3.the Balance Score Card_Grand Strategies

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MBA 0941 UNIT 3 0

Strategic Management

M.Karunakaran Lecturer


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Overview of last class

UNIT 2


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Today's topic

The Balance Score Card

Grand Strategies Growth, Expansion, Stability, Retrenchment, Combination


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Grand Strategies Growth, Expansion, Stability, Retrenchment,

Combination

Business Policy and Strategic Management Mr.M.Jeyarathnam, VSP Rao, Upendra Kachru

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- Rs. Kaplan and DP Norton

Balance score card :

Linking corporate goals with strategic actions

undertaken at Business unit

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Why - The Balance Score Card

To give superior returns to stakeholders

To give superior value to customers

To develop operations with necessary capability

To develop operations capability employee should have skills, creativity,diversity and motivations

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Grand Strategies

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Grand Strategy

Grand Strategy is a general plan of major action by which a firm intends to

achieve its long term goals

Provides basic directions of a firm

Example:McDonalds ----More products line ----low cost ----food business----

overtime customers fall---profit fall ----Diversification

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Meanings

Concentric Sharing the same circle

Conglomerate A Large corporation formed by merging of separate firms

Divestment Deprive something(remove)

Liquidation Easily converted in to cash

Bankrupt officially declarednot to have the money to pay yourdebt

Joint Venture Legal entity formed between two ormore partied to undertake an economic

activity together

Strategic Alliance Formalrelationship between two ormore parties to pursue a set ofagreed

upon goals orto meet acritical business need while remaining independent organisation

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Increase sales, market shares

Growth is more they expand the business

Expand to related or unrelated products

Internal growth External growthIntensification Mergers

Diversification Takeovers

Joint ventures

Growth/ Expansion

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When to adopt growth?

Organization achieves stability, then go for strategies

Should look for environmental demands

If government offers benefit

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Why to Pursue Growth?

To ensure survival E.g. : Ambassador car

To obtain scale of economics

To stimulate talent E.g. : Hero Honda,Wipro

To reach commanding heights E.g. : ITC, Britannia (Low pricehigh quality)

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Problems created by Growth?

Essar Group Mr.Ravi Ruia & Mr. Shashi Ruia

Raised fund $ 4000 m

Loan $ 13,000 m

Diversified in all markets

Cash flow became less

(Business today, Feb, 16,2003: Essar group erased from the Industrial map)

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How to manage growth?

According to peter drucker

Minimum Growth

Economic objectives is more important than the volume objectives

Internal Preparation

Opportunity knocks the door once, if we dont open it knocks the next door

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Diversification

E.g. : Colgate Close up is the competitor

Diversification in to related or unrelated business

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Examples

Forward : To set up selling units (TITAN)

Backward : To manufacture raw material phallic anhydride (ASIAN PAINTS)

Concentric - : Related products computers, terminals, communication (IBM)

Conglomerate -: Unrelated products Oil, hotel, financial services (ITC)

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Retrenchment

Defensive strategy

E.g. Xerox face bankruptcy 2 times because of Japanese competitors like canon

and sharp

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Combination

Large, diversified organization generally use a mixture of stability, expansion or

retrenchment strategies

In recent times, three more strategies have gained popularity namely,

1. Joint ventures - A joint venture is a legal entity formed between two or more parties to

undertake an economic activity together.

2. Strategic alliance - A Strategic Alliance is a formal relationship between two or more parties to

pursue a set of agreed upon goals or to meet a critical business need while remaining

independent organizations.

3. Consortia - An association or a combination, as of businesses, financial institutions, or

investors, for the purpose of engaging in a joint venture.

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Overview of today's class


Grand Strategies Growth, Expansion, Stability, Retrenchment, Combination


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Questions

1. What is Balance score card?

2. Explain different types of grand strategies?

3. What is grand strategy?

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Documents

3.the Balance Score Card_Grand Strategies