Strategic management session 1

WELCOME TO COURSE ON
STRATEGIC MANAGEMENT
Session 1
S G Raja Sekharan

Strategic management course plan
Session 1 Introduction and overview to SM
Session 2/3 External and Internal environment
Session 3/4 Building SCA though value chains
Session 5 Growth through Integration, Diversification,
Outsourcing and M&A
Session 6 Change management
Session 7 Tailoring strategies to fit specific industry &
company situations
Session 8/9 Strategy Implementation and control
Session 10 Industry interaction

Strategic management course plan (Hill and
Jones)
Session 1 Introduction and overview to SM –Chapter 1
Session 2/3 External and Internal environment–Chapters 2&3
Session 3/4 Building SCA though value chains –Chapter 4
Session 5 Growth through Integration, Diversification,
Outsourcing and M&A – Chapters 5, 6, 9 &10
Session 6/7 Competing in foreign markets and Tailoring
strategies to fit specific industry & company
situations – Chapters 6,7 & 8
Session 8 Strategy execution – building resource strengths
and organizational capability and Managing
internal operations -Chapters 12 &13
Session 9 Industry interaction
Session 10 Culture, leadership and ethics – Chapter 11

SESSION 1
INTRODUCTION AND
OVERVIEW TO SM

Today’s agenda
Introduction to concept of Strategy and why is
it important
Explain how strategy get’s formulated in
companies
Introduce the idea of Vision, Mission, Values
(VMV) and Goals
Form student groups and allocate some
groups their CIA 1 tasks
What caught my eye last week – just after
break
During break – I would like to meet a few of
you one to one

HOW MANY OF YOU WANT TO
BE A CEO?
LET US STEP INTO THE
SHOES OF AN EXISTING CEO?
AJAY KAUL

The key areas of focus Jubilant
Foodworks
Brand positioning
Market reach and expansion
Employee motivation
Back end infrastructure (production)
Operational efficiency
New product development

Mar '12 Mar '11 Mar '10 Mar '09 Mar '08 Mar '07 Mar '06 Mar '05
12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths
Income
Total
Income 1,018.52 767.05 475.9 313.65 235.6 154.67 108.27 79.73
Expenditure
Raw
Materials 318.22 207.38 127.59 86.5 53.21 35.68 25.23 19.59
Power &
Fuel Cost 47.56 34.07 23.28 17.65 0 0 0 0
Employee
Cost 196.22 135.53 80.46 55.57 42.51 25.57 16.24 12.47
Other
Manufacturi
ng
Expenses 4.12 3.28 2.42 1.61 0 0 0 0
Selling and
Admin
Expenses 184.75 213.52 140.16 95.15 24.88 16.71 11.57 6.9
Miscellaneo
us
Expenses 75.42 51.17 35.22 23.34 88.65 59.4 43.91 33.54
Preoperativ
e Exp
Capitalised 0 0 0 0 0 0 0 0
Total
Expenses 826.29 644.95 409.13 279.82 209.25 137.36 96.95 72.5

12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths 12 mths
Operating
Profit 192.85 120.54 66.94 34.19 26.85 18.02 11.65 8.06
PBDIT 192.23 122.1 66.77 33.83 26.35 17.31 11.32 7.23
Interest 0 0.34 9.15 8.91 5.81 3.4 2.47 2.04
PBDT 192.23 121.76 57.62 24.92 20.54 13.91 8.85 5.19
Depreciati
on 37.57 29.34 24.35 16.95 12.11 7.95 6.51 5.77
Other
Written
Off 0 0 0 0 0 0 0 0
Profit
Before
Tax 154.66 92.42 33.27 7.97 8.43 5.96 2.34 -0.58
Extra-
ordinary
items 0.77 0 -0.22 0.13 0 0 0 0
PBT (Post
Extra-ord
Items) 155.43 92.42 33.05 8.1 8.43 5.96 2.34 -0.58
Tax 49.79 20.43 0.08 0.8 0.67 0.37 0.33 0
Reported
Net Profit 105.64 72 32.97 7.3 7.76 5.58 2.02 -0.58

Thefocusareasfor thesenior management

The key areas of focus for
Jubilant Foodworks
Brand positioning
Market reach and expansion
Employee motivation
Back end infrastructure (production)
Operational efficiency
New product development

“Strategy is a choice
on how to
compete.”
- Michael Porter

What is strategy
A company’s strategy is management’s
game plan for
• how to grow the business,
• how to attract and please customers,
• how to compete successfully,
• how to conduct operations, and
• how to achieve targeted objectives.

What is strategy
Typically, a company’s strategic choices
are based
• partly on trial-and-error organizational
learning about what has worked and what
has not,
• partly on management’s appetite for risk
taking, and
• partly on managerial analysis and strategic
thinking about how to best proceed, given
all the prevailing circumstances.

Strategy aims at creating
Superior performance
Sustainable competitive advantage

Superior performance
• Company’s profitability relative to that of other
companies in the same or similar business or industry
• Profitability ratios that measure these are –
» Return on equity (ROE = reported net profit / net worth) and
» Return on capital employed (ROCE = reported net profit /Total
liabilities)
• Maximizing shareholder value is the ultimate goal of
profit making companies

Sustainable competitive advantage
• attractive number of buyers prefer its
products or services over the offerings of
competitors; and
• when the basis for this preference is
durable.
The profitability ratios are same or
improving over time

ROE and ROCE of Jubilant
Foodworks
Reported
Net Profit 105.64 72 32.97 7.3 7.76 5.58 2.02 -0.58
Networth 299.55 191.69 117.43 23.96 16.08 8.31 2.73 0.71
ROE 35.27% 37.56% 28.08% 30.47% 48.26% 67.15% 73.99% -81.69%
Reported
Net Profit 105.64 72 32.97 7.3 7.76 5.58 2.02 -0.58
Total
Liabilities 299.55 191.69 126.02 106.41 67.75 44.35 29.93 28.27
ROCE 35.27% 37.56% 26.16% 6.86% 11.45% 12.58% 6.75% -2.05%

Strategy and quest for competitive
advantage
Most companies realize that winning a
durable competitive edge over rivals
hinges more on building competitively
valuable expertise and capabilities than
it does on having a distinctive product.
Remember themanagement focuson brand
positioning, market reach, employeemotivation,
back end infrastructure, operational efficiency
and new product development

advantage can be through
 greater product innovation capabilities than rivals
 better mastery of a complex technological process,
 expertise in defect-free manufacturing,
 specialized marketing and merchandising know-how,

advantage can be through
 global sales and distribution capability,
 superior e-commerce capabilities,
 unique ability to deliver personalized customer
service, or
 anything else that constitutes a competitively valuable
strength in creating, producing, distributing, or
marketing the company’s product or service.

Strategy Is Partly Proactive and Partly
Reactive
 The biggest portion of a company’s current strategy
flows from
• previously initiated actions and business approaches that are
working well enough to merit continuation; and
• newly launched managerial initiatives to strengthen the
company’s overall position and performance.
This part of management’s game plan is deliberate
and pro-active.
 A portion of a company’s strategy is always developed
on the fly. It comes about as a reasoned response to
unforeseen developments and this part of game plan
is reactive.

Strategy is always Work in Progress
 Crafting a strategy involves stitching together a
proactive/intended strategy and then adapting first
one piece and then another as circumstances change
or better options emerge – a reactive/adaptive
strategy.
 A Company’s strategy emerges incrementally and then
evolves over time
 The task of crafting a strategy is a work in progress,
not a one-time event.

Intended, Emergent & Realized
Strategies
 Intended or Planned Strategies
• Strategies an organization plans to put into action
• Typically the result of a formal planning process
• Unrealized strategies are the result of unprecedented
changes and unplanned events after the formal planning is
completed
 Emergent Strategies
• Unplanned responses to unforeseen circumstances
• Serendipitous discoveries and events may emerge that can
open up new unplanned opportunities
• Must assess whether the emergent strategy fits the
company’s needs and capabilities
 Realized Strategies
• The product of whatever intended strategies are actually put
into action and of any emergent strategies that evolve

A business model encompasses how the company will:
The concept of Business Model
• Select its customers
• Define and differentiate
its product offerings
• Create value for its
customers
• Acquire and keep
customers
• Produce goods or
services
• Deliver those goods and
services to the market
• Organize activities within
the company
• Configure its resources
• Achieve and sustain a
high level of profitability
• Grow the business over
time
Every industry hasafew commonly used business
models

Different Business models in
restaurants
Chain restaurants vs Independent
restaurants
Franchised model
Quick service restaurants vs Fine dining
Centralized kitchen vs local cooking
Café model

The Relationship Between a Company’s
Strategy and Its Business Model
A company’s strategy relates broadly to its
competitive initiatives and business
approaches
The business model zeros in on whether the
revenues and costs flowing from the strategy
demonstrate business viability.
Strategy of Jubilant Foodworks - Invest in
branding, geographical growth and same store
growth, new offerings, employee motivation
etc

The Relationship Between a Company’s
Strategy and Its Business Model
A company’s strategy relates broadly to its
competitive initiatives and business
approaches
The business model zeros in on whether the
revenues and costs flowing from the strategy
demonstrate business viability.
Business model look at how to make profits
despite having high rentals in the prime areas
in India and offering great food at a price point
of Rs 200 per person?
centralized purchasing and manufacturing,
home delivery, standard menu, focus on costs,
operational efficiency and volumes.

To get the strategy right – the company
needs to focus on three tasks
 Strategic Leadership
• Task of most effectively managing a
company’s strategy-making process
 Strategy Formulation
• Task of determining and selecting strategies
 Strategy Implementation
• Task of putting strategies into action to improve a
company’s efficiency and effectiveness

Attributes of good strategic
leadership
 Vision, eloquence, and consistency
 Being well informed
 Ability to foresee the future trends
 Willingness to delegate and empower
 Emotional intelligence - Self-awareness,
Self-regulation, Motivation, Empathy, Social
skills
Good leaders of the strategy-making process
have a number of key attributes:

Levels of Strategic Management
TataMotors
Passenger vehicles Commercial vehicles Defensevehicles
Marketing, Finance, Operations, HR etc

Levels of Strategic Management
The corporate level managers guides
the strategy for the company as a whole
The business level managers design the
strategy for their businesses and are
guided by the overall corporate strategy
The functional level managers
implement the strategy in their functions

The Five Steps of the
Strategy Making Process
 Select the corporate vision, mission, and values
(VMV) and the major corporate goals and objectives.
 Analyze the external competitive environment (to
identify opportunities and threats).
 Analyze the organization’s internal environment (to
identify its strengths and weaknesses).
 Select strategies that:
• Build on the organization’s strengths and correct its weaknesses –
in order to take advantage of external opportunities and counter
external threats
• Are consistent with organization’s vision, mission, and values and
major goals and objectives
• Are congruent and constitute a viable business model
 Implement the stratstrategies and evaluate/course correct.

 Selecting the Organization’s
VMV and goals
Provides a framework or context within
which strategies are formulated, including:
 Vision –
A statement of “where we are going”
 Mission –
A statement of ‘who we are and what we do”
 Values –
A statement of “beliefs, business principles, and
practices that the organization is committed to”
 Major Goals –
The measurable desired future state that an
organization attempts to realize

The Vision
Provides a panoramic view of “where we
are going”
Is distinctive and specific to a particular
organization
A good vision statement is
• graphic ( helps visualize the future state)
• Focused but flexible
• Desirable and easy to communicate (helps
employees to relate to)
1 | 49

The Vision -examples
Provide a global
trading platform
where practically
anyone can trade
practically anything.
 At the Tata group we are
committed to improving
the quality of life of the
communities we serve.
We do this by striving
for leadership and global
competitiveness in the
business sectors in
which we operate
1 | 50
Vision statement provides a panoramic view of
“where we are going”

The Vision
1 | 51
Vision statement provides a panoramic view of
“where we are going”
Can you suggest a Vision
statement for Domino’s
Pizza?
McDonald’s vision
statement – to
become the
recognized leaders
in the QSR industry
India and the first
choice of our
customers

The Mission
 What is it that the company does?
 What is the companies business?
• Who is being satisfied
(what customer groups)?
• What is being satisfied
(what customer needs)?
• How customer needs are being satisfied
(by what skills, knowledge, or distinctive competencies)?
The mission statement of a company
focuses on its reason for existence today.
A company’s mission is best approached from a
customer-oriented business definition.

Strategic Vision vs. Mission
A strategic
vision concerns
a firm’s future
business path -
“where
we are going”
• Markets to be
pursued
• Future
product/market/
customer/technolog
y focus
The mission
statement of a
firm focuses on
its present
business
purpose - “who
we are and what
we do”
• Current product and
service offerings
• Customer needs
being served

The Mission
1 | 54
A company’s mission is best approached from a
customer-oriented business definition.
Can you suggest a
mission statement for for
Domino’s Pizza?
McDonald’s vision
statement – We will
lead the QSR
industry in India by
creating unmatched
value for our
customers, through
our promise of
outstanding
Quality, Service and
Cleanliness.

Values
The values of a company should state:
 How managers and employees should
conduct themselves
 How they should do business
 What kind of organization they need to build
to help achieve the company’s mission
 Organizational culture
• The set of values, norms, and standards that control how
employees work to achieve an organization’s mission and
goals
• Often seen as an important source of competitive advantage
In high-performance organizations, values
respect the interests of key stakeholders.

Values
Our Values & Philosophy are a reflection of the socially and
environmentally responsible company we aspire to be. They are
thefoundation for every businessdecision wemake.
Weuphold our commitment with six guiding principles.
1. Care for our customers, our consumers and the world we
livein.
2. Sell only productswecan beproud of.
3. Speak with truth and candor.
4. Balanceshort term and long term
5. Win with diversity and inclusion
6. Respect othersand succeed together.

The Values
1 | 57
Can you suggest a Value statement for
Dominos Pizza?
In high-performance organizations, values
respect the interests of key stakeholders.
McDonald’s value statement – We will drive our
mission through unwavering commitment
towards customer satisfaction, delivered with a
sense of warmth, friendliness, fun, integrity,
individual pride and company spirit

Key characteristics of well-constructed goals:
1. Precise and measurable – to provide a
yardstick or standard to judge performance
2. Address crucial issues – with a limited
number of key goals that help to maintain focus
3. Challenging but realistic – to provide
employees with incentive for improving
4. Specify a time period – to motivate and
inject a sense of urgency into goal attainment
Major Goals
A goal is a precise and measurable desired
future state that a company must realize if
it is to attain its vision or mission.

Financial and Strategic goals
Financial Goals
Outcomes focused
on improving
Financial
Performance
Strategic Goals
Customer
 Value creation
Internal Processes
 Value creating processes
Learning and Growth
 Aligning organizational,
information, and human
capital with strategy
Balanced score card method helps in goal setting and
performance evaluation across different types of goals

Examples of Financial Goals
 X % increasein annual
revenues
 X % increaseannually in
after-tax profits
 Profit marginsof X %
 X % return on capital
employed (ROCE)
 Sufficient internal cash
flowsto fund 100% of new
capital investment

Customer
• Winning an X % market share
• Achieving a customer retention rate of X %
• Acquire X number of new customers
Internal Processes
• Reduce product defects to X %
• Introduction of X number of new products in the
next three years
Learning and Growth
• Increase employee training to X hours/year
• Reduce turnover to X % per year
Examples of Strategic Goals

Goals Are Needed at All Levels
 First, set Corporate level goals
 Next, establish Business level goals
 Then, operating /functional level goals are
established

Performance in Nonprofit
Enterprises
Nonprofit entities such as government agencies,
universities, and charities:
• Should use their resources efficiently and effectively
• Set performance goals unique to the organization
• Set strategies to achieve goals and compete with other
nonprofits for scarce resources
A successful strategy gives potential
donors a compelling message as to
why they should contribute.

The Five Steps of the Strategy Making
Process (next session)
 Select the corporate vision, mission, and values
(VMV) and the major corporate goals and objectives.
 Analyze the external competitive environment (to
identify opportunities and threats).
 Analyze the organization’s internal environment (to
identify its strengths and weaknesses).
 Select strategies that:
• Build on the organization’s strengths and correct its weaknesses –
in order to take advantage of external opportunities and counter
external threats
• Are consistent with organization’s vision, mission, and values and
major goals and objectives
• Are congruent and constitute a viable business model
 Implement the stratstrategies and evaluate/course correct.

Some closing thoughts
A strategy-focused organization is more
likely to be a strong bottom-line
performer.
Good Strategy + Good Strategy
Execution = Good Management
Excellent execution of an excellent
strategy is the best test of managerial
excellence – and the most reliable recipe
for turning companies into standout
performers.

Strategic management session 1

More Related Content

What's hot

Viewers also liked

Similar to Strategic management session 1

Recently uploaded

Strategic management session 1

Editor's Notes