SM 1

STRATEGIC MANAGEMENT
G K Suresh
Department of Management Studies
1
How did it all begin ?
• Started with war and politics, not business

• Business strategy started in the 50’s and 60’s
• Peter Drucker, Philip Selznick, Alfred Chandler, Igor Ansoff….
• Philip Drucker – What is Business, Start from Customer
• Philip Selznick – Distinctive Competence, SWOT analysis
• Alfred Chandler – Structure Follows Strategy
• Igor Ansoff – Gap analysis
• Bruce Henderson (BCG ) – Experience Curve
BLITZKRIEG !
“The best defense is a good offense”
“You hit somebody with your fist

and not with your fingers
spread.”
Blitzkrieg
Business examples ??
• Coke/Pepsi entry into India

• Amazon when they enter a new market
• Reliance Jio
• Courage, Big Bets, Risk Taking ability, Deep pockets

Most famous verse
So 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.
But Blitzkrieg didn’t work in Russia….
• Operation Barbarossa ( Red Beard )

• Started with a Blitzkrieg but
• Vast country with population spread out
• Poor roads, diff railroads
• Tanks slowed down, too far for aircrafts and too
tired soldiers
• Underestimated the time- Summer, Autumn to
Winter
• Underestimated the size and fierceness of
Russians – “burning”
Know your competition

Business examples
• Walmart in Germany and Korea

• Not great locations
• Closed one of the HQ’s – routine in US
• No understanding of unions
• No local management
• Packaged meat vs fresh
• Smiling clerks
• Taller racks
• Open pipes
• One store in Seoul
• Large SKU’s
• Mars, Kellogs in India
Know your terrain

What is Strategy
What is Strategy ?
Core Concept
A company’s strategy is its action plan for

outperforming its competitors and achieving
superior profitability
WHAT DO WE MEAN BY STRATEGY?
• What is our present situation?
• Business environment and industry conditions
• Firm’s financial and competitive capabilities
• Where do we want to go from here?
• Creating a vision for the firm’s future direction
• How are we going to get there?
• Crafting an action plan for heading the firm in the
intended direction, staking out a market position,
attracting customers, achieving the targeted financial
and market performance, and getting the firm where it
wants to go is its strategy.
Alaska Gold Mine
16
PART I
You have 14 days to reach the claims office. The alternatives have the following outcomes:
Personal
Alternative Min Time Max Time Outcome Risk
#1 (wait 3–4 weeks) — — No $$ 0
#2 (over top) 7 days 10 days For sure $ Life
#3 (valley) 14 days 21 days Maybe 0
#4 (wait 3 days) 10–13 17–21 Sure, if over Win, if no

(top) (valley) top Lose, if storm Lose
storm $$ if storm
What if you walk for
3 days?
STORM keep walking, same as #3
NO STORM turn back (total 6 days) + over top (7–10 days).
maybe 13–16 days 17
The Alaskan Gold Mine
Part I Resulting Plan
Alternative #1 Alternative #2 Alternative #3 Alternative #4

Wait 3–4 weeks Over the Top Thru the Valley Wait 2–3 days to
decide
Go in and bluff Only way Hurt left hand #3 won’t make it

in 2 weeks
Go for it Storm will
If no storm, I
Gold equals come Life win
wealth Can versus gold If storms, too

bad, but I’m
Can make it in alive
make trip
No storm less than 2 weeks
18
PART II
You went through valley; half way there:
took 5 days 9 days left
If you were well: 7 days2 days to spare
Go with: 10–14 days1–5 days short (unless BIG push)
Go alone: 3 rest + 10–14 = 13–17 days  4–8 days short  no way
Send: 8–10 days1 spare, even, or 1 short probably for sure
19
Part II Typical plan
Go with Pat Go Alone Send Pat

Don’t trust alone Keep 100% Only way in time
Keep control Don’t trust Pat Must trust—friend
Must drive Pat hard – intellect (ability) Pat is expert—knows
to beat deadline – drunk (character flaw) the land/territory
Must train Pat to file
claim
Must motivate Pat (to
Avoid bar on way into
town)
20
“Might Do”
Environment
(threats &
opportunities)
Monitor/Measure
“Can Do” Execution Control

Org Capabilities Strategy &
(strengths &
weaknesses) Goals
Feedback Performance
“Want to Do”
Mgmt Values
21
Strategy is all about How:
● How to attract and please customers.

● How to compete against rivals.
● How to position the firm in the marketplace.
● How best to respond to changing economic
and market conditions.
● How to capitalize on attractive opportunities
to grow the business.
● How to achieve the firm’s performance targets.
STRATEGY AND COMPETITORS
• Doing what they don’t do or doing it better!

• Doing what they can’t do!
• Doing things in a manner calculated to produce a
competitive edge over rivals.
Competitive Advantage
STRATEGY AND THE QUEST FOR COMPETITIVE ADVANTAGE
• Competitive Advantage
• Require meeting customer needs either more
effectively (with products or services that customers
value more highly) or more efficiently (by providing
products or services at lower cost).
• Sustainable Competitive Advantage
• Requires giving buyers lasting reasons to prefer a firm’s
products or services over those of its competitors.
STRATEGIC APPROACH CHOICES
Building Competitive Advantage
Differentiation on Focus on
Low-cost provider Best-cost provider
features market niche
DOES STRAT REMAIN CONSTANT OVER TIME ?
• Managers modify strategy in response to:

• Changing market conditions
• Advancing technology
• Fresh moves of competitors
• Shifting buyer needs
• Emerging market opportunities
• New ideas for improving the strategy
A Company’s Strategy Is a Blend of Proactive Initiatives and
Reactive Adjustments
A FIRM’S STRATEGY AND ITS BUSINESS MODEL
Realized Business Model

Strategy $$$?
Value Proposition
Competitive
Initiatives
Business
Profit Formula
Approaches
Value Proposition
BUSINESS MODEL ELEMENTS
• The Customer Value Proposition
• Satisfying buyer wants and needs at a price customers
will consider a good value.
• The greater the value provided (V) and the lower
the price (P), the more attractive the value
proposition is to customers.
Value Proposition for College studies
(C+E+Ex)- Tuition
Value Proposition of a College : C – Certification, E- Education, Ex -
Experience
Defining Value
• Value reflects the
• Utility the customer gets from a product,
• Happiness or satisfaction he gains from

the product.
Defining Utility
Performance Design Quality Experience Point of sale After sales

Defining Satisfaction
• Performance >= Expectations

• Recommendation
Defining Price
• Low price – “good enough” product

• Hi Price – “Best in Class” product
• Is Value >=Price
Value creation
U
Comparing Toyota and General Motors
Product
Video
Ramesh Arvind
IS OUR STRATEGY A WINNER?
The Strategic
Fit Test
The Competitive Winning The Performance

Advantage Test Test
Strategy
The Strategy-Making, Strategy-Executing Process
Strategic Plan
Mission, Vision and Core Values

Mission Statement
The mission statement describes an organization’s purpose or
reason for existing.

Questions to Ask
-- What does your organization intend to accomplish?
-- Why do you work here? Why is it special to work here?
-- What would happen if we were not here?
Outcome
-- A short, concise, concrete statement that clearly defines the scope of
the organization.
https://youtu.be/1xs4I349cdc
Google’s Mission Statement
• Our Mission is to organise the World’s

Information to make it universally
accessible and useful
Some powerful Mission statements
• “to enrich our customer’s life through the unique power of mobile communication” –
Vodafone (Foundational)
• “making sense of India” - India Today ( memorable)
• “to protect our client from personal and professional hazards of life” - AXA Life (Clear)
• “to help people save money so they can live a better life “ - Walmart (original)
• “make better food so people live a better life” – Nestle ( Motivating)
• “Serving the most vulnerable” – Red Cross ( uplifting )
• “To provide students with a sense of history, an understanding of values and ethics, a
commitment to law and morality, an appreciation of human creativity and an analytical
inquiring mind”
• “To provide world class information technology solutions and services to enable to serve
their customer better” – HCL ( Major component of strategy)
• “Evolving the way the world moves” - Uber ( futuristic )
Vision Statement
A vision statement defines your desired future state and
provides direction for where we are going as an organization.

Questions to Ask
-- What will our organization look like 5–10 years from now?
-- What does success look like?
-- What mountain are you climbing and why?
Outcome
-- A picture of the future.
https://youtu.be/7yBUBmciQBk
Vision : (Aspiration):
• A company’s desired future state

• Articulates in bold terms what the company would like to
achieve
• Company’s aspiration
• Direction the Company is heading towards
Examples of Strategic Visions—How Well Do They Measure Up?
Vision Statement for Proctor & Gamble

We will provide branded products and services of superior quality and
value that improve the lives of the world’s consumers, now and for
generations to come. As a result, consumers will reward us with
leadership sales, profit and value creation, allowing our people, our
shareholders and the communities in which we live and work to
prosper.
Effective Elements Shortcomings

• Forward-looking • Not graphic
• Flexible • Not focused
• Feasible • Not memorable
• Makes good business sense
2–54
Examples of Strategic Visions—How Well Do They Measure Up?
Vision Statement for Heinz

We define a compelling, sustainable future
and create the path to achieve it.
Effective Elements Shortcomings
• Forward-looking • Not graphic
• Flexible • Not focused
• Confusing
• Not memorable
• Not necessarily feasible
2–55
Core Values
Your values statement clarifies what your organization stands for, believes in and
the behaviors you expect to see as a result.
How will we behave?
Questions to Ask
-- What are the key non-negotiables that are critical to the success of the company?
-- What are the guiding principles that are core to how we operate in this organization?
-- What behaviors do you expect to see?
-- If the circumstances changed and penalized us for holding this core value, would we still
keep it?
Outcome
-- Short list of 5-7 core values.
Values : (Being)
• How managers and employees conduct themselves

• Beliefs, traits and ways of doing things.
• Organisational culture – set of norms and standards
• Some powerful Value Statements”
• “Team, Trust and Action” – Alsthom
• “People, Excellence, Change, Integrity and Co-prosperity” Samsung Electronics
• “Perseverance, Excellence and Service”
• “Ownership, passion for winning, people development, consumer focus, team work and
innovation” - Dabur
Core Values - Amazon
Core Values for Amazon

♦ Customer We start with the customer and work backward.
Obsession
♦ Innovation If you don’t listen to your customers you will fail. But if you
only listen to your customers you will also fail.
♦ Bias for We live in a time of unheralded revolution and instrumental
Action opportunity–provided we make every minute count.
♦ Ownership Ownership matters when you’re building a great company.
Owners think long – term, plead passionately for their projects
and ideas, and are empowered to respectfully challenge
decisions.
♦ High-Hiring When making a hiring decision we ask ourselves: “Will I
Bar admire this person? Will I learn from this person? Is this
person a superstar?”
♦ Frugality We spend money on the things that really matter and believe
that frugality breeds resourcefulness, self-sufficiency and
intention.
List your personal Core Values

MBA student
• Vision – Become a CEO by 40

• Mission – Acquire superior business skills
• Core Values – Discipline, Commitment
• Strategy – Get certified by NISM, good grades in
electives, write a paper, do a fin internship
Strategic Plan
Objectives
• Objectives are an organization’s performance

targets—the specific results management wants
to achieve.
TASK 2: PURPOSE OF SETTING OBJECTIVES
• To convert the vision and mission into specific, measurable,

timely performance targets- SMART
• To focus efforts and align actions throughout the
organization.
• To serve as yardsticks for tracking a firm’s performance and
progress.
• To provide motivation and inspire employees to greater
levels of effort.
2–63
Maruti Suzuki article

Strategic Intent
• A company exhibits strategic intent when it relentlessly

pursues an ambitious strategic objective, concentrating the
full force of its resources and competitive actions on
achieving that objective.
2–65
CHARACTERISTICS OF STRATEGIC INTENT
• Indicates firm’s intent to making quantum gains in

competing against rivals and to establishing itself as
a winner in the marketplace, often against long
odds.
• Involves establishing a grandiose performance
target out of proportion to immediate capabilities
and market position but then devoting the firm’s
full resources and energies to achieving the target
over time.
• Entails sustained, aggressive actions to take market
share away from rivals and achieve a much stronger
market position.
2–66
TASK 2 : WHAT KINDS OF OBJECTIVES TO SET
• Financial Objectives
• Communicate top management’s goals for financial
performance.
• Are focused internally on the firm’s operations and
activities.
• Strategic Objectives
• Are the firm's goals related to market standing and
competitive position.
• Are focused externally on competition vis-à-vis the firm’s
rivals.
2–67
EXAMPLES OF FINANCIAL OBJECTIVES
♦ An x percent increase in annual revenues

♦ Annual increases in after-tax profits of x percent
♦ Annual increases in earnings per share of x percent
♦ Annual dividend increases of x percent
♦ Profit margins of x percent
♦ An x percent return on capital employed (ROCE) or return on
shareholders’ equity investment (ROE)
♦ Increased shareholder value—in the form of an upward-trending
stock price
♦ Bond and credit ratings of x
♦ Internal cash flows of x dollars to fund new capital investment
2–68
EXAMPLES OF STRATEGIC OBJECTIVES
♦ Winning an x percent market share

♦ Achieving lower overall costs than rivals
♦ Overtaking key competitors on product performance or quality
or customer service
♦ Deriving x percent of revenues from the sale of new products
introduced within the next five years
♦ Having broader or deeper technological capabilities than rivals
♦ Having a wider product line than rivals
♦ Having a better-known or more powerful brand name than rivals
♦ Having stronger national or global sales and distribution capabilities
than rivals
♦ Consistently getting new or improved products and services
to market ahead of rivals
2–69
THE NEED FOR SHORT-TERM AND LONG-TERM OBJECTIVES
• Short-Term Objectives:
• Focus attention on quarterly and annual performance
improvements to satisfy near-term shareholder
expectations.
• Long-Term Objectives:
• Force consideration of what to do now to achieve
optimal long-term performance.
• Stand as a barrier to an undue focus on short-term
results.
2–70
Strategic Plan
Crafting the Strategy

Levels of Strategy
TASK 3 : Levels of Strategy
Strategic Plan
Executing Strategies
EXECUTING THE STRATEGY
• Converting strategic plans into actions

requires:
• Directing organizational action.
• Motivating people.
• Building and strengthening the firm’s
competencies and competitive capabilities.
• Creating and nurturing a strategy-supportive
work climate.
• Meeting or beating performance targets.
2–77
Human Biases that hamper Decision Making
• Availability Bias
– A tendency to only consider data/information that is
made available
– Failure to consider full/complete data inappropriate
decisions/choices?
–Terrorist or police ?
• WW11 – fighter planes would come back with bullet holes

• There were some areas most commonly hit by enemy fire
• They wanted to strengthen the most commonly damaged
parts to reduce number of planes shot down
• Abraham Wald a mathematician had a different view ??

Human Biases that hamper Decision-Making
• Availability Bias
• Why do people buy lotteries ?
• Why does everyone want to start a
business ?
• Look beyond the obvious, ask for all

data, keep an open mind.
Product
2,4,6
• Confirmation Bias
– A tendency to ‘consider only that information that
‘confirms’ with our initial ‘point-of-view or thought’,
rather than seek information that rebuffs it
– This bias makes it difficult for managers to ‘revise or
change’ their point-of-view
(decision/strategy) even if there is a need to do so.
• Confirmation Bias
• Election time
• Favourite team
• “Outsourcing is bad”. “Hire candidates with
only a certain background”
• Cambridge Analytica
• Listen more. Encourage debates. 11th Man

___ANY
- A city of 600 people is likely to be attacked by a disease that

might result in the deaths of its inhabitants. Pl select a strategy
that will help combat this disease
– Program A : This program ensures that 200 people will be
saved
– Program B : one-third probability that all of them will be
saved, and two-third possibility that none of them will be
saved
– Program C : Even after implementation of this program, 400
people will die
– Program D : One-third probability that no one will die, and
two-third probability that all 600 will die
• Framing Bias:
– A tendency to make decisions based on ‘how a situation is
presented’.
– Situation framed as ‘we have a lot to gain’  more risk
taking
– Situation framed as ‘we have a lot to lose’  more risk-
averse
• Framing Bias:
– “In q3 our EPS was $1.25 compared to forecast of $1.27
– “In q3 our EPS was $1.25 compared to Q2 which was $1.21
– This product has been proven effective in 80% of the cases

– The product has failed to work in 2 out of 10 cases
– Don’t naturally accept the way a situation is ‘presented or

framed’ initially  try ‘framing’ the problem in different
ways.
Favourite movie
• Sunk-Cost Bias:
– A tendency to make future choices in a way that justifies
past investments, or decisions, even when they don’t
seem valid (because of investing a lot of time and effort
into that earlier decision)
– Over-commitment to prior course of action
– “Gambling”
– “Ordered too much food”
– “Continue with this job as I’ve spent so many years”
Strategic Plan
Task 5 : Balanced Scorecard

&
Performance Measurement
A way to control and monitor strategy execution

The Balanced Scorecard
“The Balanced Scorecard translates an organisation’s

mission and strategy into a comprehensive set of
performance measures that provides the
framework for a strategic measurement and
management system.”
Kaplan and Norton

• Measure What you MUST; Not what you can.
• What can be measured can be controlled.
• What is controlled gets done.
• Hence, Measure what needs to be controlled.

Vision and Strategy at the Core
Financial
Vision
Internal Business
Customer and Process
Strategy
Learning and Growth

Balanced Scorecard: The Concept
Financial Perspective
(What financial results do we desire – Short and long term?)
Customer Perspective
(Which customer / market needs must be met)
Internal Process Perspective

(Which processes must improve to meet business needs)
Learning & Growth Perspective

(What capabilities are required in people, systems & Technology)
Vision & Strategy

Financial Perspective : Measures
 Gross Margins from New Products

 Product Profitability
 Revenue per Employee
 Cost per Unit/Cost per Transaction
 Percentage of Marketing and Administrative Expenses to Sales
 Number of Transactions per Rupee of Revenue ( ABC )
 Return on Capital Employed
 Cash Conversion Cycle
 Dell: Vendor financing of inventories and receivables
 HLL: Distributor financing of inventories and receivables
 Minimum Operating Cash Flow
Customer Perspective: Measures
 Market Share in Target Segment

 Account Share
 Percentage of Customers Retained
 Percentage of Growth with Existing Customers
 Number of New Customers
 Product/Service Attributes - Functionality; Quality; Price; Time
 Profit from Customer (over lifetime)
 Customer Satisfaction Score
 Image and Reputation - Integrity; Knowledge; Purity
Internal-Business-Process Perspective:
 Percentage of Sales from New Products

 New Product Introduction versus Competitors
 Manufacturing Process Capabilities
 Safe Disposal of Waste and By-products
 Speed of Invoicing and Collection
 Time to Develop Next Generation of Products
 No. of prototypes from R&D
 Time to Market
 Number of Design Modifications
Learning and Growth Perspective: Measures
 Employee Satisfaction
 Survey of Employees’ Feelings
 Employee Retention
 Percentage of Key Staff Turnover
 Employee Productivity
 Revenue per Employee; Value-added per Employee;
Output per Rupee of Employee Compensation
Airlines Example - Internal
Strategic Theme:
Statement of How success
Operating Efficiency
what strategy in achieving The level of Key action
Financial must achieve the strategy performance programs
Profitability
and what’s will be or rate of required to
More
critical to its measured and improvement achieve
Fewer planes success tracked needed objectives
customers
Customer
Flight Lowest
Is on time prices
Target/ Initiative/
Objectives Measurement
Outcomes Drivers
Internal • Fast ground • On Ground Time • 30 Minutes • Cycle time
Fast ground
turnaround • On-Time • 90% optimization
turnaround Departure
Learning
Ground crew
alignment
Airlines Example - Complete
Strategic Theme:
Objectives Measurement Target Initiative
Financial
Profitability • Profitability • Market Value • 30% CAGR
• More • Seat Revenue • 20% CAGR
More Customers
Fewer Planes
Customers • Plane Lease • 5% CAGR
• Fewer planes Cost
Customer • Flight is on - • FAA On Time • #1 • Quality
Flight Lowest time Arrival Rating management
Is on Time Prices • Lowest prices • Customer • #1 • Customer
Ranking (Market loyalty
Survey) program
Internal • Fast ground • On Ground Time • 30 Minutes • Cycle time
Fast Ground turnaround • On-Time • 90% optimization
Turnaround Departure program
Learning • Ground crew • % Ground crew • yr. 1 70% • ESOP

alignment trained yr. 3 90%
Ground Crew yr. 5 100%
• Ground crew
Alignment • % Ground crew training
stockholders
PES – MBA fest
Strategic Theme:
Financial
Customer
Internal
Learning
MBA Fest
Strategic Theme:
Financial
Profitability • Profitability • Breakeven
analysis
• More
Sponsorship
More
footfalls
Customers • Sponsorship 10 lakhs
amount
• Sponsorships
Customer • Head count • #1
• Cool fest • Student rating Best pro
Cool fest Prize money • Prize Money • Sponsor rating • #1 shows
Media
coverage
Internal • Commitment • Clashes Form
Get commitment from mgmt from mgmt • Responses – teams,
students & Mtgs,
spons updates
Learning • No. of fests College
• Batch alignment attended database,
Learn features of a great fest • No of fests won mtg with
• Exp with
internal fests
Engg
THANK YOU
G K Suresh
Department of Management Studies
sureshgk@pes.edu
105

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STRATEGIC MANAGEMENT

• Started with war and politics, not business

“The best defense is a good offense”

“You hit somebody with your fist

• Coke/Pepsi entry into India

• Courage, Big Bets, Risk Taking ability, Deep pockets

So it is said that if you know your enemies and know

• Operation Barbarossa ( Red Beard )

Know your competition

• Walmart in Germany and Korea

• Mars, Kellogs in India

Know your terrain

A company’s strategy is its action plan for

#2 (over top) 7 days 10 days For sure $ Life

#3 (valley) 14 days 21 days Maybe 0

#4 (wait 3 days) 10–13 17–21 Sure, if over Win, if no

Alternative #1 Alternative #2 Alternative #3 Alternative #4

Go in and bluff Only way Hurt left hand #3 won’t make it

wealth Can versus gold If storms, too

If you were well: 7 days2 days to spare

Go with: 10–14 days1–5 days short (unless BIG push)

Go alone: 3 rest + 10–14 = 13–17 days  4–8 days short  no way

Send: 8–10 days1 spare, even, or 1 short probably for sure

Go with Pat Go Alone Send Pat

“Can Do” Execution Control

● How to attract and please customers.

• Doing what they don’t do or doing it better!

Building Competitive Advantage

• Managers modify strategy in response to:

Realized Business Model

• Value reflects the

• Utility the customer gets from a product,

• Happiness or satisfaction he gains from

Performance Design Quality Experience Point of sale After sales

• Performance >= Expectations

• Low price – “good enough” product

The Competitive Winning The Performance

Mission, Vision and Core Values

The mission statement describes an organization’s purpose or

reason for existing.

• Our Mission is to organise the World’s

A vision statement defines your desired future state and

provides direction for where we are going as an organization.

• A company’s desired future state

Vision Statement for Proctor & Gamble

Effective Elements Shortcomings

Vision Statement for Heinz

the behaviors you expect to see as a result.

How will we behave?

• How managers and employees conduct themselves

Core Values for Amazon

List your personal Core Values

• Vision – Become a CEO by 40

• Objectives are an organization’s performance

• To convert the vision and mission into specific, measurable,

Maruti Suzuki article

• A company exhibits strategic intent when it relentlessly

• Indicates firm’s intent to making quantum gains in

♦ An x percent increase in annual revenues

♦ Winning an x percent market share

Crafting the Strategy

• Converting strategic plans into actions