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8/8/2019 T1 - Strategics Levels & Stages
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BUSINESS STRATEGY AND
POLICY
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MODULE - 1
Conceptual Framework of Policy
and Strategy
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Without a strategy, an organization is like aship without a rudder, going around in circles.
Its like a tramp ; its has no place to go
- Peter Drucker
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STRATEGY
ST R
A
EG
Y
T
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What Is Strategy?
Strategy is an overriding goalto achieve superior performance
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A well thought out systematic plan of action todefend and to defeat competitors.
Managements game planto
Attract and please customers
Stake out a market position
Compete successfully Grow the business
Achieve targeted objectives
What Is StrategicManagement?
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Thinking Strategically:
The Three Big Strategic Questions
1. Where are we now?
2. Where do we want to go?
Business to be in and market positions to stake out
Buyer needs and groups to serve
Outcomes to achieve
3. How will we get there?
A companys answer to howwill we get there? is its strategy
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LEVELS/TYPES AND STAGES
OF STRATEGY
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Levels of strategy
Corporate
Business1 Business 2 Business3
F1 F2 F3 F4
Corporate
Business
Functional
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Prentice Hall, 2004 Chapter 1Wheelen/Hunger
10
Hierarchy ofStrategy
Corporate Strategy
Business Strategy
Functional
Strategy
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Functional Level Strategy
They are directed towards
improving the efficiency of basic operationswithin a company by attaining a
companywide efficiency, quality, innovation
and customer responsiveness.
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Business Level Strategy
It refers to a plan of action that
strategic managers adopt to use a companies
resources and distinctive competenciesto gain competitive advantage
over its rivals in a market or industry.
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Key IssuesKey Issues
inin
BusinessBusiness--levellevel
StrategyStrategy
Who will beWho will be
served?served?
What needs willWhat needs will
be satisfied?be satisfied?
How will thoseHow will those
needs be satisfied?needs be satisfied?
Customers: Their Relationship toBusiness-Level Strategies
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All CustomersAll Customers
ConsumerConsumerMarketsMarkets
IndustrialIndustrial
MarketsMarkets
Who: Determining the Customers to
Serve
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Basis for SegmentationConsumerMarkets
Demographic factors (age, income, sex, etc.)
Socioeconomic factors (social class, stage in the family life cycle)
Geographic factors (cultural, regional, and national differences)
Psych
ological factors (lifestyle, personality traits) Consumption patterns (heavy, moderate, and light users)
Perceptual factors (benefit segmentation, perceptual mapping)
IndustrialMarkets
Product segments (based on technological differences or productioneconomics)
Geographic segments (defined by boundaries between countries or by
regional differences within them)
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Customer needs are related to a products
benefits and features.
Customer needs are neither right nor wrong,good nor bad.
Customer needs represent desires in terms of
features and performance capabilities.
What: Determining Which Customer
Needs to Satisfy
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Firms use core competencies to implement
value creating strategies that satisfy
customers needs.
Only firms with capacity to continuously
improve, innovate and upgrade their
competencies can expect to meet and/orexceed customer expectations across time.
How: Determining Core Competencies
Necessary to Satisfy Customer Needs
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GENERIC BUSINESS LEVEL STRATEGIES
Cost Leadership Differentiation
Cost Focus Differentiation
Focus
Offers to many
Kinds of
customers
Offers to oneGroup of
customers
Lower Cost Uniqueness
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Examples
Strive to be the industrys low-cost provider
Wal-Mart
Outcompete rivals on a key differentiating feature
Rolex Top-of-the-line prestige
Mercedes-Benz Engineering design andperformance
Focus on a narrow market niche
eBay Online auctions
Starbucks Premium coffees and coffee drinks
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Eg..
Consider the global market for restaurants.
Place the following restaurants onto the
Generic Strategies matrix.
McDonalds (Global Brand).
Chick King (lesser known chicken restaurant).
KF
C (global brand). Burger King (global brand).
Subway (growing 'sub' sandwich brand).
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Answer
McDonalds
KFC
Burger King
Subway
Chick King
Lower Cost Uniqueness
Offers to many
Kinds of
customers
Offers to one
Group of
customers
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SBU
It is an operating unit that groups a distinct set
of products/services, which are sold to a set ofcustomers and facing a defined set of
competitors.
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Corporate Level Strategy
It is concerned with the overall purpose and
scope of the business.
corporate strategy answers the questions of"which businesses should we be in?"and
"how does being in these businesses create
synergy and/or add to the competitive
advantage of the corporation as a whole?"
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BCG MATRIX
STARS QUESTION
MARKS
??
CASH COWS DOGS
Market
Growth
LOW
HIGH
Market ShareHIGH LOW
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THEFOURSEGMENTS OFTHE BCG MATRIX
Placing products in the BCG matrix provides 4 categories in
a portfolio of a company:
Stars (high growth, highmarket share)
Stars are using large amounts of cash. Stars are
leaders in the business.T
herefore they should alsogenerate large amounts of cash.
They generate large cash flows internally as they have
Low cost advantage
Economies of scale They can meet their investment by their internal cash
flows
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Cash Cows (low growth, highmarket share)
Profits and cash generation are high. Because of
the low growth, reinvestment opportunities are
low.
The surplus amount generated by Cash Cows are
often used to invest in emerging stars, invest in
question marks (which can be groomed as futurestars).
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Dogs (low growth
, low market sh
are)
Avoid and minimize the number of Dogs in a
company.
Watch out for expensive rescue plans.
Dogs must deliver cash, otherwise they must be
liquidated.
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QuestionMarks
(high growth, low market share) Question Marks have the worst cash
characteristics of all, because they have high cash
demands and generate low returns, because of
their low market share.
If the market share remains unchanged, Question
Marks will simply absorb great amounts of cash.
Either invest heavily, or sell off, or invest nothingand generate any cash that you can. Increase
market share or deliver cash.
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Stages in strategic management
Formulation
Implementation
Evaluation
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Formulation
Strategy formulation is the process of
establishing the organization's mission,objectives, and formulating strategies.
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Implementation
It involves managing the process.
This includes monitoring results, comparing tobenchmarks and best practices, evaluating the
efficiency of the process and making
adjustments to the process as necessary.
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Evaluation
To measure the effectiveness of theorganizational strategy, it's extremelyimportant to conduct a SWOTAnalysis.
Strategic options are evaluated against threekey success criteria:
Suitability (would it work?)
Feasibility (can it be made to work?)
Acceptability (will they work it?)
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Why is Strategy Important?
It lends a Methodology and framework
Provide route map to a firm
Ensure speedy decision & directionHedge against uncertainty
To understand the external trends in advance
To Ensure the best utilization of resources