The Definition of

Strategic Management
The Art and Science of
Formulating, Implementing, and
Evaluating Cross-Functional
Decisions That Enable an
Organization to Achieve Its
Objectives
Mahesh P. Joshi: Strategy and HR

The Basis for Good

Strategic Decisions
Intuition + Analysis

Effective Strategic Decisions

Mahesh P. Joshi: Strategy and HR

Keys to Formulating Strategies

Business
Business Mission
Mission

Internal
Internal
Strengths
Strengthsand
and
Weaknesses
Weaknesses

External
External
Opportunities
Opportunities
and
andThreats
Threats

Strategy
Strategy Formulation
Formulation
Mahesh P. Joshi: Strategy and HR

A
A Comprehensive
Comprehensive Strategic
Strategic Management
Management Model
Model
Feedback

Perform
Perform
External
External
Audit
Audit

Establish
Establish
LongLongterm
term
Objectives
Objectives

Develop
Develop
Mission
Mission
Statement
Statement

Perform
Perform
Internal
Internal
Audit
Audit

Strategy
Formulation

Generate,
Generate,
Evaluate,
Evaluate,
and
and
Select
Select
Strategies
Strategies

Establish
Establish
Policies
Policiesand
and
Annual
Annual
Objectives
Objectives

Strategy
Implementation
Mahesh P. Joshi: Strategy and HR

Allocate
Allocate
Resources
Resources

Measure
Measure
and
and
Evaluate
Evaluate
Performance
Performance

Strategy
Evaluation

A Strategic Management Framework

V a lu e C r e a tio n d r iv e s
th e s tr a te g y p r o c e s s

D e v e lo p
M is s io n &
V is io n

P e r fo r m
S it u a t io n
A n a ly s is

C u sto m e rs

V a lu e
C r e a t io n

O w n e rs

S et
O b je c t iv e s
& C r a ft
S tr a t e g y

I m p le m e n t
S tr a t e g y

E m p lo y e e s

E ffe c tiv e s tr a te g ic
m a n a g e m e n t c r e a te s
v a lu e

Mahesh P. Joshi: Strategy and HR

A ssess
V a lu e
C r e a t io n &
P r o v id e
Feed b ack

The Stages and Activities in the

Strategic Management Process
Stages

Activities

Strategy
formulation

Conduct
research

Integrate
intuition
with analysis

Make
decisions

Strategy
implementation

Establish
annual
objectives

Devise
policies

Allocate
resources

Strategy
evaluation

Review internal
and external factors

Measure
performance

Mahesh P. Joshi: Strategy and HR

Take
corrective
action
6

Forces Influencing Design of Strategic

Management Systems
Organization
Small one-plant companies
Large companies
Toward
more
formality
and more
details

Management Styles
Policy maker
Democratic-permissive
Authoritarian
Day-to-day operational thinker
Intuitive thinker
Experienced in planning
Inexperienced in planning
Mahesh P. Joshi: Strategy and HR

Toward
less
formality
and fewer
details

Forces Influencing Design of Strategic

Management Systems
Complexity of
Environment
Toward
more
formality
and more
details

Stable environment
Turbulent environment
Little competition
Many markets and customers
Single market and customer
Competition severe
Mahesh P. Joshi: Strategy and HR

Toward
less
formality
and
fewer
details
8

Forces Influencing Design of Strategic

Management Systems
Complexity of
Production Process
Toward
more
formality
and more
details

Long production lead times

Short production lead times
Capital intensive
Labor intensive
Integrated manufacturing processes
Simple manufacturing processes
High technology
Low technology
Market reaction time for new
product is short
Market reaction time is long
Mahesh P. Joshi: Strategy and HR

Toward
less
formality
and
fewer
details
9

Forces Influencing Design of Strategic

Management Systems
Nature of Problems

Toward
more
formality
and more
details

Facing new, complex, tough

problems having long-range
aspects
Facing tough short-range problems
Purpose of Planning System
Coordinate division activities

Toward
less
formality
and
fewer
details

Train managers
Mahesh P. Joshi: Strategy and HR

10

Levels of Strategic Decisions

E Corporate

Level

What business to be in?

E Business

Level

How to compete in a chosen

Business
E Functional

Level

Support at each function

Mahesh P. Joshi: Strategy and HR

11

Intended or Realized Strategy

Deliberate
Deliberate

Intended
Intended
Strategy

Realized
Realized
Strategy

Strategy

Unrealized
Strategy

Emergent
Emergent
Strategy

FIO Decisions
Decisions
Financing

byInvesting
Operations
Organization
Mahesh P. Joshi: Strategy and HR

12

Vision Versus Mission

Mission
Mission Statement
Statement
Answers
Answers the
the Question
Question

What
What isis Our
Our
Business?
Business?

Vision
Vision Statement
Statement
Answers
Answers the
the Question
Question

What
What Do
Do We
We Want
Want
to
to Become?
Become?

Mahesh P. Joshi: Strategy and HR

13

The Growth Matrix

Market Penetration
E
E

Present Products
Present Markets

Market Extension
E
E

Present Products
New Markets

Product Development
E
E

New Products
Present Markets

Diversification
E
E

New Products
New Markets

Mahesh P. Joshi: Strategy and HR

14

Expansion Strategies

Market Penetration
Seeking Increased Market Share For Present Products
or Services in Present Markets
Market Development
Introducing Present Products or Services into New
Geographic Areas
Product Development
Seeking Increased Sales by Improving Present
Products/Services or Developing New Ones
Mahesh P. Joshi: Strategy and HR

15

Expansion Strategies

Diversification Strategies
Related Diversification
Adding New, But Related, Products or Services
Adding New, Unrelated Products or Services for Present
Customers

Unrelated Diversification
Adding New, Unrelated Products or Services
Mahesh P. Joshi: Strategy and HR

16

What Else Besides Growth

Staying the Course
E Reduction in operations
E

Mahesh P. Joshi: Strategy and HR

17

Retrenchment Strategies
Cost-Cutting
Reducing the use of allocation of resources for a specific
function

Liquidation
Closing all operations

Divestment
Selling a Division or Part of an Organization
Mahesh P. Joshi: Strategy and HR

18

Key
Key External
External Forces
Forces
Economic

Competitive

Social

Technological
Governmental

Cultural
Demographic

Political
Legal

Environmental

Mahesh P. Joshi: Strategy and HR

19

Key
Key Internal
Internal Forces
Forces
Management
Marketing

Finance/Accounting

Manufacturing
Packaging

Research &
Development

Production/Operations

Human Resource
Management

Computer
Information Systems
Purchasing

Distribution
Mahesh P. Joshi: Strategy and HR

20

Formulating Strategies Based on Key

Internal Factors
Developing Strategies That Use An
Organizations Strengths To

Take full
advantage of
external
opportunities

Reduce the effects

of external threats
Mahesh P. Joshi: Strategy and HR

Improve an
organizations
weaknesses
21

Overview of the External

Environment
Macroenvironment: the set of broad
forces and factors that affect the
behavior of key players in the task
environment
E Task Environment: the key players
whose behavior directly impacts the firm
and its prospects for success
E

Mahesh P. Joshi: Strategy and HR

22

SOCIETAL (MACRO)
TECHNOLOGICAL
TASK (MICRO)
Suppliers, Competitors, Customers

ECONOMIC

INTERNAL

POLITICAL/
LEGAL

Other Stakeholders

Demographic and Socioeconomic

Mahesh P. Joshi: Strategy and HR

23

Industry Analysis
E Market

Share Analysis

Definition of market
Definition of competitors
E Financial

Analysis

Sales
Net Income
Other Indicators
Ratios
Mahesh P. Joshi: Strategy and HR

24

Competitor Analysis

Who are the existing and potential

competitors?
What strategic groups can be identified?
What are their levels of sales, share and
profits?
What are their growth trends?
What are their strengths, weaknesses,
strategies?
Mahesh P. Joshi: Strategy and HR

25

The SWOT Matrix

OPPORTUNITIES - O

THREATS - T

STRENGTHS - S

WEAKNESSES - W

SO STRATEGIES

WO STRATEGIES

Use strengths to take

advantage of
opportunities

Overcome weaknesses
by taking advantage of
opportunities

ST STRATEGIES

WT STRATEGIES

Use strengths to avoid

threats

Mahesh P. Joshi: Strategy and HR

Minimize weaknesses
and avoid threats

26

So What Matters?
E

Idea of SWOT analysis

Just a basic tool
This is a starting point for strategic analysis
Identifying long term and Short term trends
in macro environment
economic, socio-cultural, legal-political and
knowledge-technology
in task environment
customers, competition, and suppliers
Mahesh P. Joshi: Strategy and HR

27

Sustainable Competitive
Advantage is Based on:
E

Assets and Skills

People and Culture

Processes and Systems

R&D Capability

Manufacturing or Service Capability

Mahesh P. Joshi: Strategy and HR

28

Sustainable Competitive Advantage

SCAS Should Be:
E Substantial...Enough to Make a Difference
E Sustainable...In the Face of Inevitable
Changes, Competitive Actions
E Leveraged...Into Viable Business
Attributes That Will Influence Customers
Mahesh P. Joshi: Strategy and HR

29

Sustainable Competitive Advantage

SCA Based a Combination of Strategic
Thrusts:
E
E
E

Differentiation
Low Cost
Focus

Mahesh P. Joshi: Strategy and HR

30

Differentiation Strategies
Characteristics:
Provide Customer Value
E Be Difficult to Copy
E

Mahesh P. Joshi: Strategy and HR

31

Approaches to Differentiation

Invest in Quality
Focus on Customer Satisfaction
Build Strong Brands

Mahesh P. Joshi: Strategy and HR

32

Low Cost Strategies

Bases:
No Frills Product / Service
Sourcing
Design
Operations
Experience Curves
Economies of Scale
Low Cost Culture
Mahesh P. Joshi: Strategy and HR

33

Scale Economies
Natural Efficiencies Associated
With Size
-Can Spread Fixed Costs
-Can Support Specialized
Assets and/or Activities

Mahesh P. Joshi: Strategy and HR

34

Focus Strategies
Product and or Market Concentration
Benefits:
E Avoids Strategy Dilution, Distraction
E Minimizes Impact of Limited Resources
E Potential to Bypass Competitor Assets/Skills
e.g.. Private Label Producers
E Niche Strategy

Mahesh P. Joshi: Strategy and HR

35

Focus Strategies - Options

Note: These Are Not Mutually Exclusive
E Focus Product Line
Enhance Technical Superiority; Exciting,
Innovative, High Quality
E Target a Segment
E Target a Geographical Area
E Target Low-Share Competitors
Mahesh P. Joshi: Strategy and HR

36

Cross-Functional Integration
Operational
Operational
Strategy
Strategy

Level III Functional

Marketing/
Sales Strategy

SBU
Strategy

R&D Strategy

Mahesh P. Joshi: Strategy and HR

Human
Resources
Strategy

Accounting/
Control
Strategy
37

Behavioral Aspects Strategic

Choices
Senior Management Team
E Organizational Culture
E Personal Ethics
E Corporate Social Responsibility
E

Mahesh P. Joshi: Strategy and HR

38

Barriers to Implementation
E
E
E
E

Unclear strategy E
management style
lack of coordination
resistance to change

Reasons for Resistance

loss of control
fear of the unknown
lack of confidence to learn
increasing workload
past resentment or distrust
loss of status or security
and others

Mahesh P. Joshi: Strategy and HR

39

Overcoming Resistance
Establish a sense of urgency
E Communicate and involve
E Create a shared vision
E Anticipate and remove barriers
E Reinforce and institutionalize new
approaches
E

Mahesh P. Joshi: Strategy and HR

40

A Case Study
Using Internet: an Indian Firm
E In a very unlikely industry
E

Innovative marketing tool

Use of HRM

Mahesh P. Joshi: Strategy and HR

41

WWW.SURATDIAMOND.COM

Mahesh P. Joshi: Strategy and HR

42

eBay and SDJ

E Surat Diamond Jewellery is one of the few

players who have secured a firm footing in

this internationally reputed e-commerce
site.
E It goes a long way in proving the credibility
and goodwill to its customers

Mahesh P. Joshi: Strategy and HR

43

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E

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Mahesh P. Joshi: Strategy and HR

44

How SDJ did it?

E Competitive intelligence
E Hard work
E Feedback from customers
E but
E key ingredient: HR

Mahesh P. Joshi: Strategy and HR

45

Strategy and Value for Owners

E P TC = Profit, a contribution to value for

owners
E P = Price paid by customer
E TC = Total Cost of making and

delivering the product/service

Mahesh P. Joshi: Strategy and HR

46

Value for Employees

Financial
Non-financial

Mahesh P. Joshi: Strategy and HR

47

Value for Employees (2)

Attraction and retention

Company cash flow and tax incentives
Awareness of success of the company
More employee commitment to the company
and greater satisfaction
Better organizational performance

Mahesh P. Joshi: Strategy and HR

48

Customer Value
E Benefits derived from solving the

customers problem, a function of product service quality

. Relative to .
E The total cost of the acquisition and use of
the product, including out of pocket
expense, time, effort, etc.
Mahesh P. Joshi: Strategy and HR

49

Customer Value
E Operational Excellence
E Customer Intimacy
E Product Leadership
E People in the organization

Mahesh P. Joshi: Strategy and HR

50