Engineering Management

Chapter-No-05

Prepared by: Dr. Muhammad Yasir

 Contents:

5.1. The elements of Corporate strategy

5.2. The strategy formulation process
5.3. Alliances and acquisitions
5.4. Strategy formulation tools and techniques
5.5. Plan implementation
 5.1. The elements of Corporate
strategy
• The requirements for strategy are well known and accepted by every
engineer and manager.
• One needs to decide often sometimes in advance, what is to be
achieved what actions are to be taken when it is to be completed how
it is to be done, and by whom.
• A corporate strategic plan is no different except that it is at a much
higher level and involves the whole organization it comprises the
action that the corporation needs to take to get from its present
position to where its vision of the future.
 5.1. The elements of Corporate
strategy
• Linking the present and future with the strategic plan,

Vision for
Present Future
 5.1. The elements of Corporate
strategy
• A strategic plan is often long range for several reasons,
• It usually involves a high level of investment in terms of capital and people
who need time to develop.
• Businesses are much more Global than they used to be entering new
markets or planning to take on foreign competitors in our home market
needs long-term planning.
• Technological changes need to be predicted and intercepted. Higher levels
of Technology also require greater investment in product development.
• However, reduced Product life cycle cost by technology change and reduced
margins due to competitor activity mean that payback periods are longer.
 5.1.1. Organizational variances
• Every company needs to develop its own strategic plan which will be
different from that of another company even if they are both operating
in the same businesses and market sector.
• The strategic plan will also vary depending upon the stage in the
company's development. There are generally four distinct stages not
all of them relevant to all companies,
❑The entrepreneur or Birth stage
❑The expansion and consolidation stages
❑The diversification stage
❑The decline and renewal status
5.1.1. Organizational variances

Finance

Product sales

Product
Marketing
Product
Manufacture
Product Development
• Technology
development
• Process development
• Environmental factors
• Political consideration
 5.1.2. Strategic ownership:
• Corporate strategy has many elements to it and covers all the functions
within a company. A company, therefore, needs to invest in its processes and
develop a supports infrastructure that can deliver value to a customer. Of
effective processes are,
❑The process is geared to meeting the customer's needs.
❑The process must allow fast response to changes in the environment such as
competitor activity or political changes.
❑The process must be Transferable for example from one company to
another when mergers occur.
❑The process must be Expendables to cope with changes in the company's
operations
 5.2.1 Strategy formulation process
• The strategy formulation process often known as strategic cycle
usually commences with an assessment of the future.
• In its determination of this within the organization must consider what
it believes to be important for its future,
❑Established itself as a technology market leader.
❑Be into the market place with new product.
❑Be a narrow supplier of a specialist products and services.
❑Concentrate on its home market gaining greater share.
 5.2. Strategy formulation process
Mission
Business Aim
Environment
Current position
Vision of
future

Assessment Strategic SWOT

SWOT
of future action plan Alternative Plans

Review of
current
position
Mission
Business Aim
Environment
 5.2.2 Action Plans

A strategic Action Plan usually has three main concentrations,

❑The need to maintain the current level for example customers and
market.
❑Improving existing items such as the performance of an existing
product or the revenue from an existing customer.
❑Introducing change such as a new product or entering a new market
for dealing with the new customer.
 5.2.2 Action Plans
A strategic Action Plan can cover many areas although it usually
includes the following,
❑Financial considerations
❑Market development
❑Technology
❑Process improvement
❑It develops in the culture of the organization
❑Responsibility to public
 5.2.3 SWOT Analysis:
• Analysis of the strengths, weaknesses, opportunities, and threats
facing the company is conducted at all stages of the strategic cycle.
• Opportunities can be found in many ways one method being identified
by the opportunities Triangle.
Business Sector

Customer Market
Characteristics Characteristics
 5.2.3 SWOT Analysis:

• Market and customer characteristics vary depending on the business

sector in which the company seeks to operate.
• Customer characteristics also change with time organizations employ
producers of goods and services and they have customers who use
these products.
• However, all the organization and their employees are usually
consumers of the same products and services so the interest of the
three groups converges.
5.2.3 SWOT Analysis:

Organization

Producer Consumer
 5.3 Alliances for acquisitions
• Acquisition are used where existing geography and Prime products are
involved and Lions is where new geography and new business are
involved a level of resources are needed to enter new geographical
areas or to develop new business situations which favor alliances.

• Acquisition on the other hand should be in geographical areas where

the company already has a strong presence or where the product is
core to its operation
5.3.1 Alliances for acquisitions
Existing Geography New Geography

Prime Business
Alliance
Acquisition
(Acquisition)

Alliance
Prime Business Alliance
(Acquisition)
 5.3.1 Reasons for Alliances
• Reasons for forming an Alliance depend largely on the activities of the
partner the main considerations are whether the company is a market
leader or market follower in the activity being considered for the
alliance and whether it formed the prime business or secondary
business of the potential partners.
5.3.1 Reasons for Alliances
Market leader Market follower

Prime Business Defend lead Drive for lead

position position

Prime Business Maintain status quo Change position

 5.3.3 Strong Alliances
• The stronger company will accept weaker partner since it believes that
it can then dominate the partnership and get its own way.
• The management of a company which is in a weak state is often too
preoccupied with the day-to-day of surviving to be able to give the
alliances the attention that it deserves with the result that the weaker
company track down the stranger one.
• It is important always to be here in mind that alliances can only
succeed if they are considered to be a win-win situation for
participants and are not treated as win lose games.
• One of the partner fail to achieve its objective than all parties to the
alliance must also fails.
 5.4 Planning tools and
Techniques:
• Value Analysis:
• The driving force in the business are atomized and analyzed activities
which add values such as manufacturing marketing space and RND
needs to be itemized and clearly identified.
• Customer satisfaction is high on the list of value analysis
considerations and many organizations regularly carry out customer
satisfaction service although these are the best conducted on the behalf
of the company by independent organizations.
 5.4 Planning tools and
Techniques:
Market Analysis:
• Element is a complete and access this should be broken into several
areas and each of these analyzed in detail example of different areas
are
• Finance and control
• Process used by the competitor
• Product portfolio
 5.4 Planning tools and
Techniques:
Market Analysis:
• Marketing expects
• Sales and distribution
• Manufacturing
• Strategic alliances
• Supplier relationship ships
• Customer relationships
• Company personal
 5.4 Planning tools and
Techniques:
• Gap Analysis:
• Gap analysis deal with the following
• Corporate AIMS
• These must be realistic and attainable, aIMS must power also be
ambitious the corporations driving continuously to better itself.
• Expected results
• These are the results that are expected to occur on present performance
standard including any improvement planned for the corporate
strategy.
 5.4 Planning tools and
Techniques:
• Size of the gap
• This is obtained by the difference in the corporate plan aims and expected
results that kept is a key element since it focus attention on the size of the
difference that has to made up. In the circumstances The corporate ends
need to be downsized to reduce the gap.
• Method of filling the gap
• This will depend on the item being covered by the gap analysis although
usually it will include growth alternative such as internal for doing funding
acquisition and alliances investment concentrations such as in Technologies
and market and financial and operational considerations
 5.5. Plan Implementation:
The goals of the implementation pyramid are
• long term plans
• Mid term plans
• Short term plans
 5.5. Management by objectives:
The steps involved in it are,
• Organization goals are set by the executive with involvement by others
within the organization.
• Objectives are agreed upon for all levels within the organization.
• Progress is monitored and against each objective and objective are
changed if the corporate aim change.
• Individuals are appraised and paste their objectives and feedback
provided the award is usually associated with attainment of objectives
 Monitoring and measuring
• Progress in the implementation of the strategic plan needs to be
measured.
• The measures must be able to provide quick feedback to management
on progress being made.
• In addition, they should be supported by more detail information so
that the problem areas can be explored in greater depth
 Customer Related Measures:

This can be translated into several actions which can be measured examples
are,
• Reducing the time from receiving an order to delivering the product to the
customer.
• Improving the quality of products delivered to the customer in terms of a
reduced defect in goods inwards inspection.

• Reducing the cost to the customer involves whole life costs.

• Improving customer care such as responding to customer complaints in a
short time and following up on other customer queries of one with an onsite
call.
 Process Related Measures:
The company's strategy may call for its processes to be one of the best
in the industry sector in which the organization operates.
• Expect for process involvement are,
• Reducing the time to market for new products.
• Quality improvement throughout the organization.
• Lower cost I gain in all stages of the development and manufacturing
• Ensuring that the product meets customer requirements.
• Development of internal core competencies processes.
 Financial Measures:
The key goal of the financial strategy is to meet shareholders'
expectations.
• This can be translated into several measures such as,
• Profit is measured in terms of return on investment.
• Sales growth in terms of turnover.
• Growth in market share.
• Adequate cash flow to refund ongoing developments.