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STRATEGIC MANAGEMENT

BY ASHOK KUMAR WADHWANI


(+91 9845232171)
EMAIL ID: WADHWANI.ASHOK@GMAIL.COM

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FACULTY INTRODUCTION
ASHOK KUMAR WADHWANI (+91 9845232171)
EMAIL ID: WADHWANI.ASHOK@GMAIL.COM
BE (ELECTRONICS & POWER) FROM VNIT, NAGPUR
MBA FROM INDIAN INSTITUTE OF MANAGEMENT, BANGALORE

12+ YEARS OF EXPERIENCE IN SOFTWARE INDUSTRY


WORKED FOR COMPANIES: BEL, PHILIPS, BOSE & ABB
8+ YEARS AS AN ENTREPRENEUR
VENTURES: HR CONSULTING, EDUCATION SECTOR, GARMENT INDUSTRY
FACULTY OF ENTREPRENEURSHIP DEVELOPMENT, STRATEGIC MANAGEMENT
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ASSESSMENT EVALUATION
COURSE CODE: UM17MB590 COURSE NAME: STRATEGIC MANAGEMENT
COURSE CREDITS: 3 TOTAL NUMBER OF LECTURE HOURS: 39
TOTAL NUMBER OF PRACTICAL HOURS: 26
TOTAL EVALUATION WEIGHTAGE: 100%
EVALUATION WEIGHTAGE FOR ISA: 60%
ISA 1: 40 MARKS CONVERTED TO 20
ISA 2: 40 MARKS CONVERTED TO 20
2 ASSIGNMENTS/PRESENTATIONS @ 10 MARKS EACH (TOTAL 20 MARKS)
FINAL EXAM: 40% FINAL EXAM DURATION: 3 HOURS

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COURSE OUTLINES
UNIT1:
INTRODUCTION TO STRATEGIC MANAGEMENT, COMPETITIVE ADVANTAGE, VALUE
PROPOSITION, VISION, MISSION, CORE VALUES, STRATEGIC INTENTS, OBJECTIVES,
BALANCE SCORE CARD, EXECUTING STRATEGIES, HUMAN BIASES IN DECISION MAKING.
CORPORATE GOVERNANCE.
UNIT2:
PESTLE, ETOP, PORTER’S 5 FORCES, RESOURCE BASED VIEW, SWOT, VALUE CHAIN.
UNIT3:
STRENGTHENING COMPANY’S COMPETITIVE POSITION, DISRUPTIVE INNOVATION, M&A,
INTEGRATION, ALLIANCES & PARTNERSHIPS, DIAMOND MODEL OF TRADING &
METHOD OF GLOBAL BUSINESS, COMPETING INTERNATIONALLY.
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COURSE OUTLINES
UNIT4:
DIVERSIFICATION AND ECONOMIES OF SCALE AND SCOPE, BCG MATRIX, GE – 9 CELL
MATRIX, ETHICS & IMPACT ON BUSINESS, CSR & TRIPLE BOTTOM-LINE.
UNIT5:
7S FRAMEWORK & COLLABORATION PARTNERSHIPS & STRUCTURES, BENCHMARKING,
BEST PRACTICES, BPR, 6 SIGMA AND TQM, BUILDING A STRONG CULTURE.

RECOMMENDED TEXT BOOK:

CRAFTING AND EXECUTING STRATEGY


By Arthur Thompson Jr, John Gamble , A. J. Strickland III, 20/e, 2016, McGraw Hill
5

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CHAPTER - 1

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MOST FAMOUS VERSE
• IT IS SAID THAT IF YOU KNOW YOUR ENEMIES AND KNOW YOURSELF, YOU WILL
NOT BE PUT AT RISK EVEN IN A HUNDRED BATTLES.
• IF YOU ONLY KNOW YOURSELF, BUT NOT YOUR OPPONENT, YOU MAY WIN OR
MAY LOSE.
• IF YOU KNOW NEITHER YOURSELF NOR YOUR ENEMY, YOU WILL ALWAYS
ENDANGER YOURSELF.

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STRATEGY
WHAT IS STRATEGY?
IS IT…
MASTER PLAN OF A COMPANY?
DECISION MAKING?
PLAN OF ACTIONS?
OPERATIONAL EFFECTIVENESS?
ALLOCATION OF RESOURCES?
TURNOVER / PROFITABILITY?
CONTINUED…
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STRATEGY CONTINUED…

WHAT IS STRATEGY?
THE SET OF ACTIONS THAT FIRMS TAKE TO DELIVER SUPERIOR PERFORMANCE TO
HAVE COMPETITIVE ADVANTAGE.

AS PER ALFRED CHANDLER, HARVARD PROFESSOR, STRATEGY IS


• “THE DETERMINATION OF THE BASIC LONG-TERM GOALS AND OBJECTIVES OF AN
ENTERPRISE, AND
• THE ADOPTION OF COURSES OF ACTION AND
• THE ALLOCATION OF RESOURCES NECESSARY FOR CARRYING OUT THESE GOALS”

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STRATEGY CONTINUED…

WHAT IS STRATEGY?
AS PER MICHAEL PORTER, HARVARD PROFESSOR, COMPETITIVE STRATEGY IS
• “A BROAD FORMULA FOR HOW A BUSINESS IS GOING TO COMPETE,
• WHAT ITS GOALS SHOULD BE, AND
• WHAT POLICIES WILL BE NEEDED TO CARRY OUT THOSE GOALS.”

STRATEGY IS THE MEANS BY WHICH INDIVIDUALS OR ORGANIZATIONS ACHIEVE


THEIR OBJECTIVES.

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CORE CONCEPT OF STRATEGY
A COMPANY’S STRATEGY IS THE SET OF ACTIONS:
• TO OUTPERFORM THE COMPANY’S COMPETITORS (COMPETITIVE ADVANTAGE)
• TO ACHIEVE SUPERIOR PROFITABILITY

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STRATEGY: WHAT, WHERE AND HOW
WHAT IS OUR PRESENT SITUATION AT FIRM LEVEL AND INDUSTRY LEVEL?
• ANALYSIS OF EXTERNAL (INDUSTRY LEVEL) FACTORS: BUSINESS ENVIRONMENT AND INDUSTRY
CONDITIONS
• ANALYSIS OF INTERNAL (FIRM LEVEL) FACTORS: FINANCIAL AND COMPETITIVE CAPABILITIES

WHERE DO WE WANT TO GO FROM PRESENT SITUATION TO FUTURE?


• CREATING A VISION FOR THE FIRM’S FUTURE DIRECTION

HOW ARE WE GOING TO GET THERE?


• BY CRAFTING AN ACTION PLAN THAT HEADS THE FIRM IN THE DIRECTION OF ITS INTENDED
MARKET POSITION,
• ATTRACTS CUSTOMERS,
• ACHIEVES FINANCIAL AND MARKET PERFORMANCE TARGETS,
• AND GETS IT WHERE IT WANTS TO GO — THAT IS, ITS STRATEGY

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STRATEGY IS ALL ABOUT HOW ?
NEED TO UNDERSTAND HOW ARE WE GOING TO ACHIEVE VISION?

● HOW TO POSITION THE FIRM IN THE MARKETPLACE

● HOW TO ATTRACT CUSTOMERS

● HOW TO COMPETE AGAINST RIVALS

● HOW TO ACHIEVE THE FIRM’S PERFORMANCE TARGETS

● HOW TO CAPITALIZE ON OPPORTCHAPTERIES TO GROW THE BUSINESS

● HOW TO RESPOND TO CHANGING ECONOMIC AND MARKET CONDITIONS

CRAFTING AN ACTION PLAN WILL HEAD THE FIRM TOWARDS IT VISION.

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STRATEGY AND COMPETITORS
STRATEGY AS A CHOICE
• IS ABOUT COMPETING DIFFERENTLY FROM RIVALS TO GAIN COMPETITIVE ADVANTAGE FOR
LONG TERM SUSTAINABLE BUSINESS.
• DOING WHAT THEY (RIVALS) DO NOT DO OR DOING IT BETTER
• DOING WHAT THEY CANNOT DO
• DOING THINGS THAT ATTRACT CUSTOMERS AND SET A FIRM APART/DIFFERENT FROM ITS RIVALS
• DOING THINGS CALCULATED TO PRODUCE A COMPETITIVE EDGE OVER RIVALS
• DOING WHAT THE FIRM MUST DO AND ALSO KNOWING WHAT IT MUST NOT DO
• TARGETING NICHE MARKET (STAKE OUT A MARKET POSITION THAT IS NOT CROWDED WITH
COMPETITORS

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IDENTIFYING A COMPANY’S STRATEGY–WHAT TO LOOK
ACTIONS TO STRENGTHEN ACTIONS TO GAIN SALES & MARKET SHARE ACTIONS TO GAIN SALES &
FIRM’S BARGAINING POSITION VIA MORE PERFORMANCE, APPEALING MARKET SHARE WITH LOWER
WITH SUPPLIER, DISTRIBUTORS DESIGN, QUALITY, CUSTOMER SERVICE, PRICES BASED ON LOWER
AND OTHERS WIDER PRODUCT RANGE ETC. COSTS

ACTIONS TO UPGRADE, BUILD


OR ACQUIRE COMPETITIVELY THE PATTERN
IMPORTANT RESOURCES & OF ACTIONS
AND ACTIONS TO ENTER NEW
CAPABILITIES
BUSINESS PRODUCT OR GEOGRAPHIC
APPROACHES MARKETS OR TO EXIT EXISTING
ACTIONS AND APPROACHES THAT DEFINE A ONES.
USED IN MANAGING R&D, COMPANY’S
PRODUCTION, FINANCE STRATEGY
AND OTHER KEY ACTIVITIES

ACTIONS TO STRENGTHEN ACTIONS TO CAPTURE EMERGING MARKET ACTIONS TO STRENGTHEN


COMPETITIVENESS VIA OPPORTUNITIES & DEFEND AGAINST MARKET STANDING &
STRATEGIC ALLIANCES & EXTERNAL THREATS TO THE COMPANY’S COMPETITIVENESS BY
COLLABORATIVE PARTNERSHIP BUSINESS PROSPECTS ACQUISITION OR MERGER
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CASELET: MCDONALD’S STRATEGY IN THE QUICK SERVICE RESTAURANT INDUSTRY
• IN 2010, MCDONALD SETTING NEW WELL CONCEIVED AND EXECUTED PLAN-TO-WIN STRATEGY THAT
SALES RECORD DESPITE A GLOBAL FOCUSED ON “BEING BETTER, NOT JUST BIGGER”
ECONOMIC SLOW DOWN
KEY INITIATIVES OF THE PLAN-TO-WIN STRATEGY:
• MORE THAN 60 MILLION CUSTOMERS
VISIT IN A DAY • IMPROVED RESTAURANT OPERATIONS

• 32000 RESTAURANTS IN 117 • AFFORDABLE PRICING


COUNTRIES
• WIDE MENU VARIETY AND BEVERAGE CHOICES
• 2009 REVENUE AND EARNINGS $22.7
BILLION AND $6.8 BILLION • CONVENIENCE AND EXPANSION OF DINNING OPPORTUNITIES
RESPECTIVELY • ONGOING RESTAURANT REINVESTMENT AND INTERNATIONAL
• MCDONALD'S PERFORMANCE IN THE EXPANSION
MARKETPLACE MADE IT ONE OF TWO
COMPANIES LISTED ON DOW JOHNS
(OTHER ONE WALMART) - INCREASED
SHARE VALUE IN SPITE OF THE
ECONOMIC MELTDOWN

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CASELET: STARBUCKS’S STRATEGY IN THE COFFEEHOUSE MARKET
ABOUT STARTBUCKS THE KEY ELEMENTS OF STARBUCKS’S STRATEGY IN THE COFFEEHOUSE
INDUSTRY INCLUDED:
• FOUNDED IN 1985
• TRAIN “BARISTAS” TO SERVE A WIDE VARIETY OF SPECIALTY COFFEE
• NINE-STORE OPERATION IN
DRINKS THAT SATISFY INDIVIDUAL CUSTOMER PREFERENCES IN A
SEATTLE, WASHINGTON.
CUSTOMIZED WAY
• HAD BECOME THE PREMIER
• STORE AMBIENCE AND CUSTOMER EXPERIENCE AT STARBUCKS STORES
ROASTER AND RETAILER OF
SPECIALTY COFFEES IN THE • PURCHASE AND ROAST ONLY TOP-QUALITY COFFEE BEANS
WORLD. • FOSTER COMMITMENT TO CORPORATE RESPONSIBILITY
• OVER 18,800 STORE LOCATIONS • EXPAND THE NUMBER OF STARBUCKS STORES DOMESTICALLY AND
BY APRIL 2013. INTERNATIONALLY
• IN FISCAL 2013, ITS ANNUAL • BROADEN AND PERIODICALLY REFRESH IN-STORE PRODUCT
SALES WERE EXPECTED TO OFFERINGS
EXCEED $15 BILLION—AN ALL-
TIME HIGH FOR REVENUES AND • FULLY EXPLOIT THE GROWING POWER OF THE STARBUCKS NAME
NET EARNINGS. AND BRAND IMAGE WITH OUT-OF-STORE SALES

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STRATEGIC APPROACH CHOICES
Building Competitive Advantage

Low-cost provider Broad Focused Differentiation


Differentiation Strategy (Focus on Best-cost provider
Strategy Strategy Market Niche)
More value for the
Achieving a cost- money to meet their
Differentiate Niche Market: expectations on key
based advantage
product/service for By offering buyers quality,
over rivals.
broad spectrum of customize attributes that performance or
Walmart and
buyers. meet their specific needs service beyond
Southwest Airlines
Apple (innovative and tastes better than their price
have strong market
products), rivals’ products. expectations. It is a
positions because
Johnson & Johnson Lululemon: hybrid strategy of
of the low-cost
baby products specializes in high- low-cost provider
advantages over
(product reliability). quality yoga clothing and differentiation
rivals.
strategies

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PROACTIVE, PLANNED
INITIATIVES TO IMPROVE THE
COMPANY’S FINANCIAL
PERFORMANCE AND SECURE
A COMPETITIVE EDGE AND

REACTIVE, RESPONSES TO
UNANTICIPATED
DEVELOPMENTS AND FRESH
MARKET CONDITIONS.

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THE RELATIONSHIP BETWEEN A FIRM’S STRATEGY AND ITS
BUSINESS MODEL

REALIZED BUSINESS
STRATEGY MODEL
Competitive Value
Initiatives
$$$? Proposition

Business Profit
Approaches Formula

CONTINUE…

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THE RELATIONSHIP BETWEEN A FIRM’S STRATEGY AND ITS
BUSINESS MODEL CONTINUED…

BUSINESS MODEL:
• MANAGEMENT’S BLUEPRINT FOR DELIVERING A VALUABLE PRODUCT OR SERVICE TO
CUSTOMERS
• GENERATE REVENUES SUFFICIENT TO COVER COSTS AND YIELD AN ATTRACTIVE PROFIT.

THE TWO ELEMENTS OF A COMPANY’S BUSINESS MODEL ARE


1. VALUE PROPOSITION: THE CUSTOMER VALUE PROPOSITION LAYS OUT THE COMPANY’S APPROACH TO
SATISFYING BUYER WANTS AND NEEDS AT A PRICE CUSTOMERS WILL CONSIDER A GOOD VALUE.

2. PROFIT FORMULA: DESCRIBES THE COMPANY’S APPROACH TO DETERMINING A COST STRUCTURE THAT
WILL ALLOW FOR ACCEPTABLE PROFITS, GIVEN THE PRICING TIED TO ITS CUSTOMER VALUE PROPOSITION.

CONTINUE…

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THE BUSINESS MODEL AND THE VALUE-PRICE-COST FRAMEWORK
CONTINUED…
VALUE PROPOSITION:
WTP
• VALUE PROPOSITION = GET – GIVE

• THE CUSTOMER VALUE PROPOSITION = V – P


(THE CUSTOMERS’ PERCEPTION OF HOW MUCH VALUE THEY
ARE GETTING FOR THE MONEY)

• PROFIT FORMULA: PROFIT = P – C


• GREATER THE VALUE DELIVERED ( V ) AND THE LOWER THE PRICE ( P ), THE
MORE ATTRACTIVE IS THE COMPANY’S VALUE PROPOSITION. (V > P)
• THE LOWER THE COSTS ( C ), GIVEN THE CUSTOMER VALUE PROPOSITION
C = PER UNIT COST
( V – P ), THE GREATER THE ABILITY OF THE BUSINESS MODEL TO BE A
MONEY-MAKER (PROFIT MAXIMIZATION). P = PRODUCT PRICE
V = CUSTOMER VALUE

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IS OUR STRATEGY A WINNING STRATEGY?
A WINNING STRATEGY MUST PASS THREE TESTS:
THE FIT TEST The Strategic
Fit Test
HOW WELL DOES THE STRATEGY FIT THE COMPANY ’ S SITUATION?

THE COMPETITIVE ADVANTAGE TEST


The Competitive Winning The Performance
IS THE STRATEGY HELPING THE COMPANY ACHIEVE A Advantage Test Test
Strategy
SUSTAINABLE COMPETITIVE ADVANTAGE?

THE PERFORMANCE TEST


IS THE STRATEGY PRODUCING GOOD COMPANY PERFORMANCE?

CONTINUE…..

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IS OUR STRATEGY A WINNING STRATEGY? CONTINUED…

THE FIT TEST : HOW WELL DOES THE STRATEGY FIT THE COMPANY ’ S SITUATION?
• WELL MATCHED TO INDUSTRY AND COMPETITIVE CONDITIONS

• COMPANY’S BEST MARKET OPPORTUNITIES AND OTHER BUSINESS ENVIRONMENTS IN WHICH COMPANY
OPERATES.

• IT EXHIBITS GOOD EXTERNAL FIT

• SYNC WITH PREVAILING MARKET CONDITIONS

• TAILORED TO THE COMPANY’S RESOURCES AND COMPETITIVE CAPABILITIES

• SUPPORTED BY COMPLEMENTARY SET OF FUNCTIONAL ACTIVITIES (SUPPLY CHAIN MANAGEMENT, OPERATIONS,


SALES AND MARKETING etc.)

• IT EXHIBITS INTERNAL FIT AND COMPATIBLE WITH COMPANY’S ABILITY TO EXECUTE THE STRATEGY IN COMPETENT
MANNER.

• EXHIBITS DYNAMIC FIT – EVOLVE OVER TIME IN A MANNER THAT MAINTAIN EFFECTIVE ALIGNMENT WITH
COMPANY’S SITUATION CONTINUE….

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IS OUR STRATEGY A WINNING STRATEGY? CONTINUED…

THE COMPETITIVE ADVANTAGE TEST:


IS THE STRATEGY HELPING THE COMPANY ACHIEVE A SUSTAINABLE COMPETITIVE ADVANTAGE?
• WINNING STRATEGIES ENABLE A COMPANY TO ACHIEVE A COMPETITIVE ADVANTAGE OVER
KEY RIVALS THAT IS LONG-LASTING
• STRATEGIES THAT FAIL TO ACHIEVE A DURABLE COMPETITIVE ADVANTAGE OVER RIVALS ARE
UNLIKELY TO PRODUCE SUPERIOR PERFORMANCE FOR MORE THAN A BRIEF PERIOD OF TIME
• THE MORE DURABLE THE COMPETITIVE ADVANTAGE, THE MORE POWERFUL IT IS.

CONTINUE….
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IS OUR STRATEGY A WINNING STRATEGY? CONTINUED…

THE PERFORMANCE TEST


• MONITORING STRONG COMPANY PERFORMANCE
• TWO KINDS OF PERFORMANCE INDICATORS TELL THE MOST ABOUT THE CALIBRE OF A
COMPANY’S STRATEGY:
(1) COMPETITIVE STRENGTH AND MARKET STANDING AND
(2) PROFITABILITY AND FINANCIAL STRENGTH
• ABOVE-AVERAGE FINANCIAL PERFORMANCE OR GAINS IN MARKET SHARE
• COMPETITIVE POSITION, OR PROFITABILITY

GOOD STRATEGY + GOOD STRATEGY EXECUTION = GOOD MANAGEMENT

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REFERENCES:
1. CRAFTING AND EXECUTING STRATEGY BY ARTHUR THOMPSON JR, JOHN GAMBLE , A. J. STRICKLAND III,
20/E, 2016, MCGRAW HILL
2. STRATEGIC MANAGEMENT: AN INTEGRATED APPROACH BY HILL CHARLES, W. L. JONES, GARETH R.

3. CONTEMPORARY STRATEGY ANALYSIS BY ROBERT M. GRANT

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