sm session 1

8/4/2019 SM Session 1

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WELCOME TO COURSE ONSTRATEGIC MANAGEMENTSession 1

S G Raja Sekharan


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Introductions

S G Raja SekharanB. Tech in Chemical Engineering (1984) and PGDBMfrom XLRI (1989)Worked in SPIC, HCL, WIPRO, SRF, Ramco Systems,SAP and Keane. Also managed my own company for 2years in IT industry.Last assignment - was heading HR for Keane in Indiatill April 2010. Prior to this, was managing thebusiness for Keane in Asia, Middle east and Africa.

Visiting faculty in CUIM now.Desirous of sharing my experiences and learning withall of you


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Introductions - I want to know youbetter

Roll number Name

Your last degree and overall score.Any work experience?What industry you want to joinWhat is your dream company give onenameWhat is your dream role in this companypost trainingExpectations from this course?


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Broad plan for the next 30 hours

Course lectures from me -15 hoursTeam presentations 12 hoursSharing of experiences from visitingexecutives - 3 hours


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I believeA majority of our learning happens throughour experiences and the stories of othersFormal learning in classroom environmenthas a low recall after a few years I do notremember most of what I learned in class inXLRII intend to share this subject of Strategicmanagement in a story/ case format

I want help from you as researchers andco-faculty for specific sessions so thatwe as a group learn about Strategicmanagement.


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Direct Objectives of the course

To introduce to you concepts andmanagement practices at a strategiclevel.

To give you all a hands on experience of strategic level thinking that senior managers do everyday.


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Indirect Objectives of the course

To improve your learn_ability skillsTo make you thinkTo improve your team interaction skillsTo build you up for success in life


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SESSION 1


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Todays agenda

Introduction to concept of StrategyIntroduce the idea of Vision, Mission andValues and explain why it is importantExplain how strategy gets formulated incompaniesForm student groups that representvarious industries and discuss thegroup task


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Industries/Groups that I want theclass to study

Toyota Motors(Global)LG (Global)HUL

Bharti Group (Airtel)Reliance Industries

Apollo HospitalsTCSDabur

ITCHDFC

You will need to work on one of thesecompanies through this course


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Lets take the Bike market in Indiay-o-y growth as of

April 2011

Hero Honda -39%Bajaj Auto -16.71%TVS Motors 14%HMSI 0%

Yamaha 38%Suzuki - 42%Mahindra two

wheelers -6%


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Lets take the Bike market in India

Anil Dua, senior vice-president (Marketing and Sales),Hero Honda Motors -

It is extremely heartening to begin the new fiscal year with our best-ever monthly sales. This has beenpossible due to our all-round growth acrossterritories and across segments,Our company has set a target to sell 6.15 million unitsof both motorcycles and scooters in 2011-12. The

company has expanded its capacity to 6.15 millionunits with initial investment of Rs. 3 billion. Thecompany is running at its optimum capacity tosatisfied demand. As expected the companys hasstarted selling 5 lakh plus units from the last month


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Lets take the Bike market in IndiaMarket

Cap.Sales Net

ProfitTotal

Assets(Rs. cr.) Turnover

Bajaj

Auto 39,899.37 16,608.93 3,339.73 4,266.92HeroHonda 37,171.83 19,401.15 1,927.90 3,531.05

TVSMotor 2,572.60 6,289.31 192.58 1,868.67

Market share, revenue, growth Hero Honda is No 1 Net Profit, market cap and assets Bajaj is No. 1TVS is a far number 3 in all counts


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WHY DO ORGANIZATIONS INTHE SAME INDUSTRY

PERFORM DIFFERENTLY?

EVERY INDUSTRY HAS A LEADER,A FEW FOLLOWERS AND MANY

NICHE PLAYERS


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What is strategy

Competitive AdvantageResults when a companys strategies lead to

superior performance compared to competitors

Strategy is a set of related actions that managerstake to increase their companys performance.


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Strategy is a choice

on how tocompete. - Michael Porter


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To get the strategy right the companyneeds to focus on three tasks

Strategic LeadershipTask of most effectively managing acompanys strategy-making process

Strategy FormulationTask of determining and selecting strategiesStrategy Implementation

Task of putting strategies into action to improve acompanys efficiency and effectiveness


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Indra K. NooyiChairman and Chief Executive Officer, PepsiCo

PepsiCo has the worldslargest portfolio of billion-dollar food and

beverage brands,including 19 differentproduct lines that eachgenerate more than $1

billion in annual retailsales


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. PepsiCos operates inmore than 200 countrieswith approximately $60

billion in revenue andemploying nearly300,000 peopleworldwide.


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Over the last decade she has ledPepsiCos restructuring,including

the divestiture of its restaurants intothe YUM! Brands, Inc. in 1997the acquisition of Tropicana in 1998the merger with Quaker Oats thatbrought the vital Quaker andGatorade businesses in 2001the merger with PepsiCos anchor

NA bottlers in 2009Took majority stake in Wimm-Bill-Dann Foods - a Russian foodcompany which produces milk,yogurt, fruit juices and dairyproducts.


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Mrs. Nooyi is the chief architect of PepsiCosmulti-year growth

strategy, Performancewith Purpose, which isfocused on deliveringsustainable growth by

investing in a healthier future for people andour planet .


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D elivering sustainable growth by investing in ahealthier future for people and our planet


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Performance withPurpose encompassesPepsiCos commitment to

continue to build a portfolio of enjoyable and wholesomefoods and beverages,find innovative ways toreduce the use of energy,water and packaging andprovide a great workplace for PepsiCos employees.


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Examples of delivering sustainable growthby investing in a healthier future for people and our planet No outstation meeting allowed onMonday so that executives do not haveto travel on Sunday.Managers allowed to take a year off with benefits like car & healthinsurance.Annual appraisal has a parameter for describing in what way employeesmanage work-life balance.Indra Nooyi writes letter to her employees once in every two weeks.She also sends letters to parents/spouses of employees.


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Financial results Between 1996 and 2001, PepsiCosrevenue increased from $20.3 B to$26.3 B and net profit doubled from$1.14 B to $2.66 B in this period shewas the SVP strategyBy 2006, the revenue of PepsiCo hadincreased to $35.13 B - in this periodshe was the CFO and President salesIn 2010, the revenue of PepsiCo hadincreased to $60 B - in this period shewas the Chairman (since May 2007) andCEO of PepsiCo (since Oct 2006).For comparison, between 2006 and2010, The Coca Cola Company grew itsrevenues from $24 B to $35 B


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Financial results In December 2005, PepsiCo surpassedThe Coca-Cola Company in marketvalue for the first time in 112 yearssince both companies began tocompete.While Coca-Cola was in the carbonatedsoft drink market, PepsiCo had shiftedto include a broader product base,including foods, snacks andbeverages.


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To get the strategy right the companyneeds to focus on three tasks

Strategic LeadershipTask of most effectively managing acompanys strategy-making process

Strategy FormulationTask of determining and selecting strategiesStrategy Implementation

Task of putting strategies into action to improve acompanys efficiency and effectiveness


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Competitive advantage

When a companys strategies lead to superior performance compared to competitors

Sustainable Competitive AdvantageWhen a companys strategies enable it to maintainabove average profitability for a number of years


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Measure of Superior Performance

Superior PerformanceOne companys profitability relative to that of other companies inthe same or similar business or industryMaximizing shareholder value is the ultimate goal of profit makingcompanies

ROIC (Profitability) = Return On Invested CapitalNet profit Net income after tax

Capital invested Equity + Debt to creditors=ROIC =


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A business model encompasses how the company will:

Superior performance depends onCompanys Business Model

Select its customersDefine and differentiateits product offeringsCreate value for itscustomers

Acquire and keepcustomers

Produce goods or services

Deliver those goods andservices to the marketOrganize activities withinthe companyConfigure its resources

Achieve and sustain ahigh level of profitability

Grow the business over time

E very industry has a few commonly used businessmodels


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Performance in NonprofitEnterprises

Nonprofit entities such as governmentagencies, universities, and charities:

Are not in business to make a profitShould use their resources efficientlyand effectively

Set performance goals unique to theorganizationSet strategies to achieve goals andcompete with other nonprofits for scarceresources

A successful strategy gives potentialdonors a compelling message as towhy they should contribute.


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Levels of Strategic Management


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Levels of Strategic Managers

Corporate Level ManagersOversee the development of strategies for thewhole organizationThe CEO is the principle general manager whoconsults with other senior executives

General ManagersResponsible for overall company, businessunit, or divisional performance

Functional ManagersResponsible for supervising a particular taskor operatione.g. marketing, operations, accounting, human resources


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The Five Steps of theStrategy Making Process

M Select the corporate v ision, mission, and v aluesand the major corporate goals and objecti v es .

N Analyze the external competitive environment toidentify opportunities and threats.

O Analyze the organizations internal environmentto identify its strengths and weaknesses.Select strategies that:

Build on the organizations strengths and correct its

weaknesses in order to take advantage of externalopportunities and counter external threatsAre consistent with organizations vision, mission, and valuesand major goals and objectivesAre congruent and constitute a viable business model

Implement the stratstrategies.


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M Crafting the OrganizationsMission Statement

Provides a framework or context withinwhich strategies are formulated, including:

Mission The reason for existence what an organization doesVision A statement of some desired f uture stateValues A statement of key values that an organization iscommitted toMajor Goals The measurable desired future state that anorganization attempts to realize


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The Mission

What is it that the company does?

What is the companies business?Who is being satisfied(what customer groups) ?What is being satisfied(what customer needs) ?How customer needs are being satisfied(by what skills, knowledge, or distinctive competencies) ?

The mission is a statement of a companysraison detre, its reason for existence today.

A companys mission is best approached froma customer-oriented business definition.


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The Mission statement for PepsiCo

Our mission is to be the world's premier consumer products company focused on convenient foods andbeverages. We seek to produce financial rewards toinvestors as we provide opportunities for growth andenrichment to our employees, our business partnersand the communities in which we operate. And in

everything we do, we strive for honesty, fairness andintegrity.



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The Mission statement for Biocon

To be an integrated biotechnology enterprise of global distinction.Essential to this mission is excellence in:

- Intellectual asset creation through discovery, researchand development

- State-of-the-art manufacturing capabilities- Internationally benchmarked quality and regulatory systems- New medical insight through disease specific

clinical research- Customer relationship through outstanding products

and services- Human resource development through training,

mentoring and empowering- Management of research and business partnerships



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Abells Frameworkfor Defining the Business

Source: D. F. Abell, Defining the Business: The Starting Point of Strategic Planning (Englewood Cliffs, Prentice Hall, 1980), p. 7.


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Copyright Houghton Mifflin Company. All rights reserved. 1 | 45

The Vision

What would the company like to achieve?A good vision is meant to stretch a company by

articulating an ambitious but attainable future state.


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The Vision


articulating an ambitious but attainable future state.PepsiCo's responsibility is to continually improve all aspects of the world in which we operate - environment, social, economic -creating a better tomorrow than today.Our vision is put intoaction through programs and a focus on environmentalstewardship, activities to benefit society, and a commitment to

build shareholder value by making PepsiCo a truly sustainablecompany


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The Vision

Christ University is a nurturing ground for anindividuals holistic development to makeeffective contribution to the society in adynamic environment."




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The Vision

Christ University is a nurturing ground for anindividuals holistic development to makeeffective contribution to the society in adynamic environment."




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Values

In high-performance organizations, valuesrespect the interests of key stakeholders.

The values of a company should state:How managers and employees shouldconduct themselvesHow they should do businessWhat kind of organization they need to buildto help achieve the companys missionOrganizational culture

The set of values, norms, and standards that control howemployees work to achieve an organizations mission andgoalsOften seen as an important source of competitive advantage


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Values

Our Values & Philosophy are a reflection of the socially andenvironmentally responsible company we aspire to be. They arethe foundation for every business decision we make.

We uphold our commitment with six guiding principles.1. Care for our customers, our consumers and the world we

live in.2. Sell only products we can be proud of.3. Speak with truth and candor.4. Balance short term and long term5. Win with diversity and inclusion6. Respect others and succeed together.


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WITH A VIEW TO

UNDERSTAND THIS AT APERSONAL LEVEL

LETS JUST GO THROUGHTHIS SCENARIO


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WHAT YOU JUST WROTE IS YOUR PERSONAL MISSION

STATEMENT


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Mission The reason for existence what an organization doesVision A statement of some desired f uture stateValues

A statement of key values that an organization iscommitted toMajor Goals The measurable desired future state that anorganization attempts to realize


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Key characteristics of well-constructed goals:1. Precise and measurable to provide ayardstick or standard to judge performance

2. Address crucial issues with a limitednumber of key goals that help to maintain focus

3. Challenging but realistic to provideemployees with incentive for improving

4. Specify a time period to motivate andinject a sense of urgency into goal attainment

Major Goals

A goal is a precise and measurable desiredfuture state that a company must realize

if it is to attain its vision or mission.


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The Five Steps of theStrategy Making Process

M Select the corporate v ision, mission, and v aluesand the major corporate goals and objecti v es .

N Analyze the external competitive environment toidentify opportunities and threats.

O Analyze the organizations internal environmentto identify its strengths and weaknesses.Select strategies that:

Build on the organizations strengths and correct its

weaknesses in order to take advantage of externalopportunities and counter external threatsAre consistent with organizations vision, mission, and valuesand major goals and objectivesAre congruent and constitute a viable business model

Implement the stratstrategies.


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In preparing f or battle I ha v ealways f ound that plans are

useless, but planning isindispensable .

- Dwight D.Eisenhower


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STRATEGIES ARE MADE FORLONG TERM AND ARECONTINUOUSLY REVISITED

EVERY YEAR

EVERY QUARTER.


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THERE WILL BE GAPSBETWEEN WHAT WASENVISAGED AND WHAT WAS

ACHIEVED


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MOST COMPANIES ADOPT

POOR STRATEGIES WHICHRESULTS IN THEIR POORPERFORMANCE


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Reasons for poor strategicchoices

Cognitive biases:R ules o f thumb or heuristics resulting in systematic errors

Prior hypothesis biasEscalating commitmentReasoning by analogyRepresentativenessIllusion of control

Groupthink:D ecision makers embark on a course o f action without questioning the underlying assumptions

Group coalesces around a person or policy D ecisions based on an emotional rather than an objecti v eassessment o f the correct course o f action


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Attributes of good strategicleadership

Vision, eloquence, and consistencyCommitment

Being well informedWillingness to delegate and empower The astute use of power Emotional intelligence

Self-awarenessSelf-regulationMotivationEmpathySocial skills

Good leaders of the strategy-making processhave a number of key attributes:


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I f you dont ha v e a strategy,you will be . . .

- Alvin Toffler

part o f somebody elsesstrategy.


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The essence o f strategy lies inThe essence o f strategy lies increating tomorrows competiti v ecreating tomorrows competiti v ead v antage f aster thanad v antage f aster than

competitors mimic the ones you competitors mimic the ones you possess today. possess today. -- Gary Hamel &Gary Hamel &

C. K. PrahaladC. K. Prahalad


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GROUP FORMATION & TASKBEFORE THE NEXT SESSION


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Toyota Motors (Global)LG (Global)HULBharti Group (Airtel)Reliance IndustriesApollo HospitalsTCSDabur ITCHDFC


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As we go through the sessions, mostsession there will be team presentations

/discussions.

Next session please come with a 5-6slide ppt sharing with the class thestory of how the company came intoexistence and its mission, vision and

values.


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Strategic management course plan

Session 1 Introduction to SM - Vision, Mission, Values

Session 2/3 External and Internal environment and teampresentations

Session 4 Building SCA though functional value chains

Session 5 Growth through Integration, Diversification,Outsourcing and M&A

Session 6 Change managementSession 7

Corporate HR and Marketing strategiesSession 8/9 Strategy Implementation and control

Session 10 Some current issues and wrap up


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THANK YOU

sm session 1

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