2. STRATEGIC PLANNING
It’s a long-term perspective of management.
Strategic management can be used to determine
mission, vision, values, goals, objectives, roles and
responsibilities, timelines, etc.
Strategies
The decisions and actions that determine the
long-run performance of an organization
3. Standard definitions of strategy
Thompson & Strickland
“A company’s strategy consists of the combination of
competitive moves and business approaches that managers
employ to please customers and compete successfully and
achieve organizational objectives.”
Pearce II & Robinson Jr.
“Strategy reflects a Company’s awareness of law, where
and when it should compete; against whom it should
compete and for what purpose it should compete.”
Bryson
“A pattern of
purposes, policies, programs, actions, decisions, or
resource allocations that define what an organization
is, what it does, and why it does it.”
4. Standard definitions of strategy(contd…)
Mintzberg
“A mediating force between the organization and
environment: consistent patterns in streams of
organizational decisions to deal with the
environment.”
Andrews
“Pattern of objectives, purposes, or goals stated in such a
way so as to define what business the company is in or
is to be in and the kind of company it is or to be”
Chandler
“Strategy is the determination of the basic long term
goals of an enterprise and the adoption of courses of
action and the allocation of resources necessary for
carrying out these goals.”
5. EVOLUTION OF THE CONCEPT “STRATEGY”
Derived from Greek word “strategia” the art or
science of being a general.
Effective generals had to determine the right lines of
supply, decide when to fight and when not to
fight, and manage army's relation with citizens
Strategy= planning component+ decision making +
action component
6. FATHER OF STRATEGIC MANAGEMENT
Russian American, applied
mathematician and busines
s manager
Professionally, Ansoff is
known worldwide for his
research in three specific
areas:
H. Igor Ansoff
(December 12, 1918 – July
14, 2002)
The concept of environmental
turbulence;
The contingent strategic success
paradigm, a concept that has
been validated by numerous
doctoral dissertations;
Real-time strategic
management
7. STRATEGY Vs PLAN
strategy
Normally focused on
objectives and long
term goals and vision.
plan
Includes detailed
course of action and
tactics to be used.
9. Characteristics of strategic management
Strategic decisions are complex in nature.
Strategic decisions are at the top most level, are uncertain as
they deal with the future, and involve a lot of risk.
Strategic decisions have major resource propositions for an
organization. These decisions may be concerned with
possessing new resources, organizing others or reallocating
others.
Strategic decisions deal with harmonizing organizational
resource capabilities with the threats and opportunities.
Strategic decisions deal with the range of organizational
activities. It is all about what they want the organization to be
like and to be about.
Strategic decisions involve a change of major kind since an
organization operates in ever-changing environment.
11. Levels of strategy
Corporate strategy... defines the scope of the business in
terms of the industries and markets in which it competes.
includes decisions about diversification, acquisitions, new
ventures, investments, allocation of scarce resources
between business units.
Example:
1.Dell acquires apple
Dell and apple both make PC- horizontal integration
Dell makes PC. Apple makes operating systems for PC.diversification
12. Levels of strategy
Business strategy...
Is concerned with how the firm competes within a particular
industry or market...
To win a business unit must adopt a strategy that
establishes a competitive advantage over its rivals.
Eg: advertisements
Functional strategy...
The detailed deployment of resources at the operational
level.
Eg: strategy adopted to buy goods will not be same when
the firm is selling its goods.
13. Strategic business unit
It becomes very cumbersome for an organization
having multi-products and multi-businesses, to have
separate planning treatment of each of its
products/businesses.
To have better strategic planning, business products
can be grouped into strategically-related business
units known as SBU, so that they are manageable.
14. The concept of strategic business unit (SBU):
A scientific grouping of the businesses of a multi-
business corporation which helps the firm in
strategic planning.
Products/businesses within an SBU receive same
strategic planning treatment and priorities.
The task consists of analyzing and segregating the
assortment of business aspects and regrouping them
into a few, well-defined, distinct, scientifically
demarcated business units.
Grouping the businesses on SBU lines facilitates
correct relative priorities and resources to the
various businesses.
16. The Strategic Management Process
1. Internal and external analysis is done
2. The strategic management actually process
begins with the strategist’s vision
3. Next, long-term or corporate goals define specific
outcomes that an organization seeks to achieve in
order to realize its mission
4. Strategy formulation specifies the strategies for
achieving an organization’s objectives
16
17. Strategic management process (contd…)
5. Strategy implementation takes place through the
basic organizational architecture that makes
things happen
6. The final phase, strategy evaluation, involves
comparing expected outcomes with actual results
after the implementation phase
17
18. Strategic management process (contd…)
Analyzing the environment
Involves being able to identify and interpret emerging
trends before they become evident to everyone else
It is essential to learn and understand:
– The concerns of customers
– The availability and bargaining power of suppliers and
customers
– The actions of competitors
– Market trends
– Economic conditions
– Government policies
– Technological advances
18
19. Strategic management process (contd…)
Analyzing the environment (cont.)
Knowing what competitors are doing and how to
respond is clearly important to a firm’s survival
Analyzing the internal environment focuses on assessing
an organization’s:
–
–
–
–
–
–
Market strength
Financial position
Capabilities
Core competencies
Culture
Structure
19
20. Strategic management process (contd…)
Analyzing the environment (cont.)
The combined analysis of the external environment and
internal environment is commonly referred to as SWOT
(Strengths, Weaknesses, Opportunities, and Threats),
Accurate interpretation of both types of environments
requires considerable analytical and cognitive
skills, and plays a large part in the future actions and
the continuing effectiveness of an organization
20
21. Strategic management process (contd…)
Vision statement
Is an ambitious view of the future that everyone in the
organization can believe in and that is not readily
attainable, yet offers a future that is better in important ways
than what now exists
A clear and inspiring vision serves a number of important
functions:
–
–
–
–
–
–
Facilitates decision making
Inspires followers
Links the present to the past
Gives meaning to work, not just what, but why
Establishes a standard of excellence
Lays the foundation for the development of a mission statement
21
22. Vision statement of the National Thermal Power
Corporation (NTPC), India:
“To be one of the world’s largest and best power
utilities, powering India’s growth”
Vision statement of TATA Power
“To be the most admired and responsible Integrated
Power Company with international
footprint, delivering sustainable value to all
stakeholders.”
23. Strategic management process (contd…)
Mission statement
Is an unique statement of purpose that distinguishes one
organization from other similar enterprises
Is the organization’s core purpose and reasons for
existence
Features two components:
– Core values
– Core purpose
23
24. Strategic management process (contd…)
Mission statement (cont.)
Should be both broad and specific
Can provide many benefits to an organization:
–
–
–
–
Providing direction and focus
Forming the basis for objectives and strategies
Inspiring positive emotions about the organization
Helping resolve divergent views among employees
24
25.
26. DIFFERENCE BETWEEN VISION AND
MISSION
MISSION
VISION
A Mission statement talks about
A
HOW you will get to where you
want to be. Defines the purpose
and primary objectives related to
your customer needs and team
values.
What do we do today? For
whom do we do it? What is the
benefit? In other words, Why we
do what we do? What, For
Whom and Why?
Vision statement outlines
WHERE you want to be.
Communicates both the purpose
and values of your business.
Where do we want to be going
forward? When do we want to
reach that stage? How do we want
to do it?
27. Strategic management process (contd…)
Corporate-level goals
Are the desired long-term outcomes that an organization
seeks to achieve
Include both financial and strategic goals
Are essential because they help focus everyone in the
same direction
Are the targets against which actual performance is
compared for strategy evaluation
Create synergy
27
28. Strategic management process (contd…)
Corporate-level goals (cont.)
Are the means by which organizations reveal their
priorities
Are the basis for effective
planning, organizing, leading, and controlling activities
Organizations must take time to establish “SMART”
goals
–
–
–
–
–
Specific
Measurable
Achievable
Results-Based
Time-Specific
28
29. Strategic management process (contd…)
Strategy formulation
A strategy is an integrated plan of how an organization
will achieve its objectives
A good strategy focuses on exploiting opportunities in
the organization’s external environment that match the
organization’s strengths.
A good strategy must also reflect the core mission and
objectives of the organization
29
30. Strategic management process (contd…)
Strategy formulation (cont.)
To maintain a competitive edge over rivals, develop
strategies that:
– Enhance value to the customers
Value is the ratio of benefits received to the cost incurred by
the customer
– Create synergistic opportunities
– Build on the company’s core competence
A core competence is a capability that allows an organization
to perform extremely well in comparison to competitors
30
31. Strategic management process (contd…)
Strategy formulation (cont.)
Core competencies are a source of competitive
advantage when they:
–
–
–
–
Are rare
Are hard to imitate
Are not easily substitutable
Create value for the firm
A knowledge-based competitive advantage is hard to
imitate or copy by rivals because it resides in people, not
physical assets
31
32. Strategic management process (contd…)
Strategy implementation
Effective strategy implementation means that objectives
have a greater chance of being met and thus results in
better firm performance
Requires galvanizing the organization’s employees and
managers at all levels to turn formulated strategies into
action
Obstacles to effective strategy implementation
– Lack of resources
– Time
32
33. Strategic management process (contd…)
Strategy implementation (cont.)
Is considered the most difficult stage of the strategic
management process
– Involves dealing with people who come with varying levels
of motivation, commitment, and dedication
Without appropriate implementation, the best of
strategies can fail
– Must be integrated into all organizational systems
including structure, culture, pay and reward
systems, budget allocation, and organizational
rules, policies, and procedures
33
34. Strategic management process (contd…)
Strategy evaluation
Is the primary means of determining the effectiveness of the
strategic management process
Has three fundamental activities:
– Review internal and external factors
– Measure performance against objectives
– Corrective action
A popular tool used to measure the effectiveness of the
strategic management process is the balance scorecard.
34
44. INTRODUCTION
BOSTON CONSULTING GROUP (BCG) MATRIX is
developed by BRUCE HENDERSON of the BOSTON
CONSULTING GROUP IN THE EARLY 1970’s.
According to this technique, businesses or products are
classified as low or high performers depending upon
their market growth rate and relative market share.
45. MARKET SHARE AND RELATIVE
MARKET SHARE
•
Market share is the percentage of the total market that is being
serviced by your company, measured either in revenue terms or unit
volume terms.
•
Relative Market Share = Business unit sales this year
Leading rival sales this year
•
The higher your market share, the higher proportion of the market
you control.
46. MARKET GROWTH RATE
Market growth is used as a measure of a market’s
attractiveness.
MGR = Individual sales - individual sales
this year
last year
Individual sales last year
Markets experiencing high growth are ones where the
total market share available is expanding, and there’s plenty
of opportunity for everyone to make money.
47. WHY BCG MATRIX ?
To assess :
Profiles of products/businesses
The cash demands of products
The development cycles of products
Resource allocation and divestment decisions
48. THE BCG GROWTH-SHARE MATRIX
It is a portfolio planning model which is based on the
observation that a company’s business units can be classified
in to four categories:
Stars
Question marks
Cash cows
Dogs
It is based on the combination of market growth and market
share relative to the next best competitor.
49.
50. STARS
-High growth, High market share
Stars are leaders in business.
They also require heavy investment, to maintain its
large market share.
It leads to large amount of cash consumption and cash
generation.
Attempts should be made to hold the market share
otherwise the star will become a CASH COW.
51. CASH COWS
-Low growth , High market share
They are foundation of the company and often the
stars of yesterday.
They generate more cash than required.
They extract the profits by investing as little cash as
possible
They are located in an industry that is mature, not
growing or declining.
52. DOGS
Low growth, Low market share
Dogs are the cash traps.
Dogs do not have potential to bring in much cash.
Number of dogs in the company should be minimized.
Business is situated at a declining stage.
53. QUESTION MARKSHigh growth , Low market share
Most businesses start of as question marks.
They will absorb great amounts of cash if the market
share remains unchanged, (low).
Why question marks?
Question marks have potential to become star and
eventually cash cow but can also become a dog.
Investments should be high for question marks.
54. MAIN STEPS OF BCG MATRIX
1.
Identifying and dividing a company into SBU.
2.
Assessing and comparing the prospects of each SBU
according to two criteria :
1. SBU’S relative market share.
2. Growth rate OF SBU’S industry.
3.
Classifying the SBU’S on the basis of BCG matrix.
4.
Developing strategic objectives for each SBU.
55. BCG matrix for ITC ltd.
ITC is formally known as Indian Tobacco company.
Company is in to diverse business portfolio like
Hotels, Greetings, Cigarettes, Agarbatti, Specialty
papers, Agricultural business, Cloths, Sports wear and
InfoTech business.
56. BCG matrix for ITC ltd.
High
Relative Market Share
Cash Generation
High
Market
Growth
Rate
Cash
Usage
Low
STAR
Hotels, papers,
Agri business
???
Agarbatti,
Cloths
Cash Cow
Dogs
Cigarettes, FMCG InfoTech
Low
57. BCG matrix for MARUTI SUZUKI
Models available:
Swift, Zen estillo, Swift Desire, sx4, grand vitara, A
STAR, ALTO, 800, Wagon R, Versa, Baleno, Omni
58. High
Relative Market Share
Low
Cash Generation
High
Market
Growth
Rate
Cash
Usage
Low
???
STAR
SWIFT, ZEN
ESTILO, DESIRE
SX4, GRAND
VITARA, A STAR
Cash Cow
800, ALTO,
WAGON R
Dogs
BALENO, VERSA,
OMNI
59. BENEFITS
BCG MATRIX is simple and easy to understand.
It helps you to quickly and simply screen the
opportunities open to you, and helps you think about
how you can make the most of them.
It is used to identify how corporate cash resources
can best be used to maximize a company’s future
growth and profitability.
60. LIMITATIONS
BCG MATRIX uses only two dimensions, Relative
market share and market growth rate.
Problems of getting data on market share and
market growth.
