Strategic Management

Topics

1. Strategy & strategic management

2. Stages of strategic management
3. Key terms in strategic management
4. Benefits of strategic management
5. Pitfalls of strategic management
6. Do all firms plan a strategy
7. Business strategy & Military strategy
• Think of the any person who you feel is successful in life

– Why do you think they have been successful

– What characteristics can you attribute to their success

Let us talk about the one organisation
that we all know well

Institute of Management, Christ University

Let us talk about the one organisation
that we all know well

Institute of Management, Christ University

 Data on the MBA institutes in
Bangalore
• There are more than 200 MBA institutes in the city
• IIM Bangalore surely is the most well known institute
• Beyond our institute, the other ones that are well known are Symbiosis,
NMIMS, XIME and Alliance.
• Some of the lesser known institutes are Acharya, Jain, PES, Amrita etc
• And then there are many more
Why has CIM been so successful in Bangalore?

CHRIST Institute of Management

Why has CIM been successful in Bangalore?

CHRIST Institute of Management

 The ingredients of success are:
• Clear, consistent, long-term goals - over the years, the institute has
built a reputation of quality – with every small daily decision, in some
way, adding to this reputation.

• Understanding of the business environment – awareness of the

growing size of management education market – investing in growth in
quantity and quality at the right time.

• Appreciation of own resource and capabilities – build a good team,

invest in infrastructure, create a culture of continuous improvement
over long term.

• Implementation in terms of effort, leadership, and people

management – commitment, self discipline and emphasis on team
building at every level to build the organization.
The ingredients of successful strategy
 What is strategy?

• Peter Drucker (1950s, 1960s)

– Competing with rivals The idea of what
– Pricing better than rivals constitutes strategy has
been constantly evolving
• Michael Porter (1980s)
– Managing pricing pressure
• Competitive pricing against rivals
– Managing competitive forces in the industry
• Bargaining power of buyers and suppliers
• Threat of substitutes
• Post 2000
– Doing something new
– Building on what you already do
– Reacting opportunistically to emerging possibilities
 Doing something new

• Chan Kim, Renée Mauborgne (1999):

– Creating New Market Space
– Blue Ocean Strategy

• Alvin Roth (2004):

– The Art of Designing Markets

• Clay Christensen, Henning Kagermann, Mark Johnson (2008)

– Reinventing Your Business Model

• Ian MacMillan, Rita McGrath

– Discovering New Points of Differentiation
 Building on what you already do

• Chris Zook
– Finding Your Next Core Business
• Chris Zook, James Allen
– Growth Outside the Core
• David Collis , Cynthia Montgomery
– Competing on Resources
• Rob Lachenauer , George Stalk:
– Hardball: Five Killer Strategies for Trouncing the Competition
– Curveball: Strategies to Fool the Competition
• Richard D’Aveni
– The Empire Strikes Back: Counterrevolutionary Strategies for Industry
Leaders
• Clay Christensen, Max Wessel:
– Surviving Disruption
Reacting opportunistically to emerging possibilities

• Tim Luehrman
– Strategy as a Portfolio of Real Options

• David Yoffie, Michael Cusomano

– Judo Strategy

• Michael Mankins, Richard Steel

– Stop Making Plans: Start Making Decisions

• Steven Blank
– Why the Lean Start-Up Changes Everything
 What is strategy?

Strategy is an integrated set of

choices that uniquely positions the
firm in its industry so as to create
sustainable advantage and superior
value relative to the competition
 • Superior performance / value
Strategy
aims at • Sustainable competitive
making advantage
choices
 Strategy is making choices around….
The following set of FIVE interrelated questions:
• What is your winning aspiration?
– The purpose of your enterprise, its motivating aspiration.
• Where will you play?
– Playing field where you can achieve that aspiration
• How will you win?
– The way you will win on the chosen playing field
• What capabilities must be in place?
– The set and configuration of capabilities required to win in the chosen
way
• What management systems are required?
– The systems and measures that enable the capabilities and support the
choices.
 Classroom Activity

CHRIST Institute of Management has a reputation as a

good quality B-School in India. Currently it hovers among
the Top 50 B-schools.

The Institution aspires to become the TOP RANKING

B-school in India and be considered as a world class
B-school.

You are a group of executives / management consultants

assigned the task of recommending a strategy for
CHRIST Institute of Management to achieve this goal.
 Activity
Strategic choice
question

What is our winning

aspiration?

Where will we play?

How will we win?

What capabilities must

be in place?

What management
systems are required?
 What is strategic management?
• Two company CEOs who competed in the same industry. The two decided
to go on a camping trip to discuss a possible merger. They hiked deep into
the woods.

• Suddenly, they came upon a grizzly bear that rose up on its hind legs and
snarled. Instantly, one of the president took off his knapsack and got out a
pair of jogging shoes.

• The second president said, “Hey, you can’t outrun that bear.” the first
president responded, “Maybe I can’t outrun that bear, but i surely can
outrun you!”

• Story symbolizes the notion of strategic management

– To achieve and maintain competitive advantage.
 How is Strategic Management defined?

The art and science of formulating,

implementing, and evaluating
cross-functional decisions that enable an
organization to achieve its objectives
Are strategic planning and strategic management
different?
• Strategic management
– Synonymously with strategic planning

• Strategic planning
– Often referred to only for strategy formulation

• A strategic plan
– Is company’s game plan
– Results from tough managerial choices
• From among numerous good alternatives
• Signals commitment to specific
– Markets
– Policies
– Procedures
– Operations
What are the stages of Strategic Management

•Strategy formulation
•Strategy implementation
•Strategy evaluation
 Strategy Formulation
• Includes
– Developing a vision and
mission
– Identifying
organization’s external
opportunities and
threats
– Determining internal
strengths and
weaknesses
– Establishing long-term
objectives
– Generating alternative
strategies
– Choosing particular
strategies to pursue.
 Strategy Formulation
Includes making decisions on:
– Deciding what new businesses to enter
– What businesses to abandon
– How to allocate resources
– Whether to expand operations or diversify
– Whether to enter international markets
– Whether to merge or form a joint venture
– How to avoid a hostile takeover
 Strategy Implementation
• The ‘Action Stage’
– Stage when formulated
strategies are executed

• Involves:
– Establish annual
objectives
– Devise policies
– Motivate employees
– Allocate resources
 Strategy Implementation
• Involves:
– Developing strategy-supportive
culture
– Creating an effective
organizational structure
– Redirecting marketing efforts
– Preparing budgets
– Developing and using information
systems
– Linking employee compensation
to organizational performance
 Strategy Evaluation
• Strategy evaluation activities:
– Measuring performance
– Reviewing external and internal factors that are the bases for
current strategies
– Take corrective actions
 Integration intuition with analysis
• Strategic management is not a pure science
• With past experiences, judgment, and feelings
– Intuition becomes essential for strategic decisions
– Especially in situations of great uncertainty or little precedent
– Also when choosing between several plausible alternatives
• Not all organizations are gifted with intuitive geniuses
– Be careful to distinguish between
• Management by intuition
• Management by ignorance
• Strategic management process is:
– Attempt to duplicate what goes on in the mind of a brilliant, intuitive
person who knows the business
– And assimilates and integrates that knowledge using analysis to
formulate effective strategies
HUL Caselet Analysis
 HUL Caselet
In 2013, Unilever offered Sanjiv Mehta the chance to take over as CEO and Managing
Director of HUL.
HUL was not really in trouble when he took over. The company was clocking revenues
of Rs 28,947 crore and net profits of Rs 4,800 crore. It was very well structured to tap
growth in metros. It was established, big and profitable.
But nimbler rivals like Patanjali were popping up. Companies such as Wagh Bakri Tea,
Balaji Wafers, Manpasand Beverages and Ghadi Detergent were doing extremely well in
their regions and getting ready for a national foray. E-commerce was taking off in a big
way.
The country's overall economic growth had slowed that affected most FMCG players -
especially big, organised ones as consumers in rural areas traded down to buy from
smaller, unorganised rivals who were selling cheaply. Soon followed the challenges of
unexpected demonetization and GST roll out.
Sanjiv Mehta knew HUL needed to do something new – it needed to reinvent itself. It
was not rolling out new products or hitting new markets rapidly enough.

What is the critical issue
here?
What should be the most
important goal for Sanjiv
Mehta?
What are the external threats How should Sanjiv Mehta
(and opportunities) respond?
What are the internal
strengths (and weaknesses)?
 June 2019

• Net sales: 37,660 (INR • Strategy implementation

Crores)
• Profit: 8,749 (INR Crores)
• Strategy Formulation:
– Strengthen the core
– Create categories of
future
– Drive Premiumization
– Create new structures
– WiMI strategy
– 15 Country Category Business
teams
• Mini boards
• Micro marketing strategy
• Straddling the value pyramid
• Mass, Popular, Premium
• Categories
• Nascent category penetration
• Enhanced benefits (premium)
• Sub categories
– Technology
• Use of AI for supply chain
optimization
• E commerce portal
Key terms in SM
 Key terms in strategic management
• Competitive Advantage
– Anything a firm does especially well compared to rival firms

• Examples:
– Cash rich firms buying rivals (Microsoft, Apple, Google)
– Reducing fixed assets (Apple – no manufacturing assets, Sony –
57 factories, heavy balance sheet debt)
– Less brick and mortar stores, more online (Walmart - 185,000
sqft supercenter vs 40,000 sqft Walmart Express)

• Competitive advantage can be sustained only for a time

– Compulsion to adapt with change to sustain the unique
advantages
 Key terms in strategic management
• Strategic Fit
– refers to the consistency of a firm’s strategy
• External environment
• Internal environment
• Especially with its goals, values , resources and capabilities
• Poor strategic fit is a major reason for the decline and failure of some
companies
– having a strategy that lacks consistency with either the internal or the
– external environment
• Example:
– Nokia (which lost over 90% of its stock market value in the four years
up to July 2012) may be attributed to a strategywhich failed to take
account of a major change in its external environment: the growing
consumer demand for smartphones.
 Key terms in strategic management
Corporate Strategy AND Business Strategy
 Key terms in strategic management
• Intended strategy:
– Strategy as conceived by leadership team

• Realized Strategy
– Actual strategy that is implemented
– Emergent strategy determines realized strategy
• Decisions that individual managers take based on their
interpretation of the intended strategy
• Adaptation to circumstances, emerging context
 Key terms in strategic management
• External threats and opportunities
– Refers to trends in domains of
• Economic
• Social
• Cultural
• Demographic
• Environmental
• Political
• Legal
• Governmental
• Technological
• Competitive
 Key terms in strategic management
• External threats and opportunities
– Availability of capital can no longer be taken for granted
– Consumers expect green operations and products
– Marketing is moving rapidly to the internet
– Commodity food prices are increasing
– Computer hacker problems are increasing
– Intense price competition is plaguing most firms
– Unemployment and underemployment rates remain high globally
– Interest rates are rising
– Product life cycles are becoming shorter
– Winters are colder and summers hotter than usual
– Global markets offer the highest growth in revenues
– Protectionist policies by countries
 Key terms in strategic management
• Internal strengths and weaknesses
– Activities that are controllable internally
– That are done exceptionally well or poorly
– Relative to competitors
 Why do firms need a strategy …1
• A decision support system
– Simplifies decision making (by constraining the range of decision
alternatives)
– Acts as a heuristic—a rule of thumb that reduces the search required
to find an acceptable solution to a decision problem
– Permits the knowledge of different individuals to be pooled and
integrated
– Facilitates the use of analytic tools - frameworks and techniques

• A Coordinating Device
– Challenge of management is coordinating the actions of different
organizational members
– Acts as a communication device to promote coordination
 Why do firms need a strategy …2
• Strategy as Target:
– Forward looking
– How the firm will compete now but also with what the firm will
become in the future – direction and aspiration
– Strategic Intent (Gary Hamel and C. K. Prahalad) use the term
• Describes desired strategic position
• Creates misfit between resources and ambition
– Focus on closing the gap through building competitive
advantages
 The Strategic-Management Model

Where are we now?

Where do we want to go?

How are we going to get there?

1-46
 Benefits of Strategic Management
• Help organizations formulate better strategies

– Through the use of a more

• Systematic
• Logical
• rational approach
 Benefits of Strategic Management

• Key to successful strategic management

– Communication

• Get commitment from managers and employees

– Through dialogue and participation
Benefits to a Firm That Does
Strategic Planning

1-49
 Financial Benefits
• Significant improvement in
– Sales, profitability, and productivity
– Compared to firms without systematic planning activities

• High-performing firms seem to

– Make more informed decisions
– With good anticipation of both short- and long-term
consequences
 Nonfinancial Benefits

• Enhanced awareness of external threats

• Improved understanding of competitors’ strategies

• Increased employee productivity

• Reduced resistance to change

• Clearer understanding of performance–reward relationships.

 Nonfinancial Benefits
• Increased discipline

• Improved coordination
• Enhanced communication
• Increased forward thinking
• Improved decision-making
• Increased synergy
• Effective allocation of time and resources
 Why Some Firms Do No Strategic Planning

• Lack of knowledge in strategic planning

• Poor reward structures

• Firefighting

• Waste of time

• Too expensive

• Laziness

• Content with success

• Overconfidence

• Prior bad experience

• Honest difference of opinion

 Pitfalls in Strategic Planning
• Using strategic planning to gain control over decisions and
resources
• Doing strategic planning only to satisfy accreditation or regulatory
requirements
• Too hastily moving from mission development to strategy
formulation
• Failing to communicate the plan to employees, who continue
working in the dark
• Top managers making many intuitive decisions that conflict with the
formal plan
• Top managers not actively supporting the strategic-planning process
• Failing to use plans as a standard for measuring performance
• Delegating planning to a “planner” rather than involving all managers
• Failing to involve key employees in all phases of planning
• Failing to create a collaborative climate supportive of change
Guidelines for Effective Strategic
Management

1-55
 Comparing Business and
Military Strategy
• A fundamental difference between military and business strategy is
that business strategy is formulated, implemented, and evaluated
with an assumption of competition, whereas military strategy is
based on an assumption of conflict

• Both business and military organizations must adapt to change and

constantly improve to be successful
 Excerpts from Sun Tzu’s The Art of War Writings

• War is a matter of vital importance to the state: a matter of life or death,

the road either to survival or ruin. Hence, it is imperative that it be studied
thoroughly.

• Warfare is based on deception. When near the enemy, make it seem that
you are far away; when far away, make it seem that you are near. Hold
out baits to lure the enemy.

• Strike the enemy when he is in disorder. Avoid the enemy when he is

stronger. If your opponent is of choleric temper, try to irritate him. if he is
arrogant, try to encourage his egotism. If enemy troops are well prepared
after reorganization, try to wear them down. if they are united, try to sow
dissension among them. Attack the enemy where he is unprepared, and
appear where you are not expected. These are the keys to victory for a
strategist. It is not possible to formulate them in detail beforehand.
 Excerpts from Sun Tzu’s The Art of War Writings
• Speedy victory is the main object in war. if this is long in coming, weapons
are blunted and morale depressed. When the army engages in protracted
campaigns, the resources of the state will fall short. Thus, while we have
heard of stupid haste in war, we have not yet seen a clever operation that
was prolonged.
• Generally, in war the best policy is to take a state intact; to ruin it is
inferior to this. to capture the enemy’s entire army is better than to
destroy it; to take intact a regiment, a company, or a squad is better than
to destroy it. For to win one hundred victories in one hundred battles is
not the epitome of skill. to subdue the enemy without fighting is the
supreme excellence. those skilled in war subdue the enemy’s army
without battle.
• The art of using troops is this: When ten to the enemy’s one, surround
him. When five times his strength, attack him. if double his strength,
divide him. if equally matched, you may engage him with some good plan.
If weaker, be capable of withdrawing. And if in all respects unequal, be
capable of eluding him.
 Excerpts from Sun Tzu’s The Art of War Writings

• Know your enemy and know yourself, and in a hundred battles you will
never be defeated. When you are ignorant of the enemy but know
yourself, your chances of winning or losing are equal. If ignorant both of
your enemy and of yourself, you are sure to be defeated in every battle.

• He who occupies the field of battle first and awaits his enemy is at ease,
and he who comes later to the scene and rushes into the fight is weary.
And therefore, those skilled in war bring the enemy to the field of battle
and are not brought there by him. Thus, when the enemy is at ease, be
able to tire him; when well fed, be able to starve him; when at rest, be
able to make him move.

• If you decide to go into battle, do not announce your intentions or plans.

Project “business as usual.”