Strategy & Strategic Management

Lecture 2

Basic Elements of Strategic Management

Strategic Management consists of 4 basic elements Environmental Scanning Strategy Formulation Strategy Implementation Evaluation & Control
Environmental Scanning Strategy Formulation Strategy Implementation Evaluation & Control

Strategic Management Model

Environmental Scanning: Gathering information
External: Opportunities & Threats Natural Environment: Resources & Climate Societal Environment: General forces Mission:

Strategy Formulation: Developing Long Range Plans

Strategy Implementation: Putting Strategy into Action

Evaluation and Control: Monitoring Performance

Reason for existence

Objective s: Strategies:

What results to accomplish by when

Task Environment: Industry Analysis

Internal: Strengths & weaknesses Structure: Chain of Command Culture: Beliefs, expectations, values Resources: Assets, skills, competencies, Knowledge

Plan to achieve the mission & Objectives

Policies:
Programs

Broad Guidelines for decision making

Activities needed to accomplish a plan

Budgets Procedures

Cost of the Programs

Sequence of steps needed to do the job FEEDBACK

Performance

Actual results

Environmental Scanning
Natural Physical Env Socio cultural forces Task Env ( Industry) Govts
Shareholders Customers

Societal Env Economic Forces

suppliers Employees/ labour unions competitors

Physical Resources

Internal Env
Structure Culture Resources

Politico-legal forces

Creditors

Trade Associations Communities

Technological forces
Climate

Wild life

SWOT
Assessment of external environment throws up Opportunities & Threats Assessment of internal environment Strengths and Weaknesses

Strategy Formulation
Development of long-range plans for the effective management of environmental Opportunities & Threats, in the light of corporate Strengths and Weaknesses (SWOT) It includes defining corporate mission, specifying achievable objectives, developing strategies and setting policy guidelines

Mission
Mission is the purpose or reason for the existence of the organisation A well conceived mission statement defines
The fundamental purpose and identifies the scope or domain of companys operations in terms of product/services offered and markets served May also contain firms values and philosophy about how it does business and treat its employees It puts in words companys strategic vision of the firms future Mission describes what the organisation is now and vision describes what it would like to become

Examples of Mission statements

Google
To optimize the worlds information and make it universally accessible and useful

Newport News Shipbuilding unchanged since 1886

We shall build good ships here- at a profit if we can- at a loss if we must- but always good ships

Bharat Gas
To make Bharat Gas a dominant brand in the segments we market by becoming trendsetters in customer service, safety and quality

Nirma
Nirma is a customer focused company committed to consistently offer better quality products and services that maximize value, to the customer

Examples of Conglomerates
Hindustan Unilever
Personal Care Foods New Ventures Exports Sundaram Fasteners Lucas TVS Brakes India Wheels India Sundaram Brake Linings TVS Motor Company TVS Electronics

Balmer Laurie

TVS Group

Finolex Group

Grease & Lubricants Leather & functional chemicals Packaging Turnkey Projects Tea Exports Travel & Tourism Cargo & Logistics Telecommunications Petrochemicals Irrigation Education

Some Mission Statements

The Bank of New York We strive to be the acknowledged global leader and preferred partner in helping our clients succeed in the world's rapidly evolving financial markets. Barnes & Nobles, Inc
Our mission is to operate the best specialty retail business in America, regardless of the product we sell. Because the product we sell is books, our aspirations must be consistent with the promise and the ideals of the volumes which line our shelves. To say that our mission exists independent of the product we sell is to demean the importance and the distinction of being booksellers. As booksellers we are determined to be the very best in our business, regardless of the size, pedigree or inclinations of our competitors. We will continue to bring our industry nuances of style and approaches to bookselling which are consistent with our evolving aspirations. Above all, we expect to be a credit to the communities we serve, a valuable resource to our customers, and a place where our dedicated booksellers can grow and prosper. Toward this end we will not only listen to our customers and booksellers but embrace the idea that the Company is at their service.

Some Mission Statements

Citigroup
Our goal for Citigroup is to be the most respected global financial services company. Like any other public company, we're obligated to deliver profits and growth to our shareholders. Of equal importance is to deliver those profits and generate growth responsibly.

Ford Motor Company

We are a global family with a proud heritage passionately committed to providing personal mobility for people around the world.

Characteristics of Mission Statements

It should be feasible
NASA- To land on the moon

It should be precise
Hero Cycles It is our mission to strive for a synergy between technology, systems and human resources, to produce products and services that meet the quality, performance and price aspirations of our customers. While doing so, we maintain the highest standards of ethics and social responsibilities

It should be clear
India Today- Making sense of India

Characteristics of Mission Statements

It should be Motivating
Bank of Baroda- Pursuing best global practices for delivering added value to customers

It should be distinctive
Bajaj Auto- Value for money, for years,inspiring confidence

It should indicate major components of Strategy

HCL Infosystem- To provide world-class information technology solutions and services to enable our customers to serve their customers better

It should indicate how objectives are to be accomplished

LG becoming 2 by 10, that is double the sales volume and profit by year 2010

Difference between Vision & Mission

Chief concern of vision is Where we are going and why Company mission usually deals with a companys present business scope and purpose who we are, what we do, and why we are here

Some Vision Statements

Red Hat Linux
To extend our position as the most trusted Linux and open source provider to the enterprise. We intend to grow the market for Linux through a complete range of enterprise Red Hat Linux software, a powerful internet platform, and associated support and services

General Electric
We will become number one or number two in every market we serve, and revolutionalise this company to have the speed and agility of a small enterprise

Some Vision Statements

Wyeth
Our vision is to lead the way to a healthier world. By carrying out this vision at every level of our organization, we will be recognized by our employees, customers, and shareholders as the best pharmaceutical company in the world, resulting in value for all. We will achieve this by:
Leading the world in innovation by linking pharmaceutical, biotech and vaccine technologies Making quality, integrity, and excellence hallmarks of the way we do business Attracting, developing and motivating best people Continually growing and improving our business

Some Vision Statements

Nike
To bring innovation and inspiration to every athelete in the world

Heinz
Our vision, quite simply is to be the worlds premier food company, offering nutritious, superior tasting foods to people everywhere. Being the premier food company does not mean being the biggest but it does mean being the best in terms of consumer value, customer service, employee talent, and consistent and predictable growth

Some Vision Statements

Intel
Our vision: Getting to a billion connected computers world-wide, millions of servers, and millions of dollars of e-commerce. Intels is being the building block supplier to the Internet economy and spurring efforts to make the Internet more useful. Being connected is now at the centre of peoples computing experience. We are helping to expand the capabilities of the PC platform and the Internet. ..We have seen only the early stages of development of digital technologies

Objectives
Objectives are the end results of planned activity They are action verbs and tell what is to be accomplished and by when and quantified if possible
Example: To increase firms profitability by 10% in 2010 over 2009

Goals and objectives are interchangeable Some areas where objectives are set are:
Profitability (net profits) Efficiency Growth ( increase in total assets, sales etc) Shareholder wealth ( dividends plus stock price appreciation ) Market leadership ( Market share) Etc.

Strategies

It is a comprehensive master plan that states how the corporation will achieve its mission and objectives It maximises competitive advantage and minimises competitive disadvantage. There are three types of strategy
Corporate strategy- companys overall direction
Expansion strategies ( Concentration, integration, diversification, cooperation, internationalisation, digitalisation) Stability strategies ( No change strategies, pause/ proceed with caution, profit strategies) Retrenchment strategies ( Turn-around strategies, Divestment strategies, Liquidation Strategies) Combination Strategies ( Simultaneous, sequential, both)

Business strategy- at business unit level , it emphasizes improvement of competitive position in the specific industry or market segment served by the business unit
Competitive Strategies- cost leadership, differentiation, focused cost/ differentiation strategiesgeneric strategies) Cooperative strategies

Functional Strategy- approach taken by a functional area to achieve corporate and business unit objectives and strategies by maximising resource productivity

Policies
Policy is a broad guideline for decision making that links the formulation of a strategy with its implementation
Examples
To support Ciscos strategy of growth through acquisitions, it established a policy to consider only companies with no more than 75 employees 3M s policy that researchers should spend 15% of their time working on something other than their primary project to support innovation strategy Intel cannibalizes its own product line with better products before a competitor does so

Different Contexts for Strategy (1)

Small Business Single market. Limited product/service range. Competitive strategy. Strategic capability. Restricted funds. Multinational Corporation Manufacturing / Service Organisations Diverse products/markets/businesses. Structure/control/parenting. Competitive strategy. Portfolio management. Resource coordination. Manufacturing physical product often augmented with service, brand image for competitive advantage. Services no physical product, competitive advantage based on intangibles

Different Contexts for Strategy (2)

Public Sector Ideology. Direct/indirect external influence (e.g. government). Competition for resource inputs. Best value in outputs. Interagency cooperation Diverse sources of funds. Values and ideology. Lobbying. Stakeholder management.

Voluntary and Not-for-Profit

Strategy Implementation
A process by which strategies and policies are put into action through the development of programs, budgets and procedures This process might involve changes within overall culture, structure and management systems of the entire organisation Typically implemented by middle and lower level managers Sometime referred to Operational planning, strategy implementation often involves day to day decisions in resource allocation

Programs
A program is a statement of the activities or steps needed to accomplish a single-use plan It makes a strategy action-oriented It may involve restructuring the corporation, changing the companys internal culture, or beginning a new research effort

Budgets
Statement of corporations programs in money terms Used in planning and control Procedures
Standard Operating Procedures (SOP)- are a set of sequential steps or techniques that describe in detail how a particular task or job is to be done

Evaluation & Control

It is a process in which corporate activities and performance results are monitored so that actual performance can be compared with desired performance for control purposes Performance
Is the end result of activities eg. Achieving planned market share

Case discussion & Group presentations

Date: 30-8-2012 by Group 2 Case: Strategic aspirations of Reserve Bank of India Date: 31-8-2012 by group 3 Project presentation: Pick up several business magazines and newspapers. Locate the corporate reports of different types of companies. Identify the strategies that these companies are employing at present. Make power point presentation of the strategies being used by these companies to the class