Professional Documents
Culture Documents
Strategic
Intent
Chosen Strategy
Context
Strategic Available
Assessment Options
Strategy Formulation : Corporate
Strategies- Choice of Direction to the Firm
Allocating resources among different
businesses in a firm
Transferring resources from one set of
businesses to the other
Managing and nurturing a portfolio of
businesses.
Diversified Firms
Expansion
Business Definition
Market
Penetration Stability
Mkt Dev Retrenchment
Cooperation
Innovation. Incremental Divestment
Growth Turnaround
Joint Ventures
Diversification Profit Liquidation
Horizontal Sustained Growth Bankruptcy
Strategic
Concentric Pause Strategy
Alliances
Conglomerate
Vertical Consortia
Forward
Backward
Strategic Alternatives -Grand Strategies
Expansion
Stability
Retrenchment
Combination of any of above three
Grand Strategies
Expansion -Is followed when an organisation aims
at high growth
Stability – when it attempts at incremental
expansion of its functional performance
Retrenchment – when it aims at contraction of its
activities
Combination – adopting a mixture of expansion
stability or retrenchment either at the same time or
in different businesses or at different times in the
same business to improve performance
Expansion
Cooperation
Several
Concentration (core competence)
Focus
All Carry risk
Integration
Integration – combining activities related to
the present activity of the firm- done on the
basis of value chain – horizontal and vertical
Horizontal – same type of products at the
same level of production or marketing
process ,it is said to horizontally integrate.
Vertical – can be forward or backward.
Backward means integrating the source of
raw materials and forward moves it ahead
towards the ultimate customer
Diversification
Minimise risk
Capitalise on capabilities and Biz model to
maximise org strengths and minimise
weaknesses.
If growth in existing business is blocked by
regulatory and environmental factors.
When?
Expansion within existing product market not meet
objectives
High retained cash exceeds needs for expansion
Greater profit opportunities than in present product
market
If information available does not permit clear choice
between expansion and diversification
Risk spreading-avoid dependence on one
product /market, greater use of existing distribution
and acquire technology
Horizontal Integration
New Products
New Functions
Export
Position in 2009
Retrenchment
Stability
Expansion No longer wish Combination
Less risky, less changes to remain In biz Organisation large
Increase pace of Comfort Envrironment and faces complex
Activity Environement is threatening Environment
Prospects of growth Stable Stability ensured by Comprses
Increased size more Expansion percieved as Reallocating different biz
Control overmarket Threatening Resources from each lying in different
Expernce curve and Consolidation Unprofitable Industries
Scale of operations after to profitable Requiring different
expansion businesses responses
Stability
Strategy
Strong focus,
Unlock critical funds,
Invest in emerging tech,
exit non dominant ventures,
turn red to black,
exit unviable projects
Turnaround Strategy
1998-99 –
Sales and valuations hit rock bottom
balance sheet dismal picture,
recession
Strategy
Vendor consolidation – from 1400 suppliers brought
down to 500 in 2002 with reduction in ordering
monitoring costs
J-I-T inventories Reduced from 23 days to 7 days
Demand and Forecasting MIS –reduced product
inventory form 90 days to 50 days reducing
marketing overheads by Rs 10000 per truck
Financial re-engineering – Switched Rs 90 crs form
high to low cost loans and raised Rs 100 cr CP at
9.5 % bringing average cost of debt by 2% over 2
years to 9.6%
Liquidation
Selling of disposing of all or part of an
organisation’s assets
When future is bleak –sales ,profitability
Unamanageable accumulated losses
Someone willing to buy to avail tax benefits
Not possible to revive with existing resources
Difficult in labour surplus, cash hungry country like
India as unions will oppose
Govt, FIs may oppose
By selling avoid bankruptcy and protect
shareholders interests
Liquidation
Combination of
Simultaneous
Sequential Simultaneous
Combination
Combination And
Sequential
Combination Strategies
Joint ventures - pool resources to accomplish
tasks not done independently way of
implementing strategy –spreads risk. Firms
take equity in one another
Strategic Alliance – Partners Contribute skills
and expertise to a cooperatively conceived
and executed project for a specific period
Consortia – Interlocking relationship between
business of an industry -Japanese upto 50
firms – Airbus an example
BHEL -Case
Government
Firm Strategy,
Structure
And Rivalry
Demand
conditions
Factor
Conditions
Related and
Supporting
Industries Chance
Diamond Determinants (Porter’s Model)
Factor Conditions
Demand conditions
Related and Supported Industries
Firm strategy, structure and rivalry
Factors Impinging on Firms’
Internationalisation Strategies
Cost Pressure- minimise unit cost
Pressures for local Responsiveness-
strategies to respond to national level
differences in terms of variables like
customer preferences and tastes, policies
and biz practices
International Entry Modes
Home base
Portfolio
Hub
Platform
Mandate
Strategies for the Base of the
Pyramid
Easy payments in instalments
Dramatic cost cutting
Offering products in small packages
Charge prices by pay by use
Direct distribution by avoiding costly
intermediaries
Strategy Options for Local Companies in Competing
Against Global Companies
Introduction
Characteristics of Environment
Impact of Environmental Changes
Major Environmental Components
Environmental scanning
Techniques used for environmental scanning
Strategic Alternatives
Grand strategies
Types of Principal/Grand/ Major strategies
Strategic Choice
Introduction
Strategic Analysis at the corporate level
Techniques used for corporate portfolio analysis
Industry competitor and SWOT analysis
Behaviour/Subjective factors affecting strategic
choices
Contingencies approach to strategic choices
Strategic plan
Rationalising the Strategy
Introduction
Leadership and Implementation of Skills
Leadership and Strategy Skills
Political aspects, power and strategy
Personal values, ethics and strategies
Social responsibility
Strategic Evaluation Control
Introduction
Strategic Control
Operational Control
Evaluation Techniques for Strategic Control
Evaluation Techniques for operational control
New Business Models and Strategies for
the internet Economy
Introduction
Strategy shaping characteristics of E-
commerce Environment
E-Commerce Business Models and
strategies
Internet strategies for traditional business
Key success factors in e-commerce
Restructuring
Revamping
Regrouping
Rationalisation
Consolidation
Corporate Restructuring
Corporate or business level restructuring –
composition of organisation set of
businesses for more profits
Financial restructuring – equity pattern
,holdings ,debt servicing schedule ,cross
holding
Organisational restructuring –changes in
structure, reducing hierarchies, downsizing,
redesignating positions, altering reporting
relationships
Why Restructuring?
Industry Structure
Positioning of the Firm
Competitive Advantage
Competitive Scope –breadth of
organisation’s target within an industry
Basis for Business level Strategies
Competitive
Scope
Differentiated Products/Services
Low Cost Product/Services
Competitive Advantage
Porter’s Generic Business Strategies
Porter Classification –Business
Strategies
Cost Leadership (lower cost/ broad target –
same utility/comparable price). Higher profit
by volumes and lower margins. Competition
stiff. Achieved by ensuring cumulative value
chain costs are lower than competitors by
analysing cost drivers)
Differentiation (differentiation/broad target)
Focus (lower cost or differentiation/narrow
target)
Cost Leadership
A sub strategy
A specific operating plan detailing how a
strategy is to be implemented ain tems of
when ( timing) and where (market location) it
is to be put into action
Narrower in scope
Shorter in time horizon
Timing tactics
Strategy of low cost , dfferentiation or focus may be
right move only if it is made at the right time –
targets for managers by time
Timing based strategy means attacking the
competitor indirectly through surprise and gaining
market share at reduced cost
Low labour cost by JIT
Time based manufacturing , time based sales and
distribution
First Mover and Late Mover
Market location
Embryonic Stage
Growth stage
Maturity stage
Decline stage
Strategic Analysis and
Choice
Overview
Performance Gap
Present
Performance
Performance
T1 T2 Time
SWOT
Portfolio Analysis BCG Matrix
GE/ McKinsey Nine Cell matrix
Financial Ratios
Brainstorming
Delphi Techniques
CSF
Market Opportunity Analysis
Strategic Analysis Tools
Process mapping
Focus groups
Competitor Analysis
Porter Five Forces Model
Stakeholder Analysis
Budgeting and Value Chain Analysis
Factor Analysis
McKinseys 7 S
PEST Analysis
Corporate Portfolio Analysis
BCG
GE’s Nine cell Matrix (McKinsey & Co)
Hofer’s Product- market Evolution
Directional policy
Strategic position and Action Evaluation
Matrices
Corporate Parenting Analysis
High
Invest
expand
Medium Harvest /
Divest
Profit
Low
4 3
Plan for
Upgrading
2 factory with 3
new
manufacturing 1
3 equipment
3
1
1
Total 10 Total 11
Action
Train staff (increase cost by 1) eliminate fear of
technology (reduce fear by 2)
Show stafff change is necessary for business
survival (new force in favor +2)
Staff shown new machines could add interest and
variety to jobs (new force + 1)
Raise wges to to reflect new productivity(cost+1,loss
of overtime -2)
Slightly different machines with filters to eliminate
pollution (environmental impact -1)
Total For 13 Total against 8
Strategic Groups
Cluster of firms based on technological
leadership ,degree of product quality, pricing
policies, choice of distribution channels and degree
of customer service.
Indian Pharma –Exploiters (Neuland labs),
Explorers (CIPLA), Outsourcers (Dishman Pharma),
emerging globals(e.g Dr Reddy’s) and globals (e.g
Ranbaxy).
Restaurant industry – fast food, fine dining based on
preparation time, pricing and presentation
Other Analysis -Strategic Groups
Strategic Groups – are dynamic collections of
companies that compete simultaneously fo
customers and capital
conceptually defined clusters that share
similar strategies and
business models and therefore
compete more directly with one another than with
other firms in the same industry.
Firms which appear homogenous form one
strategic group.
Similar groups that compete for customers and
capital.
Bench marking
Comparing your organisation or part of your
services with others
Why are others better?
How are others better
What can we learn?
How can we catch up?
How can we become the best in our sector?
Which are the right organisations to compare with?
–Direct competitors (domestic), International,
indirect competitor (providing related product or
service, other successful companies
Steps in Benchmarking
Focus
Analyse
Evaluate
Chose
Process of Strategic Choice
Focus on strategic alternatives
corporate level (expansion, stability,
retrenchment and combination)
business level (low cost, differentiated,
focus) based on level of gap by Gap
analysis (3-5 years time frame between
present and desired performance and
working back wards to see if it can reach
through present level of efforts)
Process of Strategic Choice
Formulated Implemented
Strategy Strategy
Deliberate
Intended Strategy
Strategy Realised
Strategy
Influences
Unrealised Emergent
Strategy Strategy Resultant outcome
Simple Model of Strategy
Implementation
Activating Achieving
Strategies Managing Change
Effectiveness
Achieving
Activating Managing change
Effectiveness
Strategies
Project
Implementation Structural
Functional Evaluation
Implementation
Implementation & Control
Leadership
Procedural
Implementation
Implemetation
Behavioural Operational
Strategic Implementation
Plan Implementation
Resource
Allocation
FEEDBACK
Strategy
Plans
Programmes
Projects
Budgets
Policies,Procedures
Rules and Regulations
Strategic Management
Process
Strategy Strategy
Implementation Evaluation
And Control
Project Control
Objectives Measures
Degree of change
Timing of change
Activity areas of change
Organisational Effectiveness
Assistance
Liaison Formal and Informal – approval, permissions, statutory
benefits
Corporate Affairs
Consultants
Advisors
CA’s
Company Secretary
Legal Experts
Lawyers
Political donations and lobbying
Sickness
Taxation
Internationalisation- different countries environment
Resource Allocation
Minimising gaps
Executive Proposals
Management
Position Papers
Envrt,Core Comp.
Marketing
Operating Past Performance
Management Target/
Implementation
Operational
Plans
Factors in Resource Allocation
Scarcity of resources
Restrictions on generating resources for
newer units and those with greater potential
for growth
Overstatement of needs
Tendency to imitate competitors
Method
Structure
Strategy Systems
Shared
Values
Skills Style
Staff
McKinsey 7 -S
Environment
Strategy
Structure
Effectiveness
Structural Implementation
New Imple
Strategic Mentation
Strategies Mismatches
Plan is Of new
Put in
Implemented Strategies
Place
Entrepreneurial
Functional
Divisional
SBU
Matrix
Network
Product based
Customer based
Process based
Goegraphic
Intrapreneurial
Evolving Structures –Horizontal
Vertical Horizontal
Structure Structure
Routine Rigid
Tasks Culture
Empowered Adaptive
Roles Culture
Formal Competitive
Systems Strategy Shared Collaborative
Information Strategy
Corp
Headquarters
Region B
Structure Function
Y structure
Project Group
N Structure
Structures for Digitalisation
Strategies
Flexible organisation structure,
Small decentralised organisation
Improved coordination
Processes may be redesigned
Greater interorganisational relationships
Organisational Change
Structural change – Modification in structural
relationships of reporting/ changes in depts. etc
Accompanied by behavioural Change to absorb
impact of organisational changes
All organisations make changes in their strategy,
structure and administrative procedures from time to
time.
Change response now moved from increasing
rigid vertical structure to more flexible horizontal
structures by empowering employees, shared
information and adaptive culture
Changes in Organisation Structure
Design
Restructuring/Reorganisation – changing
organisation structure in line with environmental
changes and strategies
Reengineering (business process reengineering) –
fundamental rethinking and radical redesign of
business process to improve cost quality and speed
Delayering or flatter structures- reducing the number
of layers in the organisational hierarchy
Network structures
Interorganisational relationships
Virtual Organisations
Structure for Business level
Strategies
Cost Leadership – Efficiency approach
Differentiation – learning approach
Focus - similar but structure with different
emphasis
Linking Strategies and Structure
Establish standards
Measure actual performance
Evaluate actual vs Standard
Determine and apply corrective action
Tailoring Control to Strategy -factors
Outsourcing
Strategic alliances
Product –team structures
Reengineering
Restructuring
Through culture and shared values
Reward System -
Designed to induce Strategically desired behaviour
Performance evaluation and feed back
Compensation – salary bonus, stock options
,promotions and perks
Linked to control and motivation towards desirable
behaviour
Wage inflation and talent shortage due to growth
Parity for similar work or responsibility and to
differentiate between unequal grades of employees.
Reward System
High and differentiated compensation –
Salary,ESOP, Bonus, promotions and perks
Innovative titles
Faster career progression
Training
Congenial work environment
More satisfying jobs
Overseas exposure
Opportunities to work on cutting edge technologies
Retention plans
Referral schemes
Reward and Strategy
Implementation
Stability strategies – improve efficiency and
have appraisal that use objective short term
criteria
Expansion - Broad based appraisal and long
range performance appraisal
Diversification /Internationalisation- Group
rewards and team performance criteria over
individual awards.Company wide incentives
for knowledge sharing
SYSTEM CHARACTERISTICS vs STRATEGIC
CONTINUM AND STRUCTURAL ALTERNATIVES
Nature of Economy Controlled Protected Globalised
Regulated Liberalised
Privatised
Environmental Certain,stable and Unstable volatile
characteristics predictable and bewildering
Stability/controlled
growth
Strategic Continum Stability/Controlled Focused
growth expansion/ selective
divestment
Mechanistic
Organic