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Strategic management
 

Strategic management

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  • After formulation of any strategy a concrete strategic plan is prepared.

Strategic management Strategic management Presentation Transcript

  • STRATEGIC MANAGEMENT 1
  • STRATEGIC MANAGEMENT A CONCEPT ON STRATEGIC THINKINGAND MODUS OPERANDI FOR SURVIVAL IN 21st CENTURY 2
  • WHY STRATEGIC THINKING? Companies are operating in age of discontinuing change - an age of creative & constructive destruction. Business, technology and product life is shrinking. Demographic shift in terms of consumer preference and requirements. A direct promotion from Agricultural economy to service or Hi-tech economy in the new growth economy. A concept from liberalization, privatization & Globalization (LPG) to regionalization. Shift from controlled economy to market driven economy. Rich countries adopt deindustrialization. Emergence of new Global Socio – economic system and world orders. Knowledge is replacing Infrastructure Self-leadership is in, command and control out Networks are replacing hierarchies Wanted - employees with Emotional Intelligence. Current Trends –  Increasing environmental awareness  Growing health consciousness  Expanding seniors market  Impact of the Generation Y boom let  Declining mass market  Changing pace and location of life  Changing household composition  Increasing diversity of workforce & market 3
  • Challenge of Strategic ManagementOnly 16 of the 100 largest U.S. companies atthe start of the 20th century are stillidentifiable today!In a recent year, 44,367 businesses filed forbankruptcy and many more U.S. businesses failedCompetitive success is transient...unless care istaken to preserve competitive position 4
  • Challenge of Strategic Management Best Stocks of the DecadeThe goals of achievingstrategic competitivenessand earning above-average returns arechallengingThe performance ofsome companies morethan meets strategicmanagementschallenge 5
  • 21st Century Competitive LandscapeFundamental nature of The pace of changecompetition is changing is relentless....• Rapid technological changes and increasing• Rapid technology diffusions Traditional industry• Dramatic changes in boundaries are information and blurring, such as... communication technologies • Computers• Increasing importance of • Telecommunications knowledge 6
  • 21st Century Competitive LandscapeThe global economy is Traditional sources ofchanging competitive advantage no longer guarantee • People, goods, services and success ideas move freely across geographic boundaries New keys to success • New opportunities emerge include: in multiple global markets • Flexibility • Markets and industries • Innovation become more • Speed internationalized • Integration 7
  • 21st Century Competitive LandscapeA country’s Country Competitiveness Rankings 1999 1998 Country Competitiveness Competitivenesscompetitiveness is Index 1999 Index 1998achieved through the 1 2 1 3 Singapore United States 2.12 1.58 2.16 1.41accumulation of 3 2 Hong Kong 1.41 1.91 4 6 Taiwan 1.38 1.19individual firms’ 5 5 Canada 1.33 1.27strategic 6 7 8 10 Switzerland Luxembourg 1.27 1.25 1.10 1.05competitiveness in 8 4 United Kingdom 1.17 1.29the global economy 9 10 7 11 Netherlands Ireland 1.13 1.11 1.13 1.05 11 15 Finland 1.11 0.70 12 14 Australia 1.04 0.79 13 13 New Zealand 10.1 0.84Achieving improved 14 12 Japan 1.00 0.97 15 9 Norway 0.92 1.09competitiveness 16 17 Malaysia 0.86 0.59allows a countrys 17 16 Denmark 0.85 0.61 18 30 Iceland 0.59 -0.18citizens to have a 19 23 Sweden 0.58 0.25higher standard of 20 21 20 18 Austria Chile 0.37 0.57 0.37 0.57living 22 19 Korea 0.46 0.39 23 22 France 0.44 0.25 24 27 Belgium 0.39 -0.03 25 24 Germany 0.37 0.15 8 26 25 Spain 0.16 0.02
  • Changing CorporationsOld Organizational Format New Organizational FormatOne large corporation Mini-business units & cooperative relationshipsVertical communication Horizontal communicationCentralized top-down decision making Decentralized participative decision makingVertical integration Outsourcing & Virtual OrganizationsWork/quality teams Autonomous work teamsFunctional work teams Cross-functional work teamsMinimal training Extensive trainingSpecialized job design focused on individual Value-chain team-focused job designStability & Structured & Gradual Change & Flexibility & Speedy, FastMass Production Mass Customization 9
  • FOUR MAJOR THRUST AREAS OF BUSINESS Managing Competition - Aggressive Marketing – Market Share – Go Global - Superior Quality of Products / Services - Cost Reduction / Lowering Prices - Faster Deliveries / Response Time - Innovations / Productivity Improvements Developing Leadership Skills for Vision and Change. To focus on People besides Products, Process, Profits. Today, every person is a Profit Center. Using IT based tsunami of information, ideas and tools for managing the business – E Business Making ours a Learning Organization 10
  • WHAT IS BUSINESS? PRODUCTMARKET FUNCTION What Business the Firm is in? Why the Firm is in the Business? What should be Firm’s Business? 11
  • Strategic Management Creating & Why?To ensure Growth Sustainingwith Profits inthe long-run! Competitive Advantages, Globally 12
  • The Strategic Management SystemInvolves the full set of:Commitments Decisions Actionswhich are required for firms to achieve: Strategic Competitiveness Sustained Competitive Advantage Above-Average Returns 13
  • Strategic Competitiveness Achieved when a firm successfully formulates and implements a value-creating strategySustained Competitive Advantage Occurs when a firm develops a strategy that competitors are not simultaneously implementing Provides benefits which current and potential competitors are unable to duplicateAbove-Average Returns Returns in excess of what an investor expects to earn from other investments with similar risk 14
  • BASIC CONCEPTS STRATEGY: It is Unified, Comprehensive, and Integrated long term plan that relates to the strategic advantages of the firm to the challenges of the environment. STRATEGIC MANAGEMENT : It is a stream of decisions and actions which leads to the development of an effective strategy to help achieve the corporate objective. It is a continuous, iterative, & Cross functional process of matching firm with its environment. COMPETITIVE ADVANTAGE: is delivering superior value advantage to your target customers relative to your competitors. Or delivering equivalent customer value to your target customers relative to your competitors , but at a lower cost. 15
  • GAP OUT PUTVISION VALUE SYSTEM FIRM/BUSINESSMISSION OBJECTIVES PURPOSEBASIC INFRASTRUCTURE AND FRAME WORK OF A FIRM 16
  • MISSION & GOALS OF A COMPANY VISION: It is a vividly descriptive image of what you what to be or what you want to be known for. Vision is an art for seeing invisibles. MISSION : It a statement of intent of “what a firm wants to create and through which line of Business”. It is a process of legitimization of corporate existence of business. It defines the culture, philosophy and grand design of the firm. To pursue the Creation of Value to all Stakeholders in the Business. It is an answer to question – “What business are we in?” GOALS / OBJECTIVES : End to be achieved. It is To make Profit for today and forever To satisfy Customers today and forever To satisfy Employees today and forever 17
  • Strategic Planning 18
  • Three Big Strategic Questions Where Are We Now? Where Do we Want to Go? How Will We Get There? 19
  • The Five Task of Strategic Planning Developing a Vision and a Mission Setting Objectives Crafting a Strategy Implementing and Executing Strategy Evaluating Performance, Reviewing the Situation and Initiating Corrective Action 20
  • An organization’s MISSION reflects management’s vision of what the organization seeks to do and to become sets forth a meaningful direction for the organization indicates an intent to stake out a particular business position outline “Who we are, What we do, and Where we are headed”. 21
  • Setting Objectives The purpose is to convert the mission into Specific Performance Targets Serve as yardsticks for tacking company progress and performance. Should be set at levels that require stretch and disciplined effort . 22
  • Two Types of Objectives are Needed  FINANCIAL OBJECTIVES  STRATEGIC OBJECTIVES  Short-Run  Long-Run 23
  • Crafting a Strategy HOW to out compete rivals and win a competitive advantage. HOW to respond to changing industry and competitive conditions HOW to defend against threats to the company’s well-being HOW to pursue attractive opportunities 24
  • Crafting Strategy is an Exercise in Entrepreneurship Risk-taking and venture someones Innovation and business creativity· A keen eye for spotting emerging market opportunities· Choosing among alternatives 25
  • Why Good Management of Strategy Matters Powerful execution of a powerful strategy is a proven recipe for success. Crafting and implementing a strategy are CORE management functions. To qualify as WELL-MANAGED, a company should · Have an attractive strategy A good strategy builds a position that is strong enough to overpower rivals and flexible enough to overcome unexpected obstacles . 26
  • Why is a Company’s Strategy Constantly Evolving? Changing market conditions· Moves of competitors· New technologies and production capabilities· Evolving buyer needs and preferences· Political and regulatory factors· New windows of opportunity· Fresh ideas to improve the current strategy· A crisis situation 27
  • What is a Strategic Plan?  A strategic plan specifies where a company is headed and HOW management intends to achieve the targeted levels of performance . 28
  • Strategic Management Basic model Options on Learning Competitive points from Positioning deviations Four Basic ElementsStrategic management is the process of moving where you are to where you want to be in future – through sustainable competitive advantages 29
  • VISION GAP VALUE STRATEGIC IMPLEMEMTATION BASICMISSION FIRM STRATEGIES GOAL ORGANISATION DESIGN MACRO ENVIRO STRATEGIC APPRAISAL ALTERNATIVES FUNCTIONALLEVEL STRATEGIES & RESOURCES MICRO ENVIRO ALLOCATION APPRAISAL OF BUSINESS LEVEL INDUSTRIES STRATEGIES DEVELOPMENT OF MICRO ENVIRO CONTROL APPRAISAL OF STRATEGIC FIRM SELECTION Is Strategy Working? STRATEGIC PLANNING DESIGN AND IMPLEMENTATION PROCESS 30
  • Characteristic of the Strategic Management Process An ongoing exercise Boundaries among the tasks are blurry rather than clear- cut Doing the 5 task is not isolated from other managerial responsibilities and activities. The time required to do the tasks of strategic management comes in lumps and spurts rather than being constant and regular. Involves pushing to get the best strategy supportive performance from each employee, perfecting the current strategy. 31
  • ENVIRONMENTAL APPRAISALENVIRONMENTAL ENVIRONMENTAL ANALYSIS DIAGNOSIS O S T W ETOP SAP OFPP EVALUATION PROCESS OF SWOT ANALYSIS 32
  • Impact Of Environment Business ENVIRONMENTAL FACTORSGOVERNMENTAL INTERNATIONAL ECONOMICAL POLITICALTECHNOLOGICAL FIRM/BUSINESS LEGALSOCIETAL CULTURAL 33
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  • 35
  • Industry Analysis 36
  • Threat of Substitute Products or ServicesBargaining Power of BuyersBargaining Power of SuppliersRelative Power of Other Stakeholders 37
  • Threat of New Entrants – Economies of scale Product differentiation Capital requirements Switching costs Access to distribution channels Cost disadvantages Government policy 38
  • Rivalry Among Existing Firms – Number of competitors Rate of industry growth Product or service characteristics Amount of fixed costs Capacity Height of exit barriers Diversity of rivals 39
  • SWOT analysis of strengths, weaknesses, opportunities,and threats. 40
  • TOWS Matrix 41
  • CREATING STRATEGIC MIND SET 42
  • Corporate StrategyThree Key Issues: Firm’s directional (CORPORATE) strategy Firm’s portfolio (BUSINESS LEVEL) strategy Firm’s parenting (FUNCTIONAL LEVEL) strategy 43
  • Initiation of Strategy •New CEO •External intervention Stimulus for changeTriggering •Threat of change in ownership in event strategy •Performance gap •Strategic inflection point 44
  • Corporate Directional Strategies COMBINATION STRATEGIES DERIVED STRATEGIES 45
  • STRATEGIC VARIATIONS - EXPANSION INTERNAL: Add new product, product line, market, functions, redefine/ reposition of product – market. EXTERNAL : Take over, acquisition, merger. RELATED : Synergic diversification. UNRELATED: Non – synergic diversification. HORIZONTAL: Supplementary/ Complementary Expansion. VERTICAL: Integration. ACTIVE: R & D, Entrepreneurial development. PASSIVE: Imitation, adoption & adaptation. 46
  • IGOR ANSOFF’S BUSINESS GROWTH MODEL New products /New Markets CO Unrelated NEW CUSTOMERS BU RP FOR EXISTING LINES SIN ORA Businesses ES T OF PRODUCTS S D E PL NEW E A Related VELO NNIMARKETS / CUSTOMERS N MARKET DEVELOPMENT Businesses – PME G NT EXISTING PRODUCTS NEW PRODUCTS FOR IN EXISTING MARKETS EXISTING CUSTOMERS EXISTING Increase Market Share NEW PRODUCT Existing SALES DEVELOPMENT, UPGRADES Share of Business MGMT. EXISTING NEW Products PRODUCTS 47
  • SPIN OUT MANAGING Creating New Business PROJECT As an external Ventures INTERNAL VENTURE STRATEGY Managing new products/ services, development projects as in company Ventures ALLIANCE EXTERNAL INVESTMENTS In Joint Ventures Acquisition of Product, Market,Venture Acquisition, Partnering Technology, or Management control EXTERNAL VENTURES STRATEGY 48
  • EXTERNAL GROWTHSTRATEGIES  TAKE OVER, AQUISION & MERGER BUYING FIRM SELLING FIRM•Acquire Controlling interest} •TAKE OVER•Acquire Assets and liabilities} of selling Firm} •ACQUISION•Acquire & merge of Assets } liabilities of both the firms.} •MERGER 49
  • WHY THE FIRM PURSURE EXTERNAL EXPANSION To increase the firm’s stock.. To increase the growth rate of the firm. To make good investments. To improve the firm’s earnings & stability. To balance or fill out the product line. To diversified the product line in mature state. To reduce the competition. To acquire the needed resources. For Tax purpose. To increase the efficiency and profitability. To diversify the owner’s holding. To deal with top management problems. 50
  • CRITICAL ISSUES RELATED TO M & A STRATEGIC ISSUES: It relates to the commonality of strategic interest. Strength of one firm may be weakness of the other firm and vice versa. The firms can create Synergy and complementing business situation. FINANCIAL ISSUES: These are related to (a) Valuation of selling firms based on assets, market standing, share prices, earning potential etc. (b) Sources of financing for merger. MANAGERIAL ISSUES: It relates to professional compatibility and acceptance of managerial system of selling company. LEGAL ISSUES: It is related to various issues of legal provisions such as Chapter V of the Companies Act, the MRTP Act, and section 72A (I) of the Income Tax Act OR Anti Trust Act, Sherman’s Act. CULTURAL ISSUES: It relates to the cultural compatibility of the organization, society, market etc. LABOUR ISSUES: It relates to continuation of old staff and subsequent relations. SOCIETAL ISSUES: It relates to the benefits of society and Social compatibility. OTHER ISSUES: It relates to Political, Economic, Environmental factors. 51
  • REASONS FOR FAILUR OF EXTERNAL GROWTH Paying too much for the acquired firm. Assuming that a growing market or product will be out standing in market. Leaping into merger without carefully studying the consequences. Diversifying in to areas in which the firm had too little knowledge. Buying too large a firm and thus incurring an excessively large debt. Trying to merge disparate corporate cultures. Counting on key personnel staying after the merger. 52
  • DERIVED BUSINESS STRATEGIES OFFENSIVE DEFFENSIVE CO-OPERATIVE •RAISE STRUCTURAL •SYNDICATING (COLLUSION)•FRONTAL ASSAULT BARRIER •STRATEGIC ALLIANCES•FLANKING MANEUVER •INCREASE EXPECTED •MUTUAL CONSORTIA•BYPASS ATTACK RETALIATION •JOINT VENTURE•ENCIRCLEMENT •LOWER INDUCEMENT FOR •LICENSING ARRANGEMENT•GUERRILLA WARFARE ATTACK •VALUE CHAIN PARTNERSHIP 53
  • CO-OPERATIVE STRATEGIES COLLUSION (SYNDICATING):It is an active cooperation of firm for their individual and collectiveadvantages within an industry to reduce out-put and raise price in order to thenormal economic law of supply & Demand. Collusion may be Explicit, in which firms co operate through direct communication and negotiation, or Tacit in which firms cooperate indirectly through an informal system of signals. Explicit is illegal under MRTP/ Anti trust Acts.It can be successful if:(1) There are small number of identifiable competitors.(2) Cost are similar among firms.(3) One firm tends to act as price leader or market leader.(4) There is common industrial culture that accepts the cooperation.(5) Sales are characterized by high frequency of small orders.(6) There are high entry barriers to new competitors. (Exp: Economic Scale of operation, Switching cost, Capital, Capacity, Regulations, market accessibility, stage in learning curve, Brand loyalties etc ) 54
  •  MUTUAL CONSORTIA – Complemented Grouping: It is a partnership of similar companies in similar industries who pool their competency & resources to gain benefits that are too expensive to develop/ deploy alone, such as access to advance technology or capturing the market. It is fairly weak and fragile alliances. There is very little interaction or communication among the partners. LICENSING ARRANGEMENT: It is an agreement in which the licensing firm (licensor) grants rights to another firm( licensee) in another country or market to produce and/or sell a product or services. The licensee pays compensation (Royalties, profit sharing, or lump sum payment) to the licensing firm in return for technical expertise. It is useful strategy if the trademark or brand name is well known. It is also useful when there is Entry barrier for a MNC. 55
  • STRATEGIC ALLIANCE(Partnering): It is a partnership of two or more corporations or business units to achieve strategically significant objectives which can be mutually beneficial. Some alliance are short term till the product is established, while the others are longer lasting, resulting in merger.The reasons for alliance are:(a) To obtain technological, management and/or manufacturing capabilities.(b) To enter into specific markets.(c) To reduce financial risk.(d) To reduce political and economic risk.(e) To achieve or ensure competitive advantages in new businesses or markets(f) It plays vital role in today’s market condition and environment to solve some complicated issues.(g) It provides vital role in providing the firms synergic strength.(h) It helps to develop product, process, market & share the investment outlay jointly.(i) It facilitates the development of unique technological capabilities to meet the challenges of technological revolution.(j) It create a compulsion for alliance to enter in the local market through JV.(k) Building brand image in local market is mostly possible through alliance. 56
  • SPECIFIC ALLIANCE Production Alliance: Two or more companies share the common manufacturing facilities, existing or new facilities. Marketing Alliance: Two or more companies share marketing services expertise and facilities. Financial Alliance: Companies joint together in order to reduce financial risks associated with the activities & share the profit in proportion to financial contribution. Research & Development Alliances: Fast changing technology, high cost of R & D and need of being ahead of changes, force companies to form alliance in R & D area. Human Resources Alliance : Alliance for outsourcing 57
  • BREAK – UP OF ALLIANCE: Incompatibility between/among partners in management style, financial position, culture, business interest. Access to information. Distribution of Income. Change in business environment. Acquiring the strength of partner: The companies over a period of alliance, acquire the strengths of the partner and starts new operations in competitions. 58
  • STRATEGIC JOINT VENTURE Joint ventures (JV) are partnership in which two or more firms carry out a specific project or business in a selected area of industry in a form of new venture. Ownership of the original firms remains unchanged. Actually, corporate partnership are formed with specific and time bound objectives which, once achieved, leaves little reasons for the alliance to continue. Joint venture can be temporary or it can be long term. JV that last longer do so because their objectives have been redesigned. Every JV:1. Has a scheduled life – cycle, which will end sooner or later (5 to 10 years)2. Has to be dissolved when it has outlived its life – cycle.3. Change in environment forces joint venture to be redesigned regularly4. Translations seek to absorb their partner’s competencies.5. It is a contractual obligation on fragile platform. 59
  • Strategic reasons for Formation of JV1. Foreign firms are allowed to operate only if they enter into a JV with local partner.2. Size of the project may be very large and one company accomplish it.3. Some projects require multidimensional technology that no one firm possesses. Firm with different, but compatible technology may join together.4. One firm with technology competence and another with managerial competence join together.5. A foreign firm with technology competence joins with a domestic firm with marketing competence.6. While setting up of an organization requires surmounting hurdles such as import quota, tariffs, nationalistic political interest and cultural road block, Government’s support for the JV.7. JV are undertaken for a variety of reasons like political, economic or technologicalTYPES OF JV: (A) SPIDER WEB (B) GO-TOGATHER & SPLIT (C) SUCCESSIVE INTEGRATION 60
  • Building CompetitiveAdvantage Through Business Level Strategy 61
  • Corporate Value Chain 62
  • Porter’s Generic Competitive Strategies 63
  • What is a Business level strategy• Business level strategies are firm-specific business model that will allow a company to gain a competitive advantage over its rivals in a market or industry.• It aims at improving the effectiveness of a company’s operations and thus its ability to attend superior efficiency, quality, innovation and customer responsiveness .• Its ability to improve company’s operations helps in achieving cost leadership or helps the company in differentiating its product from the rival company. 64
  • Distinctive Competencies… They are firm specific strengths that allow a company to differentiate its products and/or achieve substantially lower costs than its rivals and thus gain a competitive advantage. E.g. Toyota…They arise from two sources:1) Resources2) Capabilities 65
  • Build RESOURCES Differentiation BUSINESS STRATEGIES Superior: •Efficiency DISTINCTIVE •Quality Value profitabilityCOMPETENCIES •Innovation creation •Customer responsiveness Low cost BuildCAPABILITIES 66
  • Product/Market/Distinctive-Competency Choices and Generic Competitive Strategies Cost Differentiation Focus Leadership Low Low to High Product High (Principally (Principally by (Price orDifferentiation by Uniqueness) Price) Uniqueness) High (Many Market Low (Mass Low (One or a MarketSegmentation Market) few Segments) Segments) Research & Manufacturing Any kind of Distinctive Development, and Materials DistinctiveCompetency Sales & Management Competency Marketing 67
  • Cost Leadership It is based on the intent to outperform competitors by doing every thing to establish a cost structure that allows it to produce or provide goods or services at a lower unit cost. Cost leader chooses a low to moderate level of product differentiation relative to its competitors. Aims for a differentiation not markedly inferior to that of the differentiator but a level obtainable at a low cost. Frequently ignores the many different market segments in industry to appeal the average customers. 68
  • Advantages and DisadvantagesAdvantages Disadvantages Protected from industry  Cost leadership approach competitors lurk in competitors’ ability Less affected by to find ways to lower their competitors price change cost structure Requires a big market share  Ability to imitate cost so they purchases in leader’s methods easily relatively large quantities  The single minded desire Barrier to entry. to reduce costs might drastically affect the demand 69
  • Implications To pursue a full blown cost-leadership, strategic managers need to devote enormous efforts to incorporate all the latest information, materials, management, and manufacturing technology into their operations to find new ways to reduce costs. A differentiator cannot let a cost leader get too great a cost advantage because the leader might then be able to use its high profits to invest more in product differentiation and beat leaders. Must respond to the strategic moves of its differential competitors and increase the quality and features of its products if it is to prosper in the long run 70
  • Differentiation Strategy The objective of the differentiation strategy is to achieve a competitive advantage by creating a product that consumers perceive as different or distinct in some important way. Product differentiation can be achieved in three ways  Quality  Innovation  Responsiveness to customers Generally, a differentiator chooses to segment its market into many segments and niches A differentiated company concentrates on the organizational functions that provide the source of its differentiation advantage. 71
  • Advantages and DisadvantagesAdvantages Disadvantages Differentiation safeguards a  Strategic manager’s long company against competitors to term ability to maintain a the degree that customers develop brand loyalty for its product product’s perceived Suppliers are rarely a problem as distinctness in customers’ company’s strategy is geared eyes. more toward the price it can  The ease with which charge than toward costs competitors imitate the Distinct product solves the differentiator’s product problem of strong buyers The threat of substitutes depends on the ability of the competitors’ product. 72
  • Focus Strategies Focus Strategies position a company to compete for customers in a particular market segment, which can be defined geographically, by type of customers, or by region or even by locality. 73
  • Focus Strategies Focused Cost Leadership Strategy : If a company uses a focused low – cost approach, it competes against the cost leader in the market segment in which it has no cost disadvantage. Focused Differentiation Strategy : If a company uses a focused differentiation approach, then all the means of differentiation that are open to the differentiator are available to the focused company. 74
  • Advantages A focused company’s competitive advantage stem from the source of its distinctive competency: efficiency, quality, innovation, or responsiveness to customers. The company is protected from rivals to the extent that it can provide a product or service they cannot. This ability also gives the focuser power over its buyers because they cannot get the same things from anyone else. 75
  • Disadvantages Powerful suppliers The focuser’s niche can suddenly disappear because of technological change or change in customer’s tastes. The focuser is vulnerable and has to defend its niche constantly. 76
  • Competitive positioning and business – level strategy Strategic group Analysis Investment Analysis Game Theory 77
  • Strategic group Analysis Strategic group analysis helps a company identify the strategies that its industry rivals are pursuing. It allows managers to uncover the most important basis of competition in an industry and identify products and market segments where they can compete most successfully for customers. Such analysis also helps to reveal what competencies are likely to be most valuable in the future so that companies can make the right investment decision. 78
  • Investment Analysis An Investment Strategy sets the amount and type of resources – human, financial and functional – that must be invested to maximize a company’s profitability over time. Two factors are crucial in choosing an investment strategy:  The strength of a company’s position in an industry relative to its competitors.  The stage of the industry’s life cycle in which the company is competing. 79
  • Game Theory Game such as chess, player move in turn, and one player can select a strategy to pursue after considering its rival’s choice of strategies or the players act at the same time, in ignorance of their rival’s current action. 80
  • Business Level Strategies Help ToImprove1.Efficiency2.Quality3.Innovation4.Customer responsiveness 81
  • Industry Generic Strategies Force Cost Leadership Differentiation Focus Ability to cut price in retaliation deters Customer loyalty can discourage Focusing develops core ntry potential entrants. potential entrants. competencies that can act as an arriersBarriers entry barrier. Ability to offer lower price to powerful Ability to offer lower price to Ability to offer lower price to uyerBuyer buyers. Large buyers have less power to powerful buyers. Large buyers have powerful buyers. Large buyers ower negotiate because of few close alternatives. less power to negotiate because of have less power to negotiate Large buyers have less power to negotiate few close alternatives. Large buyers because of few close alternatives. because of few alternatives. have less power to negotiate because Large buyers have less power to of few alternatives. negotiate because of few alternatives. Better insulated from powerful suppliers. Better insulated from powerful Better insulated from powerful upplier Better able to pass on supplier price suppliers. Better able to pass on suppliers. Better able to pass on ower increases to customers. Suppliers have supplier price increases to supplier price increases to power because of low volumes, but a customers. Suppliers have power customers. Suppliers have power differentiation-focused firm is better able to because of low volumes, but a because of low volumes, but a pass on supplier price increases. differentiation-focused firm is better differentiation-focused firm is able to pass on supplier price better able to pass on supplier increases. price increases. Can use low price to defend against Can use low price to defend against Can use low price to defend hreat of substitutes. Customers become attached to substitutes. Customers become against substitutes. Customers ubstitut differentiating attributes, reducing threat of attached to differentiating attributes, become attached to differentiating substitutes. Specialized products & core reducing threat of substitutes. attributes, reducing threat of s competency protect against substitutes. Specialized products & core substitutes. Specialized products & competency protect against core competency protect against substitutes. substitutes. Better able to compete on price.Brand Better able to compete on Better able to compete on ivalryRivalry loyalty to keep customers from rivals.Rivals price.Brand loyalty to keep price.Brand loyalty to keep cannot meet differentiation-focused customers from rivals.Rivals cannot customers from rivals.Rivals customer needs. meet differentiation-focused 82 cannot meet differentiation- customer needs. focused customer needs.
  • RETRENCHMENT STRATEGYCommon Retrenchment Strategies: Turnaround, restructuring,Divesting, Bankruptcy, LiquidationWHY FIRM GO FOR RETRENCHMENT: Prevalence of poor economic conditions. Competitive pressure may also cause firms to curtail their operations. The comp. is not doing well or perceive itself as doing poorly. The comp. has not met its objectives and there is pressure from shareholders, customers, or others to improve performance. The external environment poses threats and internal strengths are insufficient to face the threats. Better opportunities in the environments are perceived else where were firms strength can be utilized. Inability to implement latest technology cause by tech. revolution. 83
  • International Strategy 84
  • International Strategy Opportunities and Outcomes Identify Explore Use Core StrategicInternatiodgd Resources and Competence Competitiveness gnal Capabilities Management OutcomesOpportunities Problems International Modes of and Risk Strategies EntryIncreased International ExportingMarket Size Business-Level Higher Strategy Exporting PerformanceReturn onInvestment Multidomestic Returns Strategic StrategyEconomies of AlliancesScale and Global AcquisitionLearning Strategy InnovationLocation Transnational Establishment ofAdvantage Strategy New Subsidiary Management Problems and Risk 85
  • International Strategy LifecycleSelling Products or Services Outside a Firm’s Domestic Market 2 Product Demand Develops and Firm Exports Products1 Firm Introduces 3 Foreign Innovation in Domestic Market Competition Begins Production 5 Production Becomes Standardized and is 4 Relocated to Low Cost Firm Begins Countries Production Abroad 86
  • Motivations for International Expansion Increase Market Share Domestic market may lack the size to support efficient scale manufacturing facilities Example: Japanese electronics or automobile manufacturers Return on Investment Large investment projects may require global markets to justify the capital outlays Example: Aircraft manufacturers Boeing or Airbus Weak patent protection in some countries implies that firms should expand overseas rapidly in order to preempt imitators 87
  • Motivations for International Expansion Economies of Scale or Learning Expanding size or scope of markets helps to achieve economies of scale in manufacturing as well as marketing, R & D or distribution - Can spread costs over a larger sales base - Increase profit per unit Location Advantages Low cost markets may aid in developing competitive advantage May achieve better access to: - Raw materials - Key customers - Lower cost labor - Energy - Key suppliers - Natural resources 88
  • Porter’s Determinants of National Advantage Home Country of Origin Is Crucial to International Success Related & Supporting Industries - Japanese cameras & copiers Factor Conditions - Italian shoes & leatherBasic Factors - Land, labor DemandAdvanced Factors Conditions - Highly educated workers Home country may - Digital communications support scale efficientGeneralized Factors operations by itself - Capital, infrastructureSpecialized Factors Firm Strategy, Structure & - Skilled personnel Rivalry Intense rivalry fosters industry competition 89
  • Business-Level International Strategies International Low Cost Usually located in home country Export to international markets Low value added operations in foreign countries High value added operations in home country International Differentiation Countries with advanced or specialized factor conditions most likely to use this strategy Example: Japan, Germany, U.S. 90
  • Business-Level International StrategiesInternational Focus Strategies Technologically advanced firms follow focused low cost strategy Focused differentiation firms compete on the basis of image & design Third group competes on low price by imitatingInternational Integrated Low Cost/Differentiation Can be most effective in dealing with diverse markets Often relies upon flexible manufacturing, total quality management or rapid communication networks 91
  • Corporate-Level International Strategies Type of Corporate Strategy selected will have an impact on the selection and implementation of the business-level strategies Some Corporate strategies provide individual country units with flexibility to choose their own strategies Others dictate business-level strategies from the home office and coordinate resource sharing across units Multi-Domestic Strategy Three Corporate Global Strategy Strategies Transnational Strategy 92
  • Corporate-Level International Strategies Multi-Domestic Strategy Strategy and operating decisions are decentralized to strategic business units (SBU) in each country Products and services are tailored to local markets Business units in each country are independent of each other Assumes markets differ by country or regions Focus on competition in each market Prominent strategy among European firms due to broad variety of cultures and markets in Europe 93
  • Corporate-Level International Strategies Global Strategy Products are standardized across national markets Decisions regarding business-level strategies are centralized in the home office Strategic business units (SBU) are assumed to be interdependent Emphasizes economies of scale Often lacks responsiveness to local markets Requires resource sharing and coordination across borders (which also makes it difficult to manage) 94
  • Corporate-Level International Strategies Transnational Strategy Seeks to achieve both global efficiency and local responsiveness Difficult to achieve because of simultaneous requirements for strong central control and coordination to achieve efficiency and local flexibility and decentralization to achieve local market responsiveness Must pursue organizational learning to achieve competitive advantage 95
  • International Corporate Strategy When is each strategy appropriate? High Need for GlobalIntegration Multi- Domestic Low Low High Need for Local Market Responsiveness 96
  • International Corporate Strategy When is each strategy appropriate? High Global Trans- Strategy national Need for GlobalIntegration Multi- Domestic Low Low High Need for Local Market Responsiveness 97
  • Choice of International Entry Mode Exporting Exporting Common way to enter new international markets No need to establish operations in other countries Establish distribution channels through contractual relationships May have high transportation costs May encounter high import tariffs May have less control on marketing and distribution Difficult to customize products 98
  • Choice of International Entry Mode Licensing LicensingFirm authorizes another firm to manufacture andsell its productsLicensing firm is paid a royalty on each unitproduced and soldLicensee takes risks in manufacturing investmentsLeast risky way to enter a foreign marketLicensing firm loses control over product qualityand distributionRelatively low profit potentialA significant risk is that licensor learns technologyand competes when license expires 99
  • Choice of International Entry Mode Strategic Alliances Strategic AlliancesEnable firms to shares risks and resources to expand intointernational venturesMost joint ventures (JVs) involve a foreign companywith a new product or technology and a host companywith access to distribution or knowledge of localcustoms, norms or politicsMay experience difficulties in merging disparateculturesMay not understand the strategic intent of partners orexperience divergent goals 100
  • Choice of International Entry Mode Acquisitions Acquisitions Enable firms to make most rapid international expansion Can be very costly Legal and regulatory requirements may present barriers to foreign ownership Usually require complex and costly negotiations Potentially disparate corporate cultures 101
  • Choice of International Entry Mode New Wholly-Owned Subsidiary Most costly and complex of entry alternatives Achieves greatest degree of control Potentially most profitable, if successful Maintain control over technology, marketing and distribution May need to acquire expertise and knowledge that is relevant to host country Could require hiring host country nationals or consultants at high cost 102
  • Strategic Competitiveness Outcomes International diversification facilitates innovation in the firm Provides larger market to gain more and faster returns form investments in innovation May generate resources necessary to sustain a large- scale R&D program Generally related to above-average returns, assuming effective implementation and management of international operations International diversification provides greater economies of scope and learning 103
  • Major Risks of International Diversification Political Risk Rebel fighting in Chechnya (Russia) and Liberia (Africa) Continual warfare among Middle Eastern nations Potential renationalization of privatized enterprises in Russia Failure of European Community in quest for economic superpower status because of intercountry disagreements 104
  • Major Risks of International Diversification Economic Risk Mexico’s effect on world trade with low wages and high quality but strong currency risks China’s difficulty in enforcing intellectual property rights on CDs, software, etc. Germany’s struggle with high unemployment, high interest rates, sagging competitiveness, and cuts in social programs China’s trade policies. $44 billion trade surplus with United States in 1977. China’s overall trade surplus increased twentyfold in first half of 1997. 105
  • Limits To International Expansion Management ProblemsCost of Coordination across diverse geographicalbusiness unitsInstitutional and cultural barriersUnderstanding strategic intent of competitorsThe overall complexity of competition 106
  • PORTFOLIO ANALYSIS 107
  • Stages of the Industry Life Cycle 108
  • PRODUCT LIFE CYCLE Most product sales observed over long periods can be portrayed as bell shaped curves – Product life cycle curves which can be typically divided into four stages: Introduction, Growth, Maturity and Decline. Product Life Cycle asserts four things. 1. Products have limited life. 2. Product Sales pass through distinct stages, each posing different challenges, opportunities and problems to the seller. 3. Profits rise and fall through different stages of the life cycle. 4. Products require different marketing, financial, manufacturing, purchasing and H.R. strategies in each life cycle stage. Growth-Slump-Maturity pattern (small kitchen appliances) Cycle Recycle Pattern Scalloped Pattern (succession of PLC’s; eg: Nylon) 109
  • INTRODUCTION - STRATEGIES•Sales growth tends to be slow - Delays in production capacityexpansion /technical problems; Distribution/retail chains being put up;sales expensive as conversion rates are lower (innovators).•Promotion at the highest ratio to sales – inform customers, inducetrial and secure distribution in retail outlets.•Prices tend to be high as costs are higher. Hi SLOW RAPID SKIMMING SKIMMING PRICE SLOW RAPID PENETRATION PENETRATION Lo Hi PROMOTION 110
  • PLC - GROWTH STAGE Introduction is followed by a stage marked by rapid climb in sales. Companies starts to eye for market share. Growth is a period of rapid market acceptance & substantial profit improvement. Innovators, early adaptors like the product and continue to buy the product while middle majority starts trying. New competition as sales and profits are growing. The stage where we see entry of competition in large numbers. Prices remain where they are or fall slightly to allow better penetration or for entry into other segments. Time noted for the introduction of variants/ brand extensions. Companies maintain promotion at same or higher level. Profits increase even with higher promotion costs as it gets spread over higher sales volume. 111 111
  • PLC - GROWTH STAGE MARKETING STRATEGIES Firm improves product quality and adds new features and models. Enters new market segments. Enters new distribution channel. Advertising focus shifts from awareness / knowledge to Interest/desire/conviction. Prices should be reduced (or low priced variants launched) at the right time to attract the next level of price sensitive customers. Faces tradeoff between high market share to high current profit. Firm that pursues market expansion strategy will improve its competitive position. 112 112
  • PLC - MATURITY STAGE Many products which we see around us are in the maturity stage of PLC. A stage characterized by the slow down in the growth rate. Most of practical Marketing management deals with a mature product. Hence the most important phase in PLC. Three Phases 1. Growth Maturity: Sales growth starts to fall due to distribution saturation. Growth predominantly due to trial by laggards. 2. Stable Maturity: Most potential customers have tried the product. Future sales governed by population growth and replacement demand. 3. Decaying Maturity: Absolute level of sales decline. Slow down in sales growth causes over-capacity ----- Intensified competition ----- price wars ---- profit Erosion---- weak exit. 113
  • MATURITY STAGE STRATEGIES R&D spends are increased to find better versions. Increased advertising spends. More Consumer / Dealer cuts. Three types of interventions are taken up by Marketers. 1. Market Modification: Company should not try to conserve but should try & expand market for its Brand. Sales vol. = No. of users X usage rate. Try expand the no. of Brand Users by: Convert non users: Attempts to convert non coffee drinkers to try coffee. Enter new market segments: Johnson & Johnson baby shampoo for adults, Cerelac adapted for the senile. Win competitors customers: Pepsi/Coke, NIIT/Apple. 114
  • MATURITY STAGE STRATEGIES Volume can also be increased by focusing on the Current Users – convincing them to use more. More frequent use: Biscuits an all time snack, Coke instead of coffee/tea, clinic shampoo, variety of SKU, vending machines. More usage per Occasion: Shampoo giving better results in two rinsing, more SKU’s. New more varied uses: Recipe route tried out by microwave oven manufacturers, Sachets by shampoo manufacturers for travelers, Arm & Hammer Baking soda as a refrigerator deodorant. 2. PRODUCT MODIFICATION Stimulate sales by modifying the product’s characteristics by improvements in quality, feature and style. 115
  • STRATEGIES FOR MATURE STAGE 2. PRODUCT MODIFICATION Quality Improvement: Functional performance improved- for cars, TV, white goods - New Improved eg: Santro Xing, Indica V2. Plus launch - from FMCG manufacturers --------- stronger, bigger, better,– Lifebuoy Plus. Aimed at triggering Brand switching Style Improvement: Aimed at increasing aesthetic appeal. Periodic intro of color variants by auto manufacturers. Consumer/packaged food bringing packaging /color variants. Advantages: Unique identity / can secure loyal customers. Major disadvantage arises from the fact that it is difficult to judge customer preferences --- risk of losing those who liked earlier version 116
  • STRATEGIES FOR MATURE STAGE (contd.) Advantages of feature improvements Build progressive and leadership image for co. (Maruti) New features can be made optional (adapted or dropped easily). Helps to win loyalty of some segments. Cost effective publicity. Can generate enthusiasm for sales force and dealers. Main disadvantage is that many of these can be easily imitated. 3. Marketing Mix Modifications: Product Manager should also try to stimulate sales by modifying Mktg. Mix. Price: Decision whether a price cut will attract new customers. Trying price specials, early bird discounts, easier credit terms to retain loyal customers.. 117
  • MATURITY STAGE STRATEGIES 3. Marketing Mix Modifications: Advertising: Change message- copy, media- vehicle mix, timing/frequency, to target new audience. Build new brand identity / image. Direct comparison Ads about competition. Sales Promotion: Step up trade discount Price offs, Rebates, warranties, festival offers, gifts etc. Personal selling: should the quality of sales people or their area of specialization need to be changed. Questions on territory revisions; incentive plans; planning of sales call etc. Services: can the company speed up delivery. Extending technical services. Disadvantages: can be easily copied. Mass distribution and penetration efforts may not help – can lead to profit erosion. 118
  • STRATEGIES FOR DECLINE STAGE Sales of most products/brands eventually decline –. 1. Technological advancements in the product category. 2. Consumer shifts in taste & perception. 3. Increased domestic & foreign competition------ price cutting/ over capacity/ profit erosion. Sales may plunge to zero or gradually fall for a long period. As sales decline, profits fall. Some of the weaker firms withdraw. Those remaining drop smaller market segments & marginal trade channels to conserve profits. They may cut their promotion budgets and may reduce prices further. Unless strong reasons for retention exist, carrying a weak product is very costly to the firm. It can delay aggressive search for alternatives/replacement. 119 119
  • STRATEGIES FOR DECLINE STAGE MARKETING STRATEGIES: 1. Increase firms investment (Dominate the market or to strengthen its competitive position) 2. Hold investment level until uncertainties about the industry are resolved. 3. Decreasing investment selectively. (Unprofitable target groups/ markets/ products will have to be identified and instead look for strong niche’s.) 4. Harvesting: milking to recover cash quickly (Brands with high loyalty can continue longer without any investments). 5. Divest the business quickly by disposing off its assets as advantageously as possible. Drop Decision: Sell/transfer to someone Should drop slowly or fast. Inventory/service level to be maintained. 120
  • P.L.C WEAKNESSES No Uniform Shape: An ‘S’ shaped curve describes only shape of PLC while most of them vary or are unique. Unpredictable Turning Points: While most products do peak and then fall there is no specific turning point. Difficult to Decide the Stages: A dormant sales (flat) pattern may denote the product has reached maturity while it may be just that the product has touched a plateau before another growth period. Tendency to drop a product due to such readings can turn out to be fatal due to the risks involved in new product development. 121
  • P.L.C WEAKNESSES Unclear Implications: Growth phase may or may not be associated with high profit margin. Rapid growth can be associated with low profits and decline can be very profitable. Product Oriented: Fails to understand the changes in the requirement of customers / strategies of competitors, attractiveness of new market to competitors/ Emergence of technologies etc. Technologies, needs/ demands, product categories have different driving forces. 122
  • P.L.C WEAKNESSES No Uniform Shape: An s shaped curve describes only shape of PLC while most of them vary or are unique. Unpredictable Turning Points: While most products do peak and then fall there is no specific turning point. Difficult to Decide the Stages : A dormant sales (flat) pattern may denote the product has reached maturity while it may be just that the product has touched a plateau before another growth period. Tendency to drop a product due to such readings can turn out to be fatal due to the risks involved in new product development Unclear Implications: Growth phase may or may not be associated with high profit margin. Say rapid growth can be associated with low profits and decline can be very profitable. Product Oriented: Fails to understand the changing requirement of customers / strategies of competitors, attractiveness of new market to competitor-ors / Emergence of technologies etc. Technologies, needs/ demands, product categories have different driving forces. 123
  • BCG Portfolio Matrix MARKET SHARE DOMINANCE HIGH LOWMARKET GROWTH RATE LOW High growth High growth Market leaders Low market share Require cash Need cash Large profits Poor profit margins HIGH $ Low growth Low growth High market share Low market share High cash flow Minimal cash flow 124
  • BCG Matrix Relative Market Share Position High Medium Low 1.0 HighIndustry Sales Growth Rate Stars Question Marks IV III Med Cash Cows Dogs I II Low 125
  • BCG Matrix 126
  • BCG Portfolio Matrix Example MARKET SHARE DOMINANCE HIGH LOW Sub-Notebooks IntegratedMARKET GROWTH RATE and Hand-Held phone/Palm LOW Computer devices PROBLEM STAR CHILD Laptop and Mainframe Personal HIGH Computer Computers CASH COW DOG 127
  • Boston Consulting Group (BCG) Matrix When a firm’s divisions compete in different industries, a separate strategy often must be developed for each business. To enhance and formulate strategies. To manage its portfolio of businesses Focuses on relative market share position and the industry growth rate . 128
  • BCG Matrix Pie Chart corresponds to corporate revenue generated by that business unit. The pie slice indicates the proportion of division’s profit. Divisions located Quadrant I is called Cash Cows , Quadrant II is called Dogs . Quadrant III is called Question Marks , Quadrant IV is called Stars , 129
  • Cash Cows High relative market share but compete in a low-growth industry  Generate cash in excess of their needs  Milked i.e. cash for other purposes Manages to maintain strong position as long as possible  Product development  Concentric diversification  Retrenchment or divestiture if the division becomes weak 130
  • Dogs Low relative market share and compete in a slow- or no-growth industry Weak internal and external position  Liquidation  Divestiture  Retrenchment 131
  • Question Marks Low relative market share—compete in a high growth industry  Cash needs are high  Cash generation is low Decision: strengthen by pursuing an intensive strategy, e.g. to sell them. 132
  • Stars High relative market share and a high industry growth rate Represent the organization’s best long- run opportunities for growth and profitability. Substantial investment to maintain or strengthen their dominant position.  Integration strategies  Intensive strategies  Joint ventures 133
  • BCG Matrix & Benefit Setting the path for growth Knowing dead investments Draws attention to the cash flow, Investment characteristics Needs of an organization’s various divisions. To achieve a portfolio of divisions that are Stars. 134
  • BCG Matrix Limitations Viewing every business as a star, cash cow, dog, or question mark is overly simplistic. Middle of the BCG matrix is not easily classified. The BCG matrix does not reflect whether or not various divisions or their industries are growing over time. Other variables besides relative market share position and industry growth rate in sales are important in making strategic decisions about various divisions. 135
  • G.E Strategic Planning Model Business Strength Strong Average Weak Industry Attractiveness High Medium Low Business Strength Index Industry Attractiveness Index * Market Share * Market size * Price Competitiveness * Market Growth * Product Quality * Industry Profit Margin * Customer Knowledge * Amount of Competition * Sales Force and Effectiveness * Seasonality * Geographic Advantage * Cost Structure 136 * Others * Etc.
  • Strategies for Resource Allocation Provide financial resources if SBU (Problem Build Build Child) has potential to be a Star. Preserve market share if SBU is a successful Hold Hold Cash Cow. Use cash flow for other SBUs. Increase short-term cash return. Appropriate Harvest for all SBUs except Stars. Harvest Get rid of SBUs with low shares in Divest Divest low-growth markets. 137
  • Parenting-Fit Matrix Low Heartland and parenting characteristicsMISFIT between critical success Ballast Edge of Heartland Alien Territoryfactors Value Trap High Low High FIT between parenting opportunities and parenting characteristics 138
  • McKinsey’s 7 S Model StrategyStructure Systems Super Ordinate Goals- Shared Values Style Skills Staff 139
  • Implementation of a strategy 140
  • Strategy Implementation Sum total of the activities and choices required for the execution of a strategic plan. Process by which strategies and policies are put into action through programs, budgets, and procedures. The toughest phase in Strategy Management 141
  • Strategy Implementation •More time than planned •Unanticipated problems •Activities ineffectively coordinated •Crises deferred attention away Problems in •Employees w/o capabilitiesImplementing •Inadequate employee trainingStrategic plans •Uncontrollable external factors •Inadequate leadership •Poorly defined tasks •Inadequate information systems 142
  • DESIGN OF OBJECTIVESIS STRATEGY & COMMUNICATE TO CONCERNEDFUNCTIONAL ? TASK BREAK DOWNEVALUATION OF OUT COME STRATEGIC ORGANISATION DESIGN IMPLEMENTATION & DEVELOPMENT TRAINING & & DEVELOPMENT OF CONTROL MANAGERS PROCESS DELEGATION OF TASK & AUTHORITIES & RESPOSIBILITIESDESIGN OF SIS /MIS RESOURCES MOBILISATION & DESIGN OF ALLOCATION PERFORMANCE STANDARD 143
  • The Nature of Strategy ImplementationThe greatest strategy will be failed if it’s implemented badly.Successful strategy formulation does not guarantee successful strategy implementation.Less than 10% of strategies formulated are successfully implemented! 144
  • The Nature of Strategy ImplementationStrategy Implementation can have a low success rate • Implementation may fail due to: Failing to segment markets appropriately Paying too much for a new acquisition Falling behind competition in R&D Not recognizing benefit of computers in managing information 145
  • The Nature of StrategyImplementationSuccessful Strategy Implementation Market goods & services well Raise needed working capital Produce technologically sound goods Sound information systems 146
  • Formulation vs. Implementation Formulation focuses on effectiveness Implementation focuses on efficiency• Formulation is primarily an intellectual process• Implementation is primarily an operational process• Formulation requires good intuitive & analytical skills• Implementation requires special motivational & leadership skills• Formulation requires coordination among a few individuals• Implementation requires coordination among many individuals 147
  • Nature of StrategyImplementationStrategy Implementation Varies among different types & sizes of organizations 148
  • Nature of StrategyImplementationImplementation Activities Altering sales territories Adding new departments Hiring new employees Cost-control procedures Modifying advertising strategies Building new facilities 149
  • Nature of StrategyImplementationManagement Perspectives Shift in responsibility Division or Strategists Functional Managers 150
  • Management Issues Annual Objectives ResourcesManagement Issues Organizational structure Restructuring 151
  • Management Issues (cont’d) Resistance to ChangeManagement Issues Production/Operations 152
  • Management IssuesPurpose of Annual Objectives --Basis for resource allocationMechanism for management (e.g. ITmanagement) evaluationMetric for gauging progress on long-termobjectivesEstablish priorities (organizational, division,& departmental) 153
  • Management Issues-- Central management activity thatallows for the execution of strategyResource Allocation enables resources to be allocated according to priorities established by annual objectives. 154
  • Management Issues 4 Types of Resources1. Financial resources2. Physical resources3. Human resources4. Technological resources 155
  • Management IssuesMatching Structure w/ Strategy-- Changes in strategy = Changes instructure Structure dictates how objectives & policies will be established and how resources will be allocated; e.g. is structure based on location or based on the product… 156
  • Structure should be designed tofacilitate the strategic pursuit of a firm OrganizationalNew strategy New administrative performanceIs formulated problems emerge declines Organizational New organizational performance structure is established improves 157
  • Management IssuesRestructuring-- Reducing the size of the firm – # ofemployees, divisions and/or units, # ofhierarchical levels; e.g. The Internet isushering in a new wave of businesstransformations… 158
  • Management IssuesReengineeringIn reengineering, a firm usesinformation technology to break downfunctional barriers and create a worksystem based on businessprocesses… Reconfiguring orredesigning work, jobs, & processes toimprove cost, quality… (alteration ofScott Morton’s value chain) Think ofan example. 159
  • Management IssuesResistance to Change -- Singlegreatest threat to successful strategyimplementationRaises anxiety; fear concerning:economic loss, Inconvenience or UncertaintyForce Change StrategyEducative Change StrategyRational or Self-Interest Change Strategy 160
  • Management IssuesProduction/Operations ConcernsProduction processes typicallyconstitute more than 70% of firm’s totalassetsDecisions concern e.g. : Plant size Quality control Technological innovation 161
  • Marketing Issues Marketing variables affect success/failure of strategy implementation1. Market segmentation1. Product positioning 162
  • Marketing IssuesMarket Segmentation: Subdividing of amarket into distinct subsets of customersaccording to needs and buying habits Market segmentation variables:  Product  Place  Promotion  Price 163
  • Marketing Mix – Component FactorsProduct Place Promotion Price DistributionQuality Advertising Level channels Distribution Discounts &Features Personal selling coverage allowancesStyle Outlet location Sales promotion Payment termsBrand name Sales territories Publicity InventoryPackaging levels/locations TransportationProduct line carriersWarrantyService level 164 164
  • Marketing IssuesProduct Positioning Schematic representations that reflect how products/services compare to competitors’ on dimensions most important to success in the industry; I.e. according to customer wants and customer needs 165
  • Finance/Accounting IssuesEssential for implementation Acquiring needed capital Developing projected financial statements Preparing financial budgets Evaluating worth of a business 166
  • Research & DevelopmentIssues New products and improvement of existing products that allow for effective strategy implementation Use an R&D strategy that ties external opportunities to internal strengths and is linked with objectives. 167
  • Research & Development Issues 3 Major R&D approaches to implementing strategies1. 1st firm to market new technological products2. Innovative imitator of successful products3. Low-cost producer of similar but less expensive products 168
  • Management Information Systems (MIS) Issues Information is the basis for understanding the firm. One of the most important factors differentiating successful from unsuccessful firms• MIS used to :• Information collection, retrieval, & storage• Keeping managers informed• Coordination of activities among divisions• Allow firm to reduce costs 169
  • Stages of the Industry Life Cycle Stage Introduction Growth Maturity Decline FactorGeneric Differentiation DifferentiationDifferentiationstrategies Overall cost Overall cost leadership leadership FocusMarket Low Very large Low to Negativegrowth rate moderateNumber of Very few Some Many FewsegmentsIntensity of Low Increasing Very intense ChangingcompetitionEmphasis on Very high High Low to Lowproduct moderatedesign 170
  • Stages of the Industry Life Cycle Stage Introduction Growth Maturity Decline FactorEmphasis on Low Low to High Lowprocess moderatedesignMajor Research and Sales and Production Generalfunctional Development marketing managementarea(s) of and financeconcernOverall Increase Create Defend Consolidate,objective market share consumer market share maintain, awareness demand and extend harvest, or product life exit cycles 171
  • Evaluation and Control Return on Investment (ROI) Earnings perTraditional Share Financial (EPS) Measures Return on Equity (ROE) 172
  • THANK YOU.Shefali (GIMT) 173