An overview of strategic management.ppsx11


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  • MNP – Mobile Number Portability
  • The CDMA subscriber base has reached 74.36m in the quarter ending June 2008 as against 68.37m at the end of the previous quarter. The growth in this quarter is 8.76% as against 11.37% for the previous quarter. Reliance remains the largest CDMA mobile operator followed by Tata Teleservices and BSNL with subscriber base of 42.71m, 26.33m and 4.59m respectively. Wimax – This is a disruptive technology facing Indian telecosVoIP – This will put pressure on the Telecos since ISP can offer virtually free internet based mobile phones – Also License fees is 2 Cr against 1650 Cr for telecom operators4 G – people are already talking about it
  • Cellular Services address the communication needs and staying connected.Hence a necessityThere is no substitute that can replace it completely.
  • What they are doing in retail for last 4 years. What to put in Cash Cow.BhartiInfratelThe Company has entered into a joint ventureagreement with Vodafone Essar Limited (Vodafone)and Idea Cellular Limited (Idea) to form an independenttower company (“Indus Towers Limited” or “IndusTower”) to provide passive infrastructure services in16 circles of India. The Company and Vodafone willhold approximately 42% each in Indus Tower and thebalance 16% will be held by Idea. Pursuant to theaforesaid agreement, BhartiInfratel Limited hassubscribed 50,000 equity shares of Rs. 10 each in IndusTowers Limited on December 17, 2007 for an aggregatevalue of Rs. 500 thousand. For this purpose, BhartiInfratel Ventures Limited has been incorporated as awholly owned subsidiary of BhartiInfratel Ltd. Thetelecom passive infrastructure will be transferred toBharti Infratel Ventures for ultimate merger in IndusTowers Limited.TheCompany’s 61,984,721 mobile customers accounted fora 23.8% of wireless (GSM + CDMA) market share as onMarch 31, 2008.The revenues from the mobile services for the financialyear were Rs. 218,697 mn., a growth of 55% over therevenues in the previous financial year. The mobile servicesbusiness contributed 80% to the consolidated revenues.Telemedia ServicesDuring the year, the Broadband and Telephone Servicesbusiness was renamed as Telemedia Services in line withthe Company’s growing focus on new media solutionsand foray into IPTV and DTH businesses.The Company provides broadband (DSL) and telephoneservices (fixed line) in 15 circles spanning over 94 citiesacross India. As on March 31, 2008, the Company had2,283,328 customers (a growth of 22%), of which 34.8%(~795,000) were subscribing to broadband / internetservices.The Company’s strategy for Telemedia business is to focuson the cities with high revenue potential, excepting forDTH which will be an all India offering. The productoffering in this segment includes supply and installationof fixed-line telephones providing local, national andinternational long distance voice connectivity andbroadband Internet access through DSL. The business alsoprovides value added services such as intelligent networkPassive Infrastructure ServicesThe undertaking relating to the entire assets and liabilitiesof telecom passive infrastructure was transferred fromBhartiAirtel Limited to BhartiInfratel Limited pursuant toa scheme of arrangement sanctioned by the Honble HighCourt of Delhi. BhartiInfratel provides passiveinfrastructure services on a non-discriminatory basis to alltelecom operators in India. BhartiInfratel deploys, ownsand manages passive infrastructure on an all India basis.The Company has approximately 52,000 towers as onMarch 31, 2008, of which approx 30,000 towers will betransferred to Indus Towers Ltd (a Joint Venture betweenBhartiInfratel, Vodafone and Idea Cellular) for 16 circles.
  • Telemedia – Airtel Industry % BroadBand - 0.2 4.5 4 Fixed Line 1.2 40 3 Broadband ..HP and Airtel had a deal …As on March 31, 2008, the Company had2,283,328 customers (a growth of 22%), of which 34.8%(~795,000) were subscribing to broadband / internetservices.Broadband subscribers - 4.38 million at the end of June 2008 as compared to 3.87 million at the end of March 2008 (growth rate @ 13.18%)Out of total 4.38 million broadband subscribers, 3.72 million are DSL based; 0.42 million Cable Modem; 0.11 million Ethernet LAN; 0.045 million Fiber; 0.057 million Radio, Leased Line 0.018 million and 0.005 million use other technologies.The key financial results of the Long Distance Servicesdivision for the year ended March 31,2008 are presentedbelow. About 25% growth ..Enterprise Services – Corporates--- 49% growth ….
  • An overview of strategic management.ppsx11

    2. 2. Unit I<br /><ul><li>Definition, nature, scope, and importance of strategy; and strategic management (Business policy). Strategic decision-making. Process of strategic management and levels at which strategy operates. Role of strategists.
    3. 3. Defining strategic intent: Vision, Mission, Business definition, Goals and Objectives.
    4. 4. Environmental Appraisal—Concept of environment, components of environment (Economic, legal, social, political and technological). Environmental scanning techniques- ETOP, QUEST and SWOT (TOWS) PEST.</li></li></ul><li>Unit II<br /><ul><li>Internal Appraisal – The internal environment, organizational capabilities in various functional areas and Strategic Advantage Profile. Methods and techniques used for organizational appraisal (Value chain analysis, Financial and non financial analysis, historical analysis, Industry standards and benchmarking, Balanced scorecard and key factor rating). Identification of Critical Success Factors (CSF).</li></li></ul><li>Unit IV<br /><ul><li>Strategy implementation: Resource allocation, Projects and Procedural issues. Organist ion structure and systems in strategy implementation. Leadership and corporate culture, Values, Ethics and Social responsibility. Operational and derived functional plans to implement strategy. Integration of functional plans.
    5. 5. Strategic control and operational Control. Organizational systems and Techniques of strategic evaluation. </li></li></ul><li>The Concept of Strategy<br />The term ‘strategy’ has its origin in the Greek word strategos. Strategos generalship-the actual direction of military force.<br /> Strategos is to plan the destruction of one’s enemies through the effective use of sources.<br />
    6. 6. “a plan or course of action which is of vital, pervasive, or continuing importance to an organization as a whole”.<br />
    7. 7. Examples<br />Kotak Mahindra Finance Ltd is a major non banking finance company(NBFC) that has experienced low profitability. It is planning to adopt a diversified strategy in wholesale corporate lending and focusing on new growth areas, such as wealth management, retail, insurance, and information services. <br />Birla TransAsia Carpets is a sick unit from Yash Birla Group. As it is faced with excessive manpower and high interest costs it is attempting a turnaround strategy by retrenching three-fourth of its employees, importing synthetic carpets and tiles, and exporting to U.S carpets markets. <br />Singer India is entering in white goods and color television market as part of its diversification strategy. <br />
    8. 8. How different companies reacted to their environment?<br />
    9. 9. They adopted a course of action which seemed to be appropriate to them. Such a course of action may involve actions like expansion, diversification, focus, turnaround, stability or divestment. <br />An old established company facing threats in the environment.(has to rethink the course of action)<br />Some new opportunities emerge in the environment which had not been in the past. <br />
    10. 10. These course of action are what we may call strategies. <br />
    11. 11. Definitions<br />The determination of the basic long term goals and objectives of an enterprise and the adoption of the course of action and the allocation of resources necessary for carrying out these goals. <br /> Alfred D Chandler(1962)<br />
    12. 12. The pattern of objectives, purpose, goals, and the major policies and plans for achieving these goals stated in such a way so as to define what business the company is in or is to be and the kind of company it is or it is to be.<br /> Kenneth Andrews(1965)<br />
    13. 13. Strategy is about achieving competitive advantage through being different- delivering a unique value added to the customer, having a clear and enact able view of how to position yourself uniquely in the industry.<br /> Michael Porter <br />
    14. 14. Strategy<br />A plan or course of action or a set of decision rules forming a pattern or creating a common thread,<br />The pattern or common thread related to the organization’s activities which are derived from its policies, objectives and goals,<br />Related to pursuing those activities which move an organization from its current position to derived future state,<br />Concerned with the resources necessary for implementing a plan or following a course of action, and<br />Connected to the strategic positioning of a firm, making trade offs between its different activities and creating a fit among these activities.<br />
    15. 15. Levels at which Strategy Operates<br />Strategy can be formulated on three different levels: <br /> Corporate level <br /> Business unit level <br /> Functional or departmental level<br />
    16. 16. A single strategy is not only inadequate but also inappropriate.<br />The need is for multiple strategies at different levels.<br />Strategic Business Unit(SBU): Any part of a business organization which is treated separately for the strategic management purpose.<br />
    17. 17. Corporate strategy is the selection and development of the markets (or industries)1 in which a firm competes. Therefore, corporate strategy deals with what industries (or markets) a firm seeks to compete in. <br />Business level strategies (low cost, diversification, and focus) are HOW a firm competes in a single market or industry.<br />
    18. 18. Corporate level Strategies<br />Corporate level strategy is the "big picture" view of the organization and includes deciding in which product or service markets to compete and in which geographic regions to operate.<br />For multibusiness firms, the resource allocation process like cash, staffing, equipment and other resources are distributed is established at the corporate level.<br />Market definition is also in the domain of corporate-level strategists, the responsibility for diversification,or the addition of new products or services to the existing product/service line-up, also falls within the realm of corporate-level strategy. <br />Similarly, whether to compete directly with other firms or to selectively establish strategic alliances—falls within the purview corporate-level strategy<br />
    19. 19. Critical questions answered by corporate-level strategists include:<br />What should be the scope of operations-what businesses should the firm be in?<br />How should the firm allocate its resources among existing businesses?<br />What level of diversification should the firm pursue;- which businesses represent the company's future? Are there additional businesses the firm should enter or are there businesses that should be targeted for termination or divestment?<br />How diversified should the corporation's business be?<br />How should the firm be structured? Are the responsibilities or each business unit clearly identified and is accountability established?<br />Should the firm enter into strategic alliances—cooperative, mutually-beneficial relationships with other firms?<br />
    20. 20. Corporate strategies represent the long-term direction for the organization. The top management has the primary decision making responsibility in developing corporate strategies and these managers are directly responsible to shareholders. <br />They are paralyzed without accurate and up-to-date information from managers at the business level. <br />Corporations are responsible for creating value through their businesses which they do so by managing their portfolio of businesses, ensuring that the businesses are successful over the long-term, developing business units, and ensuring that each business is compatible with others in the portfolio.<br />
    21. 21. Example<br />The Tata group has a wide range of business from cars, software to Insurance .The main strategic responsibilities of Tata’s CEO RatanN.Tata is to<br />i. Overall strategic objectives<br /> ii. Deciding whether the firm should divest itself from any of its business<br /> iii. Allocating resources among different business<br /> iv. Decisions on any new acquisitions or mergers for any particular unit<br /> v. Corporate strategies and policies for business which fall under the brand umbrella ‘Tata’<br /> vi. Managing corporate portfolio of business<br /> vii. Maximize corporate responsibility<br /> viii. Give a sense of direction to the Corporation<br />
    22. 22. Strategic Business Unit<br />A strategic unit may be a division, product line or other profit center that can be planned independently from the other business units of the firm. <br />
    23. 23. At the business level, the strategy formulation phase deals with:<br />Positioningthe business against rivals<br />Anticipating changes in demand and technologies and adjusting the strategy to accommodate them<br />Influencing the nature of competition through strategic actions such as vertical integration<br />Developing and sustaining a competitive advantage for the goods and services that are produced.<br />
    24. 24. Taking again Tata group as an example and in particular Tata consultancy services. The responsibility of the Managing Director, N.Chandrasekharanwill be to<br />i. Translate the general statement of intent from the CEO into strategies for TCS<br /> ii. Formulate strategy for TCS<br /> iii. Take strategic decisions regarding the company’s market foray<br /> iv. Develop strategies against competitors<br /> v. Assess and take appropriate action on the progress of the company in the market<br /> vi. Lookout for suitable acquisitions which will help enhance the competitiveness of the company<br />
    25. 25. According to Michael Porter three generic strategies-cost leadership, differentiation, and focus can be implemented at the business unit level to create a competitive advantage and defend against the adverse effects of the five forces.<br />
    26. 26. Five Generic Strategies<br />Competitive Advantage<br />Cost<br />Uniqueness<br />Cost Leadership<br />Differentiation<br />Broad target<br />Integrated Cost<br />Leadership/<br />Differentiation<br />Competitive Scope<br />Narrow target<br />Focused Cost Leadership<br />Focused Differentiation<br />
    27. 27. Toyota<br />Toyota Motor Corporation primarily conducts business in the automotive industry. Toyota also conducts business in the finance and other industries. Its business segments are automotive operations, financial services operations and all other operations. Its automotive operations include the design, manufacture, assembly and sale of passenger cars, recreational and sport utility vehicles, minivans and trucks and related parts and accessories. Toyota pursues a combined cost leadership and differentiation strategy that is economies of scopes are relevant. A dual focus on both cost leadership and differentiation is often required across the various segments of the value chain. Toyota’s production system is reportedly the most efficient in the world. This efficiency gives Toyota a low cost strategy in the global car industry. At the same time Toyota has differentiated its cars from those of rivals on the basis of superior design and quality. This superiority allows the company to charge a premium price for many of its popular models. Thus Toyota seems to be simultaneously pursuing both a low cost and a differentiated business level strategy, which is called stuck in the middle.<br />
    28. 28. Low Cost Strategy<br />The low cost strategy emphasizes having the lowest costs, not necessarily the lowest price, in a market. A firm attempting to realize a low cost strategy should stress resources that facilitate efficiency. A firm that has successfully achieved a low cost position will have the lowest costs relative to competitors. A firm can use such a position to either lower its prices and gain market share and sales from rivals OR keep its prices at the present market level and make relatively more profit per unit sold. The key idea is that cost and price are independent choices, and this strategy is focused on cost.<br />
    29. 29. Differentiation Strategy<br />The differentiation strategy focuses on developing a unique product or (equally useful) a perception of a unique product that customers are willing to pay a premium for. If a firm is not receiving a premium price for its goods or services it is NOT a differentiator. A firm seeking to follow a differentiation strategy should attempt to develop and enhance its resources that promote customer responsiveness, quality, and/or innovation. Note that costs are still important to a differentiator because it is possible that the costs of making the product unique will be greater than the premium consumers are willing to pay for it.<br />
    30. 30. Functional Level Strategy<br /> The functional level of the organization is the level of the operating divisions and departments. The strategic issues at the functional level are related to business processes and the value chain.<br />
    31. 31. Functional units of an organization are involved in higher level strategies by providing input into the business unit level and corporate level strategy, such as providing information on resources and capabilities on which the higher level strategies can be based. Once the higher-level strategy is developed, the functional units translate it into discrete action-plans that each department or division must accomplish for the strategy to succeed.<br />
    32. 32. For example in the above two cases where the CEO gave direction to the conglomerate as a whole and the managing director of TCS set to implement his company’s strategy on the lines of the corporate policy, it will actually be the Functional level managers such as in Human resource, product development, customer service etc who actually carry on the task of implementing this strategy. As above it could be in production, service ,finance or any integral functional unit in the company.<br />
    33. 33. The manager in product development in TCS will have his work cut out as follows<br /> i. Implement the general strategic outline provided by the managing director<br /> ii. Plan, communicate and implement the strategic outline provided by the MD<br /> iii. Determine which products are to be followed up with, products which are to be done with<br /> iv. Identifying the right, viable products for R&D<br /> v. Ensure quality conforming to the standards of the organization<br /> vi. Ensure smooth running of the product development unit<br /> vii. On the look out for new technologies to acquire<br /> viii. Staying tuned with the competitors R&D work<br /> ix. Give feedback to the corporate & business level managers about the success of their policies or drawbacks since they are in the frontline of the battle.<br />
    34. 34. Strategic Management<br />“The on-going process of formulating, implementing and controlling broad plans guide the organizational in achieving the strategic goals given its internal and external environment”.<br />Art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achieve its objectives.<br />
    35. 35. Interpretation<br />1. On-going process:<br /> Strategic management is a on-going process which is in existence through out the life of organization.<br />2. Shaping broad plans:<br /> First, it is an on-going process in which broad plans are firstly formulated than implementing and finally controlled.<br />3. Strategic goals:<br /> Strategic goals are those which are set by top management. The broad plans are made in achieving the goals.<br />4. Internal and external environment:<br /> Internal and external environment generally set the goals. Simply external environment forced internal environment to set the goals and guide them that how to achieve the goals?<br />
    36. 36.
    37. 37. Importance of strategic Management<br />Why do we need to lay so much stress on strategic management?<br />
    38. 38. Strategic management becomes important due to the following reasons:<br />Globalization: The survival for business<br /> (global considerations impact virtually all strategic decisions!)<br />E-Commerce: A business tool<br /> (electric commerce (e-commerce) has become a vital strategic-management tool.)<br />Earth environment has become a major strategic issue<br />
    39. 39. Importance<br />Strategic management can and will influence the organization’s performance. That’s why you can have organizations that face the same environmental conditions, but with different performance levels – and considering recent studies, there is a wide belief that organization’s that use strategic planning usually have better performance that the ones that don’t. <br />Another reason that supports the importance of strategic management has to do with the continually changing situation that organizations face these days, because it helps managers to examine relevant factors before deciding their course of action, thus helping them to better cope with uncertain environments.<br />Finally, strategic management is important most organizations are composed by diverse divisions and departments that need to be coordinated, else there would be no focus on achieving the organization's goals<br />
    40. 40. Strategic management – A route to success<br />The study of strategic management integrates different topics. Different courses are integrated due to the study of this course so that businesses become successful in every sector. It integrates the following:<br /> Marketing<br /> Management<br /> Finance<br /> Research and development<br />
    41. 41. Phases in Strategic management process<br />There are four essential phases in the strategic management process. <br />Establishing the hierarchy of strategic intent,<br /> Formulation of strategies,<br /> Implementation of Strategies, and <br /> Performing strategic evaluation and control.<br />
    42. 42. Elements in the Strategic Management Process<br />Establishing the hierarchy of strategic intent:<br /> a) creating and communicating a vision<br /> b) designing a mission statement <br /> c) defining the business,<br /> d) setting objectives, <br />
    43. 43. 2) Formulation of strategies:<br /> e) performing environmental appraisal,<br /> f) doing organizational appraisal,<br /> g) considering corporate level strategies,<br /> h) considering business level strategies,<br />i) undertaking strategic analysis,<br /> j) exercising strategic choice, <br /> k) formulating strategies,<br /> l) preparing a strategic plan. <br /> <br />
    44. 44. 3) Implementing of strategies<br /> m) activating strategies,<br /> n) designing structures and systems<br /> o) managing behavioral implementation,<br /> p) managing functional implementation,<br /> q) operationalising strategies,<br />
    45. 45. 4) Performing strategic evaluation and control:<br /> r) performing strategic evaluation,<br /> s) exercising strategic control, and<br /> t) reformulating strategies. <br />
    46. 46.
    47. 47. The strategic-management process is dynamic and continuous.<br />Strategy formulation, implementation, and evaluation activities should be performed on a continual basis, not just at the end of the year or semiannually.<br /> The strategic-management process never really ends.<br />
    48. 48. Nature of Strategic Management<br />Without understanding and commitment, strategy-implementation efforts face major problems.<br />Implementing strategy affects an organization from top to bottom; it impacts all the functional and divisional areas of a business.<br />Change comes through implementation and evaluation, not through the plan.<br />A technically imperfect plan that is implemented well will achieve more than the perfect plan that never gets off the paper on which it is typed.<br />
    49. 49. “Strategic Management” Synonymous with "Strategic Planning”<br />Strategic management<br /> Used more often in academia<br />Strategic planning<br /> Used more often in the business world<br />
    50. 50. Strategic management Refers to:<br /> Strategy formulation<br /> Strategy implementation<br /> Strategy evaluation<br /> Strategic planning Refers to:<br /> Strategy formulation<br />
    51. 51. Adapting to change<br /><ul><li>Organizational survival depends on:
    52. 52. Continuous monitoring of internal and external factors
    53. 53. Well-timed changes
    54. 54. Effective adaptation calls for a long-run focus
    55. 55. Incremental rise in degree of change</li></ul> 1. Technology<br /> 2. E-commerce<br /> 3. Merger-mania<br /> 4. Demographics<br />
    56. 56. The need to adapt to change leads organizations to key strategic management questions, such as <br /> “What kind of business should we become?” “Are we in right field?” <br /> “Should we reshape our business?”<br /> “Are new technologies being developed that could put us out of business?”<br />
    57. 57. Nature, Importance and scope of strategic planning<br />Serves as a road map for the corporation.<br />Lays down the growth objectives of the firm and also provides the strategies needed for achieving them.<br />Serves as a hedge against uncertainly arising from environmental turbulence. <br />Ensures that the firm remains a prepared organization.<br />Helps the firm understand trends in advance and provides the benefits of a lead time for taking crucial decisions and actions.<br />
    58. 58. Helps avoid haphazard response to environment.<br />Provides the best possible fit between the firm and the external environment.<br />Ensures that the firm’s businesses, products and markets are chosen wisely.<br />Ensures best utilization of the firm’s resources among the product- market opportunities.<br />Helps build competitive advantages and core competencies. <br />
    59. 59. Prepare the firm to not only face the future but even to shape the future in its favor, helps the firm influence its mega environment in its favor to the extent possible.<br />
    60. 60. Concerns of Strategic Planning<br />Future: Long term dynamics is its concern, not day to day tasks.<br />Growth: Direction, extent, pace and timing of growth.<br />Environment: The fit between the business and its environment.<br />Business Portfolio: Product market scope.<br />
    61. 61. Strategy: Strategy is its concern, not the operational activities.<br />Integration: Integration of all management functions is its concern, not a particular function.<br />Creating core competencies/competitive advantages, creating long term, sustainable organizational capability is its concern.<br />
    62. 62. Key Strategic Management Terms <br />1.Strategists<br />2. Vision statements<br />3. Mission statements<br />4. External opportunities and threats<br />5. Internal strengths and weaknesses<br />6. Long-term objectives<br />7. Strategies<br />8. Annual objectives<br />9. Policies<br />
    63. 63. Strategists<br />Usually found in high levels of management (CEO)<br />Help organization gather, analyze, and organize information<br />Track industry and competitive trends<br />Develop forecasting model and scenario analyses, evaluate corporate and divisional performance,<br />Spot emerging market opportunities, identify business threats, and develop creative action plans.<br />
    64. 64. Vision Statements<br />Answers the question: “What do we want to become?”<br />First step in strategic planning<br />Oftentimes a single sentence<br />
    65. 65. Mission Statements<br />Mission statements are "enduring statements of purpose that distinguish one business from other similar firms.<br />A mission statement identifies the scope of a firm's operations in product and market terms. <br />It addresses the basic question that faces all strategists: What is our business? A clear mission statement describes the values and priorities of an organization. <br />Developing a mission statement compels strategists to think about the nature and scope of present operations and to assess the potential attractiveness of future markets and activities. <br />A mission statement broadly charts the future direction of an organization.<br />
    66. 66. Example<br />Microsoft's mission is to create software for the personal computer that empowers and enriches people in the workplace, at school and at home. Microsoft's early vision of a computer on every desk and in every home is coupled today with a strong commitment to Internet-related technologies that expand the power and reach of the PC and its users. As the world's leading software provider, Microsoft strives to produce innovative products that meet our customers' evolving needs.<br />
    67. 67. Environmental Scanning<br />The process of conducting research and gathering and assimilating external information is sometimes called environmental scanning or industry analysis<br />SWOT<br />
    68. 68.
    69. 69. The external environment consist of opportunities and threats variables that outside the organization. External environment has two parts:<br />Task Environment<br /> Social Environment<br />
    70. 70. Task Environment:<br />Task environment includes all those factors which affect the organization and itself affected by the organization. These factor effects the specific related organizations. These factors are shareholders community, labor unions, creditor, customers, competitors, trade associations.<br />Social Environment:<br />Social environment is an environment which includes those forces effect does not the short run activities of the organization but it influenced the long run activities or decisions. PEST analysis are taken for social environment PEST analysis stands for political and legal economic socio cultural logical and technological.<br />
    71. 71. External Opportunities & Threats<br />Largely beyond the control of a single organization<br />Economic<br />Social<br />Cultural<br />Demographic<br />Environmental<br />Political <br />Governmental<br />Technological<br />Competitive trends & events<br />
    72. 72. A basic tenet of strategic management is that firms need to formulate strategies to take advantage of external opportunities and to avoid or reduce the impact of external threats. For this reason, identifying, monitoring, and evaluating external opportunities and threats are essential for success.<br />
    73. 73. Internal Strengths & Weaknesses/ Internal Assessment<br /><ul><li>Controllable activities that are performed well or poorly relative to competitors
    74. 74. Based on functional analysis of activities in the firm’s:</li></ul> Management<br /> Marketing<br /> Finance/accounting<br /> Production/operations <br /> Research and development<br /> Computer information systems<br /><ul><li>Organizations strive to pursue strategies that capitalize on strengths and improve weaknesses</li></li></ul><li>Corporate Objectives-Example of Reliance Industries<br />Shareholders value of Reliance would be doubled by the year 2002.<br />Sales revenue would reach Rs. 20,000 crore by the year 2002.<br />In petrochemicals, production capacity would be raised by 50 per cent from 6 million tones to 9.3 million tones.<br />In EPS, 20 percent CAGR would be achieved.<br />A dividend of around 25 percent would be paid out every year.<br />The company will be choosing the best in class technologies in all its businesses, emphasis would be on strength in advanced process control and computer integrated manufacturing. <br />There would be substantial investment towards enhancing the expertise of staff.<br />Best of attention will be given to community health, safety and environmental protection.<br />
    75. 75. Long-Term Objectives<br />Objectives can be defined as specific results that an organization seeks to achieve in pursuing its basic mission. Long-term objectives represent the results expected from pursuing certain strategies. Strategies represent the actions to be taken to accomplish long-term objectives. <br />The time frame for objectives and strategies should be consistent, usually from two to five years. <br />Objectives are essential for organizational success because they state direction<br />Objectives should be challenging, measurable, consistent, reasonable, and clear. <br />
    76. 76. The Nature of Long-Term Objectives<br />Objectives should be quantitative, measurable, realistic, understandable, challenging, hierarchical, obtainable, and congruent among organizational units. Each objective should also be associated with a time line. <br />Objectives are commonly stated in terms such as growth in assets, growth in sales, profitability, market share, degree and nature of diversification, degree and nature of vertical integration, earnings per share, and social responsibility. <br />
    77. 77. Benefits<br />Objectives help stakeholders understand their role in an organization's future.<br />An organization can minimize potential conflicts later during implementation. <br />They serve as standards by which individuals, groups, departments, divisions, and entire organizations can be evaluated. <br />Objectives provide the basis for designing jobs and organizing activities to be performed in an organization. <br />They also provide direction and allow for organizational synergy.<br />
    78. 78. Without long-term objectives, an organization would drift aimlessly toward some unknown end! It is hard to imagine an organization or individual being successful without clear objectives. Success only rarely occurs by accident; rather, it is the result of hard work directed toward achieving certain objectives.<br />
    79. 79. Strategies<br />Strategies are the means by which long-term objectives will be achieved. <br />Business strategies may include geographic expansion, diversification, acquisition, product development, market penetration, retrenchment, divestiture, liquidation, and joint venture.<br />
    80. 80. Annual Objectives<br />Annual objectives are short-term milestones that organizations must achieve to reach long-term objectives. <br />They should be established at the corporate, divisional, and functional levels in a large organization.<br />Annual objectives should be stated in terms of management, marketing, finance/accounting, production/operations, research and development, and information systems accomplishments. A set of annual objectives is needed for each long-term objective.<br />Annual objectives are especially important in strategy implementation, whereas long-term objectives are particularly important in strategy formulation. Annual objectives represent the basis for allocating resources.<br />
    81. 81. Example Long Tern Objective:- To improve return to shareholders by x% over the next three years, through reduction of the cost of productionAnnual objective:- To implement a "just in time" delivery system to reduce storage costs by x%Policy:- When stock levels reach a certain point the line manager is responsible for contacting the vendor to arrange for a delivery- Stock levels above a certain volume are not to be stored in the warehouse<br />
    82. 82. Policies<br />Policies are the means by which annual objectives will be achieved. Policies include guidelines, rules, and procedures established to support efforts to achieve stated objectives. <br />Policies are most often stated in terms of management, marketing, finance/ accounting, production/operations, research and development, and computer information systems activities. <br />Policies can be established at the corporate level and apply to an entire organization, at the divisional level and apply to a single division or at the functional level and apply to particular operational activities or departments.<br />Policies, like annual objectives, are especially important in strategy implementation because they outline an organization's expectations of its employees and managers. Policies allow consistency and coordination within and between organizational departments.<br />
    83. 83. Benefits of Strategic management<br />The major benefits of Strategic management:<br /> Proactive in shaping firm’s future<br /> Initiate and influence actions<br /> Formulate better strategies (Systematic, logical, rational approach)<br />Financial benefits:<br /> Improved productivity<br /> Improved sales<br /> Improved profitability<br />Non-Financial benefits:<br /> Increased employee productivity<br /> Improved understanding of competitors’ strategies<br /> Greater awareness of external threats<br /> Understanding of performance reward relationships<br /> Better problem-avoidance<br /> Lesser resistance to change<br />
    84. 84. Why Some Firms Do No Strategic Planning?<br />1. Poor Reward Structures—when an organization assumes success, it often fails to reward success. <br />2. Fire-fighting<br />3. Waste of Time—some firms see planning as a waste of time since no marketable product is produced. Time spent on planning is an investment.<br />4. Too Expensive—some organizations are culturally opposed to spending resources.<br />Laziness—People may not want to put forth the effort needed to formulate a plan.<br />6. Content with Success—particularly if a firm is successful, individuals may feel there is no need to plan because things are fine as they stand. But success today does not guarantee success tomorrow.<br />7. Fear of Failure—by not taking action, there is little risk of failure unless a problem is urgent and<br /> pressing. Whenever something worthwhile is attempted, there is some risk of failure.<br />
    85. 85. 8. Overconfidence—as individuals amass experience, they may rely less on formalized planning.<br />9. Prior Bad Experience—People may have had a previous bad experience with planning, where plans have been long, cumbersome, impractical, or inflexible. Planning, like anything, can be done badly.<br />10. Self-Interest—when someone has achieved status, privilege, or self-esteem through effectively using an old system, they often see a new plan as a threat.<br /> 11. Fear of the Unknown—People may be uncertain of their abilities to learn new skills, their aptitude with new systems, or their ability to take on new roles.<br />12. Honest Difference of Opinion—People may sincerely believe the plan is wrong. They may view the situation from a different viewpoint, or may have aspirations for themselves or the organization that are different from the plan. Different people in different jobs have different perceptions of a<br /> situation.<br />
    86. 86. Pitfalls to avoid in Strategic Planning<br />Strategic planning is an involved, intricate, and complex process that takes an organization into non chartered territory. It does not provide a ready-to-use prescription for success; instead, it takes the organization through a journey and offers a framework for addressing questions and solving problems. Being aware of potential pitfalls and prepared to address them is essential to success.<br />
    87. 87. Some pitfalls to watch for and avoid in strategic planning are provided below:<br />1. Using strategic planning to gain control over decisions and resources<br />2. Doing strategic planning only to satisfy accreditation or regulatory requirements<br />3. Too hastily moving from mission development to strategy formulation<br />4. Failing to communicate the plan to employees, who continue working in the dark<br />5. Top managers making many intuitive decisions that conflict with the formal plan<br />6. Top managers not actively supporting the strategic-planning process<br />7. Failing to use plans as a standard for measuring performance<br />8. Delegating planning to a "planner" rather than involving all managers<br />9. Failing to involve key employees in all phases of planning<br />10. Failing to create a collaborative climate supportive of change<br />11. Viewing planning to be unnecessary or unimportant<br />12. Becoming so engrossed in current problems that insufficient or no planning is done<br />13. Being so formal in planning that flexibility and creativity are stifled.<br />
    88. 88. The extent of manager and employee involvement in developing vision and mission statements can make a difference in business success. This lecture provides guidelines for developing these important documents.<br />
    89. 89. Mission statement<br />An enduring statement of purpose<br />Distinguishes one firm from another in the same business<br />A declaration of a firm’s reason for existence<br />It identifies scope of it operation in terms of product offered and market served. Mission also means what we are and what we do. <br />
    90. 90. Mission is divided into two categories:<br /> Narrow Mission<br /> Broad Mission<br />
    91. 91. Narrow Mission<br />Narrow mission identifies our mission but it restrict in terms of:<br />1. Product and services offered<br />2. Technology used<br />3. Market served<br />4. Opportunity of growth<br />
    92. 92. Broad Mission<br />Broad mission wider our mission values in terms of product and services, offered, market served, technology used and opportunity of growth. But main flow of this mission that if creates confusion among employee due to its wider sense.<br />
    93. 93. For example two different firms A & B. A deals in Rail Roads and B deals in Transportation i.e. we can say A co. has narrow mission and B co. has a wider mission.<br />
    94. 94. Components and corresponding questions that a mission statement should answer are given here.<br />Customer: Who are the firm’s customers?<br />Products or services: What are the firm’s major products or services?<br />Markets: Geographically, where does the firm compete?<br />Technology: Is the firm technologically current?<br />Concern for survival, growth, and profitability: Is the firm committed to growth and financial soundness?<br />Philosophy: What are the basic beliefs, values, aspirations, and ethical priorities of the firm?<br />Self-concept: What is the firm’s distinctive competence or major competitive advantage?<br />Concern for public image: Is the firm responsive to social, community, and environmental concerns?<br />Concern for employees: Are employees a valuable asset of the firm?<br />
    95. 95. Nest vision computer college mission statement reveals:-<br /> “We are dealing in all activities which includes in IT, definition”.<br />Qarshi Laborites Mission Statement,<br /> “Production of herbal product is our mission”.<br />
    96. 96. Apple Computer (<br />It is Apple’s mission to help transform the way customers work, learn and communicate by providing exceptional personal computing products and innovative customer services. We will pioneer new directions and approaches, finding innovative ways to use computing technology to extend the bounds of human potential. Apple will make a difference: our products, services and insights will help people around the world shape the ways business and education will be done in the 21st century.<br />
    97. 97. AT & T (<br /> We are dedicated to being the world’s best at bringing people together giving them easy access to each other and services they want anytime, anywhere<br />
    98. 98. Vision Statement<br />“Vision is the art of seeing things invisible<br />Answers the question: “What do we want to become?”<br />First step in strategic planning<br />Oftentimes a single sentence<br />
    99. 99. A vision statement is sometimes called a picture of your company in the future but it’s so much more than that. <br />A lucid and clear vision lays down a foundation on which a sound mission statement can be built.<br />The vision statement answers the question, “Where do we want to go?” Vision statement also answers the question “What do we want to become?” What you are doing when creating a vision statement is articulating your dreams and hopes for your business. It reminds you of what you are trying to build.<br />
    100. 100. While a vision statement doesn’t tell you how you’re going to get there, it does set the direction for your business planning. <br />Unlike the mission statement, a vision statement is for you and the other members of your company, not for your customers or clients.<br />
    101. 101. Our vision is helping individuals and organizations discover and develop their God given potentials to achieve the ultimate Success”.<br /> . . . . University of Management & Technology, Lahore<br />
    102. 102. ADAMJEE Insurance Company Limited<br />Mission Statement: Being the leading insurance company Pakistan and second best in Asia, our aim is to be a significant participant in developing Pakistan’s image by providing maximum insurance protection at the most competitive price in a highly efficient manner for industrial and economic growth.<br />Vision Statement: To remain in the leading insurance company of Pakistan and excelling it’s every aspect of business and in delivering its obligations as a good corporate citizen to its clients, employees and shareholders, public and to the country.<br />
    103. 103. The Process of Developing a Mission Statement<br />First to select several articles about mission statements and ask all managers to read these as background information. <br />Then ask managers themselves to prepare a mission statement for the organization. <br />A facilitator, or committee of top managers, then should merge these statements into a single document and distribute this draft mission statement to all managers.<br /> A request for modifications, additions, and deletions is needed next, along with a meeting to revise the document.<br />All managers have input into and support the final mission statement document, organizations can more easily obtain managers' support for other strategy formulation, implementation, and evaluation activities.<br />
    104. 104. Importance of Vision and Mission Statements<br />Unanimity of purpose within the organization<br />Basis for allocating resources<br />Establish organizational climate<br />Focal point for direction<br />Translate objectives into work structure<br />Cost, time and performance parameters assessed and controlled<br />Most companies are now getting used to the idea of using mission statements.<br />Small, medium and large firms in Pakistan are also realizing the need and adopting mission statements.<br />
    105. 105. Environmental Scanning <br />Environmental scanning:<br />The monitoring, evaluating, and disseminating of information from the external and internal environments to key people within the organization to avoid strategic surprise and ensure the long-term health of the firm.<br />
    106. 106. External Environment – 4 Analytical Tools:<br />Model 1: Macro/Societal environment (PEST):<br />General forces that do not directly touch on the short-run activities but often influence its long-run decisions.<br />Model 2: Task Environment (5 forces + 1):<br />Task environment includes all those factors which affect the organization and itself affected by the organization. The collective strength of these forces in the task environment determines the ultimate profit potential in the industry. The corporation must assess the importance to its success of each of the six forces.<br />Model 3: Issues Priority Matrix<br />Used to help managers decide which environmental trends should be merely scanned (low priority) and which should be monitored as strategic factors (high priority)<br />Model 4: Industry analysis (Group Map)<br />An in-depth examination of key factors within a corporation’s task environment.<br />
    107. 107. What Environmental Forces Should Be Scanned?<br />Societal Environment (PEST)<br />Task Environment<br />(Industry)<br />Shareholders Suppliers<br />Governments <br />Special- Employees/ <br />Interest Labour Unions<br />Groups <br />Customers Competitors<br />Creditors Trade Associations<br />Communities<br />Social-cultural<br />Forces<br />Political-Legal<br />Forces<br />Economic<br />Forces<br />Technological<br />Forces<br />Internal <br />Environment<br />Structures<br />Culture<br />Resources<br />
    108. 108. 1: Macro/Societal Environment <br />PEST forces:<br />Political-legal forces<br />Allocate power, provide laws and regulations<br />Economic forces<br />Regulate the exchange of materials, money, energy, and information<br />Social-cultural forces<br />Regulate values, mores, and customs <br />Technological forces<br />Generate problem-solving inventions<br />
    109. 109. Such factors usually are beyond the firms control and sometimes present themselves as threat.<br />Changes in the external environment also create new opportunities. <br />STEP analysis.<br />4-105<br />
    110. 110. Model 1: PESTMacro/Societal Environment: Important Variables<br />Economic<br />GDP trends<br />Interest rates<br />Money supply<br />Inflation rates<br />Unemployment levels<br />Wage/price controls<br />Devaluation/revaluation<br />Energy availability and cost<br />Disposable and discretionary income<br />Technological<br />Total government spending for R&D<br />Total industry spending for R&D<br />Focus of technological efforts<br />Patent protection<br />New products<br />New developments in technology transfer from lab to marketplace<br />Productivity improvements through automation<br />Political-legal<br />Antitrust regulations<br />Environmental protection laws<br />Tax laws<br />Special incentives<br />Foreign trade regulations<br />Attitudes toward foreign companies<br />Laws on hiring and promotion<br />Stability of government<br />Social-cultural<br />Lifestyle changes<br />Career expectations<br />Rate of family formation<br />Growth rate of population <br />Age distribution of population<br />Regional shifts in population<br />Life expectancies<br />Birth rates<br />3-106<br />
    111. 111. 2: Task EnvironmentForces Driving Industry Competition<br />MODEL 2:<br />5 Forces + 1<br />Michael Porter’s <br />Forces Driving<br />Industry Competition<br />Relative Power<br />Of Unions, <br /> Governments, <br /> etc.<br />Other <br />Stakeholders<br />3-107<br />
    112. 112. Model 2: Forces Driving Industry Competition<br />3-108<br />Based on the model:<br />Strong Force: a threat, because it is likely to reduce profits<br />Weak Force: an opportunity, because it may allow the company to earn greater profits<br />
    113. 113. Porter’s model<br />Corporation is concerned with the intensity of competition within its industry.<br />Collective strength of these forces determine the ultimate profit potential of the industry.<br />A strategist can analyze industry by rating each competitive force as high, medium or low in strength.<br />
    114. 114. Threat of New Entrants<br />Bring new capacity<br />Desire to gain market share, substantial resources.<br />Presence of entry barriers and the reaction expected from existing competitors.<br />No automobile companies have been successfully established in U.S since 1930s.<br />
    115. 115. Entry Barriers<br /><ul><li>Economies of scale(Intel Microprocessor)
    116. 116. Product differentiation(Procter & Gamble Tide)
    117. 117. Capital requirements( commercial airplanes)
    118. 118. Switching costs( software programs in office)
    119. 119. Access to distribution channels(shelf space for small retailers)
    120. 120. Cost advantage independent of size(Microsoft operating system MS-DOS)
    121. 121. Government Policy(licensing requirements)</li></li></ul><li>Rivalry Among Existing Firms<br />Corporations are mutually dependent.<br />
    122. 122. Intense rivalry is related to the presence of several factors:<br />No of competitors( auto industry) <br />Rate of industry growth( Airline industry)<br />Product or service characteristics<br />Amount of fixed cost<br />
    123. 123. Threat of Substitute Products or Service<br />A substitute product is a product that appears to be different but can satisfy the same need as another product.<br />E-mail is substitute for the fax, water is substitute for cola.<br />Substitute limit the potential returns of an industry by placing a ceiling on the prices firms in the industry can profitably charge. <br />
    124. 124. Bargaining Power of Buyers<br /><ul><li>A buyer purchase a large proportion of the seller’s product or service(for example, oil filters purchased by a major auto maker)
    125. 125. A buyer has the potential to integrate backward by producing the product itself( a newspaper chain could make its own chain)
    126. 126. Alternative suppliers are plentiful because the product is standard or undifferentiated(motorists can choose among many gas station)
    127. 127. Changing suppliers cost very little</li></li></ul><li>Bargaining Power of Suppliers<br />Suppliers affect an industry through their ability to raise prices or reduce the quality of purchasing goods and services. <br />
    128. 128. <ul><li>A supplier or supplier group is powerful if some of the following factors are apply:
    129. 129. The supplier industry is dominated by a few companies, but it sells to many(petroleum industry)
    130. 130. Its product or service is unique and/or it has built up switching costs( word processing software)
    131. 131. Substitutes are not readily available.
    132. 132. Suppliers are able to integrate forward and compete directly with their present customers.(a microprocessor producer such as Intel can make PCs)
    133. 133. A purchasing industry buys only a small portion of the supplier group’s goods and services and is unimportant to the supplier(sales of lawn mover tiers are less important to the tier industry than the sales of auto tires)</li></li></ul><li>Relative Power of Other Stakeholders<br />Governments<br />Creditors<br />Trade associations<br />Special interest groups<br />Unions<br />Shareholders<br />
    134. 134. Why are some companies better able to adapt than others? <br />4-119<br />
    135. 135. Difference in ability of managers to recognize and understand external strategic issues and factors.<br />4-120<br />
    136. 136. 3-121<br />Model 3: Issues Priority MatrixUsed to help managers decide which environmental trends should be merely scanned (low priority) and which should be monitored as strategic factors (high priority)<br />Probable Impact on Corporation<br /> High Medium Low<br /> High<br />Probability<br />Of Medium<br />Occurrence<br /> Low<br />
    137. 137. 3-122<br />Model 4: Industry Analysis <br />Industry<br />A group of firms producing a similar product or service, such as soft drinks or financial services.<br />Strategic Groups<br />A set of business units or firms that pursue similar strategies with similar resources.<br />
    138. 138. Model 4: Industry Analysis (Group Map)<br />3-123<br />
    139. 139. Strategic group map of the video game industry<br />High<br />Game publishers<br />Sony, Sega, Nintendo<br />Complexity of game<br />Arcade owners<br />Low<br />Arcades<br />PCs<br />Consoles<br />Distribution channels<br />Competitive Analysis<br />Who are my competitors?<br />How do I analyze them?<br />SWOT AnalysisPorter’s Five ForcesStrategic Group MapsPEST analysis<br />There are many ways to analyze your competitors; we’ve selected the strategic group map technique. After answering a few questions, you’ll be ready to draw a strategic map for your industry. This map will illustrate the competitive forces within your industry, your competitive position, and your competitors’ positions.<br />
    140. 140. High<br />Product price<br />Low<br />Broad<br />Narrow<br />Strategic focus differentiation<br />High<br />High<br />Brand image<br />Market penetration<br />Low<br />Low<br />Online<br />Retail stores<br />Direct mail<br />Low cost focus<br />Broad range<br />Specialty focus<br />Product line mix<br />Creating a strategic group map<br />Identify the two top competitive factors in your market.One competitive factor should be expressed in a high to low range. The other variable is more flexible, but should still reflect the most important competitive factor in your market. These two factors will be the X and Y map variables.<br />Possible axes for your strategic map<br />Distribution channels<br />
    141. 141. Creating a strategic group map<br />List your five nearest competitors. These can be indirect or direct competitors but should be companies that compete closely with your product or service.These are the strategic groups that you’ll plot on your map.<br />
    142. 142. Creating a strategic group map<br />Create groups of competitors that fall into the same strategic space. Looking at the list from Step 1 and the criteria from Step 2, assess each competitor’s strengths and weaknesses against the competitive factors. You should have 2-3 groups. Include your own company in one of the groups. Consider strengths that the companies have individually and strengths that they share. Consider unique characteristics of each company’s product or service as well as any feature a company’s product or service lacks. Consider market share, marketing approach, and product mix as well as any other relevant, industry-specific factors.<br />Plot the strategic groups from Step 3 on your map. Draw circles around each group, making circles proportional to the size of each group's share of total industry sales.<br />
    143. 143. Build your own map<br />Fill in the text boxes below with the information you’ve gathered in the previous slides. Adjust the size of the circles as needed and place them in the map.<br />Title of map goes here<br />High<br />List strategic group members here<br />Competitive factor #1 goes here<br />List strategic group members here<br />Low<br /> of<br />Range<br />factor<br />Competitive factor #2 goes here<br />List strategic group members here<br />
    144. 144. Review your new map<br />In his book, Competitive Strategy, Michael Porter recommends these analytical steps:<br />Identify mobility barriers: Look at the qualities that protect each group from attack by other groups. This can help you to predict threats to the groups.<br />Chart directions of strategic movement: Draw arrows from each group that represent the direction in which the group seems to be moving in strategic space.<br />Predict reactions: Firms in the same group often react to an industry event in the same way. <br />Assess both the overall map and the position of each group.<br />Are there any “empty” areas on the map that you or one of your competitors could move into by revising an existing product or launching something new?<br />Could you improve your strategic position by moving to a different strategic group?<br />What advantages do your competitors have that you lack? Are they significant to your position on the map or not?<br />If there are more than two important competitive factors in your industry, you can draw additional maps to get a more complete analysis of your competitive environment.<br />
    145. 145. Bharti Airtel<br /><ul><li>Largest Private Integrated Telecom Company in India
    146. 146. 3th Largest Wireless Operator in the World by subscriber base.
    147. 147. Largest & Fastest Growing Wireless Operator in India
    148. 148. Largest Telecom Company listed on Indian Stock Exchange</li></ul>130<br />GROUP 7<br />
    149. 149. Business Divisons<br /><ul><li>Mobile Services
    150. 150. 2G/3G
    151. 151. GSM Mobile Service
    152. 152. TelemediaServices
    153. 153. Fixed Line
    154. 154. Broadband
    155. 155. DTH
    156. 156. Enterprise Services
    157. 157. Carrier
    158. 158. Corporate</li></ul>GROUP 7<br />131<br />
    159. 159. Vision 2015<br />By 2015 airtel will be the most loved brand, enriching lives of millions. <br />
    160. 160. Vision 2020 <br />To build India's finest business conglomerate by 2020<br />Supporting education of underprivileged children through Bharti Foundation <br />
    161. 161. Mission<br />“ We at Airtel always think in fresh and innovative ways about the needs of our customers and how we want them to feel. We deliver what we promise and go out of our way to delight the customer with a little bit more” <br />
    162. 162. Core Values<br />Empowering People<br />Being Flexible<br />Making it Happen<br />Openness and transparency<br />Creating Positive Impact<br />
    163. 163. Objectives/Goals<br />To undertake transformational projects that have a positive impact on the society and contribute to the nation building process. <br />To Diversify into new businesses in agriculture, financial services and retail business with world-class partners<br />To lay the foundation for building a “conglomerate” of future<br />
    164. 164. Indian Telecom Sector<br /><ul><li>Fastest Growing Sector across the world adding 15 to 20 million subscriber every month– CAGR 22% (2002-07)
    165. 165. Crossed 500 Mn Mobile subscriber mark in Dec 2009.
    166. 166. Second Largest Telecom Market
    167. 167. Lowest tariff charges in the world
    168. 168. Wireless Subscribers – 723.28 Mn(by Sep 2010)
    169. 169. Teledensity – 60.99%
    170. 170. 23 Circles - 4 Categories ( Metro, A, B & C)
    171. 171. BhartiAirtel – Largest player with presence in 23 Circles</li></ul>137<br />GROUP 7<br />
    172. 172. Tariff Wars<br />Indian is most competitive market in the world which has led to the tariff wars.<br />Revenue growth has impacted significantly.<br />Increase in Churn<br />GROUP 7<br />138<br />
    173. 173. 139<br />Why Mad Rush for Telecom ??<br /> Low teledensity (depicting large untapped potential) <br />Large number of additions in telecom subscribers<br />Telecom<br />Advantage<br />GROUP 7<br />CAGR 40.4%<br />
    174. 174. 140<br />Evolution of Telecom In India<br />Department of Telecommunication (DoT) is the main body formulating laws and various regulations for the Indian telecom industry.<br />ILDservices was opened to competition<br />BSNL was established by DoT<br />Number portability was proposed (pending) <br />Intra-circle merger guidelines were established<br />Independent regulator, TRAI, was established<br />Private players were allowed in Value Added Services<br />Calling Party Pays (CPP) was implemented<br />Attempted to boost Rural telephony<br />Go-ahead to the CDMA technology<br />1999<br />2007<br />1994<br />2002<br />2005<br />2003<br />2004<br />2006<br />2000<br />Internet telephony initiated<br />Unified Access Licensing (UASL) regime was introduced<br />INDIA <br />1992<br />1997<br />Broadband policy 2004 was formulated—targeting 20 million subscribers by 2010<br />Decision on 3G services (awaited)<br />National Telecom Policy (NTP) was formulated<br />NTP-99 led to migration from high-cost fixed license fee to low-cost revenue sharing regime<br />Reduction of licence fees<br />FDI limit was increased from 49 to 74 percent<br />Reference Interconnect order was issued<br />ILD – International Long Distance<br />GROUP 7<br />
    175. 175. Regulatory Framework<br />GROUP 7<br />141<br /><ul><li>74% FDI Investment
    176. 176. Lack of Transparency in Spectrum & License Allocation
    177. 177. 3G Policy & MNP still Pending</li></li></ul><li>Declinging Tariff – Rising Revenue<br />GROUP 7<br />142<br />Source: TRAI Report<br />
    178. 178. Economic Factors<br />GDP growth rate - Return to 9% 2011-12<br />Rising Tele-density – 60.99%<br />The per capita income grew by 10.5 per cent to Rs 44,345 in 2009-10 against Rs 40,141 in the year-ago period, according to the government<br />Falling Handset Prices<br />
    179. 179. Changing Demographics<br /><ul><li>Demand for VAS & Broadband services Among Youth
    180. 180. 28 % Urban Population(2008)
    181. 181. Rapid Urbanization
    182. 182. Rising Income level</li></ul>Source: Mckinsey Report<br />
    183. 183. Technology<br />CDMA – Already there are big players in this segment Reliance , Tata <br />3G – Value added services potential still to be tapped fully<br />2G/3G – GSM Currently commands 70% of mobile subscribers in India<br />Voice over internet protocol<br />Worldwide interoperability for microwave access<br />
    184. 184. Porter’s Generic Strategy <br />146<br />GROUP 7<br />
    185. 185. Porter’s 5 Forces<br />147<br />GROUP 7<br />
    186. 186. 1. Threat from Competition<br />Wireless Market – Top 4 acquire 75% market share<br />148<br />GROUP 7<br />HIGH<br />
    187. 187. Competitor Analysis<br />149<br />GROUP 7<br />Best OP Margins & Net Profit Margins among Peers<br />Source: CMIE November 2008<br />
    188. 188. 2. Customer Bargaining Power<br /><ul><li>Lack of differentiation among Service Providers
    189. 189. Cut throat Competition
    190. 190. Low Switching Costs
    191. 191. Number Portability will have –Ve Impact</li></ul>150<br />GROUP 7<br />HIGH<br />
    192. 192. 3. Suppliers Bargaining Power<br />151<br />GROUP 7<br />LOW<br />
    193. 193. 4. Threat of Substitutes<br /><ul><li>Landline
    194. 194. CDMA
    195. 195. Video Conferencing
    196. 196. VOIP - Skype, Gtalk, Yahoo Messenger
    197. 197. e-Mail & Social Networking Websites</li></ul>152<br />GROUP 7<br />HIGH<br />DIMINISHING MARKET<br />BROADBAND SERVICES<br />
    198. 198. 5. Threat of New Entrants<br /><ul><li>Huge License Fees to be paid upfront & High gestation period
    199. 199. Spectrum Availability & Regulatory Issues
    200. 200. Infrastructure Setup Cost - High
    201. 201. Rapidly changing technology</li></ul>153<br />GROUP 7<br />LOW<br />
    202. 202. SWOT<br />Strengths<br />Largest Telecom Player in India - ~80Mn, 22.6%<br />Strategic Alliance with other stakeholders in Bharti Airtel include Sony-Ericsson, Nokia - and Sing Tel<br />Pan India Presence<br />Strong Financials<br />Weakness<br />Outsourcing of Core Systems<br />Lack of emerging market investment opportunity<br />Source: CMIE Report NOV 08<br />154<br />GROUP 7<br />
    203. 203. SWOT<br />Opportunities<br /><ul><li>BhartiInfratel – Cutting Down cost in Rural area
    204. 204. Match Box Strategy – Scale of Penetration
    205. 205. Current Tele-Density – 30.6 is still low among developing countries
    206. 206. Low Broadband Penetration, Rural Telephoney</li></ul>Threats<br />India centric – Major revenues from India<br />Falling ARPU <br />Intense Competition & Shortage of Bandwidth <br />155<br />GROUP 7<br />
    207. 207. BCG Matrix for Bharti Airtel<br />HIGH<br />Mobile Services<br />DTH & IPTV<br />Broad Band<br />Market Growth Rate<br />LOW<br />LOW<br />HIGH<br />Market Share<br />156<br />GROUP 7<br />
    208. 208. GE Matrix Classification <br />Business Strength<br /> Strong<br />Medium<br />Weak<br />5.00<br />High<br />3.67<br />Medium<br />Market Attractiveness<br />2.33<br />Low<br />157<br />GROUP 7<br />5.00<br />1.00<br />2.33<br />3.67<br />
    209. 209. Business Strength<br /><ul><li>Current market share
    210. 210. Brand image
    211. 211. Brand equity
    212. 212. Production capacity
    213. 213. Corporate image
    214. 214. Profit margins relative to competitors
    215. 215. R & D performance
    216. 216. Managerial personal
    217. 217. Promotional effectiveness</li></ul>158<br />GROUP 7<br />
    218. 218. Factors Underlying Market Attractiveness<br />159<br />GROUP 7<br />
    219. 219. Factors Underlying Market/Biz Strength<br />160<br />GROUP 7<br />
    220. 220. Airtel’s GE Matrix<br />Business Strengths<br />Low<br />High<br />5.00<br />High<br />Attractive<br />Airtel<br />Enterprise<br />Mobile <br />3.67<br />Moderate Attractive<br />Market Attractiveness<br />TeleMedia<br />2.33<br />Unattractive<br />Low<br />5.00<br />1.00<br />2.33<br />3.67<br />161<br />GROUP 7<br />
    221. 221. Telemedia – Airtel Industry % <br />BroadBand - 0.2 4.5 4 <br />Fixed Line 1.2 40 3 <br />Broadband ..HP and Airtel had a deal …<br />As on March 31, 2008, the Company had<br />2,283,328 customers (a growth of 22%), of which 34.8%<br />(~795,000) were subscribing to broadband / internet<br />services.<br />Broadband subscribers - 4.38 million at the end of June 2008 as compared to 3.87 million at the end of March 2008 (growth rate @ 13.18%)Out of total 4.38 million broadband subscribers, 3.72 million are DSL based; 0.42 million Cable Modem; 0.11 million Ethernet LAN; 0.045 million Fiber; 0.057 million Radio, Leased Line 0.018 million and 0.005 million use other technologies.<br />The key financial results of the Long Distance Services<br />division for the year ended March 31,2008 are presented<br />below. About 25% growth ..<br />Enterprise Services – Corporates--- 49% growth ….<br />GROUP 7<br />162<br />
    222. 222. Airtel – Strategy<br />MANTRA : Focus on Core Competencies and Outsource the rest!<br />
    223. 223. Strategy<br /><ul><li>Airtelpartnered with leading players in telecommunication players across the globe.
    224. 224. It has managed to work with the best of domain specialists globally and emerge as a world class entity.
    225. 225. Partnerships include operational contracts with marquee vendors and strategic investors ranging from private equity investors to global telecom giants.</li></li></ul><li>Strategic partnerships/ Shareholders – Technology and Capital<br />Warburg Pincus – a celebrated PE investor held a stake for a substantial period of time and was instrumental in providing Airtel support in its early stages.<br />Vodafone was a strategic investor in Airtel.<br />Temasek – the Singapore based investor holds a considerable stake in it.<br />Was also affiliated with Singapore Telecom.<br />
    226. 226. Outsourcing deals in 2004<br />Ericsson was given the mandate to provide, manage and maintain the equipment as well as provide quality assurance in Airtel‘s then 13 mobile circles.<br />IBM was given the mandate to handle the back office requirements of Airtel’s presence in India<br />
    227. 227. Operational Strategies.<br /><ul><li>Higher emphasis on ARPU/min – stark contrast with other operators who concentrate on ARPU only.
    228. 228. Aim to be become a one stop shop for all telecommunication services under the Bharti umbrella.
    229. 229. Exploring opportunities in international markets.
    230. 230. Hived off tower infrastructure into a separate entity.</li></li></ul><li>Performance till date<br />Bharti Airtel has enjoyed an excellent run ever since the telecom sector opened.<br />It has managed to hold on to its leadership position inspite of the presence of other players with deep pockets – Ambani’s, Tata’s, Birla’s and Vodafone.<br />Has coped well with regulatory changes.<br />Continues to attract and delight customers.<br />
    231. 231. Future Strategies<br /><ul><li>Translate its expertise in Indian markets to other emerging economies.
    232. 232. This could call for acquisitions globally.
    233. 233. Technology leadership is a must – Airtel must ensure that its reliance on GSM technology does not render it obsolete.
    234. 234. Indian market inspite of being the worlds largest is still not matured. Opportunities abound in the hinterland which must be exploited.</li></li></ul><li>Growth Factors<br />GROUP 7<br />170<br />
    235. 235. Road Map – Growth Path<br />GROUP 7<br />171<br />VPN & VoIP<br />WiMAX<br />3G<br />2G/2.5G<br />
    236. 236. Airtel - Strategy<br />MANTRA : Focus on Core Competencies and Outsource the rest!<br />
    237. 237. SBU <br />
    238. 238. HMT<br />HMT is 50 year old public sector undertaking, with 16 production units, 24 divisons, 35,000 employees and a large basket of products, which include machine tools, flexible manufacturing systems and factory automation, tractors, printing machines, dairy machinery, lamps and lamp making machines and a wide range watches.<br />
    239. 239. It is possible to group some of them, as they are related in their basic function and the markets they serve. <br />
    240. 240. HMT products can be grouped into five groups.<br />Machine tools<br /> Consumer products<br /> Tractors<br /> Engineering components and industrial machinery<br /> Technology and information systems.<br />
    241. 241. An SBU is a group of related businesses, that can be treated as a unified for the purpose of strategic planning.<br />
    242. 242. The concept of strategic business unit<br /><ul><li>It is scientific method of grouping the businesses of a multi-business corporation, which helps the firm in strategic planning.
    243. 243. SBU can be taken and treated as one entity for the purpose of strategic planning.
    244. 244. Products within an SBU receive same strategic planning treatment and priorities.
    245. 245. Products/businesses that are related on the basis of function are assembled together as a distinct SBU. Unrelated products/businesses in any are seprated.</li></li></ul><li><ul><li>Grouping the businesses on SBU lines help in removing confusion
    246. 246. Each SBU is a separate business from the strategic planning standpoint. In basic factors-mission, objectives, competition and strategy-one SBU will be distinct from other.
    247. 247. Each SBU will have its own distinct set of competitors and its own distinct strategy.
    248. 248. Each SBU will have a CEO. He will be responsible for strategic planning for the SBU and its profit performance, he will also have control over the factors affecting its profit.</li></li></ul><li>INTRODUCTION<br /><ul><li>BOSTON CONSULTING GROUP (BCG) MATRIX is developed by BRUCE HENDERSON of the BOSTON CONSULTING GROUP IN THE EARLY 1970’s.
    249. 249. According to this technique, businesses or products are classified as low or high performers depending upon their industry growth rate and relative market share. </li></li></ul><li>Relative Market Share and Industry Growth<br />To understand the Boston Matrix you need to understand how market share and Industry growth interrelate.<br />  <br />
    250. 250. MARKET SHARE<br /><ul><li>Market share is the percentage of the total market that is being serviced by your company, measured either in revenue terms or unit volume terms.
    252. 252. RMS = Business unit sales this year</li></ul> Leading rival sales this year<br /><ul><li>The higher your market share, the higher proportion of the market you control. </li></li></ul><li>IINDUSTRY GROWTHRATE<br />Industry growth is used as a measure of a market’s attractiveness. <br />IGR = Individual sales - individual sales<br />this year last year<br /> Individual sales last year <br />Industries experiencing high growth are ones where the total market share available is expanding, and there’s plenty of opportunity for everyone to make money.<br />
    253. 253. THE BCG GROWTH-SHARE MATRIX<br />It is a portfolio planning model which is based on the observation that a company’s business units can be classified in to four categories:<br /><ul><li>Stars
    254. 254. Question marks
    255. 255. Cash cows
    256. 256. Dogs</li></ul>It is based on the combination of market growth and market share relative to the next best competitor.<br />
    257. 257.
    258. 258. STARSHigh growth, High market share<br />Stars are leaders in business.<br />Stars are net users of resources.<br />They also require heavy investment, to maintain its large market share.<br />It leads to large amount of cash consumption and cash generation.<br />
    259. 259. Stars<br />Investment—continue to invest for capacity expansion<br />Earnings—Low to high earnings<br />Cash-flow—Negative (net cash user)<br />Strategy Implications<br />Continue to increase market share—even at the expense of short-term earnings<br />
    260. 260. CASH COWS<br />Low growth , High market share<br />They are foundation of the company and often the stars of yesterday. <br />Cash Cows are net generators of resources.<br />They generate more cash than required.<br />They extract the profits by investing as little cash as possible<br />They are located in an industry that is mature, not growing or declining.<br />
    261. 261. DOGSLow growth, Low market share<br />Dogs are the cash traps.<br />Dogs do not have potential to bring in much cash.<br />Number of dogs in the company should be minimized.<br />Business is situated at a declining stage. <br />
    262. 262. Dogs<br />Investment<br />Gradually reduce capacity<br />Earnings—High to low<br />Cash-flow<br />Positive (net cash contributor) if deliberately reducing capacity<br />Strategy Implications<br />Plan an orderly withdrawal to maximize cash flow<br />
    263. 263. QUESTION MARKSHigh growth , Low market share<br />Most businesses start of as question marks.<br />They will absorb great amounts of cash if the market share remains unchanged, (low).<br />Why question marks?<br />Question marks have potential to become star and eventually cash cow but can also become a dog.<br />Investments should be high for question marks.<br />
    264. 264. Question Marks<br />Investment—heavy initial capacity expenditures and high R&D costs<br />Earnings—negative to low<br />Cash-flow—negative (net cash user)<br />Strategy Implications<br />If possible to dominate segment, go after share. If not, redefine the business or withdraw<br />
    265. 265. BCG Matrix(Three Paths to Success)<br />Continuously generate cash cows and use the cash throw-up by the cash cows to invest in the question marks that are not self-sustaining<br />Stars need a lot of reinvestments and as the market matures, stars will degenerate into cash cows and the process will be repeated.<br />As for dogs, segment the markets and nurse the dogs to health or manage for cash<br />
    266. 266. Relative Market Share<br />High<br />Low<br />High <br />Market Growth Rate<br />Low <br />Three Paths to Success (cont’d)<br />
    267. 267. BCG Matrix(Three Paths to Failure)<br />Over invest in cash cows and under invest in question marks <br />Trade further opportunities for present cash flow<br /> Under invest in the stars<br />Allow competitors to gain share in a high growth market<br /> Over milked the cash cows<br />
    268. 268. Relative Market Share<br />High<br />Low<br />High <br />Market Growth Rate<br />Low <br />Three Paths to Failure (cont’d)<br />
    269. 269. WHY BCG MATRIX ?<br />To assess :<br /><ul><li>Profiles of products/businesses
    270. 270. The cash demands of products
    271. 271. The development cycles of products
    272. 272. Resource allocation and divestment decisions</li></li></ul><li>MAIN STEPS OF BCG MATRIX<br />Identifying and dividing a company into SBU.<br />Assessing and comparing the prospects of each SBU according to two criteria :<br /> 1. SBU’S relative market share.<br /> 2. Growth rate OF SBU’S industry.<br />Classifying the SBU’S on the basis of BCG matrix.<br />Developing strategic objectives for each SBU.<br />
    273. 273. BCG MATRIX WITH CASH FLOW<br />
    274. 274. BENEFITS<br />BCG MATRIX is simple and easy to understand.<br />It helps you to quickly and simply screen the opportunities open to you, and helps you think about how you can make the most of them.<br />It is used to identify how corporate cash resources can best be used to maximize a company’s future growth and profitability.<br />
    275. 275. LIMITATIONS<br />BCG MATRIX uses only two dimensions, Relative market share and market growth rate.<br />Problems of getting data on market share and market growth.<br />High market share does not mean profits all the time.<br />Business with low market share can be profitable too.<br />
    276. 276. PRACTICAL USE<br />MAHINDRA & MAHINDRA<br />HLL<br />IES<br />
    277. 277. scorpio<br />BCG MATRIX <br />Jeep<br />balero<br />
    278. 278. CONCLUSION<br />Though BCG MATRIX has its limitations it is one of the most FAMOUS AND SIMPLE portfolio planning matrix ,used by large companies having multi-products.<br />
    279. 279. GE(General Electric)/McKinsey Multi-Factor Matrix<br />Originally developed by GE’s planners drawing on McKinsey’s approaches<br />Market attractiveness is based on as many relevant factors as are appropriate in a given context<br />Business-position assessment also made on a many factors<br />SBU needs to be rated on each factor<br />
    280. 280. GE Multifactor Portfolio Matrix<br />Industry Attractiveness<br />High<br />Medium<br />Low<br />Invest to Build<br />Protect Position<br />Build selectively<br />High<br />Selectively manage for earnings<br />Limited expansion or harvest<br />Build selectively<br />Invest/Grow<br />Medium<br />Business Strengths<br />Selectivity<br />/earnings<br />Protect & refocus<br />Manage for earnings<br />Low<br />Harvest <br />/Divest<br />Divest<br />
    281. 281. Industry Attractiveness<br />Industry potential<br />Current size of the industry<br />The rate of growth of the industry<br />The industry structure<br />Profitability of industry<br />
    282. 282. Company's Business Strength<br />Current market share<br />Growth rate <br />Differentiation strength<br />Brand Image<br />Corporate image<br />