Download - Strategic Management
Mahesh P. Joshi: Strategy and HR 1
The Definition of Strategic Management
The Art and Science of Formulating, Implementing, and
Evaluating Cross-Functional Decisions That Enable an
Organization to Achieve Its Objectives
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The Basis for Good Strategic Decisions
Intuition + Analysis
Effective Strategic Decisions
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Business MissionBusiness Mission
Strategy FormulationStrategy Formulation
External Opportunities and Threats
External Opportunities and Threats
Internal Strengths and Weaknesses
Internal Strengths and Weaknesses
Keys to Formulating Strategies
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A Comprehensive Strategic Management ModelA Comprehensive Strategic Management Model
DevelopMission
Statement
DevelopMission
Statement
Establish Long-term
Objectives
Establish Long-term
Objectives
Generate,Evaluate,
andSelect
Strategies
Generate,Evaluate,
andSelect
Strategies
Establish Policies and
AnnualObjectives
Establish Policies and
AnnualObjectives
AllocateResourcesAllocate
Resources
Measureand
EvaluatePerformance
Measureand
EvaluatePerformance
PerformExternal
Audit
PerformExternal
Audit
PerformInternalAudit
PerformInternalAudit
Feedback
Strategy Formulation
Strategy Implementation
Strategy Evaluation
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D ev elo pM iss io n &V is io n
P e r fo r mS itu at io nA na ly s is
S etO b ject iv es& C ra ftS trateg y
I m p le m e n tS trateg y
A ssessV a lu eC re at io n &P ro v id eF e ed b ac k
V a lu e C rea tio n dr ivesth e s tra teg y p ro cess
E ffec tive s tra teg icm a n a g em en t crea tes
va lu e
V a lu eC re at io n
C u sto m ers
E m p lo yees
O w n ers
A Strategic Management Framework
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The Stages and Activities in the Strategic Management Process
Stages Activities
Strategy formulation
Strategy evaluation
Strategy implementation
Conduct research
Establish annual
objectives
Review internal and external factors
Integrate intuition
with analysis
Devise policies
Measure performance
Make decisions
Allocate resources
Take corrective
action
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Forces Influencing Design of Strategic Management Systems
Toward more formality and more details
Toward less formality and fewer details
Management StylesPolicy makerDemocratic-permissiveAuthoritarianDay-to-day operational thinkerIntuitive thinkerExperienced in planningInexperienced in planning
OrganizationSmall one-plant companiesLarge companies
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Forces Influencing Design of Strategic Management Systems
Toward more formality and more details
Toward less formality and fewer details
Complexity ofEnvironment
Stable environmentTurbulent environmentLittle competitionMany markets and customersSingle market and customerCompetition severe
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Forces Influencing Design of Strategic Management Systems
Toward more formality and more details
Toward less formality and fewer details
Complexity of Production Process
Long production lead timesShort production lead timesCapital intensiveLabor intensiveIntegrated manufacturing processesSimple manufacturing processesHigh technologyLow technologyMarket reaction time for newproduct is shortMarket reaction time is long
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Forces Influencing Design of Strategic Management Systems
Toward more formality and more details
Toward less formality and fewer details
Nature of Problems
Facing new, complex, tough problems having long-range aspects
Facing tough short-range problems
Purpose of Planning System
Coordinate division activities
Train managers
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Levels of Strategic Decisions
Corporate Level• What business to be in?Business Level• How to compete in a chosen
BusinessFunctional Level• Support at each function
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Intended Deliberate RealizedStrategy Strategy Strategy
Unrealized EmergentStrategy Strategy
FIO DecisionsFinancingInvestingOperations
Intended or Realized Strategy
Intended RealizedDeliberate
Decisions
by Organization
Emergent
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Mission Statement Answers the QuestionMission Statement
Answers the Question
“What is Our Business?”
“What is Our Business?”
Vision Statement Answers the Question
Vision Statement Answers the Question
“What Do We Wantto Become?”
“What Do We Wantto Become?”
Vision Versus Mission
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The Growth Matrix
Market PenetrationPresent ProductsPresent Markets
Product DevelopmentNew ProductsPresent Markets
Market ExtensionPresent ProductsNew Markets
DiversificationNew ProductsNew Markets
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Expansion Strategies
Market Penetration
Seeking Increased Market Share For Present Products or Services in Present Markets
Market Development
Introducing Present Products or Services into New Geographic Areas
Product Development
Seeking Increased Sales by Improving Present Products/Services or Developing New Ones
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Expansion Strategies
Diversification Strategies
Related DiversificationAdding New, But Related, Products or Services
Unrelated DiversificationAdding New, Unrelated Products or Services
Adding New, Unrelated Products or Services for Present Customers
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What Else Besides Growth
Staying the CourseReduction in operations
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Retrenchment Strategies
Cost-Cutting
Reducing the use of allocation of resources for a specific function
LiquidationClosing all operations
DivestmentSelling a Division or Part of an Organization
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Key External ForcesKey External Forces
EconomicEconomic
SocialSocial
CulturalCultural
DemographicDemographic EnvironmentalEnvironmental
PoliticalPolitical
LegalLegal
GovernmentalGovernmental
TechnologicalTechnologicalCompetitiveCompetitive
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Key Internal ForcesKey Internal ForcesManagementManagement
MarketingMarketing
DistributionDistribution
Production/OperationsProduction/OperationsResearch & DevelopmentResearch & Development
PurchasingPurchasing
ManufacturingManufacturing
Finance/AccountingFinance/Accounting
PackagingPackaging
Human Resource Management
Human Resource ManagementComputer
Information SystemsComputer
Information Systems
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Developing Strategies That Use An Organization’s Strengths To
Developing Strategies That Use An Organization’s Strengths To
Take full advantage of
external opportunities
Take full advantage of
external opportunities
Reduce the effects of external threatsReduce the effects of external threats
Improve an organization’s
weaknesses
Improve an organization’s
weaknesses
Formulating Strategies Based on Key Internal Factors
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Overview of the External Environment
Macroenvironment: the set of broad forces and factors that affect the behavior of key players in the task environmentTask Environment: the key players whose behavior directly impacts the firm and its prospects for success
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SOCIETAL (MACRO)
ECONOMIC POLITICAL/LEGAL
TECHNOLOGICAL
Demographic and Socioeconomic
TASK (MICRO)
Other Stakeholders
Suppliers, Competitors, Customers
INTERNAL
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Industry Analysis
Market Share AnalysisMarket Share Analysis•• Definition of “market” Definition of “market” •• Definition of competitorsDefinition of competitorsFinancial AnalysisFinancial Analysis•• SalesSales•• Net IncomeNet Income•• Other IndicatorsOther Indicators•• RatiosRatios
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Competitor Analysis
• Who are the existing and potential competitors?
• What strategic groups can be identified?• What are their levels of sales, share and
profits?• What are their growth trends?• What are their strengths, weaknesses,
strategies?
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STRENGTHS - S WEAKNESSES - W
OPPORTUNITIES - O SO STRATEGIES WO STRATEGIES
THREATS - T ST STRATEGIES WT STRATEGIES
Use strengths to take advantage of opportunities
Overcome weaknesses by taking advantage of
opportunities
Use strengths to avoid threats
Minimize weaknesses and avoid threats
The SWOT Matrix
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So What Matters?
Idea of SWOT analysis• Just a basic tool• This is a starting point for strategic analysis
Identifying long term and Short term trends • in macro environment
– economic, socio-cultural, legal-political and knowledge-technology
• in task environment– customers, competition, and suppliers
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Sustainable Competitive Advantage is Based on:
Assets and Skills
People and Culture
Processes and Systems
R&D Capability
Manufacturing or Service Capability
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Sustainable Competitive Advantage
SCA’S Should Be:Substantial...Enough to Make a DifferenceSustainable...In the Face of Inevitable Changes, Competitive ActionsLeveraged...Into Viable Business Attributes That Will Influence Customers
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Sustainable Competitive Advantage
DifferentiationLow CostFocus
SCA Based a Combination of Strategic Thrusts:
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Differentiation Strategies
Characteristics:
Provide Customer ValueBe Difficult to Copy
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Approaches to Differentiation
•Invest in Quality
•Focus on Customer Satisfaction
•Build Strong Brands
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Low Cost Strategies
Bases:•No Frills Product / Service•Sourcing•Design•Operations•Experience Curves•Economies of Scale•Low Cost Culture
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Scale Economies
Natural Efficiencies Associated With Size
-Can Spread Fixed Costs-Can Support Specialized Assets and/or Activities
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Focus StrategiesProduct and or Market ConcentrationBenefits:
Avoids Strategy Dilution, DistractionMinimizes Impact of Limited ResourcesPotential to Bypass Competitor Assets/Skills• e.g.. Private Label Producers
Niche Strategy
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Focus Strategies - Options
Note: These Are Not Mutually ExclusiveFocus Product Line• Enhance Technical Superiority; Exciting,
Innovative, High QualityTarget a SegmentTarget a Geographical AreaTarget Low-Share Competitors
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Cross-Functional Integration
Level III -Functional
R&D Strategy Accounting/ControlStrategy
SBUStrategy
Marketing/Sales Strategy
HumanResourcesStrategy
Operational Strategy
Operational Strategy
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Behavioral Aspects Strategic Choices
Senior Management TeamOrganizational CulturePersonal EthicsCorporate Social Responsibility
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Barriers to Implementation
Reasons for Resistance• loss of control• fear of the unknown• lack of confidence to learn• increasing workload• past resentment or distrust• loss of status or security• and others
Unclear strategymanagement stylelack of coordinationresistance to change
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Overcoming Resistance
Establish a sense of urgency Communicate and involveCreate a shared vision Anticipate and remove barriers Reinforce and institutionalize new approaches
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A Case Study
Using Internet: an Indian FirmIn a very unlikely industry
Innovative marketing tool
Use of HRM
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WWW.SURATDIAMOND.COM
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eBay and SDJeBay and SDJ
Surat Diamond Jewellery is one of the few Surat Diamond Jewellery is one of the few players who have secured a firm footing in players who have secured a firm footing in this internationally reputed ethis internationally reputed e--commerce commerce site. site. It goes a long way in proving the credibility It goes a long way in proving the credibility and goodwill to its customersand goodwill to its customers
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Mahesh P. Joshi: Strategy and HR 45
How SDJ did it?How SDJ did it?
Competitive intelligenceCompetitive intelligenceHard workHard workFeedback from customersFeedback from customersbutbutkey ingredient: HRkey ingredient: HR
Mahesh P. Joshi: Strategy and HR 46
Strategy and Value for OwnersStrategy and Value for Owners
P P –– TC = Profit, TC = Profit, a a contributioncontribution to value for to value for ownersowners
P = Price paid by customerP = Price paid by customerTC = Total Cost of making and TC = Total Cost of making and delivering the product/servicedelivering the product/service
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Value for EmployeesValue for Employees
•• Financial Financial
•• NonNon--financialfinancial
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Value for Employees (2)Value for Employees (2)
•• Attraction and retentionAttraction and retention•• Company cash flow and tax incentivesCompany cash flow and tax incentives•• Awareness of success of the companyAwareness of success of the company•• More employee commitment to the company More employee commitment to the company
and greater satisfaction and greater satisfaction •• Better organizational performanceBetter organizational performance
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Customer ValueCustomer Value
Benefits derived from solving the Benefits derived from solving the customer’s problem, a function of product customer’s problem, a function of product --service qualityservice quality
….…. Relative to ….Relative to ….The total cost of the acquisition and use of The total cost of the acquisition and use of the product, including out of pocket the product, including out of pocket expense, time, effort, etc.expense, time, effort, etc.
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Customer ValueCustomer Value
Operational ExcellenceOperational Excellence
Customer IntimacyCustomer Intimacy
Product LeadershipProduct Leadership
People in the organizationPeople in the organization