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Strategic management session 1

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Introduction to Strategic management - MBA class in Christ Institute of management, Bangalore - June 2013

Introduction to Strategic management - MBA class in Christ Institute of management, Bangalore - June 2013

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  • Slide 13,35 Groups – Industries –Hotel ( Taj /mahindra holidays),Two wheeler ( Bike market), Two wheeler (Scooter market), Banks ( HDFC vs SBI), Four wheeler ( Maruti Vs Tata Motors), Apollo Hospitals, Mahindra and Mahindra, HDFC,
  • http://blip.tv/serious-eats/domino-s-dough-production-factory-4085597
  • Rs 1,56,670 per employee per year
  • Brand positioning Market reach and expansion Employee motivation Back end infrastructure (production) Operational efficiency New product development
  • the operation and logistics part of the 30 minute delivery that from USP has become a UBP for the brand. Mr. Kaul recalled the biggest challenge in implementing this meant that the store had to say no to business. He told for a store manager this would have been a precarious situation as on one hand there were sales targets and on the other hand this meant people who were outside the 2.5 km range (or Lakshman Rekha in company parlance) the store owner was supposed to say no. The company trained its store staff on lines military training to ensure a strong store discipline. He told that even today once in the year the senior management in supposed to work in the store to remember this regime and also understand consumers better. Another part was to celebrate the first free delivery to get the stigma out of free delivery and also wearing a badge that said “I won’t be fined for delivering free”, thus taking the loss on company’s books. This also discourages any practice where people may still pay out of pity. Upon being asked how much the loss would was he indicated it to be around 1% of all pizza’s delivered were free.
  • “ Exceptional people, all with a shared goal : to be the best pizza delivery company in the world
  • Domino’s Pizza is committed to an inclusive culture which values the contributions of our customers, team members, suppliers and neighbors. The cornerstones of our diversity philosophy will be clearly communicated to each team member, with a promise that we are committed to providing an environment in which:Team members are treated fairly. Team members are recognized and rewarded based on ability and merit for their contributions. Team members have equal access to opportunity for growth and advancement. Team members respect each other and are free from harassment, discrimination, and intolerance. The management and development of our team members is recognized as crucial to the success of the business.”
  • Transcript

    • 1. WELCOME TO COURSE ONSTRATEGIC MANAGEMENTSession 1S G Raja Sekharan
    • 2. Strategic management course planSession 1 Introduction and overview to SMSession 2/3 External and Internal environmentSession 3/4 Building SCA though value chainsSession 5 Growth through Integration, Diversification,Outsourcing and M&ASession 6 Change managementSession 7 Tailoring strategies to fit specific industry &company situationsSession 8/9 Strategy Implementation and controlSession 10 Industry interaction
    • 3. Strategic management course plan (Hill andJones)Session 1 Introduction and overview to SM –Chapter 1Session 2/3 External and Internal environment–Chapters 2&3Session 3/4 Building SCA though value chains –Chapter 4Session 5 Growth through Integration, Diversification,Outsourcing and M&A – Chapters 5, 6, 9 &10Session 6/7 Competing in foreign markets and Tailoringstrategies to fit specific industry & companysituations – Chapters 6,7 & 8Session 8 Strategy execution – building resource strengthsand organizational capability and Managinginternal operations -Chapters 12 &13Session 9 Industry interactionSession 10 Culture, leadership and ethics – Chapter 11
    • 4. SESSION 1INTRODUCTION ANDOVERVIEW TO SM
    • 5. Today’s agendaIntroduction to concept of Strategy and why isit importantExplain how strategy get’s formulated incompaniesIntroduce the idea of Vision, Mission, Values(VMV) and GoalsForm student groups and allocate somegroups their CIA 1 tasksWhat caught my eye last week – just afterbreakDuring break – I would like to meet a few ofyou one to one
    • 6. HOW MANY OF YOU WANT TOBE A CEO?LET US STEP INTO THESHOES OF AN EXISTING CEO?AJAY KAUL
    • 7. HOW DOES THE COMPANYDELIVER?
    • 8. The key areas of focus JubilantFoodworksBrand positioningMarket reach and expansionEmployee motivationBack end infrastructure (production)Operational efficiencyNew product development
    • 9. 1 | 10
    • 10. Mar 12 Mar 11 Mar 10 Mar 09 Mar 08 Mar 07 Mar 06 Mar 0512 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mthsIncomeTotalIncome 1,018.52 767.05 475.9 313.65 235.6 154.67 108.27 79.73ExpenditureRawMaterials 318.22 207.38 127.59 86.5 53.21 35.68 25.23 19.59Power &Fuel Cost 47.56 34.07 23.28 17.65 0 0 0 0EmployeeCost 196.22 135.53 80.46 55.57 42.51 25.57 16.24 12.47OtherManufacturingExpenses 4.12 3.28 2.42 1.61 0 0 0 0Selling andAdminExpenses 184.75 213.52 140.16 95.15 24.88 16.71 11.57 6.9MiscellaneousExpenses 75.42 51.17 35.22 23.34 88.65 59.4 43.91 33.54Preoperative ExpCapitalised 0 0 0 0 0 0 0 0TotalExpenses 826.29 644.95 409.13 279.82 209.25 137.36 96.95 72.5
    • 11. Mar 12 Mar 11 Mar 10 Mar 09 Mar 08 Mar 07 Mar 06 Mar 0512 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mthsOperatingProfit 192.85 120.54 66.94 34.19 26.85 18.02 11.65 8.06PBDIT 192.23 122.1 66.77 33.83 26.35 17.31 11.32 7.23Interest 0 0.34 9.15 8.91 5.81 3.4 2.47 2.04PBDT 192.23 121.76 57.62 24.92 20.54 13.91 8.85 5.19Depreciation 37.57 29.34 24.35 16.95 12.11 7.95 6.51 5.77OtherWrittenOff 0 0 0 0 0 0 0 0ProfitBeforeTax 154.66 92.42 33.27 7.97 8.43 5.96 2.34 -0.58Extra-ordinaryitems 0.77 0 -0.22 0.13 0 0 0 0PBT (PostExtra-ordItems) 155.43 92.42 33.05 8.1 8.43 5.96 2.34 -0.58Tax 49.79 20.43 0.08 0.8 0.67 0.37 0.33 0ReportedNet Profit 105.64 72 32.97 7.3 7.76 5.58 2.02 -0.58
    • 12. Thefocusareasfor thesenior management
    • 13. Copyright © Houghton Mifflin Company. All rights reserved. 1 | 14
    • 14. The key areas of focus forJubilant FoodworksBrand positioningMarket reach and expansionEmployee motivationBack end infrastructure (production)Operational efficiencyNew product development
    • 15. “Strategy is a choiceon how tocompete.”- Michael Porter
    • 16. What is strategyA company’s strategy is management’sgame plan for• how to grow the business,• how to attract and please customers,• how to compete successfully,• how to conduct operations, and• how to achieve targeted objectives.
    • 17. What is strategyTypically, a company’s strategic choicesare based• partly on trial-and-error organizationallearning about what has worked and whathas not,• partly on management’s appetite for risktaking, and• partly on managerial analysis and strategicthinking about how to best proceed, givenall the prevailing circumstances.
    • 18. Strategy aims at creatingSuperior performanceSustainable competitive advantage
    • 19. Strategy aims at creatingSuperior performance• Company’s profitability relative to that of othercompanies in the same or similar business or industry• Profitability ratios that measure these are –» Return on equity (ROE = reported net profit / net worth) and» Return on capital employed (ROCE = reported net profit /Totalliabilities)• Maximizing shareholder value is the ultimate goal ofprofit making companies
    • 20. Strategy aims at creatingSustainable competitive advantage• attractive number of buyers prefer itsproducts or services over the offerings ofcompetitors; and• when the basis for this preference isdurable.The profitability ratios are same orimproving over time
    • 21. ROE and ROCE of JubilantFoodworksMar 12 Mar 11 Mar 10 Mar 09 Mar 08 Mar 07 Mar 06 Mar 05ReportedNet Profit 105.64 72 32.97 7.3 7.76 5.58 2.02 -0.58Networth 299.55 191.69 117.43 23.96 16.08 8.31 2.73 0.71ROE 35.27% 37.56% 28.08% 30.47% 48.26% 67.15% 73.99% -81.69%Mar 12 Mar 11 Mar 10 Mar 09 Mar 08 Mar 07 Mar 06 Mar 05ReportedNet Profit 105.64 72 32.97 7.3 7.76 5.58 2.02 -0.58TotalLiabilities 299.55 191.69 126.02 106.41 67.75 44.35 29.93 28.27ROCE 35.27% 37.56% 26.16% 6.86% 11.45% 12.58% 6.75% -2.05%
    • 22. Strategy and quest for competitiveadvantageMost companies realize that winning adurable competitive edge over rivalshinges more on building competitivelyvaluable expertise and capabilities thanit does on having a distinctive product.Remember themanagement focuson brandpositioning, market reach, employeemotivation,back end infrastructure, operational efficiencyand new product development
    • 23. Strategy and quest for competitiveadvantage can be through greater product innovation capabilities than rivals better mastery of a complex technological process, expertise in defect-free manufacturing, specialized marketing and merchandising know-how,
    • 24. Strategy and quest for competitiveadvantage can be through global sales and distribution capability, superior e-commerce capabilities, unique ability to deliver personalized customerservice, or anything else that constitutes a competitively valuablestrength in creating, producing, distributing, ormarketing the company’s product or service.
    • 25. Strategy Is Partly Proactive and PartlyReactive The biggest portion of a company’s current strategyflows from• previously initiated actions and business approaches that areworking well enough to merit continuation; and• newly launched managerial initiatives to strengthen thecompany’s overall position and performance.This part of management’s game plan is deliberateand pro-active. A portion of a company’s strategy is always developedon the fly. It comes about as a reasoned response tounforeseen developments and this part of game planis reactive.
    • 26. Strategy is always Work in Progress Crafting a strategy involves stitching together aproactive/intended strategy and then adapting firstone piece and then another as circumstances changeor better options emerge – a reactive/adaptivestrategy. A Company’s strategy emerges incrementally and thenevolves over time The task of crafting a strategy is a work in progress,not a one-time event.
    • 27. Intended, Emergent & RealizedStrategies Intended or Planned Strategies• Strategies an organization plans to put into action• Typically the result of a formal planning process• Unrealized strategies are the result of unprecedentedchanges and unplanned events after the formal planning iscompleted Emergent Strategies• Unplanned responses to unforeseen circumstances• Serendipitous discoveries and events may emerge that canopen up new unplanned opportunities• Must assess whether the emergent strategy fits thecompany’s needs and capabilities Realized Strategies• The product of whatever intended strategies are actually putinto action and of any emergent strategies that evolve
    • 28. A business model encompasses how the company will:The concept of Business Model• Select its customers• Define and differentiateits product offerings• Create value for itscustomers• Acquire and keepcustomers• Produce goods orservices• Deliver those goods andservices to the market• Organize activities withinthe company• Configure its resources• Achieve and sustain ahigh level of profitability• Grow the business overtimeEvery industry hasafew commonly used businessmodels
    • 29. Different Business models inrestaurantsChain restaurants vs IndependentrestaurantsFranchised modelQuick service restaurants vs Fine diningCentralized kitchen vs local cookingCafé model
    • 30. The Relationship Between a Company’sStrategy and Its Business ModelA company’s strategy relates broadly to itscompetitive initiatives and businessapproachesThe business model zeros in on whether therevenues and costs flowing from the strategydemonstrate business viability.Strategy of Jubilant Foodworks - Invest inbranding, geographical growth and same storegrowth, new offerings, employee motivationetc
    • 31. The Relationship Between a Company’sStrategy and Its Business ModelA company’s strategy relates broadly to itscompetitive initiatives and businessapproachesThe business model zeros in on whether therevenues and costs flowing from the strategydemonstrate business viability.Business model look at how to make profitsdespite having high rentals in the prime areasin India and offering great food at a price pointof Rs 200 per person?centralized purchasing and manufacturing,home delivery, standard menu, focus on costs,operational efficiency and volumes.
    • 32. To get the strategy right – the companyneeds to focus on three tasks Strategic Leadership• Task of most effectively managing acompany’s strategy-making process Strategy Formulation• Task of determining and selecting strategies Strategy Implementation• Task of putting strategies into action to improve acompany’s efficiency and effectiveness
    • 33. To get the strategy right – the companyneeds to focus on three tasks Strategic Leadership• Task of most effectively managing acompany’s strategy-making process Strategy Formulation• Task of determining and selecting strategies Strategy Implementation• Task of putting strategies into action to improve acompany’s efficiency and effectiveness
    • 34. Attributes of good strategicleadership Vision, eloquence, and consistency Being well informed Ability to foresee the future trends Willingness to delegate and empower Emotional intelligence - Self-awareness,Self-regulation, Motivation, Empathy, SocialskillsGood leaders of the strategy-making processhave a number of key attributes:
    • 35. Levels of Strategic ManagementTataMotorsPassenger vehicles Commercial vehicles DefensevehiclesMarketing, Finance, Operations, HR etc
    • 36. Levels of Strategic ManagementThe corporate level managers guidesthe strategy for the company as a wholeThe business level managers design thestrategy for their businesses and areguided by the overall corporate strategyThe functional level managersimplement the strategy in their functions
    • 37. To get the strategy right – the companyneeds to focus on three tasks Strategic Leadership• Task of most effectively managing acompany’s strategy-making process Strategy Formulation• Task of determining and selecting strategies Strategy Implementation• Task of putting strategies into action to improve acompany’s efficiency and effectiveness
    • 38. The Five Steps of theStrategy Making Process Select the corporate vision, mission, and values(VMV) and the major corporate goals and objectives. Analyze the external competitive environment (toidentify opportunities and threats). Analyze the organization’s internal environment (toidentify its strengths and weaknesses). Select strategies that:• Build on the organization’s strengths and correct its weaknesses –in order to take advantage of external opportunities and counterexternal threats• Are consistent with organization’s vision, mission, and values andmajor goals and objectives• Are congruent and constitute a viable business model Implement the stratstrategies and evaluate/course correct.
    • 39.  Selecting the Organization’sVMV and goalsProvides a framework or context withinwhich strategies are formulated, including: Vision –A statement of “where we are going” Mission –A statement of ‘who we are and what we do” Values –A statement of “beliefs, business principles, andpractices that the organization is committed to” Major Goals –The measurable desired future state that anorganization attempts to realize
    • 40. The VisionProvides a panoramic view of “where weare going”Is distinctive and specific to a particularorganizationA good vision statement is• graphic ( helps visualize the future state)• Focused but flexible• Desirable and easy to communicate (helpsemployees to relate to)1 | 49
    • 41. The Vision -examplesProvide a globaltrading platformwhere practicallyanyone can tradepractically anything. At the Tata group we arecommitted to improvingthe quality of life of thecommunities we serve.We do this by strivingfor leadership and globalcompetitiveness in thebusiness sectors inwhich we operate1 | 50Vision statement provides a panoramic view of“where we are going”
    • 42. The Vision1 | 51Vision statement provides a panoramic view of“where we are going”Can you suggest a Visionstatement for Domino’sPizza?McDonald’s visionstatement – tobecome therecognized leadersin the QSR industryIndia and the firstchoice of ourcustomers
    • 43. The Mission What is it that the company does? What is the companies business?• Who is being satisfied(what customer groups)?• What is being satisfied(what customer needs)?• How customer needs are being satisfied(by what skills, knowledge, or distinctive competencies)?The mission statement of a companyfocuses on its reason for existence today.A company’s mission is best approached from acustomer-oriented business definition.
    • 44. Strategic Vision vs. MissionA strategicvision concernsa firm’s futurebusiness path -“wherewe are going”• Markets to bepursued• Futureproduct/market/customer/technology focusThe missionstatement of afirm focuses onits presentbusinesspurpose - “whowe are and whatwe do”• Current product andservice offerings• Customer needsbeing served
    • 45. The Mission1 | 54A company’s mission is best approached from acustomer-oriented business definition.Can you suggest amission statement for forDomino’s Pizza?McDonald’s visionstatement – We willlead the QSRindustry in India bycreating unmatchedvalue for ourcustomers, throughour promise ofoutstandingQuality, Service andCleanliness.
    • 46. ValuesThe values of a company should state: How managers and employees shouldconduct themselves How they should do business What kind of organization they need to buildto help achieve the company’s mission Organizational culture• The set of values, norms, and standards that control howemployees work to achieve an organization’s mission andgoals• Often seen as an important source of competitive advantageIn high-performance organizations, valuesrespect the interests of key stakeholders.
    • 47. ValuesOur Values & Philosophy are a reflection of the socially andenvironmentally responsible company we aspire to be. They arethefoundation for every businessdecision wemake.Weuphold our commitment with six guiding principles.1. Care for our customers, our consumers and the world welivein.2. Sell only productswecan beproud of.3. Speak with truth and candor.4. Balanceshort term and long term5. Win with diversity and inclusion6. Respect othersand succeed together.
    • 48. The Values1 | 57Can you suggest a Value statement forDominos Pizza?In high-performance organizations, valuesrespect the interests of key stakeholders.McDonald’s value statement – We will drive ourmission through unwavering commitmenttowards customer satisfaction, delivered with asense of warmth, friendliness, fun, integrity,individual pride and company spirit
    • 49.  Selecting the Organization’sVMV and goalsProvides a framework or context withinwhich strategies are formulated, including: Vision –A statement of “where we are going” Mission –A statement of ‘who we are and what we do” Values –A statement of “beliefs, business principles, andpractices that the organization is committed to” Major Goals –The measurable desired future state that anorganization attempts to realize
    • 50. Key characteristics of well-constructed goals:1. Precise and measurable – to provide ayardstick or standard to judge performance2. Address crucial issues – with a limitednumber of key goals that help to maintain focus3. Challenging but realistic – to provideemployees with incentive for improving4. Specify a time period – to motivate andinject a sense of urgency into goal attainmentMajor GoalsA goal is a precise and measurable desiredfuture state that a company must realize ifit is to attain its vision or mission.
    • 51. Financial and Strategic goalsFinancial GoalsOutcomes focusedon improvingFinancialPerformanceStrategic GoalsCustomer Value creationInternal Processes Value creating processesLearning and Growth Aligning organizational,information, and humancapital with strategyBalanced score card method helps in goal setting andperformance evaluation across different types of goals
    • 52. Examples of Financial Goals X % increasein annualrevenues X % increaseannually inafter-tax profits Profit marginsof X % X % return on capitalemployed (ROCE) Sufficient internal cashflowsto fund 100% of newcapital investment
    • 53. Customer• Winning an X % market share• Achieving a customer retention rate of X %• Acquire X number of new customersInternal Processes• Reduce product defects to X %• Introduction of X number of new products in thenext three yearsLearning and Growth• Increase employee training to X hours/year• Reduce turnover to X % per yearExamples of Strategic Goals
    • 54. Goals Are Needed at All Levels First, set Corporate level goals Next, establish Business level goals Then, operating /functional level goals areestablished
    • 55. Levels of Strategic ManagementTataMotorsPassenger vehicles Commercial vehicles DefensevehiclesMarketing, Finance, Operations, HR etc
    • 56. Performance in NonprofitEnterprisesNonprofit entities such as government agencies,universities, and charities:• Should use their resources efficiently and effectively• Set performance goals unique to the organization• Set strategies to achieve goals and compete with othernonprofits for scarce resourcesA successful strategy gives potentialdonors a compelling message as towhy they should contribute.
    • 57. The Five Steps of the Strategy MakingProcess (next session) Select the corporate vision, mission, and values(VMV) and the major corporate goals and objectives. Analyze the external competitive environment (toidentify opportunities and threats). Analyze the organization’s internal environment (toidentify its strengths and weaknesses). Select strategies that:• Build on the organization’s strengths and correct its weaknesses –in order to take advantage of external opportunities and counterexternal threats• Are consistent with organization’s vision, mission, and values andmajor goals and objectives• Are congruent and constitute a viable business model Implement the stratstrategies and evaluate/course correct.
    • 58. Some closing thoughtsA strategy-focused organization is morelikely to be a strong bottom-lineperformer.Good Strategy + Good StrategyExecution = Good ManagementExcellent execution of an excellentstrategy is the best test of managerialexcellence – and the most reliable recipefor turning companies into standoutperformers.
    • 59. Strategic management course planSession 1 Introduction and overview to SMSession 2/3 External and Internal environmentSession 3/4 Building SCA though value chainsSession 5 Growth through Integration, Diversification,Outsourcing and M&ASession 6 Change managementSession 7 Tailoring strategies to fit specific industry &company situationsSession 8/9 Strategy Implementation and controlSession 10 Industry interaction
    • 60. THANK YOU