21-01-2022

Marks Break-up

Component Mode Weightage

Mid Term Exam
( open book) 25%
(Compulsory)
End Term Exam
( open book) 30%
(Compulsory)

Strategic Management
Including Case study
Class participation and quiz 25%
presentation in groups

Group Project Presentation 20%

Total 100 %

SESSION 1

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Group Project Details

1. Form groups with 6 to 7 students in each group.

2. Select a firm from the list of firms shared (preferably a laggard or a successful firm)

3. For the firm selected –

I. Assignment 1 – Analyze how Vision/Mission and values change over a period of time.
II. Assignment 2 – PEST analysis, Industry structure analysis (Porter’s 5 forces and Industry Key success factors)
III. Assignment 3 – Strategic Group Analysis (add foreign firms in the industry for analysis)

What is a Strategic Decision?

IV. Assignment 4 – Identify firm’s core competency, and whether they have a sustainable competitive advantage
V. Assignment 5 – Map the foreign expansion trajectory
Note
I. Preferably, one slide each for each assignment
II. 1 or 2 students in each group should lead in I-V as mentioned above
III. Time period for the study – 2003-2020
IV. Annual reports can be accessed from – Dion Global’s Insight database

Only PPT must be submitted by the end of 18th session

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Characteristics of Strategic
Decisions? Strategic Management
 Usually affect long-term direction of an organization
 Concerned with achieving some advantage for the organization
 Likely to be concerned with the scope of an organization’s activities
 Involve large financial outlay “The field of strategic management deals with the major intended and
emergent initiatives taken by general managers on behalf of owners,
 Have organization-wide / cross-functional implications involving utilization of resources, to enhance the performance of firms
 Outcomes highly uncertain in their external environments” ….. (Nag et al. 2007)

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Strategic management – two broad

perspectives
CONTENT OF STRATEGY
 What is the purpose of business?
 What is a good strategy?
 What contributes to a firm’s
success?
 What should a firm do next?
 Draws primarily on – economics,
finance, marketing and operations
as well as ethics
This is what needs to be done…..
The Strategic Management Process
PROCESS OF STRATEGY
 How are strategies created?
External Environment Opportunities, Threats
 How does a firm compete? Analysis Strengths, Weaknesses,
Internal Environment
unique competencies
 How do organizations work? Customers to be served
Vision/Mission Competencies to be
 Draws primarily on – behavioral Formulation developed
disciplines like psychology and Corporate, business and
Strategies
sociology functional strategies
Organization structure,
Implementation
systems, processes, etc.
Adjustment/Evaluation (Cycle to earlier steps)
Here is how to do it….

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The Purpose of the firm Create shareholder value?

Why firms do business?
What is the primary objective of a firm?
 Create shareholder value?

Or create value that meets the needs of all its stakeholders?

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Firm’s Stakeholders India’s Most Valuable Companies

S No. Company Name Market Cap (Rs. cr)
1 Reliance 1611757.28
Stakeholder group Membership Primary expectation/demand 2 TCS 1345178.53 Market Cap
Company
Shareholders Wealth enhancement 3 HDFC Bank 843528.19 (Rs Cr)

Financial 4 Infosys 738913.2 RIL 3,46,881

Lenders Wealth preservation 5 HUL 548136.15 ONGC 2,51,319

Value for money, Reliable 6 ICICI Bank 526170.49 NTPC 1,64,661

Customers products at lowest possible 7 HDFC 508827.06 Infosys 1,54,753

8 Bajaj Finance 449747.2 TCS 1,50,215
prices
9 SBI 441500.53 SBI 1,49,104
Receive highest sustainable 10 Bharti Airtel 397232.45 MMTC 1,44,300
Product-market Suppliers
prices 11 Kotak Mahindra 375899.88 BHEL 1,16,848
12 Wipro 349696.38 ITC 1,08,131
Employment, tax revenues, HCL Tech 315192.2
13 L&T 1,01,771
Host communities minimum use of public support 14 Asian Paints 314799.12
services, CSR 15 Avenue Supermar 310617.68 As on 31st March 2010
Job Security, stimulating, and 16 ITC 290746.51
17 Bajaj Finserv 281940.63
Organizational Employees rewarding work environment,
18 Larsen 263133.42
$$$
19 Maruti Suzuki 224333.71
As on 12th Dec 2021

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The Concept of Economic Value

Added (EVA)
A firm is creating value when it has a +ve EVA
Spread between a firms ROIC and its WACC
 PAT – Capital Charge How is shareholder
value created?

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Value Creation, Delivery and Capture Value Based Business Strategies

Firm Competitors
Customer’s willingness to pay
for the product
Willingness to pay
Buyer’s share Willingness to pay
Increase switching costs
Price Differentiate Bad mouth competitors?

Value Created Firm’s share

Cost
Opportunity Cost
Supplier’s share
Opportunity Cost Highest alternative option to Increase suppliers switching costs
sell available to the supplier Reduce costs
Ease of doing business? Specific investments
Non salary benefits

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The concept of value creation The concept of value creation

Apple P = 120
P = 100 added
3.8 value 15
Price and cost Price and cost 105
Walmart P = 97 C = 96.2
normalized to normalized to 10
added P = 100
K-Mart $100 an Mi $ 100 C = 95
value 3.5
basket 3.8 phone
C = 89.7 C = 90

Walmart K-Mart Note: Figures are hypothetical Mi Apple

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Decomposition of Firm’s Value

Creation Decomposition of value creation
p1  Comes from scale and or reputation
of being a hard bargainer
Bargaining Bargaining It is a zero-sum gain, firm’s gain is
2% Advantage

Advantage supplier’s or customer’s loss
 Builds up over a time, cannot be
3% Value creation Value creation achieved immediately
advantage advantage  May not be sustainable, Suppliers
p2 and customers can push back
10%
operating
margin  Comes from operational excellence
Common Common  Product development or marketing
5% 5% operating Common
performance performance performance expertise
margin  More sustainable

c c
 Decided by industry structure
Competitive Advantage – Firm’s ability to capture more value from a transaction then  Porter’s 5 forces (to be discussed
later) come into picture
its competitor

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Bargaining Advantage Value Creation Advantage

Relative
importance
of the deal Resources and Value
Pattern of Activities Proposition
Relative Relative Capabilities
importance risk of Inputs Process Output
of Terms breakdown

Relative
Scale/scope externalities
Bargaining
power
Externalities/Interactions

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The Architecture of Strategy

Financial Performance
• Economic Value added
• Profitability
• Growth

Common performance Competitive Advantage

• Differentiation
 Determined by intensity of competitive rivalry • Low cost
• Focused strategies

 Firms usually compete on prices -

Structural Position
• Rivalry Process Execution
• Entrants • Product development
• Substitutes • Demand fulfilment
Benefits of cutting prices are when – • Customers • Order fulfilment
Close substitutes • Suppliers
Costs of cutting prices –
Small switching costs
Reduction in revenue base
Transparent Market
Reciprocation or retaliation Enterprise Synergies
Low marginal cost or excess capacity
• Core competencies
Installed base matters • Infrastructure
• Transnational advantages

Organizational Capacity
• Leadership
• Learning
• Levers

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What is Strategy? Strategy Levels

A firm’s theory on how to be competitively superior
Corporate Level Strategy
A set of decisions and actions taken by firm to achieve a sustainable
competitive advantage Chairman,
President, VPs
Business Level Strategy

Business #1 Business #2 Business #3

Functional Level Strategy

Manufacturing,
R&D Marketing
Operations

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Why Intended Strategies are not

Different forms of Strategy Realized?
 People in the organization have a poor understanding of the
intended strategy
Strategy-making is an ongoing, changing process
 The incentive systems in the organization do not motivate
employees to work towards intended strategies

Intended Strategy Realized Strategy

 External forces influence the actions taken to implement the
Deliberate strategy
Strategy

Unrealized What we
Emergent Strategy
Strategy observe, may
not have
been planned

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Two extremes of the Strategy making

External forces process
 Errors of analysis
 Fresh moves of competitors Rational Planning
Organization
Learning
Incrementalism

 Evolving customer preferences

 Technological breakthroughs • Future is predictable • The future is unknown and
• External forces can be controlled unknowable
 Shifting market conditions • Organizational strategy lends itself to • External forces are too powerful and
cannot be controlled
intellectual analysis and formulation
• Managers cannot enforce adherence
 Crisis situations  Has led to development of many
powerful planning tools and to their plans
techniques  Encourages flexibility and is
x Plans may be quickly outdated due to concerned more with implementation
changing environment. Formal x Does not encourage proactive efforts
planning breaks down during to control organizations future and
implementation destiny

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Should we have Strategic Plan?

Variables
change very fast
Thank You………..

Too many
variables to
consider

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