Unit - 1_Strategic Management (18MBA25)_Introduction

Introduction to
Strategic Management
MBA Programme – BIET, DavangereProf. Vijay K S
Unit - 1

18MBA25
As Per the VTU Syllabus
Unit - 1

South – West Airline; Activity System
Limited
Passenger
Service
Very Low
Ticket Prices
High Aircraft
Utilization
Lean & High
Productive
ground and
gate crews
Frequent &
Reliable
Departures
Point to Point
routes between
mid size cities

Limited
Passenger
Service
Very Low
Ticket Prices
High Aircraft
Utilization
Lean & High
Productive
ground and
gate crews
Frequent &
Reliable
Departures
Point to Point
routes between
mid size cities
No
Meals
No Seat
Assignment
No
Baggage
Transfers
Limited use
of travel
agents
No Connection
with other
airline
Standardised
fleet of 737
aircraft
Automatic
Ticket
machines
15 Minutes
gate
turnarounds
High
compensation
of employees
High Level of
employee stock
ownership
Flexible
union
contracts
Automatic
Ticket
machines

IKEA Furniture:
The furniture store has an impressive 298 stores in 26
countries, selling $36 billion a year.
Solving the worst part of buying furniture.
Hitting the right demographic
Not expensive, but not too cheap
Stores are a destination

IKEA

Similar to South West Airline, ……
Dell Computers, performing better when it compares
with other players in personal computer industry
In Retail Industry K-mart is out performed by Wal-
Mart
In Software market, Microsoft still maintains strong
market position
The FedEx American multinational courier Provides
unparalleled tracking system and service

What is Strategy ?
• They Avoided Operational Effectiveness - OE is Not Strategy
• They rests in “Unique Activities”
• Their Activities leads to Sustainable Competitive Advantage
• Fit a drive for both Competitive Advantage and Sustainability
• They Preserve their Core, and Stimulated the Progress

Strategy
Sustainable Competitive Advantage
Competitive Advantage
Superior Performance
Organizational Goals
Core Competency

“…is about identifying and describing the strategies that managers can
pursue to attain superior performance and a competitive advantage
for their organizations”
- Profitability - return that it makes on the
capital invested. The more efficient a company is, higher are its
profitability.
- profitability is greater than the average
profitability of all firms in its industry.
– When the firm maintains
above-average profitability for a number of years.
Superior Performance
Sustained Competitive Advantage

Competitiveness
Differentiation
Cost Leadership
Quick Response
Competitive
Advantage
Economic
Value
Added
Market
Value
Added
Value Created for Customers
Financial Performance
Value Captured for Investors

Core Competency

The Story of….. BINGO
pakoda inspired Live Wires
Khakra inspired Mad Angles
time pass snack in the form
of Tedhe Medhe

Meaning of Strategic Management
strategy formulation
decisions and actions
long-run performance
environmental scanning
strategy implementation
evaluation and control.

Meaning of Strategic Management
Strategic Management is a set of managerial
decisions and actions that determines the
long-run performance of a corporation. It
includes environmental scanning (both
external and internal), strategy formulation
(Strategic and long-range planning), strategy
implementation and evaluation and control.
It emphasizes the monitoring and evaluating
of external opportunities and threats in light
of a corporation’s strengths and weaknesses

• Nature – What are the Traits / Qualities?
• Importance – Why it has to exists?
• Character – Distinguishable features?
• Relevance – How it is connected to something else?

Nature of Strategic Management - What?
• Strategic management is
• Strategic management is both an of
• SM allows to take that facilitate an
organization to accomplish its objectives.
• it demands awareness to the
"big picture" and a rational assessment of the future options.
well-organized approach
Art and Science
formulating, implementing, and evaluating
cross-functional decisions

Importance of Strategic Management
Why Strategic
Management was
important for Bingo?

There are Opportunities
Management problems
Need for Coordination
& Control of Activities
Need to Minimize adverse
condition and Changes
Major decisions to
Achieve Objectives
Effective Allocation Time
fewer resources and less time for Erroneous or Ad hoc decisions

Why Strategic
Management was
important for Gillette?

Why Strategic
Management was
important for S-W
Airline?

• It creates a framework for internal communication among personnel.
• It helps to integrate the behaviour of individuals into a total effort.
• It provides a basic for the clarification of individual responsibilities.
• It gives encouragement to forward thinking.
• It provides a cooperative, integrated, and enthusiastic approach to
tackling problems and opportunities.
• It encourages a favourable attitude towards change.
• It gives a degree of discipline and formality to the management of a
business.

Characteristics of Strategic Management
Is the decision taken by
them are Typical and easy to
recognize ?
What are the
Characteristics of
Strategic Decision
Taken by these
companies?

What are the
Characteristics of
Strategic Decision
Taken by these
companies?
 Has support of organization’s executive officer.
 Long Term Process
 Is fresh and continuous, not static and stale.
 Is participatory, not left to planners.
 Is flexible.
 Leads to resources decisions. Resource
Mobilization and Application

What are the
Characteristics of
Strategic Decision
Taken by these
companies?
 Integrated System
 Hierarchical Strategy
 Proactive and not a quick fix
 Management by Process
 Analytical tools are used every time
 BCG, Five Force Model

Minnesota Mining and Manufacturing Company
• The company has more than 88000 people.
• The company has more than 30 billion dollars of annual sales.
• The company serves more than 200 countries across the globe
through various retail stores.

Minnesota Mining and Manufacturing Company
• The company has more than 55000 products in various categories.
• Portfolio
• Industrial Business
• Safety and Graphics Business
• Health Care Business
• Consumer Business
https://www.reuters.com/finance/stocks/company-profile/MMM

Relevance of Strategic Management
Why they have taken the
Such strategic Decisions?
Relevance of
Strategic
Management?

Companies are operating in age of discontinuing change - an age of creative &
constructive destruction.
Business, technology and product life is shrinking.
Demographic shift in terms of consumer preference and requirements.
A direct promotion from Agricultural economy to service or Hi-tech economy in
the new growth economy.
Shift from controlled economy to market driven economy.

Rich countries adopt deindustrialization.
Emergence of new Global Socio – economic system and world orders.
Knowledge is replacing Infrastructure
Self-leadership is in, command and control out
Networks are replacing hierarchies
Wanted - employees with Emotional Intelligence.

Strategic Management Process?
“…is the process by which managers choose a set of
strategies for a company that will allow it to achieve
Superior performance and to have Competitive
Advantage”

Mission, Vision, Values and Goals
SWOT
Strategic Choice
Internal AnalysisExternal Analysis
Functional Level Strategies
Business Level Strategies
Global Strategies
Corporate Level Strategies
Implementation of Strategy
Control System
Strategic Intent
Scanning
Strategic Formulation
Strategy Implementation
Strategy Control

FEEDBACK AND CONTROL
Strategic Management Process / Model
Environmental Scanning
Or Analysis
Strategy Formulations Implementation of Strategy Evaluate & Control
External Opportunities
and Threats
Natural Environment
Resources and Climate
Social Environment
General force
Task Environment
Industry Analysis
Internal Strengths &
Weaknesses
Structure:
Chain of Command
Culture:
Belief, expectations,
values
Resources:
Assets, Skills, Competencies,
knowledge
Mission
Objectives
Strategies
Policies
Programs
Performance
Procedures
Budgets
Reason
for existence
What results
to accomplish
by when Plan to achieve
mission and
Objectives Broad
guidelines
for decision
making
Activities
Needed to
accomplish a
plan
Cost of the
programs
Sequence
of steps
needed to
do the job
Actual
Results

What is Speciality About these companies?

Anything a firm do to…..
to creates value,
delivers value to consumers and
collects revenue from customers to make a profit.
“BUSINESS MODEL”

Relationship between Companies Strategy
and Its Business Model
Business models convert new innovation to economic value
for the firm and the customer.
Crafting strategy sets the course, direction, objectives and
performance capabilities for implementing and actualizing a
chosen strategic outcome.

• Business Model in context of Strategy
• A Company’s business model is management’s story line for how the
strategy will be a Money Maker
• Is strategy is capable of earning profit?
• How will business generates revenue?
• Is revenue enough to cover cost?
• Value to customer @ Profitable price?

• The Business Model is more narrowly focused than the concept of Strategy
• Companies Strategy is relates broadly to its competitive initiatives and action plans
• The bottom Line result of Strategy is “Business Model” i.e. Making Profit
• Business Model is a outcome or result of your strategy, but not itself, a strategy.
• Strategy is a firm’s contingent plan as to the business model it will use

Unit - 1_Strategic Management (18MBA25)_Introduction

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Unit - 1_Strategic Management (18MBA25)_Introduction