Strategic Management-1

Dr. Kamal Kishore Sharma

+91 79 255 58418
kk.sharma@aiim.ac.in
kksharma1@gmail.com

AIIM PGDIM program

III Term, Session 1, 2
6 February 2019
Topics
Understanding Strategy, Changing Competitive landscape & Strategy Drivers

The Vision, Mission, Objectives and Goals

External Environment – Socio-Economic-Political Environment & Industry

Evolution
External Environment – Industry Competition, Rivalry & Dynamics

Internal Environment- Business Scope, Value Chain & Costs

Internal Environment- Activities, & Capabilities

Strategies for Competitive Advantage – Cost, Differentiation & Focus

Generic Strategies at Business Level- Competitive Advantage & Competitive

Rivalry
Strategy Development models & Portfolio Approach to Corporate Strategy

Developing a Strategy Blueprint & Dovetailing it to market

Sources of Sustaining Competitive advantage & Value based strategy

 Course progress, learning & evaluation

• Class Participation & Inquisitiveness – 10%

• Assignments/Project Work/ Case Reports/Pre-
Class Submissions - 10%
• Presentations & discussions on cases – 10%
• Quiz – 20%
• Mid-term exam/Quiz – 20%
• End-term Exam – 30%
What is a business?
What is the objective of
business?
The Science & Art of
Management
Identify some Good & Great
Companies

Why are they Good & Great?

 Research Evidence
Why some companies are Good & Great
• Have a clear vision & mission & never lose momentum
• Highly effective Leaders at multiple levels
• Do the basics right , don’t spread resources thin and
utilise them better with a proper integrated strategy
• People first, strategy second
– Right people at the right place,
– Succession plan, don’t make yourself indispensible
• Face the most brutal facts of current reality but have faith that eventually
you will prevail
• Adopt enabling technologies, at times management fails to keep pace with
technology (Steel)
• Inspired standards – no place for mediocrity
• Distribute credits liberally
• Are disciplined ….disciplined people -> no need of hierarchy, disciplined
thoughts -> no need of bureaucracy, disciplined action -> no need of
excessive controls
• Work to build, create and contribute & not for money, fame power,
adulation
 Concepts to begin with
• Vision, mission & clarity in the organisation
purpose?
• Goals, Policy, Objectives, Tactics
• Stakeholders & their perspectives
• Value of a good/service & Willingness to Pay
• Types of Industries, Forms & differences in
Goals with respect to type
• Attractiveness of an industry - Industry
profitability
• Strategy Drivers
 Concepts to begin with
• Competitive Advantage
– When a firm implements a strategy that its
competitors are unable to duplicate or find too
costly to try to imitate.
– LIFE ????
• Strategic position v/s operational
effectiveness – Cost/Differentiation/Both
• Economies of scale
• Barriers to market entry
• Product differentiation
 Concepts to begin with

• Risk
– An investor’s uncertainty about the economic
gains or losses that will result from a particular
investment.
• Average & Above-average Returns
– Returns equal to or in excess of those an
investor expects to earn from other investments
with a similar amount of risk.
 The epic story
• The Hare & the Tortoise
Why do you need a strategy?

To ensure making money?

How is money made?

Role of Opportunity?
 Why do you need a Strategy?
Strategy Approach
• Known environment
• Stable environment
• Building on existing
competencies, capabilities,
products, markets
• Need consolidation
• Need stability and
certainty
• Lack capacity for flexibility,
corporate venturing, and
speed
Opportunity Approach
• Unknown environment
• Unstable environment
• Building on new
competences, capabilities,
products, markets
• Need rapid growth
• Need change, accept
uncertainty
• Established capacity for
flexibility, corporate
venturing, and speed
 Are these strategies?
“Our strategy is to beat the competition on costs and reach.”

“We’re pursuing a global strategy.”

“The company’s strategy is to integrate a set of regional

acquisitions.”

“Our strategy is to provide unrivaled customer service.”

“Our strategy is to move from defense to industrial applications.”

Or they are current priorities?

• Michael Porter
The Competitive Strategy Process
 Why do you need a strategy?
• Make pieces look a whole - need for
coordination and unity of purpose
• To convey a sense of direction, discovery,
and opportunity that can be communicated
as worthwhile to all employees.
• To meet the dynamic nature of environment
& competition
• Sustainability – survival in the long run by
taking advantage of existing and impending
opportunities
All industries are influenced by the
environment - Key dimensions, how
is it evolving, opportunities, threats
 Changing Competitive Landscape
• New Government policies (Excise, Tax-holidays, SEZs,
Environment)
• Economic growth, liberalisation, entrepreneurship &
competition
• Technologies (product as well as the way the product is
delivered – internet, store-formats)
• New growth industries (Services, Telecom, Education, Agri
processing, Bio-tech etc.
• Competition
• Product profiles across price and value segments
• People skills, migration
• New management tools (JIT, Six sigma, Zero defect…)
 Do you believe…
All industries influenced by the
environment - Key dimensions, how
is it evolving, opportunities, threats

Every firm has a competitive strategy-

implicit or explicit
 What Strategy means
• the way in which a company orients itself towards the
market in which it operates and towards the other
companies in the marketplace against which it competes

• a plan an organization formulates to gain a sustainable

competitive advantage

• that adds value for the targeted customers over the long
run by consistently meeting their needs better than the
competition does

• a plan that does not focus so much on today's problems,

which are normally dealt with by company visions and
missions, but rather on tomorrow's opportunities
 Definition of Strategy
An integrated and coordinated
set of commitments and
actions designed to exploit
core competencies and gain a
competitive advantage.
 Strategy… as a process
Strategy Development - developing a set of answers to five
interlinked questions
1. What are our broad aspirations for our organization &
the concrete goals against which we can measure our
progress?
2. Across the potential field available to us, where will we
choose to play and not play?
3. In our chosen place to play, how will we choose to win
against the competitors there?
4. What capabilities are necessary to build and maintain to
win in our chosen manner?
5. What management systems are necessary to operate to
build and maintain the key capabilities?

• The trick is to have five answers that are consistent with one
another and actually reinforce one another.
The Competitive Strategy Process
Two generic models to run
successful businesses

Input- Output model

Resource-Based Model
(Core Competency)
Formulation of a Strategy - process
• What is business doing now
– Identification of current strategy
– Implied assumtions (SWOT, competition & industry trends)

• The Environment
– Industry analysis (key factors of success)
– Competitor analysis (present & future, possible future moves)
– Societal analysis (Policy changes etc.)
– Strengths and Weaknesses (relative to present and future competitors

• So what should the business do

– Tests of assumption and strategy (status of current strategy)
– Available strategic alternatives (is this your current strategy?)
– Strategic choice and implementation

• Requires a great effort and a penetrating analysis

 Why do you need a Vision & Mission
• Public face
• To fire/energise the employees
• For everybody to know where the
organization is going and what it is trying to
achieve in the future
 Issues in Strategy
1.Develop Strategy as a
Product /Process ?
2.Strategy development
3.Strategy Implementation
Strategy Drivers/ Levers
 Strategy Drivers/ Levers
• Internal (e.g. conserving liquidity - through reduced spend
management and sharp reduction in working capital levels; Cost
leadership- improvement in the productivity levels and reduction in
overheads; capital expenditure re-prioritised)
• External (e.g. long term capital at competitive rates)

At Tata Steel
• Making the European operations competitive
• Quick completion of the expansion plans in India.
• Investment in raw material assets to provide better raw material
security especially to European operations.
• Vigorous pursuit of continuous improvement across operations.
 Resources, Capabilities and Core Competencies

Discovering Core
Core Competencies Competencies
Core • Activities that a firm
Competencies performs especially
well compared to Four Criteria of
Capabilities competitors Sustainable
• Activities through Advantage
which the firm adds
Resources
•Tangible unique value to its
•Intangible goods or services • Valuable
over long time period • Rare
• Costly to imitate
• Nonsubstitutable
 Resources
• Types of Resources
– Tangible resources
• Financial resources
• Physical resources (capital equipment)
• Technological resources
• Organizational resources
– Intangible resources
• Human resources (Skills of employees, talented
managers)
• Innovation resources
• Reputation resources (Brand names)
 Classical approach
• Ends (Goals/Objectives/Mission etc.)
• Means (Policies/tactics etc.)

• The wheel of competitive strategy the

importance of the hub(goals) and the spokes
(policies), need of the spokes to be connected
to each other
– Policies need to be broken down into operational
goals
 Classical approach
• 4 key factors in Context
– Internal factors
• Company strengths and weaknesses (assets and relative
skills, financials, technical competence, brand image etc.)
• Personal values of the Key Implementors
– External factors
• Industry Opportunities & Threats (Economical as well as
Technical)
• Broader Societal Expectations (Govt Policy, social concerns,
evolving mores etc.)
• Tata Steel
The Three Stakeholder Groups
 Vision, Mission and Strategy
• Vision (Combination of Core ideology & Visionary goals)
– core & unchanging ideals that remain relatively steady and
provide guidance in the process of strategic decision-making
– three components:
• Core values to which the firm is committed
• Core purpose of the firm
• Visionary goals the firm will pursue to fulfill its mission
– core ideology remains relatively constant- are independent of
industry structure and the product life cycle

• Mission (statement)
– Expression of the business vision
– Communicates the firm's core ideology and visionary goals
– phrasing may change with the times, but the underlying
ideology remains constant
Goals, Policy, Objectives, Tactics, Paradigm
• While Goals are general intentions with broad outcomes that help to define
specific objectives (eg. becoming the leading greeting cards player in India,
Objectives are precise statements relating to specific outcomes that can be
validated (eg. to sell 10,000 greeting cards in Year One, 25,000 Year Two and
40,000 Year Three- can be substantiated by reviewing your company's sales
reports), Short term plans (Budget, 5-year plan)
• Operational planning - the result expected by the end of the budget (or other
designated short term cycle)
• Policy refers to a definite course of action adopted by an individual, group, or
organization in an effort to promote the best practice particular to desired
results/objectives,
– some sort of a prescription “what’ s ok, what’s not, what should be etc.
• Tactics involves the detail, the procedure, and the order of how to achieve the
desired results particular to the strategy
• Paradigm: the whole conceptual framework embracing our most deeply held,
unconscious assumptions and values. It encompasses the things we take for
granted in any situation. It therefore determines our expectations, frames the
questions we ask, and structures the way we do things
– paradigm becomes so embedded that new ideas that do not fit the paradigm, are not
welcome, and are treated as anomalies
– only when anomalies mount up to cause major disruption, that changes occur and a paradigm
shift take place
Criteria for Resources and Capabilities That Become
Core Competencies

Valuable
Valuable Rare
Rare

Core
Core
Competencies
Competencies

Nonsubstitutable
Nonsubstitutable Costly
Costlyto
toImitate
Imitate
 Tata Steel
• Innovator- technology & human systems
• The culture … of endurance & commitment
• Raw materials security
 Vision & Missions at Tata Steel
We aspire to be the global steel industry benchmark for Value Creation
and Corporate Citizenship
We make the difference through:
•Our people, by fostering team work, nurturing talent, enhancing leadership capability and acting with
pace, pride and passion.
•Our offer, by becoming the supplier of choice, delivering premium products and services, and creating
value with our customers.
•Our innovative approach, by developing leading edge solutions in technology, processes and products.
•Our conduct, by providing a safe working place, respecting the environment, caring for our
communities and demonstrating high ethical standards.

Mission statement of Tata Steel

•Achieve sustainable, profitable growth in steel and related businesses.
•Create differential value for our customers through innovative offerings.
•Continuous improvement of business processes and technologies.
•Foster partnership with key stake holders.
•Enhance employees' competencies to create a high performing and innovative organization. Be a
responsible corporate citizen and enhance the quality of life of employees and key community.

Policies - Quality Policy, CSR Policy, Environmental, Occupational Health & Safety Policy, Research
Policy

Core Values - a value – driven organization. Five core values - Integrity, Respect for individuals,
Excellence, Unity, Responsibility