An overview of strategic management.ppsx11

AN OVERVIEW OF STRATEGIC MANAGEMENT

Unit IDefinition, nature, scope, and importance of strategy; and strategic management (Business policy). Strategic decision-making. Process of strategic management and levels at which strategy operates. Role of strategists.

Defining strategic intent: Vision, Mission, Business definition, Goals and Objectives.

Environmental Appraisal—Concept of environment, components of environment (Economic, legal, social, political and technological). Environmental scanning techniques- ETOP, QUEST and SWOT (TOWS) PEST.Unit IIInternal Appraisal – The internal environment, organizational capabilities in various functional areas and Strategic Advantage Profile. Methods and techniques used for organizational appraisal (Value chain analysis, Financial and non financial analysis, historical analysis, Industry standards and benchmarking, Balanced scorecard and key factor rating). Identification of Critical Success Factors (CSF).Unit IVStrategy implementation: Resource allocation, Projects and Procedural issues. Organist ion structure and systems in strategy implementation. Leadership and corporate culture, Values, Ethics and Social responsibility. Operational and derived functional plans to implement strategy. Integration of functional plans.

Strategic control and operational Control. Organizational systems and Techniques of strategic evaluation. The Concept of StrategyThe term ‘strategy’ has its origin in the Greek word strategos. Strategos generalship-the actual direction of military force. Strategos is to plan the destruction of one’s enemies through the effective use of sources.

“a plan or course of action which is of vital, pervasive, or continuing importance to an organization as a whole”.

ExamplesKotak Mahindra Finance Ltd is a major non banking finance company(NBFC) that has experienced low profitability. It is planning to adopt a diversified strategy in wholesale corporate lending and focusing on new growth areas, such as wealth management, retail, insurance, and information services. Birla TransAsia Carpets is a sick unit from Yash Birla Group. As it is faced with excessive manpower and high interest costs it is attempting a turnaround strategy by retrenching three-fourth of its employees, importing synthetic carpets and tiles, and exporting to U.S carpets markets. Singer India is entering in white goods and color television market as part of its diversification strategy.

How different companies reacted to their environment?

They adopted a course of action which seemed to be appropriate to them. Such a course of action may involve actions like expansion, diversification, focus, turnaround, stability or divestment. An old established company facing threats in the environment.(has to rethink the course of action)Some new opportunities emerge in the environment which had not been in the past.

These course of action are what we may call strategies.

DefinitionsThe determination of the basic long term goals and objectives of an enterprise and the adoption of the course of action and the allocation of resources necessary for carrying out these goals. Alfred D Chandler(1962)

The pattern of objectives, purpose, goals, and the major policies and plans for achieving these goals stated in such a way so as to define what business the company is in or is to be and the kind of company it is or it is to be. Kenneth Andrews(1965)

Strategy is about achieving competitive advantage through being different- delivering a unique value added to the customer, having a clear and enact able view of how to position yourself uniquely in the industry. Michael Porter

StrategyA plan or course of action or a set of decision rules forming a pattern or creating a common thread,The pattern or common thread related to the organization’s activities which are derived from its policies, objectives and goals,Related to pursuing those activities which move an organization from its current position to derived future state,Concerned with the resources necessary for implementing a plan or following a course of action, andConnected to the strategic positioning of a firm, making trade offs between its different activities and creating a fit among these activities.

Levels at which Strategy OperatesStrategy can be formulated on three different levels: Corporate level Business unit level Functional or departmental level

A single strategy is not only inadequate but also inappropriate.The need is for multiple strategies at different levels.Strategic Business Unit(SBU): Any part of a business organization which is treated separately for the strategic management purpose.

Corporate strategy is the selection and development of the markets (or industries)1 in which a firm competes. Therefore, corporate strategy deals with what industries (or markets) a firm seeks to compete in. Business level strategies (low cost, diversification, and focus) are HOW a firm competes in a single market or industry.

Corporate level StrategiesCorporate level strategy is the "big picture" view of the organization and includes deciding in which product or service markets to compete and in which geographic regions to operate.For multibusiness firms, the resource allocation process like cash, staffing, equipment and other resources are distributed is established at the corporate level.Market definition is also in the domain of corporate-level strategists, the responsibility for diversification,or the addition of new products or services to the existing product/service line-up, also falls within the realm of corporate-level strategy. Similarly, whether to compete directly with other firms or to selectively establish strategic alliances—falls within the purview corporate-level strategy

Critical questions answered by corporate-level strategists include:What should be the scope of operations-what businesses should the firm be in?How should the firm allocate its resources among existing businesses?What level of diversification should the firm pursue;- which businesses represent the company's future? Are there additional businesses the firm should enter or are there businesses that should be targeted for termination or divestment?How diversified should the corporation's business be?How should the firm be structured? Are the responsibilities or each business unit clearly identified and is accountability established?Should the firm enter into strategic alliances—cooperative, mutually-beneficial relationships with other firms?

Corporate strategies represent the long-term direction for the organization. The top management has the primary decision making responsibility in developing corporate strategies and these managers are directly responsible to shareholders. They are paralyzed without accurate and up-to-date information from managers at the business level. Corporations are responsible for creating value through their businesses which they do so by managing their portfolio of businesses, ensuring that the businesses are successful over the long-term, developing business units, and ensuring that each business is compatible with others in the portfolio.

ExampleThe Tata group has a wide range of business from cars, software to Insurance .The main strategic responsibilities of Tata’s CEO RatanN.Tata is toi. Overall strategic objectives ii. Deciding whether the firm should divest itself from any of its business iii. Allocating resources among different business iv. Decisions on any new acquisitions or mergers for any particular unit v. Corporate strategies and policies for business which fall under the brand umbrella ‘Tata’ vi. Managing corporate portfolio of business vii. Maximize corporate responsibility viii. Give a sense of direction to the Corporation

Strategic Business UnitA strategic unit may be a division, product line or other profit center that can be planned independently from the other business units of the firm.

At the business level, the strategy formulation phase deals with:Positioningthe business against rivalsAnticipating changes in demand and technologies and adjusting the strategy to accommodate themInfluencing the nature of competition through strategic actions such as vertical integrationDeveloping and sustaining a competitive advantage for the goods and services that are produced.

Taking again Tata group as an example and in particular Tata consultancy services. The responsibility of the Managing Director, N.Chandrasekharanwill be toi. Translate the general statement of intent from the CEO into strategies for TCS ii. Formulate strategy for TCS iii. Take strategic decisions regarding the company’s market foray iv. Develop strategies against competitors v. Assess and take appropriate action on the progress of the company in the market vi. Lookout for suitable acquisitions which will help enhance the competitiveness of the company

According to Michael Porter three generic strategies-cost leadership, differentiation, and focus can be implemented at the business unit level to create a competitive advantage and defend against the adverse effects of the five forces.

Five Generic StrategiesCompetitive AdvantageCostUniquenessCost LeadershipDifferentiationBroad targetIntegrated CostLeadership/DifferentiationCompetitive ScopeNarrow targetFocused Cost LeadershipFocused Differentiation

ToyotaToyota Motor Corporation primarily conducts business in the automotive industry. Toyota also conducts business in the finance and other industries. Its business segments are automotive operations, financial services operations and all other operations. Its automotive operations include the design, manufacture, assembly and sale of passenger cars, recreational and sport utility vehicles, minivans and trucks and related parts and accessories. Toyota pursues a combined cost leadership and differentiation strategy that is economies of scopes are relevant. A dual focus on both cost leadership and differentiation is often required across the various segments of the value chain. Toyota’s production system is reportedly the most efficient in the world. This efficiency gives Toyota a low cost strategy in the global car industry. At the same time Toyota has differentiated its cars from those of rivals on the basis of superior design and quality. This superiority allows the company to charge a premium price for many of its popular models. Thus Toyota seems to be simultaneously pursuing both a low cost and a differentiated business level strategy, which is called stuck in the middle.

Low Cost StrategyThe low cost strategy emphasizes having the lowest costs, not necessarily the lowest price, in a market. A firm attempting to realize a low cost strategy should stress resources that facilitate efficiency. A firm that has successfully achieved a low cost position will have the lowest costs relative to competitors. A firm can use such a position to either lower its prices and gain market share and sales from rivals OR keep its prices at the present market level and make relatively more profit per unit sold. The key idea is that cost and price are independent choices, and this strategy is focused on cost.

Differentiation StrategyThe differentiation strategy focuses on developing a unique product or (equally useful) a perception of a unique product that customers are willing to pay a premium for. If a firm is not receiving a premium price for its goods or services it is NOT a differentiator. A firm seeking to follow a differentiation strategy should attempt to develop and enhance its resources that promote customer responsiveness, quality, and/or innovation. Note that costs are still important to a differentiator because it is possible that the costs of making the product unique will be greater than the premium consumers are willing to pay for it.

Functional Level Strategy The functional level of the organization is the level of the operating divisions and departments. The strategic issues at the functional level are related to business processes and the value chain.

Functional units of an organization are involved in higher level strategies by providing input into the business unit level and corporate level strategy, such as providing information on resources and capabilities on which the higher level strategies can be based. Once the higher-level strategy is developed, the functional units translate it into discrete action-plans that each department or division must accomplish for the strategy to succeed.

For example in the above two cases where the CEO gave direction to the conglomerate as a whole and the managing director of TCS set to implement his company’s strategy on the lines of the corporate policy, it will actually be the Functional level managers such as in Human resource, product development, customer service etc who actually carry on the task of implementing this strategy. As above it could be in production, service ,finance or any integral functional unit in the company.

The manager in product development in TCS will have his work cut out as follows i. Implement the general strategic outline provided by the managing director ii. Plan, communicate and implement the strategic outline provided by the MD iii. Determine which products are to be followed up with, products which are to be done with iv. Identifying the right, viable products for R&D v. Ensure quality conforming to the standards of the organization vi. Ensure smooth running of the product development unit vii. On the look out for new technologies to acquire viii. Staying tuned with the competitors R&D work ix. Give feedback to the corporate & business level managers about the success of their policies or drawbacks since they are in the frontline of the battle.

Strategic Management“The on-going process of formulating, implementing and controlling broad plans guide the organizational in achieving the strategic goals given its internal and external environment”.Art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives.

Interpretation1. On-going process: Strategic management is a on-going process which is in existence through out the life of organization.2. Shaping broad plans: First, it is an on-going process in which broad plans are firstly formulated than implementing and finally controlled.3. Strategic goals: Strategic goals are those which are set by top management. The broad plans are made in achieving the goals.4. Internal and external environment: Internal and external environment generally set the goals. Simply external environment forced internal environment to set the goals and guide them that how to achieve the goals?

An overview of strategic management.ppsx11

Importance of strategic ManagementWhy do we need to lay so much stress on strategic management?

Strategic management becomes important due to the following reasons:Globalization: The survival for business (global considerations impact virtually all strategic decisions!)E-Commerce: A business tool (electric commerce (e-commerce) has become a vital strategic-management tool.)Earth environment has become a major strategic issue

ImportanceStrategic management can and will influence the organization’s performance. That’s why you can have organizations that face the same environmental conditions, but with different performance levels – and considering recent studies, there is a wide belief that organization’s that use strategic planning usually have better performance that the ones that don’t. Another reason that supports the importance of strategic management has to do with the continually changing situation that organizations face these days, because it helps managers to examine relevant factors before deciding their course of action, thus helping them to better cope with uncertain environments.Finally, strategic management is important most organizations are composed by diverse divisions and departments that need to be coordinated, else there would be no focus on achieving the organization's goals

Strategic management – A route to successThe study of strategic management integrates different topics. Different courses are integrated due to the study of this course so that businesses become successful in every sector. It integrates the following: Marketing Management Finance Research and development

Phases in Strategic management processThere are four essential phases in the strategic management process. Establishing the hierarchy of strategic intent, Formulation of strategies, Implementation of Strategies, and Performing strategic evaluation and control.

Elements in the Strategic Management ProcessEstablishing the hierarchy of strategic intent: a) creating and communicating a vision b) designing a mission statement c) defining the business, d) setting objectives,

2) Formulation of strategies: e) performing environmental appraisal, f) doing organizational appraisal, g) considering corporate level strategies, h) considering business level strategies,i) undertaking strategic analysis, j) exercising strategic choice, k) formulating strategies, l) preparing a strategic plan.

3) Implementing of strategies m) activating strategies, n) designing structures and systems o) managing behavioral implementation, p) managing functional implementation, q) operationalising strategies,

4) Performing strategic evaluation and control: r) performing strategic evaluation, s) exercising strategic control, and t) reformulating strategies.

The strategic-management process is dynamic and continuous.Strategy formulation, implementation, and evaluation activities should be performed on a continual basis, not just at the end of the year or semiannually. The strategic-management process never really ends.

Nature of Strategic ManagementWithout understanding and commitment, strategy-implementation efforts face major problems.Implementing strategy affects an organization from top to bottom; it impacts all the functional and divisional areas of a business.Change comes through implementation and evaluation, not through the plan.A technically imperfect plan that is implemented well will achieve more than the perfect plan that never gets off the paper on which it is typed.

“Strategic Management” Synonymous with "Strategic Planning”Strategic management Used more often in academiaStrategic planning Used more often in the business world

Strategic management Refers to: Strategy formulation Strategy implementation Strategy evaluation Strategic planning Refers to: Strategy formulation

Adapting to changeOrganizational survival depends on:

Continuous monitoring of internal and external factors

Effective adaptation calls for a long-run focus

Incremental rise in degree of change 1. Technology 2. E-commerce 3. Merger-mania 4. Demographics

The need to adapt to change leads organizations to key strategic management questions, such as “What kind of business should we become?” “Are we in right field?” “Should we reshape our business?” “Are new technologies being developed that could put us out of business?”

Nature, Importance and scope of strategic planningServes as a road map for the corporation.Lays down the growth objectives of the firm and also provides the strategies needed for achieving them.Serves as a hedge against uncertainly arising from environmental turbulence. Ensures that the firm remains a prepared organization.Helps the firm understand trends in advance and provides the benefits of a lead time for taking crucial decisions and actions.

Helps avoid haphazard response to environment.Provides the best possible fit between the firm and the external environment.Ensures that the firm’s businesses, products and markets are chosen wisely.Ensures best utilization of the firm’s resources among the product- market opportunities.Helps build competitive advantages and core competencies.

Prepare the firm to not only face the future but even to shape the future in its favor, helps the firm influence its mega environment in its favor to the extent possible.

Concerns of Strategic PlanningFuture: Long term dynamics is its concern, not day to day tasks.Growth: Direction, extent, pace and timing of growth.Environment: The fit between the business and its environment.Business Portfolio: Product market scope.

Strategy: Strategy is its concern, not the operational activities.Integration: Integration of all management functions is its concern, not a particular function.Creating core competencies/competitive advantages, creating long term, sustainable organizational capability is its concern.

Key Strategic Management Terms 1.Strategists2. Vision statements3. Mission statements4. External opportunities and threats5. Internal strengths and weaknesses6. Long-term objectives7. Strategies8. Annual objectives9. Policies

StrategistsUsually found in high levels of management (CEO)Help organization gather, analyze, and organize informationTrack industry and competitive trendsDevelop forecasting model and scenario analyses, evaluate corporate and divisional performance,Spot emerging market opportunities, identify business threats, and develop creative action plans.

Vision StatementsAnswers the question: “What do we want to become?”First step in strategic planningOftentimes a single sentence

Mission StatementsMission statements are "enduring statements of purpose that distinguish one business from other similar firms.A mission statement identifies the scope of a firm's operations in product and market terms. It addresses the basic question that faces all strategists: What is our business? A clear mission statement describes the values and priorities of an organization. Developing a mission statement compels strategists to think about the nature and scope of present operations and to assess the potential attractiveness of future markets and activities. A mission statement broadly charts the future direction of an organization.

ExampleMicrosoft's mission is to create software for the personal computer that empowers and enriches people in the workplace, at school and at home. Microsoft's early vision of a computer on every desk and in every home is coupled today with a strong commitment to Internet-related technologies that expand the power and reach of the PC and its users. As the world's leading software provider, Microsoft strives to produce innovative products that meet our customers' evolving needs.

Environmental ScanningThe process of conducting research and gathering and assimilating external information is sometimes called environmental scanning or industry analysisSWOT

The external environment consist of opportunities and threats variables that outside the organization. External environment has two parts:Task Environment Social Environment

Task Environment:Task environment includes all those factors which affect the organization and itself affected by the organization. These factor effects the specific related organizations. These factors are shareholders community, labor unions, creditor, customers, competitors, trade associations.Social Environment:Social environment is an environment which includes those forces effect does not the short run activities of the organization but it influenced the long run activities or decisions. PEST analysis are taken for social environment PEST analysis stands for political and legal economic socio cultural logical and technological.

External Opportunities & ThreatsLargely beyond the control of a single organizationEconomicSocialCulturalDemographicEnvironmentalPolitical GovernmentalTechnologicalCompetitive trends & events

A basic tenet of strategic management is that firms need to formulate strategies to take advantage of external opportunities and to avoid or reduce the impact of external threats. For this reason, identifying, monitoring, and evaluating external opportunities and threats are essential for success.

Internal Strengths & Weaknesses/ Internal AssessmentControllable activities that are performed well or poorly relative to competitors

Based on functional analysis of activities in the firm’s: Management Marketing Finance/accounting Production/operations Research and development Computer information systemsOrganizations strive to pursue strategies that capitalize on strengths and improve weaknessesCorporate Objectives-Example of Reliance IndustriesShareholders value of Reliance would be doubled by the year 2002.Sales revenue would reach Rs. 20,000 crore by the year 2002.In petrochemicals, production capacity would be raised by 50 per cent from 6 million tones to 9.3 million tones.In EPS, 20 percent CAGR would be achieved.A dividend of around 25 percent would be paid out every year.The company will be choosing the best in class technologies in all its businesses, emphasis would be on strength in advanced process control and computer integrated manufacturing. There would be substantial investment towards enhancing the expertise of staff.Best of attention will be given to community health, safety and environmental protection.

Long-Term ObjectivesObjectives can be defined as specific results that an organization seeks to achieve in pursuing its basic mission. Long-term objectives represent the results expected from pursuing certain strategies. Strategies represent the actions to be taken to accomplish long-term objectives. The time frame for objectives and strategies should be consistent, usually from two to five years. Objectives are essential for organizational success because they state directionObjectives should be challenging, measurable, consistent, reasonable, and clear.

The Nature of Long-Term ObjectivesObjectives should be quantitative, measurable, realistic, understandable, challenging, hierarchical, obtainable, and congruent among organizational units. Each objective should also be associated with a time line. Objectives are commonly stated in terms such as growth in assets, growth in sales, profitability, market share, degree and nature of diversification, degree and nature of vertical integration, earnings per share, and social responsibility.

BenefitsObjectives help stakeholders understand their role in an organization's future.An organization can minimize potential conflicts later during implementation. They serve as standards by which individuals, groups, departments, divisions, and entire organizations can be evaluated. Objectives provide the basis for designing jobs and organizing activities to be performed in an organization. They also provide direction and allow for organizational synergy.

Without long-term objectives, an organization would drift aimlessly toward some unknown end! It is hard to imagine an organization or individual being successful without clear objectives. Success only rarely occurs by accident; rather, it is the result of hard work directed toward achieving certain objectives.

StrategiesStrategies are the means by which long-term objectives will be achieved. Business strategies may include geographic expansion, diversification, acquisition, product development, market penetration, retrenchment, divestiture, liquidation, and joint venture.

Annual ObjectivesAnnual objectives are short-term milestones that organizations must achieve to reach long-term objectives. They should be established at the corporate, divisional, and functional levels in a large organization.Annual objectives should be stated in terms of management, marketing, finance/accounting, production/operations, research and development, and information systems accomplishments. A set of annual objectives is needed for each long-term objective.Annual objectives are especially important in strategy implementation, whereas long-term objectives are particularly important in strategy formulation. Annual objectives represent the basis for allocating resources.

Example Long Tern Objective:- To improve return to shareholders by x% over the next three years, through reduction of the cost of productionAnnual objective:- To implement a "just in time" delivery system to reduce storage costs by x%Policy:- When stock levels reach a certain point the line manager is responsible for contacting the vendor to arrange for a delivery- Stock levels above a certain volume are not to be stored in the warehouse

PoliciesPolicies are the means by which annual objectives will be achieved. Policies include guidelines, rules, and procedures established to support efforts to achieve stated objectives. Policies are most often stated in terms of management, marketing, finance/ accounting, production/operations, research and development, and computer information systems activities. Policies can be established at the corporate level and apply to an entire organization, at the divisional level and apply to a single division or at the functional level and apply to particular operational activities or departments.Policies, like annual objectives, are especially important in strategy implementation because they outline an organization's expectations of its employees and managers. Policies allow consistency and coordination within and between organizational departments.

Benefits of Strategic managementThe major benefits of Strategic management: Proactive in shaping firm’s future Initiate and influence actions Formulate better strategies (Systematic, logical, rational approach)Financial benefits: Improved productivity Improved sales Improved profitabilityNon-Financial benefits: Increased employee productivity Improved understanding of competitors’ strategies Greater awareness of external threats Understanding of performance reward relationships Better problem-avoidance Lesser resistance to change

Why Some Firms Do No Strategic Planning?1. Poor Reward Structures—when an organization assumes success, it often fails to reward success. 2. Fire-fighting3. Waste of Time—some firms see planning as a waste of time since no marketable product is produced. Time spent on planning is an investment.4. Too Expensive—some organizations are culturally opposed to spending resources.Laziness—People may not want to put forth the effort needed to formulate a plan.6. Content with Success—particularly if a firm is successful, individuals may feel there is no need to plan because things are fine as they stand. But success today does not guarantee success tomorrow.7. Fear of Failure—by not taking action, there is little risk of failure unless a problem is urgent and pressing. Whenever something worthwhile is attempted, there is some risk of failure.

8. Overconfidence—as individuals amass experience, they may rely less on formalized planning.9. Prior Bad Experience—People may have had a previous bad experience with planning, where plans have been long, cumbersome, impractical, or inflexible. Planning, like anything, can be done badly.10. Self-Interest—when someone has achieved status, privilege, or self-esteem through effectively using an old system, they often see a new plan as a threat. 11. Fear of the Unknown—People may be uncertain of their abilities to learn new skills, their aptitude with new systems, or their ability to take on new roles.12. Honest Difference of Opinion—People may sincerely believe the plan is wrong. They may view the situation from a different viewpoint, or may have aspirations for themselves or the organization that are different from the plan. Different people in different jobs have different perceptions of a situation.

Pitfalls to avoid in Strategic PlanningStrategic planning is an involved, intricate, and complex process that takes an organization into non chartered territory. It does not provide a ready-to-use prescription for success; instead, it takes the organization through a journey and offers a framework for addressing questions and solving problems. Being aware of potential pitfalls and prepared to address them is essential to success.

Some pitfalls to watch for and avoid in strategic planning are provided below:1. Using strategic planning to gain control over decisions and resources2. Doing strategic planning only to satisfy accreditation or regulatory requirements3. Too hastily moving from mission development to strategy formulation4. Failing to communicate the plan to employees, who continue working in the dark5. Top managers making many intuitive decisions that conflict with the formal plan6. Top managers not actively supporting the strategic-planning process7. Failing to use plans as a standard for measuring performance8. Delegating planning to a "planner" rather than involving all managers9. Failing to involve key employees in all phases of planning10. Failing to create a collaborative climate supportive of change11. Viewing planning to be unnecessary or unimportant12. Becoming so engrossed in current problems that insufficient or no planning is done13. Being so formal in planning that flexibility and creativity are stifled.

The extent of manager and employee involvement in developing vision and mission statements can make a difference in business success. This lecture provides guidelines for developing these important documents.

Mission statementAn enduring statement of purposeDistinguishes one firm from another in the same businessA declaration of a firm’s reason for existenceIt identifies scope of it operation in terms of product offered and market served. Mission also means what we are and what we do.

Mission is divided into two categories: Narrow Mission Broad Mission

Narrow MissionNarrow mission identifies our mission but it restrict in terms of:1. Product and services offered2. Technology used3. Market served4. Opportunity of growth

Broad MissionBroad mission wider our mission values in terms of product and services, offered, market served, technology used and opportunity of growth. But main flow of this mission that if creates confusion among employee due to its wider sense.

For example two different firms A & B. A deals in Rail Roads and B deals in Transportation i.e. we can say A co. has narrow mission and B co. has a wider mission.

Components and corresponding questions that a mission statement should answer are given here.Customer: Who are the firm’s customers?Products or services: What are the firm’s major products or services?Markets: Geographically, where does the firm compete?Technology: Is the firm technologically current?Concern for survival, growth, and profitability: Is the firm committed to growth and financial soundness?Philosophy: What are the basic beliefs, values, aspirations, and ethical priorities of the firm?Self-concept: What is the firm’s distinctive competence or major competitive advantage?Concern for public image: Is the firm responsive to social, community, and environmental concerns?Concern for employees: Are employees a valuable asset of the firm?

Nest vision computer college mission statement reveals:- “We are dealing in all activities which includes in IT, definition”.Qarshi Laborites Mission Statement, “Production of herbal product is our mission”.

Apple Computer (www.apple.com)It is Apple’s mission to help transform the way customers work, learn and communicate by providing exceptional personal computing products and innovative customer services. We will pioneer new directions and approaches, finding innovative ways to use computing technology to extend the bounds of human potential. Apple will make a difference: our products, services and insights will help people around the world shape the ways business and education will be done in the 21st century.

AT & T (www.att.com) We are dedicated to being the world’s best at bringing people together giving them easy access to each other and services they want anytime, anywhere

Vision Statement“Vision is the art of seeing things invisibleAnswers the question: “What do we want to become?”First step in strategic planningOftentimes a single sentence

A vision statement is sometimes called a picture of your company in the future but it’s so much more than that. A lucid and clear vision lays down a foundation on which a sound mission statement can be built.The vision statement answers the question, “Where do we want to go?” Vision statement also answers the question “What do we want to become?” What you are doing when creating a vision statement is articulating your dreams and hopes for your business. It reminds you of what you are trying to build.

While a vision statement doesn’t tell you how you’re going to get there, it does set the direction for your business planning. Unlike the mission statement, a vision statement is for you and the other members of your company, not for your customers or clients.

Our vision is helping individuals and organizations discover and develop their God given potentials to achieve the ultimate Success”. . . . . University of Management & Technology, Lahore

ADAMJEE Insurance Company LimitedMission Statement: Being the leading insurance company Pakistan and second best in Asia, our aim is to be a significant participant in developing Pakistan’s image by providing maximum insurance protection at the most competitive price in a highly efficient manner for industrial and economic growth.Vision Statement: To remain in the leading insurance company of Pakistan and excelling it’s every aspect of business and in delivering its obligations as a good corporate citizen to its clients, employees and shareholders, public and to the country.

The Process of Developing a Mission StatementFirst to select several articles about mission statements and ask all managers to read these as background information. Then ask managers themselves to prepare a mission statement for the organization. A facilitator, or committee of top managers, then should merge these statements into a single document and distribute this draft mission statement to all managers. A request for modifications, additions, and deletions is needed next, along with a meeting to revise the document.All managers have input into and support the final mission statement document, organizations can more easily obtain managers' support for other strategy formulation, implementation, and evaluation activities.

Importance of Vision and Mission StatementsUnanimity of purpose within the organizationBasis for allocating resourcesEstablish organizational climateFocal point for directionTranslate objectives into work structureCost, time and performance parameters assessed and controlledMost companies are now getting used to the idea of using mission statements.Small, medium and large firms in Pakistan are also realizing the need and adopting mission statements.

Environmental Scanning Environmental scanning:The monitoring, evaluating, and disseminating of information from the external and internal environments to key people within the organization to avoid strategic surprise and ensure the long-term health of the firm.

External Environment – 4 Analytical Tools:Model 1: Macro/Societal environment (PEST):General forces that do not directly touch on the short-run activities but often influence its long-run decisions.Model 2: Task Environment (5 forces + 1):Task environment includes all those factors which affect the organization and itself affected by the organization. The collective strength of these forces in the task environment determines the ultimate profit potential in the industry. The corporation must assess the importance to its success of each of the six forces.Model 3: Issues Priority MatrixUsed to help managers decide which environmental trends should be merely scanned (low priority) and which should be monitored as strategic factors (high priority)Model 4: Industry analysis (Group Map)An in-depth examination of key factors within a corporation’s task environment.

What Environmental Forces Should Be Scanned?Societal Environment (PEST)Task Environment(Industry)Shareholders SuppliersGovernments Special- Employees/ Interest Labour UnionsGroups Customers CompetitorsCreditors Trade AssociationsCommunitiesSocial-culturalForcesPolitical-LegalForcesEconomicForcesTechnologicalForcesInternal EnvironmentStructuresCultureResources

1: Macro/Societal Environment PEST forces:Political-legal forcesAllocate power, provide laws and regulationsEconomic forcesRegulate the exchange of materials, money, energy, and informationSocial-cultural forcesRegulate values, mores, and customs Technological forcesGenerate problem-solving inventions

Such factors usually are beyond the firms control and sometimes present themselves as threat.Changes in the external environment also create new opportunities. STEP analysis.4-105

Model 1: PESTMacro/Societal Environment: Important VariablesEconomicGDP trendsInterest ratesMoney supplyInflation ratesUnemployment levelsWage/price controlsDevaluation/revaluationEnergy availability and costDisposable and discretionary incomeTechnologicalTotal government spending for R&DTotal industry spending for R&DFocus of technological effortsPatent protectionNew productsNew developments in technology transfer from lab to marketplaceProductivity improvements through automationPolitical-legalAntitrust regulationsEnvironmental protection lawsTax lawsSpecial incentivesForeign trade regulationsAttitudes toward foreign companiesLaws on hiring and promotionStability of governmentSocial-culturalLifestyle changesCareer expectationsRate of family formationGrowth rate of population Age distribution of populationRegional shifts in populationLife expectanciesBirth rates3-106

2: Task EnvironmentForces Driving Industry CompetitionMODEL 2:5 Forces + 1Michael Porter’s Forces DrivingIndustry CompetitionRelative PowerOf Unions, Governments, etc.Other Stakeholders3-107

Model 2: Forces Driving Industry Competition3-108Based on the model:Strong Force: a threat, because it is likely to reduce profitsWeak Force: an opportunity, because it may allow the company to earn greater profits

Porter’s modelCorporation is concerned with the intensity of competition within its industry.Collective strength of these forces determine the ultimate profit potential of the industry.A strategist can analyze industry by rating each competitive force as high, medium or low in strength.

Threat of New EntrantsBring new capacityDesire to gain market share, substantial resources.Presence of entry barriers and the reaction expected from existing competitors.No automobile companies have been successfully established in U.S since 1930s.

Entry BarriersEconomies of scale(Intel Microprocessor)

Product differentiation(Procter & Gamble Tide)

Capital requirements( commercial airplanes)

Switching costs( software programs in office)

Access to distribution channels(shelf space for small retailers)

Cost advantage independent of size(Microsoft operating system MS-DOS)

Government Policy(licensing requirements)Rivalry Among Existing FirmsCorporations are mutually dependent.

Intense rivalry is related to the presence of several factors:No of competitors( auto industry) Rate of industry growth( Airline industry)Product or service characteristicsAmount of fixed cost

Threat of Substitute Products or ServiceA substitute product is a product that appears to be different but can satisfy the same need as another product.E-mail is substitute for the fax, water is substitute for cola.Substitute limit the potential returns of an industry by placing a ceiling on the prices firms in the industry can profitably charge.

Bargaining Power of BuyersA buyer purchase a large proportion of the seller’s product or service(for example, oil filters purchased by a major auto maker)

A buyer has the potential to integrate backward by producing the product itself( a newspaper chain could make its own chain)

Alternative suppliers are plentiful because the product is standard or undifferentiated(motorists can choose among many gas station)

Changing suppliers cost very littleBargaining Power of SuppliersSuppliers affect an industry through their ability to raise prices or reduce the quality of purchasing goods and services.

A supplier or supplier group is powerful if some of the following factors are apply:

The supplier industry is dominated by a few companies, but it sells to many(petroleum industry)

Its product or service is unique and/or it has built up switching costs( word processing software)

Substitutes are not readily available.

Suppliers are able to integrate forward and compete directly with their present customers.(a microprocessor producer such as Intel can make PCs)

A purchasing industry buys only a small portion of the supplier group’s goods and services and is unimportant to the supplier(sales of lawn mover tiers are less important to the tier industry than the sales of auto tires)Relative Power of Other StakeholdersGovernmentsCreditorsTrade associationsSpecial interest groupsUnionsShareholders

Why are some companies better able to adapt than others? 4-119

Difference in ability of managers to recognize and understand external strategic issues and factors.4-120

3-121Model 3: Issues Priority MatrixUsed to help managers decide which environmental trends should be merely scanned (low priority) and which should be monitored as strategic factors (high priority)Probable Impact on Corporation High Medium Low HighProbabilityOf MediumOccurrence Low

3-122Model 4: Industry Analysis IndustryA group of firms producing a similar product or service, such as soft drinks or financial services.Strategic GroupsA set of business units or firms that pursue similar strategies with similar resources.

Model 4: Industry Analysis (Group Map)3-123

Strategic group map of the video game industryHighGame publishersSony, Sega, NintendoComplexity of gameArcade ownersLowArcadesPCsConsolesDistribution channelsCompetitive AnalysisWho are my competitors?How do I analyze them?SWOT AnalysisPorter’s Five ForcesStrategic Group MapsPEST analysisThere are many ways to analyze your competitors; we’ve selected the strategic group map technique. After answering a few questions, you’ll be ready to draw a strategic map for your industry. This map will illustrate the competitive forces within your industry, your competitive position, and your competitors’ positions.

HighProduct priceLowBroadNarrowStrategic focus differentiationHighHighBrand imageMarket penetrationLowLowOnlineRetail storesDirect mailLow cost focusBroad rangeSpecialty focusProduct line mixCreating a strategic group mapIdentify the two top competitive factors in your market.One competitive factor should be expressed in a high to low range. The other variable is more flexible, but should still reflect the most important competitive factor in your market. These two factors will be the X and Y map variables.Possible axes for your strategic mapDistribution channels

Creating a strategic group mapList your five nearest competitors. These can be indirect or direct competitors but should be companies that compete closely with your product or service.These are the strategic groups that you’ll plot on your map.

Creating a strategic group mapCreate groups of competitors that fall into the same strategic space. Looking at the list from Step 1 and the criteria from Step 2, assess each competitor’s strengths and weaknesses against the competitive factors. You should have 2-3 groups. Include your own company in one of the groups. Consider strengths that the companies have individually and strengths that they share. Consider unique characteristics of each company’s product or service as well as any feature a company’s product or service lacks. Consider market share, marketing approach, and product mix as well as any other relevant, industry-specific factors.Plot the strategic groups from Step 3 on your map. Draw circles around each group, making circles proportional to the size of each group's share of total industry sales.

Build your own mapFill in the text boxes below with the information you’ve gathered in the previous slides. Adjust the size of the circles as needed and place them in the map.Title of map goes hereHighList strategic group members hereCompetitive factor #1 goes hereList strategic group members hereLow ofRangefactorCompetitive factor #2 goes hereList strategic group members here

Review your new mapIn his book, Competitive Strategy, Michael Porter recommends these analytical steps:Identify mobility barriers: Look at the qualities that protect each group from attack by other groups. This can help you to predict threats to the groups.Chart directions of strategic movement: Draw arrows from each group that represent the direction in which the group seems to be moving in strategic space.Predict reactions: Firms in the same group often react to an industry event in the same way. Assess both the overall map and the position of each group.Are there any “empty” areas on the map that you or one of your competitors could move into by revising an existing product or launching something new?Could you improve your strategic position by moving to a different strategic group?What advantages do your competitors have that you lack? Are they significant to your position on the map or not?If there are more than two important competitive factors in your industry, you can draw additional maps to get a more complete analysis of your competitive environment.

Bharti AirtelLargest Private Integrated Telecom Company in India

3th Largest Wireless Operator in the World by subscriber base.

Largest & Fastest Growing Wireless Operator in India

Largest Telecom Company listed on Indian Stock Exchange130GROUP 7

Business DivisonsMobile Services

Vision 2015By 2015 airtel will be the most loved brand, enriching lives of millions.

Vision 2020 To build India's finest business conglomerate by 2020Supporting education of underprivileged children through Bharti Foundation

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”

Core ValuesEmpowering PeopleBeing FlexibleMaking it HappenOpenness and transparencyCreating Positive Impact

Objectives/GoalsTo undertake transformational projects that have a positive impact on the society and contribute to the nation building process. To Diversify into new businesses in agriculture, financial services and retail business with world-class partnersTo lay the foundation for building a “conglomerate” of future

Indian Telecom SectorFastest Growing Sector across the world adding 15 to 20 million subscriber every month– CAGR 22% (2002-07)

Crossed 500 Mn Mobile subscriber mark in Dec 2009.

Lowest tariff charges in the world

Wireless Subscribers – 723.28 Mn(by Sep 2010)

23 Circles - 4 Categories ( Metro, A, B & C)

BhartiAirtel – Largest player with presence in 23 Circles137GROUP 7

Tariff WarsIndian is most competitive market in the world which has led to the tariff wars.Revenue growth has impacted significantly.Increase in ChurnGROUP 7138

139Why Mad Rush for Telecom ?? Low teledensity (depicting large untapped potential) Large number of additions in telecom subscribersTelecomAdvantageGROUP 7CAGR 40.4%

140Evolution of Telecom In IndiaDepartment of Telecommunication (DoT) is the main body formulating laws and various regulations for the Indian telecom industry.ILDservices was opened to competitionBSNL was established by DoTNumber portability was proposed (pending) Intra-circle merger guidelines were establishedIndependent regulator, TRAI, was establishedPrivate players were allowed in Value Added ServicesCalling Party Pays (CPP) was implementedAttempted to boost Rural telephonyGo-ahead to the CDMA technology199920071994200220052003200420062000Internet telephony initiatedUnified Access Licensing (UASL) regime was introducedINDIA 19921997Broadband policy 2004 was formulated—targeting 20 million subscribers by 2010Decision on 3G services (awaited)National Telecom Policy (NTP) was formulatedNTP-99 led to migration from high-cost fixed license fee to low-cost revenue sharing regimeReduction of licence feesFDI limit was increased from 49 to 74 percentReference Interconnect order was issuedILD – International Long DistanceGROUP 7

Regulatory FrameworkGROUP 714174% FDI Investment

Lack of Transparency in Spectrum & License Allocation

3G Policy & MNP still PendingDeclinging Tariff – Rising RevenueGROUP 7142Source: TRAI Report

Economic FactorsGDP growth rate - Return to 9% 2011-12Rising Tele-density – 60.99%The per capita income grew by 10.5 per cent to Rs 44,345 in 2009-10 against Rs 40,141 in the year-ago period, according to the governmentFalling Handset Prices

Changing DemographicsDemand for VAS & Broadband services Among Youth

Rising Income levelSource: Mckinsey Report

TechnologyCDMA – Already there are big players in this segment Reliance , Tata 3G – Value added services potential still to be tapped fully2G/3G – GSM Currently commands 70% of mobile subscribers in IndiaVoice over internet protocolWorldwide interoperability for microwave access

Porter’s Generic Strategy 146GROUP 7

1. Threat from CompetitionWireless Market – Top 4 acquire 75% market share148GROUP 7HIGH

Competitor Analysis149GROUP 7Best OP Margins & Net Profit Margins among PeersSource: CMIE November 2008

2. Customer Bargaining PowerLack of differentiation among Service Providers

Number Portability will have –Ve Impact150GROUP 7HIGH

3. Suppliers Bargaining Power151GROUP 7LOW

4. Threat of SubstitutesLandline

VOIP - Skype, Gtalk, Yahoo Messenger

e-Mail & Social Networking Websites152GROUP 7HIGHDIMINISHING MARKETBROADBAND SERVICES

5. Threat of New EntrantsHuge License Fees to be paid upfront & High gestation period

Spectrum Availability & Regulatory Issues

Infrastructure Setup Cost - High

Rapidly changing technology153GROUP 7LOW

SWOTStrengthsLargest Telecom Player in India - ~80Mn, 22.6%Strategic Alliance with other stakeholders in Bharti Airtel include Sony-Ericsson, Nokia - and Sing TelPan India PresenceStrong FinancialsWeaknessOutsourcing of Core SystemsLack of emerging market investment opportunitySource: CMIE Report NOV 08154GROUP 7

SWOTOpportunitiesBhartiInfratel – Cutting Down cost in Rural area

Match Box Strategy – Scale of Penetration

Current Tele-Density – 30.6 is still low among developing countries

Low Broadband Penetration, Rural TelephoneyThreatsIndia centric – Major revenues from IndiaFalling ARPU Intense Competition & Shortage of Bandwidth 155GROUP 7

BCG Matrix for Bharti AirtelHIGHMobile ServicesDTH & IPTVBroad BandMarket Growth RateLOWLOWHIGHMarket Share156GROUP 7

An overview of strategic management.ppsx11

More Related Content

What's hot (20)

Viewers also liked (20)

Similar to An overview of strategic management.ppsx11 (20)

An overview of strategic management.ppsx11

Editor's Notes