01 Strategic Intent EVS App Value Chain

8/9/2019 01 Strategic Intent EVS App Value Chain

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Business Policy and StrategicManagement

A theoretical and PracticalPerspective

By Prof. Nikhil Rao


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Sessions Main Topic

1 Introduction to BP/SM

Core concepts

Comprehensive Model of SM2 Strategic Intent

Formulation Of Strategies

a) Environment Appraisal

b) Organisational Appraisal

c) SWOT Analysis

3 d) Corporate Level Strategies

4 e) Portfolio Analysis

5 f) Business Level Strategies

6 Strategy Implementation

7 Functional Strategies

Marketing Strategies

8/9 Functional StrategiesFinancial Strategies

HR Strategies

Operational Strategies

10 Turnaround Management

Strategic Evaluation and Control


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Business Policy

Defn :The study of the function and responsibility of

senior management , the crucial problems that affectsuccess in the total enterprise and the decisions thatdetermine the direction of the organization and shapeits future.

Context :

The problems of policy in business have todo with the choice of purposes , the moulding oforganizational identity and character, the continuousdefinition of what needs to be done and themobilization of resources for the attainment of goals

in the face of competition or adverse circumstances


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MANAGEMENT

IS THE PROCESS OF DESIGNING AND MAINTAININGAN ENVIRONMENT IN WHICH INDIVIDUALS ,WORKING TOGETHER IN GROUPS , EFFICIENTLY

ACCOMPLISH SELECTED AIMS

FUNCTIONS OF MANAGEMENT :

)PLANNING

)ORGANIZING )STAFFING

)LEADING

)CONTROLLING


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Definitions Of Management )Mary Follett :--The art of getting things done through

people.

)Peter Drucker :--- Managers give direction to theirorganizations, provide leadership and decide how to use

organizational resources to accomplish goals )Richard daft :;;-- Management is the attainment of

organizational goals in an effective and efficient mannerthrough planning, organizing , leading and controllingorganizational resources.

)Griffin : Management is a set of functions directed atthe efficient and effective utilization of resources in thepursuit of organizational goals.


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Key Points in Management

Efficient : using resources wisely and in a cost effective manner.

Effective : making the right decisions and successfullyimplementing them.

Planning:The management function concerned with defininggoals for future organizational performance and deciding onthe tasks and use of resources needed to attain them.

Organizing : The management function concerned withassigning tasks , grouping tasks into departments and allocatingresources to departments.

Leading : The management function that involves the use ofinfluence to motivate employees to achieve organizational goals.

Controlling : the management function concerned withmonitoring employees activities , keeping the organization ontrack toward its goals and making corrections if needed.


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Old Paradigm New Paradigm

Vertical Organization Learning

Organization

Forces on Organization

Markets Local, Domestic Global

Workforce Homogeneous Diverse

Technology Mechanical Electronic (Digital)

Values Stability, Efficiency Change, Chaos


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Old Paradigm New Paradigm

Management Competencies

Focus Profits Customers,Employees

Leadership Autocratic Dispersed,empowering

Doing work By individuals By Teams

Relationships

Conflict, CompetitionCollaboration


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Strategies

y comes from the Greek word Strategos meaning Artof the general

y Military used the word strategy to mean grand plans

made in the light of what it is believed an adversarymight or might not do.

y Defn of strategy :

y 1) General program of action and deployment ofresources to attain comprehensive objectives

y Alfred Chandler : Determination of the basic long termobjectives of an enterprise and the adoption of

course of action and allocation of resources necessary toachieve these goals.


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Glueck : A unified , comprehensive and integrated plan

designed to assure that the basic objectives of theenterprise are achieved

Michael Porter : : Developing and communicatingthe companys unique position, making trade-offs and

forging fit among activities.


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Corporate level

Division level

Business level

Functional level


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ColourTV

Business

VCD/DVD

business

Consumerelectronics

Division

WashingMachine Refrigerator A/C

HomeAppliances

Division

FMCG

Division

LG

Corporateteam


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Different levels of strategy

CORPORATE E E

si ss l

cti l

l l

Str t yls

Cor or t

S U

f ctional

S U

Operations arketing Personnel inance

S U S U

Corporate office

/ ead office


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Strategic Management

Glueck : A stream of decisions and actions whichleads to the development of an effective strategy orstrategies o help achieve corporate objectives.

Hofer : The process which deals with thefundamental organizational renewal and growth withthe development of strategies , structures andsystems necessary to achieve such renewal and

growth and with the organizational systems neededto effectively manage the strategy formulation andimplementation processes.


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Ansoff : A systematic approach to a major and

increasingly important responsibility of generalmanagement to position and relate the firm to itsenvironment in a way that will assure its continuedsuccess and make it secure from surprises.

Sharplin :

The formulation and implementation of plansand carrying out of activities relating to the matterswhich are of vital , pervasive or continuingimportance to the total organization


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Harrison :The process through which organizations

analyze and learn from their internal and externalenvironments, establish strategic direction , createstrategies that are intended to help achieveestablished goals and execute these strategies , all inan effort to satisfy key organizational stakeholders.


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Phases In SM

Establishing Strategic Intent

Formulation of strategies

Implementation of strategiesStrategic Evaluation and control.


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Establishing Strategic Intent

Vision , Mission, Business Definition and objectives

Formulation ofstrategies

EnvironmentAppraisal, Organizational AppraisalSWOT Analysis , Corporate Level Strategies

Business level Strategies , Strategic Choice

Strategy ImplementationProject, Procedural, ResourceAllocation

Structural, Behavioral, Functional and operational

Strategic Evaluation

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Comprehensive Model of Strategic Management Process


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Part A : Establishing Strategic Intent

Vision , Mission, BusinessDefinition and objectives


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Establishing the hierarchy of strategicintent

1) Creating and communicating a vision : It servesthe purpose of stating what an organization wishes toachieve in the long run.

2) Designing a mission statement : The mission relatesan organization to society.

The essential purpose of the organization ,concerning particularly why it is in existence , the

nature of of the business it is in and the customers itseeks to serve and satisfy.


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ision and MissionAnheuser-Busch

vision:

T rough all ofourproducts,ser ices and relationships, we will add tolife's enjoy ent.

mission:

Be the world's beercompany

Enrich and entertain a global audience

Deli ersuperiorreturnsto ourshareholders


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ision and Mission

Boeing

Mission Statement

To provide innovative, world-class, integrated technical data andtraining systems that enable our customers to operate at optimalperformance.

ision

To ensure that the integrated Instructional Systems and Training

Support organizations become our domestic and internationalcustomers' preferred supplier of training systems, systems support andequipment by providing innovative, world-class integrated products andservices that enable our customers to operate at optimal performance.


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ision and Mission

ONGCVision and mission:

To be a world-class Oil and Gas Company integrated in energybusiness with dominant Indian leadership and globalpresence.

HPCLVision:

"To be a leading world class company in hydrocarbons and energyrelated sectors with a global presence."

Mission:

"HPCL, along with its joint ventures, will be a fully integrated

company in the hydrocarbons sector of exploration andproduction, refining and marketing;

focusing on enhancement of productivity, quality and profitability;caring for customers and employees; caring for environment

protection and cultural heritage.It will also attain scale dimensions by diversifying into other

energy related fields and by taking up transnational operations


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Vision and Mission

Infosys' Vision:

To be a globallyrespected corporation that provides

best-of-breed businesssolutions,leveragingtechnology, delivered by best-in-class people"

Infosys' Mission Statement :

"To achieve ourobjectivesin an environment of

fairness, honesty, and courtesytowards ourclients,

employees, vendors and society atlarge"


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Vision and MissionTitan

Vision

To be the most desirable jewellery brand for Indianwomen

MissionWe will continuously create wealth for all our stakeholders,

by transforming the jewellery business and by being thegold standard in design, shopping experience and ethicalpractices.


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Vision and Mission

Birla Sunlife Mutual fund

Vision

To be the most trusted name in investment and wealthmanagement, to be the preferred employer in theindustry and to be a catalyst for growth and excellence

of the asset management business in India.

Mission

To consistently pursue investor's wealth optimization by :

Achieving superior and consistent investment results

Creating a conducive environment to hone and retaintalent

Providing customer delight

Institutionalizing system-approach in all aspects offunctioning

Upholding highest standards of ethical values at all

times


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3) Defining the business : explains the businesses ofan organization in terms of customer needs ,

customer groups and alternate technologies

4) Setting objectives : what is to be achieved in agiven time period


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Business definitions

Customer groups relate to who is being satisfied.

Customer needs describe what is being satisfied

Alternative technologies means how the need isbeing satisfied.

e.g

Whirlpool Refrigerators

Customer needs quick refrigeration

Customer groups--- individuals, institutions andexports

Technologies: high quality and latest from Whirlpool ,USA--- (6th sense )


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Business definitions

e.g Maruti Suzuki

Customer function/needs transportation witheconomy and style (Maruti 800, Zen)

Customer Groups --- individuals (middle class andlower upper class), institutions(companies) andexport market.

Technology --- latest from Suzuki (MPFI, and

technology to meet Euro 2 /3 norms)


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Setting Objectives

Objectives denote what an organization hopes toaccomplish in a future period of time.

Characteristics of objectives1) Should be understandable

2) should be quantifiable

3) should be time bound

4) should be measurable5) should be challenging

eg To increase market share from 10% to 25%in 2years


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Part B :Formulation of strategies

Environment Appraisal, Organizational Appraisal

(SWOT Analysis) , Corporate

Level Strategies

Business level Strategies , Strategic

Choice


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Environment Appraisal(Opportunities and Threat analysis)

Market Environment :1) Customer factors like needs , preferences,

perceptions, buying behavior etc.

2) product factors : demand , utility, features,lifecycle, price, place, promotion, differentiation ofproducts/services

3) Marketing intermediary factors : levels andquality of customer service, middlemen, logistics,

costs and financial intermediaries.4) Competitor related factors : different types ofcompetitors , entry level barriers , nature ofcompetition


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Environment Appraisal

Technological Environment :

1) Sources of Technology : internal , external,

cost of acquiring technology, collaboration etc.2) technological development, stages of

development , change and rate of change oftechnology.

3) Communication and infrastructural technology


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Economic Environment :consists of macro-level factors related to the

means of production and distribution of wealth which

have an impact on the business of an organization.Some of the important factors operating inthe economic environment are:

1) The economic stage at which a country existsat a given point of time .

2)The economic structure adopted such ascapitalistic, socialistic or mixed economy.3) Economic policies such as

industrial, monetary and fiscal policies


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Economic planning such as 5 year plans, annual budgets etc.

Economic indices like GNP, GDP, rate ofsavings, exports , imports,BOP,disposable income etc.

Liberalization, Privatization,Globalization


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Regulatory Environment:

Policies related to licensing , foreign

investment,foreign stakesPolicies related to import and export

Policies related to PSU , small scale industries , sickindustries , development of backward areas ,

environment pollution , consumer protection


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Socio-cultural Environment :Demographic characteristics changing lifestyle

patterns , materialism, socio-cultural attitudes ,beliefs , values education levels , awareness of rights, work ethics.

The role of men, women, children and the aged infamily and society


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Supplier Environment :consists of factors related to the cost , reliability and

availability of the factors of production or service thathave an impact on the business of an organization. cost, availability and continuity of supply of raw materials ,

parts and components

cost and availability of finance for implementing projects

cost, availability of energy used in production

infrastructure support and bargaining power of suppliers andexistence of substitutes

cost , availability and dependability of human resources


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Political Environment :

Political philosophy , govts role in

business and its policies, intervention in economicand business development.


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International Environment : Globalization ,its process , content and direction.

Global economic forces , organizations , blocs etc.Global trade and commerce , its process and trendsGlobal financial system , sources of finance andaccounting standards ---(US Generally Acceptedaccounting Practice)

Geopolitical situation , equations , alliances andstrategic interest of nations Global demographicpatterns and shifts.


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Global human resource- nature and quality of skillsand expertise, mobility of personnel.

Global information systems , communication

networks and mediaGlobal technological and quality systems andstandards .

Global markets and competitiveness

Global legal system, adjudication and arbitrationmechanism


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Organizational Appraisal(Strength and weakness analysis)

The appraisal of the external environment of a firmhelps it to think of what it might choose to do. Theappraisal of the internal environment enables a firm

to decide about what it can do.

Organizational capability could be understood interms of the strengths and weaknesses existing inthe different functional areas of the organization.

For ex. HR, Financing, Marketing, operationsetcetc


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Financial Capability Factors

relate to the availability, usage and management offunds. Some of the important factors, which influencethe financial capability of any organization, are as

follows:

)Factors related to source of funds: Capital structure,working capital availability, reserves and surplus, andrelationship with lenders, bank and financial

institutions.

)Factors related to usage of funds: Capitalinvestment, fixed asset acquisition, current assets,loans and advances, dividend distribution andrelationship with shareholders.


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Financial Capability Factors

)Factors related to management of funds: Financialaccounting and budgeting systems, return and riskmanagement, tax planning, cost reduction and

control.Typical strengths that support financial capability

y Access to financial resources

y Excellent relationship with financial institutions

y

High level of credit worthinessy Low cost of capital

y Shareholders confidence

y Tax benefits due to govt. policies.


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Marketing Capability factors

relate to the 4Ps

)Product related factors: variety, differentiationetc.

)Price related factors: Pricing objectives andpolicies

)Place related: distribution, logistics, marketingintermediaries etc.

)Promotion related : Advertising, salespromotion, PR


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Marketing Capability factors

Some of the typical strengths leading to marketingcapability are as follows:

y Wide range of quality products

y Brand name

y Effective distribution and sales promotion

y High decibel advertising

y

Effective MR and MISy Low prices


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Operations Capability factors

relate to the production of products, use of rawmaterials etc.

1) Factors related to the production system: Capacity,location, layout, product design, degree of automationextent of vertical and backward integration etc.

2) Factors related to the operations and control system:

Production planning, material supplies (Purchase dept.),Inventory, quality control, maintenance and procedures

)Factors related to R & D system: Personnel,product development, patent rights, technicalcollaboration and support etc.


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Operations Capability factors

Typical strengths that support operationscapability

y High level of capacity utilizationy Favorable plant location

y Reliable source of supply

y Existence of good inventory control system

yAvailability of high calibre R&D personnely Technical collaboration with reputed firms

abroad.


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Personnel Capability

Personnel capability factors relate to the existenceand use of human resources and skills. Some of theimportant factors, which influence the personnel

capability of an organization, are as follows: )Factors related to the personnel system:

System of manpower planning, selection,development, compensation, communication,

appraisal, and procedures.


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Personnel Capability

)Factors related to industrial relations: Union-management relationship, safety, welfare,security, employee satisfaction etc.

)Factors related to organizational andemployees characteristics: Quality ofmanpower, availability of growth opportunitiesfor employees, working conditions etc.

h d d h i d f


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Methods and techniques used forOrganizational Appraisal

)Internal analysis :

)Value chain analysis

)Quantitative analysis :1) Financial Analysis2) Non-Financial analysis

)Comparative analysis :

1)Historical Analysis2) Industry norms

3)Benchmarking


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Michael Porters Value chain

Porter: divided the value chain of a manufacturing company into

)Primary activities :

y Inbound Logistics : Warehousing, Materials HandlingInventory control,Scheduling

y Operations : Manufacturing, Q.A, packaging,Assembly,maintenance

y Outbound Logistics : transportation, storage, order

processingy Marketing and sales: 4Ps

y Service: after sales service, training, installation


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Michael Porters Value chain

)Support activities :

y Procurement : Purchasing, physical resources

y Human Resource Development: Recruiting, developing,

Retrenchment, training.y Technology Development

y Infrastructure: Staff functions, organizational designs,finance, accounting.

The profit margin and the inbuilt quality of the organization is adirect correlation of how effectively it manages its value chain.


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Quantitative Analysis

Financial Analysis:Traditional methods for evaluating financial

performance includes ratio analysis --- Financial

ratio analysis (current ratio, debt-equity ratio, ROIetc.) assesses the liquidity , profitability , leverageaspects of the organization.

-Modern techniques include EVA and ABC


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EVA: Economic value added analysis: is the wealthan organization creates for its owners and isexpressed as the difference of the after tax

operating profits and the total cost of capital.

Activity based cost accounting: ABC identifies themajor activities in the value chain within thecompany and keeps a tab on the costs within each

activity. This helps in identifying the factors thatdetermine cost (cost drivers) and the areas wherecosts are actually incurred.


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Non Financial Quantitative analysis--

This includes

1) Employee turnover ratio2) Absenteeism

3) number of patents registered per quarter4) number of units produced per day

5) service calls per day6) service complaints per day etc.


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Comparative Analysis

Historical Analysis :The company compares its present performance

with its own past performance to see whether its

improving or not.Industry norms : The industry to which a businessbelongs is used for comparison . The companycompares parameters like cost structure, sales ,profit

margins etc. with that of the industry to see how itsfaring .


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Comparative Analysis

BENCHMARKING

The practice of being humble enough to admit thatsomeone else is better at something and being wise

enough to learn how to match and even surpassthem at it

Competitive Benchmarking: direct comparison ofones own performance against the best competitors.

Generic Benchmarking: comparison of ones ownprocesses against the best practices anywhere in anytype of organization.


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Organizational Capability Profile

Weakness normalstrength

-5 05

)Financial capability a)

b)

c)

)Marketing Capability

a)

b)

c)


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Organizational Capability ProfileWeakness normal

strength

-5 05

)Personnel capability

a) b)

c)

)Operational Capability

a)

b)

c)

)General Management capability

From this the company arrives at the Strategic

Documents

01 Strategic Intent EVS App Value Chain