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Corporate Leel Strategies

Strategic
Assessment
Available
Options
Strategic
ntent
Context
Chosen Strategy
STRATEGC CHOCE PROCESS
Strategy lormulation : Corporate Strategies-
Choice o Direction to the lirm
Allocating resources among different
businesses in a firm
Transferring resources from one set of
businesses to the other
Managing and nurturing a portfolio of
businesses.
Diersiied lirms
Multi business firms have interests in serving
a diverse base of customer groups, customer
functions and alternative technologies that
the firm is involved with
Strategic Alternaties
hether to continue or change the business
the enterprise is currently in or improve the
efficiency and effectiveness with which the
firm achieves its corporate objectives in its
chosen business sector
Strategic Alternatives
Expansion
Business Definition
Market
Penetration
Mkt Dev
nnovation.
Diversification
Horizontal
Concentric
Conglomerate
Vertical
Forward
Backward
Stability
ncremental
Growth
Profit
Sustained Growth
Pause Strategy
Retrenchment
Divestment
Turnaround
Liquidation
Bankruptcy
Cooperation
Joint Ventures
Strategic
Alliances
Consortia
Strategic Alternaties -Grand Strategies
Expansion
Stability
Retrenchment
Combination of any of above three
Grand Strategies
Expansion -s followed when an organisation aims
at high growth
Stability when it attempts at incremental expansion
of its functional performance
Retrenchment when it aims at contraction of its
activities
Combination adopting a mixture of expansion
stability or retrenchment either at the same time or
in different businesses or at different times in the
same business to improve performance
pansion
Concentration converging resources into
one or more firms businesses in terms of
customer needs, customer functions,or
alternative technologies either singly or jointly
in such a manner that expansion result
market penetration (more to same),
market development ( same to new),
Product development (new to same)
Expansion
Concentration
Market
Penetration
Market
Development
Product
Development
ntegration
Vertical
Horizontal
Diversification
Concentric
(related)
Marketing
Technology
Marketing&
Technology
Conglomerate/
Unrelated
Cooperation
Merger &
Acquisition
Horizontal
Vertical
Concentric
Conglomerate
Joint
Venture
Strategic
Alliances
Pro
Competitive
Non Competitive
Competive
Precompetitive
nternation
alisation
nternational
Multidomestic
Global
Transnational
Digitalisation
Concentration
dea to get more milk out of same cow
Specialise in a few areas and gain rich
experience
ith predictable conditions market forces
manageable
Growth and survival through time tested
technologies proven products and familiar
markets
Conditions - Concentrated growth
resistant to major technological
advancements,
when firm's target markets are not saturated,
firms products are differentiated,
market is stable
ore to Same
Combine toothbrush with toothpaste
oo customers from others (offer below
competitors price Santro over Maruti),
convert non users into users (soap,
toothpaste),
LCD TV, in rural areas and sell Tata Max to
rural customers over RTV with Safari for
urban
Product
Market
Present
Products
New
Products
Present
Markets
Market
penetration
Product
development
New
Markets
Market
Development
Diversification
Ansoff's Product Market Expansion Matrix
D

V
E
R
S

C
A
T

O
n
VERTCAL
HORZONTAL
FORARD
BACKARD
CONCENTRC
CONGLOMERATE
TYPES OF DVERSFCATON STRATEGES
%ata %ea - Increase Sales
Cut prices
ncrease advertising
Get product into more stores
Better store displays
Point of purchase merchandising
ncrease usage by current customers and
attract customers from other brands by
providing similar but additional flavours or
advantages
pansion
Manageable
Meet environmental
demands- legal limits
Natural Choice among
alternatives
Minimal growth or
optimal growth
nternal preparation
For Survival
For economies of scale
To stimulate talent
Reach higher targets
#easons or Diersiication
Several
Concentration (core competence)
Focus
All Carry risk
Integration
ntegration combining activities related to
the present activity of the firm- done on the
basis of value chain horizontal and vertical
Horizontal same type of products at the
same level of production or marketing
process ,it is said to horizontally integrate.
Vertical can be forward or backward.
Backward means integrating the source of
raw materials and forward moves it ahead
towards the ultimate customer
Diersiication
nvolves a substantial change in business
definition singly or jointly in terms of
customer functions, customer groups or
alternate technologies of one or more of
firm's businesses
#easons or Diersiication
Minimise risk
Capitalise on capabilities and Biz model to
maximise org strengths and minimise
weaknesses.
f growth in existing business is blocked by
regulatory and environmental factors.
hen
Expansion within existing product market not meet
objectives
High retained cash exceeds needs for expansion
Greater profit opportunities than in present product
market
f information available does not permit clear choice
between expansion and diversification
Risk spreading-avoid dependence on one product
/market, greater use of existing distribution and
acquire technology
orizontal Integration
Firms expand by acquiring other companies
in the same line of business or services to the
existing product line eliminate competitors,
provide new markets
Mergers and Acquisitions
Concentric - Related (through product
,market or technologies) but distinct business
e.g Philips electronics producer into cell
phones
orizontal
Conglomerate when co diversifies into
unrelated to current business - tech change ,
risk diversification, volatile market
Buying high, buying cash
Matching complementary business cycles
Debt free co if fin. poor
Concentric ,#elated but Distinct,
Diersiication
Transaction costs saving financial synergies
ncreased market power marketing synergies
Economies of scale (size of operations) and
economies of scope ( using common base of
resources and capabilities for varied but related
businesses) - operational synergies
Optimising HR utilisation common skill sets and
competencies- Personnel synergies
Concentric
Using common databases and information
sources nformation synergy
Using common admin skill and experience-
managerial synergies
BM Main frames to PC to communication
equipment,
Procter and Gamble -use common networks for
distribution
Conglomerate or Unrelated Diersiication
Spreading risk over different ,unrelated business
instead of synergy creation.
Stress is on financial matters (to spread risk) instead
of operational matters( benefits of synergy)
Maximising returns by investing in profitable biz and
selling out unprofitable ones.
Stabilising returns through ups and down on biz
cycles
Taking advantages of emerging opportunities
Migrating from biz under threat.
Personal choice of owners to create industrial
umpires
New Products
Related
Technology
Unrelated Technology
New Functions
Firm its own
customer
Vertical ntegration
Same Type of
Product
Horizontal
Diversification
Similar type of
Product
Marketing and
technology
Related diversification
Marketing related
concentric
diversification
New Type of Product Technology-related
concentric
diverisifcation
Conglomerate
Diversification
ANSOFF's MATRX FOR DVERSFCATON STRATEGES
Oil /Gas
Expolaration
Back ward
Forward
RL
Oil
Production
Pipelines
Refining
Product
pipelines
Export
Retail
Petro pumps
Position in 1998
Position in 2009
ntegration Strategies based on Value Chain
orizontal Integration
Taking up same type of products at the same level
of production or marketing process
E.g taking over a rival company manufacturing the
same product (acquisition or merger)
Results in bigger size with con commitment benefits
of stronger competitive position.
Geographical expansion, increase market share
n value chain keeps company at same level
e.g Bank takeover
eneits o orizontal Integration
Economies of scale ( Spreading fixed cost
over larger numbers)
ncreased product differentiation
Economies of scope (same resource base for
variety of products)
ncreased market power
Replicating a successful biz model
Reduction in industry rivalry
#isk
Demands very high level of managerial,
operational and financial competence.
Demands wide variety of skills
Decreasing commitment to old businesses.
May not result in promised rewards
ncreases the administrative costs of
managing integrating and controlling a wide
portfolio of businesses
Concentric Diersiication
hen organisation takes up an activity in
such manner that it is related to the existing
business definition of one or more of a firms'
business either in terms of customer groups,
customer functions or alternate technologies
Conglomerate Diersiication
hen an organisation adopts a strategy
which requires taking up activities unrelated
to its to its existing business definition in any
of its businesses, either in terms of their
respective customer groups, functions or
alternate technologies
Strategic Alternatives
Expansion
ncrease pace of
Activity
Prospects of growth
ncreased size more
Control overmarket
Expernce curve and
Scale of operations
Stability
Less risky, less changes
Comfort
Environement
Stable
Expansion percieved as
Threatening
Consolidation
after
expansion
Retrenchment
No longer wish
to remain n biz
Envrironment
is threatening
Stability ensured by
Reallocating
Resources from
Unprofitable
to profitable
businesses
Combination
Organisation large
and faces complex
Environment
Comprses
different biz
each lying in different
ndustries
Requiring different
responses
Stability
Strategy
No change
Strategies
Pause /Proceed
with caution
Strategies
Profit
Strategies
Stability Strategies
Maintaining status quo or growing in a slow
manner.
Resources put into existing operations
Focus on current products current markets
and functions maintaining same level of effort
hy
Not rock the boat
Stop for a while
hy swallow risk? -f growth low hold on to market
share after stretched period of growth
Resource crunch for new products new markets or
changing organisation ,resources required
orks only if firm doing well and environment is not
volatile or in niche market
Cannot be eld for along time as shareholder will
want improved profits.
Retrenchment
Strategies
Turnaround
Strategies
Divestment
Strateges
Liquidation
Strategies
%ypes
Retrenchment defensive when rival performance
is good and its own disappointing or survival at
stake
Eco recession, production inefficiencies and
innovative breakthroughs by competitors
Chosen if firm not competitive enough to beat leader
or make fast changes
Address weakness and restore
Arvind Mills (Denim) and Xerox did address their
weakness and came out stronger
Diestment
Divestment Sale of units or parts of unit that no
longer contribute to or fit the firm's distinctive
competence
Outright sale
Leveraged Buy Out
Spin Off - create new company and distribute
shares to present shareholders
Focus on core business
ACC, Raymond, TC Classic Fin Services, Parle
Thums Up
Diestment Strategy -#easons
Strong focus,
Unlock critical funds,
nvest in emerging tech,
exit non dominant ventures,
turn red to black,
exit unviable projects
%urnaround Strategy
Turnaround Reverse a negative trend and
bring organisation back to normal health and
profitability.
Rid of unprofitable products, leaner firm,
more efficiency, reduce distribution outlets.
%urnaround -Danger signals
Continuous cash flow problems
Declining profits-lower margins
Dwindling market share
High employee turnover
Low morale of employees
Under utilisation of capacity
Raw materials supply problem
Rising input prices
Strikes lockouts
ncreased competition, recession, Mismanagement
Action Plan
Change the leader
Change the prices
Focus on specific customer and producers
Extend product life thru improvements
Replace old products with new
Focus on power brands that are valued
Liqiudate assets for generating cash
Better internal coordination
Emphasis on selling advertising
Cut employees, interest and fixed costs
Ashok Leyland
1998-99
Sales and valuations hit rock bottom
balance sheet dismal picture,
recession
Strategy
Vendor consolidation from 1400 suppliers brought
down to 500 in 2002 with reduction in ordering
monitoring costs
J--T inventories Reduced from 23 days to 7 days
Demand and Forecasting MS reduced product
inventory form 90 days to 50 days reducing
marketing overheads by Rs 10000 per truck
Financial re-engineering Switched Rs 90 crs form
high to low cost loans and raised Rs 100 cr CP at
9.5 % bringing average cost of debt by 2% over 2
years to 9.6%
Liquidation
Selling of disposing of all or part of an
organisation's assets
hen future is bleak sales ,profitability
Unamanageable accumulated losses
Someone willing to buy to avail tax benefits
Not possible to revive with existing resources
Difficult in labour surplus, cash hungry country like
ndia as unions will oppose
Govt, Fs may oppose
By selling avoid bankruptcy and protect
shareholders interests
Liquidation
Compulsory winding up under the order of a
court
Voluntary winding up
Voluntary winding up under the supervision of
a court
Companies Act 1956 provides for a liquidator
who takes control of the company ,sell its
assets, pays its debt, and distributes the
surplus if any to its equity shareholders
ankruptcy
Means whereby an organisation is unable to
pay its debts and can see court protection
from creditors and from certain contract
obligations while it tries to regain financial
health and stability( reorganisation
bankruptcy)
Combination Strategies
Simultaneous
Combination
Sequential
Combination
Combination of
Simultaneous
And
Sequential
Combination Strategies
Joint ventures - pool resources to accomplish
tasks not done independently way of
implementing strategy spreads risk. Firms
take equity in one another
Strategic Alliance Partners Contribute skills
and expertise to a cooperatively conceived
and executed project for a specific period
Consortia nterlocking relationship between
business of an industry -Japanese upto 50
firms Airbus an example
L -Case
Shift from concentration to include integration
or diversification
hat areas to diversify if it decides to
pansion -
Internationalisation,
Cooperation and Digitalisation
Internationalisation
Type of expansion that requires market for
their product or service overseas
Evaluate international environment, own
capabilities, devise strategies to enter
mprovements in communication and
transportation, investment climate, lowering
of barriers
Government
Firm Strategy,
Structure
And Rivalry
Demand
conditions
Factor
Conditions
Related and
Supporting
ndustries Chance
PORTER's DAMOND OF NATONAL ADVANTAGE
Diamond Determinants ,Porter`s odel,
Factor Conditions
Demand conditions
Related and Supported ndustries
Firm strategy, structure and rivalry
lactors Impinging on lirms`
Internationalisation Strategies
Cost Pressure- minimise unit cost
Pressures for local Responsiveness-
strategies to respond to national level
differences in terms of variables like
customer preferences and tastes, policies
and biz practices
International ntry odes
Export entry mode
Contractual entry mode
nvestment Entry mode
Born Global firms
Strategic Alliances
Two or more firms unite to pursue agreed
upon goals but remain independent
Partner firms share the benefits of an alliance
and control over the performance of assigned
tasks.
Partner firms contribute on a continuing basis
in one or more key strategic areas
technology, product and so forth
#easons or Strategic Alliances
Entering new market
Reducing manufacturing costs
Developing and diffusing technology
Strategic Decisions in Internationalisation
hich nternational markets to enter?
Timing of entry into international markets?
Scale of entry into international markets?
Adantages and Disadantages o
pansion through Internationalisation
Economies of scale
Economies of scope
Expansion and
extension of markets
Realising location
economies
Access to resources
and markets overseas
Higher risks
Difficulty in managing
cultural diversity
High bureaucratic costs
Higher distribution
costs
Trade barriers
#egionalisation Strategies
Home base
Portfolio
Hub
Platform
Mandate
Strategies or the ase o the Pyramid
Easy payments in instalments
Dramatic cost cutting
Offering products in small packages
Charge prices by pay by use
Direct distribution by avoiding costly
intermediaries
Dodge rivals by
shifting to new
business model or
market niche
Contend on a
global level
Defend by using
home field
advantages
Transfer company
expertise to cross
border markets
ndustry
Pressure
To
Globalise
Tailored for
Home Market
Transferable to Other
Countries
Resources and Competitive Capabilities
Low
High
Strategy Options for Local Companies in Competing
Against Global Companies
Global
Strategy ( standardised
products /services low cost
approach to get benefits of
experience and location for
manuf. And sell in diff
countries)
Transnational Strategy (low
cost and high local
responsiveness)
nternational
Strategy ( transferring
standard product and
services to foreign markets)
Multi domestic
Strategy (modify product and
services to foreign conditions)
Pressures for Local responsiveness
Pressures
For cost
Reduction
Types of Global Strategies
#esponse o Local lirms to C`s
Using Home Field Advantages
Transferring the Co's expertise to Cross
Border Markets
Shifting to New Business Model or Market
Niche
Contending on a global scale
Patterns o Indian Co #esponse
Moving from position of comparative advantage to
position of competitive advantage
Reaching a point of having global advantages,
pushing towards global markets pulled by change of
ndia's perception in the world
Three strategies
1.outsourcing (small markets),
2.internationalised firms (market expansion/balance biz
risks),
3. multinational firms (creating sustainable competitive
position in several regions)
Patterns o #esponse
Different requirements of retail ( JV feasible
for retail) and institutional customers (no JVs)
Require different type of organising and
capability building
Conviction laden leadership focused on
business fundamentals, international
orientation and ready for long tem
engagements
Cooperatie Strategies
Mergers ( combination, consolidation (if both
organisations dissolve identity to create a new
organisation ) or
integration (in which one acquires the assets
and liabilities of the other in exchange for
shares or cash ))or
both the organisations are dissolved and
assets and liabilities combined and new stock
is issued
.
Cooperatie Strategy
Here the objective of buyer and seller firm
matched and
Acquisitions or takeover (surprise attempt to
acquire or take control of ownership against its
wishes or shareholders)
Joint Ventures
Strategic Alliances resources capabilities and
core competencies are combined to pursue
mutual interests
%ypes o ergers
Horizontal Mergers same business
Vertical Mergers- combination to create
complementarities in the same business
Concentric Mergers same biz definition
Conglomerate mergers Unrelated
combinations of biz definition
#easons or erger
ncrease value of stock
ncrease growth rate and investment
mprove stability of earnings and savings
Balance, complete, or diversify product line
Reduce competition
Acquire needed resources quickly
Avail tax concessions and benefits
Advantages of synergy
Sellers #easons to merge
ncrease value of owner's stock and
investment
ncrease growth rate
Acquire resources to stabilise operations
Benefit from tax legislation
Deal with top management succession plans
Important Issues
Strategic ssues commonality of strategic
interests between buyer and seller.
Valuation of business and shares of target
firm, sources of financing for mergers and
taxation matters after merger.
Managerial ssues problem of managing
firms after merger.
Legal ssues Sec 391 to 395 of Companies
Act.
Digitalisation
Digital coding of information and the growing
productivity gains in processing and
transmission it enables
Type of Strategy Digital Strategy Traditional Strategy
Method Experiment and
respond
Predict and plan
Time frame Monthly, revised
continously
Three to five year
,revised annually
Owner Everyone in
Organisation
CEO's ,strategists
Competitive threat New forces of
digitalisation
,globalisation and
deregulation
Porter's Five Forces
Model
Role of T Disrupter Enabler
Output Killer Applications Plan
Comparison of Digital Strategy and Traditional Strategy
Digitalisation and Value Chain
Deconstruction deliverables may not be
products but components of value
Disintermediation removal of some processes
Reintermediation processes are supplemented
ndustry Mapping- transforming traditional
boundaries by morphing providing goods and
services in different ways
Digitalisation and Value Chain,2,
Cannibalisation set of activities in a value
chain are replaced by new activities, like eating
away parts of the value chain
Techno intensification intensive use of
technology
Rechanneling Breaking value chain into parts
and divesting or outsourcing
Use o eb Site
Disseminate product information only
Minor distribution channel for direct selling
Major distribution channel to access
customers
Primary distribution channel to access buyers
Exclusive channel to transact sales with
customers
Leeraging Internet
New means of generating synergies
Enhancing revenue among elements of a
diverse firm
Linking sources of supply more efficiently
Streamline distribution
Dealing with suppliers more efficiently
Digitilisation Strategies
Phases Choosing among e-biz patterns, ebiz
models, e biz designs, e governance
Patterns-
1. E-Channel pattern E chaupal
2. Click and Brick pattern - HDFC Life
3. E- Portal pattern - R, SRL labs (Stick , view more
join)
4. E market maker or Net Market pattern developer
of a B2B site.
5. Pure e digital products pattern
%ypes o Sites
Vanity Self expression
Billboard information brochure
Advertising funding of programming and
content
Subscriptions niche individuals
Storefront electronic version of catalog,
promotions, shopping cart
One time purchase with no future obligations
Strategic lramework o an Organisation
Introduction
Evolution
Genesis
Managerial practices based evolution
Historical perspective and pointers to the future
Business Policy
Understanding Strategy
Concept of Strategy and levels of operation
Strategic Decision making
Schools of thought in Strategy formulation
Prescriptive, Descriptive
Conceptual Introduction o Organisation
ission
Mission and Purpose
Business Definitions Dimensions
Company Objectives and Goals
nironmental Appraisal
ntroduction
Characteristics of Environment
mpact of Environmental Changes
Major Environmental Components
Environmental scanning
Techniques used for environmental scanning
Strategic Alternaties
Grand strategies
Types of Principal/Grand/ Major strategies
Strategic Choice
ntroduction
Strategic Analysis at the corporate level
Techniques used for corporate portfolio analysis
ndustry competitor and SOT analysis
Behaviour/Subjective factors affecting strategic
choices
Contingencies approach to strategic choices
Strategic plan
#ationalising the Strategy
Desired qualities of Annual Objectives
Benefits offered by annual objectives
Linkages between strategy formulation and
implementation
Project implementation
Procedural mplementation
Resource Allocation
Structural Implementation
Structure Definition
Types of Structure
Selection of Structure
Organisation Culture
Content of Culture
nfluence of culture on organisational life
The Strategy Culture relationship
Organisational Systems
ehaiour Implementation
ntroduction
Leadership and mplementation of Skills
Leadership and Strategy Skills
Political aspects, power and strategy
Personal values, ethics and strategies
Social responsibility
Strategic aluation Control
ntroduction
Strategic Control
Operational Control
Evaluation Techniques for Strategic Control
Evaluation Techniques for operational control
ew usiness odels and Strategies or
the internet conomy
ntroduction
Strategy shaping characteristics of E-
commerce Environment
E-Commerce Business Models and
strategies
nternet strategies for traditional business
Key success factors in e-commerce
#estructuring
Redesigning an organisation structure with
the intent of emphasizing and enabling
activities most critical to a firms' strategy to
function at maximum effectiveness
hy
Reduce unnecessary control
Focus on enhancing core competencies
Reducing costs
Opening organisations more fully to outside
involvement and influence
Globalisation
Speed
internet
Core Competencies
Special qualities possessed by an
organisation that make them withstand the
pressures of competition in the market place
Net result of strategic advantages and
disadvantages
hen a specific ability is possesed by a
organisation exclusively or relatively in large
measure it is called distinctive competence
#estructuring
Revamping
Regrouping
Rationalisation
Consolidation
Corporate #estructuring
Corporate or business level restructuring
composition of organisation set of
businesses for more profits
Financial restructuring equity pattern
,holdings ,debt servicing schedule ,cross
holding
Organisational restructuring changes in
structure, reducing hierarchies, downsizing,
redesignating positions, altering reporting
relationships
hy #estructuring
ays of working of organisations.
Changes in the environment
usiness leel Strategies
Strategy Leels and locus
Strategy level Focus
Corporate Level Market Definition and
Resource allocation
,Competition and
alliances(cash,HR
equipment)
Business level Market navigation
Functional level Organisation function
ntegrated support of
business and corporate
level strategies
usiness Leel Strategies
Are courses of action by an organisation for
each of its businesses separately, to serve
identified customer groups and provide value
to the customer by satisfaction of their needs
n the process the organisation uses its
competencies to gain, sustain and enhance
its strategic or competitive advantage.
SU
A group of related business /divisions each
responsible to corporate head quarters for its own
profits and losses
Each SBU has its own competitior and own unique
strategy
Focus on a particular product or service line
Business level strategies involve decsions regarding
these individual products within this service line
One product may contribute by huge cash flow for
corporate level strategy while another rproduct uses
the cash to increase sales and market share of
existing biz.
usinss leel Strategies Concerned with
Coordinating and integrating unit activities to
conform to organisational strategy
Developing distinctive competencies and
competitive advantage in each unit
dentifying product or service market niches
and developing strategies for competing in
each
Monitoring product or service market so that
strategies conform to market needs at the
current stage of evolution
Porter`s Generic Strategies
Overall cost leadership focus on cost not
price (give s alternatives for pricing)
Differentiation uniqueness of product
warranty ,brand image,technology, service
,dealer networks
Focus on a particular market niche
concentrate on a product line,area, channel,
stage in production process,or market niche-
serve a limited segment
usiness Strategies hy
Direction for business in designing incentive
systems
Control procedures
Operations
nteraction with buyers and suppliers
Making product decisions
usiness Leel Strategies -
ndustry Structure
Positioning of the Firm
Competitive Advantage
Competitive Scope breadth of
organisation's target within an industry
asis or usiness leel Strategies
ndustry Structure determined by Porter
five forces model which vary from industry to
industry which determines long term
profitability of the firm
Positioning of the firm within the industry
overall approach of the firm towards
competing and designed to gain a
sustainable competitive advantage
readth o Organisation
Range of products
Distribution channels
Types of buyers
Geographic areas
Array of industries in which firm competes.
Broad (full range of products to wide
customer groups) target or narrow ( limited
range of products to few groups in restricted
area )target approach
Sustainable Competitie Adantage
Competitive Advantage (lower cost and
differentiation)
Competitive scope (broad target and narrow
target
Competitie Adantage -Low Cost
Low Cost mass produced goods,
distributed through mass marketing thereby
resulting in lower cost per unit.
Based on competence of the organisation to
design ,produce and market a comparable
product more efficiently than its competitors
Dierentiation
Differentiation - Marketing relatively higher
priced product of a limited variety but
intensely focussed on identified customer
groups who are willing to pay the higher
price.
Produced by batch production and marketed
through specialised distribution networks
Dierentiation
Competence of the firm to provide unique
and superior value to the buyer in terms of
product quality ,special features and after
sales service
Cost Leadership Differentiation
Focussed Cost
leadership
Focussed
Differntiation
Porter's Generic Business
Strategies
Competitive
Scope
Low Cost Product/Services
Differentiated Products/Services
Competitive Advantage
Broad
Target
Narrow
Target
Porter Classiication -usiness Strategies
Cost Leadership (lower cost/ broad target
same utility/comparable price). Higher profit
by volumes and lower margins. Competition
stiff. Achieved by ensuring cumulative value
chain costs are lower than competitors by
analysing cost drivers)
Differentiation (differentiation/broad target)
Focus (lower cost or differentiation/narrow
target)
Cost Leadership
Lower cost/ broad target
same utility/comparable price).
Higher profit by volumes and lower margins.
Competition stiff.
Achieved by ensuring cumulative value chain costs are
lower than competitors by analysing cost drivers
Standard products and uniform service packages
Economies of scale
Demand forecasting and high capacity utilisation
nvesting in cost saving technologies
Dierentiation
Competitive advantage through special features
incorporated into the product/ service which is
demanded by customers and who are willing to pay
for it.
Outperform competitor through special features in its
product or service
Customer value the utility of special features and are
willing to pay more
Product or service stand apart in the market and is
recognised by its customer
Higher profits from premium vs additional cost of
features
locus
Relies on cost leadership or differentiation
Caters to a narrow segment of the total
market
Also called niche strategies
Based on identifying customer groups on
demographics (age, gender, income
occupation), geographic (rural urban,
North/South ndia or lifestyle (traditional
/modern)
locus
Locate a niche where cost leaders and
differentiators are not operating as they leave
out segments which require special attention
or superior skills or efficiency in handling the
segment
For identified market segment adopt focus
based in cost leadership or differentiation
Music, jewellery, healthcare,
BPOs,TV,biscuits.
%actics
A sub strategy
A specific operating plan detailing how a
strategy is to be implemented ain tems of
when ( timing) and where (market location) it
is to be put into action
Narrower in scope
Shorter in time horizon
%iming tactics
Strategy of low cost , dfferentiation or focus may
be right move only if it is made at the right time
targets for managers by time
Timing based strategy means attacking the
competitor indirectly through surprise and gaining
market share at reduced cost
Low labour cost by JT
Time based manufacturing , time based sales and
distribution
First Mover and Late Mover
arket location
here to compete target market.
Role organisation plays in in the target market
and the type of business tactics they adopt to
play such a role.
ndustry has no of organisations offering
products services to make market shares.
One organisation has largest market share,
other differing in magnitude

arket #ole
Role can be Leader (expanding total, defending
existing, expanding by enhancements)
Challenger (try to gain market share by objectives and
opponents, general and specific attack strategy
choices ,
Follower (imitate market leaders but not upset balance
of competition),
Nichers ( carve out distinct segment left out by others
or of no interest to them by creating, expanding and
protecting niches).
usiness Strategies or Dierent Industry
Conditions- lactors
nvestment,
returns
capital
Timing
Technology
demand
business models
risks
market shares
growth
products
Stages in Industry Cycle
Embryonic Stage
Growth stage
Maturity stage
Decline stage
Strategic Analysis and Choice
Oeriew
Process of Strategic choice
Strategic Analysis tools and techniques
Subjective factors
Contingency Strategies
Strategic plan
Strategic Analysis
nvestigation of objective factors being
considered in strategic choice ?
hich markets to enter ?
hich industries to leave ?
hich business to create/ acquire/ divest ?
hich products and markets to retain
/grow/divest ?
Corporate Growth Strategies -Choices
,Corporate parent -biz units children,
Firms Orientation towards growth stability
and retrenchment (Directional Strategy)
ndustries or Markets in which the firm
competes (Portfolio strategies)
Manner in which it management coordinates
activities and transfers resources and
cultivates capabilities among product lines
and business units (parenting strategy)
Performance
Desired Performance
Performance Gap
Time
T1 T2
Present
Performance
GAP ANALYSS FOR FOCUSSNG ON STRATEGC ALTERNATVES
%ools and %echniques
Clark Study (1997) -80 tools and techniques
Hussey(1992) 57 techniques
Most popular 25 relevant topical and measurable
2007 Tool Strategic planning
Techniques CRM, customer segmentation, bench
marking, vision and mission statement
Scenario and contingency planning, strategic
alliances, balanced scorecard,growth strategy tools
Less popular M&A, Six sigma, offshoring,
consumer ethnography, corporate blogs
Strategic Analysis %ools
SOT
Portfolio Analysis BCG Matrix
GE/ McKinsey Nine Cell matrix
Financial Ratios
Brainstorming
Delphi Techniques
CSF
Market Opportunity Analysis
Strategic Analysis %ools
Process mapping
Focus groups
Competitor Analysis
Porter Five Forces Model
Stakeholder Analysis
Budgeting and Value Chain Analysis
Factor Analysis
McKinseys 7 S
PEST Analysis
Corporate Portolio Analysis
Competitive analysis and strategic planning
in multi product and multi business firms
Resources targeted at those businesses that
possess the greatest potential for creating
competitive advantage
%ools
Corporate Portfolio Analysis
Corporate Parenting Analysis
SOT Analysis -ETOP and SAP combined
Experience Curve Analysis
Life Cycle Analysis
ndustry Analysis Porter Five Forces model
Corporate Portolio Analysis
BCG
GE's Nine cell Matrix (McKinsey & Co)
Hofer's Product- market Evolution
Directional policy
Strategic position and Action Evaluation
Matrices
Corporate Parenting Analysis
Role of corporate headquarters in managing
and nurturing a set of business in a portfolio
Effective use of resources and capabilities,
build individual businesses and creating
synergies .
Corporate Parenting Analysis
Two key questions are :-
hat business should a diversified
corporation own and why?
hat organisation structure, management
processes and philosophy will foster superior
performance from the corporation's individual
business units ?
Better than portfolio as it more than just
financial aspect of the business.
G` S ine Cell atri
Profit
eak Average
Strong
Business Strength/Competitive Position
High
Medium
Low
ndustry
Attractiveness
nvest
expand
Harvest /
Divest
Industry Attractieness usiness Strength
Market size
Growth rate
ndustry profit margin
Global opportunities
Competitive intensity/rivalry
Seasonality/Demand growth
rate
Cyclicality
Economies of scale
PEST ( Political Technology,
Economic
Social, environmental )
Legal
Human mpact
Relative market share
Profit margins relative to
competition
Ability to compete on price
and quality
Knowledge of customer and
market
Distribution channel access
Competitive strengths and
weaknesses -production
capacity
Technological capability
Calibre of management
Brand equity
Dierence -ine Cell and CG
n nine cell ,ndustry attraciveness and business
strength vs industry growth rate and market share
Nine vs four cells
ndustry attractivess and business strength criteria
are first identified , then given a value and then
multiplied by weightage factor.
Result is a quantitative measure of industry
attractiveness and business units relative
importance in the industry
Not consider interactions among units and neglects
core competencieslaeding to value creation
Plotting
Market size represented by size of circle
Market share by pie in the circle
Expected future position of circle by means of
an arrow
Strategic Implications -resource
allocations recommendations
Grow strong business units in attractive
industries, average business units in
attractive industries, and strong business
units in average industries
Hold average BUs in average industries,
Strong BUs in weak industries,weak business
in attractive industrues
Harvest- weak Bus in unattractive industries,
average BUs in unattractive industries, weak
Bus in average industries
oer- Lie Cycle Product arket
olution atri Stage o Industry s iz
Strength,Company Position
Early development
Rapid growth/Take off
Shake out
Maturity /Saturation
Decline/Stagnation
Strong
Average
eak
lorce lield Analysis
Understanding the pressures for and against
change or a decision- specialised method of
weighing pros and cons
By analysis trying to strengthen forces for
change and reduce impact of opposition
Problem
Problem A firm is considering upgrading a
factor with new manufacturing equipment.
List and prioritise the forces for and against
change
Analysis
Customers want new
products (4)
mprove speed of
production(2)
Raise volume of
output(3)
Control rising
maintenance costs (1)
Loss of staff overtime
(3)
Staff frightened of new
technology (3)
Environment impact of
new technology (1)
Cost (3)
Disruption (1)
Plan for
Upgrading
factory with
new
manufacturing
equipment
FORCES FOR
CHANGE
FORCES AGANST
CHANGE
Total 10
Total 11
4
2
3
1
3
3
1
3
1
Action
Train staff (increase cost by 1) eliminate fear of
technology (reduce fear by 2)
Show stafff change is necessary for business
survival (new force in favor +2)
Staff shown new machines could add interest and
variety to jobs (new force + 1)
Raise wges to to reflect new productivity(cost+1,loss
of overtime -2)
Slightly different machines with filters to eliminate
pollution (environmental impact -1)
Total For 13 Total against 8
Strategic Groups
Cluster of firms based on technological leadership
,degree of product quality, pricing policies, choice of
distribution channels and degree of customer
service.
ndian Pharma Exploiters (Neuland labs), Explorers
(CPLA), Outsourcers (Dishman Pharma), emerging
globals(e.g Dr Reddy's) and globals (e.g Ranbaxy).
Restaurant industry fast food, fine dining based on
preparation time, pricing and presentation
Other Analysis -Strategic Groups
Strategic Groups are dynamic collections of
companies that compete simultaneously fo
customers and capital
conceptually defined clusters that share
similar strategies and
business models and therefore
compete more directly with one another than with
other firms in the same industry.
Firms which appear homogenous form one
strategic group.
Similar groups that compete for customers and
capital.
ench marking
Comparing your organisation or part of your
services with others
hy are others better?
How are others better
hat can we learn?
How can we catch up?
How can we become the best in our sector?
hich are the right organisations to compare with?
Direct competitors (domestic), nternational,
indirect competitor (providing related product or
service, other successful companies
Steps in enchmarking
dentify Product / service to be benchmarked
dentify comparable institutions
Collect data
dentify performance gap
Estimate performance potential
Communicate and get acceptance
Establish targets
Develop action plans
Act according to targets and monitor the process
Adjust process according to monitoring results
Continue the cycle from step !
Stakeholders Analysis
Describes a process where all individuals or groups
that are likely to be affected by a proposed action
are identified and then sorted according to how
much they can affect the action and how much the
action can affect them
Primary-ultimately affected
Secondary -intermediates or indirectly affected
Key stakeholders significant influence or
importance in organisation
locus Groups
A form of qualitative research in which a
group of people are asked about their
perceptions, opinions, beliefs and attitudes
towards a concept product service idea
,advertisement or packaging
Acquires feedback, test marketing, test new
product before being made available to
public
Competitor`s Analysis
Actions and reactions of individual firms
within and industry or strategic groups.
Determine each competitor's reaction to
industry and environmental changes
Anticipate response of each competitor to the
strategic moves by other firms
Develop a profile of the nature and success
of the possible strategic changes each
competitor might undertake
Components o Competitor Analysis
Future goals of competitor Comparison
with own
Current strategy of competitor How are we
currently competing
Key assumptions made by competitor of
future volatile ,status quo. Competitor's
assumptions
Capabilities of competitor(S vs competitors)
usiness Process apping
Activity involved in defining exactly what business
entity does, who is responsible,to what standard a
process should be completed and how the success
of a business process can be determined.
Once done no uncertainty as to the requirements of
every business
To meet SO 9000 standard requires a process
approach and business process maps help in
assisting the same Then the process becomes
effective and efficient.
Visually depict s the sequence of events to build a
product or produce an outcome.
usiness Process mapping
Biz Process Acollection of interrelated tasks
which accomplishes a particular goal
Three types management operational,
supporting
Begins with acustomer need and ends when
that need is satisfied
ncreases effctiveness (add cusomer value)
and increases efficiency (save time/money)
f a step does not add value why do it
P apping
dentify all your processes
dentify the person responsible for that process
Break down each process into individual steps from
start to finish document
Physically map out the steps on computer,
whiteboard
Start with the most ineffective or inefficeient
processes customer/staff dissatisfaction, staff time
%actics
Position Defence
Flank Defence
Counter offensive defence
Mobile defence
Contraction defence
Frontal Attack
Flank Attack
Encirclement Attack
Bypass attack
Guerilla Attack
Couterfeiter
Cloner
mitator
Adapter
Subjectie lactors in Strategic Choice
Govt Policy
Perception of CSF and distinctive
competencies
Commitment to past strategic actions
Strategist's decision style and attitude to risk
nternal political considerations
Timing and competitor analysis
Strategic plan
After strategy formulation next phase is
strategic plan.
A document which provides information
regarding the different elements of strategic
management and the manner in which the
organisation and its strategists propose to
put strategies into action.
Strategic Plan
Serve as a framework for decisions for
securing support/approval
Provide a basis for more detailed planning
Explain the business to others in order to
inform ,motivate and involve
Assist benchmarking and performance
monitoring
Stimulate change and become building
blocks for next plan.
Contents o Strategic Plan
Statement of Strategic ntent
Environmental appraisal results
Organisational Appraisal results
Strategies chosen and assumptions
Resource Allocation
Contingent strategies
Organisation structure proposed
Functional Strategies and implementation
Performance evaluation and assessment of success
Contents o Strategic Plan
Statement of Strategic ntent vision ,mission,
business definition, goals and objectives.
Results of environmental appraisal
Results of organisational appraisal
Strategies chosen and the assumptions under which
strategies would be relevant
Contingent strategies to be used under different
conditions
.
Contents o Strategic plan
Strategic budget for the purpose of resource
allocation for implementing strategies and the
schedule for implementation
Proposed organisation structure and the major
organisational systems for strategy implementation
including the top functionaries and their role and
responsibility
Functional strategies and the mode of their
implementation
Measures to be used to evaluate performance and
assess the success of strategy implementation
Contingent Strategies
Are strategies formulated in advance to deal with
uncertainties, emergencies and disaster
management that are natural part of the business.
Strategic choices are made on certain conditions,
assumptions and premises which may not turn out
to be valid. These shifts can be sudden with little
time to react.
Some changes in environment are fast (market
regulatory or international depending on industry)
and others like social change is slow.
Strategic Choice
Focus
Analyse
Evaluate
Chose
Process o Strategic Choice
Focus on strategic alternatives
corporate level (expansion, stability,
retrenchment and combination)
business level (low cost, differentiated,
focus) based on level of gap by Gap
analysis (3-5 years time frame between
present and desired performance and
working back wards to see if it can reach
through present level of efforts)
Process o Strategic Choice
Analyse- Strategic Alternatives- Few feasible
alternatives by objective factors( like market
share based on rational objective or
prescriptive factors) or subjective factors(
personal judgement, collective or descriptive
factors like top management perception).
Strategic Choice ,3,
Evaluate based on analysis of subjective and
objective factors
Chose - Clear assessment of choice of which
alternative is most suitable under the existing
conditions by making a blue print and also
looking a t contingency strategies
alyani Group
Motive for nternationalisation
Type of nternational Strategy group is
adopting
Strategy Implementation
Strategy Implementation
Carries out the exercise of putting a freshly
chosen strategy in place
Characteristics
1. Action orientation
2. Comprehensive in scope
3. Demanding varied skills
4. ide ranging involvement
5. ntegrated process
Strategy Implementation
Barriers
Overcome by adopting clear model of effective
strategy implementation and
Effective management of change
Formulation and implementation are iterative
functions and feed upon each other in a two way
relationship through forward and backward
linkages.
ntended strategies may not get implemented in the
intended way.
Strategy Implementation
Nature Action oriented, comprehensive in
scope, varied skills required, wide ranging
involvement, integrated process.
Linkages between formulation and
mplementation.
Project mplementation
Procedural mplementation
Resource Allocation
arriers to Strategy Implementation
Barriers inability to change, poor strategy,
no guidelines for implementation, poor
information sharing, unclear
responsibility/accountability,
Adopting clear model of strategy
implementation and effective management of
change in complex situations
Interrelationship between lormulation
and Implementation ,action and doing,
Forward Linkages managerial task
Changes to structure leadership styles to
operationalise strategy
Strategy Formulation
Strategy mplementation
Backward Linkages strategy implemented in
the past, indented strategy, unrealised strategy
and emergent strategy
Unrealised
Strategy
Emergent
Strategy
Deliberate
Strategy
ntended
Strategy
Realised
Strategy
mplemented
Strategy
Formulated
Strategy
MNTZBERG CONCEPTON OF TYPES OF STRATEGY
Resultant outcome
nfluences
Simple odel o Strategy Implementation
Activating
Strategies
Managing Change
Achieving
Effectiveness
Project
mplementation
Procedural
mplemetation
Resource
Allocation
Structural
mplementation
Leadership
mplementation
Behavioural
mplementation
Functional
mplementation
Operational
mplementation
Strategic
Plan
Activating
Strategies
Managing change
Achieving
Effectiveness
FEEDBACK
Evaluation
& Control
Strategy
Plans
Programmes
Projects
Budgets
Policies,Procedures
Rules and Regulations
PYRAMD OF STRATEGY ACTVATON
Strategy Plans Programmes Projects Budgets
Policy
Rules
Regulations
procedures
Strategy to Project mplementation
Strategic Management
Process
Project Management Process
nitiating Planning
Executing Controlling Closing
Project
Objectives
Control
Measures
Strategy
mplementation
Strategy
Evaluation
And Control
STRATEGY MPLEMENTATON THROUGH PROJECT MANAGMENT
anaging Change
Respond to Dynamic environment challenges
Organisation keep internally fit
Strategy implementation itself requires change
nnovation and learning
Triggers set within or outside the organisation
dentify need, prepare , minimise resistance and
then start change with monitoring
Degree, timing and Activity areas of change are
important to manage change effectively
Organisational ectieness
Goal Model how well goals achieved (profitability
growth market share))
Resource based model ability of organisation to
obtain resources (finance raw materials)
nternal process Model how well are internal
activities working (corporate culture, climate,team
work, communication)
Conflicting values model consolidating different
viewpoints, activities and outcomes so diverse
indicators of performance are used (dominant issues
external or internal,values, stability or change)
Change anagement
Degree of change
Timing of change
Activity areas of change
Organisational ectieness
Means the degree to which an organisation is
able to achieve its objectives through the
implementation of strategies.
Project anagement
Key enabler of strategy implementation
within organisations
Not something that are an appendage to
strategy implementation but need to be part
of overall strategy.
Supported by the right approach, processes
and tools and techniques
Must be executed fully inline with the
strategies they support.
Project management
Awareness of procedural framework within
which plans, programmes and projects have
to be approved by the govt. at the central,
state and local level.
Project management is for creation of the
infrastructure required to put plans into
action.
Procedural implementation helps in getting
the go ahead form concerned agencies to
implement projects
#egulatory #equirements
Formation of a company
Licensing procedures
SEB Requirements
MTRP/Competition Act Requirements
Foreign Collaboration procedures
mport and Export Requirements
Patenting and trade mark requirements
Labour legislation requirements
Environmental protection requirements
Consumer Protection Requirements
ncentives and facilities benefit.
Procedural Implementation
Reacting to regulation
Conform
Confront
Lobbying
PR
Existentialist look for opportunities
Dynamic govt. respond to changes
Anticipate changes

Assistance
Liaison Formal and nformal approval, permissions, statutory
benefits
Corporate Affairs
Consultants
Advisors
CA's
Company Secretary
Legal Experts
Lawyers
Political donations and lobbying
Sickness
Taxation
nternationalisation- different countries environment
#esource Allocation
Procurement, commitment and distribution of
of financial ,human, informational and
physical resources to strategic tasks for
achieving organisational objectives
Managers guided by strategy
Aligning #esources to Strategy
Challenge is how to allocate resources to
competitive strategic tasks that lead to the
accomplishments of organisational objectives
and realisation of strategic intent
Done through strategic budgeting by iterating
strategic decision making between different
levels of management
ays o #esource Allocation
Top Down Approach
Bottoms Up Approach
Mix of Both (Strategic Budgeting ) iterative
manner , assumptions made, inputs received
and used prepared by Exec level committee
Trade offs
Level of
Management
Top
Management
Executive
Management
Operating
Management
Corporate
Policy
Guidelines
Desired long
And short run
goals
Resource
Availability
Strategic
Budget
Position Papers
Envrt,Core Comp.
Marketing
Past Performance
Minimising gaps
Target/
Operational
Plans
Proposals
Approval
And sanction
mplementation
STRATEGC BUDGETNG PROCESS
lactors in #esource Allocation
Objectives of the organisation explicit
&implicit
Preference of dominant strategists Decision
maker
nternal politics units see it as possession
of power
External influences outside govt,
shareholders, Fs, legal requirements,social
responsibilities
Diiculties in #esource Allocation
Scarcity of resources
Restrictions on generating resources for
newer units and those with greater potential
for growth
Overstatement of needs
Tendency to imitate competitors
ethod
Role of CEO is major
Participative mode
Communication of strategic plan to all
executives creates congenial environment for
decisions on resource allocation
Structural Implementation
Structural Implementation
s the way in which the tasks and sub tasks
required to implement strategy are arranged.
Relationship of structure and strategy creates
its own special requirement that should be
met by structure.
Structure
dentifies formal reporting relationships -
hierarchy levels and span of control
Grouping into departments and of
departments in the organisation
Design of system to ensure communication
coordination and integration of efforts across
departments.
-S lramework
Strategy
Structure
Systems
Skills
Style
Staff
Shared
Values
McKinsey Model Seven factors for Organising Co
cinsey -S
Management model describing seven factors
that enable organising a company in a holistic
and effective way.
Together these factors determine how a
company operates
-S lramework
Shared values - -superordinate goals what the organisation
stands for and what it believes in
Strategy plans for allocation of a firms scarce resources over
time to reach identified goals envrt ,customers, competition
Structure way in which organisation units relate to each other-
centralised ,functional,divisions or decentralised ,matrix,network
,a hoilding co
Systems procedures,processes and routines that define how
work is done- fin systems, R&S, P&PA,info system
Staff no and types fo employess
Style cultural sde of the organisation and how key managers
behave to achieve goals (Management style )
Skills distinctive capabilities of personnel or organisation as a
whole .Compar(e :core competencies).

Uses
Value based Management model
Diagnostic Tool
Guides organisational change
Combines rational and hard elements with
soft and emotional elements
Managers must act in parallel and all Ss are
interrelated
Structure o Organisations
Vertical (superior and sub ordinates division
of labour and specialisation)
Horizontal (coordination and collaboration
among peers created by integration for team
work and cross function information systems)
Challenge is to create and manage
organisation requirements and coexistence
of both vertical and horizontal structure at the
same time
orizontal and Vertical Structures
Shared tasks
Flexible authority
Few rules and
regulations
Horizontal
communications
Decentralised decision
making
Emphasis on learning
Specialised tasks
Hierarchy of authority
Rules and regulations
Vertical
communications and
formal reporting
systems
Centralised decision
making
Emphasis on efficiency
Changing Environment impacts strategy
Strategy determines the type of structure to
have
Strategy and structure affect each other more
on the forward side
Strategy and structure is spanned by
environment and in one direction and
effectiveness in the other.
Relationship Environment, Strategy and Structure
Environment
Strategy
Structure
Effectiveness
Environment Strategy Structure and Effectiveness
Structural Implementation

Strategic
Plan is
mplemented
New
Strategies
Put in
Place
mple
Mentation
Of new
Strategies
Mismatches
Performance
mproves
Structure
s changed
Effectiveness
s reduced
Performance
declines
Lie Cycles o Organisations
Stage -Small scale enterprises owner
manager. Simple objectives, operations.
Expansion
Stage Bigger than stage and wider in
scope of operations. Marked by functional
specialisation and process orientation.
Stability and Expansion.
Stages
Stage large and scattered multi location,
SBUs and Divisions, Stability and Expansion
Stage V complex, multi plant multi product
organisation resulting from related or
unrelated diversification. Divisional
organisation with corp. headquarters.
Corporate and business level strategies
coexist
SU
A discrete element of a business serving
specific products-markets with readily
identifiable competitors and for which
strategic planning can be conducted
%ypes o Organisational Strcture
Entrepreneurial
Functional
Divisional
SBU
Matrix
Network
Product based
Customer based
Process based
Goegraphic
ntrapreneurial
oling Structures -orizontal
Horizontal based on a structure that
corresponds to the process of providing
products or services to the customer rather
than the functions that the organisations
perform.
nstead of marketing finance etc forming the
basis of departmentation, it is core processes
managed by cross functional teams used as
basis for structuring.
oling Structures -Delaminated
atrices
Delaminated matrices are combinations of horizontal
organisations with a functional structure.
This way retains the process oriented horizontal
teams with functional departments providing the
depth of expertise and capabilities to perform those
functions.
n this way the functional layer and the process layer
of the traditional matrix organisation is separated
and the workers and staff of the firm are assigned to
either functions or teams but not both.
Organisation Design
based on key activities derived from mission
and objectives
Purpose is to create the right structure that
fits the requirement of strategy to be
implemented
Difficult task to find the right type of structure
to fit and satisfy the requirements of strategy.
Dimensions o Organisation Design
Structures should match the requirements of
strategy and needs of organisation as it
grows from one stage to the next
Purpose of organisation design is to create
the right structure.
Structural Dimensions- describe the internal
characteristics of an organisation
Contextual Dimensions describe the
organisational setting that influences and
shapes the structural dimensions.
Organisational Design- Structural
Dimensions
Formalisation- amount of written documentation to
describe procedures, job descriptions, regulations and
policy manuals.
Specialisation- degree of sub division of tasks
Hierarchy of authority reporting relationships and span
of control
Centralisation extent of decision making by top
authority
Professionalism level of effective formal education and
training displayed and practiced
Personnel Ratios- deployment of people (administrative
ratio, clerical ratio, indirect to direct labour employees
ratios).
Organisation Design - Contetual
Dimensions
Environment
Goals and Strategy
Culture
Technology
Size
Steps required or Organisation
Deelopment
dentifying key activities
Grouping similar activities that need common skills
Choice of structure to accommodate different groups
of activities
Creation of department and divisions to which the
different groups of activities could be assigned
Establishing interrelationship among departments
and divisions for coordination and communication
Routine
Tasks
Vertical
Structure
Rigid
Culture
Formal
Systems
Competitive
Strategy
Horizontal
Structure
Empowered
Roles
Adaptive
Culture
Shared
nformation
Collaborative
Strategy
STABLE ENVRONNMENT
Mechanical design
Efficient Performance
TURBULENT
Natural System Design
Learning Organisation
CONTEMPORARY ORGANSATON DESGN
%raditional Design merging Design
One large firm
Vertical communication
Central top down decision
making
Vertical integration
ork quality based teams
Functional work teams
Minimum training
ndividual focussed
specialised job design
Small business having
cooperative characteristics
Horizontal communication
patterns
Decentralised decision
making
Outsourcing and virtual
organisations
Autonomous work teams
Cross functional work
teams
Extensive training
Value chain team focussed
job design
Organisation Design lor usiness
Strategies Cost s Dierentiation
Efficiency orientation
Strong central authority
Tight cost controls
Detailed control reports
SOPs
Efficient procurement
Close supervision
Routine tasks
Limited or no employee
empowerment
Learning orientation
Flexible loosely knit
organisation
Stress on horizontal
coordination than vertical
control for product
development
Strong R&D and marketing
capability
Creativity and innovation
encouraged
Rewards for risk taking
Broad guidelines for
performance of duties
Liberal employee
empowerment.
OD or Corporate Strategies
Concentration- no change but added
emphasis on marketing for marketing
penetration and development/R&D for
product development
ntegration- Horizontal (greater emphasis on
OD and structure to accommodate adjacent
business units) and vertical (extend the
value chain forward and backward and
extend structure accordingly).
OD or Corporate Strategies
Diversification mplement through
multidivisional and SBU structures.
Depending on if related or unrelated,
Corproate headquarters may retain some
functions and decentralise others
Related would create requirement for
retaining linkages among functions and
departments within organisations to maintain
synergies for economies of scope.
Unrelated through multi division structure
OD Structures or Internationalisation
Four types create own requirements for for
OD and change
Global strategy global product structure
nternational Strategy international division
structure as part of hybrid structure
Multidomestic strategy Global geographic
structure
Transnational strategy Global matrix
Structure
Global Strategy
Global Product
Structure
Transnational
Strategy
Global Matrix
structure
nternational
Strategy
nternational
Division Structure
Multi Domestic
Strategy
Global Geographic
Structure
Pressures for Global Responsiveness
Pressures
For Cost
Reduction
Structures for nternationalisation Strategies
OD Structures or Cooperatiie and
etwork Structures
Cooperative Network structure within and
network structure outside for creating and
maintaining interorganisational relationships
Region A
Structure
Project
M group
Structure
Function X
Structure
Region B
Structure
Project Group
N Structure
Function
Y structure
Corp
Headquarters
Structures or Digitalisation Strategies
Flexible organisation structure,
Small decentralised organisation
mproved coordination
Processes may be redesigned
Greater interorganisational relationships
Organisational Change
Structural change Modification in structural
relationships of reporting/ changes in depts. etc
Accompanied by behavioural Change to absorb
impact of organisational changes
All organisations make changes in their strategy,
structure and administrative procedures from time to
time.
Change response now moved from increasing
rigid vertical structure to more flexible horizontal
structures by empowering employees, shared
information and adaptive culture
Changes in Organisation Structure Design
Restructuring/Reorganisation changing
organisation structure in line with environmental
changes and strategies
Reengineering (business process reengineering)
fundamental rethinking and radical redesign of
business process to improve cost quality and speed
Delayering or flatter structures- reducing the number
of layers in the organisational hierarchy
Network structures
nterorganisational relationships
Virtual Organisations
Structure or usiness leel Strategies
Cost Leadership Efficiency approach
Differentiation learning approach
Focus - similar but structure with different
emphasis
Linking Strategies and Structure
ntegration and Diversification Multi
divisional and SBU
nternationalisational Tailored for
requirement
Cooperative Strategies Network
Digitalisation based on impact on
organisation
Organisational System
Set of interacting elements devised to accomplish a
process.
heels that make an organisation move
Transformation process requires a variety of
management and production systems and sub
systems.
Organisation breaks objectives into tasks and tasks
are performed by groups delegated the
responsibility and discharge with coordination and
communication
Performance needs to be appraised and desirable
behaviour promoted.
System Processes
Defining major tasks to implement strategy
Grouping of tasks on skill required/value chain basis
Division of responsibility and delegation of authority
Coordination and divided responsibility
Design and administration of
1. nformation system
2. Appraisal system
3. Motivation System
4. Reward system
5. Development system
6. Planning system
Structural Implementation
Structural mechanisms are the hardware
Systems are the software of implementation
Need to look closely at
1. nformation to complete task and
coordination of activities with others
2. Control
3. Reward system.
Implementing Inormation systems
Policy Stance (strict or flexible)
Hardware configuration( mainframe,
microcomputers)
System (transaction processing system,DSS)
Generic
Strategies
Stability
(efficiency
Conc(mkt
/prod devp)
Growth
(ntegration,
Diversification,
nternationalisation)
Key Rigid Policy
Stance
(clearly
defined
resp.)
Flexible
policy
stance(learning
orientation,creativ
e response)
Dimensions Mainframe
computers
Micro
computers
Transaction
processing
system
Decision
Support
System
Computer nformation Systems and Strategies
Control
Process for ensuring that behaviours and
performance conform to an organisation's
standards ,including rules procedures and
goals
Ensures that implementation of strategy
takes place
Control Process
Establish standards
Measure actual performance
Evaluate actual vs Standard
Determine and apply corrective action
%ailoring Control to Strategy -actors
Need for control - structure type
Type of control preventive corrective,
formal or informal, direct or indirect, social or
individual
ntegrating formal and informal control
Control Systems
Stability/Cost leadership
1. Formal
2. Traditional
3. Cost control focus
4. Specific operating
goals and budget
5. Rigid budget controls
Diversification/ ntl
1. nformal
2. Open control
3. Long term controls
4. nteractive use of
budgets
5. nformal
communications
orderless Structures -Present oundaries
Horizontal Boundaries depts / functions
Vertical Boundaries ops/mgt, corporate and
division
Geographic Boundaries physical locations,
countries /regions.
External nterface boundaries customers
and company, suppliers, partners, regulators,
competitors
orderless Structures -
Outsourcing
Strategic alliances
Product team structures
Reengineering
Restructuring
Through culture and shared values
#eward System -
Designed to induce Strategically desired behaviour
Performance evaluation and feed back
Compensation salary bonus, stock options
,promotions and perks
Linked to control and motivation towards desirable
behaviour
age inflation and talent shortage due to growth
Parity for similar work or responsibility and to
differentiate between unequal grades of employees.
#eward System
High and differentiated compensation
Salary,ESOP, Bonus, promotions and perks
nnovative titles
Faster career progression
Training
Congenial work environment
More satisfying jobs
Overseas exposure
Opportunities to work on cutting edge technologies
Retention plans
Referral schemes
#eward and Strategy Implementation
Stability strategies improve efficiency and
have appraisal that use objective short term
criteria
Expansion - Broad based appraisal and long
range performance appraisal
Diversification /nternationalisation- Group
rewards and team performance criteria over
individual awards.Company wide incentives
for knowledge sharing

Nature of Economy Controlled


Protected
Regulated
Globalised
Liberalised
Privatised
Environmental
characteristics
Certain,stable and
predictable
Stability/controlled
growth
Unstable volatile
and bewildering
Strategic Continum Stability/Controlled
growth
Focused
expansion/ selective
divestment
Structural
Alternatives
Entrepreneurial
Functions
Divisional/SBU/Alter
nate and new forms
nformation
System
Efficiency
Orientation
Decisional-
orientation
Control System Formal direct
/mechanistic
nformal indirect
/organic
Reward System Efficiency based;
monetary.informal
,internal focused
Non
monetary,formal
External -focused
SYSTEM CHARACTERSTCS vs STRATEGC
CONTNUM AND STRUCTURAL ALTERNATVES
anaging
nformation ,control and reward (appraisal,
motivation, development) and planning systems and
processes are managed and are the core of any
structure
These play an important role in strategy
implementation .
Systems and structure have to change to meet the
requirements of strategy.
Structural changes also are accompanied by
behavioural changes that affect strategy
impelementation
Organisational Process
A series of actions undertaken to achieve a
predetermined result
Classiication by Contingency %heories
Mechanistic
Organic