STRATEGIC MANAGEMENT

DEFINITION A UNIFIED COMPREHENSIVE and INTEGRATED PLAN The above relates to the strategic advantages of the firm to the challenges of the Environment.

ESSENTIAL ELEMENTS
Most important objectives to be achieved Most Significant policies guiding or limiting action and Major action sequences that are to accomplish the defined goals within the limits set.

CRITERIA EFFECTIVE STRATEGIES

CLEAR OBJECTIVES MAINTAINING THE INITIATIVE CONCENTRATION FLEXIBILITY CO-ORDINATED AND COMMITTED LEADERSHIP SURPRISE ( Speed, Secrecy and intellignece) SECURITY ( Develop resources required)

NEED FOR STRATEGY

GUIDE FOR NEW OPPORTUNITIES HIGH QUALITY PROJECT DECISIONS TO MEASURE A PARTICULAR OPPORTUNITY ASSURANCE ON FIRMS RESOURNCE ALLOCATION DEVELOP INTERNAL ABILITY SAVE TIME, MONEY AND EXECUTIVE TALENT ( E.G PAPER RECYCLE) To IDENTIFY, DEVELOP AND EXPLOIT POTENTIAL OPPORTUNITIES. TO UTILIZE THE DELAY PRINCIPLE THAT IS DELAY THE COMMITMENT UNTIL AN OPPORTUNITY IS ON HAND.

MANAGER CONSIDER THE KEY AREAS IN DEVELOPING A STRATEGY THE TYPE OF GOODS AND SERVICES MODE OF PRODUCING GOODS AND RENDERING SERVICES FIND WHO ARE WILL BE FIRMS CUSTOMER THE METHODS OF FINANCING THE VARIOUS OPERATION OF THE FIRM METHOD OF IMPLEMENTING THE STRTEGY.

STRATEGIC MANAGEMENT
DEFINITION SET OF DECISIONS AND ACTIONS RESULTING IN FORMULATION AND IMPLEMENTATION OF DESIGNED STRATEGIES TO ACHIEVE THE OBJECTIVES OF AN ORGANIZATION.

HIERARCHY OF STRATEGIC INTENT VISION

A DESCRIPTIVE IMAGE OF WHAT A COMPANY WANTS TO BE OR WANTS TO BE KNOWN FOR IN FUTURE. EXAMPLE : BHEL - A World Class innovative, competitive and Profitable engineering enterprise providing total business solution. MISSION MISSION REVEALS THE LONG TERM VISION OF AN ORGANIZATION IN TERMS OF WHAT IT WANTS TO BE, WHERE EXACTLY IT WANTS TO GO , AND WHOM IT WANTS TO GO, AND WHOM IT WANTS TO SERVE. EXAMPLE : ONGC - To stimulate, Continue and accelerate efforts to develop and maximize the contribution of the energy sector to the economy of the country.,

STRATEGIC PLANNING
NECESSITY FOR PLANNING OPERATE SURVIVE and PROGRESS in a highly dynamic environment where change is the rule, not the exception.

LEVELS OF STRTEGIES
CORPORATE OFFICE

SBU - 1

SBU - 2

SBU - 3

PRODUCTION

MARKETING

FINANCE

PERSONNEL

LEVELS OF STRATEGIES
CORPORATE LEVEL SP
Strategy at this level is typically developed by top management ( Board of Directors, CEO etc)

BUSINESS LEVEL SP
At this level are aimed at deciding the competitive advantage, market situations, allocation of resources and coordinating functional level

FUNCTIONAL LEVEL - SP
Process of determining policies and procedures for different functions of an enterprise.

DIMENSIONS OF STRATEGIC DECISIONS

TOP MANAGEMENT INVOLVEMENT ALLOCATION OF MORE RESOURCES EFFECT AN LONG TERM PROSPERITY OF THE FIRM FUTURE ORIENTED MULTI-FUNCTIONAL OR MULTI BUSINESS CONSEQUENCES FOCUS ON EXTERNAL GROUPS

ELEMENTS OF STRTEGIC MANAGEMENT PROCESS

DEFINING THE VISION OF THE COMPANY DEFINING THE MISSION OF THE COMPANY DETERMINING THE PURPOSE OR GOALS DEFINING THE OBJECTIVES ENVIRONMENT SCANNING Carrying out corporate appraisal Developing Strategic alternatives Selecting a Strategy Formulating detailed strategy Preparing a Plan Implementing a Strategies Evaluating a Strategy

STRATEGIC PLANNING PROCESS

Clarifying the Mission of the Corporation Defining the business Surveying the Environment Internal appraisal of the firm Setting the Corporate Objectives Formulating the Corporate Strategy Monitoring the Strtegy

Merits Corporate Strategic Planning

Clear Road Map Shows the way for achieving targets Optimal utilization of resources Respond to Environment changes in a better way Utilizing the Opportunities Avoiding Costly mistakes in Investment decisions

Merits Corporate Strategic Planning

Organizations control on activities Frame work for internal communication Integrate the behaviour into a total effort Encouragement towards forward thinking Encourages a favourable attitude towards change CSP provides a co-operative , integrated and enthusiastic approach for handling problems and realizing opportunities.

Demerits Corporate Strategic Planning

More Time Consuming CSP More Expensive More than the adequate resources are taken Often changes will be taken place Proximity of miscommunication Certain Individual behaviour not suit for CSP Lack of Co-Operation

Organizations Environment
COMPONENTS OF EXTERNAL ENVIRONMENT
Economic Environment (@ interest, Savings & Income Distribution) Social and Culture Environment ( Attitude, beliefs lifestyle) Demographic factor Population, age, literacy level Social factor beliefs, rituals Political Environment Legal Environment

COMPONENTS OF EXTERNAL ENVIRONMENT

Technology Environment National Environment (Geographical area) International Environment ( china Product)

COMPONENTS OF INTERN`AL ENVIRONMENT

Organisational Aspects Marketing Aspects Financial Aspects Personnel Aspects Production Aspects Managerial Aspects

General Environment Scanning

Environmental analysis or scanning is a process by which organizations monitor their internal and external environment to spot opportunities and threats affecting their business. The basic purpose is to help management determine the future direction of the organization.

General Environment Scanning

Environmental scanning include the following Internal Sources
World Development report World Economic Survey Statistical Year Book etc.

Government Sources
Census of India Five Year Plan Indian Year Book Economic Survey RBI Bulletins Indian Trade Journal

Other Sources
BSE Kothari Industrial Directory Economic Times CRISIL Research Report

STRENGTHS AND WEAKNESSES ANALYSIS

Organizational analysis requires data and information about the internal Environment. A SWOT analysis consists of evaluating a companys internal strength and weakness and its external opportunities and threats.

STRENGTHS AND WEAKNESSES ANALYSIS

Identifying Strengths and Weakness Distinctive / Core Competencies Identifying Opportunities and Threats Strategic Cost Analysis

PORTFOLIO ANALYSIS
THE CORE AIM OF MANAGEMENT IS DEPOLOYING RESOURCES IN THEIR BEST COMBINATION TO CREATE PROFITS AND TO ACCOMPLISH A SET OF OBJECTIVES. THE STRATEGY MANAGER IS ALWAYS IN SEARCH OF WAYS AND MEANS FOR OPTIMISING DEPLOYMENT OF VARIOUS RESOURCES

THE JOB OF THE STRATEGY MANAGER IS TO DRAW A PICTURE OF ALL HAPPENINGS FOR BETTER COMPREHENSION, AND UNDERSTANDING VARIOUS OPERATIONAL EQUATIONS OF CASH FLOW , FINANCIAL REQUIREMENTS, ETC

WHEN A COMPANY HAS VERY COMPLEX AND MULTITUDES OF OPERATIONS, THE PROBLEM BECOMES MULTIDIMENSIONAL AND THERE ARE COMPELLING NEEDS TO ACCOUNT FOR VARIOUS DIMENSIONS AND TAKE DECISIONS ON RESOURCES, CASH FLOW, FINANCIAL REQUIREMENTS ETC. THE APPROACH ESSENTIALLY HAS TO BE HOLISTIC RATHER THAN CONCENTRATING INDIVIDUALLY ON EACH BUSINESS. THIS MULTIPRONGED ( POINTED PARTS OF A FORK) APPROACH IS CALLED PORTFOLIO ANALYSIS.

KEEPING RATE OF RETURNS ON INVESTMENTS ARE IN THE FORM OF RESOURCES, THE OBJECTIVE OF A MANAGER IS TO ANALYSE THE CORPORATION AS A WHOLE, CONSIDERING DIFFERENT BUSINESS IN WHICH IT IS INVOLVED TO MAKE BEST USE OF RESOURCES TO DERIVE DESIRED BENEFITS. THIS KIND OF ANALYSIS IS CALLED AS PORTFOLIO ANALYSIS

PORFOLIO ANALYSIS IS DONE TO MAXMISE THE RATE OF RETURN BY ANALYSING THE PRESENT RESOURCE ALLOCATION AND CONTINUAL EVALUATION FOR FUTURE IMPLICATION AND TAKING DECISIONS ON PRODUCTS AND OPERATIONS THAT REQUIRE EXPANSION, CLOSURE, OR CURTAILMENT. A COMPANY THAT OPERATES IN AN INVIRONMENT IS FACED BY COMPETITIVE STRATEGIES OF OTHER COMPANIES AND HENCE PORTFOLIO ANALYIS ALSO TAKES INTO ACCOUNT THE COMPANYS CORE COMPETENCIES, RESOURCE ALLOCATION AND SPECTRUM OF CHARACTERSTICS OF THE INDUSTRY

BALANCING OF CORPORATION PORTFOLIO

Portfolio analysis is done with a view to balance the investment of a corporation in different products, business or industries. When there is a lot of diversification in investments in limited markets it is found to be very useful.

The balancing is to be done with regard to three basic aspects

1. CASH FLOW REQUIREMENTS
- The cash flow patterns in various business is different in different stages and portfolio analysis attempts to balance the cash flow in each business

2. DEVELOPMENT
INNOVATION AND PRODUCT DEVELOPMENT ARE A NECESSITY FOR A COMPANY FOR ITS SURVIVAL, GROWTH, AND PROFITS GENERATION. A COMPANY FOLLOW A PRODUCT LIFE CYCLE i.e. A PRODUCT IS CREATED TO SATISFY A NEED OF A CUSTOMER, IT MATURES AND FINNALLY DECLINES. COMPANY INVESTMENT REFQUIRED BASED ON EACH CATEGROY AND RETURNS ARE BALANCED.

3. RISK INVOLVED
ONE CANNOT OPERATE IN A TOTALLY RISKY ENVIRONMENT OR IN A TOTALLY SAFE ENVIRONMENT AS BOTH THESE EXTREMES ARE ONLY THEORETICAL IN NATURE. COMPLETE ELIMINATION OF RISKS MAY BE QUITE EXPENSIVE AND NOT DESIRABLE AND SAME TIME OPERATING IN A TOTALLY RISK FRE ENVIRONMENT MAY LEAD TO LOWER RETURN THAN EXPECTED. A COMPANY TRIES TO BALANCE INVESTMENTS AND ADDITIONAL CASH FLOWS IN DIFFERENT BUSINESS SUCH THAT RISKS ARE REDUCED AND BALANCED IN DIFFERENT PRODUCTS AND SERVIECS.

BCG MATRIX
HIGH GROWTH LOW MARKET SHARE HIGH GROWTH HIGH MARKET SHARE LOW GROWTH HIGH MAREKT SHARE LOW GROWTH LOW MARKET SHARE

GENERIC STRATEGIES
THE COMPETITIVE STRATEGY INCLUDES ALL THE MOVES AND APPROACHES. THE MAIN REASON FOR TAKING COMPETITIVE STRATEGY IS TO ATTRACT BUYERS TO WITHSTAND COMPETITIVE PRESSURES TO IMPROVE MARKET POSITION

GENERIC STRATEGIES
GS STRATEGIES CAN BE BROADLY DIVIDED INTO THE FOLLOWING THREE CATEGORIES. STRIVING TO BE THE OVERALL LOW-COST PRODUCER IN THE INDUSTRY ( Low Cost leadership strategy) SEEKING TO DIFFERENTIDATE ONES PRODUCT ( A differentiation strategy) Focusing on a narrow portion of the market rather than the whole market ( a focus or niche strategy)

A LOW COST LEADRSHIP STRATEGY

The low cost strategy is a powerful approach in markets where most of the customers based on price. The main purpose
To fix the price at lower level compared to competitors To gain maximum market share To earn high profit margin and thus maximize the profits WAYS TO ACHIEVE COST ADVANTATE Managing rivals on efficiency and cost control Finding creative ways to cut cost in Production process

A LOW COST LEADRSHIP STRATEGY

STEPS IN MINIMIZE COST PROPER APPRAISAL OF PRODUCTION FACTORS FIND CONTROLLABLE & UNCONTROLLABLE COST AND POST POND COST. RE-ENGINEERING PROCESS VENDOR ANALYSIS TO MINIMIZE THE COST

DIFFERENTITAION STRATEGIES
Customer needs, taste and preferences vary from one customer to the another customer. Producer to satisfy the diversified needs of the customer by a standardized product. The producer to make this strategy successful should study the different needs, tastes and preferences of various classes of customers.

Advantages on Differentiation strategies

The product commands a Premium Price More number of Units are sold to additional customers. Products creates its quality brand Profitability when the cost of differentiation is less than the extra price of the product.

APPROACHES TO DIFFERENTIATION
A Different taste Special Features Superior Service Spare Parts availability Overall value to the customer Engineering design and performance Product reliability Quality Manufacture Technological Leadership A full range of service Complete lines of Products Image and reputation.

Achieving Differentiation Raise the Products Performance Make the Product More Economical to use Enhance customer satisfaction in tangible or intangible ways

FOCUS/SPECIALISATION STRTEGIES

FOCUSING BEGINS BY CHOOSING A MARKET NICHE WHERE CUSTOMERS HAVE DISTINCITIVE PREFERENCES OR REQUIREMENTS.

SITUATION WHERE THE FOCUS STRATEGY IS EFFICIENT

The Market segment is large enough to be profitable. The Market segment is large enough to be profitable. The Market segment is not significant to the success of major competitors. Thr skills and resources to serve the segment efficiently. Producer can defend against challengers Difficult to the competitors to meet the specialized needs No other competitor is attempting to specialize Focuser to select an attractive segment based on his strength and capabilities.

Advantages of Focus Strategies

Specialised skills of a producer The focused companys competence in serving the market niche creates entry barriers for new firms. A hurdle to the producer of substitute products to enter in niche market. The niche strategy combined with low-cost and differentiation strategies will enable the producer to enhance market share and profitabilities

GRAND STRATEGIES/ STRATEGIC ALTERNATIVES

GS IS THE GENERAL PLAN OF MAJOR ACTION BY WHICH A FIRM INTENDS TO ACHIEVE ITS LONG TERM GOALS. IT PROVIDES BASIC DIRECTION FOR THE STRATEGIC ACTIONS OF A FIRM.

Grand Strategies fall into four general categories. A. GROWTH / EXPANSION i. Intensification ii. Diversification B.STABILITY C.RETRENCHMENT AND D. COMBINATION.

A. GROWTH / EXPANSION
In an Organization generally seek growth in sales, market share or some other measure as a primary objective. INTENSIFICATION
1. Market Penetration : It is the strategy of a firm that directs
its resources to the profitable growth of a single product in a single market with a single dominant technology. e.g. Increasing sales to Existing Customers ( buy toothpaste and take tooth brush free offer) Convert non-users into users ( that is tooth paste in rural segment)

A. GROWTH / EXPANSION
2. MARKET DEVELOPMENT : It consists of marketing existing products in new markets. The firm tries to achieve growth by finding new uses for the existing products and tap new customers. E.g. Hindusthan Levers offerings in toilet soap, detergent powder segment similarly NIRMA

A. GROWTH / EXPANSION
3. PRODUCT DEVELOPMENT : Product development strategy tries to achieve growth through new products in existing markets. The new products in this case are not essentially new products, but improved version of an existing product. E.g Quality Improvement ( Stronger/bigger/better)
Feature Improvement ( Convenience/Change size) Style Improvement ( New Models / New package)

A. GROWTH / EXPANSION
4. INNOVATION : An Organization tries to develop new products or services and there by makes similar existing products obsolete. There could be radical innovations where the company tries to replace existing products or technologies in an industry. CD Pen Drive Disk

A. GROWTH / EXPANSION
DIVERSIFICATION (I) Horizontal Integration : Horizontal Integration take place when some firms expand by acquiring other companies in the some line of business. It come through mergers and acquisitions. The purchase of one firms by another firm of approxmately the same size is called a merger. An acquisition when one of the organisation involved is considerably larger than the other is called an acquisition.

A. GROWTH / EXPANSION
DIVERSIFICATION (I) Horizontal Integration : a. Concentric Diversification : It occurs when an organization diversifies into a related, but distinct business with concentric diversification, the new business can be related to existing business thr products, markets or technology (e.g) Philips the Electronic major decided to diversify into related business such as cellar Phones , Telecommunication equipments etc.

A. GROWTH / EXPANSION
DIVERSIFICATION (I) Horizontal Integration : b. Conglomerate : It takes place when an organization diversifies into areas that are unrelated to its current business. E.g. ITCs diversified into edible oil, hotels, financial services, food and textiles.

A. GROWTH / EXPANSION
DIVERSIFICATION (II) Vertical Integration : It allows the firm to enlarge its scope of operations within the same overall industry. It takes place when one firm acquires another that is involved either in an earlier stage of the production process ( backward or upstream) or a later stage of the Production process ( forward or Down streams)

B.STABILITY STRATEGY
A Stability strategy involves maintaining the status quo or growing in a methodical, but slow manner. The firm follows a safety-oriented, status quo type strategy without effecting any major changes in its present operations. The resources are put on existing operations to achieve moderate, incremental growth.

B.STABILITY STRATEGY
Types of Stability Strategies 1. Incremental Growth : This strategy concentrates on one product line at a time, growing steadily. It is a low risk, low-market share and also very comfortable with their present line of business. 2. Profit / harvesting strategy : This is followed when the primary goal of the firm or any of its strategic business into is to generate cash so as to ensure a steady growth of business.

B.STABILITY STRATEGY
Types of Stability Strategies 3. Sustainable Growth Strategy: This strategy is followed when the firm perceives that the external environment is not favourble due to certain critical resource constraints like financial resources or raw materials, Import/Export restrictions, Govt. Policy changes etc. In this situation the firm to stay on course and seek only sustainable growth. 4. Stability as a pause strategy: After organisation have undergone a turbulent period of rapid growth, managers often pause for a while to integrate strategic business units, consolidates their position, improve operational efficiency R& D marketing etc, pause for a while and prepare themselves for another big leap(jump) forward.

C.RETRENCHMENT STRATEGIS
The third major class of strategic alternatives available to a firm is retrenchment strategies. Growth strategies and stability strategies are generally adopted by firms that are in satisfactory competitive positions. But when a firms position is disappointing then retrenchment strategies may be appropriate.

C.RETRENCHMENT STRATEGIS
1. Divestment Strategy : Divestment is another form of retrenchment strategy. Company sells or Spins Off one of its business units under the divestment strategy. Divestment strategy is usually adopted when the company is performing poorly or when it no longer fits the companys strategic profile. 2. Turnaround Strategy : Improving Internal efficiency can be done by adopting turnaround strategy. The aim of turnaround strategy is to transform the organisation into more effective business. Turnaround means reverse the negative trend.

C.RETRENCHMENT STRATEGIS
3. Liquidation Strategy : The liquidation strategy is generally considered the most extreme retrenchment strategy. This strategy involves closing down a business organization and selling its assets. This is the last alternative strategy as its consequences are severe. 4. Bankruptcy. It is a means whereby an organisation that is unable to pay its debts can seek court protections from creditors and from certain contract obligation while it tries to regain financial health and stability.

D. COMBINATION STRATEGIES
Large dieversified organizations generally use a mixture of stability expansion or retrenchment strategies eithr simultaneously or sequentially. For e.g growth could be achieved by an organisation through acquisition of new business or divesting itself of unprofitable ventures. Depending on situational demands, therefore, an organisation can employ various strategies to survive, grow and remain profitable.

D. COMBINATION STRATEGIES
1. Joint Venture : When two or more firms pool the resources to accomplish a task that a firm could not accomplish, but it can be done more effectively by joining. Like a meger or acquisition, a joint venture is not a strategy but a way of implementing a strategy. It helps a firm to undertake giant projects by spreading risks more efficiently. Eg. Maruthi udyog & suzuki

Non-Profit Organization
All Organizations formulate the MOST ( Mission, Objective, Strategies and Tactics) and analyse their environments like Internal and External , formulate strategies, analyze and select the appropriate strategies, implement the strategies and evaluate and Control the strategies. There are distinct differences between profit and non-profit organisations.

Non-Profit Organization
The Public Organisations like Central Government, State Government and local governments are also included under nonprofit organizations, like same the term non-profit includes Private non-profit organizations such as hospitals, Private universities, Private colleges, recreational societies etc.

Types of Non-Profit Organisation

Private Educational Institutions like private universities, colleges and Schools Charities Social Service Organisations Health Service Organisations like Institute of Medical Scie Foundations (Dr. Swaminathan Research Foundation) Cultural Organisations Religions Organisations Religions organisations like Tirumala Tirupathi Devasthaanam Social Organizations

Sources of Revenue for Non-Profit Organisations

Revenue depends on Membership dues Assessments and Donations Fund from Sponsor Agencies, Subscription to the Periodicals Published by the Organisation. Note: Strategic Mangement point of view , it is applicable for both profit-making organizations and non-profit organizations.

Mission Non- Profit Organisation

The Non-Profit Organisations while formulating the mission should consider the following questions. What is our business? What are our activities? Who is the customer? Who are our Client? What does our customer consider the value. The Corporate goals and Operating objectives flow from Mission.

Goals and Objectives Non profit Organisation

Formulation of Objectives and Goals will help the Organization to have a clear direction. The non profit organisations may formulate objectives and goals by considering the interest of all the stakeholders. piggybacks

Popular Strategies of Non-Profit Organization

Strategic Piggybacks : The term refers to the development of a new activities for non Profit organizations for the purpose of generating funds needed to make up the deficits in the budget. E.g something to sell, Trustee suport Inter Organization linkage ( e.g hospital to hospital) Linkage with a profit making organisations.

STRATEGY FORMULATION AND IMPLEMENTATION

Constraints on Strategic Management Service is often intangible and hard to measure Payment by customers may be a very small source of funds. There is no employee commitment Resource Contribution

STRATEGY FORMULATION AND IMPLEMENTATION

Constraints on Strategic Management Service is often intangible and hard to measure Payment by customers may be a very small source of funds. There is no employee commitment Resource Contribution

STRATEGY FORMULATION AND IMPLEMENTATION

Impact of Constraints on Strategy Formulation Goal conflicts interfere with rational Planning ( Different interests of the sponsors may prevent the mgt from formulating the goals) An integrated planning focus tends to shift from results to resources. Planning is concerned with the resource input than the service outcomes) Ambiguous operating objectives create opportunities for internal politics and goal displacement. Professionalisation simplifies detailing planning but adds rigidity ( not flexible)

STRATEGY FORMULATION AND IMPLEMENTATION

Impact of Constraints on Strategy Implementation. Decentralization is complicated Linking pins for external internal integration become important Job enrichment and executive development

STRTEGY EVALUATION AND CONTROL

Two major problems caused by the constraints a. Rewards and penalties have little or no relations to performance. Control the inputs heavily rather than output. Measures to control the Constraints. Select a Dynamic and forceful leader Generate Rules and Regulations Appointment of a strong Board Establishment of Performance based budgets.

COMPETITIVE COST DYNAMICS

Business success built on cost leadership requires the business to be able to provide its product or service at a cost below what its competitors can achieve and it must be a sustainable cost advantage.

COMPETITIVE COST DYNAMICS

LOW-COST ADVANTAGE THAT REDUCE THE PROPABLY OF PRICING PRESSURE FROM BUYERS TRULY SUSTAINED LOW-COST ADVANTAGE MAY PUSH RIVALS INTO OTHER AREAS. LOW-COST ADVANTAGES SHOULD MAKELESS THE ATTRACTIVENESS OF SUBSTITUTE PRODUCTS. HIGHER MARGIN ALLOW LOW COST PRODUCERS TO WITHSTAND SUPPLIER COST INCREASES MANY COST SAVING ACTIVITIES ARE EASILY DUPLICATED ( QUICKLY ADOPTED BY OTHER COPMTETIRORS) COST CUTTING CAN SHRINK OTHER COMPETITIVE ADVANTAGES INVOLVING KEY PRODUCT ATTRIBUTES. COST DIFFERENCES OFTEN DECLINE OVER TIME

EVALUATING DIFFERENTIATION OPPORTUNITIES

A SUCCESSFUL DIFFERENTIATION STRATEGY ALLOWS THE BUSINESS TO PROVIDE A PRODUCT OR SERIVCE OF PERCEIVED HIGHER VALUE TO BUYERS AT A DIFFERENTIATIN COST BELOW THE VALUE PREMIUM TO THE BUYERS. COMPETITIORS WILL REDUCED WHEN A BUSINESS SUCCESSFULLY DIFFERENTIATES ITSELF. BUYERS ARE LESS SENSITIVE TO PRICES FOR EFFECTIVELY DIFFERENTIATED PRODUCTS BRAND LOYALITY IS HARD FOR NEW ENTRANTS TO OVER COME. TECHNOLOGICAL CHANGES THAT NULLIFY PAST INVESTMENT.

EVALUATING DIFFERENTIATION OPPORTUNITIES

1. 2. 3. 4. 5. EVALUATING SPEED AS A COMPETITIVE ADVANTAGE CUSTOMER RESPONSIVENESS PRODUCT DEVELOPMENT CYCLES PRDOUCT OR SERVICE IMPROVEMENT SPEED IN DELIVERY OR DISTRIBUTION INFORMATION SHARING AND TECHNOLOGY.

EXPERIENCE CURVE ANALYSIS

As firms produce, they grow more efficient as experience teaches better way of doing things. Repetition helps a firm gain mastery over the task, speed up the operations and develop new and improved ways of doing a job at a lower cost. This is cost of performing an activity often declines on a per unit basis this is known as experience curve effects. For instance, any firm trying to enter the integrated circuit business faces a tremendous challenge to learn how to be cost competitive in a market where experienced players are clearly having a competitive edge-because they are already producing millions of pieces.

MATCHING ORGANIZATION STRUCTURE WITH STRATEGY

THERE ARE SEVERAL TYPES OF STRUCTURS THAT ARE FOUND IN ORGANISATIONS. HERE, SOME MAJOR TYPES OF PURE STRUCTURES ARE DESCRIBED, WITH A SPECIAL EMPHASIS ON THEIR APPROPRITENESS FOR THE DIFFERENT TYPES OF STRTEGIES. In Practice, the actual organizaitonal structure may be a combination of these pure structures.

1.ENTREPRENEURIAL STRUCTURE
OWNER-MANAGER

EMPLOYEES

2. FUNCTIONAL STRUCTURE
CEO

Public Relations
Finance

**************
Marketing Personnel

Legal
Production

3. DIVISIONAL STRUCTURE
CEO

Corporate Finance

Corporate Legal/PR

General Manager

General Manager Division B

Division - A

Marketing

Operations

Marketing

Operations

Personnel

Personnel

4. STRATEGIC BUSINESS UNIT

CEO

GROUP HEAD SBU 1

Divisions ABC

GROUP HEAD SBU 2

DIVISIONS DEF

GROUP HEAD SBU 3

DIVISIONS GHI

5. MATRIC ORGANISATIONAL STRUCTURE

CEO
FINANCE MARKETING PERSONNEL OPERATIONS

Project Mgr - A

Project Mgr - B

FUNCTIONAL SPEACIALISTS

Project Mgr - C

6. NETWORK STRUCTURE ( SPIDERS WEB STRUCTURE)

REGION A PROJECT GROUP M CORPORATE HEAD QUARTERS REGION B PROJECT GROUP N FUNCTION Y FUNCTION - X

OTHER TYPES OF STRUCTURES

1. PRODUCT BASED STRUCUTRES 2. CUSTOMER BASED STRUCUTRES 3. GEOGRAPHICAL AREA BASED STRUCTURES

STRATEGIC CONTROL PROCESS

ONCE THE STRATEGY IS FORMULATED AND IMPLEMENTED, THERE IS NO GUARANTEE THAT THE STRATEGY IS IMPLEMENTED AS IT IS DESIGNED AND THE STRATEGY GENERATES THE RESULTS AS AIMED AT. THEREFORE, THE STRATEGIST HAS TO EVALUATE THE STRATEGY AND ITS PROGRAMME TO ASSESS WHETHER THE IMPLEMENTATION OF THE STRATEGY IS AS PER THE STRATEGIC PLAN. FURTHER, A NUMBER OF DEVIATIONS EITHER IN THE EXTERNAL ENVIRONMENT OR IN ORGANISATIONAL ENVIRONMENT MAY TAKE PLACE. THESE DEVIATIONS, MAY NECESSITATE A CHANGE IN THE STRATEGY. THESE CHANGES ALSO REQUIRE A STRATEGIC EVALUATION AND CONTROL.

CONTROL FUNCTIONS
THE CONTROL FUNCTIONS INCLUDE THREE PROCEDURES

Measuring actual Performance Comparing Actual Performance to Standard Taking Corrective Action to ensure that planned events are taken place.

Strategic Control Process (Controlling Begins)

Measure of Performance

Compare with Standards Performance different fr Stds

Performance r = Stds

No C.A.Necessary

C.A.Plan New wok situation Begins

Work Continues

Process of Strategic Control

1. 2. 3. 4. Key areas to be Monitored Establishing Standards Measuring Performance Compare Performance with Standards (Profitability Market position productivity product leadership HR standards) 5. NO action taken ( if performance is in Harmony with Standards) 6. Take Corrective Action Plan ( if Necessary)

Porter five forces analysis

PORTERS FIVE FORCES

Three of Porter's five forces refer to competition from external sources. The remainder are internal threats. It is useful to use Porter's five forces in conjunction with SWOT analysis (Strengths, Weaknesses, Opportunities, and Threats). Porter's five forces include - three forces from 'horizontal' competition: threat of substitute products, the threat of established rivals, and the threat of new entrants; and two forces from 'vertical' competition: the bargaining power of suppliers and the bargaining power of customers.

DU PONTS MODEL
THE DUPONT MODEL IS A TECHNIQUE THAT CAN BE USED TO ANALYSE THE PROFITABILITY OF A COMPANY USING TRADITIONAL PERFORMANCE MANAGEMENT TOOLS. TO ENABLE THIS, THE DUPONT MODEL INTEGRATES ELEMENTS OF THE INCOME STATEMENT WITH THOSE OF THE BALANCE SHEET.

USAGE OF THE DE PONT FRAME WORK ANALAYSIS

The model can be used by the Purchasing Department or by the sales Department to examine or demonstrate why a given ROA was earned. Compare a firm with its other firms Analyze changes over time Teach people a basic understanding how they can have an impact on the company results. Show the impact of professionalizing the purchasing funtions

STEPS IN THE DUPONT METHOD PROCESS

1. collect the business numbers ( details ( FROM Finance Dept) 2. Calculate ( Use of Spread Sheet) 3. Draw Conclusions 4. If the Conclusions seen unrealistic check the numbers and recalculate.

Strengths Du pont Model

Simplicity. Good tool to teach people a basic understanding how they can have an impact on results. Can be easily linked to compensation schemes. Can be used to convince Management that certain steps have to be taken to professionalize the Purchasing or Sales functions.

Limitations : Du Pont Model 1. Based on accounting numbers, which are basically not reliable. 2. Does not include the cost of Capital 3. Garbage in , Garbage out.

TOWS MATRIX
THE TOWS MATRIX , PROFOUNDED BY HEINZ WEIHRICH, IS AN IMPORTANT STRATEGY FORMULATION MATCHING TOOLL. THE TOWS MATRIX POSTULATES THE FOLLOWING FOUR ALTERNATIVE STRATEGIES.

INTERNAL Factors ---

EXTERNAL Factors | vM

Internal Strengths (S)

Internal Weaknesses (W)

External Opportunities (O)

SO = Maxi Maxi WO = Mini Maxi Strategy Strategy Maximize S & O Minimise W & Maximise-O
ST= Maxi Mini Strategy Maximize S and Minimize Threats WT = Mini Mini Strategy Minimise W & Threats

External Threats (T)

Balanced Score Card

For the past decade, organizations have reaped the benefit of the Balanced Scorecard (BSC) that has become a key tool to manage and implement strategy. Now, organizations are developing scorecards across all functional areas to support an executive decision-making methodology. They will inevitably lead to implementing balanced scorecards for a growing number of functions in organizations across the world. When BSCs are developed to achieve functional excellence, they can make strategy operational by translating strategy into performance measures and targets. They also help to measure and focus on the functions of the entire organization, which results in creating breakthrough performance.

Balanced Score Card-Model

Balanced Scorecard Executive Overview

Balanced Scorecard is a Management System that allows firms to clarify their ideas and policies and put them into action. It offers feedback about both the internal business processes and the external outcomes to enhance strategic performance and outputs. The Balanced Scorecard shifts strategic planning from an academic practice into the nerve centre of an organization.

Balanced Score Card

BSCt also maintains the balance between the long term and short term aims of the organization, between the financial and non- financial measures, between developing and leading indicators and between external and internal task perspectives.

McKinseys model of 7S
7S model was created by McKinsey and company in 1980. Seven factors are included in this model. The model also includes practical guidance for the students. The 7S model was dividing in thinking about organizational efficiency. In previous the manager focus was on organization because organization grew in size and complicated questions were also raised.

McKinseys model of 7S
The seven elements are categorized as either hard or soft elements. Hard elements are easy to define and the other hand Soft elements are more difficult. If one wants to make organization successful then they should think that both elements are equally important. In hard elements Strategy, structure and Systems are included. In soft elements Shared Values, Skills, style, and Staff are included.

McKinseys model of 7S is given below:

McKinseys model of 7S is given below:

Explanation of each element in 7s

Strategy: Strategy is created to maintain and make competitive benefit over the competition. Structure: Structure is the way the organization is constructed and who reports to whom. Systems: In systems the daily activities and events that staff members join in to get the job done. Shared values: Shared values are also called super ordinate goals. These values are the center values of the company that are evidenced in the corporate culture and the general work. Style: you have to adopt the style of leadership. Staff: In staff employees and their general capabilities are included. Skills: Skills are the actual skills of the employees who are working for the company.