Strategic Management - CMRCET

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Strategic Management

Dr. T. Seshadri Kiran

Dr. T. Seshadri Kiran, Asst. Prof. , CMR College of Engineering & Technology

Strategic

Management

Process


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Strategic Management Process

It is a process by which mangers make a

choice of a set of strategies for the

organization that will enable it to achieve

better performance.



Strategic Intent

EnvironmentScanning

Strategic Formulation

Strategic Evaluation

Strategy Implementation


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Strategic Intent

EnvironmentScanning




(Or)


Strategic

Management

Process

Strategic Intent

EnvironmentScanning




Strategic Intent

Strategic Intent(ion)

Strategic Intent refers to the purposes of what the organization strives for senior managers must define “What they want to do” and “Why they want to do”

represents strategic intent of the firm.


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Strategic

Management

Process

Strategic Intent

EnvironmentScanning




Strategic Intent

Strategic Intent(ion)

Vision

Mission

Business Definition

Business Model

Goals and Objectives


Strategic

Management

Process

Strategic Intent

EnvironmentScanning




Strategic Intent

Vision

Mission

Business Definition

Vision implies the blue print of the company’s future position. It describes where the organization wants to land. It depicts the organization’s aspirations and provides a glimpses of what the

organization would like to become in future.

Mission delineates the firm’s business. Its goals and ways to reach the goals. It explains the reason for the existence of the firm. Through this

statement one can understand the purpose of the company.

It seeks to explain the business undertaken by the firm with respect to the customer needs, target markets, and alternative technologies. In

simple terms, defining business in all aspects.


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Strategic

Management

Process

Strategic Intent

EnvironmentScanning




Strategic Intent

Business Model

Goals and Objectives

Business Model, as the name implies is a strategy for the effective operation of the business, ascertaining sources of income, desired

customer base and financial details. Rival firm, operating in the same industry rely on the different business model due to their strategic choice.

Goals are the end results, that the organization attempts to achieve. On the other hand, objectives are the time based measurable targets, which

helps in the accomplishment of goals.


Strategic

Management

Process

Strategic Intent

EnvironmentScanning




Environment Scanning

Internal Environment External Environment


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Strategic

Management

Process

Strategic Intent

EnvironmentScanning





Strategic Formulation is the process of deciding best

course of action for accomplishing organizational

objectives and hence achieving organizational

purpose.

As a process of strategy Formulation, the concerned managers

formulate three types of strategies…..

• Corporate level strategies

• Business level Strategies

• Functional Level Strategies


Strategic

Management

Process

Strategic Intent

EnvironmentScanning





Strategy implementation implies making the strategy work as

intended or putting the organizations’ chosen strategy into

action. Strategy implementation includes project

implementation, procedural implementation, Budget,

organization’s structure, distributing resources.


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Strategic

Management

Process

Strategic Intent

EnvironmentScanning




Strategy Evaluation

This is the final step in the process of strategic management.

The activities are…….

• Appraising internal and External factors

• Understand the present strategy

• Measuring performance of the strategy

• Taking corrective actions (If necessary)

This last stage makes sure that the strategy which is

formulated and implemented meets the organizational pre-

determined objectives.


Strategic Intent


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Strategic Intent

Developing a Strategic Vision

“ Vision implies the blue print of the company’s future position. It describes where the organization wants to land. It depicts the organization’s aspirations and

provides a glimpses of what the organization would like to become in future.”

Vision represents future aspirations that lead to inspiration to be the best in one’s field of activity.

Agenda

1. Characteristics of Vision Statement

2. Developing Vision Process

3. Communicating the strategic Vision


Strategic Intent



Agenda

1. Characteristics

2. Vision Process

3. Communicating

Characteristics of Vision

1. Directional

2. Focused

3. Flexible

4. Feasible

5. Desirable (Long term interest)

6. Easy to explain


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Strategic Intent



Agenda

1. Characteristics

2. Vision Process

3. Communicating

Process of Developing Vision Statement

Understand the

Organization

Conduct Vision Audit

Target the Vision

Set the context

Generate Alternative

VisionsChoose the Final One

* To Craft the vision, one must think about what the future organization’s environment looks like…

*


Strategic Intent



Agenda

1. Characteristics

2. Vision Process

3. Communicating

Communicating Vision Statement

Formulating of Vision by strategies

Strategies Communicating to

Middle Level

Strategies Communicating to Low

Level


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Strategic Intent

Developing a Strategic Mission

Mission is a statement which defines the role that an organization plays in a society

Agenda

1. Key Elements in Developing Mission

2. Characteristics of Mission statement

3. Functions and Need of Mission statement

4. Contents of Mission statement

“Mission is the purpose or reason for the organization’s existence”


Strategic Intent



Agenda

1. Key Elements

2. Characteristics

3. Functions and Need

4. Contents

Key Elements in Developing Mission

1. History of the organization

2. Distinctive Competencies of the organization

3. Organization’s Environment


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Strategic Intent



Agenda

1. Key Elements

2. Characteristics


4. Contents

Characteristics of Mission statement

1. Market rather than product focus

2. Achievable

3. Motivational

4. Specific

5. Clear

6. Distinctive

7. Achievement of Policies


Strategic Intent



Agenda

1. Key Elements

2. Characteristics


4. Contents

Functions of Mission statement

1. Should define what the organization is?

2. Should differentiate an organization from others

3. Should serve as a frame work for evaluating both current and prospective activities.

4. Should be in understandable manner.


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Strategic Intent



Agenda

1. Key Elements

2. Characteristics


4. Contents

Need of Mission statement

1. To ensure unanimity of purpose within the organization

2. To provide a basis for motivating the use of organizational

resources

3. To develop a basis for allocating organizational resources.

4. To establish a good climate in the organization with the

central focus.

5. It will serve as a focal point to identify who is working

towards mission or not.


Strategic Intent



Agenda

1. Key Elements

2. Characteristics


4. Contents

Contents of Mission statement

1. Company product or service

2. Markets

3. Technology

4. Organizational objectives

5. Organizational philosophy or core values

6. Public Image


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Strategic Intent

Developing a Strategic Objective

Agenda

1. Role of Objectives

2. Characteristics of Objectives

3. Areas of Objectives

4. Guidelines for formulating Objectives

5. Factors considered for Objective setting

6. Process of Setting Mission & Objective

A specific result that a person or system aims to achieve within a time frame

and with available resources.


Strategic Intent


Agenda


2. Characteristics

3. Guidelines for setting Objectives

4. Factors to be considered for Objective setting




Role of Objectives

• Objectives define the organization’s relationship with its

environment.

• Objectives help an organization to pursue its mission and

purpose.

• Objectives provide the basis for strategic decision

making.

• Objectives provide the standards for performance

appraisal.


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Strategic Intent


Agenda


2. Characteristics






Characteristics of Objectives

• Objective should be understandable

• Objectives must be specific

• Objectives must be related to time frame

• Should be measurable and controllable

• Objectives should be challenging

• Different objectives must be correlated


Strategic Intent


Agenda


2. Characteristics






Guidelines for setting an Objectives

• Involve all those who is responsible for carrying out.

• Each Functional objectives should aim at main objective.

• Objectives should have some ‘reach’.

• Objectives should be contemporary and innovative.

• One functional manager should not have too many.

• Objectives must relate to the environment.


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Strategic Intent


Agenda


2. Characteristics






Factors to be considered for setting an Objectives

Objectives

Forces in the Environment Resources of Organization

Value system of Top LevelAwareness of Past Objectives


Strategic Intent


Agenda


2. Characteristics






Process of setting an Mission and Objectives

Environmental Scanning

Formulate and Understand Mission

Organizational Objectives

Specific Targets


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Strategic Intent

Developing a Strategic Policies

Agenda

1. Characteristics of Good policy

2. Importance or need of a policy

A policy is a course or principle of action adopted or proposed by an

organization or individual.


Strategic Intent




Business Policies are the

guideline developed by an

organization to govern its

actions. They define the limits

within which decisions must be

made.


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Strategic Intent


Policy Vs Rule




Strategic Intent


1. Characteristics of Good policy



1. Broad Outline

2. Consistent

3. Adequate Number

4. Flexible

5. Objective Related

6. Inclusive / Comprehensive

7. Simple

8. Clear


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Strategic Intent


2. Need of a Policy



1. Achieving Objective

2. Clear thinking

3. Uniformity

4. No Exploitation

5. Continuity

6. Delegation of Authority

7. Stability

8. Efficiency

9. Training

10. Self Confidence

11. Motivation

12. Guide to Management

13. Quick Decision


Strategic Intent


3. Scope of a Policy



1. It covers many aspects of Business

2. It includes the function and the responsibilities of the top level

management related to the organizational problems, which affects

the success of the total enterprise.

3. It includes the resources by the help of which the organization can

achieve its goals.


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Environment

Scanning


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Environment

Environment is surroundings in which business operates. This environment will

have high influence on one’s business

Environment Analysis is the process by which strategies monitor the

environmental changes to identify opportunities and threats in the market.

Elements of Environment Analysis

Scanning

Monitoring

Forecasting

Assessing

Identifying early signals

of environmental changes

and trends



Environment






Scanning

Monitoring

Forecasting

Assessing

Detecting meaning

through ongoing

observations and trends


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Environment






Scanning

Monitoring

Forecasting

Assessing

Developing projections

of anticipated

outcomes based on the

monitored changes and

trends



Environment






Scanning

Monitoring

Forecasting

Assessing

Determining the

timings and

importance of

environmental changes

and trends for firms’

strategies and their

management.


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Characteristics of Environment

• Environment is complex

• Environment is dynamic

• Environment is multi-faceted

• Environment has a far-reaching impact



Environment

Internal

Environment

External

Environment

Evaluating Company Resources

Evaluating Competitive capabilities

SWOT Analysis

Value Chain Analysis

Competitive Advantage


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Environment

Internal

Environment

External

Environment

Remote / General Environment

Industry Environment

Operating Environment



External Environment

The factors beyond the control of the firm that influences its choice of

direction and action, organizational structure and internal process.

Remote Environment Industry Environment Operating Environment

• Demographical

• Economical

• Political

• Technological

• Socio cultural

• Entry Barriers

• Supplier Power

• Buyer Power

• Substitute Availability

• Competitive Rivalry

• Competitors

• Creditors

• Customers

• Labour

• Suppliers

The

Firm

In Combination, these factors form the basis of the opportunities and

threats that a firm faces in its competitive environment


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External EnvironmentThe factors beyond the control of the firm that influences its

choice of direction and action, organizational structure and

internal process.

Remote Environment

• Demographical

• Economical

• Political

• Technological

• Socio cultural

Elements

Population Size

Age structure

Geographical Distribution

Income distribution






Remote Environment Industry Environment

• Entry Barriers

• Supplier Power

• Buyer Power



• Demographical

• Economical

• Political

• Technological

• Socio cultural




• Competitors

• Creditors

• Customers

• Labour

• Suppliers

The

Firm


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The General Conditions for competition that

influences all businesses that provide similar

products and services.






FirmIndustry

Environment

General Environment

Industry Profit Potential = f (Entry Barriers, Supplier Power, Buyer Power, Substitute

Availability, Competitive Rivalry)

“Firms must be able to identify direct and indirect competition

which effects the ability of the firm.”

Source: Strategic Management : South-Asian Perspective (9th Edition) by Hitt and Ireland, Cenage Publication, Pg: 44


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• Entry Barriers

• Supplier Power

• Buyer Power



Threat of New Entrants

Source: Strategic Management : South-Asian Perspective by Hitt and Ireland, Cenage Publication, Pg: 45

Identifying New entrants is very important

because…….

they can threaten the market share of

existing competitors

New Entrants

Entry Barriers The Retaliation

Five Forces of Competition





• Entry Barriers

• Supplier Power

• Buyer Power




Source: Strategic Management : South-Asian Perspective by Hitt and Ireland, Cenage Publication, Pg: 45

New Entrants




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• Entry Barriers

• Supplier Power

• Buyer Power



“ Firms competing in an industry try to develop

entry barriers to thwart potential competitors.”

Source: Strategic Management : South-Asian Perspective by Hitt and Ireland, Cenage Publication, Pg: 46-48

New Entrants


several significant entry barriers may

discourage competitors from entering a market

are…..







• Entry Barriers

• Supplier Power

• Buyer Power




Strategic Management: Formulation, Implementation and Control by JohnA Pears, Richard B, TMH, Pg:106-110

New Entrants


Economies of Scale


Product Differentiation

Capital Requirements

Access to Distribution Channels

Government Policies

The savings that companies achieve

because of increased volume



To overcome this the new

company need to enter into

market either to come in

large scale or to accept a

cost disadvantage.

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• Entry Barriers

• Supplier Power

• Buyer Power



New Entrants


Economies of Scale





Government Policies

The extent to which customers perceive differences among

products and services

The product differentiation

creates a barrier by

forcing new players to

spend heavily to overcome

customer loyalty.








• Entry Barriers

• Supplier Power

• Buyer Power



New Entrants


Economies of Scale





Government Policies

It is a need for the new firm to invest large

financial resources in order to compete the

existing firms. This may become hurdle for the

companies who wants to enter into a market.





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• Entry Barriers

• Supplier Power

• Buyer Power



New Entrants


Economies of Scale





Government Policies

Over time, existing companies in the industry typically develop effective

means of distribution channel. This is the big

barrier for the new players to enter into industry.

Price breaks and cooperative

advertising allowances may be used

by the new players.






• Entry Barriers

• Supplier Power

• Buyer Power



New Entrants


Economies of Scale





Government Policies

Through licensing and permit requirements, governments can also control entry into an

industry.

Ex: Liquor Industry, Petrol bunks etc.



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• Entry Barriers

• Supplier Power

• Buyer Power



New Entrants



“Companies seeking to enter an industry also anticipate

the reactions of the firms in the industry. An expectation

of vigorous response from the competitor will reduces

the likelihood of entry.”






• Entry Barriers

• Supplier Power

• Buyer Power





Bargaining Power of Suppliers

Suppliers are also essential for the success of an

organization. Raw material is deadly needed to

complete the process of production. The supplier enjoys

the power when….

1. If there are only one supplier or few suppliers who

supply that particular raw material.

2. If it costly for the organization to move from one

supplier to another (Known as switching cost).

3. If there is no other substitute for their product.



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• Entry Barriers

• Supplier Power

• Buyer Power





Bargaining Power of Buyers

Buyers or customers will have control over an industry

in certain circumstances. In the following situations the

customer can enjoy power…..

1. There is a little and differentiation over the product.

2. Substitute products are widely available.

3. Customers are sensitive to price.

4. Switching to another product is not costly.






• Entry Barriers

• Supplier Power

• Buyer Power





Substitute Availability

Substitute products are goods and services from outside

a given industry that perform similar or the same

functions as a product that the industry produces.

Product substitutes present a strong threat to a firm

when substitute product’s price and quality are in

greater close to the competitors’ products.

So, in order to avoid the effect of substitute products, the

competitor firms should differentiate product in different

dimensions like quality, price etc. to reduce substitute

attractiveness.



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• Entry Barriers

• Supplier Power

• Buyer Power





Competitive Rivalry

In one industry, generally the actions taken by one

company invites competitive responses.

Competitive rivalry intensifies when a company

challenges by other firms or when company identifies an

opportunity.

Also the following are the different situations where

competitive rivalry will be intensified…..

1. There is a little differentiation between the products

2. Competitors are approximately the same size of

each other.

3. If the competitors have similar strategies.






Source: Strategic Management: Formulation, Implementation and Control by JohnA Pears, Richard B, TMH, Pg:111-116

This industry environment analysis tells us a clear,

complete story about the companies’ environment

needed for shrewdly matching a strategy to the

company’s external situation.

Industry Environment Analysis


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• Industry Features

• Industry Boundaries

• Industry Structure

• Industry performance

• Industry Practices

• Industry attractiveness

• Industry prospects for future



✓ Overall Size

✓ Market Growth rate

✓ Geographic boundaries of the market

✓ Number and size of the competitor

✓ Pace of technological change

✓ Product innovatons…















✓ Product and Service Quality

✓ Geographic distribution

✓ Level of Vertical Integration

✓ Profit Motives



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✓ Concentration

✓ Economies of Scale

✓ Product Differentiation

✓ Barriers to entry















✓ Production

✓ Sales

✓ Profitability

✓ Technical Advancement



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✓ Product Policy

✓ Pricing Policy

✓ Promotion Policy

✓ Distribution Policy

✓ R&D Policy

✓ Competitive Tactics















✓ Profit Potential

✓ Growth Prospects

✓ Competition

✓ Industry Barriers



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✓ Innovation in product and services

✓ Trends in consumer preferences

✓ Emerging changes in regulatory mechanisms

✓ Product Life Cycle of the Industry







Remote Environment Industry Environment

• Entry Barriers

• Supplier Power

• Buyer Power



• Demographical

• Economical

• Political

• Technological

• Socio cultural




• Competitors

• Creditors

• Customers

• Labour

• Suppliers

The

Firm


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Operative / Competitive Environment


The competitor analysis is focuses on each company against

which a firm directly competes.

In competitive analysis, the firm should understand the following,

1. What drives the competitor ? - Future Objectives

2. What Competitor is doing and can do ? - Current Strategy

3. What the competitor believes about the industry ? - Assumptions

4. What the competitors’ capabilities are ? - Strengths and weaknesses




Operative / Competitive Environment


In competitive analysis, the firm should understand the following,


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Methods of Industry and Competitive Analysis

Methods of Industry Analysis:

• External Factor Evaluation Matrix (EFE Matrix)

• Competitive Profile Matrix (CPM)

EFE Matrix allows strategist to summarize and evaluate economic, social, cultural,

demographical, political, legal, technological, and competitive information

CPM Identifies the major competitors and its particular strengths and weaknesses in relation

to sample firm’s strategic position.






• External Factor Evaluation Matrix (EFE Matrix)


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• Competitive Profile Matrix (CPM)





Methods of Competitive Analysis:

• Competitor Array

• Competitor Profiling

• Media Scanning

• New Competitors

✓ Define your industry – scope and nature of industry

✓ Determine who your competitors are

✓ Determine who is your customer are and what

benefits they expect

✓ Determine what the key success factors are in your

industry


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Environment

Internal

Environment

External

Environment

Evaluating Company Resources

Evaluating Competitive capabilities

SWOT Analysis





Internal Environment


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Resources

Capabilities

Core Capabilities

Discovering Core Competencies


Strategic Competitiveness

Components of internal Analysis

leading to competitive

advantage and strategic

competitiveness




Resources

Capabilities

Core Capabilities







competitiveness

Resources alone do not yield a competitive advantage.

Competitive advantage is generally based on the unique bundle of several resources.

Tangible Resources

Intangible Resources

Financial Resources The firms borrowing capacityThe firm’s ability to generate internal funds

Organizational Resources The firm’s formal reporting structure and its formal planning, controlling, and coordinating systems

Physical Resources Sophistication and Location of a firm’s plant and equipment.Access to Raw material

Technological Resources Stock of technology, such as patents, trade marks, copyrights, and trade secrets.


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Resources

Capabilities

Core Capabilities







competitiveness

Resources alone do not yield a competitive advantage.

Competitive advantage is generally based on the unique bundle of several resources.

Tangible Resources Intangible Resources

Human Resources • Knowledge• Trust• Managerial capabilities• Organizational routines

Innovation Resources • Ideas• Scientific capabilities• Capacity to innovate

Reputational Resources • Reputation with customers• Brand Name• Perceptions of product quality, durability, and

reliability• Reputation with suppliers• For efficient, effective, supportive, and mutually

beneficial interactions and relationships.




Resources

Capabilities

Core Capabilities







competitiveness

Capabilities exists when resources have been purposely integrated to achieve a specific task or set of tasks which includes from human resource selection to

product marketing and R&D Activities.

Capability will be based on developing, carrying, and exchanging of information and knowledge through firm’s human capital, customers or clients.

Capacity is …………….

“Managing Human intellectual and to convert it

into useful products and services”

Contd….Dr. T. Seshadri Kiran, Asst. Prof. , CMR College of Engineering & Technology

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Resources

Capabilities

Core Capabilities







competitiveness

Many global business leaders have strong belief that…..

Knowledge possessed by Human Capital

Contd….


Organization Capability

Root

With the view of this… it’s a challenge for the firms………

To create an environment that allows people to integrate their individual knowledge with that held by others in the firm so that, collectively, the firm has a significant

organization knowledge.



https://strategicmanagementinsight.com/tools/value-chain-analysis.html

Source:

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Value chain represents the internal activities a firm engages in when

transforming inputs into outputs

Value chain analysis (VCA) is a process where a firm identifies its primary and

support activities that add value to its final product and then analyze these

activities to reduce costs or increase differentiation.

- M. Porter





More Understanding……

• Value chain analysis is a strategy tool used to analyze internal firm

activities.

• the analysis reveals where a firm’s competitive advantages or disadvantages

are.

• When a company is capable of producing goods at lower costs than the

market price or to provide superior products, it earns profits.

• If it competes through cost advantage, it will try to perform internal

activities at lower costs than competitors would do

- M. Porter

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Value Chain Analysis- M. Porter




Value Chain Analysis - M. Porter

Using the Tool

There are two different approaches on how to perform the

analysis, which depend on what type of competitive advantage a

company wants to create (cost or differentiation advantage).

There are some steps needed to achieve cost or differentiation

advantage using VCA.

https://strategicmanagementinsight.com/topics/competitive-advantage.html

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Value Chain Analysis - M. Porter

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Strategic Management - CMRCET