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Chapter.1

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  • 1. SHREE GANESHA WELCOMES YOU TO EXPLORE AND UNDERSTAND HOW TO CRAFT AND EXECUTE STRATEGY STRATEGIC MANAGEMENT
  • 2. 1 CHAPTERS 1. Business Environment 2. Business Policy & Strategic Management 3. Strategic Analysis 4. Strategic Planning 6. Strategy implementation & control 7. Reaching Strategic Edge 5. Formulation of Functional Strategy
  • 3. 2 14. Porter’s Five Forces Model – Competitive Analysis CONTENTS CHAPTER 1 : BUSINESS ENVIRONMENT 1. Introduction 2. Business 3. Objectives of a Business (Eco & Soc.) 4. Environmental Influences on Business 5. Why Environmental Analysis? 6. Characteristics of Business Environment 8. Relationship between Organization and its Environment 9. The Micro and Micro Environment 10. Elements of Macro Environment 11. Elements of Macro Environment 12. Strategic Responses to the Environment (3 types) 13. Competitive Environment (Porter)
  • 4. 3 10. Strategic Levels in Organizations (3 levels) CHAPTER 2 BUSINESS POLICY AND STRATEGIC MANAGEMENT 1. Introduction 2. Business Policy as a Discipline (1911-Harward) 3. What is a Strategy ? 4. Generic strategic alternatives (4 types) 5. The Dynamics of Competitive Strategy (5 factors) 6. Strategic Management 7. Strategic Decision Making 8. The Task of Strategic Management 9. Vision, Mission and Objectives
  • 5. 4 1. Introduction 2. Strategic Analyses 3. Situational Analysis 4. The Methods of Industry and Competitive Analysis 5. SWOT Analysis 6. Tows Matrix 7. Portfolio Analysis (BCG,Ansoff’s,GEC,portfolio) 1. Introduction 2. Corporate Strategy 3. The Stages of Corporate Strategy Formulation Implementation 4. Strategic Alternatives (Cost leadership, generic) CHAPTER 3 STRATEGIC ANALYSIS CHAPTER 4 STRATEGIC PLANNING
  • 6. 5 1. Introduction (facilitate flow of SM to all depts) 2. Marketing Strategy Formulation 3. Financial Strategy Formulation 4. Production Strategy Formulation 5. Logistics Strategy 6. Research and Development 7. Human Resource Strategy Formulation CHAPTER 5 FORMULATION OF FUNCTIONAL STRATECY
  • 7. 6 1. Introduction 2. Interrelationships between Strategy Formulation and implementation 3. Issues in Strategy Implementation 4. Organization and Strategy Implementation 5. Strategic Business Units & Core Competence 6. Leadership and Strategic Implementation 7. Building a Strategy-Supportive Corporate Culture CHAPTER 6 STRATEGY IMPLEMENTATION AND CONTROL
  • 8. 7 1. Introduction 2. Business Process Reengineering 3. Benchmarking 4. Total Quality Management (TQM) 5. Six Sigma and Management 6. Contemporary Strategic Issues CHAPTER 7 REACHING STRATEGIC EDGE
  • 9. 8 BUSINESS ENVIRONMENT Chapter 1
  • 10. 9 2. L. H. Haney “Business is a human activity directed towards producing or acquiring wealth through buying and selling activities.” Entity View Company / corporation Work View (occ/profession) Process (Buy/sell/produce) MEANING OF BUSINESS DEFINITION OF BUSINESS 1. B. O. Wheeler “Business is an institution organised & operated to provide goods & services to society under the incentive of private gain.”
  • 11. 10 Objectives of Business 1. Survival 2. Stability 3. Growth 4. Efficiency / Productivity 5. Profitability 6. Others Objective
  • 12. 11 Smooth workflow 2. Stability Least resistance in hostile environment Conservative & cautious objective Dynamic response Objectives of Business Basic objective 1. Survival Will & anxiety to remain in Business Depends upon nature of business / competence / Financial strength / Eco. conditions
  • 13. 12 4. Efficiency Productivity - Input - output ratios Utilise resources efficiently 3. Growth Qualitative- Image / product innovation / Brand image / ISO 9000 / HR / Foreign Entry Quantitative – Net worth (Total cap. + Res. + ) value / volume / assets / sales/ output / no. of people / capacity / power - R/W mat. Operational objective
  • 14. 13 6. Others Employee welfare Compliance of laws Societal welfare Stakeholders satisfaction Survival 5. Profitability Main objective Creation of wealth for shareholders Self – reliance Competitive strength Qly. Product to customer
  • 15. Business does not function in an isolated vacuum What are the interactions / exchanges between organizations & environment ? OR Exchange of information Exchange of resources Exchange of influence & power Inflow Outflow Men materials machines etc. Other Inputs Inflow Outflow 14
  • 16. Business does not function in an isolated vacuum What are the interactions / exchanges between organizations & environment ? OR Exchange of information Exchange of resources Exchange of influence & power Inflow Outflow Market condition Technological Demographical Govt. policies Activities of other co’s Advertisements Annual Reports Press releases Stock exchanges Trade unions Govt. agencies Employees 15
  • 17. 17 Exchange of resources Exchange of influence & power Inflow outflow Inflow Outflow Exchange of information Inflow Outflow 5M’s M M M M M Goods & services Values & interests Govt. Other organisations Suppler Investor Customers If a firm has command over resources, it can dictate terms Eg. Monopoly Eg. Qly. Managers 16
  • 18. 17 1. Does not exist in vacuum. 2. Bus. will thrive only if it interacts with environment. 3. Passive to environment will fade away. 4. Givers and takers 5. Opportunities and threats 6. Identity, appraise and respond 7. Monitor the environment for growth/survival and prosperity Brief Note on Environmental Influence on Business
  • 19. 18 (a) Study current environment (b) Study change in environment (c) Inputs for strategic Decision making (d) Strategic thinking for fresh view points 1. Complex - factors / events / conditions 2. Dynamic - Fast changing 3. Multifaceted - Depends upon the perception of the observer (opportunity for some while threats for others). 4. Far - reaching impact opportunities / threats 5. Pervasive – irrespective of its size, objective, nature, products etc. Characteristic of Business Environment Why ? Environmental Analysis ?
  • 20. 19 1. Diversity - All factors cannot be studied 2. Uncertainty - Technological changes 3. Complexity - Don’t rely on past Problems in understanding environment
  • 21. (SWOT Analysis) What are the various environmental influences on business? Item Description Example 1. Opportunity Opportunity is a favorable condition in the Firms ‘environments which enables it to consolidate and strengthen its position. Increase in consumer income, and growing demand for the products or services that a company provides. 2. Threat Threat is an Unfavorable condition in the Firms environment which creates a risk for, or causes damage to the Firm Emergence of strong new competitors who are likely to offer stiff competition to the existing companies 3. Strength Strength is an inherent capacity which a Firm can use to gain strategic advantage over its competitors Superior R& D skills which can be used for new product development so that the company gains competitive advantage Huge production infrastructure leading to mass production & economies of scale. 4. Weakness Weakness is an inherent limitation or constraint which creates a strategic disadvantage. Over dependence on a single product line or single Customer or Supplier which is potentially risky for a Firm in times of crisis 20
  • 22. SWOT Analysis 21  Examples 1. Godrej 2. State Bank of India 3. L & T 4. HUL etc. 5. R & D 6. Dependence on a single product (weakness) 7. Growing demand 8. New strong competitor (weakness)
  • 23. Q. What are the board categories or components of environment ? 22 Categories environment External environmentInternal environment Micro Macro (S + W) (O + T)
  • 24. Q. What are the board categories or components of environment ? 23  MICRO ENVIRONMENT (Components) 1. Micro Environment is the immediate environment 2. Also called Internal Environment or Task Environment 3. Micro Environment is related to small area or immediate periphery of an Firm 4. Micro-Environment affects business and marketing in the day to day operational level 5. Its refers to factors within the origination 1. Organisation 2. Suppliers 3. Customers 4. Competitors 5. Market 6. Intermediaries Features of Micro Environment
  • 25. 24 MACRO-ENVIRONMENT 1. Demographic environment 2. Economic environment 3. Political legal environment 4. Socio-cultural environment 5. Technological environment 6. Global environment Element of Macro Environment A. General Env. B. External to the firm C. They provided opportunity or pose threats D. They are beyond the control and influence of the organisation. E. They exert powerful influence on the organisation. Features of Macro Environment
  • 26. Q. Write short notes on Demographic environment. 1. Age 25 2. Income 3. Education 4. Sex Ratio 5. Employment status 6. Living standard 7. Wage Structure 8. Growth rate
  • 27. Economic Environment. 26 Eco System Eco Conditions Eco Policies 1. General situation in the region and the nation 2. Strength and size of the market 3. Key economic factors to be considered are - (a) Rates : (b) GDP Aspects : (c) Customer related : (d) External Trade : (e) General : 4. Level of political morality, 5. Law and Order situation,
  • 28. 6. Public attitude towards business, 7. Specific legal enactments and framework in which the enterprise has to function, 8. Specific legal enactments and framework in which the enterprise has to function, 9. Degree of effectiveness with which laws are implemented, 10. Government policies (fiscal, monetary, industrial, labour and export-import policies), 11. Extent and nature of governmental intervention in the economy and the industry. 12. Purposefulness and efficiency of Governmental agencies. 27
  • 29. Q. Explain the various aspects of Technological Environment. 1. Technology and Business are highly inter-related. 2. Technology influences the business operations. 3. Factors to be considered in the Technological Environment are - 4. Opportunities arising out of technological inventions, 5. Risk and uncertainty of technological development, 28 i) The prevalent technique / technology ii) The future technological needs iii) The R & D needed
  • 30. 6. Role of R & D in a country and Government’s R & D budget, 7. Technologies used by the Company (Manufacturing and Information Technologies), 8. Sources of Technology (Internal or External / foreign collaboration 9. Investment in Technology, 29
  • 31. 31Q.How organisation respond to the environment (OR) What are the strategic responses to environment. 3 Types of Responses Least Resistance Proceed with caution Dynamic Response Just to survive stability strategy. Non Ambitious approach. Monitor changer and Proceed consciously. Anticipate changers and change strategies Aggressive response. Highly powerful. Convert threats into opportunities. Confident
  • 32. Q. What are the reasons for Globalization ? [or] What are the advantages of Globalization ? 1. Rapid shrinking of time and distance 2. Global Market 3. Cheaper source of Raw Materials 4. Foreign investment 5. Lower Transportation Costs 6. Global Technology 7. Increasing emphasis 8. The rise of service sector 32
  • 33. Q. What are the effects / manifestations of Globalization? 1. Global locations : 2. Inter-linked and inter-dependent international environment: 3. Lowering of Trade barriers : 4. Infrastructure : 5. Privatization : 6. Entrepreneurship : 7. Mobility of skilled resources : 8. Efficiency and Quality : 9. Regional Blocs : 33
  • 34. 34MAICHAEL PORTER’S FIVE FORCES MODEL FOR COMPETITIVE ANALYSIS Potential development of substitute products Potential entry of new competitors Bargaining power of suppliers Bargaining power of consumersRivalry among Competing firms Harvard Business School Prof.MAICHAEL PORTER
  • 35. 35 Rivalry among competing firms 1) Most powerful 2) Everyone has strategy to compete 3) Your Strategy must have competitive advantage 4) Tool is Retaliatory or Counter moves such as : - a) Lowering Price b) Add on features c) Extended warranty b) Increased Advertising e) Set up E- commerce sites ( MTNL) (Airline - Hotel) (3 year on Spark, G.Motors) (“What an Idea sir ji”) ( Make My Trip/Foreign Tour Amazon watches) 5) Intensity is higher as competitors increase 6) Rivalry increases when consumers can switch over easily (cell phone – number portability) 7) Paves the way for more Mergers and Acquisitions 8) Else, Profit declines 9) Industry becomes un attractive (1)
  • 36. 36 Potential entry of new competitors Intensity of competition increases when a) Ind. Attractiveness increases (e.g. 1. cellular phones 2. shopping malls)b) When new entrants appear What Prevents Competitors ? [ Barriers to entry]1) Technology 2) Economies of scale 3) Experiences 4) Customer loyalty 5) Brand image 6) Huge capital 7) Distribution channels 8) Raw materials 9) Potential Saturation of Market (2)
  • 37. 37 Potential development of substitute products(3) Plastic containers Vs Glass and Aluminum Paper glasses / cups Vs Glass / plastic/cups PVC Vs steel Disposable Vs Conventional Durable Soft squeeze tubes Vs Metal tubes 1) So, be conscious about your pricing 2) Else, consumer may switch over
  • 38. 38 Bargaining power of suppliers(4) 1) Concentration on suppliers 2) Alternate source of supply 3) Switching over cost is cheap/less. 4) supplier resorting to forward integration 5) Customer is least important to the supplier. (Indian Oil) (because of specialization) (Raymond wollen Mills Ltd.) (without cartel)
  • 39. 39 Bargaining power of consumers(5) 1) Concentration of Buyers 2) Alternate sources of supply. 3) Switching over cost is cheap/less 4) Threat of backward integration 5) Availability of substitutes (Opp. Of 4 - 1) (Opp. Of 4 - 4) (Opp. Of 4 - 3) What did you learn from Michal Porter ? Collective strength of the above 5 forces to determine Weather current business is attractive or not ?
  • 40. 40 Concept of co-operation 1. Individually 2. Collectively (OPEC) 3. Forms 1. cartel 2. Same family control / Tatas / Birlas 3. Brand Tie - ups Godrej - HUL Colgate - HUL ITC Agarbatti - Match Box (Ship) 4. KIERETSUS 1. Co-operative Networks 2. Related Industries 3. Allow competition 4. Interlocking of Capital 5. Common Board of Directors (ITC - Oberoi) 6. Independent Companies 7. Preference for members in business 8. Different from Coglomerates 9. No Agreement to share information 10. But share activities such as purchases, distribution, etc.
  • 41. 41 Political and Legal Environment 1) State of political development 2) Degree of politicalisation of business issues (1. Valentine Day 2. Coke controversy 3. sons of the soil 4. language issues) 3) Level of Political Morality ( Nano – in west Bengal) 4) Law and order situation 5) Political stability ( Industrial Revolution in England) 6) Political ideology of the Ruling Party 7) Efficiency of government Agencies 8) Government policies – Industrial, Monetary, Export-Import policies
  • 42. 42 PESTLE ANALYSIS (Acronym for) P - Political E - Economic S - Socio - Cultural T - Technological L - Legal E - Environmental
  • 43. Shared Vision v/s Vision Shared People in organisation connect themselves with the vision of their organisation. People bring vision of the organisation close to their hearts and minds. Creates commonality. Brings coherence to diverse activities. Compliance is a commitment. Top Management imposes vision of the organisation on the people in the organisation, Compliances demanded. Brings diversity. Incentives and penalties are introduced. Commitment is lacking. Shared Vision is better than Vision Shared Lacks coherence.

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