presentation on strategic management (2)(2)

8/7/2019 Presentation on Strategic Management (2)(2)

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CORPORATE

STRATEGY

By: Dr. Ayesha FarooqAssistant Professor

DBA,AMU,Aligarh


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Environmental and Organizational

Appraisal

Corporate strategies

Competitive strategies

Strategic alternatives and choices

Strategy implementation

Strategy evaluation and control


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Checklist for a PESTEL Analysis

Political Future

Political parties and alignments at local, national orregional trading block level.

Legislation, e.g. on taxation and employment law

Relations between government and the organization

(possibly influencing the preceding terms in a major

way and forming a part of future corporate strategy)

Government ownership of industry and attitude to

monopolies and competitionSocio- Cultural Future

Shifts in values and culture

Change in lifestyle

Attitudes to work and leisure

Education and health

Demographic changes

Distribution of income

Economic Future

Total GDP and economic condition

Inflation

Consumer expenditure and disposable income

Interest rates

Currency inflation and exchange rates

UnemploymentEnergy costs, transport costs, communications costs,

raw materials costs

Technological Future

Government and investment policy

Identified new research initiatives

New patents and products

Speed of change and adoption of new technology

Level of expenditure on R&D by organizations

rivals

Development in nominally unrelated industries that

might be applicable

Environmental Future

Green issues that affect the environment

Level and type of energy consumed-renewableenergy?

Rubbish, waste and its disposal

Legal Future

Competition law and government policy

Employment and safety law

Product safety issues


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Issue priority matrix

High Priority High Priority Medium Priority

High Priority Medium Priority Low Priority

Medium Priority Low PriorityLow Priority

High Medium Low

Low

Medium

High

Probable Impact on Corporation

Probability of

Occurrence


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Identifying external strategic factors

Strategic Myopia- willingness to reject unfamiliaras well as negative information

1. Identify a number of likely trends emerging in

the societal and task environments. These are

strategic environmental issues- those importanttrends that, if they occur, determine what the

industry will look like in near future.

2. Assess the probability of these trends actually

occurring from low to high.3. Attempt to ascertain the likely impact (from low

to high) of each of these trends on the

corporation being examined.


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External Factors Weight Rating Weighted

Score

Comments

Opportunities

O1 Boom in construction industry

O2 Demographics favor mass customization

O3 Economic development of Asia and India

O4Growth in rural Indian market.

O5 Promising auto and white goods industry

.15

.05

.10

.05

.15

4.0

3.5

3.0

2.53.0

.60

.18

.30

.13

.45

Consolidation in decorative segment

End user awareness

Low APL presence in Asia

Exterior and economy segmentsAlliances required

Threats

T1 Liberal Government policies

T2 Strong Chinese competition

T3 ICI and Berger strong globally

T4 New product advances

T5 Strict environmental laws world over

.05

.15

.15

.05

.10

2.5

4.0

3.02.5

3.0

.13

.60

.45

.13

.30

Well positioned

Well positioned

APL weak comparativelyQuestionable

Non- tariff barriers

1 2 3 4 5

* The most important external factors are identified in the EFAS table as shown here.

External Factor Analysis Summary (EFAS): Asian Paints Limited (APL)

as Example (Selection of Strategic Factors)*


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Internal Factors Weight Rating WeightedScore

Comments

Strengths

S1 Experienced top management

S2 Vertical Integration

S3 Current assets management

S4 Distribution networkS5 International orientation

0.05

0.05

0.15

0.10

0.15

2.5

2.0

4.0

3.5

3.5

.13

.10

.60

.35

.52

Know the paint industry

In- house manufacturing of key raw material

Good automated inventory control system

Strong distribution capabilities

Steady international expansion

Weaknesses

W1 Global positioning

W2 Product portfolio

W3 Employee relations

W4 Manufacturing facilities

W5 Process oriented R&D

.15

.15

.05

.10

.05

3.5

4.0

2.5

2.0

2.0

.53

.60

.13

.20

.10

Name of Asian in outside Asia market

Concentration on decorative segment

Nature of job and hygienically unsafeindustry

Low investment in other than decorative

segment

Slow in new products

1 2 3 4 5

Internal Factor Analysis Summary (IFAS Table): Asian Paints Limited (APL)

as Example (Selection of Strategic Factors)


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Checklist for a PESTEL Analysis

Political Future

Political parties and alignments at local, national and

European or regional trading block level.

Legislation, e.g. on taxation and employment law

Relations between government and the organization

(possibly influencing the preceding terms in a major

way and forming a part of future corporate strategy)

Government ownership of industry and attitude to

monopolies and competition

Socio- Cultural Future

Shifts in values and culture

Change in lifestyle

Attitudes to work and leisure

Green environmental issues

Education and health

Demographic changesDistribution of income

Economic Future

Total GDP and GDP per head

Inflation

Consumer expenditure and disposable income

Interest rates

Currency inflation and exchange rates

Cyclicality

Unemployment

Energy costs, transport costs, communications costs,

raw materials costs

Technological Future

Government and EU investment policy

Identified new research initiatives

New patents and products

Speed of change and adoption of new technology

Level of expenditure on R&D by organizations rivals

Development in nominally unrelated industries that

might be applicable

Environmental Future

Green issues that affect the environment

Level and type of energy consumed-renewable energy?

Rubbish, waste and its disposal

Legal Future

Competition law and government policy

Employment and safety law

Product safety issues


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Environmental Turbulence Repetitive Expanding Changing Surprising

Complexity

Familiarity of events

National

Familiar

National

Extrapolable

Regional

Technological

Global

Economic

Discontinuous

Novel

Rapidity of Change

Visibility of future

Slower than

responseRecurring

Comparable to

responsePredictable Partially

predictable

Faster than

responseUnpredictable

surprises

Turbulence level

1 2 3 4

HighLow

Changeability

Predictability

Assessing the dynamics of the environment


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Five-Forces Analysis

The five forces are industry forces that

impact on a companys ability tocompete in a given market.

The purpose of five-forces analysis is to

diagnose the principal competitive

pressures in a market and assess how

strong and important each one is.


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Threat of

Substitute

Products

Threat of

Substitute

Products

Threat of

New

Entrants

Threat of New

Entrants

Threat of New

Entrants

Rivalry Among

Competing Firms in

Industry

Rivalry Among

Competing Firms in

Industry

Bargaining

Power of

Buyers

Bargaining

Power of

Buyers

Bargaining

Power of

Suppliers

Bargaining

Power of

Suppliers

Porters Five Forces

Model ofCompetition

Porters Five Forces

Model ofCompetition


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Threat of New EntrantsThreat of New Entrants

Barriers to

Entry

Barriers to

Entry

Expected RetaliationExpected Retaliation

Government PolicyGovernment Policy

Economies of ScaleEconomies of Scale

Product DifferentiationProduct Differentiation

Capital RequirementsCapital Requirements

Switching CostsSwitching Costs

Access to Distribution ChannelsAccess to Distribution Channels

Cost Disadvantages Independent ofCost Disadvantages Independent of

ScaleScale


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Bargaining Power of BuyersBargaining Power of Buyers

Buyers compete with

the supplying industry

by:

Buyers compete with

the supplying industry

by:

* Bargaining down prices* Bargaining down prices

* Forcinghigherquality* Forcinghigherquality

* Playing firms off

of

* Playing firms off

ofeachothereachother

Buyer groups are likely to be powerful if:Buyer groups are likely to be powerful if:

Buyers are concentrated or purchases are largeBuyers are concentrated or purchases are large

relative to sellers salesrelative to sellers sales

Purchase accounts for a significant fraction ofPurchase accounts for a significant fraction ofsuppliers salessuppliers sales

Products are undifferentiatedProducts are undifferentiated

Buyers face few switching costsBuyers face few switching costs

Buyers industry earns low profitsBuyers industry earns low profits

Buyer presents a credible threat of backwardBuyer presents a credible threat of backwardintegrationintegration

Product unimportant to qualityProduct unimportant to quality

Buyer has full informationBuyer has full information


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Threat of Substitute ProductsThreat of Substitute Products

Products with

similarfunction

limit the prices

firms can

charge

Products with

similarfunction

limit the prices

firms can

charge

Keys to evaluate substitute products:Keys to evaluate substitute products:

Products with improvingProducts with improvingprice/performance tradeoffs relativeprice/performance tradeoffs relative

to present industry productsto present industry products


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CutthroatCutthroat competitioncompetition is more likely to occuris more likely to occurwhen:when:

Rivalry Among Existing CompetitorsRivalry Among Existing Competitors

Numerous or equally balanced competitorsNumerous or equally balanced competitors

Slow growth industrySlow growth industry

High fixed costsHigh fixed costs

Lack of differentiation or switching costsLack of differentiation or switching costs

High storage costsHigh storage costs

Capacity added in large incrementsCapacity added in large increments

High strategic stakesHigh strategic stakes

High exit barriersHigh exit barriers

Diverse competitorsDiverse competitors


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STRATEGIC GROUP ANALYSIS

Price

Restaurants in star

Hotels like

Oberoi

Pizza Hut

Kentucky Fried ChickenBarista

Dominos

Burger King

Mc Donalds

Nirulas

Dhabas and Local

small food outlets

Haldirams

Saravana Bhawans

Product- Line Breadth

Low

High

Mapping Strategic Groups in the Indian Food Retail Industry

Limited Menu Full Menu


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Competitor Analysis

RESPONSE

What will our competitors

do in future?

Where do we hold an

advantage over our competitors?

How will this change our

relationship with competitors?

CAPABILITIESWhat are our strategies and weaknesses?

How do we rate compared to our competitors?

FUTURE OBJECTIVES

How do our goals compare to competitors?

Where will emphasis be placed in the future?

What is the attitude toward risk?

CURRENT STRATEGYHow are we currently competing?

Does this strategy support changes

in the competitive strategy?

ASSUMPTIONSDo we assume the future will be volatile?

Are we operating under a status quo?

What assumptions do our competitors

hold about the industry and ourselves?


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THE ORGANIZATION

Government links and

networks

Informal co-operative

links and networks

Complementors Formal co- operative links

Analyzing cooperation: the Four links Model


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Dynamics ofInternal Environment

(Resource Based View )

Strategic Competitiveness/Advantage

Competitive Advantage

Organisational CapabilityCompetencies

Synergistic Effects

Strenghts and WeaknessesOrganisational Organisational

Resources Behaviour


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How do we assembleHow do we assemble bundlesbundles ofof

Resources, Capabilities and CoreResources, Capabilities and Core

Competencies to createCompetencies to create VALUEVALUEforfor

customers?customers?

Will environmental changes make ourWill environmental changes make ourcore competencies obsolete?core competencies obsolete?

And...And...

Are substitutes available for our coreAre substitutes available for our corecompetencies?competencies?

Are our core competencies easily imitated?Are our core competencies easily imitated?

Key Questions for Managers

in Internal Analysis

Key Questions for Managers

in Internal Analysis


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O.Resources

An asset is anything the firm owns or controls.

Loosely, Asset is to Accounting as Resource is to

Management. Tangible assets are the easiest to value, and often are the

only resources that appear on a firms balance sheet. They

include real estate, production facilities, and raw materials,

among others. Although tangible resources may be

essential to a firms strategy, due to their standard nature,they rarely are a source of competitive advantage. There

are, of course, notable exceptions.


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Intangible assets include such things ascompanyreputations, brand names, cultures, technological

knowledge, patents and trademarks, and accumulated

learning and experience. These assets often lay an important

role in competitive advantage (or disadvantage), and firm

value. Organizational capabilities are not factor inputs like tangible

and intangible assets; they are complex combinations of

assets people, and processes that organizations use to

transform inputs into outputs. The list of organizational

capabilities includes a set of abilities describing efficiency andeffectiveness: low cost structure, lean manufacturing, high

quality production, fast product development.


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Strengths and Weakness form a basis for

INTERNAL analysis

By examining strengths, you can

discover untapped potential or identifydistinct competencies that helped you

succeed in the past.

By examining weaknesses, you can

identify gaps in performance,

vulnerabilities, and erroneous

assumptions about existing strategies.


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Competencies

A competencyis an internal capabilitythat acompany performs better than other internalcapabilities.

A core competencyis a well-performed internalcapability that is central, not peripheral, to acompanys strategy, competitiveness, and

profitability.

A distinctive competence is a competitivelyvaluable capabilitythat a companyperformsbetter than its rivals.


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Core Competencies must be:

Nonsubstitutable/ OrganisableNonsubstitutable/ OrganisableResources that do not have strategic equivalents, such as firm-specific

knowledge or trust-based relationships and which can be organised by the firm.

Resources that do not have strategic equivalents, such as firm-specific

knowledge or trust-based relationships and which can be organised by the firm.

Core CompetenciesCore Competencies

ValuableValuable

RareRare

Costly to ImitateCostly to Imitate

Resources that other firms cannot develop easily, usually due to unique historicalconditions, causal ambiguity or social complexityResources that other firms cannot develop easily, usually due to unique historicalconditions, causal ambiguity or social complexity

resources that are possessed by few, if any, current or potential competitorsresources that are possessed by few, if any, current or potential competitors

Resources that either help a firm to exploit opportunities to create value forcustomers or to neutralize threats in the environmentResources that either help a firm to exploit opportunities to create value forcustomers or to neutralize threats in the environment


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Core Competencies--Cautions and

Reminders

Core Competencies--Cautions and

Reminders

Never take for granted that core competencies willcontinue to provide a source of competitiveadvantage

Never take for granted that core competencies willcontinue to provide a source of competitiveadvantage

All core competencies have the potential tobecome Core Rigidities

All core competencies have the potential tobecome Core Rigidities

Core Rigidities are former core competencies thatsow the seeds of organizational inertia andprevent the firm from responding appropriately to

changes in the external environment

Core Rigidities are former core competencies thatsow the seeds of organizational inertia andprevent the firm from responding appropriately to

changes in the external environmentStrategic myopia and inflexibility can strangle thefirms ability to grow and adapt to environmentalchange or competitive threats

Strategic myopia and inflexibility can strangle thefirms ability to grow and adapt to environmentalchange or competitive threats


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Capabilities A capability is usually considered a bundle of assets or resources

to perform a business process (which is composed of individual

activities) E.g. The product development process involves conceptualization,

product design, pilot testing, new product launch in production,process debugging, etc.

Capabilities represent the firms capacity or ability to integrateindividual firm resources to achieve a desired objective.

All firms have capabilities. However, a firm will usually focus oncertain capabilities consistent with its strategy.

For example, a firm pursuing a differentiation strategy would focuson new product development. A firm focusing on a low coststrategy would focus on improving manufacturing processefficiency.


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Capabilities develop over time as a result of complex interactions

that take advantage of the interrelationships between a firms

tangible and intangible resources that are based on the

development, transmission and exchange or sharing of information

and knowledge as carried out by the firm's employees.

CapabilitiesCapabilities becomebecome importantimportant whenwhen theythey areare combinedcombined inin uniqueunique

combinationscombinations whichwhich createcreate corecore competenciescompetencies whichwhich havehave strategicstrategic

valuevalue andand cancan leadlead toto competitivecompetitive advantageadvantage..


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Organisational Capability Factors

Strategic strenghts existing in different functional areas

Functional Capability

1. Factors related to sources of funds

2. Factors related to usage of funds

3. Factors related to the management of funds

Marketing Capability

1.

Product related factors2. Price related factors

3. Place related factors

4. Promotion related factors


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Operations Capability

1.Factors related to production system

2. Factors related to the operations and control system

3. Factors related to the R&D system

HR Capability

1. Factors related to the HR system

2. Factors related to organisational and employees

characteristics

3. Factors related to industrial relations


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Information management capability

1. Factors related to acquisition and retention of

employees

2. Factors related to processing and synthesis of

information

3. Factors related to retrieval and usage of information

4. Factors related to transmission and dissemination

General management capability

1. Factors related to general management system

2. Factors related to general managers

3. Factors related to external relationships

4. Factors related to organisational climate


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Figure 7.2.doc


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Possible Business Definition of an Oral

Care Company

CUSTOMER TECHNOLOGY

Form

Foam

Freshness

Flavor

Dental/ Oral Health

Cosmetic Segment Fluoride Segment

Paste/ Powder

Different Packaging Material

Different Base Material

Different Flavoring Material

Different additives

CUSTOMER FUNCTIONS

CUSTOMERGROUPS


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Three Stages of Strategy & Competition

Competition for

Existing Market

Competition for

Resources

Competencies

Competition for

Dreams

CompetitiveStrategy

StrategicArchitecture

OpportunityHorizon (Blue-

Ocean Strategy)

yIndustry Analysis

y

Strategic Segmentationand Positioning

yCost and Differentiation

Drivers

yResources (Technology,

Brands etc.)yCompetencies

ySkills

yVision of Future

MarketsyCorporate Ambition

ySense of Purpose


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figure 7.1.doc


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Corporate Strategies- Grand Strategies

1. Stability Strategies

2. Expansion Strategies

3. Retrenchment Strategies


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1. Stability Strategies

Less risky, involves fewer changes and people

feel comfortable.

Relatively stable environment.Expansion is perceived as a threat.

Consolidation is sought through after rapid

expansion.


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2. Expansion Strategies

Due to environmental demand.

Psychologically strategists feel more satisfied

with growth prospects, have pride. Increasing size may lead to more control over

the market vis- a- vis competitors.

Advantages from the experience curve andscale of operations may help.


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Dimensions of Grand Strategies:

1. Internal/ External Dimension

2. Related/ Unrelated Dimension

3. Horizontal/ Vertical Dimension

4. Active/ Passive Dimension


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STABILITY STRATEGIES

No- change strategy

Profit Strategy

Pause/ Proceed- with- caution strategy


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Concentration

Vertical Growth

Horizontal Growth

Diversification

Concentric

Conglomerate

Pause/ Proceed with

caution

No ChangeProfit

Turnaround

Captive Company

Sell- out/ Divestment

Bankruptcy/ Liquidation

GROWTH STABILITY RETRENCHMENT


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EXPANSION STRATEGIES

Five types:

a) Expansion through concentration

b) Expansion through integration

i) vertical ii) horizontalc) Expansion through diversification

d) Expansion through cooperation

e) Expansion through internationalizationi) concentric diversification

ii) conglomerate diversification


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Expansion through concentration


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Expansion through integration-Vertical ,horizontal

Typical Value Chain for a Manufactured Product

Raw MaterialsPrimary

ManufacturingFabrication

ProductProducer

Distributor Retailer


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Firm Infrastructure

(general management, accounting, finance, strategic planning)

Human Resource Management

(recruiting, training, development)

Technology Management

(R&D, product and process improvement)

Procurement

(purchasing of raw materials, machines, supplies)

Inbound

Logistics

(raw materials

handlingand

warehouses)

Operations

(machining,

assembling,

testing)

Outbound

Logistics

(warehousing and

distribution offinished

product)

Marketing

and Sales

(advertising,

promotion,pricing,

channel

relations)

Service

(installation,

repair, parts)

ProfitMargin

Primary Activities

Support

Activities


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Corporate Value Chain involves three steps:

1. Examine each product lines value chain in termsof the activities involved in producing that

product or service.

2. Examine the linkages within each product linesvalue chain.

3. Examine the potential synergies among the value

chains of different product lines or business units.


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Taper Vertical

Integration:

Produce some

Internally

Full Vertical

Integration:

Produce all

Vertically

Outsource

Completely:

Buy on Open Market

OutsourceCompletely:

Purchase with Long-

Term contracts

LOW HIGH

LOW

HIGH

Activitys Potential for

Competitive Advantage

Activitys total Value- Added to Firms

Products and Services

PROPOSED OUTSOURCING MATRIX


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Outsourcing errors

Activities that should not be outsourcedWrong vendor selection

Writing poor contractOverlooking personnel issuesHidden costs of outsourcing

Failing to plan exit strategy


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- Complementors are those companies whose productsadd more value to the products of base organization

than they would derive from their own products.


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Co-operative strategies could be of thefollowing types:i) Mergers

Horizontal Mergers

Vertical MergersConcentric MergersConglomerate Mergers

ii) Takeovers

iii) Joint Venturesiv) Strategic Alliances


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Reasons for Mergers

1. To increase the value of the organizations stock.

2. To increase the growth rate and make a good

investment.

3. To improve the stability of earning and sales.

4. To balance, compete, or diversify product line.

5. To reduce competition.

6. To acquire needed resources quickly.7. To avail tax concessions and benefits.

8. To take advantage of synergy.


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Why the seller wishes to merge:

1. To increase the value of the owners stock

and investment.

2. To increase the growth rate.3. To acquire resources to stabilize operations.

4. To benefit from tax legislation.

5. To deal with top management successionproblem.


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Issues in Mergers:

Strategic

Financial

Legal

Managerial


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e) Expansion through Internationalization

Global Strategy Transnational Strategy

International Strategy Multi- DomesticStrategy

Four Types ofInternational Strategies

Cost Pressures

Pressure for Local Responsiveness

Low

High

HighLow


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Entry Modes:

1. Export Entry Modes

2. Contractual Entry Modes

3. Investment Entry Modes


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Modes of Entry Advantages Disadvantages

Export

Does not require a high resource

commitment in the targeted country.

Inexpensive way to gain experiential

knowledge in foreign markets.

Low- cost strategy to expand sales in

Order to achieve economies of scale.

Hard to control operations

abroad.Provides very small experiential


Licensing

Speedy entry to foreign market.

Does not require a high resourcecommitment in the targeted country.

Can be used as a step towards a

more committed mode of entry.

Low- cost strategy to expand sales

in order to achieve economies of scale.

Hard to monitor partners in

foreign markets.High potential for opportunism.

Hard to enforce agreements.

Provides a small experiential

knowledge in the foreign market.

International

franchising

Speedy entry to foreign market.Requires a moderate resource

commitment in the targeted country.

Moderate cost strategy to expand

sales in order to achieve economies

of scale

High monitoring costs.High potential for opportunism.

Could damage the firms

reputation and image.

Does not provides experiential

knowledge in the foreign market.


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Mode of Entry Advantages Disadvantages

Wholly owned

Ventures

Greenfield Strategy

Low risks of technology appropriation

Able to control operations abroad.

Provides high experiential


Low level of conflict between the

subsidiary and the parent firm.

Managers of foreign subsidiary

have a strong attachment to the

parent firm.

Could not rely on pre-

existing relationships withcustomers, suppliers, and

government officials.

Adds extra capacity to the

existing market.

The firm is seen as a foreign

firm by local stakeholders.

Mergers and

Acquisitions

Low risks of technology appropriation.

Able to control operations abroad.

Provides high experiential


Could rely on pre-

existing relationships with

customers, suppliers, and

government officials.

Does not add extra capacity to

the market.

Problem of integrating foreign

subsidiaries into the parents

system.

Managers of acquired foreign

subsidiaries may have a weak

attachment to the parent firm.


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RETRENCHMENT STRATEGIES

Turnaround

Captive Company Strategy

Selling out/Divestment

Bankruptcy

Liquidation


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TURNAROUND STRATEGIES:

Conditions for turnaround:

1. Persistent negative cash flow.

2. Declining market share.3. Deterioration in physical facilities.

4. High turnover of employees, low morale.

5. Uncompetitive products or services.6. Mismanagement


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Elements in a turnaround strategy:

1. Changes in the top management

2. Initial credibility- building actions

3. Neutralizing external pressures

4. Initial control5. Identifying quick pay off activities

6. Quick cost reduction

7. Revenue generation8. Asset liquidation for generating cash

9. Better internal coordination


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DIVESTMENT STRATEGIES

Reasons:

1. An acquired business proves to be a mismatch and

cannot be integrated with the company.2. Negative cash flows leading to financial problems.

3. Severity of competition and firms inability to cope.

4. Technological up gradation required, lack of

investment.

5. Survival is based on cash generated by selling off a

part.


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6. Better alternative available for investment.

7. Divestment by one firm may be a part of merger

plan- mutual strategic interest.

8. Not to attract the provisions of MRTP Act or owing

to oversize and the resultant inability to manage alarge business.


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LIQUIDATION STRATEGIES

Closing down a firm and selling its assets.

Last resort, most extreme and unattractive.

Why liquidation undesirable?

Management hesitate due to fear of failure.

Govt. does not allow liquidation due to political

risk involved. Trade unions resist the loss of employment of

workers.


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Creditors and supplies desire the fulfillment of

contractual obligations.

Selling assets is difficult as buyers are not

found easily.


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Legal Aspects of Liquidation:

Under the Companies Act, 1956,liquidation is termed as winding-up.

Winding- up is the process whereby itslife is ended and its property administered

for the benefits of its creditors andmembers.


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Act provides for the liquidator-

Takes control of the company.

Collects its assets.

Pays its debts.

Distributes surplus among the members

according to the rights.


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Competitive strategies-Tactics For Business

Strategies

Timing Tactics

When

Where


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Market Location Tactics:

1. Market leaders

2. Market Challengers

3. Market Followers

4. Market Nichers


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BCG Matrix


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GE NINE- CELL MATRIX

HIGH

MEDIUM

LOW

STRONG AVERAGE WEAK

BUSINESS STRENGTH/ COMPETITIVE POSITON

I

N

D

U

S

T

R

Y

AT

T

R

A

C

T

I

V

E

N

E

SS

GREEN

YELLOW

RED

INVEST/ EXPAND

SELECT/ EARN

HARVEST/ DIVEST

ZONESTRATEGIC

SIGNAL


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CORPORATE PARENTING ANALYSIS

Alien Territory

Ballast Edge- of-

heartland

Heartland

Value- Trap

Low High

High

Low

MISFIT BETWEEN

CRITICAL SUCCESS

FACTORS AND

PARENTING

CHARACTERISTICS

FIT BETWEEN PARENTING

OPPORTUNITIES AND PARENTING

CHARACTERISTICS


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Strategic Plan

A clear statement of strategies intent covering vision, mission, businessdefinition, goals, and objectives.

Results of environmental appraisal, major opportunities and threats andcritical success factors.

Results of organization appraisal, major strengths, and weaknesses and core

competencies. Strategies chosen and the assumption under which the strategies would be

relevant contingent strategies under different conditions.

Strategies budget for the purpose of resource allocation.

Proposed organizational structure and major organizational systems for

strategic implementation. Functional strategies and the mode of their implementation.

Measures to be used to evaluate performance and assess the success ofstrategy implementation.


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Strategy implementation

Project

Procedural

Resource

Structural

Functional

Behavioral


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Project Implementation

Conception Phase Definition Phase

Planning and Organizing Phase

Implementation Phase

Clean-up Phase


84/106

Procedural Implementation

Formation of a company

Licensing procedures

Securities and Exchange Board ofIndia requirements

Foreign collaboration procedures

Foreign Exchange Management Act requirements

Import and export requirements

Patenting and trademarks requirements

Labour legislation requirements

Environmental protection and pollution control requirements Consumer protection requirements

Incentives and facilities benefits

N t f t t d i ti l t t


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Nature of strategy and organizational structure Nature of strategy

Single business-one major set of

strategies for business

Range of products extending across a

single business- several strategies for

each product area but business still

runs as one entity

Separate businesses within groups

with limited links

Separate businesses within group with

strong link needed across parts of the

group

Unrelated businesses-series of businesses each with its own strategic

issues

Ideas factory-strategy needs to be

strongly experimental

Likely organizational structure

Functional

Functional but monitor each

range of products using

separate profit and loss

accounts

Divisional

Matrix

Holding company

Innovative structure


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Structure follows strategy

New strategy is created

New administrative problems emerge

Economic performance declines

New appropriate structure is invented

Profitreturns to previous level

F ti l I l t ti


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Functional Implementation

Production Strategies

Factors related to the production system: Capacity, product, orservice design, work systems, extent of vertical integration.

Factors related to the operations control system: Aggregate

production planning, procurement, and sourcing, materialsupply, inventory, cost and quality control, maintenancesystems and procedures, etc

Factors related to the R & D system: Technology, Technicalcollaboration and support, patent rights, etc

S i Q i


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Strategic Questions

What types of production processes to adopt?

What should be the plant and facility design?

Where should the plant be located?

How to procure resources?

What type of technology to be used?


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Production Strategies vis--vis Grand

Strategies Expansion: Technology innovation, investment in facility and

plant, heavy R&D spends, capacity enhancement, optimizationof plant use, continuous production, plant upgradation, vertical

integration, outsourcing, contracting and joint venture.

Stability: Technology diffusion, operations smoothing,economies of scale, recouping of costs, process improvement,

product modifications, production efficiencies.

Retrenchment: Technology transfer, cut in volume and size,capacity reduction, sale of facility and asset, depletion ofinventories and stocks, resources cuts


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HR Strategies

Factors related to the personnel system: system for manpowerplanning, selection, training, development, compensation,communication, appraisal, position of the personneldepartment within the organization, procedures, policies,

standards etc. Factors related to organizational and employees

characteristics: corporate image, quality of personnel, skillsand knowledge base, HR values and culture, perception aboutthe organization as an employer, etc

Factors related to industrial relations: Labor-managementrelationship, collective conditions, employees satisfaction,commitment, motivation and morale etc.


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Strategic Questions

What type of personal systems and processes

to adopt?

What should be the HR values and systems?

What type of skills to look for and build?

How to maintain harmonious industrial

relations?

How to motivate and satisfy?


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HR Strategies vis--vis Grand

Strategies Expansion: Organizational manning and staffing, external

hiring, heavy investment in training and development, shiftworking and productivity improvements, relocations andtransfers, increasing work load with commensurate rewards,

increase in compensations budget, outsourcing.

Stability: Internal promotions, post induction training,retraining, growth and improvement in employability, skillsconsolidation, performance management, employee retention.

Retrenchment: Lean staffing, redeployment and relocation,curtailment of outsourcing and contracting, removal of causaland temporary workers, voluntary retrenchment.


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Marketing Strategies Product related factors: Quality, size, smell, look, features,

models, variants, packaging etc.

Price- related factors: Market price, mark-up price, discount,mode of payment, credit terms, allowances etc.

Place- related factors: distribution, transportation, logistics,channels, coverage, intermediaries, storage, inventory,warehousing etc.

Promotion related factors: Advertising, sales promotion,personal selling, public relations, etc.

Integrative and systematic factors: Marketing mix,


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Strategic Questions

What types of products to offer?

What price to be charged?

Which distribution channel to be used?

Which promotional tools to be used?


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Marketing Strategies vis--vis

Grand Strategies Expansion: aggressive promotion, sales promos, heavy ad

spends, push marketing, incentives, market and product

development, rapid market penetration, brand extension, price

differentiation , multiple channel and wide coverage ,extensive distribution and networking

Stability: slow market moves, brand building , market

consolidation, gradual market skimming

Retrenchment: demarketing , receding promotions, ad spendcuts, price increases , distribution cuts.


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Finance Strategies

To provide the organization with funds and a capital structure

to suit the strategic requirements

1. Sources of funds(capital mix decisions)

Internal vs external and2. Usage of funds

Linking allocation to strategies

Prioritizing projects and activities

Capital expenditure vs. working capital3. Management of funds

Dividend mgt., accounts and audit, capital structure

management, compensation


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Strategic Questions

What balance between internal and external

funds? Permissible risks? Priorities for

allocation? Cash flow needs?

Credit policies?


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Finance Strategies vis--vis Grand

Strategies Stability: daily operations, cash mgt., working

capital needs, current assets

Expansion: capital budgeting, fixed assets,long term investments, decentralised

expenditure

Retrenchment: rescue operations, centralisedexpenditure,reallocation of funds, pruning and

cuts

B h i l I l t ti


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Behavioral Implementation

Leadership implementation

Strategy-Corporate Culture Fit

Corporate Power and Politics

Values and Ethics

InfluenceVi i


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Teams CultureOrganizational

Environment Monitor*

Refine

Establish

Mission

Business Ideas

Strategy

Goal

Task

Energize*

Attune

Align

Connect*

Unify

Focus

Empower*

Engage

Enable

Vision

Strategic

What?

How?

Decision

What?

Why?

People

Results

Tactical*Representative Leadership Linking PinActions


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Is the planned strategy compatible

With the current culture?

Tie changes into the culture

Introduce minor culture-

changing activities

Can the culture be modified

to make it more compatible

with the new strategy?

Is management willing and ableto make major organizational changes

and accept probable delays and

a likely increase in costs?

Manage around the culture by

establishing a new structural

unit to implement strategy.

Find a joint- venture partner or

Contract with another company

to carry out the strategy

Is management still

committed to implementing

the strategy

Formulate a

Different strategy

NoYes

Yes No

Yes

No

Yes No

Methods of Managing the Culture of an Acquired Firm


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Methods of Managing the Culture of an Acquired Firm

Integration Assimilation

Separation Deculturation

Very

Attractive

Not atAll

Attractive

Very Much Not atAll

Perception of the

Attractiveness of the

Acquirer

Gap Analysis


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Gap Analysis

Present Performance

Performance

Desired

Performance

Performance Gap

Time

t1 t2


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Did the existing strategies

produce

the desired results?

Tie changes into the culture

Introduce minor culture-

changing activities

Can the culture be modified

to make it more compatible

with the new strategy?

Is management willing and ableto make major organizational changes

and accept probable delays and

a likely increase in costs?

Manage around the culture by

establishing a new structural

unit to implement strategy.

Find a joint- venture partner or

Contract with another company

to carry out the strategy

Is management still

committed to implementing

the strategy

Formulate a

Different strategy

No

Yes

Yes No

Yes

No

Yes No

Were strategies

poorly executed?

ISSUECONCLUSIONS

Were strategies and their


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Did the

existingstrategies

produce

the desired

results?

Were strategies

poorly executed?

requirements

communicated effectively?Poor Communication

Were the underlying

Assumptions valid?

Were alternate

Scenarios definedAnd assessed?

Were the current

situations and

important trends

properly diagnosed?

Did managementcommit to & follow

through the strategies?

Were results monitored

And strategies

Revised as needed?

Was strategy

formulation

adversely affected?

Were supporting functional

Strategies consistent withthe business unit strategies?

Were resource

allocation consistent

with the strategy?

Weak commitment

of operating

management

Failure to establish

Proper feedback

mechanismInvalid planning bases:

Incorrect strategy

formulation

Inconsistent

functional plans

Incorrect assessment

of resource

requirements

Successful strategy

and results

NN

N

N

Y

N

N

Y

Y

N

Y

Y

Y

Y

N

N

N

Y

Y


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Thank you

presentation on strategic management (2)(2)

Documents