business strategy lecture 2

8/3/2019 Business Strategy Lecture 2

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Management Accounting Business Strategy


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Strategic Planning Model

Reassess anddevelop the

Organizationsmission andobjectives

Reassess anddevelop the

Organizationsmission andobjectives

Formulatestrategies

Formulatestrategies

Implementstrategies

Implementstrategies

Evaluateresults

Evaluateresults

Analyzethe

environment

Analyzethe

environment

IdentifyOpportunities

Andthreats


Andthreats

Analyzethe

Organizationsresources

Analyzethe


IdentifyStrengths

andweaknesses

IdentifyStrengths

andweaknesses

Identify theOrganizationsCurrent vision

mission,Objectives, and

Strategies

Identify theOrganizationsCurrent vision

mission,Objectives, and

Strategies

What is Strategy ?


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What doweWant to

Become ?

Intellectual thoughts aboutfuture Vision

General Motors vision is to be the world leader in transportation productsand related service

Reassess anddevelop the Organizations

mission and objectives



Formulatestrategies

Formulatestrategies

Implementstrategies

Implementstrategies

Evaluateresults

Evaluateresults

Analyzethe

environment

Analyzethe

environment


Andthreats


Andthreats

Analyzethe


Analyzethe


IdentifyStrengths

andweaknesses

IdentifyStrengths

andweaknesses

Identify the OrganizationsCurrent vision mission,

Objectives, and Strategies



Vision


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What is ourBusiness ?

Reason for existence Mission

FedEx is committed to our people Service Profit Philosophy. We willproduce outstanding financial returns by providing totally reliable,competitively superior, global, air-ground transportation of high-prioritygoods and documents that require rapid, time-certain delivery





Formulatestrategies

Formulatestrategies

Implementstrategies

Implementstrategies

Evaluateresults

Evaluateresults

Analyze

theenvironment

Analyze

theenvironment


Andthreats


Andthreats

Analyzethe


Analyzethe


IdentifyStrengths

andweaknesses

IdentifyStrengths

andweaknesses





Mission


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Goal/Long termobjectives

General Statementof aim or purposeAnnual

Objective

Quantificationof goals

Goal/Long term objective Annual Objective

To enhance customer satisfaction Number of complaints shoulddecrease by 20% over a period of one

year





Formulatestrategies

Formulatestrategies

Implementstrategies

Implementstrategies

Evaluateresults

Evaluateresults

Analyze

theenvironment

Analyze

theenvironment


Andthreats


Andthreats

Analyzethe


Analyzethe


IdentifyStrengths

andweaknesses

IdentifyStrengths

andweaknesses





Goals and Objectives


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Identify current strategies

Operational Strategy

Business Strategy

CorporateStrategy





FormulatestrategiesFormulatestrategies

Implementstrategies

Implementstrategies

Evaluateresults

Evaluateresults

Analyzethe

environment

Analyzethe

environment


Andthreats


Andthreats

Analyzethe


Analyzethe


IdentifyStrengths

andweaknesses

IdentifyStrengths

andweaknesses





Identify Strategies


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Identify current strategies

Objectives

Goal

Reduce by20%in one year

Reduce Complaints

CustomerSatisfaction


Business Strategy

CorporateStrategy






Implementstrategies

Implementstrategies

Evaluateresults

Evaluateresults

Analyzethe

environment

Analyzethe

environment


And

threats


And

threats

Analyze

th

eOrganizationsresources

Analyze

th

eOrganizationsresources

Identify

Strength

sandweaknesses

Identify

Strength

sandweaknesses





Identify Strategies


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Reassessanddevelop the Organizations





Implementstrategies

Implementstrategies

Evaluateresults

Evaluateresults

Analyzethe

environment

Analyzethe

environment


Andthreats


Andthreats

Analyzethe


Analyzethe


IdentifyStrengths

andweaknesses

IdentifyStrengths

andweaknesses





Macro /Direct /

TaskEnvironment

Macro /Direct /

TaskEnvironment

Macro / Direct /General

Environment

Macro / Direct /General

Environment

PorteranalysisPorter

analysis

PESTELanalysisPESTELanalysis

ThreatsThreats

OpportunitiesOpportunities

Analyze the external environment


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Formulatestrategies

Formulatestrategies

Implementstrategies

Implementstrategies

Evaluateresults

Evaluateresults

Analyzethe

environment

Analyzethe

environment


Andthreats


Andthreats

Analyzethe


Analyzethe


IdentifyStrengths

andweaknesses

IdentifyStrengths

andweaknesses





Internal

Capabilities

Weaknesses

Strength

Strategic Planning ModelAnalyzing the internal environment


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Analyzethe


Analyzethe


InternalCapabilities

Weaknesses

Strengths

Strategic Planning ModelAnalyzing the internal environment


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Strategic Planning ModelAnalyzing the environment


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Organization Profile External Environment

Gap = Basis for Long-Term

Strategic Plan

Gap = Basis for Long-Term

Strategic Plan

Strategic Planning ModelAnalyzing the environment


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Reassess the mission and objectives

Annual Objectives

Goal/

Long term objectives






Implementstrategies

Implementstrategies

Evaluateresults

Evaluateresults

Analyzethe

environment

Analyzethe

environment


Andthreats


Andthreats

Analyzethe


Analyzethe


IdentifyStrengths

andweaknesses

IdentifyStrengths

andweaknesses







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Formulate strategies

Annual Objectives

Goal/

Long term objectives


Business Strategy

CorporateStrategy






Implementstrategies

Implementstrategies

Evaluateresults

Evaluateresults

Analyzethe

environment

Analyzethe

environment


And

threats


And

threats

Analyze

theOrganizations

resources

Analyze

theOrganizations

resources

Identify

Strengthsand

weaknesses

Identify

Strengthsand

weaknesses





Estimation

of viable price

Whichsegment to sell

LiquidationStrategy


Finance

Finance

Finance

Formulate strategies Corporate level strategies


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Reduce by20% in one year

Reduce

Complaints

Customer

Satisfaction

Objectives

Goal

OperationalStrategy

BusinessStrategy

CorporateStrategy

Estimationof viable price

WhichSegment

to sell

Liquidation

Strategy

Finance

CurrentYear plan

WhichProduct

Product

DevelopmentFinance

Finance

Reassess the

mission andobjectives

Formulate Strategies

Strategic Planning ModelFormulate strategies Corporate level strategies


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Reassess the




HR

Operations

Finance

Mkt

Operational

Strategy

BusinessStrategy

CorporateStrategy

Tactics-activitiesOperational / business plans

Operational & overall budgets

Reduce by20% in one year

Reducecomplaints

Customersatisfaction

Vision

Mission

Strategieslong term

objectives/Goals

Annual

Objectives

Measures/standard

O1 O2

AI1AI2AI3

M1M2M3

T1 T1T1Targets

Initiatives/Activities

Objectives

Goal


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Corporate level Strategies:Guidelines from top

Overalld

ecisionsGuiding decisions

Intensivestrategies

Defensive

strategies

Integrationstrategies

Diversification

strategies

OperationalStrategy

BusinessStrategy

CorporateStrategy

Otherstrategies

Porters genericstrategies

An overall suite of the organization



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SO

strategies

SO

strategies

WO

strategies

WO

strategies

STstrategies

STstrategies

WTstrategiesWT

strategies

TOWS Matrix

Oppo

rtunities(O)

Strengths (S) Weaknesses (W)

Threats(T)

Strategic Planning ModelFormulate strategiesCorporate level strategiesWhich Strategy to select


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Market

Penetration

Market

Penetration

Product

Development

Product

Development

MarketDevelopment

MarketDevelopment

DiversificationDiversification

Ansoff Matrix

Markets

/Are

as

Products / Solutions

Present

Present

New

New

Formulate strategiesCorporate level strategiesWhich Strategy to select


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BenchmarksFinance ?


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Diversification Finance ?Overall ROI should be

20% over five years

BenchmarksFinance ?



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At the level of SBU for achievement of corporate strategy

OperationalStrategy

BusinessStrategy

CorporateStrategy

6

7

8

5

Focused differentiation

4Differentiation

3

Hybrid

2Low price

1

No frills

Strategies destinedFor ultimate failure

Low

High

HighLow

Strategic Planning ModelFormulate strategies Business level strategies


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Selection from corporate level strategies as trickled down effect

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Price Based Strategies: Position 1 & 2

Hybrid Strategy: Position - 3

Differentiation Strategy: Position - 4

Focused differentiation: Position - 5

Failure Strategies: Position 6,7 & 8

OR/AND

Strategy Clock



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SO

strategies

SO

strategies

WOstrategiesWO

strategies

STstrategies

STstrategies

WTstrategiesWT

strategies

TOWS Matrix

Opportunities(O)

Formulate strategiesBusiness level strategiesWhich Strategy to select

Strengths (S) Weaknesses (W)

Threats(T)


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Business level strategies

Guidelines at execution levelImplementation guidelines

BenchmarksFinance ?



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Overall ROI shouldbe 20% in five years

Finance ?

Operational

Strategy

BusinessStrategy

CorporateStrategy

Diversification

Business 1 =15%Business 2 = 5%

Enter in two differentbusiness

Business oneBusiness two

Finance ?

?



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It is set of actions to implement business level strategy

Marketing strategyFinancial strategyR & D strategyOperations strategyPurchasing strategy

Logistics strategyHR strategyI.T strategy

Marketing actions plansFinancial actions - plansR & D actions - plansOperations actionsPurchasing actions - plans

Logistics actions - plansHR actins - plansI.T actions - plans

Overall year wise consolidated budget

Marketing budgetFinancial budgetR & D budgetOperations budgetPurchasing budget

Logistics bud

getHR budgetI.T budget

Overall year wise business plan

Formulate strategies Operational level strategies

OperationalStrategy

BusinessStrategy

CorporateStrategy

Tactics-activitiesOperational/business plans


Operational Strategies Tactics - Activities Operational Budgets

Finance ?


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Product Strategy

Pricing strategy

Placement strategy

Promoting strategy

Marketing strategies

Capital acquisition

Resource allocation

Financial strategies

Strategic Planning ModelFormulate strategies Operational level strategies


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Operational level strategiesTactics ActivitiesOperational plans

Marketing strategyFinancial strategyR & D strategyOperations strategyPurchasing strategyLogistics strategy

HR strategyI.T strategy

Marketing actions plansFinancial actions - plansR & D actions - plansOperations actionsPurchasing actions - plansLogistics actions - plans

HR actins - plansI.T actions - plans

Marketing budgetFinancial budgetR & D budgetOperations budgetPurchasing budgetLogistics budget

HR budgetI.T budget

Develop ForecastedResults business plans

& BudgetsFinance ?

Strategic Planning ModelFormulate strategies Operational level strategies


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Reassess the



Strategic Planning ModelFormulate strategies

HR

Operations

Finance

Mkt

Operational

Strategy

BusinessStrategy

CorporateStrategy



Reduce by

20% in one year

Reducecomplaints


Vision

Mission

Strategieslong term

objectives/Goals

Annual

Objectives

Measures/standard

O1 O2

AI1AI2AI3

M1M2M3

T1 T1T1Targets


Objectives

Goal

OperationallevelstrategiesTactics ActivitiesOperationalplans

.

MarketingstrategyFinancialstrategyR & DstrategyOperationsstrategyPurchasingstrategyLogisticsstrategyHR strategyI.T strategy

- - - - - . -

Marketingactions plansFinancialactions- plansR & Dactions-plansOperationsactionsPurchasingactions- plansLogisticsactions-plansHR actins-plansI.T actions-plans

.

MarketingbudgetFinancialbudgetR & DbudgetOperationsbudgetPurchasingbudgetLogisticsbudgetHR budgetI.T bu dget

DevelopForecasted Resultsbusinessplans

& Budgets?Finance ?


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Overall ROI shouldbe 20% five years

Finance ?

OperationalStrategy

BusinessStrategy

CorporateStrategy

Diversification

Business 1 =15%Business 2 = 5%

Enter in juices businessEnter in textile businessFinance ?

Business 1 = 8% + 8%Business 2 = 3% + 2%

Mange juice lineApple juice line

Casual wear T-shirts lineFormal wear line

Finance ?

Implementation

Tactics activities of alldepartments to implement

operational strategyYear wise

Businessplan

Year wisebudget

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Strategic Planning ModelFormulate strategies Operational level strategies & Implementation Plan


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Formulate strategies

Objectives

Goal

OperationalStrategy

BusinessStrategy

Corporate

Strategy The Key


Finance

Finance

Finance

OperationalStrategy

BusinessStrategy

CorporateStrategy

Implement strategies

Implement strategies

Tactics activities of alldepartments to implement

operational strategy Year wiseBusiness

plan

Year wisebudget

33


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Reassess the


Formulate Implement Strategies

Strategic Planning ModelFormulate Implement strategies

HR

Operations

Finance

Mkt

Operational

Strategy

BusinessStrategy

CorporateStrategy



Reduce by

20% in one year

Reducecomplaints


Vision

Mission

Strategieslong term

objectives/Goals

Annual

Objectives

Measures/standard

O1 O2

AI1AI2AI3

M1M2M3

T1 T1T1Targets


Objectives

Goal

OperationallevelstrategiesTactics ActivitiesOperationalplans

.

MarketingstrategyFinancialstrategyR & DstrategyOperationsstrategyPurchasingstrategyLogisticsstrategyHR strategyI.T strategy

- - - - - . -

Marketingactions plansFinancialactions- plansR & Dactions-plansOperationsactionsPurchasingactions- plansLogisticsactions-plansHR actins-plansI.T actions-plans

.

MarketingbudgetFinancialbudgetR & DbudgetOperationsbudgetPurchasingbudgetLogisticsbudgetHR budgetI.T bu dget

DevelopForecasted Resultsbusinessplans

& Budgets?Finance ?


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Implementstrategies

Implementstrategies

Evaluateresults

Evaluateresults

Analyzethe

environment

Analyzethe

environment


Andthreats


Andthreats

Analyzethe


Analyzethe


IdentifyStrengths

andweaknesses

IdentifyStrengths

andweaknesses





Business Planyear plan &

Year-wise financialsincluding budgets

Activities

Tactics

Marketing Plan & budget

HR plan & budget

R& D plan and budget

other plans & budgets

Reassessthemission

and

objectives

Implementstrategies

Formulate

strategies

Yearwisea

ctivities

Year wise implementation

Yearwise

and

overall

bu

dget

Year-wiseand

ov

erallbusinessplan

Strategic Planning ModelImplement strategies


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Process

Marketing strategyFinancial strategyR & D strategy

Operations strategyPurchasing strategyLogistics strategyHR strategyI.T strategy

Marketing actions plansFinancial actions - plansR & D actions - plans

Operations actionsPurchasing actions - plansLogistics actions - plansHR actins - plansI.T actions - plans

Capital budgeting :NPV

Marketing budgetFinancial budgetR & D budget

Operations budgetPurchasing budgetLogistics budgetHR budgetI.T budget

Tactics - Activities Operational Budgets

Strategic plan

Vision, Mission,Long term objectives

Corporate strategy

Business strategy

Operational strategy

Budgeted Financial statements

Financial analysis: ROIBudgeting: Variance analysis

Integrating Strategy and Finance


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Strategy

Strategic Planning ModelIntegrating strategy and finance

SuitabilityExpectation

of stakeholders

AcceptabilityReturn / profitability

Risk

Cost effective

FeasibilityFunding sources

Develop ForecastedResults business plans

/ BudgetsFinance ?


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Business strategy

Operational

strategy

Implementation

Bench

mark: ROI

Evaluate

Formulation

Benchmark:

NPV ofprojects/ activitiesis positive

Bench

marks: bud

gets are ach

ieved

ToolsBenchmarks

Variance analysis

Capital bud

getingtechniques

Financial analysis

Finance

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Strategic Planning ModelEvaluate Strategies

Corporate strategy


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Corporate strategy

Business

strategy

OperationalStrategy

Implementation

Benchmark: ROI

Evaluate

Formulation

Benchmark:NPV of

projects/ activitiesis positive

Benchmarks:

budgets are achieved

ToolsBenchmarks

Varianceanalysis

Capitalbudgetingtechniques

Implementation

Communication

Financial analysis

Evaluate Strategies


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Corporate strategy

Business

strategy

OperationalStrategy

Implementation

Benchmark: ROI

Evaluate

Formulation

Benchmark:NPV of

projects/ activitiesis positive

Benchmarks:

budgets are achieved

ToolsBenchmarks

Varianceanalysis

Capitalbudgetingtechniques

Implementation

Communication

Financial analysis

Evaluate Strategies


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Planned benchmarks Actual benchmarks Interpretation

ROI

NPV

Budget

10% 164% Positive Variance

NPV should bepositive

Positive NPVachieve

Benchmarkachieve

- - -

Financial forecast reflect/evaluates that benchmarks set at corporate strategyand business strategy level are achievable through operational strategy and

implementation plan, therefore, strategy should be implemented

Strategy and FinanceEvaluate Strategies - Benchmarks comparison in strategy

implementation decision& use of finance


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Strategic Planning ModelEvaluate Strategies


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Strategic Planning

Strategic managementcan be defined as formulating, implementing and evaluating cross-functional sections

that enable an organization to achieve its objectives(Academic)

Strategic management vs Strategic planning

Summary& Key terms

Strategic planning(Applied)

Strategy FormulationStrategy FormulationStrategy FormulationVisionMission

Opportunities & ThreatStrengths & weaknessesLong term objectivesDeveloping and selecting strategies

Strategy FormulationVisionMission

Opportunities & ThreatStrengths & weaknessesLong term objectivesDeveloping and selecting strategies

ProductsBusiness

Resources allocationMarkets

Guiding actions /activities

ProductsBusiness

Resources allocationMarkets

Guiding actions /activities

Corporate level strategyBusiness level strategy

Operational level strategy


Operational level strategyStrategy Implementation

Annual objectivesActionable polices and procedures

Actionable itemsResource allocationBudgetsExecuting activities

Operational level strategyOperational level strategy

Culture

Organizational structureMarketing

MIS

HRChange management

BPR

Strategy EvaluationReviewing the current basis (SWOT)Measuring performance

Corrective action

Strategy EvaluationReviewing the current basis (SWOT)Measuring performance

Corrective action






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Strategic Planning

Strategic management Model

Summary& Key terms

Reassess/develop the Organizations

mission and longterm objectives

Reassess/develop the Organizations

mission and longterm objectives

Formulate, evaluateand selectstrategies

Formulate, evaluateand selectstrategies

Implementstrategies

Implementstrategies

Measure &Evaluateresults

Measure &Evaluateresults

Analyzethe

environment

Analyzethe

environment


Andthreats


Andthreats

Analyzethe


Analyzethe


IdentifyStrengths

andweaknesses

IdentifyStrengths

andweaknesses





Strategy formulationStrategy

ImplementationStrategy

Evaluation

An on going process, need retreat, communication is must. Formality relates with cost, accuracyand comprehensiveness etc


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Strategic Planning

Benefits of Strategic management

Summary& Key terms

General

Enhanced communication

Deeper understanding

Greater commitment

Better results

Financial

Increased profitability

Improved dales

High productivity

Non financial

Opportunity exploitation

Object oriented approach to problems

Effective allocation of resources

Integration within the organization

Clear responsibilities

Forward thinking

Positive attitude

Discipline and formality in organization


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Strategic Planning

Guidelines for effective Strategic management

Summary& Key terms

People process

Learning process

Words supported by numbers

Simple

Variation

Challenge to current strategy

Welcome bad news

Openness and sprit in inquiry

Not too formal

Simple language

Consider qualitative information also

Not too many strategies

Good ethics is good business


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Strategic Planning

Reasons for not doing Strategic planning

Summary& Key terms

Lack of knowledge /experience

Poor reward structures

Waste of time

Expensive

Laziness

Case of success

Fear of failure

Overconfidence

Past bad experience

Self interest

Fear of unknown

Honest difference of opinion

suspicion


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Strategic PlanningSummary& Key terms

Pitfall/mistakes in Strategic planning

Control over decisions

Satisfy regulatory requirements only

Hasty following of processFailure of communication of plan

Intuitive decisions

Non active support from top

Non use of plans as performance measure

Non involvement of all tiersNon support from different departments

See planning as unimportant

Immense formality


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Differentiation (Quality; Uniqueness;e.g., Luxury cars, Fashion Industry,

Brand Name Drugs)

Responsiveness (Reliability; Quickness; Flexibility;e.g.,Dell, OvernightDelivery Services)

Competitive Advantage through whichthe company market share is attracted

Competitive advantageSomething which gives the organisation advantage over its rivals.

Dells competitive advantage: Provide customized PC configurations, withshort delivery times and affordable prices.


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StrategistIndividuals who are most responsible for the success or failure of anorganization

Top managers

Decision making positionsPerforms the steps of strategic planning

Have different philosophies

Visionwhat do we want to become?

Mission

what is our business?


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Opportunities and threatsCome from external environment

Changes that can harm or benefit organization

Beyond control of organization

Environmental scanning Industry analysis

Strengths and weakness

Come from internal environment

Changes that can be controlled

Relates to operational areas

Relative to competitors


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Long term objectives - Goals

Specific objectives

Come from mission

More than one year

Challenging, measureable, consistent, reasonable, clear

Annual objectives

Short term milestones

Year based

Measurable, quantitative, challenging, realistic, consistent, prioritized

Established at corporate, business/divisional and operation/functionallevel

Should be all areas i.e. marketing, finance etc.

Base for resource allocation


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PoliciesMeans for achieving the objectives

Guidelines, rules, procedures to support objective

Usually separate for each function

Intuition and analysis

change

Business and military strategy


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Questions ?


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Thank You

business strategy lecture 2

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