Professional Documents
Culture Documents
STRATEGIC MANAGEMENT
MODULE 1
1
INTRODUCTION & COURSE REVIEW
2
CONCEPT OF STRATEGY
&
STRATEGIC MANAGEMENT
STRATEGY
GREEK WORD STRATEGIA Science of guiding & Directing
COMPLEX PROCESSOF DETERMINING LONG TERM GOALS &
COURSE OF ACTIONS NEEDED TO BE CARRIED OUT, ALLOCATION
OF RESOURCES FOR CARRYING OUT THESE GOALS.
MOVING FROM WHERE YOU ARE TO WHERE YOU WANT TO BE IN
NEAR FUTURE THROUGH A SERIES OF DECISIONS AND ACTIONS.
PRE DETERMINED COURCE OF ACTION
FUTURE
Long term dynamics is its concern not day-to-day tasks
GROWTH
Direction, extent, pace and timing of growth
ENVIRONMENT
The fit between business and its environment
PORTFOLIOS OF BUSINESSES
Product-market scope and postures
STRATEGY
Strategy is its concern ; not the operational activities
INTEGRATION
Integration is its concern ; not a particular function
CREATING CORE COMPETENCIES / COMPETITIVE ADVANTAGE
Creating long term , sustainable organizational capability
CORPORATE STRATEGY
In one word corporate strategy is its concern
STRATEGIC MANAGEMENT
ESTABLISHMENT OF VISION & MISSION statements, Business Definition
STRAT. INTENTS
Adopting Business Model, Setting Goals & Objectives
FORMULATION of
STATEGIES
IMPLEMENTATION
OFSTRATEGIES
REVIEW,EVALUATION
Performing Strategic Evaluation, Exercising Strategic
CONTROL
Control and Reformulating Strategies
STRATEGIC MANAGEMENT
ENVIRONMENT
SCANNING
EXTERNAL
SOCIETAL
TASK
ENVIRONMETAL
INTERNAL
STRENGTS
WEAKNESSES
structure
Culture ( Beliefs,
xpectations,Values )
Resourses, Skills,
STRATEGY
FORMATION
STRATEGY
IMPLEMENTATION
EVALUATION
& CONTROL
MISSION
(Reason for existence)
OBJECTIVES
(What results to
accomplish & by
when )
STRATEGIES
(Plan to achieve
Mission&Objectives)
POLICIES
(Broad guidelines
for decision
PROGRMS
Activities needed
To accomplish plans
Making)
BUDGETS
Cost of
programs
ompetencies,Knowledge
PROCEDURE
Sequence of
steps needed
to do the job
FEEDBACK / LEARNING
PERFORMANCE
Actual results
NATURE OF
INTERNATIONAL STRATEGIC MANAGEMENT
4
LEVELS OF STRATEGY
&
EVOLUTION
OF
STRATEGIC MANAGEMENT
HIERARCHY OF STRATEGY
CORPORATE STRATEGY
BUSINESS STRATEGY
FUNCTIONAL
STRATEGY
COMPETITIVE STRATEGY
OPERATIONAL
PURPOSE OR MISSION
SHAREHOLDER VALUE ?
STAKEHOLDER INTEREST?
ASPIRATIONAL ?
ATTAIN SUSTAINABLE
COMPETITIVE ADVANTAGE
BY:
FUNCTIONAL
LEVELSTRATEGY
HR,FINANCE,PRODUCTN
MARKETING,QUALITY
Etc.
MEANS :
. GOOD PARENTING
. SELECT PORTFOLIO
. GUARD REPUTATION
. LEVERAGING RESOURSES
. DEVELOPING CAPABILITIES
AND
. COMPETING ON COST,OR
DIFFERENTIATING OR
OCCUPYING A NICHE
STRATEGIC MANAGEMENT
PROCESS
IV
INTERNAL
ANALYSIS
.STENGTHS
.WEAKNESSES
I
IORG.
. MISSION
. OBJECTIVES
.STRATEGIES
. POLICIES
II
ORG.
CURRENT
PERFORM
- ANCE.
III
REVIEW
BOARD OF
DIRECTORS
&
TOP. MGMT
V
SELECTION
OF
STRATEGIC
FACTORS
IV
EXT. ENV.
ANALYSIS
. OPP.
. THREATS
VI
REVIEW
REDEFINE
. MISSION
.OBJECTIVES
VII
GENERATION
&
EVALUATION
OF
STRATEGIC
ALTERNATIVES
VIII
IMPLEMENT
BEST
ALTERNATIVE
REWORK AS
NEEDED
IX
MONITORING
7
A CORPORATE VALUE CHAIN
FIRM INFRASTRUCTURE
( Gen.Mgmt,Accounting,Finance, Plg)
SUPPORT
ACTIVITIES
TECHNOLOGY DEVELOPMENT
PROFIT
MARGIN
PROCUREMENT
OPERATIONS
( Machining,
( Assembly,
Testing )
OUTBOUND
LOGISTICS
( Distribution )
PRIMARY ACTIVITIES
MARKETING
& SALES
( Advt. Prom
- otion )
SERVICES
( Installation,
Repair )
PEST FACTORS
POLITICAL
ECONOMIC
TECHNOLOGICAL
SOCIAL
PESTLE MATRIX
POLITICAL
CURRENT/FUTURE LEGISLATION
REGULATORY BODIES
GOVT. POLICIES
GOVT. TERM & CHANGE
SOCIAL
ECONOMIC
ECONOMY SITUATION & TRENDS
TAXATION
INTEREST & EXCHANGE RATES
MARKET & TRADE CYCLE
TECHNOLOGICAL
LIFESTYLE TRENDS
TECHNOLOGY ACCESS,LICENSING,PATENTS
DEMOGAPHICS
COMPANY ATTITUDES & OPINIONS
BRAND,COMPANY ,TECHNOLOGYIMAGE
CONSUMER BUYING PATTERNS
ETHNIC/RELIGIOUS FACTORS
MATURITY OF TECHNOLOGY
REPLACEMENT TECHNOLOGY / SOLUTIONS
INNOVATION POTENTIAL
MANUFACTURING MATURITY & CAPACITY
LEGAL
ENVIRONMENTAL
INTERNATIONAL LAW
ENVIRONMENTAL IMPACT
EMPLOYMENT LAW
COMPETITIOM LAW
HEALTH & SAFETY LAW
REGIONAL LEGISLATION
ENVIRONMENTAL LEGISLATION
ENERGY CONSUMPTION
WASTE DISPOSAL
A SWOT CHECKLIST
INTERNAL STRENGTHS:
MANY PRODUCT LINES?
BROAD MARKET COVERAGE?
MANUFACTURING COMPETENCE?
GOOD MARKETING SKILLS?
GOOD INVENTORY MANAGEMENT?
R&D?
INFORMATION SYSTEM?
GOOD HUMAN RESOURCES?
BRAND EQUITY?
COST ADVANTAGE?
APPROPRIATE ORG. STRUCTURE?
APPROPRIATE CONTROL SYSTEMS?
ABILITY TO MANAGE STRAT. CHANGE
Etc
INTERNAL WEAKNESSES:
NARROW PRODUCT LINES?
RISING MANUFACTURING COST?
POOR MARKETING PLAN?
POOR MATERIAL MANAGEMENT?
INADEQUATE HUMAN RESOURCES
LOSS OF BRAND NAME?LACK OF
CORPORATE DIRECTION?
LACK OF CORPORATE CONTROL
POOR FINANCIAL MANAGEMENT
INAPPROPRIATE ORG. STRUCTURE
& CONTROL SYSTEMS
HIGH CONFLICTS, POLITICS? Etc
MACKENZIES 7S MODEL
STRUCTURE
STRATEGY
SYSTEMS
SHARED
VISION
STYLE
SKILLS
STAFF
CONCEPT OF STRETCH,LEVERAGE
& FIT
STRETCH : Misfit between Resources & Aspirations
LEVERAGE : Refers to concentrating, accumulating,
conserving. contemplating and utilizing precious &
scarce resources in such a manner that these are
stretched to meet the aspirations of a company.
FIT : Positioning the firm by matching its organizational
resources to its environment.
VISION
Future aspirations that lead to an inspiration
Basic & at the top of hierarchy of strategic intents
Aspirations expressed as strategic intent should lead to
an end.
This is what a person or an organization would
ultimately like to attain in the near future.
A vision is generally more dreamt than it is articulated
By its nature it may be as good as a dream, yet it is a
powerful motivator to action.
MISSION
INTERNATIONAL STRATEGIES
PRESSURES
FOR
COST REDUCTION
GLOBAL
STRATEGY
( OFFERING STANDARDISED
PRODUCTS / SERVICES)
TRANSNATIONAL
STRATEGY
(LOCATED IN A
DEVELOPED COUNTRY)
INTERNATIONAL
STRATEGY
MULTIDOMESTIC
STRATEGY
(UNDER DEVELOPED
COUNTRIES WHERE
PRODUCT/SERVICES
NOT AVAILABLE )
( SUITING TO NATIONAL
CONDITIONS )
COST
GLOBALISATION DRIVERS
GLOBAL SCALE ECONOMIES CONTINUING PUSH
FOR ECONOMIES OF SCALE
GOVRNMENT
GLOBALISATION DRIVERS
COMPETITIVE
GLOBALISATION DRIVERS
HIGH EXPORTS AND IMPORTS CONTINUOUS INCREASE
IN THE LEVEL OF WORLD TRADE
OTHER DRIVERS
REVOLUTION IN INFORMATION &
COMMUNICAION
( PERSONAL COMPUTORS, INTERNET& INTRANET , FSCIMILE
MACHINES )
PRODUCT / SERVICE
( EXTENT TO WHICH A WORLDWIDE BUSINESS OFFERS THE SAME OR DIFFERENT
PRODUCTS IN DIFFERENT COUNTRIES
MARKETING
( EXTENT TO WHICH WORLDWIDE BUSINESS USES SAME BRAND
NAMES,ADVERTISING,AND OTHER MARKETING ELEMENTS IN DIFFERENT COUNTRIES )
COMPETITIVE MOVES
( EXTENT OF COMPETITIVE MOVES IN DIFFERENT COUNTRIES )
I
N
C
R
E
A
S
I
N
G
I
N
T
E
R
N
A
T
I
O
N
A
L
I
S
A
T
I
O
N
TYPE OF CUSTOMERS
BUY IN
FOREIGN
MARKRTS
FROM
FOREIGN
SUPPLIER
FOREIGN
CUSTOMER
GLOBAL CUSTOMER
BUY IN
DOMESTIC
MARKET
FROM
FOREIGN
SUPPLIER
BUY IN
DOMESTIC
MARKETS
FROM
DOMESTIC
SUPPLIER
INTERNATIO
NAL
CUSTOMER
CONTROLL
ED
LOCAL
CUSTOMER
FREE
LOCAL
CUSTOMER
NO HQ
INVOLVEME
NT
HQ RECOMMENDS
STANDARDS?
PRODUCTS
HQ MANDATES
STANDARDS/
PRODUCTS
HQ DOES THE
PURCHASING
HI
GROWTH
POTENTIAL
OF
BUSINESS
IN
COUNTRY
LO
DOG
COUNTRIES
LO
CASH COW
COUNTRIES
HI
GLOBALISATION
GLOBALISATION
BENEFITS:
Cost benefits: Economies of scale due to standardization & Logistics
management
Timing benefits: Coordinated approach in product launching and
implementation strategies
Learning benefits: Coordinated transfer of information, best practices and
people across subsidiaries.
Arbitrage benefits: using resources in one country for the benefit
of another country.
SOCIAL BENEFITS
Creates overall wealth for all nations as specialization increases trade.
Reduces inflation due to cost efficiencies
Benefits customers: quality products at competitive price.
Better allocation of financial ,material and Human resources
Reduces corruption due to free market trade.
OTHER BENEFITS:
Leads to economic integration and globalized economy.
Transition from multinational to global competitiveness
PORTERS MODEL
BARGAINING
POWER
POTENTIAL ENTRANTS
Economies of scale
Absolute cost
advantage
Switching cost
Access to distribution
Govt. policy
THREAT OF NEW ENTRANTS
SUPPLIERS
Supp.concentration
No. of buyers
Switching cost
Substitute raw mat.
Threat of forward
integration
BARGAINING
POWER OF COMPETITIVE
SUPPLIERS
OTHER
STAKEHOLDERS
(RELATIVE POWER OF
UNIONS, GOVT)
BARGAINING
POWER OF
RIVALARY
( INDUSTRY
SUPPLIERS
COMPETITORS )
SUBSTITUTES
Functional similarity
Price/Performance
trend
Product identity
BUYERS
Buyers
concentration
No of suppliers
Switching cost
Substitute products
Threat of backward
Integration
QUADRANT 2
TURNAROUND
STRATEGY
QUADERANT 1
AGGRESSIVE
STRATEGY
QUADERANT 4 QUADERANT 3
DEFENSIVE
STRATEGY
DIVERSIFICATION
STRATEGY
THREATS
WEAKNESSES
STREGTHS
TOWs MATRIX
SAP
ETOP
1
2
3
4
1
2
3
4
1
2
3
4
OW
Turnaround Strategies
1
2
3
4
S
OS
Aggressive Strategies
Take advantage of
(Use strengths to take
(Opportunities by overcoming
advantage Of opportunities)
Weaknesses)
TW
Defensive Strategies
( To minimize weaknesses
& avoid Threats )
TS
Diversification strategies
(Consider corporations
strengths
To avoid threats)
HIGH
20
18
16
STARS
Market
Growth 14
rate
12
QUESTION MARKS
10
8
6
CASH COWS
DOGS
4
2
0
LOW
10
1.5
1
6
4
2
Relative market share
0.8
0.5
0.1
GENERIC STRATEGIES
Corporate strategies lay down the framework in which business strategies operate.
COST LEADERSHIP
Vigorous cost reduction programmers and make all possible attempts to achieve the lowest cost.
DIFFERENTIATION
Firms seeking to adopt Focus Strategy has to locate a niche in the market where
Cost Leaders and Differentiators are not operating