Stretegic Management Strategies

8/8/2019 Stretegic Management Strategies

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Strategic ManagementStrategic Management

The UnThe Un--Corporational wayCorporational way

RomanaRomana NargusNargus


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Defining Strategies:Defining Strategies:

The term strategy is derivedThe term strategy is derived

from the Greek word strategosfrom the Greek word strategos

which means generalshipwhich means generalship-- thetheactual direction of military force.actual direction of military force.

It also means planning whichIt also means planning which

are long term in terms ofare long term in terms of

achieving predeterminedachieving predetermined

business objectives.business objectives.


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Need for Strategies:Need for Strategies:

Threats:Threats:

Emergence of competitorsEmergence of competitors

Opportunities:Opportunities:

New opportunities that areNew opportunities that are

available or emerge in theavailable or emerge in the

environment.environment.


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Importance of strategy:Importance of strategy:

It is one of the most significantIt is one of the most significant

concept to emerge in the subjectconcept to emerge in the subject

of management studies.of management studies. Critical input to organizationalCritical input to organizational

success.success.

It helps reduce ambiguity andIt helps reduce ambiguity and

provide a solid foundation as aprovide a solid foundation as a

theory to conduct business.theory to conduct business.


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Different Level of Strategies:Different Level of Strategies:

Corporate Level (CorporateCorporate Level (Corporate

Office)Office)

Business Level (SBUs)Business Level (SBUs)

Functional Level ( finance,Functional Level ( finance,marketing, operations,marketing, operations,

personnel, information etc)personnel, information etc)


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Strategic Decision Making:Strategic Decision Making:

It means making a choiceIt means making a choice

regarding the course of action toregarding the course of action to

adopt.adopt. Fundamental strategic DecisionFundamental strategic Decision

relates to the choice of arelates to the choice of a

mission of the organization.mission of the organization.


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Issues in Strategic DecisionIssues in Strategic Decision

Making:Making:

Criterion for decision making.Criterion for decision making.

Rationality in decision making.Rationality in decision making.

Creativity in decision making.Creativity in decision making. Variability in decision making.Variability in decision making.

Person related factors inPerson related factors in

decision making.decision making. Individual versus group decisionIndividual versus group decision

making.making.


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Phases in StrategicPhases in Strategic

Management:Management:

Establishing the hierarchy ofEstablishing the hierarchy of

Strategic Intent.Strategic Intent.

Creating & Communication ofCreating & Communication ofVision.Vision.

Designing a Mission statement.Designing a Mission statement.

Defining the Business( CG, CF &Defining the Business( CG, CF &

AT).AT). Setting Objectives.Setting Objectives.


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ContdContd

Formulation of Strategies:Formulation of Strategies:

Performing environmental appraisals.Performing environmental appraisals.

Doing Organizational appraisalsDoing Organizational appraisals

Considering corporate level strategiesConsidering corporate level strategies

Considering business level strategiesConsidering business level strategies

Undertaking strategic analysisUndertaking strategic analysis

Exercising strategic choiceExercising strategic choice

Formulating strategies.Formulating strategies.

Preparing Strategic Plan.Preparing Strategic Plan.


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ContdContd

Implementation of strategies:Implementation of strategies:

Activating StrategiesActivating Strategies

Designing structures & systems

Designing structures & systems

Managing BehaviorManaging Behavior

ImplementationImplementation

Managing FunctionalManaging Functional

ImplementationImplementation Operationalizing Strategies.Operationalizing Strategies.


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ContdContd

Performing Strategy EvaluationPerforming Strategy Evaluation

& Control:& Control:

Performing Strategic Evaluation.Performing Strategic Evaluation. Exercising Strategic ControlExercising Strategic Control

Reformulating Strategies.Reformulating Strategies.


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Comprehensive Model OfComprehensive Model Of

S.M:S.M:

Establishing strategic IntentEstablishing strategic Intent

Vision, Mission, Business Definition &Vision, Mission, Business Definition &Objectives.Objectives.

Formulation of StrategiesFormulation of Strategies

Environmental appraisals/OrganizationalEnvironmental appraisals/OrganizationalAppraisalsAppraisals

SWOT AnalysisSWOT Analysis

Corporate Level StrategiesCorporate Level Strategies

Business Level StrategiesBusiness Level Strategies

Strategic choiceStrategic choiceStrategic PlanStrategic Plan

Strategic Implementation: Project, Procedural,Strategic Implementation: Project, Procedural,Resource Allocation, Structural, Behavioral,Resource Allocation, Structural, Behavioral,Functional & OperationalFunctional & Operational

Strategic Evaluation.Strategic Evaluation.

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Strategic Intent:Strategic Intent:

VisionVision

MissionMission

Business Definition keeping inBusiness Definition keeping inmind customer function,mind customer function,

Customer Groups & AlternativeCustomer Groups & Alternative

Technologies.Technologies.


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Environmental Appraisals:Environmental Appraisals:

Environment means theEnvironment means the

surroundings, external objects,surroundings, external objects,

influences or circumstancesinfluences or circumstances

under which someone orunder which someone or

something exists.something exists.

Types of Environment:Types of Environment:

Internal Environment.

External Environment.


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Characteristics ofCharacteristics of

Environment:Environment:

Environment is ComplexEnvironment is Complex

Environment is DynamicEnvironment is Dynamic

Environment is MultifacetedEnvironment is Multifaceted Environment has a far reachingEnvironment has a far reaching

impact.impact.

Environment is difficult toEnvironment is difficult tocontrol.control.


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Different EnvironmentalDifferent Environmental

Sectors:Sectors:

Market EnvironmentMarket Environment

Technological EnvironmentTechnological Environment

Supplier EnvironmentSupplier Environment Economic EnvironmentEconomic Environment

Regulatory EnvironmentRegulatory Environment

Political EnvironmentPolitical Environment

SocioSocio--Cultural EnvironmentCultural Environment

International EnvironmentInternational Environment


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Grand Strategies:Grand Strategies:

It helps in making decisionsIt helps in making decisionsrelated to allocating resourcesrelated to allocating resourcesamong the different businessesamong the different businesses

of a firm, transferring resourcesof a firm, transferring resourcesfrom one set of Business tofrom one set of Business toothers and managing andothers and managing andnurturing a portfolio of Businessnurturing a portfolio of Businessin such a way that the overallin such a way that the overallcorporate objectives arecorporate objectives areachieved.achieved.


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4 types of Grand strategies:4 types of Grand strategies:

Stability strategies:Stability strategies:

It is adopted when there is anIt is adopted when there is anattempt at an incrementalattempt at an incremental

improvement of its functionalimprovement of its functionalperformance by marginallyperformance by marginallychanging the one or more of itschanging the one or more of itsbusiness in terms of theirbusiness in terms of their

respective customer group,respective customer group,customer function and alternativecustomer function and alternativetechnologies.technologies.


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ContdContd

Expansion strategies:Expansion strategies:

It is followed when an organizationIt is followed when an organizationaims at high growth by substantiallyaims at high growth by substantially

broadening the scope of one orbroadening the scope of one or

more of its businesses in terms ofmore of its businesses in terms of

their customer groups, customertheir customer groups, customerfunctions and alternativefunctions and alternative

technology.technology.


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ContdContd

Retrenchment Strategies:Retrenchment Strategies:

It is followed when an organizationIt is followed when an organization

aims at a contraction of its activitiesaims at a contraction of its activities

through substantial reduction orthrough substantial reduction or

elimination of the scope of one orelimination of the scope of one or

more of its businesses in terms ofmore of its businesses in terms of

their respective customer group,their respective customer group,

customer function and alternativecustomer function and alternative

technologies.technologies.


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ContdContd

Combination Strategies:Combination Strategies:

It is followed when an organizationIt is followed when an organization

adopts a mixture of stability,adopts a mixture of stability,

expansion and retrenchmentexpansion and retrenchment

either at the same time in differenteither at the same time in different

businesses or at different times inbusinesses or at different times in

the same businesses with the aimthe same businesses with the aim

of improving its performance.of improving its performance.


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Stability Strategies:Stability Strategies:

No Change Strategies.No Change Strategies.

Profit Strategy.Profit Strategy.

Pause/Proceed with cautionPause/Proceed with caution

StrategyStrategy


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Expansion Strategies:Expansion Strategies:

Expansion Through :Expansion Through :

Concentration.Concentration. Integration.Integration.

Diversification.Diversification.

Cooperation.Cooperation.

Internationalization.Internationalization.


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Retrenchment strategies:Retrenchment strategies:

It is followed when anIt is followed when an

organization substantiallyorganization substantially

reduces the scope of itsreduces the scope of its

activities.activities.

They are:They are:

Turnaround StrategiesTurnaround Strategies

Divestment StrategiesDivestment Strategies

Liquidation StrategiesLiquidation Strategies


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Strategic Evaluation &Strategic Evaluation &

Control:Control:

Nature of Strategy Evaluation:Nature of Strategy Evaluation: To evaluate the effectiveness of strategyTo evaluate the effectiveness of strategy

in achieving organizational objectives.in achieving organizational objectives.

S.E & C can be defined as a processof determining the effectiveness of agiven strategy in achieving theorganizational objectives and takingcorrective actions wheneverrequired.

Through the process of S.E & C thestrategists attempt to answer twosets of following questions:


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S.E & C:S.E & C:

1.1. Are the premises made during strategyAre the premises made during strategyformulation proving to be correct? Is theformulation proving to be correct? Is thestrategy guiding the organization towardsstrategy guiding the organization towardsits intended objectives? Are theits intended objectives? Are the

organization & Managers doing thingsorganization & Managers doing thingswhich ought to be done? Is there a needwhich ought to be done? Is there a needto change and reformulate the strategy.to change and reformulate the strategy.

2.2. How is the organization performing? AreHow is the organization performing? Arethe time schedules being adhered to?the time schedules being adhered to?

Are the resources being utilizedAre the resources being utilizedproperly? What needs to be done toproperly? What needs to be done toensure that resources are utilizedensure that resources are utilizedproperly and objectives met?properly and objectives met?


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Importance of StrategicImportance of Strategic

Evaluation:Evaluation:

It helps in segregation of keyIt helps in segregation of keymanagerial tasks which leads to amanagerial tasks which leads to asituation where individual managerssituation where individual managers

are required to perform a smallare required to perform a smallportion each of the overall tasksportion each of the overall tasksrequired to implement a strategy.required to implement a strategy.

The importance of S.E lies in itsThe importance of S.E lies in itscapacity to coordinate the taskscapacity to coordinate the tasksperformed by individual managersperformed by individual managersand also groups, divisions or SBUsand also groups, divisions or SBUsthrough the control of Performance.through the control of Performance.


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ContdContd

It provides feedback and thus alsoIt provides feedback and thus also

helps in appraisals of the employeeshelps in appraisals of the employees

at different levels.at different levels.

It also helps to keep a check on theIt also helps to keep a check on thevalidity of a strategic choice.validity of a strategic choice.

It provides a considerable amount ofIt provides a considerable amount of

information & experience toinformation & experience to

strategist that can be useful in newstrategist that can be useful in new

strategic planning.strategic planning.


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Participants in S.E:Participants in S.E:

The Board ofDirectors.The Board ofDirectors.

Chief Executives.Chief Executives.

SBU Heads.SBU Heads. Financial Controllers.Financial Controllers.

Audit & Executive Committees.Audit & Executive Committees.

Middle level Managers.Middle level Managers.


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Barriers in StrategyBarriers in Strategy


Limits in Control.Limits in Control.

Difficulties in Measurement.Difficulties in Measurement.

Resistance to evaluation.Resistance to evaluation. ShortShort--termism.termism.

Relying on efficiency rather thanRelying on efficiency rather than

effectiveness.effectiveness.


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Requirements for effectiveRequirements for effective

control:control:

Control should involve only the minimumControl should involve only the minimumamount of information.amount of information.

It should control only managerial activitiesIt should control only managerial activitiesand results.and results.

It should be timely.It should be timely.

Both long term and short term controlsBoth long term and short term controlsshould be used.should be used.

Controls should aim at pinpointingControls should aim at pinpointing

exceptions as nitpicking does not result inexceptions as nitpicking does not result ineffective evaluation.effective evaluation.

Rewards for meeting or exceedingRewards for meeting or exceedingstandards should be emphasized.standards should be emphasized.


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Strategic Control:Strategic Control:

Premise Control:Premise Control: Every strategy is based on certainEvery strategy is based on certain

assumptions about the environmentalassumptions about the environmentaland organizational factors.and organizational factors.

It is necessary to identify the keyIt is necessary to identify the keyassumptions and keep track of anyassumptions and keep track of anychange in them so as to assess theirchange in them so as to assess theirimpact on strategy and itsimpact on strategy and itsimplementation.implementation.

It serves the purpose of continuallyIt serves the purpose of continuallytesting the assumptions to find outtesting the assumptions to find outwhether they are still valid or not.whether they are still valid or not.


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ContdContd

The responsibility for premiseThe responsibility for premise

control can be assigned to thecontrol can be assigned to the

corporate planning staff who cancorporate planning staff who can

identify key assumptions andidentify key assumptions and

keep a regular check on theirkeep a regular check on their

validity.validity.


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Implementation Control:Implementation Control:

It aims at evaluating whether the plans,It aims at evaluating whether the plans,programmes and projects are actually guidingprogrammes and projects are actually guidingthe organization towards its predeterminedthe organization towards its predeterminedobjectives or not.objectives or not.

Implementation control may lead to strategicImplementation control may lead to strategicRethinking.Rethinking.

It may be put into practice through theIt may be put into practice through theidentification and monitoring of strategicidentification and monitoring of strategicthrust such as an assessment of thethrust such as an assessment of the

marketing success of a new product aftermarketing success of a new product afterprepre--testing or checking the feasibility of atesting or checking the feasibility of adiversification programmes after makingdiversification programmes after makinginitial attempts at seeking technologicalinitial attempts at seeking technologicalcollaborations.collaborations.


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Strategic Surveillance:Strategic Surveillance:

It aims at more generalized andIt aims at more generalized andoverarching control.overarching control.

It is designed to monitor a broad range ofIt is designed to monitor a broad range ofevents inside and outside the company thatevents inside and outside the company that

are likely to threaten the course of a firmsare likely to threaten the course of a firmsstrategy.strategy.

It can be done through a broad based,It can be done through a broad based,general monitoring on the basis of selectedgeneral monitoring on the basis of selectedinformation sources to uncover events thatinformation sources to uncover events that

are likely to affect the strategy of theare likely to affect the strategy of theorganization.organization.


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Special Alert Control:Special Alert Control:

It is based on a trigger mechanism for rapidIt is based on a trigger mechanism for rapidresponses and immediate reassessment ofresponses and immediate reassessment ofstrategy in the light of sudden andstrategy in the light of sudden andunexpected events.unexpected events.

It can be exercised through the formulationIt can be exercised through the formulationof contingency strategies & assigning theof contingency strategies & assigning theresponsibility of handling unforeseenresponsibility of handling unforeseenevents to crisis management terms.events to crisis management terms.

Examples of such events can be theExamples of such events can be thesudden fall of a government at central orsudden fall of a government at central or

state level, instant change in competitorsstate level, instant change in competitorsposture, an unfortunate industrial disasterposture, an unfortunate industrial disasteror a natural catastrophe.or a natural catastrophe.


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Techniques of S.E & C :Techniques of S.E & C :

The two most common and bestThe two most common and best

suited techniques used for S.Esuited techniques used for S.E

& C are:& C are:

Strategic Momentum Control.Strategic Momentum Control.

Strategic Leap Control.Strategic Leap Control.


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Strategic Momentum Control:Strategic Momentum Control:

Aims at ensuring that theAims at ensuring that theassumptions on whose basisassumptions on whose basisstrategies were formulated are stillstrategies were formulated are stillvalid and finding out what needs tovalid and finding out what needs to

be done in order to allowbe done in order to alloworganization to maintain its existingorganization to maintain its existingstrategic momentum.strategic momentum.

The three techniques which could beThe three techniques which could beused to achieve these aims are:used to achieve these aims are: Responsibility control centersResponsibility control centers

The underlying success factorsThe underlying success factors

The generic strategies.The generic strategies.


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ContdContd

Responsibility control CentersResponsibility control Centersform the core of managementform the core of managementcontrol system and are of fourcontrol system and are of four

typestypes revenue, expense, profitrevenue, expense, profitand investment centers.and investment centers.

Each of these centre isEach of these centre isdesigned on the basis of thedesigned on the basis of themeasurement of inputs andmeasurement of inputs andoutputs.outputs.


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ContdContd

The underlying success factorsThe underlying success factorsenables organization to focus onenables organization to focus onCSFs in order to examines theCSFs in order to examines the

factors that contribute to the successfactors that contribute to the successof strategies.of strategies.

By managing on the basis of CSFs ,By managing on the basis of CSFs ,the strategists can continuallythe strategists can continuallyevaluate the strategies to assessevaluate the strategies to assesswhether or not these are helping thewhether or not these are helping theorganization to achieve itsorganization to achieve itsobjectives.objectives.


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ContdContd

The generic strategies is based onThe generic strategies is based on

the assumption that the strategiesthe assumption that the strategies

adopted by a firm similar to anotheradopted by a firm similar to another

firm are comparable.firm are comparable. Based on such a comparison a firmBased on such a comparison a firm

can study why and how other firmscan study why and how other firms

are implementing strategies andare implementing strategies and

assess whether or not its ownassess whether or not its ownstrategy is following a similar path orstrategy is following a similar path or

not.not.


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Strategic Leap Control:Strategic Leap Control:

Where the environment is relativelyWhere the environment is relativelyunstable, organizations are requiredunstable, organizations are requiredto make strategic leaps in order toto make strategic leaps in order tomake significant changes.make significant changes.

There are four techniques ofThere are four techniques ofevaluation used to exercise Strategicevaluation used to exercise StrategicLeap control:Leap control: Strategic Issue Management.Strategic Issue Management.

Strategic Field Analysis.Strategic Field Analysis.

Systems Modeling.Systems Modeling.

Scenarios.Scenarios.


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Strategic Issue Management:Strategic Issue Management:

It is aimed at identifying one or moreIt is aimed at identifying one or morestrategic issues and assessing their impactstrategic issues and assessing their impacton the organization.on the organization.

A strategic issue is a forthcomingA strategic issue is a forthcoming

development, either inside or outside of thedevelopment, either inside or outside of theorganization which is likely to have anorganization which is likely to have animportant impact on the ability of theimportant impact on the ability of theenterprise to meet its objectives.enterprise to meet its objectives.

By managing strategic issues one canBy managing strategic issues one can

overcome the environmental changes andovercome the environmental changes anddesign contingency plans to shift strategiesdesign contingency plans to shift strategieswhenever required.whenever required.


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Strategic Field analysis:Strategic Field analysis:

It is a way of examining theIt is a way of examining thenature and extent of synergiesnature and extent of synergiesthat exists or are lackingthat exists or are lacking

between the components of anbetween the components of anorganization.organization.

Whenever synergies exists theWhenever synergies exists thestrategists can assess the abilitystrategists can assess the abilityof the firm to take advantage ofof the firm to take advantage ofthose.those.


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Systems Modeling:Systems Modeling:

It is a computer based model thatIt is a computer based model that

simulate the essential features of thesimulate the essential features of the

organization and its environment.organization and its environment.

By this organization may exerciseBy this organization may exerciseprepre--action control by assessing theaction control by assessing the

impact of environment onimpact of environment on

organization because of the adoptionorganization because of the adoption

of a particular strategy.of a particular strategy.


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Scenarios:Scenarios:

These are perceptions about theThese are perceptions about the

likely environment a firm wouldlikely environment a firm would

face in the future.face in the future.


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Different types of systems inDifferent types of systems in


Information Systems.Information Systems.

Control Systems.Control Systems.

Appraisal Systems.Appraisal Systems. Motivation Systems.Motivation Systems.

Development Systems.Development Systems.

Planning Sysytems.Planning Sysytems.


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Business Unit Strategies:Business Unit Strategies:

These are the course of actionadopted by a firm for each of itsbusiness separately to serve identified

customer groups and provide value tothe customer by satisfaction of theirneeds.

These are classified in 3 types:

a) Cost Leadership.b) Differentiation.

c) Focus.


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Cost Leadership:Cost Leadership:

When the competitive advantage ofWhen the competitive advantage of

a firm lies in a lower cost of thea firm lies in a lower cost of the

products or services relative to whatproducts or services relative to what

the competitors have to offer it isthe competitors have to offer it istermed as cost leadership.termed as cost leadership.

Cost leadership offers a flexibility toCost leadership offers a flexibility to

the firm to lower the price if thethe firm to lower the price if the

competition becomes stiff & yet earncompetition becomes stiff & yet earnmore or less the same level of profit.more or less the same level of profit.


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How to achieveHow to achieve

Cost leadership???Cost leadership???

Accurate demand forecasting & high capacityAccurate demand forecasting & high capacityutilization is essential to realize cost advantages.utilization is essential to realize cost advantages.

Attaining economies of scale leads to lower per unitAttaining economies of scale leads to lower per unitcost of product/service.cost of product/service.

High level of standardization of products and offeringHigh level of standardization of products and offeringuniform service packages using mass productionuniform service packages using mass productiontechniques yields lower unit costs.techniques yields lower unit costs.

Aiming at the average customer makes it possible toAiming at the average customer makes it possible tooffer a generalized set of utilities in a product/serviceoffer a generalized set of utilities in a product/serviceto cover greater number of customers.to cover greater number of customers.

Investments in cost saving technologies can help aInvestments in cost saving technologies can help a

firm to squeeze every extra paisa out of the cost,firm to squeeze every extra paisa out of the cost,making the product/service more competitive in themaking the product/service more competitive in themarket.market.


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Benefits of Cost Leadership:Benefits of Cost Leadership:

It is best insurance against industryIt is best insurance against industrycompetition.competition.

Powerful suppliers possess a higherPowerful suppliers possess a higherbargaining power to negotiate pricebargaining power to negotiate priceincrease for inputs.increase for inputs.

Powerful buyers possess a higherPowerful buyers possess a higherbargaining power to effective pricebargaining power to effective pricereduction.reduction.

The threat of cheaper substitutes can beThe threat of cheaper substitutes can beoffset to some extent by lowering prices.offset to some extent by lowering prices.

Cost advantage acts as an effective entryCost advantage acts as an effective entrybarrier for potential entrants who cannotbarrier for potential entrants who cannotoffer the product/services at a lower price.offer the product/services at a lower price.


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Risks in Cost Leadership:Risks in Cost Leadership:

It is ephemeral.It is ephemeral.

It is not a market friendly approach.It is not a market friendly approach.

Sometimes less efficient producersSometimes less efficient producers

may not choose to remain in themay not choose to remain in themarket owing to the competitivemarket owing to the competitivedominance of the cost leader.dominance of the cost leader.

Technological shifts are a greatTechnological shifts are a great

threat to a cost leader as these maythreat to a cost leader as these maychange the ground rules on which anchange the ground rules on which anindustry operates.industry operates.


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Differentiation Business

Strategies:

When the competitive advantage of

a firm lies in special features

incorporated into the

product/service, which are

demanded by the customers who

are willing to pay for those, then the

strategy adopted is thedifferentiation Business Strategies.


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How to achieve Differentiation:

A firm can incorporate features that offer utility for thecustomer and match their tastes & preferences.

A firm can incorporate features that lower the overallcosts for the buyer in using the product/services.

A firm can incorporate features that raise the performanceof the product.

A firm can incorporate features that increase the buyersatisfaction in tangible or non-tangible ways.

A firm can incorporate features that can offer the promiseof a high quality of product/service.

A firm can incorporate features that enable the customersto claim distinctiveness from other customers andenhance their status and prestige among the buyer

community. A firm can offer the full range of products or services that

customer require for their need satisfaction.


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Benefits:Benefits:

Distinguishing factor.Distinguishing factor.

Powerful suppliers can negotiate pricePowerful suppliers can negotiate priceincrease that the firm can absorb to someincrease that the firm can absorb to someextent as it has brand loyal customersextent as it has brand loyal customers

typically less sensitive to price increase.typically less sensitive to price increase. Powerful buyers do not usually negotiatePowerful buyers do not usually negotiate

price decrease as they have fewer options.price decrease as they have fewer options.

It is an expensive proposition.It is an expensive proposition.

In case of new entrants, substituteIn case of new entrants, substituteproduct/service suppliers too pose aproduct/service suppliers too pose anegligible threat to establishednegligible threat to establisheddifferentiator firms.differentiator firms.


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Risks:Risks:

In growing market product tends to becomeIn growing market product tends to becomecommodities.commodities.

In case of several differentiators adoptingIn case of several differentiators adoptingsimilar differentiation strategies the basis ofsimilar differentiation strategies the basis of

differentiations is gradually lessened anddifferentiations is gradually lessened andultimately lost.ultimately lost.

It fails to work if its basis is something thatIt fails to work if its basis is something thatis not valued by the customer.is not valued by the customer.

Price premiums too have a limit.Price premiums too have a limit.

Failure on the part of the firm toFailure on the part of the firm tocommunicate the benefit arising out ofcommunicate the benefit arising out ofdifferentiation adequately.differentiation adequately.


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Focus Business Strategy:Focus Business Strategy:

It rely on either cost leadership orIt rely on either cost leadership or

differentiation but cater to a narrowdifferentiation but cater to a narrow

segment of the total market.segment of the total market.

In terms of the market, thereforeIn terms of the market, thereforefocus strategies are niche strategies.focus strategies are niche strategies.

For the identified market segment aFor the identified market segment a

focused firm uses either the lowerfocused firm uses either the lower

cost or differentiation strategy.cost or differentiation strategy.


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Benefits:Benefits:

A focused firm is protected from competition to theextent that the other firms which have a broadertarget do not possess the competitive ability to caterto the niche markets.

Focused firm buys in small quantities, so powerfulsuppliers may not evince much interest.

Powerful buyers are less likely to shift loyalties asthey might not find others willing to cater to theniche markets as the focused firms do.

The specialization that focused firms are able toachieve in serving a niche market acts as apowerful barrier to substitute products/services that

might be available in the market. The competence of the focused firms acts as an

effective entry barrier to potential entrants into theniche market.


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Risks:Risks:

Being focused means commitment toBeing focused means commitment to

a narrow market segment.a narrow market segment.

A major risk for the focused firms liesA major risk for the focused firms lies

in the cost configuration.in the cost configuration. Niches are often transient.Niches are often transient.

Rivals in the market may sometimesRivals in the market may sometimes

out focus the focused firms byout focus the focused firms by

devising ways to serve the nichedevising ways to serve the niche

markets in a better manner.markets in a better manner.


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Tactics for BusinessTactics for Business

Strategies:Strategies:

Tactic is a sub strategy.Tactic is a sub strategy.

It is a specific operating planIt is a specific operating plandetailing how a strategy is to bedetailing how a strategy is to be

implemented in terms of whenimplemented in terms of whenand where it is to be put intoand where it is to be put intoaction.action.

There are two tactics:There are two tactics: Timing Tactics.Timing Tactics.

Market location Tactics.Market location Tactics.


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Strategy Implementation:Strategy Implementation:

Interrelationship between formulationInterrelationship between formulationand implementation:and implementation: The formulation and implementationThe formulation and implementation

processes are intertwined.processes are intertwined.

Two types of linkages exist betweenTwo types of linkages exist betweenthese two phases of SM.these two phases of SM.

The forward linkages deal with theThe forward linkages deal with theimpact of the formulation onimpact of the formulation on

implementation.implementation. The backward linkages are concernedThe backward linkages are concerned

with the impact in the opposite direction.with the impact in the opposite direction.


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Pyramid of StrategicPyramid of Strategic

Implementation:Implementation:

StrategiesStrategies -->>

PlansPlans -->>

ProgrammesProgrammes -->> Projects


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Project Implementation:Project Implementation:

Conception Phase.Conception Phase.

Definition Phase.Definition Phase.

Planning & Organizing Phase.Planning & Organizing Phase. Implementation Phase.Implementation Phase.

Clean Up Phase.Clean Up Phase.


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Resource Allocation:Resource Allocation:

It deals with the procurement andIt deals with the procurement andcommitment of financial, physicalcommitment of financial, physicaland human resource to strategicand human resource to strategictasks for the achievement oftasks for the achievement of

organizational objectives.organizational objectives. It is both a one time and continuousIt is both a one time and continuous

process.process.

When a new project is implementedWhen a new project is implementedit requires resource allocation.it requires resource allocation.

An ongoing concern would alsoAn ongoing concern would alsorequire a continual infusion ofrequire a continual infusion ofresources.resources.


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Factors affecting ResourceFactors affecting Resource

Allocation:Allocation:

Objectives of the organization.Objectives of the organization.

Preference of dominantPreference of dominant

strategists.strategists.

Internal Politics.Internal Politics.

External influences.External influences.


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Difficulties in ResourceDifficulties in Resource

Allocation:Allocation:

Scarcity of Resources.Scarcity of Resources.

Restrictions on generatingRestrictions on generating

Resources.Resources.

Overstatement of needs.Overstatement of needs.


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Structural Implementation:Structural Implementation:

Structure: It is the way in which theStructure: It is the way in which the

tasks and subtasks required totasks and subtasks required to

implement a strategy are arranged.implement a strategy are arranged.

The diagrammatical representationThe diagrammatical representation

of structure could be anof structure could be an

organization chart but the chartorganization chart but the chart

shows only skeleton.shows only skeleton.


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What is Structural Mechanism:What is Structural Mechanism:

Defining the major task required to implement aDefining the major task required to implement astrategy.strategy.

Grouping tasks on the basis of common skillGrouping tasks on the basis of common skillrequirements.requirements.

Subdivision of responsibility & delegation ofSubdivision of responsibility & delegation ofauthority to perform tasks.authority to perform tasks.

Coordination of divided responsibility.Coordination of divided responsibility.

Design and administration of the informationDesign and administration of the informationsystem.system.

Design and administration of the appraisal system.Design and administration of the appraisal system.

Design and administration of the motivation system.Design and administration of the motivation system.

Design and administration of the developmentDesign and administration of the developmentsystems.systems.

Design and administration of the planning system.Design and administration of the planning system.


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Structures for Strategies:Structures for Strategies:

Entrepreneurial Structure.Entrepreneurial Structure.

Functional Structure.Functional Structure.

Divisional Structure.Divisional Structure.

Matrix Structure.Matrix Structure. Network Structure.Network Structure.

Product based Structure.Product based Structure.

Customer based Structure.Customer based Structure.

Geographic Structure.Geographic Structure.

Intrapreneurial Structure.Intrapreneurial Structure.


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Organization Systems:Organization Systems:

Another way of looking at organizationalAnother way of looking at organizationalstructure is to view it as a means ofstructure is to view it as a means ofsubdividing the total authority andsubdividing the total authority andresponsibility among differentresponsibility among differentorganizational units and positions.organizational units and positions.

Since the organization has to perform a setSince the organization has to perform a setof tasks designed to achieve its objectives,of tasks designed to achieve its objectives,a need arises to evolve systems that woulda need arises to evolve systems that wouldbind the different units and positions, sobind the different units and positions, sothat the performance of activities takesthat the performance of activities takes

place in a coordinated manner.place in a coordinated manner. these systems could be collectivelythese systems could be collectively

referred to as organization systems.referred to as organization systems.


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Six organizational systemsSix organizational systems

are:are:

Information System.Information System.

Control System.Control System.

Appraisal System.Appraisal System. Motivation System.Motivation System.

Development System.Development System.

Planning System.Planning System.


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Behavioral Implementation:Behavioral Implementation:

The five major issues involved inThe five major issues involved in

Behavior Implementation are:Behavior Implementation are:

Leadership.Leadership.

Corporate Culture.Corporate Culture.

Corporate policies & use of power.Corporate policies & use of power.

Personal Values & Ethics.Personal Values & Ethics.

Social Responsibility.Social Responsibility.


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Leadership Implementation:Leadership Implementation:

The role of appropriate leadership inThe role of appropriate leadership in

strategic success is highlystrategic success is highly

significant.significant.

Leadership plays a critical role in theLeadership plays a critical role in thesuccess and failure of enterprise.success and failure of enterprise.

It is considered as one of the mostIt is considered as one of the most

important elements affectingimportant elements affecting

organizational performance.organizational performance.


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Theory of leadership states:Theory of leadership states:

A leader must:A leader must:

Develop new qualities to performDevelop new qualities to performeffectively.effectively.

Be a visionary.Be a visionary.

Exemplify the values, goals andExemplify the values, goals andculture of the organization.culture of the organization.

Pay attention to strategic thinkingPay attention to strategic thinkingand intellectual activities.and intellectual activities.

Lead by empowering others.Lead by empowering others.

Create leadership at lower levels.Create leadership at lower levels. Delegate authority and placeDelegate authority and place

emphasis on motivation.emphasis on motivation.


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Styles of Leadership:Styles of Leadership:

Risk Taking: Willing to take risks.Risk Taking: Willing to take risks.

Technology: Use of planning,Technology: Use of planning,

qualified personnel and techniques.qualified personnel and techniques.

Organicity: Extent of organizationalOrganicity: Extent of organizationalstructural flexibility.structural flexibility.

Participation: Involvement ofParticipation: Involvement of

managers.managers.

Coercion: Domination by TopCoercion: Domination by Top

Management.Management.


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Corporate Culture:Corporate Culture:

The phenomenon that oftenThe phenomenon that often

distinguishes good organization fromdistinguishes good organization from

bad organization is termed asbad organization is termed as

Corporate Culture.Corporate Culture. The well managed organizationsThe well managed organizations

apparently have distinct cultures thatapparently have distinct cultures that

are in some way responsible forare in some way responsible for

their ability to successfully implementtheir ability to successfully implementstrategies.strategies.

C iti f C tC iti f C t


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Composition of CorporateComposition of Corporate

Culture:Culture:

It is the set of important assumptionsIt is the set of important assumptions-- oftenoftenunstatedunstated that members of an organization share inthat members of an organization share incommon.common.

There are two major assumptions in common:There are two major assumptions in common:

Beliefs.Beliefs. Values.Values.

Beliefs are assumptions about reality & are derivedBeliefs are assumptions about reality & are derivedand reinforced by experience.and reinforced by experience.

Values are assumptions about ideals that areValues are assumptions about ideals that aredesirable and worth striving for.desirable and worth striving for.

When beliefs and values are shared in anWhen beliefs and values are shared in anorganization, they create a corporate culture.organization, they create a corporate culture.

C t liti d fC t liti d f


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Corporate politics and use ofCorporate politics and use of

power:power:

All corporate cultures include aAll corporate cultures include apolitical component andpolitical component andtherefore all organizations aretherefore all organizations are

political in nature.political in nature. Organizational members bringOrganizational members bring

with them their likes, dislikes,with them their likes, dislikes,views, opinions, prejudices andviews, opinions, prejudices and

inclinations when they enterinclinations when they enterorganization.organization.

U d t di P &U d t di P &


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Understanding Power &Understanding Power &

Politics:Politics:

Power is defined as the ability toPower is defined as the ability to

influence others and corporateinfluence others and corporate

politics is the carrying out of thepolitics is the carrying out of the

activities not prescribed by theactivities not prescribed by thepolicies for the purpose ofpolicies for the purpose of

influencing the distribution ofinfluencing the distribution of

advantages within the organization.advantages within the organization.

Politics is related to the use of PowerPolitics is related to the use of Powerbut it is not simillar.but it is not simillar.

F ti l & O ti lF ti l & O ti l


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Functional & OperationalFunctional & Operational

Implementation:Implementation:

Functional strategies deal with a relativelyFunctional strategies deal with a relativelyrestricted plan which provides therestricted plan which provides theobjectives for a specific function, for theobjectives for a specific function, for theallocation of resources among differentallocation of resources among different

operations within the functional area andoperations within the functional area andfor enabling a coordination between themfor enabling a coordination between themfor an optimal contribution to thefor an optimal contribution to theachievement of the business and corporateachievement of the business and corporatelevel objectives.level objectives.

Functional strategies are derived fromFunctional strategies are derived frombusiness and corporate strategies and arebusiness and corporate strategies and areimplemented through functional andimplemented through functional andoperational implementation.operational implementation.


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Vertical fit:Vertical fit:

It leads us to define functionalIt leads us to define functionalstrategies in terms of their capabilitystrategies in terms of their capabilityto contribute to the creation of ato contribute to the creation of astrategic advantage for thestrategic advantage for theorganization.organization.

Types of Functional Strategies:Types of Functional Strategies: Strategic marketing management.Strategic marketing management.

Strategic financial management.Strategic financial management.

Strategic operations management.Strategic operations management.

Strategic human resource management.Strategic human resource management.

Strategic information management.Strategic information management.


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Horizontal fit:Horizontal fit:

It means that there has to be anIt means that there has to be an

integration of the operationalintegration of the operational

activities undertaken to provideactivities undertaken to provide

a product or service to aa product or service to acustomer.customer.

These have to take place in theThese have to take place in the

course of operationalcourse of operationalimplementation.implementation.


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Organizational AppraisalsOrganizational Appraisals

The appraisal of the external environment of a firm

helps it to think what it might choose to do.

The appraisal of the internal environment enables a

firm to decide about what it can do.

Internally an organization has to deal with resource

related behavior, weaknesses and strengths,

synergy, competency etc.


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Organisational Resources + Organisational Behaviour

Strength and Weaknesses

Synergistic Effects

Competencies

Organisational Capability

Strategic Advantage

M th d d T h i iM th d d T h i i


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Method and Technique inMethod and Technique in

Organisational AppraisalOrganisational Appraisal

1. Internal Analysis

2.Comparative Analysis

3.Comprehensive Analysis

Application of these methods results in highlighting

strengths and weaknesses that exist in differentfunctional areas.

The internal environment provides an organisation

with capability to capitalise on opportunities and protect

itself from the threats that are present in external

environment.

O i ti l A i lO i ti l A i l


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The balancing factor of external and internal

environment is key to success of business strategy.

An organisation uses different types of resources

and exhibits a certain type of behaviour:


WHAT ARE ORGANISATIONAL RESOURCESWHAT ARE ORGANISATIONAL RESOURCES

The theory of strategy is developed by BARNEYBARNEY (1991):

A firm is a bundle of resources

1.Tangible.2. Intangible.

This include all assets, capabilities, organisational processes,

information and knowledge.


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Resources:

1. Physical Resources: Technology, plant & equipment

geographic location, access to raw materials etc.

2. Human Resources: Education, experience, skills,

intelligence, judgment, relationship etc.

3. Organisational Resources: Structure, formal systems

and procedures, informal relations among groups.

Possessing the resources but not utilising does not make

any sense. The usage depends on organisational

behaviour.


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Barney said These resources can lead to strategic

advantage if following four characteristics are present:

1. Valuable

2. Rare3. Costly to imitate

4. Non-Substitutable

Most organisation have to acquire these resources in hard

way. The cost and availability of resources are important

factors on which success of an organisation depends.



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Organisational Behaviour: It is affected byinternal forces and influences.


i. Quality of Leadership.

ii. Management Policy.

iii. Shared Values & Culture.

iv. Work Environment.v. Organisational Climate.

vi. Organisational Politics.

vii. Use of Power.

Strength & Weakness of an organisation depends upontackling above factors. S&W do not exist in isolation but

combine within functional area and also across different

functional area to create synergistic effect.



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Synergistic Effects:

Two strong points in a particular functional area

add up to some thing more than two or more than

double the strength. Likewise, two weaknesses

in tandem result in more than double damage

Two + Two = FiveFive

Synergy is the idea that the whole is

greater or lesser than the sum of its parts.

Synergy is the idea that the whole is

greater or lesser than the sum of its parts.

Or

one + one = Zero



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Competencies:

Competencies are special qualities possessed by an

organisation that make it with stand pressures of

competition in market place. It is also known as core-

capabilities, invisible assets or embedded knowledge.

When a specific ability is possessed by a particular

organisation exclusively, or relatively large measures, it is

called Distinctive Competence.

Many organisations achieve strategic success

building Distinctive Competence around Core

Strategic Functions.

Many organisations achieve strategic success

building Distinctive Competence around Core

Strategic Functions.



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Organisational Capability:

Organisational Capability means the capacity or

potential of an organisation to utilise its resources to

manage & use its strengths and over-come its

weaknesses in order to exploit opportunities and face

threats in its external environment.

As an attribute, it is sum total of resources and

behaviour, strength and weakness, synergistic effects

occurring in and the competence of an organisation.

Capability is out-come of an organization's

knowledge base, i.e. the skills and knowledge of its

employees. This develop the concept of LEARNING

ORGANISATION.


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ORGANISATIONAL STRATEGIC ADVANTAGEORGANISATIONAL STRATEGIC ADVANTAGE

1. It aims at improvement in organisational

capability. That in turn improves functioning of the

organisation and results into generation of higher

revenue and profit.

2. It has to be positive in nature. The strategic

advantage is measurable feature for realistic

assessment.

3. OSA is applied in all the functional areas of the

organisation for better results.

4. Financial, Marketing, Production, Procurement &

Logistics, Personnel Management and General

Management



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Financial Capability:

It is availability, usage and management of funds. Following

factors are for consideration:

1. Factors related to source of funds.

2. Factors related to usage of funds.

3. Factors related to management of funds.

Marketing Capability:

It rests on and relate to product, its promotion &

distribution and pricing etc.1. Product related factors.

2. Price related factors.

3. Place related factors.

4. Promotion related factors.

5. Integrative & System factors.

Method and Technique used forMethod and Technique used for


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Method and Technique used forMethod and Technique used for


1. Internal Analysis

i. Value Chain Analyses.

ii. Quantitative Analysis

a. Financial Analysis

b. Non-Financial Analysis.

iii. Qualitative Analysis.

2. Comparative Analysis

i. Historical Analysis

ii. Industry Norms

iii. Benchmarking

3. Comprehensive Analysis

i. Balance Scorecard

ii. Key factor rating



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VALUE CHAIN ANALYSIS:


Porter (1985) is credited with the introduction of the

frame work called VALUE CHAINVALUE CHAIN.. A value chain is a

set of interlinked value-creating activities performed

by an organisation.

Porter divided the value chain of a manufacturingorganisation into PRIMARY and SUPPORT activities.

Primary activities are directory related to the flow of

the product to the customer.

COMPREHANSIVE ANALYSIS


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COMPREHANSIVE ANALYSIS

Balance Scorecard: Robert S Kaplan and David P Norton

Balance scorecard identifies four key performance

measures

1. Customer perspective How do customer see

us?

2. Internal Business Perspective What must weexcel at?

3. Innovation and Learning Perspective Can

we continue to improve and create value?

4. Financial Perspective How do we look at

share holders?

Key Factor Rating: It is an analysis of organisationalkey area functions in association with financial analysis.

It determines the capability of organisation in performing

in some area with financial gain or loss.


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Documents

Stretegic Management Strategies