Professional Documents
Culture Documents
By Prof. RAMKI
IES Management College
Bandra(Recl.), Mumbai
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STRATEGIC MANAGEMENT
MODULE – I
STRATEGY FORMULATION
Perform
External
Audit
Implement
Develop Generate, Implement Strategies-
Establish Measur
vision and Evaluate Strategies- Marketing,
long term Evaluat
mission and Select management Finance,
objectives Perform
statements Strategies issues Accounting
, R&D,
MIS Issues
Perform
Internal
Audit
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5. Explain the term ‘environment’ with reference to business and discuss why
environmental analysis is necessary in strategic management.
10. What are the critical components of the social environment of business?
Explain each element with examples.
11. Evaluate the historic role and emerging role of government on the business.
14. What factors have made the management of the technology at enterprise level
important? Explain.
15. How does the economic environment impinge upon business management?
Explain with suitable examples.
16. How do social factors play a role in strategy formulation? Explain with
examples.
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20. How do mission, vision and goals drive an organization? Design mission,
vision and goal for any foreign insurance company operating in India.
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The term Strategic planning originated in the 1950s and was very
popular between the mid-1960s to mid-1970s. During these years,
Strategic planning was widely believed to be the answer of all
problems. At the time, much of corporate America was “obsessed”
with strategic planning.
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LEVELS OF STRATEGY
Corporate Strategy
SBU Strategy
Functional Strategy
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Corporate
Functional
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SBU or
single
Scope Entire business Functional
organizatio company area
n
Top level
Top level SBU Functional
business managers level
managers or top level managers
Responsibil single
ity business
company
managers
Medium to
long-term
Time Long-term Short to
horizon long-term
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STRATEGIC MANAGEMENT
Perform
External
Audit
Implement
Develop Generate, Implement Strategies-
Establish Measure and
vision and Evaluate Strategies- Marketing,
long term Evaluate
mission and Select management Finance,
objectives Performance
statements Strategies issues Accounting
, R&D,
MIS Issues
Perform
Internal
Audit
What is mission?
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The strategic management process does not end when the firm
decides what strategy or strategies to pursue. There must be a
translation of strategic thought in to strategic action. This
translation is much easier if managers and employees of the firm
understand the business, feel a part of the company, and through
involvement in strategy formulation activities have become
committed to helping the organisation succeed. Without
understanding and commitment, strategy-implementation efforts
face major problems.
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STRATEGIC MANAGEMENT
ORGANIZATIONAL STRATEGIES
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Integration Strategies
Forward integration
Backward integration
Horizontal integration
Intensive Strategies
Market penetration
Market development
Product development
Diversification Strategies
Concentric diversification
Horizontal diversification
Defensive Strategies
Retrenchment
Divestiture
Liquidation
EXPLANATION:
Integration strategies:
Intensive Strategies:
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Diversification strategies:
Defensive strategies:
STRATEGIC IMPLEMENTATION
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BUSINESS ENVIRONMENT
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Macro
Technological Environment
Factors
Socio-
cultural
Factors
Product Price
Political Co.
Factors
Promotion
Place
Legal
Factors
Economic Factors
Micro
Environment
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Competition
Market forces
Vendors/Suppliers and Creditors
Public
Customers/consumers
Price advantage
Quality discounts
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Shipping expenses
Quality standards
Rejection rates
Quality of services
Abilities and reputation
Dependability, especially in emergency situation
Industrial condition:
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Capital:
Labour:
Adequate supply of labour force with the ability & skills require to
perform the task involved in translating strategy in to action is vital
for the success of an organisation. Without people being able to use
them effectively sophisticated technology, capital & materials are of
little value. The price of labour is also an extremely important
economic unit for an enterprise. High wages create cost problems
for producers. Thus, while deciding about the type of product to be
manufactured, the corporate planner must consider the availability,
quality & price of labour.
Managers:
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2) Technological Environment
3) Political Environment
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turmoil and instability. Where the ruling party is strong and stable
and relations between central and state governments are cordial
role of opposition party is constructive, decisions-making powers are
reasons ably distributed among different social groups and
government has clear-cut fiscal, financial and trade policies, the
business organisation will find it conducive to expand their
operations. The climate in our country presents a mixed picture.
On the one hand, we have the democratic and federal system of
government in which there is a strong and stable central
government with equally strong state governments working in
harmony with each other and businessmen have freedom to operate
within the prescribed limits. These aspects are quite encouraging
for the growth of private sector business enterprises. However,
emerging regionalism at the political level, occasional communal
disturbances, linguistic problem and politicalisation of trade unions
present threats to business enterprises.
4) Demographic Environment
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there will be rise in costs which will, in turn depress profit margins of
businessmen. The ageing pattern of the population should also be
analyzed because that affects product demand.
5) Social-Cultural environment
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MODULE – II
STRATEGY IMPLEMENTATION
“If the 1980’s were about quality and the 1990;s were about
re-engineering, then the 2000’s will be about velocity. About
how quickly the nature of business will change. Business is
going to change more in next ten years than, it has in the last
fifty” - Bill Gates, Chairman Microsoft Corporation
Perform
External
Audit
Implement
Develop Generate, Implement Strategies-
Establish Measur
vision and Evaluate Strategies- Marketing,
long term Evaluat
mission and Select management Finance,
objectives Perform
statements Strategies issues Accounting
, R&D,
MIS Issues
Perform
Internal
Audit
C (2)
23. What is GE planning grid? How can you use GE grid in a business
organization? Illustrate and explain.
24. What is Mc Kinsey 7- S framework? How can you use Mc Kinsey framework
when a new bank is being launched.
25. Explain the Product Life Cycle concept with illustration. How does it affect
the Strategy?
D3
30. “Leadership and motivation are key drivers of strategy”. Substantiate with
examples.
D4
31. Explain the role of creativity and innovation in strategic management SA.
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BCG MATRIX
The four cell of BCG matrix has been termed as stars, cash cows,
question marks(or problem children), and dogs. Each of these cells
represents a particular type of businesses.
CASH COWS: As the term indicates, cash cows are business which
generates large amounts of cash but their rate of growth is slow.
These businesses can adopt mainly stability strategies. The cash
generated by ‘cash cows’ is reinvested in ‘stars’ and ‘question
marks’.
E.g.: toothpaste for Colgate, decorative paints for Asian Paints.
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The life cycle concept provides a useful framework for carrying out
an analysis to formulate business level strategies. Essentially the
benefit of the life cycle concept lies in its ability to provide
strategists with a convenient method of devising a broad approach
to business strategy formulation, on the basis an understanding of
the stage of the life cycle a business is in at a particular period of
time. Here it is significant to note that the life cycle concept is not to
be used as a guide to when a change will occur in the life cycle.
Rather it is a useful guide to what changes might occur over a
period of time, with regard to the market or industry conditions.
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Sales
Volume
Revenue
During
Maturity,
Profit
Growth slows down and Profit
Levels off
Loss Time
Note: Whilst there are various classic PLC shapes covering, for example, fashion goods, the principal
Stages apply, and the value of the model is to encourage managers to see how dynamic business is.
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The second, skills, means that the employees have the skills to
carry out the company’s strategy.
The third, staffing, means that the company has hired able people,
trained them well and assigned them to the right jobs.
The fourth, shared values, means that the employees share the
same guiding values.
When these elements are present, companies are usually more
successful at strategy implementation.
ORGANISATIONAL STRUCTURE
Entrepreneurial Structure
Owner-Manager
Exhibit 1 Employees
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Functional Structure
Exhibit 2
CEO
PR Legal
Divisional Structure
CEO
Marketing Marketing
Operations Operations
Personnel Personnel
Exhibit 3
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C EO
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Matrix Structure
Project
Manager A
Functional
Specialists
Project
Manager B
Project
Organizational Manager C
Structure
Network Structure
CORPORATE
HEADQUATERS
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Strategy is usually developed at three levels – Corporate level, SBU level &
Departmental level. Every big organization has a Strategic Management Group
(SMG) which develops the Strategies for the organization to achieve in the years to
come. This team works on the changes in the Environment which can impact and
affect the business. New Ventures, expansion, turnaround, new product development,
diversifications, divestures, etc.
LIC was a mammoth player in the Insurance Sector and was literally an undisputed
player. LIC came to know that, if it doesn’t revamp its strategy, it cannot protect its
leadership status. It took a series of steps, to combat competition from the private
players.
LIC believed that being a Government body, decision making was literally slow and
this would hamper the fighting spirit. So, LIC overhauled its entire Organisation
Structure. A lot of changes were initiated to bring in more transparency and faster
decision making. From a tall hierarchical structure, LIC worked on various
departments of the organization and tried to bring flat structures, where flexibility is
there and would ultimately lead to faster decision making.
LIC also initiated massive promotional plans. They created new advertisements
mostly through outdoors. They also – unveiled their new punchline “Jeevan ke sath
bhi, jeevan ke baad bhi”. If LIC did not wake up to the increasing competition, it
would have died a natural death. To drive the Strategy, LIC did make slight structural
adjustments in their organizational structure to make the smooth flow of their
strategy. A record 10 million policies were sold by LIC in March 2006, earning a
premium income of Rs. 6,000 crore. LIC’s first premium from new policies rose 48.5
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percent to Rs. 18,085 crore, from Rs. 12,170 crore last year, thus proclaiming its
market leadership.
The above example, signifies that Strategy should always try to fit into the Structure.
An organization cannot change its structure, just to meet its strategy requirements.
However, if the need arises, a slight change in the structure can also power the
strategy. But, in many instances, Structures follow the Strategy.
Define leadership:
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Leadership Implementation
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MODULE – III
STRATEGY CONTROLLING
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Perform
External
Audit
Implement
Develop Generate, Implement Strategies-
Establish Measur
vision and Evaluate Strategies- Marketing,
long term Evaluat
mission and Select management Finance,
objectives Perform
statements Strategies issues Accounting
, R&D,
MIS Issues
Perform
Internal
Audit
D5
33. Explain the meaning and various steps involved in the process of control with
reference to strategic management.
35. What are the various tools that can be used for controlling a strategy?
Definition:
1. Strategic Control:
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b) Bench marking
c) Cost benefit analysis
d) Performance gap analysis
e) Responsibility centres
f) Return on Investments
g) Budgeting
(a) Standards:
Standards are the basis for evaluation of performance and
are related to the goals of an enterprise. They are the
specific criteria which are required to be fulfilled by the
workers. A standard is a desired outcome or expected
event with which managers can compare subsequent
activities, performance or change. Setting of standards is
useful for an enterprise for the following reasons:
Once the standards have been set, the workers perform their
activities according to these standards. The activities having been
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(g) Budgeting:
A budget is a statement which reflects the future incomes,
expenditures and profits that can probably be earned by a firm. It is
a future projection of the firm’s financial position. Non-financial
aspects like number of units produced, number of units sold,
material and labour required per unit of output, etc. can also be
important components of a budget.
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Concept questions which can be asked for short note for 5 marks
1. Define Strategy
2. Define Strategic management
3. Integration
4. Diversification and types of diversification
5. Divestment. What is Disinvestment? Is India successful in disinvestment?
6. Downsizing
7. Levels of strategic management
8. Generic strategies
9. Question marks
10. Cash cows
11. Performance gap analysis
12. Responsibility centres
13. Return on investment(ROI)
14. Benchmarking
15. Standards
16. Cost-benefit analysis
17. Budgeting
18. Creativity and innovation
19. Political environment
20. Social responsibility of business
21. Future of strategic management
22. Role of leadership in strategic management
23. Role of Motivation in Strategic Management.
24. How can you mobilize the resources for Strategy? Explain them.
25. Role of Creativity and Innovation in Strategy formulation.
2. Markets:
Market provides the physical infrastructure for exchange of
goods and services. Market plays an important role in providing the
necessary inputs for production. It also helps to sell the outputs of
goods and services provided by the business enterprise. Market
behaviour is decided by the consumers. Consumers have needs and
specific behaviour. Market provides competition, sustains some
firms, allows disintegration of others. Market helps to discover
price, level of consumptions and demand for goods and services.
3. Machine:
Machine represents technology used in any business. In a
competitive environment the quality of the product decides the fact
of the business. Quality depends on the technology used.
Therefore, technology is an important deciding factor.
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4. Material:
All physical inputs which go into production can collectively
termed as ‘material’. Material forms the inventory in the balance
sheet of the firm. Inventory is an idle asset and therefore involves
cost in the form of interest on working capital required to hold such
inventory. Optional holding of inventory is called material
management. Excessive holding of material can lead to increase in
cost of the ultimate product. Effective materials management
involves maximizing materials productivity. Modern material
management attempts for zero inventory. Excessive material
varieties and unpredictability of demand for materials and spares
frustrate the attempt to minimize material on hand. Proper
planning of stores, issuing policies, avoidance of pilferage can help
reduce inventory holding. Standardization and codification are
variety reduction methodologies for improving materials
productivity. Minimisation of wastage is another aspect of
improving efficiency.
5. Merit:
Human resources forms only living input in resources. Human
resources are characterized by emotions, skill levels, psychological
aspect. Therefore, management of human resources is important in
any organization. Unlike other resources, human resources can be
motivated for improved performance.
Depending on the job, human resources should provide the skill sets
required. Human resource management involves recruitment,
selection, inductions and orientation, training and development and
also periodic performance appraisals which helps to review the
contribution of each employee.
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BENCH MARKING :
GENERIC STRATEGIES
DOWNSIZING:
DISINVESTMENT
Investopedia Says:
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DIVERSIFICATION
Main objectives of diversification;:
1. Raising resources:
2. Autonomy to management:
4. Generation of employment:
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INTEGRATION STRATEGIES:-
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2) Backward Integration –
3) Horizontal Integration –
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DIVERSIFICATION STRATEGIES:-
1) Concentric Diversification –
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2) Horizontal Diversification:
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Gap analysis
The concept:
Another important step in strategic management is the gap
analysis. Gap analysis is also a means for motivating top
management to initiate steps for strategic management. Gap is
the deviation between events which is perceived, planned or
forecasted and that of actual. Based on the system analysis, the
outcome is based on the objectives, which is conditioned by the
criteria and constraints. Hence, broadly, gap analysis is classified
under the following categories:
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…THE END…
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