28
DECOMPOSING THE ECONOMIC ENGINEDECOMPOSING THE ECONOMIC ENGINE
CONCEPT OF
SERVED MKT
-1-
REVENUE &
MARGIN
STRUCTURE
-2-
CONFIGRATION
OF SKILL &
ASSETS
-3-
FLEXIBILITY &
ADAPTIVENESS
-4-
WHAT IS OUR BASIC VALUE POSITION?
HOW HAVE WE SEGMENTED THE MARKET?
WHAT KIND OF CUSTOMERS DO WE SERVE?
WHERE ARE OUR CUSTOMERS?
WHERE IN THE BUSINESS SYSTEM WE TAKE
PROFIT?
WHERE DO OUR MARGINS COME FROM?
WHAT HAS DETERMINED THE SIZE OF THE
MARGIN?
WHAT ARE THE MAJOR COST & PRICE DRIVERS?
WHAT DO WE BELIEVE WE KNOW HOW
TO
DO WELL?
WHAT KINDS OF SKILLS PREDOMINATE
IN
OUR INDUSTRY?
WHAT IS THE TRAJECTORY OF OUR
DEVELOPMENT SPENDING?HOW ALERT ARE WE TO NEW VALUE
DELIVERY MODELS?
HOW EASILY COULD INVESTMENTS
PROGRAMME BE RECONFIGURED?
WHICH CONSTITUENCIES WOULD
RESIST CHANGE?

29. tksabarwal 29
FINDING THE LIMITS OF THE CURRENT FINDING THE LIMITS OF THE CURRENT
ECONOMIC ENGINEECONOMIC ENGINE
-1-
-2-
-3-
- 4-
WHAT CUSTOMER NEEDS ARE’T WE SERVING.
COULD PROFITS BE EXTRACTED AT A
DIFFERENT POINT IN THE VALUE
CHAIN.
MIGHT CUSTMER NEEDS BE
BETTER SERVED BY AN ALTERNATE
CONFIGURATION OF SKILLS &
ASSETS.

WHAT IS OUR
VULNERA-
BILITY TO’ NEW RULES’
OF THE GAME

30. tksabarwal 30
PLANNING- CREATING & DELIVERING SERVICESPLANNING- CREATING & DELIVERING SERVICES
CORPORATE OBJECTIVES &
RESOURCES
MARKET OPPURTUINITY ANALYSIS RESOURCE ALLOCATION ANALYSIS
MARKET POSITIONING STATEMENT
•WHAT PRODUCT/S
•WITH WHAT DISTINGUISHING
CHARACTERISTICS
•TO WHAT TARGET MARKET
SEGMENT
OPERATING ASSETS STATEMENT
•WHAT PHYSICAL FACILITIES
•WHAT EQUIPMENT
•WHAT INFO & COMM TECHNO LOGY
•WHAT HUMAN RESOURCES
(NUMBER SKILLS)
SERVICES MARKETING CONCEPT
WHAT CUSTOMER BENEFITS
•CORE PRODUCT
•SUPPLMENTARY ‘S’
•SERVICE RELIABILITY LEVELS
•ACCESSABILITY (WHERE & WHEN)
AT WHAT COST
•MONEY
•TIME
•MENTAL HASSLE
•PHYSICAL EFFORT
SERVICES OPERATING CONCEPTS
GEOGRAPHIC SCOPE OF OPERATIONS
•AREAS SERVED
•SINGLE VS MULTISITE
•FACILITIES LOCATION
•TELECOM LINKAGE
SCHEDULING
•HRS-DAYS-SEASON
•CONTINUOUS/ INTERMITENT
FACILITY DESIGN- LAYOUT
OPERATING ASSESTS DEPLOYMENT
•WHAT TASKS-WHERE-WHEN
•LEVERAGE THROUGH INTERMEDIARIES
OPERATING COSTS
•LEVERAGE THRU’ CUSTOMER ASSETS
(PARTNERSHIP & SELF SER.
•SPECIFIC TASKS ASSIGNED TO “FRONT-
BACKSTAGE OPERATIONS
SERVIC DELIVERY
PROCESS

31. tksabarwal 31
Firms in other industries
offering substitute
products
Rivalry among competing
sellers
Competitive pressure
created by jockeying for
better market position
and comptt advantage
Potential new entrants

Buyers
S
u
p
pl
ie
r
s
o
f
r
a
w
m
a
t
e
ri
al
s,
p
a
r
t
s,
c
o
m
p
o
n
e
n
t
s
e
t
c.
Porter’s modelPorter’s model

32. tksabarwal 32
Means to competitive advantageMeans to competitive advantage
Competitive
advantage
Strategic assets
And market
achievements
Core and distintictive
competencies
Core capabilities
Company resources

33. tksabarwal 33
Product portfolio analysisProduct portfolio analysis
Relates attractiveness and competitiveness
indicators to facilitate strategic thinking
suggesting specific marketing strategies to
achieve a balanced mix of products that will
ensure growth and profit performance in the long
run
•Helps a multibusiness firm to decide how to allocate
scarce resources among product markets they compete
in.
•Procedure consists of cross- classifying each activity
each activity with respect to two independent
dimensions.
•Dimensions are
•Attractiveness of the reference market
•Firm’s capacity to take advantage of opportunities
within the market

34. tksabarwal 34
BCG GROWTH –SHARE MATRIXBCG GROWTH –SHARE MATRIX
There are two basic assumptions underlying the BCG
matrix
2.Concerning the existence of experience effect.
Higher market share leads to cost advantage.
The largest competitor will be the most
profitable at current prices. The implication of
this assumption is that the expected cash flow is
market share specific.
3.The PLC model highlights the desirability of a
balanced mix of products situated in different
phases of PLC. Implication is that the cash needs
for products in rapidly growing markets are
expected to be greater than they are for those
in the slower growing ones

35. tksabarwal 35
dogsCash cows
Problem childstars
5
7
8
14
6
0
10x
1x
0.1x
22
Relative market share
M
a
r
k
e
t

g
r
o
w
t
h

r
a
t
e
3
2
BCG matrixBCG matrix

36. tksabarwal 36
Portfolio alternativesPortfolio alternatives
cash cows
Problem childrenstars
dogs
disaster
i
nnovator
m
e
d
io
c
r
it
y
Relative market share
M
a
r
k
e
t
g
r
o
w
t
h

r
a
t
e
+
+
+
+
-
-
-
-
follower

37. tksabarwal 37
B
Selective
Development
(problem
children)
C
Offensive
Growth
(stars)
A
Disinvestments
(dogs)
D
Low profile
(cash cows)
Multi-factor gridMulti-factor grid
weak
w
e
a
k
a
t
t
r
a
ct
iv
e
n
e
s
s
average
a
v
e
r
a
g
e
high
h
ig
h
competitiveness

38. tksabarwal 38
Evaluation of MFPGEvaluation of MFPG
MFPG Basically leads to same kind of analysis as BCG
matrix but the major difference is that the link
between the competitiveness and financial
performance is lost.

39. tksabarwal 39
Corporate strategy
Business strategies
Functional strategies
Operating strategies
Strategy levelsStrategy levels
Corporate
level managers
Business level general
mangers
Heads of
functional areas
within business
unit or division
Plant
managers,geographi
c unit managers

40. tksabarwal 40
Company value chainCompany value chain
Purchased
Supplies and
Inbound
logistics
operations
Sales and
marketing
Distribution
And
Outbound
logistics
service
Profit
margins
Product –technology and systems development
General administration
Human resources management
Primary activities and costs
Support
Activities
& costs

41. tksabarwal 41
experience effect
0
20
40
60
80
100
120
1million2milliion4million8million
units
c
o
s
t

p
e
r
u
n
i
t
Series1 Series2 Series3
Experience effectExperience effect

42. tksabarwal 42
The 7s modelThe 7s model
structures
Super ordinate
goals
staff
styleSkills
strategy Systems

43. tksabarwal 43
7s etiology7s etiology
1.Strategy—a coherent set of actions aimed at gaining a
sustainable advantage over competition., improving positin vis-
à-vis customers, or allocating resources.
2.Structure—org. chart showing who reports to whom.
3.Systems. The processes and flows showing how thing are done
on day to day basis. ( info systems, capital budgeting
systems, qc systems, etc.)
4.Style—tangible evidence of what is important, it is more
concerned with behavior of management.
5.Staff– people in the organization, important to think of
corporate demographics rather than individual personalities.
6.Shared values-- the value of the organization must be shared
by each member.
7.Sills—are those capabilities that are possessed by the
organization as a whole as opposed to people in it.