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8/3/2019 Intro to Stg Mgmt
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STRATEGIC MANAGEMENT
At the end of this module the learning outcomes are
What is Strategic Management?
Scope of Strategic Management
Why Organizations focus on strategic planning?
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STRATEGIC MANAGEMENT
SUGGESTED READINGS
1.Strategic Management
byPearce & Robinson, 3rd Edition Chapter 1
2. Exploring Corporate Strategy
by
Johnson & Scholes, Chapter 1.
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STRATEGIC MANAGEMENT
Bharti Enterprises
Telecom market Second largest market of the world
Highly competitive
Low ARPU Severe competition
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STRATEGIC MANAGEMENT
Bharti Enterprises
Market leader
Started by Sunil Mittal
In 1995
Started from Delhi Circle First-generation entrepreneur
From Punjab
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STRATEGIC MANAGEMENT
Bharti Enterprises
Once got the license
Created ambitious plans
Make Bharti as globally admired
telecommunication company
Created a team of professionals
Responsible for day to day management
Three SBUs 5
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STRATEGIC MANAGEMENT
Bharti Enterprises
Each SBU headed by President
Functional heads report to President
Corporate office
Focuses on new initiatives/opportunities Subsequently entered into retailing and
financial services
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STRATEGIC MANAGEMENT
Bharti Enterprises
Where it stands now
Leader in mobile services in India
Entered African market
Collaboration with Zain Collaborated with Wal-Mart for
retailing/wholesaling.
Aiming to be leader in retailing 7
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STRATEGIC MANAGEMENT
Bharti Enterprises
What do we observe
An element of planning
Long-term
How businesses will grow Leadership and vision of Mr Sunil Mittal
A process of Strategic Management
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STRATEGIC MANAGEMENT
WHAT DO YOU THINK?
Should Bajaj Auto diversify into cars business
ITC bidding for Indian Airlines
ITC entry into garment retailing
HLLs foray into food business
Anchor (Switch maker) into toothpaste
Nestle into mineral water
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STRATEGIC MANAGEMENT
ORGANIZATION FACE
Dynamic Environment Global competition
Increasingly discerning customers
How should organization cope?
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STRATEGIC MANAGEMENT
NEED FOR PLANNING
- Deal with changing environment- Anticipate changes
- Long term approach
- Forecast
- Preempt competition
Need for Strategic Planning
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STRATEGIC MANAGEMENTPROMINENT COMPANIES/GROUPS - INDIA
1970s 2010s
- Birlas - Infosys
- Tatas - Vedanta
- Thapars - Wipro
- Singhanias(JK) - Reliance
- Shriram group - Ranbaxy
- Mafatlal - HCL
- HLL - HLL
- Bangurs - Adani
- Escorts - A.V. Birla
- ACC - TCS
- Goenkas - Mahindras 12
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STRATEGIC MANAGEMENT
WHAT DO WE FIND
- Decline in traditional groups
- Some have strengthenedOld Economy
AV Birla
Ranbaxy Reliance
Tatas
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STRATEGIC MANAGEMENT
Some have strengthened
New Economy
Infosys
Wipro (reshaped)
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STRATEGIC MANAGEMENT
WHAT DO WE FIND
- Some are evergreen
HLL Nestle
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The Nature and Value
of Strategic Management
Strategic management:The set of decisions and actions that
result in formulation and implementation
of plans designed to achieve a companys
objectives
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Nine Critical Tasks of Strategic
Management -- Tasks 1-5:
Formulate the companys mission
Conduct an internal analysis
Assess the external environment competitive and
general contexts
Analyze the companys options by matching its
resources with the external environment Identify the most desirable options in light of the
mission
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Nine Critical Tasks of Strategic
Management -- Tasks 6-9:
Select a set of long-term objectives and grand
strategies that will achieve the most desirable
options Develop annual objectives and short-term
strategies that are compatible with long-term
objectives and grand strategies
Implement the strategic choices
Evaluate the success of the strategic process for
future decision making
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What is Strategy?
Large-scale, future-oriented plan
Used to interact within competitiveenvironment to achieve company goals
Provides a framework for managerial
decisions Reflects a companys awareness of the
main elements of competition
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Dimensions of Strategic
Decisions Strategic issues require top-management
decisions
Strategic decisions overarch severalareas of a firms operations
Usually only top management has the
perspective needed to understand their
broad implications
Usually only top managers have the
power to authorize necessary resource
allocations20
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Dimensions of Strategic
Decisions Strategic issues require large amounts of the
firms resources
They involve substantial allocations ofpeople, physical assets, and money
Strategic decisions commit the firm to actions
over an extended period
In highly competitive firms, achieving and
maintaining customer satisfaction frequently
involves commitment from every facet of the
firm21
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STRATEGIC MANAGEMENT
STRATEGIC DECISIONS DIMENSIONS
ITC Ltd
- Started as tobacco company
- Later diversified into hotels, travel, otherFMCG products
- Allocation of large amount of resources
- Significant long term implications
- Future oriented
- Major multifunctional / multi-business
consequences
- Consideration of external environment 22
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Alternative Strategic Management
Structures
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STRATEGIC MANAGEMENT
LEVELS OF STRATEGY
Three Levels
1. Corporate2. Business
3. Functional
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Three Levels of Strategy
Corporate level:board of directors,
CEO & administration [Highest] Business level:business and corporate
managers [Middle]
Functional level:Product, geographic,and functional area managers [Lowest]
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STRATEGIC MANAGEMENT
CORPORATE LEVEL- Board of Directors
- CEO
- Responsible for
Financial performance
Nonfinancial goals
- What businesses to be in?
- Activities of each business
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STRATEGIC MANAGEMENT
CORPORATE LEVEL
ITC
Should we be in Hotels? Should we be out of financial services?
Should we get into stationery?
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Characteristics of Strategic
Management Decisions: Corporate
Often carry greater risk, cost, and
profit potential
Greater need for flexibility
Longer time horizons
Choice of businesses, dividendpolicies, sources of long-term
financing, and priorities for growth28
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STRATEGIC MANAGEMENT
BUSINESS LEVEL- CEO. Each business
- How to compete in each business?
- Basis, which segments
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BUSINESS LEVEL
ITC Tobacco Division
How do we compete
Low price or high price cigarettes
Make or buy cigarettes
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Characteristics of Strategic
Management Decisions: Business
Help bridge decisions at the corporate and
functional levels
Less costly, risky, and potentially profitable
than corporate-level decisions
More costly, risky, and potentially
profitable than functional-level decisions
Include decisions on plant location,
marketing segmentation, and distribution31
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STRATEGIC MANAGEMENTFUNCTIONAL LEVEL
- Managers of each functional area
Head of Marketing
Head of Production
- Develop annual objectives
- Focus on implementation.
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STRATEGIC MANAGEMENTFUNCTIONAL LEVEL
ITC Tobacco Division
Marketing Objectives for 2010-11
Sales : 6000 Crores
Market share : 70%
Brand Awareness : 90%
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Characteristics of Strategic
Management Decisions:Functional Implement the overall strategy formulated
at the corporate and business levels
Involve action-oriented and operational
issues
Relatively short range and low risk
Modest costs: depend upon available
resources
Relatively concrete and quantifiable34
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STRATEGIC MANAGEMENT
STRATEGY MAKERS
- Depends on Organization
Size
Structure
Formal
- Many Organizations
Separate department Coordinates entire function
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Strategy Makers
Ideal strategic team includes decision
makers from all three levels Top managers must give final approval
Strategic decisions coincide with
managers responsibilities
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Formality in Strategic
Management
Formality is the degree to which participation,
responsibility, authority, and discretion in decision-
making are specified in strategic management
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Strategy Makers: The CEO
A firms CEO plays a dominant role in
strategic planning
The CEOs principal duty is giving long-
term direction to the firm
The CEO bears ultimate responsibility for
the firms success and strategic success
CEOs are typically strong-willed,
company-oriented individuals
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STRATEGIC MANAGEMENT
STRATEGIC MANAGEMENT BENEFITS
Problem Prevention
Better decisions
Collective participation
Higher employee motivation
Fosters creativity
Activates change management
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STRATEGIC MANAGEMENT
STRATEGIC MANAGEMENT BENEFITS
Managers at all levels interact in planning and
implementing strategy Similar to participative decision making
Assessing strategy formulation requires looking at
nonfinancial evaluations as well as financial ones
Promoting positive behavioral consequences
enables achievement of financial goals
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Risks of Strategic Management
Managers time away from other
responsibilities
Unrealistic expectations promised by strategy
formulators
Possible disappointment of participatingsubordinates if goal is not reached
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Strategic Management Process
Businesses vary in formulation and other
processes
The basic components of the models used to
analyze strategic management are similar
Strategic management is aprocessa flow
of information through interrelated stages ofanalysis toward the achievement of some
goal42
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Strategic Management Model
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Components of Strategic
Management Model Company Mission
External Analysis
Long-Term Objectives
Short-Term Objectives
Policies Empowering
Action Strategic Control &
Continuous
Improvement
Internal Analysis
Strategic Analysis &
Choice Generic & Grand
Strategies
Functional Tactics
Restructuring,Reengineering &Refocusing
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STRATEGIC MANAGEMENT
COMPANY MISSION
- Purpose of existence
- Statement of purposeExample
IBM
Storage and handling of data.
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STRATEGIC MANAGEMENT
INTERNAL ANALYSIS
- Quality
- Quantity
Financial
Human
Physical Resources
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STRATEGIC MANAGEMENT
EXTERNAL ANALYSIS
- PEST
- Competitive
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STRATEGIC ANALYSIS & CHOICE
To achieve mission
Various alternatives
Choosing alternative Criteria
Qualitative
quantitative
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STRATEGIC MANAGEMENT
LONG TERM OBJECTIVES- Results over a multiyear period
- Following areas
E.g.
Profitability
ROI
Productivity
Technological Leadership
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STRATEGIC MANAGEMENT
LONG TERM OBJECTIVES
INTEL
- To produce a chip after every 18 months which has double the processing capability
is produced at half of the cost
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STRATEGIC MANAGEMENT
GRAND STRATEGY
- Indicates how long term objectives will be
achieved
- Comprehensive general approach that guidesmajor actions
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STRATEGIC MANAGEMENT
GRAND STRATEGY
INTEL
- Innovation Leadership
- Focus on R & D
- Commitment to quality
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STRATEGIC MANAGEMENTGRAND STRATEGY
15 basic approaches
- Concentration
- Market development
- Product development
- Innovation
- Horizontal integration
- Vertical integration- Joint venture
- Concentric diversification
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STRATEGIC MANAGEMENT
GRAND STRATEGY
15 basic approaches
- Conglomerate diversification
- Retrenchment
- Divestiture
- Liquidation
- Consortia- Turnaround
- Bankruptcy
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STRATEGIC MANAGEMENT
SHORT-TERM OBJECTIVES
- Specific
- Less than one year frame
- Four quarterly objectives
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STRATEGIC MANAGEMENT
FUNCTIONAL STRATEGIES
- Each functional area
Marketing Strategy
HR Strategy
Finance Strategy
- In line with business strategy
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STRATEGIC MANAGEMENT
POLICIES
Standard operating procedures
Guidelines
GE
Not hire people from direct competitors
Xerox
Every employee signs performance agreement.
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STRATEGIC MANAGEMENT
INSTITUTIONALIZING THE STRATEGY
- How it should permeate the very day to day
life of the company- Fundamental elements
Structure
Leadership
Culture
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CONTROL AND EVALUATION
Implementation
Monitoring
Early signs critical
COKE
- New formula in 1985- Failed miserably
- Back to old within 6 months.
- Effective controls 59
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STRATEGIC MANAGEMENT
Restructuring, reengineering
Steps
Within organization
Make strategy successful
Helpful in implementation
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