Corporate Policy & Strategic Management.

³To compete for the Future´

Some fundamental questions«
‡ Does the senior management have a clear understanding of how the industry may be different in the next 10 years? ‡ Is it regularly defining new ways of doing business, building new capabilities and setting new standards of customer satisfaction?

Some fundamental questions«
‡ Is management aware of the threats posed by new rivals? ‡ Do senior executives have a sense of urgency about the need to reinvent the current business model? ‡ Is my company pursuing growth and new business development?

So what is Strategic Management?
‡ As defined by Hofer and others, it is ³ The process which deals with the fundamental organizational renewal and growth with the development of strategies, structures, and systems necessary to achieve such renewal and growth, and with the organizational systems needed to effectively manage the strategy formulation and implementation processes´

‡ In a changing environment one of the most difficult things in business is to know when to stick to your strategy and when to change it. ‡ Strategy means putting things in place carefully. and with a great deal of thought. . It is the opposite of just waiting for things to happen.Simply put by Edward de Bono.

‡ Vision therefore is future aspirations that lead to an inspiration to be the best in one¶s field of activity. .Vision ‡ A vision articulates the position that an organization would like to attain in the distant future.

‡ They represent integrity. ‡ Good visions foster risk-taking and experimentation. ‡ They are competitive.Why should organizations have a ³Vision´ ‡ Good visions are inspiring and exhilarating. unique and simple. ‡ It creates a common identity and a shared sense of purpose. .

‡ Mission is what an organization is and why it exists. ‡ Mission is defined as ³Essential purpose of the organization, concerning philosophical question s like What is our business, the nature of business it is in, who are our customers it looks to satisfy´.

Mission statements
‡ They should be feasible: Though mission should aim high, it should be realistic and achievable. ‡ It should be precise: It should not be very narrow nor should it be too broad. ‡ It should have clarity: It should be clear enough to lead to action. ‡ It should be motivating: It should motivate employees to achieve its mission.

Mission statements
‡ It should be unique and distinctive: A unique because an organization should be seen by market and customers as ³different´. ‡ It should the major strategy components: It should indicate the strategy direction for the organization.

Levels at which Strategy operates
‡ For many companies, a single strategy is not enough. ‡ There is a need for multiple strategies at different levels. ‡ Many companies are organized on the basis of operating divisions. ‡ These divisions are known as ³Strategic business units´ or profit centers.

Strategy at different levels Corporate office SBU A SBU B SBU C Finance Marketing Operations Personnel .

Strategy at different levels. . ‡ S B U¶s : Business level strategies. ‡ Functional : Functional level strategies. ‡ Corporate office : Corporate strategies.

. covering the various functions performed by different SBU¶s. allocation of resources and coordination of the S B U¶s for optimal performance. ‡ It is a plan of action.Corporate level strategies. ‡ The plan deals with the objectives of the company.

and coordination between them for making an optimal contribution to the achievement of corporate level objectives. . allocation of resources among functional areas.SBU Level strategy. ‡ SBU strategies is a comprehensive plan providing objectives for SBU¶s.

. and coordination between them for optimal contribution to the achievement of SBU and corporate level objectives.Functional Strategies ‡ Functional level strategies deal with a relatively restricted plan providing objectives for a specific function. allocation of resources among different operations within that functional area.

Other strategy levels ‡ Societal strategies: These strategies are at a level higher than the Corporate level. ‡ Based on the mission statement a societal strategy is a generalized view of how the corporation relates itself to society in terms of a particular need or a set of needs that it strives to fulfill. .

one step below the functional level.g. pricing. ‡ E. ‡ Some strategies are also needed to be set at lower levels. product and advertising. . distribution. A functional strategy at the marketing level could be sub divided into sales.Other strategy levels.

‡ Strategists are individuals or groups who are primarily involved in the formulation.Strategists and their role in Strategic Management. . implementation and evaluation of strategy. ‡ So all managers are strategists in a limited sense. They are also strategists. ‡ Persons outside the organization are also involved in strategic management.

‡ As directors.Various strategists ‡ Board of Directors: Is responsible for the governance of the organization. . the members of the board are responsible for providing guidance and establishing the directives according to which the managers of the organization can operate.

‡ The Chief Executive Officer: Is the most important strategist who is responsible for all the aspects of strategic management.Various strategists. ‡ He plays a very important role in strategic decision making. . right from formulation to the evaluation of strategy.

responds to it and exploits it as an opportunity. ‡ They play a very important and a proactive role in strategic management.Various strategists ‡ Entrepreneurs: are persons who always searches for change. They provide a sense of direction to the organization and set objectives and formulate strategies to achieve them. .

Various strategists ‡ Senior Management: When assigned with specific responsibilities senior managers look after modernization. technology up gradation. plan implementation and new product development. implementation and evaluation of strategies. ‡ Senior managers perform a variety of roles by assisting the board and the CEO in formulation. diversification and expansion. .

. ‡ SBU level heads are also known as profit center heads are considered as ceo¶s of a defined business unit for the purpose of strategic management.Various strategists ‡ SBU level executives: The idea for organizing to SBU is to manage a diversified company as a portfolio of businesses.

‡ They not only assist in whole planning process but also are responsible for the communication of strategic plans. They also conduct special studies and research related to strategic management.Various strategists ‡ Corporate planning staff: It plays a supporting role in strategic management. .

Boston consulting. AF Ferguson. S B Billimoria etc. . Mc Kinsey and company. Accenture.Various strategists ‡ Consultants: The main advantage of hiring consultants is getting unbiased and objective opinion from a knowledgeable outsider and availability of specialist¶s skills. ‡ Some Consulting co¶s are. KPMG.

. ‡ KPMG: Strategic financial management and feasibility studies. ‡ Boston consulting: Building competitive advantage. infotech and systems.Area of specialization ‡ McKinsey and company: Fundamental change and strategic visioning. ‡ Accenture: Business restructuring.

. ‡ Based on the mission statement a societal strategy is a generalized view of how the corporation relates itself to society in terms of a particular need or a set of needs that it strives to fulfill.Other strategy levels ‡ Societal strategies: These strategies are at a level higher than the Corporate level.

Other strategy levels. one step below the functional level.g. pricing. ‡ E. A functional strategy at the marketing level could be sub divided into sales. distribution. . product and advertising. ‡ Some strategies are also needed to be set at lower levels.

Strategic Decision Making. ‡ These decisions are difficult to measure. ‡ Is a complex process. ‡ Cannot be analyzed and explained easily. . ‡ For these reasons no theoretical model can adequately represent the different dimensions of the process of strategic decision making.

‡ Strategists do not reject analysis.Strategic decision making ‡ ³Successful business strategies result not from rigorous analysis but from a particular state of mind´. to test the ideas that emerge. but they use it only to stimulate the creative process. to work out their strategic implications.Kenichi Ohmae . or to ensure successful execution of high potential ³wild´ ides that might otherwise never be implemented´ ‡ From ³The Mind of The Strategist´«.

( two different conclusions) . ‡ Criteria for decision making.Issues related with Strategic decision making.( decision must be original and different) ‡ Variability in decision making.( choosing best possible alternatives for achieving targets) ‡ Creativity in decision making. ‡ Rationality in decision making.

Issues contd ‡ Person related factor in decision making. intelligence.( age.) ‡ Individual v/s group decision making. creativity etc. personal values. . risk taking ability. education.

Strategic Management Process 1)Establishing the hierarchy of strategic intent: ‡ Creating and communicating a vision. ‡ Defining the business. ‡ Designing a mission statement. . ‡ Setting objectives.

. ‡ Doing organizational appraisal. ‡ Considering business level strategies. ‡ Strategic analysis. ‡ Considering corporate level strategies. ‡ Preparing strategic plan. ‡ Formulating strategies.Strategic management process 2) Formulation of strategies: ‡ Performing environmental appraisal.

‡ Operationalysing strategies. 3) Implementation of strategies: ‡ Activating strategies. ‡ Designing structures and systems. ‡ Managing functional implementation. ‡ Managing behavioral implementation. .Strategic management process.

‡ Reformulating strategies.Strategic management process 4) Performing strategic evaluation and control: ‡ Performing strategic evaluation. ‡ Exercising strategic control. .

Mission ‡ Mission is a statement which defines the role that an organization plays in a society. ‡ Mission is the ³ purpose or the reason for the organization¶s existence´ .

. It should be clear.Features of a Mission statement ‡ ‡ ‡ ‡ ‡ It should be feasible. It should be distinctive. It should be motivating. It should be precise.

profits. People. ‡ Ford: Quality is job no. . products.Some Mission statements« ‡ Ranbaxy laboratories: ³To become a research-based international pharma company. ‡ Hero Honda: Desh ki Dhadkan.1 ‡ Bajaj : Inspiring confidence. ‡ HCL: To be a world class competitor. ‡ Marico Industries: The 3P¶s of Marico.

. events and influences that surround and affect it´ ‡ It is therefore crucial for any organization to understand the environmental influences on its business.Environmental Appraisal ‡ The environment of any organization is ³the sum of all conditions.

‡ It is dynamic. ‡ It is complex.Characteristics of Environment. . ‡ It has a far-reaching impact. ‡ It is multi-faceted.

promotion. image. distribution. Product factors like demand. 1) Market environment: Client¶s needs. price.Various environmental components. values. buying behavior. preferences. attitudes. nature of competition. differentiation etc Competitor factors like different types of competitors. perceptions. design. . satisfaction. life cycle. utility. features.

Components contd. human beings. cost of technology. ‡ Effects of technology on environment. R&D. . ‡ Technological development. 2) Technological Environment: ‡ Sources of technology..

components. . availability. and continuity of supply of raw material. 3) Supplier environment: ‡ Cost..Components contd. parts. ‡ Infrastructural support and ease of availability of the different factors of production.

socialistic or mixed. balance of payments etc. ‡ The economic structure adopted. . fiscal. capitalistic. industrial. 4) Economic environment: ‡ The economic stage at which the country exists at a given point of time.Components contd.. ‡ Economic policies. ‡ Per capita income.

FDI.Components contd. 5) Regulatory environment: ‡ Policies related licensing.. public sector. monopolies. consumer protection etc. ‡ Policies related to distribution and pricing. . backward areas. ‡ Policies related to sick industries.

. ‡ Political stability. ‡ Political funding of elections. ‡ Government¶s role in business. coalition compulsions.Components contd. ideological forces. . 6) Political environment: ‡ The political system and its features.

income distribution etc. corruption etc.. 7) Socio-cultural environment: ‡ Demographics like population. ‡ Socio-cultural concerns like environmental pollution. inter state migration. consumerism. . its density and distribution. ‡ Family structure changes.Components contd. age composition.

Components contd. ‡ Global markets and competitiveness.. ‡ Global trade and commerce. ‡ Global financial system. ‡ Global communication ‡ Global technology and quality systems. 8) International environment: ‡ Globalization process. . ‡ Global economic forces.

weaknesses. all these put together determine the ³ Organizational capability´ . strengths.Organizational Appraisal ‡ It deals with the internal environment of the organization. ‡ Internal environment constitutes of behavior. synergy and competencies.

knowledge. ‡ Physical resources: Technology. . plant. capabilities. organizational processes. information. ‡ Tangible and intangible resources: All assets. location. access to raw material etc.Organizational appraisal ‡ Organizational Resources. equipment.

‡ Human resources: Training. and structures. ‡ Organizational resources: Formal systems. judgment. intelligence.Organizational appraisal contd. experience. .. relationships etc.

Organizational behavior ‡ It is the manifestation of various forces and influences operating in the internal environment of an organization that create the ability for. . ‡ It leads to the development of a special identity and character of an organization. or place constraints in the usage of resources.

Factors influencing Org. .Beh. Culture Quality of work environment. Management philosophy. Shared values. ‡ ‡ ‡ ‡ ‡ ‡ Quality of leadership. Organizational politics.

‡ Strength: It is an inherent capability which an organization can use to gain strategic advantage. ‡ Weakness: A weakness is an inherent limitation or constraint which creates a strategic disadvantage for an organization. .Strengths & Weaknesses.

promotion. . distribution. synergistic effect can be achieved when product.Synergistic effects ‡ Synergy is the idea that the whole is greater or lesser than the sum of its parts. advertising support each other. ‡ E.g. In marketing dept.

Competencies ‡ Competencies are special qualities possessed by an organization that make them withstand pressures of competition in the market place. ‡ When a specific ability is possessed by a particular organization exclusively or in a large measure it is called as distinctive competence. .

.Organizational capability ‡ It is the inherent capacity or potential of an organization to use its strengths and overcome its weaknesses in order to exploit opportunities and face threats in an external environment.

. They are the result of organizational activities leading to rewards in terms of financial parameters.Strategic advantage ‡ These are the outcome of organizational capabilities.

Functional capabilities. ‡ Good relationship with financial institutions. ‡ Strengths supporting Financial capability. ‡ High level of share holder¶s confidence.worthiness. ‡ High level of credit. ‡ Low cost of capital compared to rivals. . ‡ Access to financial resources.

Effective distribution system. Better quality of products. Effective sales promotion.Marketing capabilities ‡ ‡ ‡ ‡ ‡ ‡ Wide variety of products. Effective MIS. . Sharply-focused positioning.

Favorable plant location. Effective control of operational costs. . High caliber R&D people.Operations capabilities ‡ ‡ ‡ ‡ ‡ ‡ ‡ High level of capacity utilization. Technical collaborations. Reliable sources of supply. Good inventory control system.

General management capability. ‡ ‡ ‡ ‡ ‡ Effective system for corporate planning. Favorable corporate image. Risk taking. . Effective management of organizational change. Reward and incentives for top managers.

‡ O: Opportunities. ‡ W: Weaknesses. ‡ T: Threats . ‡ S: Strengths.SWOT Analysis.

g. . superior r&d skills which can be used for new product development. ‡ E.Strength ‡ It is an inherent capacity which an organization can use to gain strategic advantage.

g. over dependence on a single product line.Weakness ‡ It is an inherent limitation or constraint which creates strategic disadvantage. . ‡ E. which could be risky in crisis.

g. growing demand for the products or services that a company provides. .Opportunity ‡ It is a favorable condition in the organization¶s environment which helps it to consolidate and strengthen its position. ‡ E.

g. ‡ E. emergence of strong new competitors who are offering stiff competition. or causes damage to. the organization.Threats ‡ It is unfavorable situation in the organization¶s environment which creates risk for. .

Combination strategy.Grand strategies ‡ Types of Grand strategies: ‡ ‡ ‡ ‡ Stability strategy. . Expansion strategy. Retrenchment strategy.

A copier machine company provides better after sales service to improve its image and product image too. ‡ E.g.Stability strategy ‡ Is adopted by on organization when it attempts at an incremental improvement of its functional performance by marginally changing one or more of its business. .

. functions and technology.Expansion strategy ‡ This strategy is followed when a company aims at high growth by increasing the scope of one or more of its businesses in terms of their respective customer groups.

‡ E.Retrenchment strategy ‡ This is followed when a company aims at contraction of its activities through substantial reduction or elimination of its business.g. . A pharmaceutical company may withdraw from its retail operations so that it can focus on institutional sales.

Combination strategy ‡ This is followed when a company adopts a mixture of all the strategies either at the same time in its different businesses. or at different times in the same business with the aim of improving its performance. .

‡ Financial plans and policies: ‡ It means. 1) Sources of funds( borrowings. dividend decisions) 3) Management of funds (system of finance. reserves & surplus) 2) Usage of funds( capital investment. budgeting) . accounting. loans.Functional Strategies.

‡ Strategic use of Marketing mix. ‡ ‡ ‡ ‡ P: Product.Marketing plans and policies. P: Price P: Place P: Promotion .

Operation plans and policies ‡ These decisions are related to production system. . operational planning and control. and R&D.

TISCO never had any industrial dispute for the past so many years. organizational and employee characteristics and industrial relations. ‡ E.g.Personnel plans and strategies ‡ These policies are related with the personnel system. .

and keep track of any change in them so as to assess the impact on strategy. programs. .Strategic evaluation and control ‡ The 4 basic type of strategic controls are. 1) Premise control: Necessary to identify the key assumptions. and projects are actually guiding the company towards its objectives. 2) Implementation control: It is aimed at whether the plans.

Strategic evaluation and control. . 3) Strategic surveillance: It is designed to monitor a broad range of events inside and outside the company that are likely to threaten the course of a company¶s strategy.

. 4) Special alert control: This is based on a trigger mechanism for rapid response and immediate reassessment of strategy in view of sudden and unexpected events.Strategic evaluation and control.


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