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BYNAYANA N P
M.TECH (HRD)FIRST YEAR
STRATEGIC MANAGEMENT
STRATEGIC PLANNING
It’s a long-term perspective of management. Strategic management can be used to
determine mission, vision, values, goals, objectives, roles and responsibilities, timelines, etc.
StrategiesThe decisions and actions that determine
the long-run performance of an organization
Standard definitions of strategy
Thompson & Strickland “A company’s strategy consists of the combination of
competitive moves and business approaches that managers employ to please customers and compete successfully and achieve organizational objectives.”
Pearce II & Robinson Jr. “Strategy reflects a Company’s awareness of law, where and when it should compete; against whom it
should compete and for what purpose it should compete.”
Bryson“A pattern of purposes, policies, programs, actions,
decisions, or resource allocations that define what an organization is, what it does, and why it does it.”
Standard definitions of strategy(contd…)
Mintzberg“A mediating force between the organization and
environment: consistent patterns in streams of organizational decisions to deal with the
environment.”Andrews“Pattern of objectives, purposes, or goals stated in such
a way so as to define what business the company is in or is to be in and the kind of company it is or to be”
Chandler “Strategy is the determination of the basic long term goals of an enterprise and the adoption of courses of action and the allocation of resources necessary for
carrying out these goals.”
EVOLUTION OF THE CONCEPT “STRATEGY”
Derived from Greek word “strategia” the art or science of being a general.
Effective generals had to determine the right lines of supply, decide when to fight and when not to fight, and manage army's relation with citizens
Strategy= planning component+ decision making + action component
FATHER OF STRATEGIC MANAGEMENT
Russian American, applied mathematician and business manager
Professionally, Ansoff is known worldwide for his research in three specific areas: The concept of environmental
turbulence; The contingent strategic success
paradigm, a concept that has been validated by numerous doctoral dissertations;
Real-time strategic managementH. Igor Ansoff
(December 12, 1918 – July 14, 2002)
strategy plan
Normally focused on objectives and long term goals and vision.
Includes detailed course of action and tactics to be used.
STRATEGY Vs PLAN
STRATEGY VS PLAN
Characteristics of strategic management
Strategic decisions are complex in nature.Strategic decisions are at the top most level, are uncertain
as they deal with the future, and involve a lot of risk. Strategic decisions have major resource propositions for
an organization. These decisions may be concerned with possessing new resources, organizing others or reallocating others.
Strategic decisions deal with harmonizing organizational resource capabilities with the threats and opportunities.
Strategic decisions deal with the range of organizational activities. It is all about what they want the organization to be like and to be about.
Strategic decisions involve a change of major kind since an organization operates in ever-changing environment.
Levels of strategy
CORPORATESTRATEGY
Division A
R & D
Personnel
Finance
Production
Marketing/Sales
Division B
R & D
Personnel
Finance
Production
Marketing/Sales
CORPORATEHEAD OFFICE
BUSINESSSTRATEGY
FUNCTIONALSTRATEGIES
Levels of strategy
Corporate strategy... defines the scope of the business in terms of the industries and markets in which it competes. includes decisions about diversification, acquisitions, new
ventures, investments, allocation of scarce resources between business units.
Example:1.Dell acquires appleDell and apple both make PC- horizontal integrationDell makes PC. Apple makes operating systems for PC.-
diversification
Levels of strategy
Business strategy... Is concerned with how the firm competes within a particular
industry or market... To win a business unit must adopt a strategy that
establishes a competitive advantage over its rivals. Eg: advertisements
Functional strategy... The detailed deployment of resources at the operational
level. Eg: strategy adopted to buy goods will not be same when
the firm is selling its goods.
Strategic business unit
It becomes very cumbersome for an organization having multi-products and multi-businesses, to have separate planning treatment of each of its products/businesses.
To have better strategic planning, business products can be grouped into strategically-related business units known as SBU, so that they are manageable.
The concept of strategic business unit (SBU):
A scientific grouping of the businesses of a multi-business corporation which helps the firm in strategic planning.
Products/businesses within an SBU receive same strategic planning treatment and priorities.
The task consists of analyzing and segregating the assortment of business aspects and regrouping them into a few, well-defined, distinct, scientifically demarcated business units.
Grouping the businesses on SBU lines facilitates correct relative priorities and resources to the various businesses.
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Analyze internal environment
Analyze externalenvironment
Vision/Mission
Strategic Goals
Formulate Strategy
Strategic Competitivenessand Above-Average Returns
FeedbackFeedback Implement Strategy
Evaluate Strategy
Strategic Management Framework
16
The Strategic Management Process
1. Internal and external analysis is done2. The strategic management actually
process begins with the strategist’s vision3. Next, long-term or corporate goals define
specific outcomes that an organization seeks to achieve in order to realize its mission
4. Strategy formulation specifies the strategies for achieving an organization’s objectives
17
5. Strategy implementation takes place through the basic organizational architecture that makes things happen
6. The final phase, strategy evaluation, involves comparing expected outcomes with actual results after the implementation phase
Strategic management process (contd…)
18
Analyzing the environment Involves being able to identify and interpret
emerging trends before they become evident to everyone else
It is essential to learn and understand:– The concerns of customers– The availability and bargaining power of suppliers
and customers– The actions of competitors– Market trends– Economic conditions– Government policies– Technological advances
Strategic management process (contd…)
19
Analyzing the environment (cont.) Knowing what competitors are doing and how to
respond is clearly important to a firm’s survival Analyzing the internal environment focuses on
assessing an organization’s:– Market strength– Financial position– Capabilities– Core competencies– Culture– Structure
Strategic management process (contd…)
20
Analyzing the environment (cont.) The combined analysis of the external
environment and internal environment is commonly referred to as SWOT (Strengths, Weaknesses, Opportunities, and Threats),
Accurate interpretation of both types of environments requires considerable analytical and cognitive skills, and plays a large part in the future actions and the continuing effectiveness of an organization
Strategic management process (contd…)
21
Vision statement Is an ambitious view of the future that everyone in the
organization can believe in and that is not readily attainable, yet offers a future that is better in important ways than what now exists
A clear and inspiring vision serves a number of important functions:– Facilitates decision making– Inspires followers– Links the present to the past– Gives meaning to work, not just what, but why– Establishes a standard of excellence– Lays the foundation for the development of a mission
statement
Strategic management process (contd…)
Vision statement of the National Thermal Power Corporation (NTPC), India:
“To be one of the world’s largest and best power utilities, powering India’s growth”
Vision statement of TATA Power “To be the most admired and responsible
Integrated Power Company with international footprint, delivering sustainable value to all
stakeholders.”
23
Mission statement Is an unique statement of purpose that
distinguishes one organization from other similar enterprises
Is the organization’s core purpose and reasons for existence
Features two components:– Core values– Core purpose
Strategic management process (contd…)
24
Mission statement (cont.) Should be both broad and specific Can provide many benefits to an organization:
– Providing direction and focus– Forming the basis for objectives and strategies– Inspiring positive emotions about the organization– Helping resolve divergent views among employees
Strategic management process (contd…)
MISSION VISION
A Mission statement talks about HOW you will get to where you want to be. Defines the purpose and primary objectives related to your customer needs and team values.
What do we do today? For whom do we do it? What is the benefit? In other words, Why we do what we do? What, For Whom and Why?
A Vision statement outlines WHERE you want to be. Communicates both the purpose and values of your
business.
Where do we want to be going forward? When do we want to reach that stage? How do we want to do it?
DIFFERENCE BETWEEN VISION AND MISSION
27
Corporate-level goals Are the desired long-term outcomes that an
organization seeks to achieve Include both financial and strategic goals Are essential because they help focus everyone
in the same direction Are the targets against which actual
performance is compared for strategy evaluation Create synergy
Strategic management process (contd…)
28
Corporate-level goals (cont.) Are the means by which organizations reveal
their priorities Are the basis for effective planning, organizing,
leading, and controlling activities Organizations must take time to establish
“SMART” goals– Specific– Measurable– Achievable– Results-Based– Time-Specific
Strategic management process (contd…)
29
Strategy formulation A strategy is an integrated plan of how an
organization will achieve its objectives A good strategy focuses on exploiting
opportunities in the organization’s external environment that match the organization’s strengths.
A good strategy must also reflect the core mission and objectives of the organization
Strategic management process (contd…)
30
Strategy formulation (cont.) To maintain a competitive edge over rivals,
develop strategies that:– Enhance value to the customers
Value is the ratio of benefits received to the cost incurred by the customer
– Create synergistic opportunities– Build on the company’s core competence
A core competence is a capability that allows an organization to perform extremely well in comparison to competitors
Strategic management process (contd…)
31
Strategy formulation (cont.) Core competencies are a source of competitive
advantage when they:– Are rare– Are hard to imitate– Are not easily substitutable– Create value for the firm
A knowledge-based competitive advantage is hard to imitate or copy by rivals because it resides in people, not physical assets
Strategic management process (contd…)
32
Strategy implementation Effective strategy implementation means that
objectives have a greater chance of being met and thus results in better firm performance
Requires galvanizing the organization’s employees and managers at all levels to turn formulated strategies into action
Obstacles to effective strategy implementation– Lack of resources– Time
Strategic management process (contd…)
33
Strategy implementation (cont.) Is considered the most difficult stage of the
strategic management process– Involves dealing with people who come with
varying levels of motivation, commitment, and dedication
Without appropriate implementation, the best of strategies can fail– Must be integrated into all organizational systems
including structure, culture, pay and reward systems, budget allocation, and organizational rules, policies, and procedures
Strategic management process (contd…)
34
Strategy evaluation Is the primary means of determining the effectiveness
of the strategic management process Has three fundamental activities:
– Review internal and external factors– Measure performance against objectives– Corrective action
A popular tool used to measure the effectiveness of the strategic management process is the balance scorecard.
Strategic management process (contd…)
SWOT AnalysisS
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SWOT ANALYSIS?
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SWOT ANALYSIS?
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SWOT ANALYSIS?
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SWOT ANALYSIS?
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PORT FOLIO MATRIX
BOSTON CONSULTING GROUP (BCG) MATRIX is
developed by BRUCE HENDERSON of the BOSTON
CONSULTING GROUP IN THE EARLY 1970’s.
According to this technique, businesses or
products are classified as low or high performers
depending upon their market growth rate and
relative market share.
INTRODUCTION
• Market share is the percentage of the total market that is being
serviced by your company, measured either in revenue terms or
unit volume terms.
• Relative Market Share = Business unit sales this year
Leading rival sales this year
• The higher your market share, the higher proportion of the
market you control.
MARKET SHARE AND RELATIVE MARKET SHARE
MARKET GROWTH RATE
Market growth is used as a measure of a market’s
attractiveness.
MGR = Individual sales - individual sales
this year last year
Individual sales last year
Markets experiencing high growth are ones
where the total market share available is expanding, and
there’s plenty of opportunity for everyone to make money.
WHY BCG MATRIX ?
To assess :
Profiles of products/businesses
The cash demands of products
The development cycles of products
Resource allocation and divestment decisions
THE BCG GROWTH-SHARE MATRIX
It is a portfolio planning model which is based on
the observation that a company’s business units can
be classified in to four categories:
Stars
Question marks
Cash cows
Dogs
It is based on the combination of market growth
and market share relative to the next best
competitor.
STARS -High growth, High market share
Stars are leaders in business.
They also require heavy investment, to
maintain its large market share.
It leads to large amount of cash consumption
and cash generation.
Attempts should be made to hold the market
share otherwise the star will become a CASH
COW.
CASH COWS -Low growth , High market share
They are foundation of the company and often
the stars of yesterday.
They generate more cash than required.
They extract the profits by investing as little
cash as possible
They are located in an industry that is mature,
not growing or declining.
DOGSLow growth, Low market share
Dogs are the cash traps.
Dogs do not have potential to bring in much
cash.
Number of dogs in the company should be
minimized.
Business is situated at a declining stage.
QUESTION MARKS-High growth , Low market share
Most businesses start of as question marks.
They will absorb great amounts of cash if the
market share remains unchanged, (low).
Why question marks?
Question marks have potential to become star
and eventually cash cow but can also become a
dog.
Investments should be high for question marks.
MAIN STEPS OF BCG MATRIX
1. Identifying and dividing a company into SBU.
2. Assessing and comparing the prospects of each
SBU according to two criteria :
1. SBU’S relative market share.
2. Growth rate OF SBU’S industry.
3. Classifying the SBU’S on the basis of BCG matrix.
4. Developing strategic objectives for each SBU.
BCG matrix for ITC ltd.
ITC is formally known as Indian Tobacco
company.
Company is in to diverse business portfolio like
Hotels, Greetings, Cigarettes, Agarbatti,
Specialty papers, Agricultural business, Cloths,
Sports wear and InfoTech business.
STARHotels, papers, Agri business
? ? ?Agarbatti, Cloths
Cash CowCigarettes, FMCG
Dogs InfoTech
Low
LowHigh
High
MarketGrowthRate
Relative Market Share
Cash Usage
Cash Generation
BCG matrix for ITC ltd.
BCG matrix for MARUTI SUZUKI
Models available: Swift, Zen estillo, Swift Desire, sx4, grand vitara, A STAR, ALTO, 800, Wagon R, Versa, Baleno, Omni
STARSWIFT, ZEN ESTILO, DESIRE
? ? ?SX4, GRAND VITARA, A STAR
Cash Cow800, ALTO, WAGON R
Dogs BALENO, VERSA, OMNI
Low
LowHigh
High
MarketGrowthRate
Relative Market Share
Cash Usage
Cash Generation
BENEFITS
BCG MATRIX is simple and easy to understand.
It helps you to quickly and simply screen the opportunities open to you, and helps you think about how you can make the most of them.
It is used to identify how corporate cash resources can best be used to maximize a company’s future growth and profitability.
LIMITATIONS
BCG MATRIX uses only two dimensions, Relative market share and market growth rate.
Problems of getting data on market share and market growth.
THANK YOU