business policy and strategic management - 2

Corporate Level Strategies

StrategicAssessment

AvailableOptions

StrategicIntent

Context

Chosen Strategy

STRATEGIC CHOICE PROCESS

Strategy Formulation : Corporate Strategies- Choice of Direction to the Firm Allocating resources among different

businesses in a firm Transferring resources from one set of

businesses to the other Managing and nurturing a portfolio of

businesses.

Diversified Firms

Multi business firms have interests in serving a diverse base of customer groups, customer functions and alternative technologies that the firm is involved with

Strategic Alternatives

Whether to continue or change the business the enterprise is currently in or improve the efficiency and effectiveness with which the firm achieves its corporate objectives in its chosen business sector


ExpansionBusiness Definition

MarketPenetration

Mkt DevInnovation.

DiversificationHorizontal

Concentric Conglomerate

Vertical Forward Backward

Stability

IncrementalGrowthProfit

Sustained GrowthPause Strategy

RetrenchmentDivestmentTurnaroundLiquidation Bankruptcy

Cooperation

Joint Ventures

StrategicAlliances

Consortia

Strategic Alternatives -Grand Strategies Expansion Stability Retrenchment Combination of any of above three

Grand Strategies

Expansion -Is followed when an organisation aims at high growth

Stability – when it attempts at incremental expansion of its functional performance

Retrenchment – when it aims at contraction of its activities

Combination – adopting a mixture of expansion stability or retrenchment either at the same time or in different businesses or at different times in the same business to improve performance

Expansion

Concentration –converging resources into one or more firms businesses in terms of customer needs, customer functions,or alternative technologies either singly or jointly in such a manner that expansion result

market penetration (more to same), market development ( same to new), Product development (new to same)

Expansion

Concentration

Market Penetration

Market Development

Product Development

Integration

VerticalHorizontal

Diversification

Concentric(related)

MarketingTechnologyMarketing&Technology

Conglomerate/Unrelated

Cooperation

Merger &AcquisitionHorizontal

VerticalConcentric

Conglomerate

Joint VentureStrategicAlliances

Pro Competitive

Non Competitive Competive

Precompetitive

Internationalisation

InternationalMultidomestic

GlobalTransnational

Digitalisation

Concentration

Idea to get more milk out of same cow Specialise in a few areas and gain rich

experience With predictable conditions market forces

manageable Growth and survival through time tested

technologies proven products and familiar markets

Conditions – Concentrated growth resistant to major technological

advancements, when firm’s target markets are not saturated, firms products are differentiated, market is stable

More to Same

Combine toothbrush with toothpaste Woo customers from others (offer below

competitors price Santro over Maruti), convert non users into users (soap, toothpaste),

LCD TV, in rural areas and sell Tata Max to rural customers over RTV with Safari for urban

Product

Market

Present

Products

New

Products

Present

Markets

Market penetration

Product development

New

Markets

Market

Development

Diversification

Ansoff’s Product Market Expansion Matrix

DIVERSIFICATIOn

VERTICAL

HORIZONTAL

FORWARD

BACKWARD

CONCENTRIC

CONGLOMERATE

TYPES OF DIVERSIFICATION STRATEGIES

Tata Tea – Increase Sales

Cut prices Increase advertising Get product into more stores Better store displays Point of purchase merchandising Increase usage by current customers and

attract customers from other brands by providing similar but additional flavours or advantages

Expansion

Manageable Meet environmental

demands- legal limits Natural Choice among

alternatives Minimal growth or

optimal growth Internal preparation

For Survival For economies of scale To stimulate talent Reach higher targets

Reasons for Diversification

Several Concentration (core competence) Focus All Carry risk

Integration

Integration – combining activities related to the present activity of the firm- done on the basis of value chain – horizontal and vertical

Horizontal – same type of products at the same level of production or marketing process ,it is said to horizontally integrate.

Vertical – can be forward or backward. Backward means integrating the source of raw materials and forward moves it ahead towards the ultimate customer

Diversification

Involves a substantial change in business definition singly or jointly in terms of customer functions, customer groups or alternate technologies of one or more of firm’s businesses

Reasons for Diversification

Minimise risk Capitalise on capabilities and Biz model to

maximise org strengths and minimise weaknesses.

If growth in existing business is blocked by regulatory and environmental factors.

When?

Expansion within existing product market not meet objectives

High retained cash exceeds needs for expansion Greater profit opportunities than in present product

market If information available does not permit clear choice

between expansion and diversification Risk spreading-avoid dependence on one

product /market, greater use of existing distribution and acquire technology

Horizontal Integration

Firms expand by acquiring other companies in the same line of business or services to the existing product line – eliminate competitors, provide new markets

Mergers and Acquisitions Concentric - Related (through

product ,market or technologies) but distinct business e.g Philips electronics producer into cell phones

Horizontal

Conglomerate – when co diversifies into unrelated to current business - tech change , risk diversification, volatile market

Buying high, buying cash Matching complementary business cycles Debt free co if fin. poor

Concentric (Related but Distinct) Diversification

Transaction costs saving – financial synergies Increased market power – marketing synergies Economies of scale (size of operations) and

economies of scope ( using common base of resources and capabilities for varied but related businesses) - operational synergies

Optimising HR utilisation common skill sets and

competencies- Personnel synergies

Concentric

Using common databases and information sources – Information synergy

Using common admin skill and experience- managerial synergies

IBM – Main frames to PC to communication equipment,

Procter and Gamble -use common networks for distribution

Conglomerate or Unrelated Diversification Spreading risk over different ,unrelated business

instead of synergy creation. Stress is on financial matters (to spread risk) instead

of operational matters( benefits of synergy) Maximising returns by investing in profitable biz and

selling out unprofitable ones. Stabilising returns through ups and down on biz

cycles Taking advantages of emerging opportunities Migrating from biz under threat. Personal choice of owners to create industrial

umpires

New Products

Related

Technology

Unrelated Technology

New Functions

Firm its own customer

Vertical Integration

Same Type of Product

Horizontal

Diversification

Similar type of Product

Marketing and technology

Related diversification

Marketing related concentric

diversification

New Type of Product Technology-related concentric diverisifcation

Conglomerate Diversification

ANSOFF’s MATRIX FOR DIVERSIFICATION STRATEGIES

Oil /GasExpolaration

Back ward ForwardRIL

Oil Production

Pipelines RefiningProduct

pipelines

Export

Retail Petro pumps

Position in 1998

Position in 2009

Integration Strategies based on Value Chain

Horizontal Integration

Taking up same type of products at the same level of production or marketing process

E.g taking over a rival company manufacturing the same product (acquisition or merger)

Results in bigger size with con commitment benefits of stronger competitive position.

Geographical expansion, increase market share In value chain keeps company at same level

e.g Bank takeover

Benefits of Horizontal Integration Economies of scale ( Spreading fixed cost

over larger numbers) Increased product differentiation Economies of scope (same resource base for

variety of products) Increased market power Replicating a successful biz model Reduction in industry rivalry

Risk

Demands very high level of managerial, operational and financial competence.

Demands wide variety of skills Decreasing commitment to old businesses. May not result in promised rewards Increases the administrative costs of

managing integrating and controlling a wide portfolio of businesses

Concentric Diversification

When organisation takes up an activity in such manner that it is related to the existing business definition of one or more of a firms’ business either in terms of customer groups, customer functions or alternate technologies

Conglomerate Diversification

When an organisation adopts a strategy which requires taking up activities unrelated to its to its existing business definition in any of its businesses, either in terms of their respective customer groups, functions or alternate technologies


Expansion

Increase pace of Activity

Prospects of growthIncreased size more Control overmarketExpernce curve and Scale of operations

Stability

Less risky, less changes Comfort

EnvironementStable

Expansion percieved asThreatening

Consolidation after

expansion

Retrenchment

No longer wish to remain In biz

Envrironment is threatening

Stability ensured byReallocating

Resources fromUnprofitable to profitable businesses

Combination Organisation large and faces complex

EnvironmentComprses

different biz each lying in different

Industries Requiring different

responses

StabilityStrategy

No change Strategies

Pause /Proceed with cautionStrategies

ProfitStrategies

Stability Strategies

Maintaining status quo or growing in a slow manner.

Resources put into existing operations Focus on current products current markets

and functions maintaining same level of effort

Why?

Not rock the boat Stop for a while Why swallow risk? -If growth low hold on to market

share after stretched period of growth Resource crunch – for new products new markets or

changing organisation ,resources required Works only if firm doing well and environment is not

volatile or in niche market Cannot be eld for along time as shareholder will

want improved profits.

RetrenchmentStrategies

TurnaroundStrategies

DivestmentStrateges

LiquidationStrategies

Types

Retrenchment – defensive when rival performance is good and its own disappointing or survival at stake

Eco recession, production inefficiencies and innovative breakthroughs by competitors

Chosen if firm not competitive enough to beat leader or make fast changes

Address weakness and restore Arvind Mills (Denim) and Xerox did address their

weakness and came out stronger

Divestment

Divestment –Sale of units or parts of unit that no longer contribute to or fit the firm’s distinctive competence

Outright sale Leveraged Buy Out Spin Off - create new company and distribute

shares to present shareholders Focus on core business

ACC, Raymond, ITC Classic Fin Services, Parle –Thums Up

Divestment Strategy -Reasons Strong focus, Unlock critical funds, Invest in emerging tech, exit non dominant ventures, turn red to black, exit unviable projects

Turnaround Strategy

Turnaround – Reverse a negative trend and bring organisation back to normal health and profitability.

Rid of unprofitable products, leaner firm, more efficiency, reduce distribution outlets.

Turnaround –Danger signals

Continuous cash flow problems Declining profits-lower margins Dwindling market share High employee turnover Low morale of employees Under utilisation of capacity Raw materials supply problem Rising input prices Strikes lockouts Increased competition, recession, Mismanagement

Action Plan

Change the leader Change the prices Focus on specific customer and producers Extend product life thru improvements Replace old products with new Focus on power brands that are valued Liqiudate assets for generating cash Better internal coordination Emphasis on selling advertising Cut employees, interest and fixed costs

Ashok Leyland

1998-99 – Sales and valuations hit rock bottom balance sheet dismal picture, recession

Strategy

Vendor consolidation – from 1400 suppliers brought down to 500 in 2002 with reduction in ordering monitoring costs

J-I-T inventories Reduced from 23 days to 7 days Demand and Forecasting MIS –reduced product

inventory form 90 days to 50 days reducing marketing overheads by Rs 10000 per truck

Financial re-engineering – Switched Rs 90 crs form high to low cost loans and raised Rs 100 cr CP at 9.5 % bringing average cost of debt by 2% over 2 years to 9.6%

Liquidation

Selling of disposing of all or part of an organisation’s assets

When future is bleak –sales ,profitability Unamanageable accumulated losses Someone willing to buy to avail tax benefits Not possible to revive with existing resources Difficult in labour surplus, cash hungry country like

India as unions will oppose Govt, FIs may oppose By selling avoid bankruptcy and protect

shareholders interests

Liquidation

Compulsory winding up under the order of a court

Voluntary winding up Voluntary winding up under the supervision of

a court Companies Act 1956 provides for a liquidator

who takes control of the company ,sell its assets, pays its debt, and distributes the surplus if any to its equity shareholders

Bankruptcy

Means whereby an organisation is unable to pay its debts and can see court protection from creditors and from certain contract obligations while it tries to regain financial health and stability( reorganisation bankruptcy)

Combination Strategies

Simultaneous Combination

SequentialCombination

Combination ofSimultaneous

And Sequential

Combination Strategies

Joint ventures - pool resources to accomplish tasks not done independently way of implementing strategy –spreads risk. Firms take equity in one another

Strategic Alliance – Partners Contribute skills and expertise to a cooperatively conceived

and executed project for a specific period Consortia – Interlocking relationship between

business of an industry -Japanese upto 50 firms – Airbus an example

BHEL -Case

Shift from concentration to include integration or diversification

What areas to diversify if it decides to

Expansion – Internationalisation, Cooperation and Digitalisation

Internationalisation

Type of expansion that requires market for their product or service overseas

Evaluate international environment, own capabilities, devise strategies to enter

Improvements in communication and transportation, investment climate, lowering of barriers

Government

Firm Strategy,Structure

And Rivalry

Demandconditions

Factor Conditions

Related and SupportingIndustries Chance

PORTER’s DIAMOND OF NATIONAL ADVANTAGE

Diamond Determinants (Porter’s Model) Factor Conditions Demand conditions Related and Supported Industries Firm strategy, structure and rivalry

Factors Impinging on Firms’ Internationalisation Strategies Cost Pressure- minimise unit cost Pressures for local Responsiveness-

strategies to respond to national level differences in terms of variables like customer preferences and tastes, policies and biz practices

International Entry Modes

Export entry mode Contractual entry mode Investment Entry mode Born Global firms

Strategic Alliances

Two or more firms unite to pursue agreed upon goals but remain independent

Partner firms share the benefits of an alliance and control over the performance of assigned tasks.

Partner firms contribute on a continuing basis in one or more key strategic areas –technology, product and so forth

Reasons for Strategic Alliances Entering new market Reducing manufacturing costs Developing and diffusing technology

Strategic Decisions in Internationalisation Which International markets to enter? Timing of entry into international markets? Scale of entry into international markets?

Advantages and Disadvantages of Expansion through Internationalisation Economies of scale Economies of scope Expansion and

extension of markets Realising location

economies Access to resources

and markets overseas

Higher risks Difficulty in managing

cultural diversity High bureaucratic costs Higher distribution

costs Trade barriers

Regionalisation Strategies

Home base Portfolio Hub Platform Mandate

Strategies for the Base of the Pyramid Easy payments in instalments Dramatic cost cutting Offering products in small packages Charge prices by pay by use Direct distribution by avoiding costly

intermediaries

Dodge rivals by shifting to new business model or market niche

Contend on a global level

Defend by using home –field advantages

Transfer company expertise to cross border markets

IndustryPressureTo Globalise

Tailored for Home Market

Transferable to Other Countries

Resources and Competitive Capabilities

Low

High

Strategy Options for Local Companies in Competing Against Global Companies

Global

Strategy ( standardised products /services low cost approach to get benefits of experience and location for manuf. And sell in diff countries)

Transnational Strategy (low cost and high local responsiveness)

International

Strategy ( transferring standard product and services to foreign markets)

Multi domestic

Strategy (modify product and services to foreign conditions)

Pressures for Local responsiveness

Pressures For costReduction

Types of Global Strategies

Response of Local Firms to MNC’s Using Home Field Advantages Transferring the Co’s expertise to Cross

Border Markets Shifting to New Business Model or Market

Niche Contending on a global scale

Patterns of Indian Co Response Moving from position of comparative advantage to

position of competitive advantage Reaching a point of having global advantages,

pushing towards global markets pulled by change of India’s perception in the world

Three strategies –1.outsourcing (small markets), 2.internationalised firms (market expansion/balance biz

risks),3. multinational firms (creating sustainable competitive

position in several regions)

Patterns of Response

Different requirements of retail ( JV feasible for retail) and institutional customers (no JVs)

Require different type of organising and capability building

Conviction laden leadership – focused on business fundamentals, international orientation and ready for long tem engagements

Cooperative Strategies

Mergers ( combination, consolidation (if both organisations dissolve identity to create a new organisation ) or

integration (in which one acquires the assets and liabilities of the other in exchange for shares or cash ))or

both the organisations are dissolved and assets and liabilities combined and new stock is issued

.

Cooperative Strategy

Here the objective of buyer and seller firm matched and

Acquisitions or takeover (surprise attempt to acquire or take control of ownership against its wishes or shareholders)

Joint Ventures Strategic Alliances – resources capabilities

and core competencies are combined to pursue mutual interests

Types of Mergers

Horizontal Mergers –same business Vertical Mergers- combination to create

complementarities in the same business Concentric Mergers – same biz definition Conglomerate mergers – Unrelated

combinations of biz definition

Reasons for Merger

Increase value of stock Increase growth rate and investment Improve stability of earnings and savings Balance, complete, or diversify product line Reduce competition Acquire needed resources quickly Avail tax concessions and benefits Advantages of synergy

Sellers Reasons to merge

Increase value of owner’s stock and investment

Increase growth rate Acquire resources to stabilise operations Benefit from tax legislation Deal with top management succession plans

Important Issues

Strategic Issues – commonality of strategic interests between buyer and seller.

Valuation of business and shares of target firm, sources of financing for mergers and taxation matters after merger.

Managerial Issues – problem of managing firms after merger.

Legal Issues – Sec 391 to 395 of Companies Act.

Digitalisation

Digital coding of information and the growing productivity gains in processing and transmission it enables

Type of Strategy Digital Strategy Traditional Strategy

Method Experiment and respond

Predict and plan

Time frame Monthly, revised continously

Three to five year ,revised annually

Owner Everyone in Organisation

CEO’s ,strategists

Competitive threat New forces of digitalisation ,globalisation and deregulation

Porter’s Five Forces Model

Role of IT Disrupter Enabler

Output Killer Applications Plan

Comparison of Digital Strategy and Traditional Strategy

Digitalisation and Value Chain Deconstruction – deliverables may not be

products but components of value Disintermediation – removal of some processes Reintermediation – processes are supplemented Industry Mapping- transforming traditional

boundaries by morphing –providing goods and services in different ways

Digitalisation and Value Chain(2) Cannibalisation – set of activities in a value

chain are replaced by new activities, like eating away parts of the value chain

Techno intensification – intensive use of technology

Rechanneling – Breaking value chain into parts and divesting or outsourcing

Use of Web Site

Disseminate product information only Minor distribution channel for direct selling Major distribution channel to access

customers Primary distribution channel to access buyers Exclusive channel to transact sales with

customers

Leveraging Internet

New means of generating synergies Enhancing revenue among elements of a

diverse firm Linking sources of supply more efficiently Streamline distribution Dealing with suppliers more efficiently

Digitilisation Strategies

Phases – Choosing among e-biz patterns, ebiz models, e biz designs, e governance

Patterns- 1. E-Channel pattern –E chaupal2. Click and Brick pattern - HDFC Life3. E- Portal pattern - IR, SRL labs (Stick , view more

join)4. E –market maker or Net Market pattern –developer

of a B2B site.5. Pure e –digital products pattern

Types of Sites

Vanity – Self expression Billboard – information brochure Advertising – funding of programming and

content Subscriptions – niche individuals Storefront – electronic version of catalog,

promotions, shopping cart One time purchase with no future obligations

Strategic Framework of an Organisation

Introduction

Evolution Genesis Managerial practices based evolution Historical perspective and pointers to the future Business Policy Understanding Strategy Concept of Strategy and levels of operation Strategic Decision making Schools of thought in Strategy formulation –

Prescriptive, Descriptive

Conceptual Introduction of Organisation Mission Mission and Purpose Business Definitions –Dimensions Company Objectives and Goals

Environmental Appraisal

Introduction Characteristics of Environment Impact of Environmental Changes Major Environmental Components Environmental scanning Techniques used for environmental scanning


Grand strategies Types of Principal/Grand/ Major strategies

Strategic Choice

Introduction Strategic Analysis at the corporate level Techniques used for corporate portfolio analysis Industry competitor and SWOT analysis Behaviour/Subjective factors affecting strategic

choices Contingencies approach to strategic choices Strategic plan

Rationalising the Strategy

Desired qualities of Annual Objectives Benefits offered by annual objectives Linkages between strategy formulation and

implementation Project implementation Procedural Implementation Resource Allocation

Structural Implementation

Structure Definition Types of Structure Selection of Structure Organisation Culture Content of Culture Influence of culture on organisational life The Strategy –Culture relationship Organisational Systems

Behaviour Implementation

Introduction Leadership and Implementation of Skills Leadership and Strategy Skills Political aspects, power and strategy Personal values, ethics and strategies Social responsibility

Strategic Evaluation Control

Introduction Strategic Control Operational Control Evaluation Techniques for Strategic Control Evaluation Techniques for operational control

New Business Models and Strategies for the internet Economy Introduction Strategy shaping characteristics of E-

commerce Environment E-Commerce Business Models and

strategies Internet strategies for traditional business Key success factors in e-commerce

Restructuring

Redesigning an organisation structure with the intent of emphasizing and enabling activities most critical to a firms’ strategy to function at maximum effectiveness

Why

Reduce unnecessary control Focus on enhancing core competencies Reducing costs Opening organisations more fully to outside

involvement and influence Globalisation Speed internet

Core Competencies

Special qualities possessed by an organisation that make them withstand the pressures of competition in the market place

Net result of strategic advantages and disadvantages

When a specific ability is possesed by a organisation exclusively or relatively in large measure it is called distinctive competence

Restructuring

Revamping Regrouping Rationalisation Consolidation

Corporate Restructuring

Corporate or business level restructuring – composition of organisation set of businesses for more profits

Financial restructuring – equity pattern ,holdings ,debt servicing schedule ,cross holding

Organisational restructuring –changes in structure, reducing hierarchies, downsizing, redesignating positions, altering reporting relationships

Why Restructuring?

Ways of working of organisations. Changes in the environment

Business level Strategies

Strategy Levels and FocusStrategy level Focus

Corporate Level Market Definition and Resource allocation ,Competition and alliances(cash,HR equipment)

Business level Market navigation

Functional level Organisation function Integrated support of business and corporate level strategies

Business Level Strategies

Are courses of action by an organisation for each of its businesses separately, to serve identified customer groups and provide value to the customer by satisfaction of their needs

In the process the organisation uses its competencies to gain, sustain and enhance its strategic or competitive advantage.

SBU

A group of related business /divisions each responsible to corporate head quarters for its own profits and losses

Each SBU has its own competitior and own unique strategy

Focus on a particular product or service line Business level strategies involve decsions regarding

these individual products within this service line One product may contribute by huge cash flow for

corporate level strategy while another rproduct uses the cash to increase sales and market share of existing biz.

Businss level Strategies Concerned with Coordinating and integrating unit activities to

conform to organisational strategy Developing distinctive competencies and

competitive advantage in each unit Identifying product or service market niches

and developing strategies for competing in each

Monitoring product or service market so that strategies conform to market needs at the current stage of evolution

Porter’s Generic Strategies

Overall cost leadership – focus on cost not price (give s alternatives for pricing)

Differentiation – uniqueness of product –warranty ,brand image,technology, service ,dealer networks

Focus on a particular market niche –concentrate on a product line,area, channel, stage in production process,or market niche- serve a limited segment

Business Strategies Why?

Direction for business in designing incentive systems

Control procedures Operations Interaction with buyers and suppliers Making product decisions

Business Level Strategies -

Industry Structure Positioning of the Firm Competitive Advantage Competitive Scope –breadth of

organisation’s target within an industry

Basis for Business level Strategies Industry Structure – determined by Porter

five forces model which vary from industry to industry which determines long term profitability of the firm

Positioning of the firm within the industry –overall approach of the firm towards competing and designed to gain a sustainable competitive advantage

Breadth of Organisation

Range of products Distribution channels Types of buyers Geographic areas Array of industries in which firm competes. Broad (full range of products to wide

customer groups) target or narrow ( limited range of products to few groups in restricted area )target approach

Sustainable Competitive Advantage Competitive Advantage (lower cost and

differentiation) Competitive scope (broad target and narrow

target

Competitive Advantage -Low Cost Low Cost – mass produced goods,

distributed through mass marketing thereby resulting in lower cost per unit.

Based on competence of the organisation to design ,produce and market a comparable product more efficiently than its competitors

Differentiation

Differentiation - Marketing relatively higher priced product of a limited variety but intensely focussed on identified customer groups who are willing to pay the higher price.

Produced by batch production and marketed through specialised distribution networks

Differentiation

Competence of the firm to provide unique and superior value to the buyer in terms of product quality ,special features and after sales service

Cost Leadership Differentiation

Focussed Cost leadership

Focussed

Differntiation

Porter’s Generic Business Strategies

Competitive Scope

Low Cost Product/ServicesDifferentiated Products/Services

Competitive Advantage

BroadTarget

Narrow Target

Porter Classification –Business Strategies Cost Leadership (lower cost/ broad target –

same utility/comparable price). Higher profit by volumes and lower margins. Competition stiff. Achieved by ensuring cumulative value chain costs are lower than competitors by analysing cost drivers)

Differentiation (differentiation/broad target) Focus (lower cost or differentiation/narrow

target)

Cost Leadership

Lower cost/ broad target same utility/comparable price).Higher profit by volumes and lower margins.Competition stiff. Achieved by ensuring cumulative value chain costs are

lower than competitors by analysing cost driversStandard products and uniform service packagesEconomies of scaleDemand forecasting and high capacity utilisationInvesting in cost saving technologies

Differentiation

Competitive advantage through special features incorporated into the product/ service which is demanded by customers and who are willing to pay for it.

Outperform competitor through special features in its product or service

Customer value the utility of special features and are willing to pay more

Product or service stand apart in the market and is recognised by its customer

Higher profits from premium vs additional cost of features

Focus

Relies on cost leadership or differentiation Caters to a narrow segment of the total

market Also called niche strategies Based on identifying customer groups on

demographics (age, gender, income occupation), geographic (rural urban, North/South India or lifestyle (traditional /modern)

Focus

Locate a niche where cost leaders and differentiators are not operating as they leave out segments which require special attention or superior skills or efficiency in handling the segment

For identified market segment adopt focus based in cost leadership or differentiation

Music, jewellery, healthcare, BPOs,TV,biscuits.

Tactics

A sub strategy A specific operating plan detailing how a

strategy is to be implemented ain tems of when ( timing) and where (market location) it is to be put into action

Narrower in scope Shorter in time horizon

Timing tactics

Strategy of low cost , dfferentiation or focus may be right move only if it is made at the right time – targets for managers by time

Timing based strategy means attacking the competitor indirectly through surprise and gaining market share at reduced cost

Low labour cost by JIT Time based manufacturing , time based sales and

distribution First Mover and Late Mover

Market location

Where to compete –target market. Role organisation plays in in the target market

and the type of business tactics they adopt to play such a role.

Industry has no of organisations offering products services to make market shares.

One organisation has largest market share, other differing in magnitude

Market Role

Role can be Leader (expanding total, defending existing, expanding by enhancements)

Challenger (try to gain market share by objectives and opponents, general and specific attack strategy choices ,

Follower (imitate market leaders but not upset balance of competition),

Nichers ( carve out distinct segment left out by others or of no interest to them by creating, expanding and protecting niches).

Business Strategies for Different Industry Conditions- Factors Investment, returns capital Timing Technology demand business models risks market shares growth products

Stages in Industry Cycle

Embryonic Stage Growth stage Maturity stage Decline stage

Strategic Analysis and Choice

Overview

Process of Strategic choice Strategic Analysis –tools and techniques Subjective factors Contingency Strategies Strategic plan

Strategic Analysis

Investigation of objective factors being considered in strategic choice ?

Which markets to enter ? Which industries to leave ? Which business to create/ acquire/ divest ? Which products and markets to retain

/grow/divest ?

Corporate Growth Strategies –Choices(Corporate parent –biz units children) Firms Orientation towards growth stability

and retrenchment (Directional Strategy) Industries or Markets in which the firm

competes (Portfolio strategies) Manner in which it management coordinates

activities and transfers resources and cultivates capabilities among product lines and business units (parenting strategy)

Performance

Desired Performance

Performance Gap

TimeT1 T2

Present Performance

GAP ANALYSIS FOR FOCUSSING ON STRATEGIC ALTERNATIVES

Tools and Techniques

Clark Study (1997) -80 tools and techniques Hussey(1992) – 57 techniques Most popular – 25 relevant topical and measurable 2007 Tool– Strategic planning Techniques – CRM, customer segmentation, bench

marking, vision and mission statement Scenario and contingency planning, strategic

alliances, balanced scorecard,growth strategy tools Less popular – M&A, Six sigma, offshoring,

consumer ethnography, corporate blogs

Strategic Analysis Tools

SWOT Portfolio Analysis BCG Matrix GE/ McKinsey Nine Cell matrix Financial Ratios Brainstorming Delphi Techniques CSF Market Opportunity Analysis

Strategic Analysis Tools

Process mapping Focus groups Competitor Analysis Porter Five Forces Model Stakeholder Analysis Budgeting and Value Chain Analysis Factor Analysis McKinseys 7 S PEST Analysis

Corporate Portfolio Analysis

Competitive analysis and strategic planning in multi product and multi business firms

Resources targeted at those businesses that possess the greatest potential for creating competitive advantage

Tools

Corporate Portfolio Analysis Corporate Parenting Analysis SWOT Analysis -ETOP and SAP combined Experience Curve Analysis Life Cycle Analysis Industry Analysis –Porter Five Forces model

Corporate Portfolio Analysis

BCG GE’s Nine cell Matrix (McKinsey & Co) Hofer’s Product- market Evolution Directional policy Strategic position and Action Evaluation

Matrices

Corporate Parenting Analysis

Role of corporate headquarters in managing and nurturing a set of business in a portfolio

Effective use of resources and capabilities, build individual businesses and creating synergies .

Corporate Parenting Analysis

Two key questions are :- What business should a diversified

corporation own and why? What organisation structure, management

processes and philosophy will foster superior performance from the corporation’s individual business units ?

Better than portfolio as it more than just financial aspect of the business.

GE’ S Nine Cell Matrix

Profit

WeakAverageStrongBusiness Strength/Competitive Position

High

Medium

Low

IndustryAttractiveness

Invest expand

Harvest /Divest

Industry Attractiveness Business Strength Market size Growth rate Industry profit margin Global opportunities Competitive intensity/rivalry Seasonality/Demand growth

rate Cyclicality Economies of scale PEST ( Political Technology,

Economic Social, environmental ) Legal Human Impact

Relative market share Profit margins relative to

competition Ability to compete on price and

quality Knowledge of customer and

market Distribution channel access Competitive strengths and

weaknesses -production capacity

Technological capability Calibre of management Brand equity

Difference –Nine Cell and BCG In nine cell ,Industry attraciveness and business

strength vs industry growth rate and market share Nine vs four cells Industry attractivess and business strength criteria

are first identified , then given a value and then multiplied by weightage factor.

Result is a quantitative measure of industry attractiveness and business units relative importance in the industry

Not consider interactions among units and neglects core competencieslaeding to value creation

Plotting

Market size represented by size of circle Market share by pie in the circle Expected future position of circle by means of

an arrow

Strategic Implications –resource allocations recommendations Grow – strong business units in attractive

industries, average business units in attractive industries, and strong business units in average industries

Hold – average BUs in average industries, Strong BUs in weak industries,weak business in attractive industrues

Harvest- weak Bus in unattractive industries, average BUs in unattractive industries, weak Bus in average industries

Hofer- Life Cycle Product Market Evolution Matrix Stage of Industry vs Biz Strength/Company Position Early development Rapid growth/Take off Shake out Maturity /Saturation Decline/Stagnation

Strong Average Weak

Force Field Analysis

Understanding the pressures for and against change or a decision- specialised method of weighing pros and cons

By analysis trying to strengthen forces for change and reduce impact of opposition

Problem

Problem – A firm is considering upgrading a factor with new manufacturing equipment.

List and prioritise the forces for and against change

Analysis

Customers want new products (4)

Improve speed of production(2)

Raise volume of output(3)

Control rising maintenance costs (1)

Loss of staff overtime (3)

Staff frightened of new technology (3)

Environment impact of new technology (1)

Cost (3) Disruption (1)

Plan for Upgradingfactory with

new manufacturing

equipment

FORCES FOR CHANGE

FORCES AGAINST CHANGE

Total 10 Total 11

4

2

3

1

3

3

1

3

1

Action

Train staff (increase cost by 1) eliminate fear of technology (reduce fear by 2)

Show stafff change is necessary for business survival (new force in favor +2)

Staff shown new machines could add interest and variety to jobs (new force + 1)

Raise wges to to reflect new productivity(cost+1,loss of overtime -2)

Slightly different machines with filters to eliminate pollution (environmental impact -1)

Total For 13 Total against 8

Strategic Groups

Cluster of firms based on technological leadership ,degree of product quality, pricing policies, choice of distribution channels and degree of customer service.

Indian Pharma –Exploiters (Neuland labs), Explorers (CIPLA), Outsourcers (Dishman Pharma), emerging globals(e.g Dr Reddy’s) and globals (e.g Ranbaxy).

Restaurant industry – fast food, fine dining based on preparation time, pricing and presentation

Other Analysis -Strategic Groups Strategic Groups – are dynamic collections of

companies that compete simultaneously fo customers and capital

conceptually defined clusters that share similar strategies and business models and therefore compete more directly with one another than with

other firms in the same industry. Firms which appear homogenous form one

strategic group. Similar groups that compete for customers and

capital.

Bench marking

Comparing your organisation or part of your services with others

Why are others better? How are others better What can we learn? How can we catch up? How can we become the best in our sector? Which are the right organisations to compare with?

–Direct competitors (domestic), International, indirect competitor (providing related product or service, other successful companies

Steps in Benchmarking

Identify Product / service to be benchmarked Identify comparable institutions Collect data Identify performance gap Estimate performance potential Communicate and get acceptance Establish targets Develop action plans Act according to targets and monitor the process Adjust process according to monitoring results Continue the cycle from step !

Stakeholders Analysis

Describes a process where all individuals or groups that are likely to be affected by a proposed action are identified and then sorted according to how much they can affect the action and how much the action can affect them

Primary-ultimately affected Secondary -intermediates or indirectly affected Key stakeholders – significant influence or

importance in organisation

Focus Groups

A form of qualitative research in which a group of people are asked about their perceptions, opinions, beliefs and attitudes towards a concept product service idea ,advertisement or packaging

Acquires feedback, test marketing, test new product before being made available to public

Competitor’s Analysis

Actions and reactions of individual firms within and industry or strategic groups.

Determine each competitor’s reaction to industry and environmental changes

Anticipate response of each competitor to the strategic moves by other firms

Develop a profile of the nature and success of the possible strategic changes each competitor might undertake

Components of Competitor Analysis Future goals of competitor – Comparison

with own Current strategy of competitor – How are we

currently competing Key assumptions made by competitor of

future –volatile ,status quo. Competitor’s assumptions

Capabilities of competitor(SW vs competitors)

Business Process Mapping

Activity involved in defining exactly what business entity does, who is responsible,to what standard a process should be completed and how the success of a business process can be determined.

Once done no uncertainty as to the requirements of every business

To meet ISO 9000 standard requires a process approach and business process maps help in assisting the same Then the process becomes effective and efficient.

Visually depict s the sequence of events to build a product or produce an outcome.

Business Process mapping

Biz Process – Acollection of interrelated tasks which accomplishes a particular goal

Three types – management – operational, supporting

Begins with acustomer need and ends when that need is satisfied

Increases effctiveness (add cusomer value) and increases efficiency (save time/money)

If a step does not add value why do it

BP Mapping

Identify all your processes Identify the person responsible for that process Break down each process into individual steps from

start to finish –document Physically map out the steps on computer,

whiteboard Start with the most ineffective or inefficeient

processes – customer/staff dissatisfaction, staff time

Tactics

Position Defence Flank Defence Counter offensive defence Mobile defence Contraction defence Frontal Attack Flank Attack Encirclement Attack Bypass attack Guerilla Attack Couterfeiter Cloner Imitator Adapter

Subjective Factors in Strategic Choice Govt Policy Perception of CSF and distinctive

competencies Commitment to past strategic actions Strategist’s decision style and attitude to risk Internal political considerations Timing and competitor analysis

Strategic plan

After strategy formulation next phase is strategic plan.

A document which provides information regarding the different elements of strategic management and the manner in which the organisation and its strategists propose to put strategies into action.

Strategic Plan

Serve as a framework for decisions for securing support/approval

Provide a basis for more detailed planning Explain the business to others in order to

inform ,motivate and involve Assist benchmarking and performance

monitoring Stimulate change and become building

blocks for next plan.

Contents of Strategic Plan

Statement of Strategic Intent Environmental appraisal results Organisational Appraisal results Strategies chosen and assumptions Resource Allocation Contingent strategies Organisation structure proposed Functional Strategies and implementation Performance evaluation and assessment of success

Contents of Strategic Plan

Statement of Strategic Intent – vision ,mission, business definition, goals and objectives.

Results of environmental appraisal Results of organisational appraisal Strategies chosen and the assumptions under which

strategies would be relevant Contingent strategies to be used under different

conditions .

Contents of Strategic plan

Strategic budget for the purpose of resource allocation for implementing strategies and the schedule for implementation

Proposed organisation structure and the major organisational systems for strategy implementation including the top functionaries and their role and responsibility

Functional strategies and the mode of their implementation

Measures to be used to evaluate performance and assess the success of strategy implementation

Contingent Strategies

Are strategies formulated in advance to deal with uncertainties, emergencies and disaster management that are natural part of the business.

Strategic choices are made on certain conditions, assumptions and premises which may not turn out to be valid. These shifts can be sudden with little time to react.

Some changes in environment are fast (market regulatory or international depending on industry) and others like social change is slow.

Strategic Choice

Focus Analyse Evaluate Chose

Process of Strategic Choice

Focus on strategic alternatives corporate level (expansion, stability,

retrenchment and combination) business level (low cost, differentiated,

focus) based on level of gap by Gap analysis (3-5 years time frame between present and desired performance and working back wards to see if it can reach through present level of efforts)

Process of Strategic Choice

Analyse- Strategic Alternatives- Few feasible alternatives by objective factors( like market share based on rational objective or prescriptive factors) or subjective factors( personal judgement, collective or descriptive factors like top management perception).

Strategic Choice (3)

Evaluate – based on analysis of subjective and objective factors

Chose - Clear assessment of choice of which alternative is most suitable under the existing conditions by making a blue print and also looking a t contingency strategies

Kalyani Group

Motive for Internationalisation Type of International Strategy group is

adopting

Strategy Implementation


Carries out the exercise of putting a freshly chosen strategy in place

Characteristics –

1. Action orientation

2. Comprehensive in scope

3. Demanding varied skills

4. Wide ranging involvement

5. Integrated process


Barriers Overcome by adopting clear model of effective

strategy implementation and Effective management of change Formulation and implementation are iterative

functions and feed upon each other in a two way relationship through forward and backward linkages.

Intended strategies may not get implemented in the intended way.


Nature – Action oriented, comprehensive in scope, varied skills required, wide ranging involvement, integrated process.

Linkages between formulation and Implementation.

Project Implementation Procedural Implementation Resource Allocation

Barriers to Strategy Implementation Barriers – inability to change, poor strategy,

no guidelines for implementation, poor information sharing, unclear responsibility/accountability,

Adopting clear model of strategy implementation and effective management of change in complex situations

Interrelationship between Formulation and Implementation (action and doing) Forward Linkages – managerial task

Changes to structure leadership styles to operationalise strategy

Strategy Formulation Strategy Implementation

Backward Linkages – strategy implemented in the past, indented strategy, unrealised strategy and emergent strategy

Unrealised Strategy

EmergentStrategy

Deliberate StrategyIntended

Strategy RealisedStrategy

Implemented Strategy

FormulatedStrategy

MINTZBERG CONCEPTION OF TYPES OF STRATEGY

Resultant outcome

Influences

Simple Model of Strategy Implementation

Activating Strategies Managing Change

Achieving Effectiveness

ProjectImplementation

ProceduralImplemetation

Resource Allocation


Leadership Implementation

Behavioural Implementation

FunctionalImplementation

OperationalImplementation

Strategic Plan

Activating Strategies

Managing change Achieving Effectiveness

FEEDBACK

Evaluation & Control

Strategy

Plans

Programmes

Projects

Budgets

Policies,ProceduresRules and Regulations

PYRAMID OF STRATEGY ACTIVATION

Strategy Plans Programmes Projects Budgets

PolicyRules

Regulations procedures

Strategy to Project Implementation

Strategic ManagementProcess

Project Management Process

Initiating Planning Executing Controlling Closing

Project Objectives

Control Measures

StrategyImplementation

Strategy Evaluation

And Control

STRATEGY IMPLEMENTATION THROUGH PROJECT MANAGMENT

Managing Change

Respond to Dynamic environment –challenges Organisation keep internally fit Strategy implementation itself requires change Innovation and learning Triggers set within or outside the organisation Identify need, prepare , minimise resistance and

then start change with monitoring Degree, timing and Activity areas of change are

important to manage change effectively

Organisational Effectiveness

Goal Model – how well goals achieved (profitability growth market share))

Resource based model – ability of organisation to obtain resources (finance raw materials)

Internal process Model – how well are internal activities working (corporate culture, climate,team work, communication)

Conflicting values model – consolidating different viewpoints, activities and outcomes so diverse indicators of performance are used (dominant issues –external or internal,values, stability or change)

Change Management

Degree of change Timing of change Activity areas of change

Organisational Effectiveness

Means the degree to which an organisation is able to achieve its objectives through the implementation of strategies.

Project Management

Key enabler of strategy implementation within organisations

Not something that are an appendage to strategy implementation but need to be part of overall strategy.

Supported by the right approach, processes and tools and techniques

Must be executed fully inline with the strategies they support.

Project management

Awareness of procedural framework within which plans, programmes and projects have to be approved by the govt. at the central, state and local level.

Project management is for creation of the infrastructure required to put plans into action.

Procedural implementation helps in getting the go ahead form concerned agencies to implement projects

Regulatory Requirements

Formation of a company Licensing procedures SEBI Requirements MTRP/Competition Act Requirements Foreign Collaboration procedures Import and Export Requirements Patenting and trade mark requirements Labour legislation requirements Environmental protection requirements Consumer Protection Requirements Incentives and facilities benefit.

Procedural Implementation

Reacting to regulation Conform Confront Lobbying PR Existentialist –look for opportunities Dynamic– govt. respond to changes Anticipate changes

Assistance

Liaison Formal and Informal – approval, permissions, statutory benefits

Corporate Affairs Consultants Advisors CA’s Company Secretary Legal Experts Lawyers Political donations and lobbying Sickness Taxation Internationalisation- different countries environment

Resource Allocation

Procurement, commitment and distribution of of financial ,human, informational and physical resources to strategic tasks for achieving organisational objectives

Managers guided by strategy

Aligning Resources to Strategy Challenge is how to allocate resources to

competitive strategic tasks that lead to the accomplishments of organisational objectives and realisation of strategic intent

Done through strategic budgeting by iterating strategic decision making between different levels of management

Ways of Resource Allocation

Top Down Approach Bottoms Up Approach Mix of Both (Strategic Budgeting ) –iterative

manner , assumptions made, inputs received and used prepared by Exec level committee

Trade offs

Level of Management

Top Management

ExecutiveManagement

OperatingManagement

CorporatePolicyGuidelines

Desired longAnd short rungoals

ResourceAvailability

StrategicBudget

Position PapersEnvrt,Core Comp.MarketingPast Performance

Minimising gaps

Target/OperationalPlans

Proposals

Approval And sanction

Implementation

STRATEGIC BUDGETING PROCESS

Factors in Resource Allocation Objectives of the organisation –explicit

&implicit Preference of dominant strategists – Decision

maker Internal politics – units see it as possession

of power External influences – outside govt,

shareholders, FIs, legal requirements,social responsibilities

Difficulties in Resource Allocation Scarcity of resources Restrictions on generating resources for

newer units and those with greater potential for growth

Overstatement of needs Tendency to imitate competitors

Method

Role of CEO is major Participative mode Communication of strategic plan to all

executives creates congenial environment for decisions on resource allocation


Is the way in which the tasks and sub tasks required to implement strategy are arranged.

Relationship of structure and strategy creates its own special requirement that should be met by structure.

Structure

Identifies formal reporting relationships -hierarchy levels and span of control

Grouping into departments and of departments in the organisation

Design of system to ensure communication coordination and integration of efforts across departments.

7-S Framework

Strategy

Structure

Systems

Skills Style

Staff

Shared Values

McKinsey Model Seven factors for Organising Co

McKinsey 7 -S

Management model describing seven factors that enable organising a company in a holistic and effective way.

Together these factors determine how a company operates

7 –S Framework

Shared values - -superordinate goals –what the organisation stands for and what it believes in

Strategy – plans for allocation of a firms scarce resources over time to reach identified goals – envrt ,customers, competition

Structure – way in which organisation units relate to each other- centralised ,functional,divisions or decentralised ,matrix,network ,a hoilding co

Systems – procedures,processes and routines that define how work is done- fin systems, R&S, P&PA,info system

Staff – no and types fo employess Style – cultural sde of the organisation and how key managers

behave to achieve goals (Management style ) Skills – distinctive capabilities of personnel or organisation as a

whole .Compar(e :core competencies).

Uses

Value based Management model Diagnostic Tool Guides organisational change Combines rational and hard elements with

soft and emotional elements Managers must act in parallel and all Ss are

interrelated

Structure of Organisations

Vertical (superior and sub ordinates – division of labour and specialisation)

Horizontal (coordination and collaboration among peers created by integration for team work and cross function information systems)

Challenge is to create and manage organisation requirements and coexistence of both vertical and horizontal structure at the same time

Horizontal and Vertical Structures Shared tasks Flexible authority Few rules and

regulations Horizontal

communications Decentralised decision

making Emphasis on learning

Specialised tasks Hierarchy of authority Rules and regulations Vertical

communications and formal reporting systems

Centralised decision making

Emphasis on efficiency

Changing Environment impacts strategy Strategy determines the type of structure to

have Strategy and structure affect each other more

on the forward side Strategy and structure is spanned by

environment and in one direction and effectiveness in the other.

Relationship –Environment, Strategy and Structure

Environment

Strategy

Structure

Effectiveness

Environment Strategy Structure and Effectiveness


Strategic Plan is

Implemented

New Strategies

Put inPlace

ImpleMentationOf new

Strategies

Mismatches

PerformanceImproves

StructureIs changed

EffectivenessIs reduced

Performancedeclines

Life Cycles of Organisations

Stage I -Small scale enterprises –owner manager. Simple objectives, operations. Expansion

Stage II – Bigger than stage I and wider in scope of operations. Marked by functional specialisation and process orientation. Stability and Expansion.

Stages

Stage III – large and scattered multi location, SBUs and Divisions, Stability and Expansion

Stage IV – complex, multi plant multi product organisation resulting from related or unrelated diversification. Divisional organisation with corp. headquarters. Corporate and business level strategies coexist

SBU

A discrete element of a business serving specific products-markets with readily identifiable competitors and for which strategic planning can be conducted

Types of Organisational Strcture Entrepreneurial Functional Divisional SBU Matrix Network

Product based Customer based Process based Goegraphic Intrapreneurial

Evolving Structures –Horizontal Horizontal – based on a structure that

corresponds to the process of providing products or services to the customer rather than the functions that the organisations perform.

Instead of marketing finance etc forming the basis of departmentation, it is core processes managed by cross functional teams used as basis for structuring.

Evolving Structures –Delaminated Matrices Delaminated matrices are combinations of

horizontal organisations with a functional structure. This way retains the process oriented horizontal

teams with functional departments providing the depth of expertise and capabilities to perform those functions.

In this way the functional layer and the process layer of the traditional matrix organisation is separated and the workers and staff of the firm are assigned to either functions or teams but not both.

Organisation Design

based on key activities derived from mission and objectives

Purpose is to create the right structure that fits the requirement of strategy to be implemented

Difficult task to find the right type of structure to fit and satisfy the requirements of strategy.

Dimensions of Organisation Design Structures should match the requirements of

strategy and needs of organisation as it grows from one stage to the next

Purpose of organisation design is to create the right structure.

Structural Dimensions- describe the internal characteristics of an organisation

Contextual Dimensions describe the organisational setting that influences and shapes the structural dimensions.

Organisational Design- Structural Dimensions Formalisation- amount of written documentation to

describe procedures, job descriptions, regulations and policy manuals.

Specialisation- degree of sub division of tasks Hierarchy of authority – reporting relationships and span of

control Centralisation – extent of decision making by top authority Professionalism – level of effective formal education and

training displayed and practiced Personnel Ratios- deployment of people (administrative

ratio, clerical ratio, indirect to direct labour employees ratios).

Organisation Design – Contextual Dimensions Environment Goals and Strategy Culture Technology Size

Steps required for Organisation Development Identifying key activities Grouping similar activities that need common skills Choice of structure to accommodate different

groups of activities Creation of department and divisions to which the

different groups of activities could be assigned Establishing interrelationship among departments

and divisions for coordination and communication

Routine Tasks

Vertical Structure

RigidCulture

FormalSystems

Competitive Strategy

Horizontal Structure

Empowered Roles

Adaptive Culture

Shared Information

CollaborativeStrategy

STABLE ENVIRONNMENTMechanical designEfficient Performance

TURBULENT Natural System DesignLearning Organisation

CONTEMPORARY ORGANISATION DESIGN

Traditional Design Emerging Design One large firm Vertical communication Central top down decision

making Vertical integration Work quality based teams Functional work teams Minimum training Individual focussed

specialised job design

Small business having cooperative characteristics

Horizontal communication patterns

Decentralised decision making

Outsourcing and virtual organisations

Autonomous work teams Cross functional work teams Extensive training Value chain team focussed

job design

Organisation Design For Business Strategies Cost vs Differentiation Efficiency orientation Strong central authority Tight cost controls Detailed control reports SOPs Efficient procurement Close supervision Routine tasks Limited or no employee

empowerment

Learning orientation Flexible loosely knit

organisation Stress on horizontal

coordination than vertical control for product development

Strong R&D and marketing capability

Creativity and innovation encouraged

Rewards for risk taking Broad guidelines for

performance of duties Liberal employee

empowerment.

OD for Corporate Strategies

Concentration- no change but added emphasis on marketing for marketing penetration and development/R&D for product development

Integration- Horizontal (greater emphasis on OD and structure to accommodate adjacent business units) and vertical (extend the value chain forward and backward and extend structure accordingly).

OD for Corporate Strategies

Diversification – Implement through multidivisional and SBU structures. Depending on if related or unrelated, Corproate headquarters may retain some functions and decentralise others

Related would create requirement for retaining linkages among functions and departments within organisations to maintain synergies for economies of scope.

Unrelated through multi division structure

OD Structures for Internationalisation Four types create own requirements for for

OD and change Global strategy –global product structure International Strategy – international division

structure as part of hybrid structure Multidomestic strategy – Global geographic

structure Transnational strategy – Global matrix

Structure

Global Strategy

Global Product

Structure

Transnational Strategy

Global Matrix

structure

International Strategy

International Division Structure

Multi Domestic Strategy

Global Geographic

Structure

Pressures for Global Responsiveness

PressuresFor CostReduction

Structures for Internationalisation Strategies

OD Structures for Cooperatiive and Network Structures

Cooperative – Network structure within and network structure outside for creating and maintaining interorganisational relationships

Region A Structure

ProjectM groupStructure Function X

Structure

Region B Structure

Project GroupN Structure

Function Y structure

CorpHeadquarters

Structures for Digitalisation Strategies Flexible organisation structure, Small decentralised organisation Improved coordination Processes may be redesigned Greater interorganisational relationships

Organisational Change

Structural change – Modification in structural relationships of reporting/ changes in depts. etc

Accompanied by behavioural Change to absorb impact of organisational changes

All organisations make changes in their strategy, structure and administrative procedures from time to time.

Change response now moved from increasing rigid vertical structure to more flexible horizontal structures by empowering employees, shared information and adaptive culture

Changes in Organisation Structure Design Restructuring/Reorganisation – changing

organisation structure in line with environmental changes and strategies

Reengineering (business process reengineering) – fundamental rethinking and radical redesign of business process to improve cost quality and speed

Delayering or flatter structures- reducing the number of layers in the organisational hierarchy

Network structures Interorganisational relationships Virtual Organisations

Structure for Business level Strategies Cost Leadership – Efficiency approach Differentiation – learning approach Focus - similar but structure with different

emphasis

Linking Strategies and Structure Integration and Diversification – Multi

divisional and SBU Internationalisational – Tailored for

requirement Cooperative Strategies –Network Digitalisation – based on impact on

organisation

Organisational System

Set of interacting elements devised to accomplish a process.

Wheels that make an organisation move Transformation process requires a variety of

management and production systems and sub systems.

Organisation breaks objectives into tasks and tasks are performed by groups delegated the responsibility and discharge with coordination and communication

Performance needs to be appraised and desirable behaviour promoted.

System Processes

Defining major tasks to implement strategy Grouping of tasks on skill required/value chain basis Division of responsibility and delegation of authority Coordination and divided responsibility Design and administration of 1. Information system2. Appraisal system3. Motivation System4. Reward system5. Development system6. Planning system


Structural mechanisms are the hardware Systems are the software of implementation Need to look closely at

1. Information – to complete task and coordination of activities with others

2. Control –

3. Reward system.

Implementing Information systems Policy Stance (strict or flexible) Hardware configuration( mainframe,

microcomputers) System (transaction processing system,DSS)

Generic

Strategies

Stability (efficiency

Conc(mkt /prod devp)

Growth(Integration,

Diversification,

Internationalisation)

Key Rigid Policy Stance (clearly defined resp.)

Flexible policy stance(learning orientation,creativ

e response)

Dimensions Mainframe computers

Micro computers

Transaction processing system

Decision Support

System

Computer Information Systems and Strategies

Control

Process for ensuring that behaviours and performance conform to an organisation’s standards ,including rules procedures and goals

Ensures that implementation of strategy takes place

Control Process

Establish standards Measure actual performance Evaluate actual vs Standard Determine and apply corrective action

Tailoring Control to Strategy -factors Need for control - structure type Type of control – preventive corrective,

formal or informal, direct or indirect, social or individual

Integrating formal and informal control

Control Systems

Stability/Cost leadership

1. Formal

2. Traditional

3. Cost control focus

4. Specific operating goals and budget

5. Rigid budget controls

Diversification/ Intl

1. Informal

2. Open control

3. Long term controls

4. Interactive use of budgets

5. Informal communications

Borderless Structures –Present Boundaries Horizontal Boundaries – depts / functions Vertical Boundaries – ops/mgt, corporate and

division Geographic Boundaries – physical locations,

countries /regions. External Interface boundaries – customers

and company, suppliers, partners, regulators, competitors

Borderless Structures -

Outsourcing Strategic alliances Product –team structures Reengineering Restructuring Through culture and shared values

Reward System -

Designed to induce Strategically desired behaviour Performance evaluation and feed back Compensation – salary bonus, stock

options ,promotions and perks Linked to control and motivation towards desirable

behaviour Wage inflation and talent shortage due to growth Parity for similar work or responsibility and to

differentiate between unequal grades of employees.

Reward System

High and differentiated compensation – Salary,ESOP, Bonus, promotions and perks

Innovative titles Faster career progression Training Congenial work environment More satisfying jobs Overseas exposure Opportunities to work on cutting edge technologies Retention plans Referral schemes

Reward and Strategy Implementation Stability strategies – improve efficiency and

have appraisal that use objective short term criteria

Expansion - Broad based appraisal and long range performance appraisal

Diversification /Internationalisation- Group rewards and team performance criteria over individual awards.Company wide incentives for knowledge sharing

Nature of Economy Controlled Protected

Regulated

Globalised

Liberalised

Privatised

Environmental characteristics

Certain,stable and predictable

Stability/controlled growth

Unstable volatile and bewildering

Strategic Continum Stability/Controlled growth

Focused expansion/ selective divestment

Structural Alternatives

Entrepreneurial Functions

Divisional/SBU/Alternate and new forms

Information

System

Efficiency –Orientation

Decisional- orientation

Control System Formal –direct /mechanistic

Informal –indirect /organic

Reward System Efficiency –based; monetary.informal ,internal focused

Non monetary,formal

External -focused

SYSTEM CHARACTERISTICS vs STRATEGIC CONTINUM AND STRUCTURAL ALTERNATIVES

Managing

Information ,control and reward (appraisal, motivation, development) and planning systems and processes are managed and are the core of any structure

These play an important role in strategy implementation .

Systems and structure have to change to meet the requirements of strategy.

Structural changes also are accompanied by behavioural changes that affect strategy impelementation

Organisational Process

A series of actions undertaken to achieve a predetermined result

Classification by Contingency Theories Mechanistic Organic

business policy and strategic management - 2

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