Business Strategytk 1222352359013505 8Presentation Transcript
WHY DO GREAT COMPANIES FAIL UNPARALLED TRACK RECORD OF SUCCESS NO GAP BETWEEN EXPEC- TATIONS & PERFOR MANCE ACCUMULATION OF ABUNDANT RESOURCES OPTIMISED BUSINESS SYSTEM SUCCESS CONFIRMS STRATEGY A VIEW THAT RESOURCES WILL WIN OUT DEEPLY ETCHED RECEPIES MOMENTUM IS MISTAKEN FOR LEADERSHIP CONTENTMENT WITH CURRENT PERFORMANCE RESOURCES SUBSTITUTE FOR CREATIVITY VULNERABILITY TO NEW RULES FAILURE TO “ REINVENT” LEADERSHIP INABILITY TO ESCAPE THE PAST INABILITY TO INVENT THE FUTURE
Successful Business strategy Competitiveness Growth and profits Managers begin To believe They are best Build layers of staff To cope with growth External arrogance And internal focus On control Decline into Satisfactory Under performance Initiative and Innovation stifled Dynamics of satisfactory underperformance
Corp profile AVERAGE ANNUAL INCREASE IN STOCK PRICE- 1977-1988 6.5 Company ‘ A’ 13.6 Company ‘ B’ 45.5 Company ‘ C’ 10% 20% 30% 50% 40%
EFFORT AUDIT None E F F O R T V.HIGH
THE VIRTUOUS CIRCLE SUPERIOR DDTS/ SERVICE CUSTOMER SATISFACTION FEWER CUSTOMER DEFECTIONS HIGH PROFITS GROWTH INVESTMENT TO ENHANCE PRODUCTIVITY INVESTMENT IN HR EMPLOYEE SATISFACTION DEDICATED WORK TEAM
THREE KINDS OF THINKING PROCESS MECHANICAL SYSTEMS HINKING PROBLEM PROTOTYPE INTUTION STRATEGIC THINKING . SOLUTION PROCESS OF THOUGHT REARRANGEMENT OF ELEMENTS LOCAL OPTIMIZATION OR SEEING TREE NOT THE FOREST TRANSFORMATION OR CHANGED CONFIGURATION ANALYSIS OF ESSENCE
A HABIT CHARACTER SOW A THOUGHT AN ACTION A HABIT CHARACTER DESTINY SOW REAP SOW SOW REAP REAP REAP AN ACTION
Basic definitions Strategic management —refers to the managerial process of forming a strategic vision,setting objectives, crafting a strategy; implementing and executing the strategy,and then over time initiating whatever corrective adjustments in the vision, objective, strategy, and execution are deemed appropriate. Strategic vision —is a road map of a company’s future—providing specifics about technology and customer focus,the geographic and the product markets to be pursued, the capabilities it plans to develop and the kind of company that management is trying to create. Mission statement – is typically focused on its present business scope—”who we are and what we do;”mission statement broadly describe an organization’s present capabilities, customer focus, activities, and business makeup. Objectives —are an organization's performance targets—the results and outcomes it want to achieve. They function as yardsticks for tracking an organization’s performance and progress. Strategic objectives —relate to outcomes that strengthen an organization’s overall business position and competitive vitality
Mission statement-IBM THE INDIVIDUAL MUST BE RESPECTED EXCELLENCE & SUPERIOR PERFORMANCE MUST BE PURSUED THE CUSTOMER MUST BE GIVEN THE BEST POSSIBLE SERVICE
Tasks of strategic management SETTING OBJECTIVES STRATEGY TO ACHIEVE OBJECTIVES IMPLEMENTING AND EXECUTI;NG STRATEGY EVALUATION AND CONTROL DEVELOPING STRATEGIC VISION AND MISSION REVISE AS NEEDED REVISE AS NEEDED IMPROVE/ CHANGE AS NEEDED IMPROVE/ CHANGE AS NEEDED RECYCLE TO TASKS 1,2,3.4 AS NEEDED TASK - 1 TASK -2 TASK-4 TASK-3 TASK-5
Strategy factors internal/ external Economic Societal Political Regulatory & Community considerations Competitive Conditions and Overall industry attractiveness Company Opportunities & Threats to the Company’s Well-being The mix of considerations that Determine a company’s strategic situation Company resources Strengths/weaknesses Competencies And Competitive capabilities Personal ambitions Business Philosophies & Ethical principals To key executives Shared values And Company culture Identification Evaluation Of Strategy alternatives Conclusions About Factors On Implications For strategy Crafting Strategy That fits The Overall situation Internal factors External factors
The Business System Diamond Jobs and structure Management and measurement system Business Process Values and beliefs
ENVISIONING THE OPPURTUNITIES CREATE A VISION OF THE FUTURE ASSES THE FIRM’S FUTURE ENVIRONMENT DEFINE THE SCOPE OF INNOVATION SET STRATEGIC DIRECTIONS & PRIORITIES TO SEEDING STAGE CREATING A VISION 1. WHAT DO WE WANT TO STAND FOR AS A COPRPORATION. 2. WHAT KINDS OF PRODUCTS DO WE WANT TO OFFER. 3. WHAT KIND OF CUSTOMERS DO WE WANT TO SERVE 4. WHAT DO WE WANT OUR PRODUCTS TO MEAN TO OUR CUSTOMERS.
Formal framework for identifying growth opportunities.
Helps focus the matching process.
Goes beyond just developing lists.
Examples of Strengths
Research and development skills
Experienced management talent
Experienced sales force
***Note that all of the above are “sustainable” strengths.
Examples of Weaknesses
Includes the lack of the previous
Lack of manufacturing capacity/capability
Examples of Opportunities
Upturn in consumer confidence
Trends in consumer needs/wants
Changes in distribution patterns/consumer shopping behavior
Formulating Product/Market Strategies MARKETS Existing New OFFERINGS Existing New Diversification New offering development Market development Market penetration
Selecting Product/Market Strategies
Is the strategy consistent with organization mission, goal, and capabilities.
What are the costs and benefits of alternative strategies and their probabilities of success?
Includes an analysis of competitive structure, market growth or decline factors, and opportunity costs.
Developing Product/Market Strategies
Selecting Target Markets
Determining the Marketing Mix
Budgeting for the Strategy
Formal, quantitative expression of the organization’s plan in financial terms. What will it cost???
Important so that organization goals are attained.
Developing Reformulation and Recovery Strategies
Plans seldom go exactly as expected since they are based on assumptions regarding consumer response, competitive reaction, and environmental factors.
Important to periodically conduct marketing audits to determine problem areas.
Preplanning of reformulation/recovery strategies allows faster response times in determining remedial action (contingency plans).
Levels of Strategy
Business Strategy (competitive strategy) is concerned with how a firm competes within a particular market
Corporate strategy is concerned with where a firm competes
Levels of Strategy (cont’d)
Business-Level Strategy (competitve strategy)
How to create competitive advantage in each busness in which the company competes:
low cost leadership
focus low cost/ focus differentiation
Business (or Competitive) Strategy is concerned with the use of resources and capabilities to create competitive advantages in each of businesses or industries in which a company competes
Corporate-Level Strategy (companywide strategy)
Corporate (or Company-wide) Strategy is the overall plan for a multi-business unit company.
Corporate strategy is what makes the corporate whole add up to more than the sum of its business unit parts
Premises of Corporate Strategy
Competition occurs at the business unit level
corporations don’t compete; only their business units do
value is created at the business unit level, it is only added at the corporate level
Successful corporate strategy must grow out of and reinforce competitive strategy
Corporate Strategy inevitably adds costs and constraints to business units
Corporate overhead and costs of communication between HQ and SBUs
bureaucratic costs, costs of coordination, costs of monitoring
Shareholders can readily diversify themselves
Shareholders can diversify their own portfolios of stocks, and they can often do it more cheaply with less risk than corporations
Shareholders can buy shares at market prices and avoid paying large acquisition premiums
Implications from these Premises
Corporate Strategy cannot succeed unless it truly adds value to business units:
by providing tangible benefits that offset costs of lost independence
economies of scope in operations
economies of scale in administration and internal financing
add value to shareholders in a way that shareholders could not replicate by themselves
DECOMPOSING THE ECONOMIC ENGINE CONCEPT OF SERVED MKT -1- REVENUE & MARGIN STRUCTURE -2- CONFIGRATION OF SKILL & ASSETS -3- FLEXIBILITY & ADAPTIVENESS -4- WHAT IS OUR BASIC VALUE POSITION? HOW HAVE WE SEGMENTED THE MARKET? WHAT KIND OF CUSTOMERS DO WE SERVE? WHERE ARE OUR CUSTOMERS? WHERE IN THE BUSINESS SYSTEM WE TAKE PROFIT? WHERE DO OUR MARGINS COME FROM? WHAT HAS DETERMINED THE SIZE OF THE MARGIN? WHAT ARE THE MAJOR COST & PRICE DRIVERS? WHAT DO WE BELIEVE WE KNOW HOW TO DO WELL? WHAT KINDS OF SKILLS PREDOMINATE IN OUR INDUSTRY? WHAT IS THE TRAJECTORY OF OUR DEVELOPMENT SPENDING? HOW ALERT ARE WE TO NEW VALUE DELIVERY MODELS? HOW EASILY COULD INVESTMENTS PROGRAMME BE RECONFIGURED? WHICH CONSTITUENCIES WOULD RESIST CHANGE?
FINDING THE LIMITS OF THE CURRENT ECONOMIC ENGINE -1- -2- -3- - 4- WHAT CUSTOMER NEEDS ARE’T WE SERVING . COULD PROFITS BE EXTRACTED AT A DIFFERENT POINT IN THE VALUE CHAIN. MIGHT CUSTMER NEEDS BE BETTER SERVED BY AN ALTERNATE CONFIGURATION OF SKILLS & ASSETS. WHAT IS OUR VULNERA- BILITY TO’ NEW RULES’ OF THE GAME
SPECIFIC TASKS ASSIGNED TO “FRONT-BACKSTAGE OPERATIONS
SERVIC DELIVERY PROCESS
Porter’s model Firms in other industries offering substitute products Rivalry among competing sellers Competitive pressure created by jockeying for better market position and comptt advantage Potential new entrants Buyers Suppliers of raw materials, parts, components etc .
Means to competitive advantage Competitive advantage Strategic assets And market achievements Core and distintictive competencies Core capabilities Company resources
Product portfolio analysis Relates attractiveness and competitiveness indicators to facilitate strategic thinking suggesting specific marketing strategies to achieve a balanced mix of products that will ensure growth and profit performance in the long run
Helps a multibusiness firm to decide how to allocate scarce resources among product markets they compete in.
Procedure consists of cross- classifying each activity each activity with respect to two independent dimensions.
Attractiveness of the reference market
Firm’s capacity to take advantage of opportunities within the market
BCG GROWTH –SHARE MATRIX
There are two basic assumptions underlying the BCG matrix
Concerning the existence of experience effect. Higher market share leads to cost advantage. The largest competitor will be the most profitable at current prices. The implication of this assumption is that the expected cash flow is market share specific.
The PLC model highlights the desirability of a balanced mix of products situated in different phases of PLC. Implication is that the cash needs for products in rapidly growing markets are expected to be greater than they are for those in the slower growing ones
Multi-factor grid B Selective Development (problem children) C Offensive Growth (stars) A Disinvestments (dogs) D Low profile (cash cows) weak weak attractiveness average average high high competitiveness
Evaluation of MFPG MFPG Basically leads to same kind of analysis as BCG matrix but the major difference is that the link between the competitiveness and financial performance is lost.
Strategy levels Corporate strategy Business strategies Functional strategies Operating strategies Corporate level managers Business level general mangers Heads of functional areas within business unit or division Plant managers,geographic unit managers
Company value chain Purchased Supplies and Inbound logistics operations Sales and marketing Distribution And Outbound logistics service Profit margins Product –technology and systems development General administration Human resources management Primary activities and costs Support Activities & costs
The 7s model structures Super ordinate goals staff style Skills strategy Systems
Strategy—a coherent set of actions aimed at gaining a sustainable advantage over competition., improving positin vis-à-vis customers, or allocating resources.
Structure—org. chart showing who reports to whom.
Systems. The processes and flows showing how thing are done on day to day basis. ( info systems, capital budgeting systems, qc systems, etc.)
Style—tangible evidence of what is important, it is more concerned with behavior of management.
Staff– people in the organization, important to think of corporate demographics rather than individual personalities.
Shared values-- the value of the organization must be shared by each member.
Sills—are those capabilities that are possessed by the organization as a whole as opposed to people in it.