Professional Documents
Culture Documents
2
STRATEGY - DEFINITION
Economical
Technological
Finance
Management
Fit
Operation
Strategic
Political
Political
HR
Strategic
Fit Intent
Political
Marketing
It involves short-cuts.
It is about forecasting.
It is about a definite formula.
It attempts to minimize risk.
It brings instant success.
It about mere data and facts.
It involves nitty-gritty's.
It a bundle of techniques or even tricks.
It involves only the top management.
It is fool-proof in nature.
It is rocket science. 8
STRATEGIC MANAGEMENT - IMPERATIVES
To be continuously alert.
To assimilate change faster.
To be future oriented.
To tap markets across boundaries.
To be insulated against environmental threats.
To leverage size, scale and scope.
To generate large resource pool.
To gain expertise in technologies.
To innovate, again and again …….
To be proactive, rather than reactive.
To develop core–competencies. 9
STRATEGY - ORIGIN
The word strategy has its origin from the Greek word
strategia meaning Military Commander. In the ancient
days battles were fought over land. In contrast, today's
battles are fought over markets.
In the ancient days battles were won not by virtue of
size of the army or armory; but by virtue of their
courage, obsession, and more importantly - strategies.
Even in today’s markets, battles fought on the market
front are won by companies by virtue of their obsession
& strategies, whose origin can be traced to some of the
greatest battles fought in the ancient days.
It is an old wine in a new bottle; but with a lot a rigour
and robustness.
10
SOME PARALLELS
Prior to 1950
3 1990 onwards
2A
2 2B 1950 to 1970
1970 to 1990 14
APPROACHES TO STRATEGY
Strategic Intent
Strategic Planning
Strategic Gap
– Environmental Scanning
– Internal Appraisal of the Firm
Strategy Formulation
– Corporate Strategy
– Business Strategy Strategic Choices
– Functional Strategy
Strategy Implementation
Strategy Performance
Strategy Evaluation & Control 19
TOP MANAGEMENT PERSPECTIVE
20
STRATEGIC INTENT
Vision
Integrative Single
Mission
Dominant
Objectives
Do
m
ina
Goals
ic
Many
g
Specific
nt
Lo
Plans
22
DOMINANT LOGIC
Environmental Change
Radical Change
Strategic Change
Degree of change
Incremental Change
Stage of Atrophy
Time 32
ORGANIZATIONAL POLITICS
Scenario Learning
Planning Organization
Static
Forecasting Decentralization
Simple Complex 39
ANALYZING
BUSINESS ENVIRONMENT
40
PLANNING & STRATEGIC PLANNING
Hyper Competition
– MNC’s - Globalization
– Cheap Imports & Dumping
– Push to Pull Marketing
Buyers exacting demands
– Shortage to surplus – Price competition
– Life-style changes
– Stress on quality, Consumerism
Challenges on the technology front
– Competencies become technology based
– Investment in R&D become inescapable 48
DISCONTINUITY
Bargaining
Bargaining Competition Bargaining
power of
power of from Existing power of
Suppliers
Suppliers Players Customers
Threat of Substitutes
50
FIVE FORCES MODEL - ASSUMPTIONS
Point of inflexion
Production / Volume 56
EXPERIENCE CURVE - TRADITIONAL VIEW
Experience = Inertia 3
1 Limited Growth = Diversification
Opportunities
Nullify weaknesses which
prevents you from Leverage strengths to make
exploiting opportunities use of opportunities
69
CORPORATE - GRAND STRATEGY
Corporate Strategy
Stability
Stability Growth
Growth Combination Divestment
Intensification Diversification
Related Unrelated
Vertical Horizontal 71
STABILITY
Market Market
Penetration (+) Development
(++)
New Product
Product Diversification
Development (+ (+++)
+)
Reliance Capital
Reliance
Reliance Industries Reliance Ports
Infrastructure
Reliance Power
81
VERTICAL INTEGRATION
Naptha-cracking
Acetic Acid
Paraxylene (PX)
(PTA) (MEG)
Purified tetra-pthalic acid Mono-ethylene glycol
Ordinary Components
Very Critical Critical
Zero Ownership
Components Components
Full Ownership
Partial
Ownership
Transmission
92
STRATEGIC CHOICE
Parent Company
Firm 1 Firm 5
Firm 3
Firm 2 Firm 4 96
STRATEGIC CHOICE – MACRO TIMING
Recession
(Stability)
Prosperity
(Diversification)
Depression
(Divestment)
Recovery
(Intensification)
97
STRATEGIC CHOICE – MICRO TIMING
Re-Engineering
Maturity - Stability
Growth (%)
Decline - Divestment
Growth - Diversification
Duration (Yrs)
Inception - Intensification
98
PORTFOLIO ANALYSIS
High Low
Industry Growth (%)
?
High
Distinctive Capabilities
Industry Attractiveness
Competitive Position
Strong Improve
Tenable Niche
Market Generate
Strong Growth
Leadership Cash
Try Phased
Custodial
Average Harder Withdrawal
Double
Phased
Or Expand Divest
Withdrawal
Weak Quit
106
TERMINOLOGIES
108
COMPETITIVE STRATEGY
Competitive Advantage
Cost Differentiation Product Differentiation
Competitive Scope
Product
Broad
Cost Leadership
Differentiation
(Toyota)
(General Motors)
Differentiation
Narrow
Cost Focus
Focus
(Hyundai)
(Mercedes)
114
HYBRID STRATEGY
124
COMPETITIVE ADVANTAGE
Infrastructure
Support
Ma
Human Resource Management
rg
in
Technology Development
Procurement
Service
Out Logistics
Operations
Primary
in
rg
Ma
128
STRATEGIC FIT – THE PORTER WAY
Use Radio +2 +7
Use Newspaper +6 -4
Use Radio +3 +7
Use Newspaper +1 -2
System Lock-In
System Economics
Market Dominance
Complementary Share
Enabled through
effective use
of technology
141
STRATEGY IMPLEMENTATION
Strategy
Structure Systems
Shared Values
Skills Style
Strategic Alliance
Joint Venture
167
WHY MANAGEMENT TOOLS?
Phase 1: Planning
– What to benchmark? Whom to benchmark?
– Identify key performance indicators & Data source.
Phase 2: Analysis
– Assessment of performance gaps.
– Predict future performance levels.
Phase 3: Integration
– Communicate findings and gain acceptance.
– Establish functional goals and its implementation.
Phase 4: Action
– Implement and monitor progress.
– Measure results against stakeholder wants and needs.
172
– Recalibrate or outperform benchmarks.
WHOM TO BENCHMARK?
Micro Vs Macro
Focus
Business Processes Vs Organisational Processes
Innovative Vs Traditional
Performance
Customer centric Vs Organisational centric
177
REENGINEERING - LEVELS
GOALS MEASURES
GOALS MEASURES
GOALS MEASURES
GOALS MEASURES
3 4
Align the organization Make strategy
to the strategy everyone’s job
192
BSC - ADVANTAGES
Ineffective Effective
Inefficient
Goes out of
Business Survives
quickly
Efficient
Dies
Thrives
Slowly
194
EFFECTIVENESS + STRATEGY
195
CORPORATE
RESTRUCTURING
196
CORPORATE RESTRUCTURING
Divestments Diversifications
Lakme – Rs. 256 cr Tata Motors – Rs. 1700 cr
ACC – Rs. 950 cr Trent – Rs. 120 cr
Merind - Rs. 42 cr Tata AIG – Rs. 250 cr
Tata Timken – Rs 120 cr Tata Telecom – Rs. 1170 cr
Voltas - Rs. 230 cr Tata Tetley – Rs. 1890 cr
Goodlass Nerolac – Rs. 99 cr Tata Power – Rs. 1860 cr
CMC – Rs. 150 cr
VSNL – Rs. 1439 cr
205
ORGANIZATIONAL RESTRUCTURING
Emphasis on Higher
strategic control performance
Business
High debt Higher
costs risk 211
NUMERATOR & DENOMINATOR MGT
213
WHY TURN AROUND MANAGEMENT?
Success
Performance
Equilibrium Line
Failure
Nadir
Indeterminate
Time
218
DECLINE
224
COOPERATIVE STRATEGIES
240
MERGERS & ACQUISITION
Co-Insurance Effect – If the cash flows of the two firms are less
than perfectly correlated, the cash flow the merged firm will be
less variable than the individual firms. This will induce higher
debt capacity, higher leverage, hence better performance.
The likelihood of default decreases when two firms' assets and
liabilities are combined through a M&A compared to the
likelihood of default in the individual companies. It relates to
the concept of diversification, as risky debt is spread across the
new firm's operations.
– Default risk comes down and credit rating improves.
– Coupon rates may also be negotiated at lower rates.
253
VALUING CORPORATE CONTROL
264
GETTING OFF THE TREADMILL
A company must get to the future not only first but also
for less. What does it take to get to the future first?
Understanding how competition for the future is different.
A process for finding and gaining insight into tomorrows
opportunities (Eg. Toshiba – LCD; South West Airlines –
LCC, Apple – iphone). It requires a lot of common sense
and a little bit of out of the box thinking.
An ability to energize the company.
Get to the future first, without taking undue risk.
Companies need to strategize (think ahead of times).
Apply the 40 – 30 – 20 principle.
272
HOW DOES THE FUTURE LOOK LIKE?
Curve
P2: Unlearning in previous period does not
necessarily ensure learning in the current period.
Learning
Curve
t1 t2 t3 t4 t5
276
Time
CORE COMPETENCE
End 1 2 3 4 5 6 7 8 9 10
Products
Core Product 2
Core
Products
Core Product 1
Core
Competence Competence Competence Competence
Competencies
1 2 3 4 279
RESOURCE STRETCH & LEVERAGE
286
EMERGING MARKETS
Strategic Fit
Risk diversification,
conglomerate power
290
GLOBAL BUSINESS ENVIRONMENT
298
INTERNATION FINANCE
302
INNOVATION
307
REVENUE MODEL
322
BLUE OCEAN
STRATEGY
323
MARKETSPACE - TWO WORLDS
324
WHAT IS RED OCEAN?
Make the value-cost trade off Break the value-cost trade off
Blue oceans have existed in the past and will exist in the
future as well.
History indicates that blue oceans exist in three basic
industries – automobiles (how people get to work) –
computers (what people use at work) – entertainment
(what people do after work).
They are not necessarily about technology; the
underlying technology was often already in existence.
Incumbents often create blue oceans within the ambit of
their core business.
Company & industry are the wrong units of strategic
analysis; managerial moves are.
It creates entry barriers through first mover advantages.
329
BLUE OCEAN - IMPLEMENTATION
Reduce
Which factors
to be reduced
below the industry
standard
Eliminate Create
Which of the industry
factors that the industry VI Which factors should be
created that the
takes for granted industry has not
should be eliminated offered
Raise
Which of the factors
should be raised above
the industry’s standard 330
IMPLEMENTATION SEQUENCE