MEANS TO ACHIEVE

STRATEGIES
Lecture 3

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  Cooperation among Competitors
Fierce competitors for decades, Apple and IBM recently
Means for formed an alliance to cooperate in developing apps and
Achieving selling iPhones and iPads. For Apple, the alliance allows
the company to expand the reach of its products into the
Strategies business world, whereas for IBM the alliance allows the
firm to move more of its business software onto mobile
devices.

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  Joint Venture and Partnering

 Joint venture is a popular strategy that occurs

Cont. when two or more companies form a temporary
partnership or consortium for the purpose of
capitalizing on some opportunity. Often, the two
or more sponsoring firms form a separate
organization and have shared equity ownership
in the new entity.

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  The Michael Porter's Five Generic Strategies has a focus
on creating strategies that helps to gain competitive
Michael advantages from three different bases: 
Porter's Five  Cost leadership,
Generic  Differentiation and
Strategie  Focus.

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  Types 1:Low Cost-strategy
Five division
 Types 2:Best value -strategy
of Generic
Strategies  Types 3:Differentiation
 Types 4:Focus-low cost
 Types 5:Focus -Best value 

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 Conditions for each Strategy

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How each Type
Operate

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 Cost Leadership
 In cost leadership, a firm sets out to become the low
cost producer in its industry. The sources of cost
advantage are varied and depend on the structure of
the industry. They may include the pursuit of
economies of scale, proprietary technology,
preferential access to raw materials and other factors
.

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  A low cost producer must find and
exploit all sources of cost advantage.
if a firm can achieve and sustain
Cont. overall cost leadership, then it will be
an above average performer in its
industry, provided it can command
prices at or near the industry
average. 

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  In a differentiation strategy a firm seeks to be
unique in its industry along some dimensions
that are widely valued by buyers. It selects
one or more attributes that many buyers in an
Differentiation industry perceive as important, and uniquely
positions itself to meet those needs. It is
rewarded for its uniqueness with a premium
price.

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  The generic strategy of focus rests on
the choice of a narrow competitive
scope within an industry. The focuser
Focus selects a segment or group of
segments in the industry and tailors its
strategy to serving them to the
exclusion of others.

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  (a) In cost focus a firm seeks a cost
advantage in its target segment, while in 
   (b) differentiation focus a firm seeks
The focus differentiation in its target segment. Both
strategy has variants of the focus strategy rest on
two variants. differences between a focuser's target
segment and other segments in the
industry.

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  The target segments must either have
buyers with unusual needs or else the
production and delivery system that best
serves the target segment must differ from
Cont. that of other industry segments. Cost
focus exploits differences in cost
behaviour in some segments, while
differentiation focus exploits the special
needs of buyers in certain segments

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  Merger/Acquisition
Merger and acquisition are two commonly used
ways to pursue strategies. A merger occurs when
two organizations of about equal size unite to
Cont. form one enterprise. An acquisition occurs when a
large organization purchases (acquires) a smaller
firm or vice versa. If a merger or acquisition is
not desired by both parties, it is called a hostile
takeover, as opposed to a friendly merger.

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  Private-Equity Acquisitions
Private equity (PE) firms are acquiring and
taking private a wide variety of companies
almost daily in the business world. The intent of
Cont.
virtually all PE acquisitions is to buy firms at a
low price and sell them later at a high price,
arguably just good business.

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  First Mover Advantages
First mover advantages refer to the benefits a
firm may achieve by entering a new market or
developing a new product or service prior to
Tactics to rival firms. Some advantages of being a first
Facilitate mover include securing access to rare resources,
gaining new knowledge of key factors and
issues, and carving out market share and a
position that is easy to defend and costly for
rival firms to overtake.

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  Outsourcing
Outsourcing involves companies hiring other
companies to take over various parts of their
functional operations, such as human
resources, information systems, payroll,
Cont. accounting, customer service, and even
marketing.
 Reshoring
Reshoring is the new term that refers to U.S.
companies planning to move some of their
manufacturing back to the United States.
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  Non-profit organizations embrace
strategic planning just as much as for-
Strategic profit firms, and perhaps even more,
Management in because equity capital is not an alternative
Nonprofit, source of financing. Nonprofits also have
Governmental, competitors that want to put them out of
and Small Firms business
 Compared to for-profit firms, nonprofit
and governmental organizations may be
totally dependent on outside financing.

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  Nonprofits and governmental
organizations owe it to their
constituencies to garner and use
Cont.
monies wisely; that requires excellent
strategy formulation, implementation,
and evaluation.

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  The world of higher education is rapidly moving
to online courses and degrees. The American
Council on Education, an association for higher
education presidents, is considering allowing
(a) free, online courses to be eligible for credit
toward a degree and eligible for transfer credit.
Educational Educational institutions are more frequently
Institutions using strategic-management techniques and
concepts. Online degrees are a threat to
traditional colleges and universities. All
institutions of higher learning need an excellent
strategic plan to survive and prosper.

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  Declining occupancy rates, deregulation, and
accelerating growth of health maintenance
organizations, preferred provider organizations,
urgent care centers, outpatient surgery centers,
(b) Medical diagnostic centers, specialized clinics, and group
practices are other major threats facing hospitals
Organizations today. Many private and state-supported medical
institutions are in financial trouble as a result of
traditionally taking a reactive rather than a
proactive approach in dealing with their
industry.

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  In the central and local government, and
(c) department such as police, chambers of
commerce, forestry associations, and health
Government departments, are responsible for formulating,
al Agencies implementing, and evaluating strategies that use
and taxpayers’ shillings in the most cost-effective
way to provide services and programs.
Departments  Strategists in governmental organizations
operate with less strategic autonomy than their
counterparts in private firms.

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  The strategic-management process is just
as vital for small companies as it is for
large firms. From their inception, all
organizations have a strategy, even if the
(d)Small strategy just evolves from day-to-day
Firms operations. Even if conducted informally
or by a single owner or entrepreneur, the
strategic-management process can
significantly enhance small firms’ growth
and prosperity.

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The end  End of Lecture 3

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  After studying this lecture you will be
able to:
Defining  Discuss various aspects of strategy
Vision, formulation
Mission and  Explain the relevance business vision
Goals  Define mission
 State the importance, characteristics and
components of mission
 Evaluate mission statements

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  Strategy formulation is the process of
determining appropriate courses of
action for achieving organisational
Introduction objectives and thereby accomplishing
organisational purpose.

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  Reviewing the current key objectives and
strategies of the organisation, which
usually would have been identified and
evaluated as part of the diagnosis
There are four  Identifying a rich range of strategic
primary steps alternatives to address the three levels of
in this phase strategy formulation outlined 3.2
including but not limited to dealing with
the critical issues

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  Doing a balanced evaluation of
advantages and disadvantages of the
alternatives relative to their feasibility
plus expected effects on the issues and
Cont. contributions to the success of the
organisation
 Deciding on the alternatives that should
be implemented or recommended.

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  1. Corporate Level Strategy
Aspects of  2. Competitive Strategy
Strategy
Formulation  3. Functional Strategy

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  In this aspect of strategy, we are
concerned with broad decisions about
total organisation's scope and direction.
Corporate
Level Strategy  Basically, we consider what changes
should be made in our growth objective
and strategy for achieving it, the lines of
business we are in, and how these lines of
business fit together.

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  Growth or directional strategy (what should be
our growth objective, ranging from
retrenchment through stability to varying
degrees of growth - and how do we accomplish
this)
 (b) Portfolio strategy (what should be our
portfolio of lines of business, which implicitly
Components of requires reconsidering how much concentration
Corporate Level or diversification we should have), and
Strategy  (c) Parenting strategy (how we allocate
resources and manage capabilities and activities
across the portfolio – where do we put special
emphasis, and how much do we integrate our
various lines of business).

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  It is quite often called as Business Level
Strategy. This involves deciding how the
company will compete within each Line
of Business (LOB) or Strategic Business
Competitive Unit (SBU).
Strategy:  In this second aspect of a company's
strategy, the focus is on how to compete
successfully in each of the lines of
business the company has chosen to
engage in.

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  These more localized and shorter-horizon
strategies deal with how each functional
area and unit will carry out its functional
activities to be effective and maximize
  resource productivity .
Functional  Three basic characteristics distinguish
Strategy: functional strategies from corporate level
and business level strategies: shorter time
horizon, greater specificity, and primary
involvement of operating managers.

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Vision and
Mission

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  To make sure all employees/managers
understand the firm’s purpose or reason for
being.
 To provide a basis for prioritization of key
Importance of
internal and external factors utilized to
vision and formulate feasible strategies. To provide a
Mission basis for the allocation of resources.
 To provide a basis for organizing work,
departments, activities, and segments
around a common purpose.

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  Vision can be defined as “a mental
image of a possible and desirable
future state of the organisation”. It is
“a vividly descriptive image of what
Vision
a company wants to become in
future”. Vision represents top
management’s aspirations about the
company’s direction and focus.

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  A Coke within arm's reach of everyone on the
planet (Coca Cola)
 Encircle Caterpillar (Komatsu)
 Become the Premier Company in the World
Example of (Motorola)
Vision Statement  Put a man on the moon by the end of the decade
(John F. Kennedy, April 1961)
 Eliminate what annoys our bankers and
customers (Texas Commerce Bank)

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  It must be easily communicable:
Everybody should be able to
Characteristics understand it clearly.
of Vision
Statements  It must be graphic: It must paint a
picture of the kind of company the
management is trying to create.

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  It must be directional: It must say
something about the company’s journey
or destination.
 It must be feasible: It must be something
Cont. which the company can reasonably expect
to achieve in due course of time.
 It must be focused: It must be specific
enough to provide managers with
guidance in making decisions

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  A mission statement is an enduring statement of
purpose. A clear mission statement is essential
for effectively establishing objectives and
formulating strategies.
 A mission statement is the purpose or reason for
Mission the organisation’s existence. A well-conceived
mission statement defines the fundamental,
unique purpose that sets it apart from other
companies of its type and identifies the scope of
its operations in terms of products offered and
markets served.

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  Thompson defines mission as “The
essential purpose of the organisation
existence, and the nature of the business it
is in, and the customers it seeks to serve
Cont. and satisfy”.
 Hunger and Wheelen simply call the
mission as the “purpose or reason for the
organisation’s existence”.

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  Customers;Who are the firm’s customers?
 Products or services;What are the firm’s
major products or services?
 Markets;Geographically, where does the firm
Mission compete?
Components  Technology; Is the firm technologically
current?
 Survival, growth, and profitability;Is the firm
committed to growth and financial
soundness?

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  Philosophy;What are the basic beliefs,
values, aspirations, and ethical priorities of
the firm?
 Self-concept (distinctive competence);What
is the firm’s major competitive advantage?
Cont.
 Public image;Is the firm responsive to
social, community, and environmental
concerns?
 Employees;Are employees a valuable asset
of the firm?

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  Not lengthy: A mission statement should be
brief (<150 words)
 Clearly articulated: It should be easy to
Characteristic understand so that the values, purposes, and
goals of the organisation are clear to everybody
s of a Mission in the organisation and will be a guide to them.
Statement  Broad, but not too general: A mission statement
should achieve a fine balance between
specificity and generality.

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  Inspiring: A mission statement should
motivate readers to action. Employees
should find it worthwhile working for such
an organisation.
 It should arouse positive feelings and
Cont. emotions of both employees and outsiders
about the organisation.
 Reflect the firm’s worth: A mission
statement should generate the impression
that the firm is successful, has direction and
is worthy of support and investment.
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  Relevant: A mission statement should be
appropriate to the organisation in terms of
Cont. its history, culture and shared values.
 Current: A mission statement may become
obsolete after some time.

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  Unique: An organisation’s mission statement
should establish the individuality and
uniqueness of the company.
 Enduring: A mission statement should
Cont. continually guide and inspire the pursuit of
organisational goals. It may not be fully
achieved, but it should be challenging for
managers and employees of the organisation

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  Dynamic: A mission statement should be
dynamic in orientation allowing judgments
about the most promising growth directions
and the less promising ones.
 Basis for guidance: Mission statement should
Cont provide useful criteria for selecting a basis for
generating and screening strategic options.
 Customer orientation: A good mission
statement identifies the utility of a firm’s
products or services to its customers, and
attracts customers to the firm.

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  A declaration of social policy: A mission
statement should contain its philosophy
about social responsibility including its
obligations to the stakeholders and the
society at large.
Cont.  Values, beliefs and philosophy: The
mission statement should lay emphasis on
the values the firm stands for; company
philosophy, known as “company creed”,
generally accompanies or appears within
the mission statement.
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  Mission Statement of IBM
At IBM, we strive to lead in the invention,
development and manufacture of the
industry's most advanced information
Example of technologies, including computer systems,
Mission software, storage systems and
Statement microelectronics.
We translate these advanced technologies into
value for our customers through our
professional solutions, services and consulting
businesses worldwide.
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  Mission Statement of FedEx
"FedEx is committed to our People-
Service-Profit Philosophy. We will produce
outstanding financial returns by providing
Cont. totally reliable, competitively superior,
global, air-ground transportation of high-
priority goods and documents that require
rapid, time-certain delivery."

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