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Prof. Parag Tikekar
Whatsapp/ Cell: +97150- 5785927
E-mail: ParagTikekar@yahoo.com
Finance for Strategic Managers
(Part 4 of 4)
About Parag Tikekar
 BE Electronics & Communication from DIT, India.
 MBA Finance & Marketing from IIM, India.
 Keynote Speaker on Segmentation at SMI Branch Banking
Conferences at London – June ‘07, ‘08, ‘09; Uniglobal
Conference Barcelona – Oct ‘08; EFMA Conference Paris –
June ‘09; Coreventus Conference KL – Sep ‘10.
 Sharia’ah Certified; Project Management; Credit Policy; Cash
Management; Omega Credit Skills Program & Trade Finance;
Quality Team Building; Customer Care – In-house courses.
 CRM Conferences at USA – NW University, Chicago – Oct ’99;
Florida – Jan ‘01 & Dallas – June ‘02.
 Gulf Marketing Review Conference on Increasing Marketing
Effectiveness at Bahrain – Oct ‘01.
Strategies for Growth
Agenda- Day 2
 Definition of Strategy
 Assessing the Organization
 Time Horizons
 Greiner’s Model & Turning Points
 VRIN Capabilities
 Activities
Introduction
Introduction / Definition of
Strategy
 Strategy is the long-term direction & scope of an
organisation, which achieves advantage in a
changing environment through its configuration of
resources and competences with the aim of fulfilling
stakeholder expectations.
 What are our long-term aims?
 What business or market segments do we want to be
in?
 How can we do better than our competitors?
 How do we react to changes in our environment?
 What skills & other resources do we have?
 How can we best satisfy the needs & wishes of our
shareholders, employees, suppliers & the wider
community?
Assessing the Organisation
 The 1st stage of planning any strategy for the
future involves looking carefully at the current
situation.
 Many organisations define their overall aims in
mission & vision statements.
 Thinking of a small retailer…
Mission, Vision & Objectives
3 Time Horizons
 Horizon 1 – These are the current core activities.
They need defending & extending, but in the long
term they will probably decline in terms of profits.
 Horizon 2 – These are emerging activities that
should provide new sources of profit.
 Horizon 3 – These are the uncertain possibilities
for the future. They are likely to be risky & only a
small number will succeed.
Activity
Activity
Apply the 3 Horizon Model to your
company, or say: London Airport
Activity / Feedback
 Horizon 1- the current flights. Some defensive work can be
done by trying to improve facilities & so become more
attractive to Customers. There may be threats from other
airports, & perhaps from other modes of transport, such as
train services.
 Airports of this type may have few opportunities in Horizon 2. It
might be possible to increase the number of flights, or perhaps
increase the number of low-cost airlines operating from the
airport.
 Horizon 3 is important. There is a possibility of building a new
runway that would significantly increase capacity. There are
also very long term ideas about future air travel involving large
number of smaller aircraft flying to many more destinations.
Both of these offer exciting possibilities, but in 2017 are not yet
even in the detailed planning stage.
6 Phases of Growth (Greiner’s
Model)
Greiner’s 6 Turning Points
Phase 1: Creativity
 The innovative entrepreneur creates a product & finds the initial market segment.
With very few employees, communication is informal. People may work long
hours & are generally rewarded by items, such as stock options, which will only
be valuable if the business succeeds.
 The phase ends with a Leadership Crisis. The innovator hands over some
responsibilities to a professional manager.
Phase 2: Direction
 The business environment is formalised; for example with formal
communications, budgets, marketing & production. Staff are rewarded using
incentive schemes.
 With further growth, the manager finds that he or she cannot control all aspects
of the business. There is an Autonomy Crisis: the manager needs to create
structures that enable delegation.
Phase 3: Delegation
 The increased number of managers enables the company to react more quickly
to new market opportunities or new production possibilities. Top managers are
able to focus on major issues. The business continues to grow.
 This phase ends with a Control Crisis: the structure needs to be developed,
typically with a head office & relatively independent separate business units.
Greiner’s 6 Turning Points
(continued…)
Phase 4: Coordination & Monitoring
 Growth continues & the business units are gradually combined to form product
groups or service practices. Investment in parts of the business is typically
allocated on the basis of ROI. Incentives for staff are based on working towards
the company’s goals.
 The risk during this phase is that business will sink under increasing amounts of
bureaucracy. The phase ends with a Red-Tape Crisis: a simplified structure must
be introduced, & the culture needs to change.
Phase 5: Collaboration
 Where previous growth occurred as a result of central control, the company may
now need a more flexible approach in which staff group & re-group to deliver
projects. It may be suitable to adopt a matrix structure with team-based financial
rewards.
 This phase ends with a crisis of Internal Growth: further internal growth has
become impossible, so the business must look for partnerships with
complementary organizations.
Phase 6: Extra-Organizational Solutions
 Growth may continue through mergers, outsourcing, networks or other solutions
that involve other companies.
Activity
Activity
1. What are the most important
resources that your company,
department or team has?
2. What are the most important
competences that your
company, department or team
has?
Activity / Feedback
 Physical factors might include resources such as machines,
raw materials, products or components, patents, or information
held on computer. Competences will relate to whether you can
use those resources effectively.
 Financial factors will appear on the organisation’s balance
sheet & cash flow statements. You may find that you currently
have cash, & may be able to use that to grow the business in
some way. Competences will include the skills of raising funds,
managing cash flows, dealing with debtors.
 Human factors include the skills & experience of your
managers, employees, suppliers, consultants & business
partners. As well as competences in carrying out key tasks &
activities, don’t forget the importance of being able to motivate
others, creating relationships, innovating.
3 Types of Capability
A Sports Centre
Activity
Activity
 Look again at the lists of
capabilities relating to resources &
competences that you created in
the preceding activity.
 Categorise each of the capabilities
as either threshold, distinctive or
dynamic.
Activity / Feedback
 You will have had some difficulty placing some capabilities in
just 1 category.
 For example, the sports centre may currently have a
distinctive capability that gives it competitive advantage
(perhaps it has an excellent swimming coach). But what will
happen if that coach leaves.
 If it has sufficient finds, it may be able to employ another
excellent coach – it will also have dynamic capability relating
to swimming coaches.
 That situation identifies a key factor when considering the
capabilities that give you competitive advantage. Will you still
have that capability in the MT & LT?
 In an interconnected world, it is increasingly difficult to seek
advantage on the basis of access to raw materials &
components; instead companies need to focus on the skills,
experience, knowledge & understanding of their workforce.
VRIN Capabilities
 Valuable – they must be a source of greater value, in
terms of relative costs & benefits, than similar
resources in competing firms
 Rare – the resource must be scarce relative to
demand for its use or what it produces
 Inimitable – it must be difficult to imitate
 Non-substitutable – other different types of
resources cannot be functional substitutes.
Any questions?
Thank you!

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Finance for strategic managers Part 4 of 4

  • 1. Prof. Parag Tikekar Whatsapp/ Cell: +97150- 5785927 E-mail: ParagTikekar@yahoo.com Finance for Strategic Managers (Part 4 of 4)
  • 2. About Parag Tikekar  BE Electronics & Communication from DIT, India.  MBA Finance & Marketing from IIM, India.  Keynote Speaker on Segmentation at SMI Branch Banking Conferences at London – June ‘07, ‘08, ‘09; Uniglobal Conference Barcelona – Oct ‘08; EFMA Conference Paris – June ‘09; Coreventus Conference KL – Sep ‘10.  Sharia’ah Certified; Project Management; Credit Policy; Cash Management; Omega Credit Skills Program & Trade Finance; Quality Team Building; Customer Care – In-house courses.  CRM Conferences at USA – NW University, Chicago – Oct ’99; Florida – Jan ‘01 & Dallas – June ‘02.  Gulf Marketing Review Conference on Increasing Marketing Effectiveness at Bahrain – Oct ‘01.
  • 4. Agenda- Day 2  Definition of Strategy  Assessing the Organization  Time Horizons  Greiner’s Model & Turning Points  VRIN Capabilities  Activities
  • 6. Introduction / Definition of Strategy  Strategy is the long-term direction & scope of an organisation, which achieves advantage in a changing environment through its configuration of resources and competences with the aim of fulfilling stakeholder expectations.  What are our long-term aims?  What business or market segments do we want to be in?  How can we do better than our competitors?  How do we react to changes in our environment?  What skills & other resources do we have?  How can we best satisfy the needs & wishes of our shareholders, employees, suppliers & the wider community?
  • 7. Assessing the Organisation  The 1st stage of planning any strategy for the future involves looking carefully at the current situation.  Many organisations define their overall aims in mission & vision statements.  Thinking of a small retailer…
  • 8. Mission, Vision & Objectives
  • 9. 3 Time Horizons  Horizon 1 – These are the current core activities. They need defending & extending, but in the long term they will probably decline in terms of profits.  Horizon 2 – These are emerging activities that should provide new sources of profit.  Horizon 3 – These are the uncertain possibilities for the future. They are likely to be risky & only a small number will succeed.
  • 11. Activity Apply the 3 Horizon Model to your company, or say: London Airport
  • 12. Activity / Feedback  Horizon 1- the current flights. Some defensive work can be done by trying to improve facilities & so become more attractive to Customers. There may be threats from other airports, & perhaps from other modes of transport, such as train services.  Airports of this type may have few opportunities in Horizon 2. It might be possible to increase the number of flights, or perhaps increase the number of low-cost airlines operating from the airport.  Horizon 3 is important. There is a possibility of building a new runway that would significantly increase capacity. There are also very long term ideas about future air travel involving large number of smaller aircraft flying to many more destinations. Both of these offer exciting possibilities, but in 2017 are not yet even in the detailed planning stage.
  • 13. 6 Phases of Growth (Greiner’s Model)
  • 14. Greiner’s 6 Turning Points Phase 1: Creativity  The innovative entrepreneur creates a product & finds the initial market segment. With very few employees, communication is informal. People may work long hours & are generally rewarded by items, such as stock options, which will only be valuable if the business succeeds.  The phase ends with a Leadership Crisis. The innovator hands over some responsibilities to a professional manager. Phase 2: Direction  The business environment is formalised; for example with formal communications, budgets, marketing & production. Staff are rewarded using incentive schemes.  With further growth, the manager finds that he or she cannot control all aspects of the business. There is an Autonomy Crisis: the manager needs to create structures that enable delegation. Phase 3: Delegation  The increased number of managers enables the company to react more quickly to new market opportunities or new production possibilities. Top managers are able to focus on major issues. The business continues to grow.  This phase ends with a Control Crisis: the structure needs to be developed, typically with a head office & relatively independent separate business units.
  • 15. Greiner’s 6 Turning Points (continued…) Phase 4: Coordination & Monitoring  Growth continues & the business units are gradually combined to form product groups or service practices. Investment in parts of the business is typically allocated on the basis of ROI. Incentives for staff are based on working towards the company’s goals.  The risk during this phase is that business will sink under increasing amounts of bureaucracy. The phase ends with a Red-Tape Crisis: a simplified structure must be introduced, & the culture needs to change. Phase 5: Collaboration  Where previous growth occurred as a result of central control, the company may now need a more flexible approach in which staff group & re-group to deliver projects. It may be suitable to adopt a matrix structure with team-based financial rewards.  This phase ends with a crisis of Internal Growth: further internal growth has become impossible, so the business must look for partnerships with complementary organizations. Phase 6: Extra-Organizational Solutions  Growth may continue through mergers, outsourcing, networks or other solutions that involve other companies.
  • 17. Activity 1. What are the most important resources that your company, department or team has? 2. What are the most important competences that your company, department or team has?
  • 18. Activity / Feedback  Physical factors might include resources such as machines, raw materials, products or components, patents, or information held on computer. Competences will relate to whether you can use those resources effectively.  Financial factors will appear on the organisation’s balance sheet & cash flow statements. You may find that you currently have cash, & may be able to use that to grow the business in some way. Competences will include the skills of raising funds, managing cash flows, dealing with debtors.  Human factors include the skills & experience of your managers, employees, suppliers, consultants & business partners. As well as competences in carrying out key tasks & activities, don’t forget the importance of being able to motivate others, creating relationships, innovating.
  • 19. 3 Types of Capability A Sports Centre
  • 21. Activity  Look again at the lists of capabilities relating to resources & competences that you created in the preceding activity.  Categorise each of the capabilities as either threshold, distinctive or dynamic.
  • 22. Activity / Feedback  You will have had some difficulty placing some capabilities in just 1 category.  For example, the sports centre may currently have a distinctive capability that gives it competitive advantage (perhaps it has an excellent swimming coach). But what will happen if that coach leaves.  If it has sufficient finds, it may be able to employ another excellent coach – it will also have dynamic capability relating to swimming coaches.  That situation identifies a key factor when considering the capabilities that give you competitive advantage. Will you still have that capability in the MT & LT?  In an interconnected world, it is increasingly difficult to seek advantage on the basis of access to raw materials & components; instead companies need to focus on the skills, experience, knowledge & understanding of their workforce.
  • 23. VRIN Capabilities  Valuable – they must be a source of greater value, in terms of relative costs & benefits, than similar resources in competing firms  Rare – the resource must be scarce relative to demand for its use or what it produces  Inimitable – it must be difficult to imitate  Non-substitutable – other different types of resources cannot be functional substitutes.