business strategytk 1222352359013505 8
DESCRIPTION
StratergizeTRANSCRIPT
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WHY DO GREAT COMPANIES FAILWHY DO GREAT COMPANIES FAIL
UNPARALLED TRACK RECORD
OF SUCCESS
NO GAPBETWEEN EXPEC-
TATIONS & PERFORMANCE
ACCUMULATIONOF ABUNDANT RESOURCES
OPTIMISEDBUSINESS
SYSTEM
SUCCESSCONFIRMSSTRATEGY
A VIEW THATRESOURCES WILL
WIN OUT
DEEPLY ETCHED RECEPIES
MOMENTUMIS MISTAKEN
FORLEADERSHIP
CONTENTMENTWITH CURRENTPERFORMANCE
RESOURCESSUBSTITUTE FOR
CREATIVITY
VULNERABILITYTO NEWRULES
FAILURE TO “REINVENT”LEADERSHIP
INABILITY TO ESCAPETHE PAST
INABILITY TO INVENT THE FUTURE
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SuccessfulBusinessstrategy
CompetitivenessGrowth 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
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AVERAGE ANNUAL INCREASEIN
STOCK PRICE- 1977-1988
6.5Company
‘A’
13.6Company
‘ B’
45.5 Company
‘C’
10%
20%
30%
50%
40%
Corp profileCorp profile
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EFFORT AUDITEFFORT AUDIT
0
1
2
3
4
5
6
7
Company A Company B Company C
CEO
None
EFFORT
V.HIGH
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THE VIRTUOUS CIRCLE
SUPERIOR DDTS/
SERVICE
CUSTOMERSATISFACTIO
N
FEWER CUSTOMERDEFECTIONS
HIGH PROFITSGROWTH
INVESTMENT TO ENHANCE
PRODUCTIVITY
INVESTMENTIN HR
EMPLOYEESATISFACTION
DEDICATED WORK TEAM
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THREE KINDS OF THINKING PROCESSTHREE KINDS OF THINKING PROCESSMECHANICALSYSTEMS HINKING
PROBLEM PROTOTYPE
INTUTION
STRATEGICTHINKING
.
SOLUTION
PROCESSOF THOUGHT
REARRANGEMENTOF ELEMENTS
LOCAL OPTIMIZATIONOR SEEING TREENOT THE FOREST
TRANSFORMATIONOR CHANGEDCONFIGURATION
ANALYSIS OF ESSENCE
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A HABIT CHARACTER
SOW A THOUGHT
AN ACTION A HABIT CHARACTER
DESTINYSOW 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
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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
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Tasks of strategic managementTasks of strategic management
SETTINGOBJECTIVES
STRATEGY TO ACHIEVE
OBJECTIVES
IMPLEMENTINGAND
EXECUTI;NGSTRATEGY
EVALUATIONAND
CONTROL
DEVELOPINGSTRATEGICVISION ANDMISSION
REVISE ASNEEDED
REVISE AS NEEDED
IMPROVE/CHANGE AS
NEEDED
IMPROVE/CHANGE AS
NEEDED
RECYCLE TOTASKS 1,2,3.4
AS NEEDED
TASK - 1
TASK -2 TASK-4TASK-3
TASK-5
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EconomicSocietalPolitical
Regulatory &Community
considerations
CompetitiveConditions and Overall industryattractiveness
CompanyOpportunities &Threats to the
Company’sWell-being
The mix of considerations thatDetermine a company’s strategic situation
Company resourcesStrengths/
weaknessesCompetencies
AndCompetitive capabilities
Personal ambitionsBusiness
Philosophies &Ethical principals
To keyexecutives
Shared values And
Company culture
IdentificationEvaluation
Of Strategy
alternatives
ConclusionsAbout
Factors OnImplications
For strategy
CraftingStrategyThat fits
The Overall
situation
Strategy factors Strategy factors internal/internal/externalexternal
Internal factors
External factors
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Jobs and structure
Management andmeasurement system
BusinessProcess
Values and beliefs
The Business System The Business System DiamondDiamond
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ENVISIONING THE OPPURTUNITIESENVISIONING THE OPPURTUNITIES
CREATE A VISIONOF THE FUTURE
ASSES THE FIRM’SFUTURE
ENVIRONMENT
DEFINE THE SCOPE OF
INNOVATION
SET STRATEGICDIRECTIONS &PRIORITIES
TO SEEDINGSTAGE
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
COMPTTTECHNOLOGIES
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
Market Market penetrationpenetration
Market Market developmendevelopmentt
New New offering offering developmendevelopmentt
DiversificatiDiversificationon
MARKETSMARKETS
ExistingExisting NewNew
OFFERINGSOFFERINGS
ExistingExisting
NewNew
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Selecting Product/Market Strategies
Is the strategy consistent with organization Is the strategy consistent with organization mission, goal, and capabilities.mission, goal, and capabilities.
What are the costs and benefits of alternative What are the costs and benefits of alternative strategies and their probabilities of success?strategies and their probabilities of success?
Includes an analysis of competitive structure, Includes an analysis of competitive structure, market growth or decline factors, and opportunity market growth or decline factors, and opportunity costs.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 Developing Reformulation and Recovery StrategiesRecovery Strategies
Plans seldom go exactly as expected since Plans seldom go exactly as expected since they are based on assumptions regarding they are based on assumptions regarding consumer response, competitive reaction, consumer response, competitive reaction, and environmental factors.and environmental factors.
Important to periodically conduct Important to periodically conduct marketing audits to determine problem marketing audits to determine problem areas.areas.
Preplanning of reformulation/recovery Preplanning of reformulation/recovery strategies allows faster response times in strategies allows faster response times in determining remedial action (contingency determining remedial action (contingency plans).plans).
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Levels of StrategyLevels of Strategy
Business Strategy (competitive Business Strategy (competitive strategy) is concerned with strategy) is concerned with howhow a firm a firm competes within a particular marketcompetes within a particular market
Corporate strategy is concerned with Corporate strategy is concerned with wherewhere a firm competesa firm competes
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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 How to create competitive advantage in each busness in which the company competes:which the 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 Business (or Competitive) Strategy is concerned with the use of resources and capabilities to create competitive use of resources and capabilities to create competitive advantages in each of businesses or industries in which a advantages in each of businesses or industries in which a company competescompany competes
Corporate-Level Strategy (companywide strategy)Corporate-Level Strategy (companywide strategy) Corporate (or Company-wide) Strategy is the overall plan Corporate (or Company-wide) Strategy is the overall plan
for a multi-business unit company.for a multi-business unit company. Corporate strategy is what makes the corporate whole add Corporate strategy is what makes the corporate whole add
up to more than the sum of its business unit partsup to more than the sum of its business unit parts
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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 value is created at the business unit level, it is only added at the
corporate levelcorporate level• Successful corporate strategy must grow out of and reinforce Successful corporate strategy must grow out of and reinforce
competitive strategycompetitive strategy
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 Corporate overhead and costs of communication between HQ and SBUsSBUs
• 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 Shareholders can diversify their own portfolios of stocks, and they
can often do it more cheaply with less risk than corporationscan often do it more cheaply with less risk than corporations• Shareholders can buy shares at market prices and avoid paying Shareholders can buy shares at market prices and avoid paying
large acquisition premiumslarge acquisition premiums
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Implications from these Implications from these PremisesPremises
Corporate Strategy cannot succeed unless it Corporate Strategy cannot succeed unless it truly adds value to business units:truly 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 add value to shareholders in a way that shareholders could not replicate by themselvescould not replicate by themselves
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DECOMPOSING THE ECONOMIC DECOMPOSING THE ECONOMIC ENGINEENGINE
CONCEPT OFSERVED 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 VALUEDELIVERY MODELS?HOW EASILY COULD INVESTMENTSPROGRAMME BE RECONFIGURED?WHICH CONSTITUENCIES WOULD RESIST CHANGE?
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FINDING THE LIMITS OF THE FINDING THE LIMITS OF THE CURRENT 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 BEBETTER SERVED BY AN ALTERNATE CONFIGURATION OF SKILLS & ASSETS.
WHAT IS OUR VULNERA-BILITY TO’ NEW RULES’OF THE GAME
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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 CONCEPTWHAT CUSTOMER BENEFITS•CORE PRODUCT•SUPPLMENTARY ‘S’•SERVICE RELIABILITY LEVELS•ACCESSABILITY (WHERE & WHEN)AT WHAT COST•MONEY•TIME•MENTAL HASSLE•PHYSICAL EFFORT
SERVICES OPERATING CONCEPTSGEOGRAPHIC SCOPE OF OPERATIONS•AREAS SERVED•SINGLE VS MULTISITE•FACILITIES LOCATION•TELECOM LINKAGESCHEDULING•HRS-DAYS-SEASON•CONTINUOUS/ INTERMITENTFACILITY DESIGN- LAYOUTOPERATING 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 DELIVERYPROCESS
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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
Suppliers of raw materials, parts, components etc.
Porter’s modelPorter’s model
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Means to competitive Means to competitive advantageadvantage
Competitive advantage
Strategic assets And market achievements
Core and distintictive competencies
Core capabilities
Company resources
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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
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BCG GROWTH –SHARE MATRIXBCG GROWTH –SHARE MATRIX
There are two basic assumptions underlying the BCG matrix
1. 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.
2. 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
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starsstars Problem childProblem child
Cash cowsCash cows dogsdogs
5
7
8
14
6
010x 1x 0.1x
22
Relative market share
Mark
et
gro
wth
rate
3
2
BCG matrixBCG matrix
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Portfolio alternativesPortfolio alternatives
cash cows
Problem childrenstars
dogs
disaster
innovator
medio
crit
y
Relative market share
Mark
et
gro
wth
rate
+
+
+
+
-
-
-
-
follower
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BSelective
Development(problem children)
COffensiveGrowth(stars)
ADisinvestments
(dogs)
DLow profile(cash cows)
Multi-factor gridMulti-factor grid
weak
weak
att
ract
iveness
average
avera
ge
high
hig
h
competitiveness
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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.
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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,geographic unit managers
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Company value chainCompany value chain
PurchasedSupplies and
Inboundlogistics
operationsSales and marketing
DistributionAnd
Outboundlogistics
serviceProfit
margins
Product –technology and systems development
General administration
Human resources management
Primary activities and costs
SupportActivities& costs
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experience effect
020406080100120
1million 2milliion 4million 8million
units
cost
per
uni
t
Series1 Series2 Series3
Experience effectExperience effect
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The 7s modelThe 7s model
structures
Super ordinategoals
staff
styleSkills
strategy Systems
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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.