STRATEGIC MANAGEMENT FOR INTRAPRENEURS by : DR. T.K. JAIN AFTERSCHO ☺ OL centre for social entrepreneurship sivakamu veterinary hospital road bikaner 334001 rajasthan, india FOR – CSE & PGPSE STUDENTS (CSE & PGPSE are free online programmes open for all, free for all) mobile : 91+9414430763
My word..... My purpose here is to give a few ideas about strategic management for intrapraneurs. Read a lot. Be an intrepreneur, change the society, change the world. Go with positive spirit. Please pass this presentation to all those who might need it. Let us spread knowledge as widely as possible. I welcome your suggestions. I also request you to help me in spreading social entrepreneurship across the globe – for which I need support of you people – not of any VIP. With your help, I can spread the ideas – for which we stand....
What is strategic management? How do you decide the future of your company? How do you decide the activities that your company will do in next 5 /10 /15 /20 years ?
How to formulate strategy? Before you formulate strategy – know about your enviroment, prepare your mission, vision then prepare your objetives then choose the strategy out of a wide variety of options available to you.
Who undertakes strategic management? Top management board of directors consultants Advisors Strategy consultants
How to have a good team to formulate strategy? Have people from diversified backgrounds have those persons who have wide experience and better understanding of economic, political, social and technological trends Take up views of industry leaders / experts about what is going to be the direction of the world.
How to frame strategy ? Undertake SWOT analysis prepare detailed projections about future Undertake trend analysis Collect data about industry, firms, competitors, customers, suppliers and important stakeholders Prepare long term vision of the company (what you want your company to be after 10/20/30 years)
Is strategy rigid or flexible ? Strategy is for long term – so it has to be stable one. For short term, we have tactics – which keep changing with the changing environment. Strategy is based on overall policy of the company, which has to be a stable one (of course, with change in environment, you may have to change it also).
What is environmental analysis ? Before formulating strategy, study the environment thoroughly. Strategy cant be formulated in vacuum. There are 2 components of environment : 1. macro (overall economy, world) 2. micro (each unit individually) we can also call it – 1. external 2. internal environment analysis
What is environment? environ=what surrounds you The forces surrounding you – for example, if you are a company in finance, the overall financial policies of the government, RBI, SEBI, other bodies – is all that we call as environment similarly, if you are working in insurance sector, then the environment consists of the rules regulations of government, IRDA, etc.
What is the best way to analyse environment ? Go systematic – write down all the forces – with their positive or negative impact the forces are : PESTLE p= political forces (government etc) e=economic (RBI policy, Budget, etc.) s=society (social trends) t=technology (change in technology) le=(legal forces, law, etc.)
Example : Environment analysis of Anant Raj Industries Ltd. P = stable government, so real estate prices likely to go up E = high inflation rate cause of worry, but liberal economic policies & VI pay and other benefits will create demand for housing S=nucleas family system, changing social values will give philip to housing T=low cost housing technologies are developing – which will reduce cost of construction L=legal system is being change in favour of property developers – thus it is good
Environmental analysis .... The previous slide give only a small number of cases of environmental analysis. In reality, the environmental analysis will go into many pages – as it is very complex and detailed analysis is required before formulating a strategy
WHAT IS STRATEGY ? Strategy is a unified comprehensive course of action which you plan for achieving your objectives considering the business environment, your resources and your capabilities. Strategy is for long term and enables you to achieve your goals.
What are the types of strategies? There are 3 levels of strategy : 1 corporate level 2. business level 3. functional level
Corporate level strategies It is framed at corporate level. If you are working in a group, there are many units in that group, you have to formulate strategy for the group as a whole.
Business level strategy It is formulated at each unit level (SBU level) SBU = strategic business unit there may be different strategy in corporate level and business level. For example : you may go for expansion in corporate strategy, but may go for retrenchment of an individual unit (which might not be growing).
What is SBU? A strategic business unit is one unit of the company, which has the power to take strategic decisions. These decisions are about the products the company can offer, the market the company can serve and the technology the company can use. These decide the future of the business definition of the company
Exmaple of SBU? Birla group is a diversified corporate group. It has many SBUs. For example, Hindalco is one SBU of Birla group. It can formulate its own strategies within the corporate strategies formulated by the group as a whole.
What is business definition? What needs are you fulfilling (through your products / services)? What market are you serving ? (or who are your customers) What technology are you using (or how are you delivering delight to the customers?)?
Functional level strategy ? It is formulated at functional level. Here we are looking at the functions of the organisation and define each functional objectives and strategies : for example : for marketing deparment, the strategy may be to get highest market share for finance department : the strategy may be to have highest ROI.
What are different functions ? There are different functions that are performed by the company : 1. marketing 2. finance 3. production / operations 4. accounting 5. human resource management 6. information technology strategy at each of these level is called functional strategy. A company can have different functions than those listed here.
What are the grand strategies ? There are 4 types of generic strategies : 1. expand 2. diversify 3. stability 4. mix of above three strategies
Porter's classification of strategies There are three types of strategies : 1. focus 2. differentiation 3. cost leadership
What is FOCUS ? Focus on niche market / small segment of market put all your efforts to develop the services of this small market segment example : Mercedes / BMW focus on premium segment
What is differentiation ? Differentiate your products from your competitors example : Dettol is better germ killer than other soaps in the market
What is mission of the organisation? The ultimate goal is the mission of the organisation. Mission is defined in terms of the ultimate services the company wants to fulfill. It is similar to purpose. Example : Apollo hospital has the mission of providing good quality health care facilities to people
What is vision ? Where do you want to see your organisation after 5 / 10 / 15 years. Vision means what you visualise for your organisation in the long term. Vision is defined in terms of the future status of the organisation.
What is the objective of the organisation? The end state that the organisation wants to achieve in the long term is called objective of the organisation. Example : After 10 years, Tata Motors want to be the number one commercial vehicle maker in the world.
What is strategic Intent? Intent = desire / aspiration / dreams no progress without DREAMS here we want concrete, well defined, written and realistic dreams. These dreams are spelled out in terms of objectives, goals, mission, vision and purpose. Thus Strategic Intent includes all the terms that we have discussed so far.
What are steps in strategy formulation ? Formulate your mission / purpose undertake environmental analysis undertake analysis of competitors, industry scenario and identify your competencies look into different strategic choices for you select the best strategy decide about strategy, objectives formulate implementation plan review your strategies and your progress.
How to undertake environmental analysis ? There are two environments : external and internal you have to undertake thorough PEST Analysis for external environment.
What is PEST ? Political Economical social Technological environment study the trends, processes, and directions so that you may formulate appropriate strategy
What is SWOT? S= strengths W= Weakness O = Opportunity T=Threat It is also called TOWS matrix prepare this so that you know about your external environment
What is SAP? Her SAP =Strategic Advantage Profile Here we prepare a profile about how our company is superior in comparison to other companies. Here we are looking at the environmental aspects and preparing the strategy which can relate our strengths to our opportunities. It enables us to focus on our competencies (strenghts) and how to use them.
What is crucial in behavioural implementation of strategy? People must understand, imbibe and follow the strategy. For this, change the leadership style, culture, and overall environment in the company.
What are the most popular options ? INTEGRATION AND DIFFERENTIATION (these are not mathematics terms here). Integrate = connect yourself well with your suppliers, customers and entire value chain Differentiate = identify how you are different from your competitors and how you can be superior in delivering products / services in comparison to your competitors. Try to see that this differentiation is clear to your customers also (not just to you alone in this world).
How to set objectives? Involve people in strategy objective formulation ensure that people set their own objectives and become responsible for achieving them. The objectives should be concrete, verifiable, reviewable, practical, and achievable. The objectives should be written down in BOLD.
objectives... We follow multiple objectives we follow a hierarchy of objectives (with clear priorities) the objectives give us direction that we need. Objectives should be understandable, time bound, clear, and expressed in terms of achievable deadlines.
What is turnaround ? Converting sick unit into a profitable unit is called turnaround. Turnaround strategy focuses on cost reduction, process improvement, better networking etc.
How do you undertake strategic analysis ? Undertake PESTLE analysis undertake PORTER'S 5 forces analysis undertake MCKINSEY 7 S analysis undertake SWOT (or TOWS) analysis generate strategic ALTERNATIVES other tools
PORTER'S 5 FORCES 1. Suppliers 2. customers 3. substitute products 4. potential entrants 5. competitors A CLOSE STUDY OF ALL THESE FORCES WILL HELP YOU IN FORMULATING YOUR STRATEGIES
BARGAINING Suppliers, customers, have bargaining power. Porter's model presents us an analytical perspective. If you working in large scale, you have advantage. If you have good network with suppliers, you have advantage. It is also important to study the switching cost of these parties – if they want to switch over to new parties. Before formulating your strategy, you have to understand your 5 forces, so that later you dont face any problem.
How to undertake internal resource analysis ? List down all internal resources identify your unique capabilities, competencies and your superior delivery methods. Identify your CSF (critical success factors) undertake VALUE CHAIN ANALYSIS use BALANCED SCORECARD ANALYSIS
What is CSF? Every business requires some key capabilities for its success. Identify the capabilities that you have and which can enable you to succeed in the business. Example : heritage hotels in Bikaner are successful due to their unique looks,folk art, cultural symbols, art and craft.
Some examples of CSF ? Better organisational culture Lower employee turnover Lower production cost Better quality Locational factors (like Bhujia of Bikaner) Better training of employees Younger staff
What is Value Chain Analysis ? Identify the value chain in each product. Identify the contribution of each element in the value chain. Value chain = the complete chain of intermediaries from origin to consumption. Example : for carpets – the value chain starts from sheep rearers, wool traders, and includes thread makers, carpet weavers, marketers and ends at the last retail store that sells the carpet.
Example of value chain analysis Look at Bikaji = leader in Bhujia and Sweet industry from Bikaner look at their inbound logistics (wherefrom they procure raw material) how do they process the raw material look at their outbound logistics (whom they supply) how do their marketing / distribution department work ?
What is balanced score card? There are 4 factors in balanced scorecard : 1. Financial component = contribution in terms of profitability 2. Organisational component : = leadership, innovation, change management 3. Customers = new customers added, and services to existing customers 4. operations = product development / improvement etc.
Benchmarking It is also a good tool for study of the organisational processes. Compare your processes with an icon. You can set your performance standards and try to achieve those standards. Example : an MNC benchmarked itself with SEWA in terms of commitment of employees and dedication. It was very successful in its efforts.
How to undertake benchmarking? It requires top management support there must be agreement between the two companies benchmarking involves sharing, ideas and opinoions employees must be willing to learn and change.
Other methods.... There are many other methods like : qualitative assessment – find overall feel of employees, capture their subjective assessments try to identify the sentiments of employees and frame objectives and strategies, which can involve employees undertake surveys, identify the gaps. Use tools like OD interventions, identify the areas where you can develop the organisations.
How to undertake SWOT ? Identify your strengths – note it down – relate it to the opportunities identify your weaknesses – try to develop your capabilities in these sectors opportunities – undertake brainstorming, look for untapped potential, identify hidden opportunities threats – explore them and prepare for them.
McKensey's 7 S framework There are 7 interrelated elements : 1. System 2. Structure 3. Strategy 4. Style 5. Shared values 6. Staff 7. Skills
Hard v/s soft elements in Mckinsey framework Hard elements : Structure, System, Strategy Soft elements : shared values, staff, skills, style
Interrelation of 7 S Each of the element influences other elements. Thus if you change staff, skills will also change similarly, if you change strategy, structure will also change (so change in one will create change in remaining 6)
What is experience curve ? When a company gains expertise, over a period of time, it is able to bring better production, better quality and is able to reduce cost of production. Thus there is experience curve. Experience curve relates experience to performance,. However, in turbulant times, there is only a little advantage of experience, when the industry is experiencing radical shift in technology, processes and work systems.
How should you differentiate ? The most useful competitive strategy is differentiation. But how do you achieve it : 1. need based (identify unmet need of customers and differentiate for those needs) : example : close up – introduced mouth freshner tooth pastes 2. ULIP based insurance plans – introduced by Birla Sunlife (profit + insurance)
What is ansoff's matrix? A company can have 4 possibilities for growth – these 4 possibilities are explained in Ansoff's matrix as under : 1. Market Penetration 2. Production development 3. Market development 4. diversification
Market penetration? Market penetration means to expand in the existing market by lowering the prices and by increasing the volume. Thus penetration here involves same product and same market. Thus market penetration means – more products to be sold in the same market by lowering prices. Example : Reliance
Product development ? When you introduce new product in the existing market, it is called product development
Market development When you introduce new market with existing product,
What should be the ultimate success strategy of a company? There are two dimensions : 1. focus 3. differentiation. A company has to decide whether to go for focus (which means the market share is less) or differentiation (which means mass marketing, so market share is larger). Thus these two dimensions are the deciding factors. Every company should go for low cost strategy – it is always successful – as the customer can easily relate the value addtion and compare it to price paid.
Why do strategies fail? Some times differentiation is not clear and so the customers are not able to understand the differentiating element and relate it to their needs and requirements. Sometimes the product / service is not clear and many people think that it is not for them. What is required that the customers should believe that the product / service is for every one (in case of differentiation).
Advantages of differentiation? Customer is prepaid to pay premium price Sustainable competitive advantage (so long as competitors dont copy it). Increasing brand loyalty Better image Increased sales – due to superior positioning in the minds of the customers.
Intangible v/s Tangible differentiating factors It is easier to convince the customer with tangible aspects of differentiation. For example, design, looks, style, Packaging etc. Are easity to demonstrate Example: Sleek Kitchen Intangible aspects can be useful for high value premium products which are targetted towards intellectual class, and customers spend a lot of time in comparing products. Example : Hallmark
What is the difference between forward and backward integration? Integration means toconsolidate forward integration = make those things which your customers are doing. Example : if you are making textile thread – now make textile cloth, if you are making cloth, now make garments backward integration: go for doing those things which your supplier is doing – example : reliance went from cloth to polyester, to petrochem, to refinery to exploration.
Why do companies go for mergers? There are 4 grand strategies : 1. expand 2 diversify 3. retrench (4: stability - do what you are doing – jut improve it). First two are the most preferred strategies for the companies – for them there are two options.
How to grow? There are 2 options : 1. organic growth – expand your existing products, markets and services - naturally – will require long patience 2. inorganic growth – acquire running companies – go for mergers and acquisitions – faster and easier road to growth
Inorganic growth.... Mergers and acquisions are the fastest routes to grow. Companies go for mergers / takeovers / acquisitions because they realise that this is the best route to grow. Inorganic growth has many challenges also –
Challenges in mergers / takeovers etc. 1. culture clash – when you takeover a company, there is a possibility that the culture of the two companies dont match 2. when you takeover a company, there is a possibility that the new company is not able to absorb the culture / practices / work systems of the existing company
Why mergers / acquisitions fail ? Most companies fail to pedict the challenges in mergers and acquisitions.
What is horizontal integration? When a company integrates with another company of similar type, it is called horizontal integration. Example : a tea making comapany (let us call Tata) takes over another tea making company (let us call Tetley) and integrates this new company, it is horizontal integration.
What is keiretsu? A keiretsu is a grouping or family of affiliated companies that form a tight-knit alliance to work toward each other's mutual success. The keiretsu system is also based on an intimate partnership between government and businesses. It can best be understood as the intricate web of relationships that links banks, manufacturers, suppliers, and distributors with the Japanese government
What is BCG model ? This model is given by Boston Consulting Group. In this model, there are 2 variables : 1. market share 2. growth rate. There are 4 quaduples (4 possible positions) : 1. dog 2. cash cow 3. star 4. question mark
What is dog? If you are in low market share and have low growth rate- better sell out this company. This is called a dog. It should be divested immediately.
What is cash cow? If you are in high market share but having low growth rate, you are in cash cow. Reap the rewards dont look for a brigher future, so whatever profit you can draw out of this business take out.
What is star ? If you are in high growth, high market share business, you are in star. Continue with it. This is the best market position. Example : Lenovo Laptops. (this laptop is in good demand now, so market share is good, the demand of laptops will continue to grow fast – so it is high growth).
What is question mark? If you are in high growth market, but the market share is very low, you are in question mark. You dont know about the future, but if it consolidates, you will be a star. It needs good investments from your side. It gives indication of brighter future.
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