strategic management4 - session 1 & 2

7/29/2019 Strategic Management4 - Session 1 & 2

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Strategic Management-1

AIIM PGP-IM program

II Term, Session 1, 2

7 November 2012

Dr. Kamal Kishore Sharma

+91 79 255 [email protected]

[email protected]


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What is a business?

What is the objective ofbusiness?

What is a business

strategy?


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Are these strategies?

Our strategy is to beat the competition on costs and reach.Were pursuing a global strategy.

The companys strategy is to integrate a set of regional

acquisitions.Our strategy is to provide unrivaled customer service.

Our strategy is to move from defense to industrial applications.

Or they are current priorities?


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What is a business?

What is the objective of

business?

What is a business strategy?

Who are business leaders?


5/30

The Competitive Strategy Process

What isthe

business

doingnow?

What ishappening

in the

environt?

Whatshould thebusiness

be doing?


6/30

Concepts to begin with

Vision, mission & clarity in the organisationpurpose?

Goals, Policy, Objectives, Tactics

Stakeholders & their perspectives

Value of a good/service & Willingness to Pay

Types of Industries, Forms & differences in

Goals with respect to type

Attractiveness of an industry - Industry

profitability


7/30


Strategic Competitiveness - When a firmsuccessfully formulates and implements a value-creating strategy.

Competitive Advantage

When a firm implements a strategy that itscompetitors are unable to duplicate or find too costlyto try to imitate.

LIFE ????

Strategic position v/s operational effectivenessCost/Differentiation/Both

Economies of scale

Barriers to market entry

Product differentiation


8/30

Risk An investors uncertainty about the economic gains

or losses that will result from a particularinvestment.

Average Returns Returns equal to those an investor expects to earn

from other investments with a similar amount ofrisk.

Above-average Returns Returns in excess of what an investor expects to

earn from other investments with a similar amountof risk.



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Two generic models to run

successful businesses

Input- Output model

Resource-Based Model

(Core Competency)


10/30

Basic Components of a Business

Strategy

Vision & Mission

The Strategy

Why do you need them?


11/30

Do you believe

All industries influenced by the

environment - Key dimensions, how

is it evolving, opportunities, threats


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What is dynamic??

New Government policies (Excise, Tax-holidays, SEZs,

Environment)

Economic growth, liberalisation, entrepreneurship &

competition

Technologies (product as well as the way the product is

delivered internet, store-formats)

New growth industries (Services, Telecom, Education, Agri

processing, Bio-tech etc.

Competition

Product profiles across price and value segments

People skills, migration

New management tools (JIT, Six sigma, Zero defect)


13/30

Do you believe

All industries influenced by the

environment - Key dimensions, how

is it evolving, opportunities, threats

Every firm has a competitive strategy-implicit or explicit


14/30

Why do you need a Vision & Mission

Public face

To fire/energise the employees

For everybody to know where theorganization is going and what it is trying to

achieve in the future


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Why do you need a Strategy?

Strategy Approach

Known environment

Stable environment

Building on existing

competencies, capabilities,products, markets

Need consolidation

Need stability andcertainty

Lack capacity for flexibility,corporate venturing, andspeed

Opportunity Approach

Unknown environment

Unstable environment

Building on new

competences, capabilities,products, markets

Need rapid growth

Need change, acceptuncertainty

Established capacity forflexibility, corporateventuring, and speed


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Why do you need a strategy?

Make pieces look a whole - need forcoordination and unity of purpose

To convey a sense of direction, discovery, and

opportunity that can be communicated asworthwhile to all employees.

To meet the dynamic nature of environment

& competition Sustainability survival in the long run by

taking advantage of existing and impendingopportunities


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Issues in Strategy

1.Product /Process ?

2.Strategy development

3.Strategy Implementation


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What Strategy means

the way in which a company orients itself towardsthe market in which it operates and towards theother companies in the marketplace against whichit competes

a plan an organization formulates to gain asustainable competitive advantage

that adds value for the targeted customers overthe long run by consistently meeting their needs

better than the competition does a plan that does not focus so much on today's

problems, which are normally dealt with bycompany visions and missions, but rather ontomorrow's opportunities


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Definition of Strategy

An integrated and coordinated

set of commitments and

actions designed to exploitcore competencies and gain a

competitive advantage.


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What is strategyStrategy Development - developing a set of answers to five

interlinked questions1. What are our broad aspirations for our organization &

the concrete goals against which we can measure ourprogress?

2. Across the potential field available to us, where will wechoose to play and not play?

3. In our chosen place to play, how will we choose to winagainst the competitors there?

4. What capabilities are necessary to build and maintain to

win in our chosen manner?5. What management systems are necessary to operate to

build and maintain the key capabilities?

The trick is to have five answers that are consistent with one

another and actually reinforce one another.


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Classical approach

Ends (Goals/Objectives/Mission etc.)

Means (Policies/tactics etc.)

The wheel of competitive strategy theimportance of the hub(goals) and the spokes(policies), need of the spokes to be connected

to each other Policies need to be broken down into operational

goals


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23/30

Classical approach

4 key factors in Context

Internal factors

Company strengths and weaknesses (assets and relative

skills, financials, technical competence, brand image etc.) Personal values of the Key Implementors

External factors

Industry Opportunities & Threats (Economical as well as

Technical) Broader Societal Expectations (Govt Policy, social concerns,

evolving mores etc.)

Tata Steel


24/30


25/30

The Competitive Strategy Process

What is the

businessdoing now?

(Current Strategy &relative advantageto industry &competition)

What is

happening inthe envt.?

(Industry,competition, society

& firmpreparedness for

future)

What should

the businessbe doing?

(Generation &analysis of options,choice &

implementation)


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Formulation of a Strategy - process

What is business doing now Identification of current strategy

Implied assumtions (SWOT, competition & industry trends)

The Environment Industry analysis (key factors of success)

Competitor analysis (present & future, possible future moves)

Societal analysis (Policy changes etc.)

Strengths and Weaknesses (relative to present and future competitors

So what should the business do Tests of assumption and strategy (status of current strategy)

Available strategic alternatives (is this your current strategy?)

Strategic choice and implementation

Requires a great effort and a penetrating analysis


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The Three Stakeholder Groups


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Vision, Mission and Strategy

Vision (Combination of Core ideology & Visionary goals) core & unchanging ideals that remain relatively steady and

provide guidance in the process of strategic decision-making

three components: Core values to which the firm is committed

Core purpose of the firm Visionary goals the firm will pursue to fulfill its mission

core ideology remains relatively constant- are independent ofindustry structure and the product life cycle

Mission (statement) Expression of the business vision

Communicates the firm's core ideology and visionary goals

phrasing may change with the times, but the underlyingideology remains constant


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Goals, Policy, Objectives, Tactics, Paradigm

While Goals are general intentions with broad outcomes that help to definespecific objectives (eg. becoming the leading greeting cards player in India,Objectives are precise statements relating to specific outcomes that can bevalidated (eg. to sell 10,000 greeting cards in Year One, 25,000 Year Two and40,000 Year Three- can be substantiated by reviewing your company's salesreports), Short term plans (Budget, 5-year plan)

Operational planning - the result expected by the end of the budget (or otherdesignated short term cycle)

Policy refers to a definite course of action adopted by an individual, group, ororganization in an effort to promote the best practice particular to desiredresults/objectives, some sort of a prescription what s ok, whats not, what should be etc.

Tactics involves the detail, the procedure, and the order of how to achieve the

desired results particular to the strategy Paradigm: the whole conceptual framework embracing our most deeply held,

unconscious assumptions and values. It encompasses the things we take forgranted in any situation. It therefore determines our expectations, frames thequestions we ask, and structures the way we do things paradigm becomes so embedded that new ideas that do not fit the paradigm, are not

welcome, and are treated as anomalies

only when anomalies mount up to cause major disruption, that changes occur and a paradigmshift take place


30/30

Criteria for Resources and Capabilities That Become

Core Competencies

Core

Competencies

Valuable Rare

Costly to ImitateNonsubstitutable

strategic management4 - session 1 & 2

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