Strategic Management

Presentation

by

Parvesh Aghi

Strategic Management

“Without a strategy the organisation is like a ship without a rudder , it would just going around in circles.”

Joel Ross & Michael Kami

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Strategic Management

“Management’s job is not to see the company as it is ….. But as it can become”

John W Turk

“A strategy is a commitment to under take one set of actions rather than other”

Sharon Oster

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OUTLINE The five tasks of Strategic Management

1. Developing a Strategic Vision and Mission

2. Setting objectives

3. Crafting a Strategy

4. Implementing and executing the strategy

5. Evaluating performance & initiating corrective Adjustments

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Five Tasks of Strategic Management

Task 1

• Develop Vision & Mission

Task2

• Setting Objectives

Task3

• Crafting Strategy to achieve Objectives

Task4

• Implementing & executing Strategy

Task5

• Evaluating and correcting

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Revise as needed

Revise as needed

Improve / Change

Improve/Change

Recycle as needed

Strategic Management is a process

Outline contd …..

Strategic management is a ongoing process.

Who performs the task of strategy ?

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The Strategic Planning process

Developing a Strategic Vision and Mission Defining the business Surveying the environment Internal appraisal of the firm Setting objectives Formulating the corporate strategy Monitoring the Strategy

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Thinking Strategically- the 3 big strategic questions

WHERE ARE WE NOW ? WHERE DO WE WANT TO GO ?

1. Business positions management wants to stake out ?

2. FINANCIAL outcomes to achieve ?

3. Strategic outcomes to achieve ? HOW DO WE GET THERE ?

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What is Strategy ? A company’s strategy consists of set of

competitive moves and business approaches that management is employing to run the company.

Managements “game plan” for

- Running the business.

- Strengthening firms competitive position.

- Satisfying customers

- Compete Successfully

- Achieve performance targets.9

Why are Strategies needed ?

To Proactively shape how a company’s business will be conducted

To mold independent actions and decisions of managers and employees into coordinated company wide game plan

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FIRST TASK OF STRATEGIC MANAGEMENT

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THREE ELEMENTS OF STRATEGIC VISION

Use the Mission statement as starting point

Develop a strategic vision that spells out a course to pursue

Communicating the vision in a clear and exciting manner

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CHARACTERSTICS OF A STRATEGIC VISION

Begins with thinking Strategically

- About firms future makeup and

- Forming Vision of firm’s future in 5-10 years

- Task includes

-- Inject sense of purpose into firm’s activities

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First task of Strategic Management

CHARACTERSTICS OF A STRATEGIC VISION

-- Provide a LONG TERM DIRECTION

-- Give firm STRONG INDENTIY

-- Decide “WHO we are , WHAT we do & WHERE we are we headed”

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Characteristics of a mission statement Define current business activities Highlights boundaries of the current

business Conveys

-- Who we are

-- What we do

-- Where we are now

A Company’s mission is not to make profit . The real mission is always – “what will do to make a profit ?”

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EXAMPLES : MISSION STATEMENT AVIS RENT –A– CAR

Our business is renting cars . Our mission is total customer satisfaction

AMRICAN RED CROSS

The mission is to improve the quality of human life; to enhance self – reliance & concern for others ; and to help people avoid, prepare for, & cope with emergencies 16

SAMPLE MISSION STATEMENT

KEY MARKETS To provide any customer

CONTRIBUTION A means of moving

people and things up,

down and sideways

over short distances

DISTINCTION With higher reliability than

any similar enterprise in

the world 17

OTIS ELEVATOR

AIRTEL– MISSION

“We at Airtel always think in fresh and innovative ways about the needs of our customers and how we want them to feel. We deliver what we promise and go out of our way to delight the customer with a little bit more”

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SAMPLE MISSION STATEMENT

Key market To offer all of the fine customers

in our territories

Contribution All of their household needs

Distinction in a manner in which they continue

thinks of us fondly

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WAL-MART

Dell Mission Statement

"To be the most successful computer company in the world at delivering the best customer experience in markets we serve."

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Nike Mission Statement

"To bring inspiration and innovation to every athlete* in the world

* If you have a body, you are an athlete."

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MacDonald’s Mission statement

Key Market : To offer the fast food customer

Contribution : Food prepared in same high quality manner world-wide , tasty and reasonably priced ,

Distinction : delivered in consistent ,low key décor and friendly atmosphere

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Wal-Mart’s Mission statement

Key Market : to offer all of the fine customers in our territories

Contribution : all of their household needs ,

Distinction : in an manner in which they continue to think of us fondly .

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VISION

It is what ultimately the firm or a person would like to become. For instance , some of you , say in ten years , or may be even earlier , would like to become general managers managing an SBU in a large , diversified multinational corporation .

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VISION

A firms thinks too. Vision , therefore , articulate the position that a firm would like to attain in the distant future. Seen from this perspective the vision encapsulates the basic strategic intent.

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General Motors Vision Statement

GM’s vision is to be the world leader in transportation products and related services.

We will earn our customers’ enthusiasm through continuous improvement driven by the integrity, teamwork, and innovation of GM people."

McDonald Vision Statement

"McDonald's vision is to be the world's best quick service restaurant experience. Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile.

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AIRTEL- VISION 2010

By 2010 Airtel will be the most admired brand in india

-- Loved by more customers

-- Targeted by top talent

-- Benchmarked by more

businesses28

AIRTEL- VISION 2020

To build india’s finest business conglomerate

Supporting education of underprivileged children through Bharti Foundation

Strategic Intent :

- To create conglomerate of the future by bringing about “big Transformations through Brave Actions”

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INFOSYS

VISION “ To be globally respected corporation that provides best- of- breed business solutions, leveraging technology ,delivered by best –in-class people.

MISSION “To achieve our objectives in an environment of fairness , honesty ,and courtesy towards our clients , employees , vendors and society at large.

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Business Philosophy  

           PRINCIPLES THAT GOVERN SRFPeople-related PrinciplesWork-related PrinciplesCreate a win/win situation for all stakeholders

Leadership by example

Self discipline

Participation by all

Continuing education for all

Focus on Quality, not short-term profits

Market in, not product out

Be customer oriented

Work with facts and data

Act on causes, not just phenomena

Be process oriented

Prioritize

            SRF PURPOSE "We Will Make Our Nation Proud By Being The Best At What We Do"               SRF's ASPIRATION 2020

"We Aspire to Achieve Global Leadership by continuously enhancing Organizational and People Capability, Developing Innovative Products and Processes that satisfy Customers and attaining challenging Benchmarks in Productivity

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Vision statement of Tata Motors

"Best in the manner in which we operate , best in the product we deliver, and best in our value system and ethics.

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Mission statements for Functional Departments

Spotlights department’s

- Role and scope of activities

- Direction which department needs to peruse

- Contribution to firm’s overall mission

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Mission statement of functional departments

Human Resources

To contribute to organizational success by developing effective leaders , creating high performance teams and maximizing the potential of individuals

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Mission statement of functional departments

Corporate Security

To provide services for the protection of corporate personnel and assets through preventive measures and investigations

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Mission v/s Vission A mission statement

focuses on current business activities

‘Who are we and what we do’

Current products & service offerings

Customer needs being served

Technological and business capabilities

A strategic Vision concerns firm’s future business path

‘Where we are going’

Markets to be perused Kind of company that

management is trying to create

Future technology-Products-customers focus 36

Communicating the vision

An exciting , Inspirational Vision

- Challenges and motivates workforce

- Arouses strong sense of organizational purpose

- induces employee buy-in

- Galvanizes people to live the business

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COMMUNICATING THE VISION

COMMUNICATING an exciting vision can Inspire, challenge, & motivate workforce Arouse strong sense of organizational purpose, build

pride, & induce employee buy-in Bring workforce together, galvanize people to act, &

cause people to live the business The BEST-WORDED mission statements

Are simple & concise Speak loudly & clearly Generate enthusiasm for firm’s future Elicit personal effort & dedication from everyone

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ROLE OF ENTREPRENEURSHIP: CHANGING THE MISSION

Entrepreneurial Challenge - Knowing when events require revising mission to avoid Getting trapped in a stagnant core business or Letting new growth opportunities slip away

Good strategy-makers are alert to Shifting customer wants & needs Emerging technological capabilities Changing international trade conditions Signs of growing or shrinking opportunities

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MANAGERIAL VALUE OF A STRATEGIC VISION & MISSION

CRYSTALLIZES top management’s view of firm’s long-term direction

Helps managers AVOID visionless or rudderless decision-making

Conveys ORGANIZATIONAL PURPOSE motivating employees to do their very best

Helps KEEP direction-related actions of lower-level managers on common path

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Defining the business Defining the business correctly is a

pre-requisite for selecting the right opportunities and steering the firm on the correct path.

For formulating the strategy proper definition of the business is an essential perquisite

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Defining the business (Contd)

Many firms fumble in the strategic planning task because they lack a proper definition of the business they are engaged in.

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Defining a Company’s business

A good business definition incorporate three factors

-- Customer needs- What is being satisfied

-- Customers groups- Who is being satisfied

-- Technologies & Competencies employed- How value is delivered to customers to satisfy their needs

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Definitions : Broad vs Narrow scope

Broad Definition

- Furniture

- Telecommunication

- Beverages- Travel & tourism

Narrow Definition

- Wrought iron furniture

- Long distance telephone service

- Soft Drinks- Airlines

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SURVEYING THE ENVIORNMENT

Survey of the environment is central to strategic planning.

The very genesis of the strategic planning task could be traced to environment turbulence .

It was as an answer to the changes taking place in the environment that strategic planning came on the scene.

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SURVEYING THE ENVIORNMENT Contd

All the opportunities are embedded in the environment .

likewise , all the threats are also hidden in the environment

Therefore environmental survey forms a vital part the strategic planning process.

It helps formulation of strategies in line with the opportunities emerging in the environment.

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INTERNAL APPRAISAL OF THE FIRM

Internal appraisal of the firm is the process of assessing the corporation’s capabilities and resources , strengths and weaknesses and core competencies and competitive advantages .

It has also to find out whether it has the requisite capabilities for tapping the selected opportunities and the required defenses against possible threats

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INTERNAL APPRAISAL OF THE FIRM … (Contd)

The firm assesses care fully its capabilities in the vairous areas ,such as marketing ,finance ,human resources, operations , R&D and general management .

It develops its strength weakness profile . The firm compares itself against

competition and develops its competitive advantage profile (CAP)

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SECOND TASK OF STRATEGIC MANAGEMENT

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SETTING OBJECTIVES

SECOND TASK OF STRATEGIC MANAGEMENT

Converts strategic vision and mission into specific performance targets.

Creates yardsticks to track performance.

Pushes firm to be innovative and focused on results.

Helps prevent complacency

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PURPOSE OF SETTING-OBJECTIVE

Substitutes results-oriented decision-making for aimlessness over what to accomplish

Provides a set of benchmarks for judging organizational performance

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TWO TYPES OF OBJECTIVES NEEDED

FINANCIAL OBJECTIVES

Outcome that relate to improving firm’s

financial performance

STRATEGIC OBJECTIVES

Outcomes that will result in greater

competitiveness & stronger long-term

market position

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EXAMPLES OF TYPES OF OBJECTIVES

Financial Objectives

Increase earning growth from 10% to 15% per year

Boost return on equity investment 15 to 20%

Achieve & maintain a AA bond rating.

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EXAMPLES OF TYPES OF OBJECTIVES

Strategic objectives

Up firms market share from 18 to 22%

Overtake rivals on quality or customer service

Attain lower overall costs than rivals

Better leader in new product introductions

Achieve technological superiorty

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Objectives are needed at all levels

Objective setting process is Top Down and not Bottom Up

First, establish organization- wide objectives and performance targets

Next , set business and product wise objectives

Then , establish functional and departmental objectives

Individual objectives are established last55

THIRD TASK OF STRATEGIC MANAGEMENT

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CRAFTING A STRATEGY

BASIC CONCEPT Firms strategy consists of combined

actions management has taken & intends to take in

Achieving strategic & financial objectives

Pursing organization's mission

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CRAFTING A STRATEGY Strategy making is all about HOW to

- Reach performance targets

- Out-compete rivals

- Achieve sustainable competitive advantage

- Maneuver through threatening environments

- Capture market opportunities

- Strengthen firm’s long term competitive position

- Make a strategic vision a reality.

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Characteristics of strategy- making

ACTION ORIENTED concerning ,

- What to do

- When to do it

- Who should be involved

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CRAFTING A STRATEGY

While the objectives clarify where the firm wants to go , the strategy provides the design for getting there .

The main function of corporate strategy is to provide strategic direction to the firm.

It is the tool with which the firm matches its growth needs with the promises and threats of the environment.

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CRAFTING A STRATEGY

It is the route map chosen for navigating the firm through all the fluctuations and turbulence the firm may face.

It clarifies the quantum and nature of growth the firm will pursue , as well its direction , pace and timing.

It prescribes to what extent the firm can be adventurous in its drive for growth.

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The How’s That Define a Firm’s Strategy

How to grow the business How to please customers How to outcompete rivals How to respond to changing market conditions How to manage each functional area of

business and develop needed organizational capabilities

How to achieve strategic & financial objectives

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Characteristics of strategy- making

Strategy is action oriented

Strategy evolves overtime

Strategy making is never ending ongoing task 63

Why do Strategies Evolve ?

There is always an ongoing need to react to

- Shifting market conditions

- Fresh moves of the competitors

- New technologies

- Evolving customer preferences

- Political and regulatory changes

- New window of opportunity

- Crises situations64

GRAND STRATEGIES

STABILITYGROWTHCOMBINATIONRETRENCMENT

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GENERIC STRATEGIES

COST LEADER SHIP STRATEGY

DIFFERENIATION STRATEGY

FOCUS OR NICHE STRATEGY

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Strategy choice

After taking a close look at generic strategy routes ,the firm selects a particular route or combination.

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FOURTH TASK OF STRATEGIC MANAGEMENT

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Implementing and executing Strategy

Implementing strategy involves

- Taking actions to put a freshly chosen strategy into place

- Executing strategy proficiently and efficiently

- Producing excellent results in timely manner

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What does strategy implementation include

Building a firm capable of carrying out successfully

Allocating ample resources to strategy-critical activities

Establishing strategy- supportive policies Installing support systems Tying reward structure to achieve results Exert strategic leadership

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FIFTH TASK OF STRATEGIC MANAGEMENT

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EVALUATING PERFORMANCE None of the task of strategic management are a

one- time only exercise.

- Time & conditions change

- Events unfolds

- Better ways to do things become evident

- New managers with different ideas take over. Manager s must

- Constantly evaluate performance

- Make necessary adjustments75

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This presentation is made with help of contents from following sources

Stamford online –presentation by Ian Mackecnie

Formulation of corporate strategy – VS Ramaswamy & S Namakumari

Strategic Management- Self study modules – csuchico.edu

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Back UP

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SETTING OBJECTIVES Purpose of setting OBJECTIVE is to

- Converts strategic vision and mission into strategic performance targets.

- Creates yardsticks to track performance.

- Pushes firm to be innovative and focused on results.

-Establish performance goals requiring stretch

- Helps prevent complacency 79

BOND RATING

To illustrate the bond ratings and their meaning, we'll use the Standard & Poor's format:

1) AAA and AA:  High credit-quality investment grade2) AA and BBB:  Medium credit-quality investment grade3) BB, B, CCC, CC, C: Low credit-quality (non-investment grade), or "junk bonds"  4) D:  Bonds in default for non-payment of principal and/or interest

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RUDDER

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