t1 - strategics levels & stages

8/8/2019 T1 - Strategics Levels & Stages

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BUSINESS STRATEGY AND

POLICY


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MODULE - 1

Conceptual Framework of Policy

and Strategy


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Without a strategy, an organization is like aship without a rudder, going around in circles.

Its like a tramp ; its has no place to go

- Peter Drucker


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STRATEGY

ST R

A

EG

Y

T


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What Is Strategy?

Strategy is an overriding goalto achieve superior performance


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A well thought out systematic plan of action todefend and to defeat competitors.

Managements game planto

Attract and please customers

Stake out a market position

Compete successfully Grow the business

Achieve targeted objectives

What Is StrategicManagement?


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Thinking Strategically:

The Three Big Strategic Questions

1. Where are we now?

2. Where do we want to go?

Business to be in and market positions to stake out

Buyer needs and groups to serve

Outcomes to achieve

3. How will we get there?

A companys answer to howwill we get there? is its strategy


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LEVELS/TYPES AND STAGES

OF STRATEGY


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Levels of strategy

Corporate

Business1 Business 2 Business3

F1 F2 F3 F4

Corporate

Business

Functional


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Prentice Hall, 2004 Chapter 1Wheelen/Hunger

10

Hierarchy ofStrategy

Corporate Strategy

Business Strategy

Functional

Strategy


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Functional Level Strategy

They are directed towards

improving the efficiency of basic operationswithin a company by attaining a

companywide efficiency, quality, innovation

and customer responsiveness.


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Business Level Strategy

It refers to a plan of action that

strategic managers adopt to use a companies

resources and distinctive competenciesto gain competitive advantage

over its rivals in a market or industry.


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Key IssuesKey Issues

inin

BusinessBusiness--levellevel

StrategyStrategy

Who will beWho will be

served?served?

What needs willWhat needs will

be satisfied?be satisfied?

How will thoseHow will those

needs be satisfied?needs be satisfied?

Customers: Their Relationship toBusiness-Level Strategies


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All CustomersAll Customers

ConsumerConsumerMarketsMarkets

IndustrialIndustrial

MarketsMarkets

Who: Determining the Customers to

Serve


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Basis for SegmentationConsumerMarkets

Demographic factors (age, income, sex, etc.)

Socioeconomic factors (social class, stage in the family life cycle)

Geographic factors (cultural, regional, and national differences)

Psych

ological factors (lifestyle, personality traits) Consumption patterns (heavy, moderate, and light users)

Perceptual factors (benefit segmentation, perceptual mapping)

IndustrialMarkets

Product segments (based on technological differences or productioneconomics)

Geographic segments (defined by boundaries between countries or by

regional differences within them)


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Customer needs are related to a products

benefits and features.

Customer needs are neither right nor wrong,good nor bad.

Customer needs represent desires in terms of

features and performance capabilities.

What: Determining Which Customer

Needs to Satisfy


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Firms use core competencies to implement

value creating strategies that satisfy

customers needs.

Only firms with capacity to continuously

improve, innovate and upgrade their

competencies can expect to meet and/orexceed customer expectations across time.

How: Determining Core Competencies

Necessary to Satisfy Customer Needs


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GENERIC BUSINESS LEVEL STRATEGIES

Cost Leadership Differentiation

Cost Focus Differentiation

Focus

Offers to many

Kinds of

customers

Offers to oneGroup of

customers

Lower Cost Uniqueness


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Examples

Strive to be the industrys low-cost provider

Wal-Mart

Outcompete rivals on a key differentiating feature

Rolex Top-of-the-line prestige

Mercedes-Benz Engineering design andperformance

Focus on a narrow market niche

eBay Online auctions

Starbucks Premium coffees and coffee drinks


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Eg..

Consider the global market for restaurants.

Place the following restaurants onto the

Generic Strategies matrix.

McDonalds (Global Brand).

Chick King (lesser known chicken restaurant).

KF

C (global brand). Burger King (global brand).

Subway (growing 'sub' sandwich brand).


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Answer

McDonalds

KFC

Burger King

Subway

Chick King

Lower Cost Uniqueness

Offers to many

Kinds of

customers

Offers to one

Group of

customers


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SBU

It is an operating unit that groups a distinct set

of products/services, which are sold to a set ofcustomers and facing a defined set of

competitors.


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Corporate Level Strategy

It is concerned with the overall purpose and

scope of the business.

corporate strategy answers the questions of"which businesses should we be in?"and

"how does being in these businesses create

synergy and/or add to the competitive

advantage of the corporation as a whole?"


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BCG MATRIX

STARS QUESTION

MARKS

??

CASH COWS DOGS

Market

Growth

LOW

HIGH

Market ShareHIGH LOW


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THEFOURSEGMENTS OFTHE BCG MATRIX

Placing products in the BCG matrix provides 4 categories in

a portfolio of a company:

Stars (high growth, highmarket share)

Stars are using large amounts of cash. Stars are

leaders in the business.T

herefore they should alsogenerate large amounts of cash.

They generate large cash flows internally as they have

Low cost advantage

Economies of scale They can meet their investment by their internal cash

flows


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Cash Cows (low growth, highmarket share)

Profits and cash generation are high. Because of

the low growth, reinvestment opportunities are

low.

The surplus amount generated by Cash Cows are

often used to invest in emerging stars, invest in

question marks (which can be groomed as futurestars).


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Dogs (low growth

, low market sh

are)

Avoid and minimize the number of Dogs in a

company.

Watch out for expensive rescue plans.

Dogs must deliver cash, otherwise they must be

liquidated.


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QuestionMarks

(high growth, low market share) Question Marks have the worst cash

characteristics of all, because they have high cash

demands and generate low returns, because of

their low market share.

If the market share remains unchanged, Question

Marks will simply absorb great amounts of cash.

Either invest heavily, or sell off, or invest nothingand generate any cash that you can. Increase

market share or deliver cash.


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Stages in strategic management

Formulation

Implementation

Evaluation


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Formulation

Strategy formulation is the process of

establishing the organization's mission,objectives, and formulating strategies.


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Implementation

It involves managing the process.

This includes monitoring results, comparing tobenchmarks and best practices, evaluating the

efficiency of the process and making

adjustments to the process as necessary.


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Evaluation

To measure the effectiveness of theorganizational strategy, it's extremelyimportant to conduct a SWOTAnalysis.

Strategic options are evaluated against threekey success criteria:

Suitability (would it work?)

Feasibility (can it be made to work?)

Acceptability (will they work it?)


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Why is Strategy Important?

It lends a Methodology and framework

Provide route map to a firm

Ensure speedy decision & directionHedge against uncertainty

To understand the external trends in advance

To Ensure the best utilization of resources

t1 - strategics levels & stages

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