Stategic Planning

7/28/2019 Stategic Planning

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Planning&StrategicManagement


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PLANNING AND STRATEGY

Introduction to planning

Difference between strategic and operationalplans

Evolution of strategy The strategic management process

Types of strategy

corporate level strategy

business level strategy

Functional level strategy


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Seven S model

Operational sing strategy

Case study Federal Express


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PLANNING


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3 main concepts

1. Planning

2. Strategy

3. Strategy management


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Wal-Mart EDPC

BMW,Hen-Blane High Price

Apple Free Replacement

EBay B2B Marketing


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Introduction & Importance of

Planning

Its 1st of the 4 major activities in

management process (planning-

organizing-leading-controlling).

it is process of setting goals and

choosing the means to achieve them


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Goals importance

1. Goals provide a sense of direction

2. Goals focus our efforts

3. Goals guide our plans and decisions4. Goals help us evaluate our progress


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The hierarchy of plan

1. Mission statement

(organizations

goal)

2. Strategic plans (way

to achieve the goal)

3. Operational plans(way to acieve

strategic plan)

mission

Strategic plans

Operational plans


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Strategic v/s Operational

Plans

STRATEGIC PLAN

Long term

Affects widely

Generic Orgs people and

people of other org

OPERATIONAL PLAN

Short term

Narrow/limited scope

Detailed Within orgs people


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The evaluation on the concept of

strategy

From Greek straregeia art or science

of being a general

Most important outcome of planning

process

the broad program for defining and

achieving an orgs objectives; the

response to its environment


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Strategy management

Its an ongoing practice of establishing a

broad program of orgs goal and the

means to achieve them


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EXAMPLES


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Strategy used by colors channel


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Launching a high profile program on day 1

opening with khatron ke khiladi


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Content Fiction shows

Reality show


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Mythology


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Reality shows on weekdays

Achieving distribution and TRP

Rating


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Hindi general entertainment

channel share Sep-Oct 2008Channel Market share as on sep 28-

oct 4 2008 (%)

1) Star plus 22

2)Colors 20

3) Zee tv 174) Sony tv 8

5) Star one 8

6) NDTV Imagine 6

7) Sahara one 68) 9X 5

9)SAB 3

10)DD1 3

11)Star utsav 2


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http://www.flickr.com/photos/15925489@N02/3581927766


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Strategies used in telecom industry

1) TATA DOCOMO

A 1 second pulse instead of the usual 1minute pulse offered by other mobile

service providers.


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How much can you really save? Explaining how it works.

The VAS (value added service) like 24 hour Music, Voice Chat, CallerTune Search etc are being charged on per second pulse rate.

2) Virgin mobile :-

Get paid for INCOMING calls

10 paisa/min

3) Reliance communication:-

50 paisa/min in all over India forLIFE-TIME just in Rs.48


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Strategy used while promotion of

movie Ghajini


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The Look-Haircut & Tattoos

Tied up with Many Multiplex like BigCinemas, PVR & Cinemax to give

distinctive Buzz-Cut to ushers and ticket-

sellers.

Aamir Personally went to Delhi for Buzz

Cut to his fans

Find GhajiniGame & 3D Games


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Getting media involved (online)

Release Date-25th December

Tata Sky

(Contest & Asin-New Brand Ambassador)

Tata Indicom(10 Million Customers)


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Samsung Launched Ghajini Edition Phones

Model No- L700 & M200

Phone Number issue


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Strategies used by AMUl


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Wide range of product categories caters consumersacross all market segments. For example, Amul Kool istargeted at children, while teenagers prefer Kool Caf.

High profile locations: Amul parlors are today present oncampuses of Infosys, Wipro, IIM-A, IIT-B, Temples, Metrorail and railway stations in Gujarat.

Amuls approach is to promote its brands in a rotationalcycle of 2 to 3 years.

Ice-cream 1996,

category re-visited in 1999, in order to improveavailability of the product and make it affordable.

Cheese in 2001,

Amul Masti Chaas in 2004-05,

Nutramul and Kool Kafe in 2006

Amul Koko cold chocolate drink in 2009


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Umbrella brand strategy

use of common brand for most product

categories

Food festival competition

Technology and e-initiative

1st firm in India implementing B2C commerce

Amul butter girl is one of the longest run adcampaigns in the country for 41 years


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Strategy used by Britannia

Britannia has adopted a three-pronged strategy.

Freshness (lower pipeline stock),

Availability (improve distribution network)

Visibility (more shelf space at modern trade).

It have entered some fresh milk markets, such as Delhi andKolkata, where AMUL does not have a presence.

It is concentrating on just 30 cities, and that too through selectclass A & B outlets

Butter and

Cheese


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(1)

Identify

the

Org.s

current

missionand

strategies

(2)

Analyze

the

environment

(4)

Analyze

the

Org.s

` resources

(3)

Identify

the

Opportunites

and threats

(5)

Identify

strengths

and

weaknesses

(6)

Formulate

strategies

(7)

Implement

strategies

(8)

Evalute

result


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STEP 1:-

IDENTIFYING THEORGANISATIONS CURRENT

MISSION,OBJECTIVES AND

STRATEGIES


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Mission statement :- A statement of the

purpose of an organisation.

It give answer the question what is our

reason for being in business


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Componentes of mission statement

(1)Customers (2)Products or services

(3)Markets

(4)Technology

(5)Philosophy

(6)Self concept

(7)Concern for public image

(8)Concerns for employee (9)Concern for survival growth and profitability

(1) C t


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(1) Customers

Who are the organizations customer

For Amul `TeenagersChildren

For Parle-G all age group people

(2) P d t i


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(2) Products or services

AMULS main products are

- Amul Milk - Amul Pizza

- Amul Butter - Amul Chocolates

- Amul Cheese - Amul Shrikhand

-Amul ice cream - Amul Curd

- Amul chaas -Amul koko


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(3)Markets

Where does organization compete

geographically?

E.G.---Amul emphasis is on whole india.


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(4)Technology

(5)Philosophy What are the organizations basic

belief,values,and ethical priorities?(6)Self concept

What is the organizations major

competitive advantage and corecompetencies?



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How responsive is organization to societal

and environmental concern?

(8)Concerns for public employee Dose the organization consider employee a

valuable asset?

CURRENT


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CURRENT

OBJECTIVE

Reliance communications current objective

is to capture 30% indian market share

CURRENT STRATEGIES

50 paisa/min in all over India forLIFE-TIME

just in Rs.48


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STEP:- 2

ANALYZING THE

ENVIRONMENT


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STEP:-3

IDENTIFYING

OPPORTUNITIES ANDTHREATS


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OPPORTUNITIES:-positive trends in

external environmental factors

THREATS:- Negative trends in external

environmental factors

`.


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STEP-4

Analyzing the organizationsresources and capabilities

S f


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Skills and abilities of employee

Available resources

Financial position Quality of its product and services

Example:-Every day Amul collects 7 million litres of milk

from 2.6 million farmers (many illiterate),

converts the milk into branded, packaged

products, and delivers goods to over 500,000retail outlets across the country

Core competencies:-


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p

The main ideas about Core Competencies were

developed by C K Prahalad and G Hamel

through a series of articles in the Harvard

Business Review followed by a best-selling

book - Competing for the Future.

An organizations major value creating

skills,capabilities,and resources that determineits competitive weapons

Example 1:-
http://www.amazon.co.uk/exec/obidos/ASIN/0875847161/tutor2u00http://www.amazon.co.uk/exec/obidos/ASIN/0875847161/tutor2u00http://www.amazon.co.uk/exec/obidos/ASIN/0875847161/tutor2u00


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pTesco have been successful in capturing

leadership of the market for online grocery

shopping

Reasons for it:-

(1) Designing and implementing supply systems that effectively

link existing shops with the Tesco.com web site

(2) Ability to design and deliver a "customer interface" that

personalises online shopping and makes it more efficient

(3) Reliable and efficient delivery infrastructure (product

picking, distribution, customer satisfaction handling)

Example 2:-


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p Dell have a strong position in the personal

computer market

Reasons for it:-

(1)Minimisation of working capital in the production process

(2)High manufacturing and distribution quality

(3) Reliable products at competitive prices


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STEP-5

Identifyingstrengths and weaknesses


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Strengths:-

Any activity the organisation

does well or any unique resources that it has

Weaknesses:-

Activity the organisation does

not well or any resources It needs but does notposses

Pepsi


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Pepsi Strength

Pepsi has a broader product line and outstanding reputation.

Increasing market share and revenues.

Availability of large free cash flow

o Great brands, strong distribution, innovative capabilities

o Number one maker of snacks, such as corn chips and potato chips

PepsiCo sells three products through the same distribution channel.

For example, combining the production capabilities of Pepsi,Gatorade and Tropicana is a big opportunity to reduce costs, improveefficiency and smooth out the impact of seasonal fluctuations indemand for particular product.

`

Weakness


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Weakness

(1)PepsiCo is far away from leader Coca-cola inthe international market - demand is highlyelastic.

(2) Pepsi had to inspire vision and direction forlarge global company.

(3)Not all PepsiCo products bear the companyname

Opportunity


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(1) Food division should expand internationally

(2) Noncarbonated drinks are the fastest-growing part of

the industry

(3) There are increasing trend toward healthy foods

(4) Focus on most important customer trend -"Convenience".

Threats


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(1) Pepsi is blamed for pesticide residues in their products in one

of their most promising emerging market e.g in India

(2) PepsiCo now competes with Cadbury Schweppes, Coca-Cola,

and Kraft foods (because of broader product line) which are

well-run and financially sound competitors.

(3) Size of company will demand a varied marketing program;

Social, cultural, economic, political and governmental

constrains. `


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STEP 6FORMULATING STRATEGIES

Established at corporate, business andfunctional level

Follows the decision making process

Strategy formulation for competitiveadvantage


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STEP 7

IMPLEMENTING STRATEGIES

Top managers should act as leaders

For better implementation managers should

seek advise

Motivation to the workforce


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STEP 8

EVALUATING THE RESULTS

Assessing the results of the current strategy

with the previous ones

Adjustments should be made if necessary.


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LEVELS OF STRATEGY


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3 LEVELS OF STRATEGY

CORPORATE LEVEL

BUSINESS LEVEL

FUNCTIONAL LEVEL

Corporate level strategy


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Corporate level strategy

management of activities which define the overall character& mission of the orgnisation,the product/service segment it will enter or

leave and allocation of resources & management of synergy among itsSBU.

Business level strategy

plans & actions that firm devise to complete in a givenproduct or market scope or setting; it addressees a questions like how do

we compete within an industry.


management of relatively narrow areas of activities,whichare of vital, pervasive or continuing importance to the total organization


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Difference between

Corporate,Business & Functional

Strategy

Characteristics Corporate Business level Functional level


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level

Scope Entire Org. SBU or single

business co.

Functional Area

Source &Motivation/Direction

Board of directors/CEO

Corporate strategy SBU strategy

Responsibility Top level

corporate

managers

Top level SBU

managers or Top level

single business co.

managers

Functional level

managers

Time Horizon Long term Medium to long term Short to long termSpecificity General statements

of overall direction

& intent

Concrete &

Operationally oriented

Action &

implementation

oriented

Type Conceptual Mixed Operational

Flexibility High Medium Low

Cooperation

Required

Considerable Moderate Little

Cost Major Medium Modest

Profit Potential Large Medium Small


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Profit Potential Large Medium Small

Relation to present activity Innovative Mixed Supplementary

Risk Wide range Moderate Low

Adoptability Low Medium High


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CORPORATE STRATEGY


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CORPORATE STRATEGY

Management of activities which define the overallcharacter and mission of the organisation, theproduct/service allocation of resources andmanagement of synergy among its SBU. Big picture view of organization SCOPE Entire Organization RESPONSIBILITY- TOP LEVEL Corporate Managers TIME HORIZON - Long-Term ISSUES ADDRESSED Diversification, acquisition,

divestment, formulation of new business ventures

Critical questions answered by


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Critical questions answered by

corporate-level strategists

1. scope what business should the firmbe in?

2. How should the firm allocate its

resources among existing businesses?

3. What level of diversification should the

firm pursue?

4. Which kind of diversification?

Related or Unrelated


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STABILITY STRATEGY

GROWTH STRATEGY

RETRENCHMENT STRATEGY

STABILITY STRATEGY


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STABILITY STRATEGY

A corporate-level strategy characterized

by an absence of significant change.

i.e. continuing to serve the same clients byoffering the same product or service,

maintaining market share, and sustaining

the organization's return-on investment.


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when should managers pursuestability?

When companies find stable environment,

when firm is making a comfortable income

GROWTH STRATEGY


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GROWTH STRATEGY

Growth Strategies are designed an orgsperformance, use as measured by sales,

profits, product mix, market coverage,

market share. Growth through:- Direct expansion

Vertical integration

Horizontal integration

Diversification

H i t l I t ti


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Horizontal Integration

E.g.

TATA-CORUS

BRUKEBOND INDIA LTD-LIPTON

TEA

DIVERSIFICATION


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DIVERSIFICATION

DIVERSIFICATION


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DIVERSIFICATION

RELATED DIVERSIFICATIONWhen a co. grows by merging with or acquiring

firms in different but related industries.

FOR e.g. VIDEOCON

Walt Disney

Theme Parks, Movie Production, Videos,Childrens apparel,

Toys, TV Broadcasting


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UNRELATED DIVERSIFICATION

TATA, RELIANCE

ITC:-- HOTEL&TOURISM- CIGARETTES

- BISCUITS

- FMCG- AGRI BUSINESS

- PAPER BOARD & PACKAGING



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It is a corporate-level strategy designed toaddress organizational weaknesses that

are leading to performance declines.

BCG-MATRIX


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BOSTON CONSULTANCY

GROUPDEF:

A strategy tool that guides resource allocation

decisions on the basis of market share andgrowth rate of SBUs.

Helps to evaluate companys position in terms of its

range of products.Helps to make decision regarding which

product/service to be kept, which it should let it go

and in which it should invest in further.


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STARS:

High market growthrate

High market share

Huge cash

generationHuge cash

consumption

Huge investment in

growing marketBecomes cash

cows when market

growth rate declines

CASH


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COWS:

Low market growthrate

High market share

LEADER in mature

market.

Huge cash

generation than

consumption

Low prospects for

future growth-so nonew investment in this

category.

Investment into

STARS and

QUESTION MARKS.

QUESTION


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MARKS:

High market growthrate

Low market share

Low cash generation

than cash

consumption.

Analyze carefully the

market situation

Investment into high

growth potentialmarket.

critical decision

making for managers.


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DOG:

Low market growthrate

Low market share

Neither large cash

generation norconsumption.

Also known as

CASH TRAPS.

Dogs should besold off or liquidated.

BCG Matrix for ITC


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STARS - INVESTHOTELS

PAPERBOARDS/PACKAG

ING

AGRI-BUSINESS

QUESTIONMARKS

ANALYZE

FMCG OTHERS

ITC INFOTECH

CASH COWS

MILK

FMCG CIGARETTES

DOGS DIVEST

BCG Matrix for Bajaj Two-wheelers


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STARS

CT 100

XCD 125 cc

AVENGER

QUESTION

MARKS

KRISTAL

PULSAR 200

PULSAR 220

CASH COWS

PULSAR 150 cc

DISCOVER 110 cc

DOGS

PLATINA

PULSAR 180

BCG Matrix for Bajaj Two-wheelers

LIMITATIONS OF BCG


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LIMITATIONS OF BCG-

MATRIX: It considers market growth rate asthe only factor in industry

attractiveness and market share asthe only factor in competitiveadvantage.

Sometimes even DOGS help in

gaining competitive advantage overother products of the company.


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Can we apply Same strategy on the product

which is being sold in all over India or, say,

all over the World?

-North, East, West, South.

=> Should we apply same strategy forthose products which are different in nature

but are being sold in same Region?


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When an organization is in several different

business, these single different business that are

Independent and that formulate their own strategies

are called SBU

In Other words, SBU is grouping of related

Business based on same strategic application.


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It is useful for multi-product and multi related enterprise

Each SBU will have different Mission, Vision, Objectives etc

Each SBU will have its own set of competitors

and own set of strategy

SBU may be of

-Functional based

-Product based

Each SBU will have CEO who has responsibility for

strategic planning and profit performance.

Examples


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-Meaning

-Ways to Acquire Competitive Advantage

*Core Competencies

*Assets & Resources

*Quality

*Product innovation


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Lowest Cost Producer in the industry

Firms do everything to cut the cost

You dont give unnecessary Extra Features (Frills).

Product should be comparable in Quality


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.


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Exceptionally High Quality

Extraordinary Service

Innovative Design

Technological Capability

Unusually Brand Image


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Cost Focus or Differentiation Focus


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Cost Focus or Differentiation Focus

Narrow Segment

It Can be based on

-Variety

-Type of End Buyer

-Distribution Channel

-Geographical location

Where it can succeed?


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Porter Says Successful Organizations end up here

Dual Emphasis on Cost & Differentiation

Should Maintain Quality in Differentiat ion

It will lead to Increase Sell

Economies of Scale & Lower Cost

Competitive strategy


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Competitive strategy

Purpose:

The purpose of five forces analysis is to

diagnose the principal competitive

pressures in a market and assess howstrong and important each one is.

Michael Porters Five Forces


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Michael Porter s Five Forces

Model

1.Threat of new entrants

2.Bargaining power of

buyers(customers)

3.Bargaining power of suppliers.

4.Threat of substitute product

5.Rivalry among existing firms

Threat of New Entrants


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Threat of New Entrants

Some of the Common Important EntryBarriers

1.Government Policy

2.Economies of Scale 3.Cost Disadvantages Independent of

Scale

4.Product Differentiation 5.Monopoly Elements

6.Capital Requirements

Example of Aviation Industry


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History of Aviation Industry1932-launch of TATA Airlines

1948-Air India International

1953-Nationalizaton of aircraft industry1986-Private sector players permitted as Air

taxi

1994-Private carriers permitted to operatescheduled services

2003-Entry of low cost airlines

Threat of New Entrants For

A i ti I d t


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Aviation Industry

High start up costs-capital Intensive Industry Over-crowded low cost airline market(too

many budget airlines in the Indian skies)

Dearth of aviation professionals(pilots,

aviation engineers) Limited infrastructure facilities

Price wares against newcomers.

Exit Barriers

Long gestation period

Net impact-Low

Bargaining power of buyers


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Bargaining power of buyers

Buyers have the potential customers. The important determinants of the buyers

power:

1.the volume of purchase relative to the

total sale of the seller.2.Differentiation of the product.

3.Profitability of the buyer.

4.Importance of the industry product withrespect to the quality of buyers product orservices.

5.Extent of buyers information.

Bargaining power ofBuyers(Customers) in Aviation


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y ( )

Industry Price dominated short-haul market with

little or no product differentiation.

Low switching costs

Price conscious consumers-little orcustomer loyalty.

Net impact-High

Bargaining power of Suppliers


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a ga g po e o Supp e s

The important determinants of supplier powerare as follows:

1.Extent of concentration and domination in thesupplier industry.

2.Importance of the product to the buyer.

3.Importance of the buyer to the supplier.

4.Extent of substitutability of the product.

5.Switching cost.

6.Standardisation of the product.

Bargaining Power of Suppliers in

A i ti I d t


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Aviation Industry

No control over ATF(Aviation Turbinefuel)prices

Negotiate favourable deals with most of theirsuppliers(eg., Airline operators do not havetheir own catering department for on-flightconsumables.)

Leased aircrafts

Specialized spare parts and limited numberof manufacturers

Net impact-High

Threat of Substitute

products


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products

Factor such as switching cost and buyerloyalty determine the degree to which

customers are likely to buy a substitute

product.

Threat of substitute products in

aviation industry


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aviation industry

Video conferencing and othertelecommunication technologies

Super fast trains for short haul flights

Net impact-law

Rivalry among firms


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y g1.Number of firms and their relative market

shares, strength etc.2.State of growth of industries

3.Fixed or storage costs.

4.Indivisibility of capacity augmentation.

5.Product standardization and switchingcosts.

6.Strategic stake.

7.Exit barrier.8.Diverse competitors.

9.Swithing cost.

10.Expected retaliation.

Rivalry among existing firms in

aviation industry


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aviation industry

Competitive and overcrowded market. Commoditized nature of product-

aggressive pricing, efficient distribution

and innovative communication maximize. Differentiation- e. g. narrow v/s wide

customer base.

Regional towns v/s main cities.

Rivalry among existing firms in

aviation industry


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aviation industry

Competition with conventional careers-with low fairs but higher level ofservice(more frills and main airportservicing.)they are a big threat.

Consolidation in the market- mergers ,acquisions and alliance(e .g .kingfisherairlines acquired air deccan,jet airwaysacquired air Sahara and merger of air

India with Indian airlines. Net impact-high



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gy

An organizational strategy that seeks todetermine how to support business level

strategy.


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FIRST PHASE

Transformation of company from small package delivery service


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y g y

into major force in overnight delivery--- information delivery

Competitors--- UPS (United parcel services), U.S. PostalService, MCI, AT&T

They make overnight-delivery service of a great importance of

doing business and become profitable and leader in the

industry

Technology and the attitude of innovation...

(40 packages 1.7 million)

1. Post office and UPS prices were a direct challenge

2. Threat of offering of new methods by competitors

International business became more common, information-

transfer system have to keep pace. (recognizing needs of

tomorrows business, anticipating them and implement strategy

to meet them were major decisions for them)

SECOND PHASE

Fed Ex failed in its ZapMail innovation (Fred Smiths


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Fed Ex failed in it s ZapMail innovation (Fred Smith s

responsiveness) which was introduced to compete with

MCIs mail system. (MISTAKE)

Therefore to be at top and become market player---it

concentrated on foreign market and acquisition.

2 major moves which made it UNDISPUTED LEADER

1.acqired Tiger International

2.built a new facility in Anchorage. Alaska which were center of

transportation triad

THIRD PHASE

New services---logistic planning for global companies

Documents

Stategic Planning