Business policy & Strategic Management for MBA


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Pune University - 2008 Syllabus

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Business policy & Strategic Management for MBA

  1. 1. Syllabus: MBA: BPSM: Semester III <ul><li>(301) BUSINESS POLICY & STRATEGIC MANAGEMENT </li></ul><ul><li>1. Strategy and the Quest for Competitive Advantage: </li></ul><ul><li>Military origins of strategy – </li></ul><ul><li>Evolution – </li></ul><ul><li>Concept and Characteristics of strategic management – </li></ul><ul><li>Defining strategy – </li></ul><ul><li>Mintzberg’s 5 ‘P’s of strategy – </li></ul><ul><li>Corporate, Business Levels of strategy – </li></ul><ul><li>Strategic Management Process. (4) </li></ul><ul><li>-------------------------------------------------------------- </li></ul>Ulhas D. Wadivkar. B.E. (Elect), PGDIM, MBA (Finance) Management Consultant, Retired Vice President (Works), Graphite India Limited. Nashik & Bangalore. 1 st August 2011
  2. 2. Business Policy and Strategic Management <ul><li>“ Without Business Policy and Strategy, an organisation is like a ship without rudder, going around in circles. It’s like a tramp; who has no place to go” – Joel Ross and Michael Kami. </li></ul><ul><li>Business Policy definition by Christensen : </li></ul><ul><li>“ Business Policy is the study of the function and responsibilities of Senior Management, the crucial problems that affect success in the total enterprise, and the decisions that determine the directions of the organisation and shape of its future.” </li></ul><ul><li>The problems of policy in the business, like those of policy in public affairs, have to do with choice of purposes, the moulding of organisational identity and character, the continuous definition of what needs to be done, and the mobilisation of resources for the attainment of organisational Goals in the face of competition or adverse circumstance. </li></ul>
  3. 3. Evolution of Business Policy as discipline . <ul><li>Origin – 1911- Harvard Business School – Integrated Course in Management aimed at providing general management capability. </li></ul><ul><li>Hofer: Strategic Management – A Casebook in Policy and Planning: The Business Policy evolution has undergone four Paradigm Shifts. This transition is of overlapping nature. </li></ul><ul><li>Development of subject of Business Policy has always followed the demands of real life business. </li></ul><ul><li>1930 -1960: Environment change: New Products: Continuously changing market : Ford Foundation recommended report, by Gordon and Howell, suggested a “Capstone” course of Business Policy which would give the students an opportunity to pull together what they have learned in the separate business fields and utilise this knowledge in the analysis of complex business problems. </li></ul>
  4. 4. Evolution of Business Policy as discipline . <ul><li>1969: The course was made mandatory by American Assembly of Collegiate School of Business (AACSB) </li></ul><ul><li>1990: The course has become an integral part of management education curriculum. </li></ul><ul><li>Evolution of Business Policy has undergone four Paradigms </li></ul><ul><li>Paradigm One: Ad-hoc Policy – making . </li></ul><ul><li>1900 -1930: Era of Mass Production – Maximising output, Normally a Single Product, Standardised and low cost product, catering to unique set of customers servicing limited geographical area – Informal control and co-ordination. The Strategic planning was centred on maximising output. </li></ul>
  5. 5. Evolution of Business Policy has undergone four Paradigms <ul><li>Paradigm Two – Integrated Policy Formulation. </li></ul><ul><li>1930 - 1940: Changes in Technology , Turbulence in Political environment, Emergence of new industries, Demand for novelty products even at higher costs, Product Differentiation, Market segmentation in increasingly competitive and changing markets. These all made investment decisions increasingly difficult. This was era of integrating all functional areas and framing policies to guide managerial actions. </li></ul><ul><li>Paradigm Three – The Concept of Strategy. </li></ul><ul><li>1940 - 1960: Planned policy became irrelevant due to increasingly complex and accelerating changes. Firms had to anticipate environmental changes. A strategy needed to be formed with critical look at basic concept of Business and its relationship to the existing environment then. </li></ul>
  6. 6. Paradigm Four – The Strategic Management. <ul><li>1980 & onwards: The focus of Strategic Management is on the strategic process of business firms and responsibilities of general management. </li></ul><ul><li>Everything out side the four walls is changing rapidly and this phenomenon is called as “Discontinuity” by Mr. Peter Drucker. Past experiences are no guarantee for future, as science and technology is moving faster. The future is no more extension of the past or the present. </li></ul><ul><li>The world is substantially compressed and managing the External & Internal environment becomes crucial function. </li></ul><ul><li>What to produce, where to market, which new business to enter, which one to quit and how to get internally stronger and resourceful are the new stakes. </li></ul><ul><li>Strategic Planning is required to be done to endow the enterprise with certain fundamental competencies / distinctive strengths which could take care of eventualities resulting from unexpected environmental changes. </li></ul>
  7. 7. The Indian Scenario: <ul><li>However, the evolution of this fourth phase is still continuing and is yet not formed into a theory of how to manage an enterprise. But Strategic Management is a very important tool for and way of thinking to resolve strategic issues. </li></ul><ul><li>The Indian Scenario: </li></ul><ul><li>IIMs and Administrative Staff College of India formed in early sixties were based on American Model. IIM-A is based on Harvard Model. The All India Council of technical Education (AICTE), The Association of Indian Management Schools (AIMS) have recommended a standard curriculum including “ Business Policy and Strategic Management ” as a compulsory course. Business Policy is the preferred nomenclature but Strategic Management is being progressively adapted. </li></ul>
  8. 8. Evolution of Strategic Management in India is divided in three periods. <ul><li>Till 1980 : Pre-liberalisation Stage : </li></ul><ul><li>Strategic management on Government fringes. </li></ul><ul><li>Entwining enterprise objectives into the national Planning framework. </li></ul><ul><li>Grabbing opportunities, high diversification, non- competitive scales, and weak technology. </li></ul><ul><li>Secretive & one man Strategic Management Process. </li></ul><ul><li>1980 - 2000 : Liberalisation Stage: </li></ul><ul><li>‘ Foreign Complex’ governed strategy. </li></ul><ul><li>Strategy of focus on rationalisation and operations improvement. </li></ul><ul><li>Strategy of growth through acquisitions, internationalisation and product market expansion. </li></ul><ul><li>Employing international consulting firms in Strategic Management. </li></ul>
  9. 9. Evolution of Strategic Management in India is divided in three periods . <ul><li>2000- Onwards: Post Liberalisation Stage: </li></ul><ul><li>‘ Global maverick’ mindset & Acquire professional skills in Strategic Management and synergise entrepreneurial flair. </li></ul><ul><li>Portfolio rationalisation, entry into emerging sectors. </li></ul><ul><li>Mobilise resources and ensure adequate growth through existing business. </li></ul><ul><li>De-merge businesses as independent companies and improve market capabilities. </li></ul><ul><li>Development of Technology capabilities </li></ul><ul><li>Decentralise organisations, develop institutionalised control mechanism. </li></ul>
  10. 10. Core concept of Strategy: <ul><li>A company’s concept of Strategy consists of the competitive moves and business approaches that managers employ to attract and please customers, compete successfully, grow the business, conduct operations and achieve targeted objectives. </li></ul><ul><li>Military Origins of Strategy: Strategy is a term that comes from the Greek Strategia , meaning &quot;Generalship“. In the military, strategy often refers to manoeuvring troops into position before the enemy is actually engaged. In this sense, strategy refers to the deployment of troops. Once the enemy has been engaged, attention shifts to tactics. Here, the employment of troops is central. </li></ul><ul><li>Military origins of strategy are century old. It seems sensible to begin our examination of strategy with the military view. </li></ul><ul><li>Substitute &quot;resources&quot; for troops and the transfer of the concept to the business world begins to take form. </li></ul><ul><li>Strategy also refers to the means by which policy is effected, As per “Clauswitz” the war is the continuation of political relations via other means. </li></ul>
  11. 11. <ul><li>Strategy According to B. H. Liddell Hart </li></ul><ul><li>In his book, Strategy , Liddell Hart examines wars and battles from the time of the ancient Greeks through World War II. He concludes that Clausewitz’ definition of strategy as &quot;the art of the employment of battles as a means to gain the object of war&quot; is seriously flawed in that this view of strategy intrudes upon policy and makes battle the only means of achieving strategic ends. </li></ul><ul><li>Wiser definition of strategy could be &quot;the practical adaptation of the means placed at a General’s disposal to the attainment of the object in view.&quot; Thus, military strategy is clearly a means to political ends. </li></ul><ul><li>Concluding his review of wars, policy, strategy and tactics, Liddell Hart arrives at this short definition of strategy: &quot;The art of distributing and applying military means to fulfil the ends of policy.&quot; </li></ul>
  12. 12. <ul><li>Strategy According to George Steiner </li></ul><ul><li>George Steiner, a professor of management and one of the founders of The California Management Review . His book, Strategic Planning , is close to being a bible on the subject. Steiner points out in his notes that there is very little agreement as to the meaning of strategy in the business world. </li></ul><ul><li>Some of the definitions in use to which Steiner pointed include the following: </li></ul><ul><li>Strategy is that which top management does that is of great importance to the organization. </li></ul><ul><li>Strategy refers to basic directional decisions, that is, to purposes and missions. </li></ul><ul><li>Strategy consists of the important actions necessary to realize these directions. </li></ul><ul><li>Strategy answers the question: What should the organization be doing? </li></ul><ul><li>Strategy answers the question: What are the ends we seek and how should we achieve them? </li></ul>
  13. 13. Defining Strategy and Concept of Strategic Management <ul><li>Alfred D Chandler(1962) : “The determination of basic long-term goals and the adoption of courses or the courses of action and the allocation of resources necessary for carrying out these goals” </li></ul><ul><li>Alfred D Chandler(1984) : “Basically, a strategy is a set of decisions-making rules for the guidance of organisational behaviour” </li></ul><ul><li>Kenneth Andrews(1965) : “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 to be </li></ul><ul><li>” Kenneth Andrews (1965) : “Business Strategy is a method of describing the future position of the company, its objectives, purposes, goals, policies, and plans that may be required for guiding the company from its existing position to where it desires to be”. </li></ul>
  14. 14. Defining Strategy and Concept of Strategic Management <ul><li>Igor Ansoff(1965) : “The common thread among the organisation’s activities and product-markets…that defines the essential nature of business that the organisation was or planned to be in future” </li></ul><ul><li>William F Gleueck(1972) : “A unified , comprehensive and integrated plan that relates the Strategic advantage of the firm to the challenges of the environment and is designed to ensure that the basic objectives of the enterprise are achieved through proper implementation process ” </li></ul><ul><li>Henry Mintzberg(1987) : “Strategy is Organisation’s pattern of response to its environment over a period of time to achieve its goals and mission. </li></ul><ul><li>Michael E Porter(1996) : “Creation of a unique and valued position involving a different set of activities. The company that is strategically positioned performs different activities from rivals or performs similar activities in different ways” </li></ul>
  15. 15. If we sum up all the above definitions, then Strategy is : <ul><li>A plan or course of action or a set of decisions rules forming pattern or creating a common thread. </li></ul><ul><li>The pattern or common thread related to the organisation’s activities which move an organisation from its current position to a desired to a desired future stage </li></ul><ul><li>Concerned with the resources necessary for implementing a plan or following a course of action and, </li></ul><ul><li>Connected to the strategic positioning of a firm, making trade-offs between its different activities, and creating a fit among these activities. </li></ul><ul><li>Set a clear direction to the organisation. </li></ul><ul><li>Enterprise knows its strengths & weaknesses compared with those of its competitors. </li></ul>
  16. 16. Essence Of Strategy <ul><li>Strategy includes the determination and evaluation of alternative paths to an already established Mission and Objectives of enterprise and choosing the alternative to be adapted. Four important aspects of Strategy are: </li></ul><ul><li>Long Term Objectives: It emphasises on long term growth and development. These Objectives give direction for implementing Strategy. </li></ul><ul><li>Competitive Advantages: The external environment is continuously monitored & Strategy is made to have the firm a continuous Competitive Advantage. </li></ul><ul><li>Vector: is a Direction with Force. Series of actions are to be taken & they should have same direction for whole organisation. </li></ul><ul><li>Synergy: Once a series of decisions are taken to accomplish the objectives in same direction, there will be synergy. Synergy can happen due to Competitive Advantages and Growth Vector. The Objectives need be measurable and could be : ROI, Sales Growth Rate, </li></ul>
  17. 17. Strategy as Action & Nature of Strategy <ul><li>Three types of actions are involved in Strategy: </li></ul><ul><li>Determination of Long Term Goals & Objectives. </li></ul><ul><li>Adoption of courses of action. </li></ul><ul><li>Allocation of resources. </li></ul><ul><li>Therefore, Strategy is “Creation of unique & valued position involving a different set of activities. The Company that is strategically positioned performs different activities from rivals or performs similar activities in different ways” – Michael Porter . </li></ul><ul><li>Thus Nature of Strategy is: </li></ul><ul><li>Strategy is a major course of action through which organisation relates itself to its environment. (External) </li></ul><ul><li>Strategy is blend of internal & external factors. Face opportunities & threats provided by external factors, internal factors are matched with them. </li></ul>
  18. 18. Nature of Strategy – contd… <ul><li>Strategic actions are different for different situations. Strategy is combination of actions to solve a certain problem to achieve a desirable end. </li></ul><ul><li>Strategy may involve contradictory actions simultaneously or with a gap of time like closing down some operations and expanding some at same time. </li></ul><ul><li>Strategy is future oriented. New situations, which have not arisen in past will require revised Strategic Actions. </li></ul><ul><li>Strategy requires some systems and norms for its efficient adoption in any organisation. </li></ul><ul><li>Strategy provides overall framework for guiding enterprise thinking and action. </li></ul>
  19. 19. Strategy v/s Policies <ul><li>Strategy & Policy are not synonymous. </li></ul><ul><li>Policy is guideline for decisions & actions to be taken by subordinates for the fulfilment of the set of objectives. </li></ul><ul><li>Policies are commonly accepted understanding of decision making. </li></ul><ul><li>Policies are thought oriented. </li></ul><ul><li>Policies have to be integrated so that Strategy is implemented successfully and effectively. </li></ul><ul><li>Strategy and policies both are the means directed towards meeting organisational objectives . </li></ul><ul><li>Strategies are concerned with the direction in which human and physical resources are deployed to maximise the chances of achieving organisational objectives in face of variable environment. </li></ul><ul><li>Strategies are specific actions suggested to achieve objectives. </li></ul><ul><li>Strategy is action oriented and empowers concerned to implement them. </li></ul><ul><li>Strategy cannot be delegated downwards. </li></ul><ul><li>Strategy is rule for making decision and Policy is contingent decision. </li></ul>
  20. 20. Strategy v/s Tactics <ul><li>Strategy determines the major plans to be undertaken. </li></ul><ul><li>Goal of Strategy is to gain competitive advantage, break the opponent. </li></ul><ul><li>Strategic decisions cannot be delegated downwards. </li></ul><ul><li>Strategy formulation is dynamic, responding to environment. It can be continuous or irregular. </li></ul><ul><li>Strategy has a long term perspective & have a high element of uncertainty. </li></ul><ul><li>Strategy formulation is affected by the personal values of person involved in the process. </li></ul><ul><li>Tactics is means by which previously determined plans are executed. </li></ul><ul><li>Goal of Tactics is to achieve success in a given action. </li></ul><ul><li>Tactics decisions can be delegated to all levels of organisation. </li></ul><ul><li>Tactics are determined on a periodic basis with some fixed timetable. </li></ul><ul><li>Tactical decisions are more certain as they work upon framework set by Strategy. </li></ul><ul><li>Tactical decision implementation is impersonal. </li></ul><ul><li>Tactical decisions are less important than Strategic decisions. </li></ul>
  21. 21. Strategic Management : <ul><li>Definition – “Strategic management is the process of systematically analysing various opportunities and threats vis-à-vis organisational strengths and weaknesses, formulating, and arriving at strategic choices through critical evaluation of alternatives and implementing them to meet the set objectives of the organisation”. </li></ul><ul><li>Definition – “Strategic Management is concerned with making decisions about an organisation’s future direction and implementing those decisions”. - By Lloyd L Byras. </li></ul>
  22. 22. Aspects of Strategic Management <ul><li>Vision Statement </li></ul><ul><li>Mission Statement indicating methodology for achieving the objectives, purposes and Philosophy of organisation as reflected in vision statement. </li></ul><ul><li>Company Profile, its internal culture, strengths and capabilities. </li></ul><ul><li>Critical study of external environmental factors, threats and opportunities. </li></ul><ul><li>Finding out way and deciding the desirable course of actions for accomplishing the Mission statement. </li></ul><ul><li>Selecting long term objectives and deciding corresponding strategies. </li></ul><ul><li>Evolving short term objectives , defining corresponding strategies in tune with Mission and Vision Statements. </li></ul><ul><li>Implementing chosen strategies in planned way, based on budgets, allocating resources, outlining action plan and tasks. </li></ul><ul><li>Installation of a continuous review system , creating a control mechanism and Data generation for selecting future course of action. </li></ul>
  23. 23. Five Tasks of Strategic Management <ul><li>Forming a strategic Vision of what the company’s future business make up will be and where the organisation is headed. (A long term vision to infuse the organisation with a sense of purposeful action.) </li></ul><ul><li>Setting objectives : converting Strategic vision into specific measurable performance outcomes. </li></ul><ul><li>Crafting a Strategy to achieve desired outcome. </li></ul><ul><li>Implementing & Executing chosen strategy efficiently and effectively. </li></ul><ul><li>Evaluating performance & initiating corrective adjustment in Vision, Long term directions, Objectives, Strategy in light of actual experience, changing conditions, new ideas & new opportunities. </li></ul>
  24. 24. Who performs these five tasks of Strategic Management? <ul><li>CEO is most important Strategy Manager, who is most visible also. He performs various roles such as, Chief direction setter, Chief objective setter, Chief strategy maker, Chief Strategy implementer. </li></ul><ul><li>Vice Presidents of various functions have role to play in strategy making and implementing. Functional heads like Production, Marketing, Finance, HR etc have responsibilities to deliver measurable performance as per Strategic Planning. </li></ul><ul><li>All major organisational units, business units, divisions, Staff, Plant support groups, district offices have leading and supporting roles in company’s strategic game plan. </li></ul><ul><li>CEO & Senior Corporate executives have responsibility & personal authority for major strategic decisions. </li></ul><ul><li>Managers with Profit & Loss responsibilities for individual business units or divisions. </li></ul><ul><li>Functional Heads & Departmental heads with direct responsibility over a major business areas. </li></ul><ul><li>Managers of operating plants: Strategy making is a job for all the line managers. Doers should be strategy makers. It should not be left to staff of Planners. Strategic Planning is not a stand alone function. It is an integrated team effort. </li></ul>
  25. 25. Aspects of Strategic Planning - 1 <ul><li>Strategic Planning provides the route map for the enterprise. It lends a framework which can ensure that decisions concerning future are taken in a systematic and purposeful way. </li></ul><ul><li>Strategic Planning provides a hedge against uncertainty, against totally unexpected developments. </li></ul><ul><li>Strategic Planning helps in understanding trends in a better way and generates a reference frame for investment decisions. </li></ul><ul><li>Strategic Planning provides the frame work for all major business decisions, decisions on business, products, markets, manufacturing facilities, investments, and organisational structure. It is a path finder for business opportunities and it is also a defence mechanism to avoid costly mistakes in choice of product market or investments. </li></ul>
  26. 26. Aspects of Strategic Planning - 2 <ul><li>The more intense the environmental uncertainty, more critical is the need for strategic planning. </li></ul><ul><li>The success of the efforts and activities of the enterprise depends heavily on the quality of strategic planning. </li></ul><ul><li>Considerable thought and effort must go in vision, insight, experience, quality of judgement and the perfection of methods and measures. </li></ul><ul><li>Strategic Planning is a management task concerned with growth and future of the business enterprise. </li></ul><ul><li>As a management tool, Strategic Planning utilises both intuition and logic. Logic is through Planning and information process and intuition is through experience, knowledge and vision of top people in Management. </li></ul><ul><li>All vital aspects of corporate governance are perfected through strategic planning, starting from corporate mission, philosophy and core values, down to choice of businesses and strategies. </li></ul>
  27. 27. Aspects of Strategic Planning - 3 <ul><li>Through analytical process aspect, involved in Strategic Planning, corporation understands where its core competencies are, identifies the competitive advantages, pinpoints the gaps, formulate steps to bridge them. </li></ul><ul><li>Main aspects of Strategic Planning are Future, Growth, Environment, basket of businesses of the firm for additions and deletions, Strategy and not day to day routine matters, creation of core competency and competitiveness and finally integration. It views the organisation / business in its totality and not a particular function. Thus Strategic Planning is Corporate Strategy. </li></ul><ul><li>Strategic Planning differs from other operative and administrative functions of management. Strategic Planning provides objective – strategy design: A) Growth Objective –Performance levels, Profitability target, B) Product Market scope, its penetration, C) Growth Vector – Product Market posture, development or diversification, D) Competitive Advantages, E) Synergy, strength obtained from new product-market selections. </li></ul>
  28. 28. Mintzberg’s 5Ps of strategy – <ul><li>Henry Mintzberg, in his 1994 book, The Rise and Fall of Strategic Planning , points out that people use &quot; Strategy &quot; in several different ways, the most common being these five : </li></ul><ul><li>Strategy is a Plan , a &quot;how,&quot; a means of getting from here to there. </li></ul><ul><li>A strategy can be a Ploy too; really just a specific manoeuvre intended to outwit an opponent or competitor. </li></ul><ul><li>Strategy is a Pattern in actions over time; for example, a company that regularly markets very expensive products is using a &quot;high end&quot; strategy. </li></ul><ul><li>Strategy is Position ; that is, it reflects decisions to offer particular products or services in particular markets. </li></ul><ul><li>Strategy is Perspective , that is, vision and direction. </li></ul>
  29. 29. <ul><li>Mintzberg argues that strategy emerges over time as intentions collide with and accommodate a changing reality. </li></ul><ul><li>Thus, one might start with a perspective and conclude that it calls for a certain position, which is to be achieved by way of a carefully crafted plan, with the eventual outcome and strategy reflected in a pattern evident in decisions and actions over time. </li></ul><ul><li>This pattern in decisions and actions defines what Mintzberg called &quot;realized&quot; or emergent strategy. </li></ul>
  30. 30. Henry Mintzberg (pictured above,) Bruce Ahlstrand and Joseph Lampell, in their 2005 book “Strategy Bites Back”, present 5 &quot;P's&quot; as a way to define strategy. Each &quot;P&quot; shines a spotlight on what strategy is / means / encompasses from a different angle, to provide a comprehensive overview that is probably more useful than definitions that try to fit all into a couple of sentences.
  31. 31. Mintzberg’s 5Ps of strategy – The 5 &quot;P's,&quot; adjusted where necessary to fit into the professional services / Industrial firms, are as follows: 1. Strategy is a PLAN To almost anyone you care to ask, strategy is a plan - some sort of consciously intended course of action , a guideline (or set of guidelines ) to deal with a situation. A kid has a &quot;strategy&quot; to get over a fence; a firm has one to dominate a market for a particular service or practice area. By this definition, strategies have two essential characteristics: they are developed consciously and purposefully .
  32. 32. <ul><li>2. Strategy as a PLOY: Strategy can be a ploy , too, which is really just a specific &quot;manoeuvre&quot; intended to outwit an opponent or competitor . The kid may use the fence as a ploy to draw a bully into his yard, where his Doberman Pincher awaits intruders. Likewise, a firm may threaten to establish a new practice area in order to discourage a competitor from trying to do the same. Here the real strategy (as plan, that is, the real intention) is the threat, not the new practice area itself, and as such is a ploy. Threatened litigation often falls into this category. </li></ul><ul><li>3. Strategy is a PATTERN: Strategy (whether as general plans or specific ploys) is pointless if it cannot be realized. In other words, defining strategy as a plan or ploy is not sufficient; we also need a definition that encompasses the resulting behaviour. Thus, strategy is also a pattern - specifically, a pattern in a stream of actions . By this definition, strategy is consistent in behaviour, whether or not intended. The outcome of strategy does not derive from the design, or plan, but from the action that is taken as a result . </li></ul>
  33. 33. <ul><li>4. Strategy is a POSITION: Strategy is also a position ; specifically a means of locating a firm in its environment. In ecological terms: strategy becomes that firm's &quot;niche.&quot; In management terms: a &quot;domain&quot; consisting of a particular combination of services, clients and markets. Position is often defined competitively (literally so in the military, where it becomes the site of a battle.) </li></ul><ul><li>5. Strategy is a PERSPECTIVE: While position is outwardly focused, perspective looks inward into the firm; even into the heads of the strategists themselves. Strategy in terms of this definition becomes an ingrained way of perceiving the world. Some firms are aggressive pacesetters; others build protective shells around themselves. Almost every profession has about it unique perspectives, that indelibly flavour the strategies that firms practicing those professions craft for themselves. A law firm's view of their business is fundamentally different to that of an accounting firm, and engineering firm or a graphic design studio, yet all are staffed by professionals. </li></ul>
  34. 34. <ul><li>The Plan provides the roadmap by which the firm intends to achieve its goals. Ploys add a dimension of feint and manoeuvre, where one firm's gain is another's loss and competitive advantage is critical. Pattern emphasizes that strategy is not a once-off event but a constant stream of decisions and resultant actions that drive the firm forward, over time, towards its goal. Position adds that different firms have different mixes of markets, clients and services that they provide to those clients. Finally Perspective provides an insight onto how the firm and its strategists are informed by their own professions, their perceptions of business, and the unique characteristics of each firms own &quot;world.&quot; </li></ul>
  35. 35. What Is Strategy? - 1 What, then, is strategy? Is it a plan? Does it refer to how we will obtain the ends we seek? Is it a position taken? Just as military forces might take the high ground prior to engaging the enemy; might a business take the position of low-cost provider? Or does strategy refer to perspective, to the view one takes of matters, and to the purposes, directions, decisions and actions stemming from this view? Lastly, does strategy refer to a pattern in our decisions and actions? For example, does repeatedly copying a competitor’s new product offerings signal a &quot;me too&quot; strategy? Just what is strategy? Strategy is all these—it is perspective, position, plan, ploy and pattern. Strategy is the bridge between policy or high-order goals on the one hand and tactics or concrete actions on the other. Strategy and tactics together straddle the gap between ends and means.
  36. 36. What Is Strategy? - 2 <ul><li>In short, strategy is a term that refers to a complex web of thoughts, ideas, insights, experiences, goals, expertise, memories, perceptions, and expectations that provides general guidance for specific actions in pursuit of particular ends. </li></ul><ul><li>Strategy, then, has no existence apart from the ends sought. It is a general framework that provides guidance for actions to be taken and, at the same time, is shaped by the actions taken. </li></ul><ul><li>The ends to be obtained are determined through discussions and debates regarding the company's future in light of its current situation. A SWOT analysis (an assessment of Strengths, Weaknesses, Opportunities and Threats) is conducted based on current perceptions. </li></ul>
  37. 37. <ul><li>A Company’s Situation </li></ul><ul><li>External Factors: </li></ul><ul><li>Industry & Competitive conditions. </li></ul><ul><li>Buyer Preferences </li></ul><ul><li>“ PESTEL ” – Political, Economical, Socio-cultural, Technological, Environmental & legal factors </li></ul><ul><li>Internal Factors like Resources, Competitive strengths & Capabilities, Weaknesses & Threats. </li></ul>Adopt / Abandon Strategy features New Initiatives & Ongoing Strategy Features continued from prior periods Adoptive reactions to Changing circumstances Company’s Strategy
  38. 38. Strategy <ul><li>It is a simple and undeniably relevant matter for managers to periodically ask the following questions of the employees reporting to them: </li></ul><ul><li>What have you done to improve customer service? </li></ul><ul><li>What have you done to improve customer satisfaction? </li></ul><ul><li>What have you done to reduce costs? </li></ul><ul><li>What have you done to increase productivity? </li></ul><ul><li>What have you done to increase revenues from new products and services? </li></ul><ul><li>Some Fundamental Questions </li></ul><ul><li>Regardless of the definition of strategy, or the many factors affecting the choice of corporate or competitive strategy, there are some fundamental questions to be asked and answered. These include the following: </li></ul>
  39. 39. <ul><li>Related to Mission & Vision </li></ul><ul><li>Who are we? </li></ul><ul><li>What do we do? </li></ul><ul><li>Why are we here? </li></ul><ul><li>What kind of company are we? </li></ul><ul><li>What kind of company do we want to become? </li></ul><ul><li>What kind of company must we become? </li></ul><ul><li>Related to Corporate Strategy </li></ul><ul><li>What is the current strategy, implicit or explicit? </li></ul><ul><li>What assumptions have to hold for the current strategy to be viable? </li></ul><ul><li>What is happening in the larger, social and educational environments? </li></ul><ul><li>What are our growth, size, and profitability goals? </li></ul><ul><li>In which markets will we compete? </li></ul><ul><li>In which businesses? </li></ul><ul><li>In which geographic areas? </li></ul>
  40. 40. <ul><li>Related to Competitive Strategy </li></ul><ul><li>What assumptions have to hold for the current strategy to be viable? </li></ul><ul><li>What is happening in the industry, with our competitors, and in general? </li></ul><ul><li>What is the current strategy, implicit or explicit? </li></ul><ul><li>What are our growth, size, and profitability goals? </li></ul><ul><li>What products and services will we offer? </li></ul><ul><li>To what customers or users? </li></ul><ul><li>How will the selling/buying decisions be made? </li></ul><ul><li>How will we distribute our products and services? </li></ul><ul><li>What technologies will we employ? </li></ul><ul><li>What capabilities and capacities will we require? </li></ul><ul><li>Which ones are core competencies? </li></ul><ul><li>What will we make, what will we buy, and what will we acquire through alliance? </li></ul><ul><li>What are our options? </li></ul><ul><li>On what basis will we compete? </li></ul>
  41. 41. <ul><li>Some Concluding Remarks -1 </li></ul><ul><li>Strategy has been borrowed from the military and adapted for business use. In truth, very little adaptation is required. </li></ul><ul><li>Strategy is about means. It is about the attainment of ends, not their specification. The specification of ends is a matter of stating those future conditions and circumstances toward which effort is to be devoted until such time as those ends are obtained. </li></ul><ul><li>Strategy is concerned with how you will achieve your aims, not with what those aims are or ought to be, or how they are established. If strategy has any meaning at all, it is only in relation to some aim or end in view. </li></ul><ul><li>Strategy is one element in a four- part structure . First are the ends to be obtained. Second are the strategies for obtaining them, the ways in which resources will be deployed. Third are tactics, the ways in which resources that have been deployed are actually used or employed. Fourth and last are the resources themselves, the means at our disposal. Thus it is that strategy and tactics bridge the gap between ends and means. </li></ul>
  42. 42. Some Concluding Remarks -2 <ul><li>5. Establishing the aims or ends of an enterprise is a matter of policy and the root words there are both Greek: politeia and polites —the state and the people. Determining the ends of an enterprise is mainly a matter of governance not management and, conversely, achieving them is mostly a matter of management not governance. </li></ul><ul><li>Those who govern are responsible for seeing to it that the ends of the enterprise are clear to the people who manages that enterprise and that these ends are legitimate, ethical and that they benefit the enterprise and its members. </li></ul>
  43. 43. Some Concluding Remarks - 3 7. Strategy is the joint province of those who govern and those who manage. Tactics belong to those who manage. Means or resources are jointly controlled. Those who govern and manage are jointly responsible for the deployment of resources. Those who manage are responsible for the employment of those resources—but always in the context of the ends sought and the strategy for their achievement. 8 Over the time, the employment of resources yields actual results and these, in light of intended results, shape the future deployment of resources. Thus it is that &quot;realized&quot; strategy emerges from the pattern of actions and decisions. And thus it is that strategy is an adaptive, evolving view of what is required to obtain the ends in view.
  44. 44. Criteria for Effective Strategy <ul><li>Clear, decisive, measurable objectives, </li></ul><ul><li>Maintaining the initiative proactively, </li></ul><ul><li>Concentration on what will make the enterprise superior in power, </li></ul><ul><li>Flexibility must be built in use of resources, buffers, reserved capabilities, manoeuvrability and repositioning, </li></ul><ul><li>Coordinated and committed leadership, </li></ul><ul><li>Surprise the opponent by use of speed, secrecy and intelligence, </li></ul><ul><li>Security: the organisation should secure & develop resources required, securely maintain all vital operating points for the enterprise, an effective intelligence system to prevent effects of surprise by the competitors. </li></ul>
  45. 45. Importance of Strategy <ul><li>Modern era witnesses the tremendous increase in the External Threats. Companies must have clear Strategies & must implement them effectively so as to survive. </li></ul><ul><li>We can see some companies like Jessops, Martin Burn have become extinct and some companies like Reliance, Infosys have become market leaders. </li></ul><ul><li>The basic factor responsible is not the Government or infrastructure or labour relations, but the Strategic thinking that different companies have shown in conducting the business. </li></ul><ul><li>Strategy helps an organisation to take decisions on long range forecasts. </li></ul><ul><li>It allows the firm to deal with a new trend and meet competition in the effective manner. </li></ul><ul><li>With the help of strategy, management develops capacity to be flexible to meet unanticipated changes. </li></ul><ul><li>Efficient strategy formation and implementation result into financial benefits to the organisation in the form of increased profits. </li></ul>
  46. 46. Importance of Strategy -2 <ul><li>5. Strategy provides focus in terms of organisational objectives and provides clarity of direction for achieving the objectives. </li></ul><ul><li>6. Strategy contributes towards organisational effectiveness by providing satisfaction to the personnel. </li></ul><ul><li>7. It gets managers into habit of thinking, makes them proactive and more conscious of their environment. </li></ul><ul><li>8. It provides motivation to employees as they can shape their work in the context of shared corporate goals and make them work for achieving these goals. </li></ul><ul><li>9. Strategy formulation & implementation gives opportunity to the management to involve different of management in the process. </li></ul><ul><li>10. It improves Corporate communication, coordination and allocation of resources. </li></ul>
  47. 47. Identifying a Company’s Strategy – What to look For: The Pattern of Actions & Business Approaches that define a Company’s Strategy Actions to gain sales & Market share via lower prices, more performance features, more appealing design, better quality or customer service, wider production selection etc. Actions to respond changing market conditions and other external circumstances Actions to diversify the Company’s revenue & earnings by entering into new business Actions to enter new geographic or product markets or exit existing market Actions to strengthen competitive capabilities & correct competitive weaknesses Actions & approaches that define how the company manages, research & development, production, sales & marketing, finance & other key activities Efforts to pursue new market opportunities & defend against threats to the Company’s well-being Actions to form Strategic alliances & collaborative partnerships Actions to merge with or acquire rival companies .
  48. 48. <ul><li>The Strategy Hierarchy </li></ul><ul><li>In most (large) corporations there are several levels of strategy. Strategic management is the highest in the sense that it is the broadest, applying to all parts of the firm. It gives direction to corporate values, corporate culture, corporate goals, and corporate missions. Under this broad corporate strategy there are often functional or business unit strategies </li></ul>Different Levels of Strategy Levels Structure Strategy Corporate Corporate Level SBU - A SBU - B SBU - C SBU Business level Functional Finance Marketing Operations Personnel Information Functional Level Corporate Office
  49. 49. <ul><li>Corporate Strategy: The companywide game plan for managing a set of businesses. The levels involved are CEO and other Senior Executives. </li></ul><ul><li>Business & Corporate Strategy </li></ul><ul><li>Business strategy , which refers to the aggregated operational strategies of single business firm or that of an SBU in a diversified corporation, refers to the way in which a firm competes in its chosen arenas. </li></ul><ul><li>Corporate strategy , then, refers to the overarching strategy of the diversified firm. Such corporate strategy answers the questions of &quot;in which businesses should we compete?&quot; and &quot;how does being in one business add to the competitive advantage of another portfolio firm, as well as the competitive advantage of the corporation as a whole </li></ul><ul><li>Business Strategy for Strategic Business Units: One for each business, the company has diversified into. Actions to build competitive capabilities and strengthen market position. Executed by General Mangers, Plant Heads, Division heads of each business with inputs from Corporate and Functional levels. </li></ul><ul><li>Many companies feel that a functional organizational structure is not an efficient way to organize activities so they have re –engineered according to processes or strategic business units (called SBUs). A Strategic Business Unit is a semi-autonomous unit within an organization. It is usually responsible for its own budgeting, new product decisions, hiring decisions, and price setting. An SBU is treated as an internal profit centre by corporate headquarters. Each SBU is responsible for developing its business strategies, strategies that must be in tune with broader corporate strategies </li></ul>
  50. 50. <ul><li>Functional Strategies </li></ul><ul><li>Functional strategies include Marketing Strategies, New product development strategies, Human resource strategies, Financial strategies, Legal strategies, Supply-chain strategies, and Information technology management strategies. The emphasis is on short and medium term plans and is limited to the domain of each department’s functional responsibility and is executed by Functional heads. Each functional department attempts to do its part in meeting overall corporate objectives, and hence to some extent their strategies are derived from broader Corporate & Business strategies. </li></ul><ul><li>Operational Strategy </li></ul><ul><li>The “lowest” level of strategy is operational strategy . At this level, detailing is done to add completeness to Business & Functional Strategies. It is very narrow in focus and deals with day-to-day operational activities such as scheduling criteria. It must operate within a budget but is not at liberty to adjust or create that budget. Operational level strategy was encouraged by Peter Drucker in his theory of Management By Objectives (MBO). Operational level strategies are informed to business level strategies which, in turn, are informed to corporate level strategies. These strategies are executed by ‘Brand Managers’, ‘Operating Managers’, ‘Plant managers’. Important activities like Advertising, Web site operations, distributions are involved at this level. </li></ul>
  51. 51. <ul><li>Dynamic Strategy </li></ul><ul><li>Since the turn of the millennium, there has been a tendency in some firms to revert to a simpler strategic structure. This is being driven by information technology. It is felt that Knowledge Management Systems should be used to share information and create common goals. Strategic divisions are thought to hamper this process. Most recently, this notion of strategy has been captured under the rubric of Dynamic Strategy , popularized by the strategic management textbook authored by Carpenter and Sanders. This work builds on that of Brown and Eisenhart as well as Christensen and portrays firm strategy, both business and corporate, as necessarily embracing ongoing strategic change, and the seamless integration of strategy formulation and implementation. Such change and implementation are usually built into the strategy through the staging and pacing facets. </li></ul><ul><li>Strategists - Their Roles & Levels: </li></ul><ul><li>Strategists are individuals or groups who are primarily involved in the formulation, implementation, and evaluation of Strategy. </li></ul><ul><li>In a limited sense, all managers are Strategists. But we may have outside agencies involved in various aspects of Strategic Management, who are also Strategists. </li></ul>
  52. 52. <ul><li>Board of Directors :- Board is an ultimate legal authority of an organisation. Board is responsible to owners, share holders, government, controlling agencies, and financial institutes. They get elected and appointed by holding or parent company. Board is requires to direct and is involved in reviewing and screening executive decisions in light of their environmental, business and organisational implications. Role of Board of Directors is to guide the senior management in setting and accomplishing objectives, reviewing and evaluating organisational performance, and appointing senior executives. Board is involved in setting strategic direction, establishing objectives & strategy, monitoring and reviewing achievement. </li></ul><ul><li>Chief Executive Officer :- is responsible for all aspects of strategic management from the formulation to evaluation of strategy. CEO plays a pivotal role in setting mission, objectives and goals. He formulates and implements strategy and ensures that organisation does not deviate from a predetermined path. CEO is primarily responsible for strategic management of the organisation </li></ul><ul><li>Entrepreneur : - is the person who starts a new business, is a venture capitalist. He has to play a proactive role to provide sense of direction, set objectives and formulate strategies. He is different from formal system and plays all strategic roles simultaneously. </li></ul>
  53. 53. <ul><li>Senior management :- consists of higher management level starting from CEO to functional managers and profit centre or SBU heads. They are responsible for implementing the strategies and plans and for a periodic evaluation of their performance. Organisationally they come together in the form of committees, task forces, work groups, think tanks and play a very important role in Strategic management. </li></ul><ul><li>SBU level Executives :- SBUs are formed with each business having a clearly defined product – market segment and a unique strategy. They are CEOs for their SBUs and hence SBU level strategy formulation and implementation is their main role. </li></ul><ul><li>Corporate Planning :- It assists management in all aspects of strategy formulation, implementation and evaluation. They are responsible for preparation and communication of strategic plans, provides administrative support and plays a measurement and controlling role. They do not from strategy and do not initiate a process on their own. </li></ul><ul><li>Consultants :- in absence of a Corporate planning many organisation take an outside help in the form of a consultants or consulting companies. Besides providing corporate strategy and strategic planning, they are specialist, knowledgeable, outsider, unbiased and provide objective evaluation. E.g. AF Ferguson, PWC, KPMG, Billimoria, Mckinsey etc. </li></ul>
  54. 54. <ul><li>Middle Level Managers:- They relate to operational matters and are seldom play active role in Strategic Management. They form departmental / functional plan in light of broad objectives and goals of organisation provided in vision, mission, goals and objective statements of the organisation. They are implementers, followers of guide lines, receivers of communication about strategic plans. They are basically involved in in the implementation of functional strategies. </li></ul><ul><li>Executive Assistant :- An executive assistant is a person who assists the chief executive in the performance of his duties like data collection and analysis, suggesting alternatives. He prepares brief for various plans, proposals, and projects. He helps in public relations and liaison functions. He coordinates activities with the internal staff and outsiders. He is a corporate planner for CEO. Generally, he orients from finance background ensuring and opining on ROI and strategic positioning of the organisation. </li></ul>
  55. 55. <ul><li>We will now look at a framework developed by Richard Rumlet for evaluating alternative strategies. It is described in a series of tests: Consistency : The strategy must not present mutually inconsistent goals and policies. </li></ul><ul><li>Consonance : The strategy must represent an adaptive response to the external environment and to the critical changes occurring within it. </li></ul><ul><li>Advantage : The strategy must provide for the creation and/or maintenance of a competitive advantage in the selected area of activity. </li></ul><ul><li>Feasibility : The strategy must neither overtax available resources nor create unsolvable sub-problems </li></ul><ul><li>We shall now look into the advantages and disadvantages of the strategy: </li></ul><ul><li>Strategy sets direction , but can also serve as a set of blinders to hide potential dangers. </li></ul><ul><li>Strategy focuses efforts , there may be no peripheral vision and can become heavily embedded into the fabric of the organization. </li></ul><ul><li>Strategy defines the organization , but defining it too sharply results in the rich complexity of the system being lost. </li></ul><ul><li>Strategy provides consistency , but could hinder creativity. </li></ul>
  56. 56. Kinds of Corporate Strategy -1 <ul><li>There are four Grand Strategic alternatives: </li></ul><ul><li>Stability Strategy: Main aim here is Stabilising and improving Functional Performance. </li></ul><ul><li>a.1) No Change Strategy. </li></ul><ul><li>a.2) Profit Strategy. </li></ul><ul><li>a.3) Pause / Proceed with caution Strategy. </li></ul><ul><li>b) Expansion Strategy : Main aim is here High Growth. </li></ul><ul><li>b.1) Concentration. </li></ul><ul><li>b.2) Integration. </li></ul><ul><li>b.3) Diversification. </li></ul><ul><li>b.4) Cooperation. </li></ul><ul><li>b.5) Internationalisation. </li></ul><ul><li>Mergers, Takeovers, Joint Ventures, Strategic Alliances, Global </li></ul><ul><li>Strategy, Trans-national Strategy, International Strategy, </li></ul><ul><li>Multi-domestic Strategy. </li></ul>
  57. 57. Kinds of Corporate Strategy - 2 <ul><li>c) Retrenchment Strategy: Main aim here is contraction of its activities. It is done through Turnaround, divestment and liquidation in modes like </li></ul><ul><li>c.1) Compulsory winding up. </li></ul><ul><li>c.2) Voluntary winding up. </li></ul><ul><li>c.3) Winding up under supervision of Court. </li></ul><ul><li>d) Combination Strategies: It is combination of all above three </li></ul><ul><li>policies simultaneously in different businesses or at different </li></ul><ul><li>times. e.g.: </li></ul><ul><li>Merger of TTK Chemicals with TTK pharma. </li></ul><ul><li>TT industries and Textiles Ltd. expanded through JV. </li></ul><ul><li>TTK Ltd., diversified into cooking utensils. </li></ul><ul><li>TTK maps and publications into the general publishing business after a turn-around. </li></ul>
  58. 58. Schools of Thought on Strategy Formation-1 <ul><li>The fourth paradigm (1980 onwards) says that subject of Strategic Management is still under evolution. Strategic decision making is at the core of Managerial activity, their Strategic behaviour is outcome of Formation of Strategy. </li></ul><ul><li>Mintzberg and other doyens in field of Strategy have formed various perspectives called as Schools of Thought : </li></ul><ul><li>The Perspective Schools: </li></ul><ul><li>Design School -(Sleznic & Andrews): Strategy is unique. The process of Strategy formation is based on Judgement and Thinking. </li></ul><ul><li>Planning School- (Ansoff): Strategy is seen as a plan divided into sub-strategies and programmes. The lead role in Strategy formation is played by Strategy Planners. </li></ul><ul><li>The Positioning School- (Schendel –Hatten & Porter): Under this school Strategy is seen as set of planned generic positions chosen by a firm on the basis of an analysis of the competition and the industry in which they operate. </li></ul>
  59. 59. Schools of Thought on Strategy Formation-2 <ul><li>The Descriptive Schools: </li></ul><ul><li>4. Entrepreneurial School - (Schumpeter & Cole): Strategy formation is mainly intuitive, visionary & deliberate. Strategy is an outcome of a personal & unique perspective to create a niche. </li></ul><ul><li>5. Cognitive School - (Simon & March): Strategy formation is mental process. The lead role is played by thinker philosopher. </li></ul><ul><li>6. Learning School - (Weick, Quinn, Senge & Lindblom): This school perceives Strategy formation as an emergent process. The process is informal and messy and lead role is played by the learner. </li></ul><ul><li>7. Power School - (Allison & Astley): Strategy is seen as political & cooperative process or pattern. This school perceives Strategy formation as negotiation process. The process of Strategy formation is messy, emergent & deliberate. </li></ul>
  60. 60. Schools of Thought on Strategy Formation-3 <ul><li>8. Cultural School - (Rhenman & Normann): Strategy is seen as collective perspective. The process of Strategy formation is ideological, constrained & deliberate. </li></ul><ul><li>9. Environmental School -( Hanan, Freeman & Pugh): The lead role in strategy formation is played by environment as an entity. The process of Strategy formation is reactive, passive & imposed and hence deliberate. </li></ul><ul><li>The Integrative School: -(Chandler, Miles & Snow): </li></ul><ul><li>10. The Strategy is viewed in relation to a specific context and any of the nine schools mentioned above can be used to form the Process. The Strategy formation process is integrative, episodic & sequential. </li></ul>
  61. 61. Strategic Management Process - an Overview Definition of Strategic Management: Strategic management is defined as the dynamic process of formulation, implementation, evaluation and control of strategies to realise the Organisation’s Strategic intent. Strategic Management is a continual, evolving, iterative process. It is not rigid, stepwise activities arranged in a sequential order. It is repeated over time as situation demands. Establish Strategic Intent Formulation of Strategies Implementation of Strategies Strategic Evaluation Strategic Control
  62. 62. Strategic Management Process-1 <ul><li>Strategic Intent: </li></ul><ul><li>Creating & Communicating the Vision. </li></ul><ul><li>Defining the Business. </li></ul><ul><li>Designing a Mission Statement. </li></ul><ul><li>Adopting the Business Model. </li></ul><ul><li>Clarifying the business mission, purpose & setting broad Objectives and Goals. </li></ul><ul><li>Formulation of Strategies: </li></ul><ul><li>External Environment Survey. SWOT Analysis. </li></ul><ul><li>Internal Appraisal of the firm. </li></ul><ul><li>Setting Corporate Objectives. </li></ul><ul><li>Formulating the Corporate objectives. </li></ul><ul><li>Formulating the Corporate strategies. </li></ul><ul><li>Exercising Strategic Choice. </li></ul><ul><li>Preparing a Strategic Plan. </li></ul>
  63. 63. Strategic Management Process-2 <ul><li>Implementation of Strategies: </li></ul><ul><li>Activating Strategies. </li></ul><ul><li>Designing Structure, Systems and processes. </li></ul><ul><li>Managing Behavioural Implementation. </li></ul><ul><li>Managing Functional Implementations. </li></ul><ul><li>Operationalising Strategies. </li></ul><ul><li>Performing Strategic evaluation & Control: </li></ul><ul><li>Performing Strategic evaluation. </li></ul><ul><li>Exercising Strategic Control. </li></ul><ul><li>Reformulating Strategies. </li></ul>
  64. 64. Syllabus 2. Strategic Intent & Strategy Formulation: Vision, mission and purpose – Business definition, objectives and goals – Stakeholders in business and their roles in strategic management – Corporate Social Responsibility, Ethical and Social considerations in Strategy (4) --------------------------------------------------------------
  65. 65. Strategic Intent <ul><li>Strategic Intent is combination of four levels in the Management. It involves discussions of Vision, Mission, Business Definition & Goals and Objectives. </li></ul><ul><li>Strategic Intent refers to the purposes the Organisation strives for. </li></ul><ul><li>Strategic Intent lays down the frame work within which firms would operate, adopt a predetermined direction, and attempt to achieve the Goals. </li></ul><ul><li>Hamel & Prahalad considered Strategic Intent as an obsession with an Organisation. </li></ul><ul><li>Strategic Intent envisions a desired leadership positioning and establishes the criterion the Organisation will use for charting its progress. In addition to ambitions of the Organisation; it encompasses active Management Process that includes focussing the organisation’s attention on winning. It covers motivating the people by communicating the values, targets. The intent encourages individual and team contributions and attempts sustaining enthusiasm by providing new operational definitions. The Strategic Intent guides the organisation through changing circumstances and guides use of resource allocations. </li></ul>
  66. 66. Strategy Formulation- Vision, Mission and Purpose, <ul><li>A vision is more dream t of than it is. Vision Statement is permanent statement of a company. Vision is future aspiration s that lead to an inspiration. It defines the very purpose of existence of a company. </li></ul><ul><li>The vision of a company is a direction for action for employees. The essence of a vision is forward looking view of what an organisation wishes to become. </li></ul><ul><li>Kotter(1990) defines Vision as “ a description of an enterprise. (an organisation, corporate culture, a business, a technology, an activity) in future”. </li></ul><ul><li>El-namaki(1992) defines vision as a “mental perception of the kind of environment an individual, or an organisation, aspires to create within a broad time horizon and underlying conditions for the actualisation of this perception” </li></ul><ul><li>Miller and Dess(1996) defines vision as “category of intentions that are broad, all inclusive, and forward thinking” </li></ul>
  67. 67. Characteristics of a Vision Statement <ul><li>Inspiring and exhilarating. </li></ul><ul><li>It represents, a discontinuity, a step, a jump ahead to dream what it is to be. </li></ul><ul><li>Creation of common identity and share sense of purpose. </li></ul><ul><li>Competitive, original and unique and practical. </li></ul><ul><li>Foster risk taking and experimentation. </li></ul><ul><li>Foster long term thinking. </li></ul><ul><li>A vision is a statement about what your organization wants to become. </li></ul><ul><li>It should resonate with all members of the organization and help them feel proud, excited, and part of something much bigger than themselves. </li></ul><ul><li>A vision should stretch the organization’s capabilities and image of itself. It gives shape and direction to the organization’s future. </li></ul><ul><li>Visions range in length from a couple of words to several pages. </li></ul><ul><li>Shorter vision statements is recommended because people will tend to remember their shorter organizational vision. </li></ul>
  68. 68. Vision Statement <ul><li>Vision Statement Samples: </li></ul><ul><li>&quot;Year after year, Westin and its people will be regarded as the best and most sought after hotel and resort management group in North America.&quot; (Westin Hotels) </li></ul><ul><li>&quot;To be recognized and respected as one of the premier associations of HR Professionals.&quot; (HR Association of Greater Detroit) </li></ul><ul><li>Vision Statement of “TATA STEEL” </li></ul><ul><li>“ TATA Steel enters the new millennium with the confidence of learning, knowledge based and happy organisation. We will establish ourselves as a supplier of choice by delighting our customers with our service and products. In the coming decade, we will become the most cost competitive steel plant and so serve the community and the nation”. </li></ul><ul><li>Vision Statement of Farm Fresh Produce </li></ul><ul><li>“ We help the families of Main Town live happier and healthier lives by providing the freshest, tastiest and most nutritious local produce: From local farms to your table in under 24 hours.” </li></ul>
  69. 69. Developing a Vision Statement <ul><li>The vision statement includes vivid description of the organization as it effectively carries out its operations. </li></ul><ul><li>Developing a vision statement can be quick culture-specific, i.e., participants may use methods ranging from highly analytical and rational to highly creative and divergent, e.g., focused discussions, divergent experiences around daydreams, sharing stories, etc. Therefore, visit with the participants how they might like to arrive at description of their organizational vision. </li></ul><ul><li>Developing the vision can be the most enjoyable part of planning, but the part where time easily gets away from you </li></ul><ul><li>Note that originally, the vision was a compelling description of the state and function of the organization once it had implemented the strategic plan, i.e., a very attractive image toward which the organization was attracted and guided by the strategic plan. Recently, the vision has become more of a motivational tool, too often including highly idealistic phrasing and activities which the organization cannot realistically aspire. </li></ul>
  70. 70. Strategic Vision <ul><li>Strategic Vision is a road map showing the route a company intends to take in developing and strengthening the business. It defines Company’s destination and provides rational for going there. It culminates in to a Mission Statement. Strategic Vision points an Organisation in a particular direction, charts a strategic path to follow for future and moulds the organisation’s identity. </li></ul><ul><li>Strategic Vision is different from Mission Statement: Strategic Vision deals with where we are going, where as Mission Statement deals with Company’s present business scope and purpose. </li></ul><ul><li>A company Mission is guided by the buyer’s needs it seeks to satisfy, the customer groups and market segments it is endeavouring to serve, and the resources and technologies that it is deploying in trying to please customers and achieve a Market and Industry position. </li></ul>
  71. 71. Example of Strategic Vision <ul><li>“ The San Antonio Express News” developed this Strategic Vision, </li></ul><ul><li>&quot; EXPAND” our customer base and enhance the franchise by pursuing multimedia opportunities. </li></ul><ul><li>“ DELIVER” an award-winning level of journalistic excellence, building public interest, trust and pride. </li></ul><ul><li>“ PROVIDE” vigorous community leadership and support. </li></ul><ul><li>“ INSTILL” an environment of internal and external excellence in customer service. </li></ul><ul><li>“ EMPOWER” and recognize each employee's unique contribution. </li></ul><ul><li>“ ACHIEVE” the highest standards of quality. </li></ul><ul><li>“ IMPROVE” financial strength and profitability.&quot; </li></ul>
  72. 72. Mission <ul><li>Thompson(1997) defines Mission as “the essential purpose of the organisation, concerning particularly, why it is in existence, the nature of businesses it is in, and the customers it seeks to serve and satisfy” </li></ul><ul><li>Hunger and Wheelen(1999) say that “mission is the purpose and reason for the organisation’s existence” </li></ul><ul><li>Mission statements could be formulated on the basis of vision that an entrepreneur decides on in the initial stages. </li></ul><ul><li>A business mission helps to evolve an executive action. </li></ul><ul><li>Mission of organisation is what it is and why it exists. It represents common purpose which the entire organisation shares and pursues. It is a guiding principle. </li></ul>
  73. 73. Mission Statement <ul><li>Mission of a company is expressed it terms of products and geographical scope. It includes a methodology of attaining the desired goal in vision. It defines the competitive strength of a company and it emanates from corporate vision and strategic posture of a company. </li></ul><ul><li>Thus the mission of a business is a statement, a build-up philosophy of its current and future expected position with regards to its products, market leadership. </li></ul><ul><li>Mission is statement which defines the role of organisation plays in a society. </li></ul><ul><li>The corporate mission is growth ambition of the firm. </li></ul>
  74. 74. Mission <ul><li>Characteristics of a Mission Statement </li></ul><ul><li>It should be feasible, achievable & It should be precise. </li></ul><ul><li>It should be clear & It should be distinctive. </li></ul><ul><li>It should be motivating. </li></ul><ul><li>It should be indicative of major component of strategy & Objectives. </li></ul><ul><li>It should be indicative of how objectives are to be accomplished. </li></ul><ul><li>It should be indicative of how Policies will be achieved. </li></ul><ul><li>It should focus Market Rather than Product. </li></ul>
  75. 75. Mission Statement Creation <ul><li>To create your mission statement, first identify your organization’s “winning idea”. This is the idea or approach that will make your organization stand out from its competitors, and is the reason that customers will come to you and not your competitors. </li></ul><ul><li>Next identify the key measures of your success. Make sure you choose the most important measures (and not too many of them!) </li></ul><ul><li>  </li></ul><ul><li>Combine your winning idea and success measures into a tangible and measurable goal.   </li></ul><ul><li>Refine the words until you have a concise and precise statement of your mission, which expresses your ideas, measures and desired result. </li></ul>
  76. 76. Developing a Mission Statement <ul><li>At is most basic; the mission statement describes the overall purpose of the organization. </li></ul><ul><li>If the organization elects to develop a vision statement before developing the mission statement, ask “Why does the image, the vision exist -- what is it’s purpose?” This purpose is often the same as the mission. </li></ul><ul><li>Developing a mission statement can be quick culture-specific, i.e., participants may use methods ranging from highly analytical and rational to highly creative and divergent, e.g., focused discussions, divergent experiences around daydreams, sharing stories, etc. Therefore, visit with the participants how they might like to arrive at description of their organizational mission. </li></ul><ul><li>When wording the mission statement, consider the organization's products, services, markets, values, and concern for public image, and maybe priorities of activities for survival. </li></ul>
  77. 77. Mission Statements <ul><li>Consider any changes that may be needed in wording of the mission statement because of any new suggested strategies during a recent strategic planning process. </li></ul><ul><li>Ensure that wording of the mission is to the extent that management and employees can infer some order of priorities in how products and services are delivered. </li></ul><ul><li>When refining the mission, a useful exercise is to add or delete a word from the mission to realize the change in scope of the mission statement and assess how concise is its wording. </li></ul><ul><li>Does the mission statement include sufficient description that the statement clearly separates the mission of the organization from other organizations? </li></ul>
  78. 78. <ul><li>Mission Statement of Ranabaxy </li></ul><ul><li>“ To become a $ 1 Billion research based global (International) pharmaceutical company” </li></ul><ul><li>Mission Statement of Graphite India Limited </li></ul><ul><li>“ To be within top three companies in the world by achieving 1,00,000 MT Production of Graphite Electrodes before 2012” </li></ul><ul><li>The mission statement of Farm Fresh Produce is: </li></ul><ul><li>“ To become the number one produce store in Main Street by selling the highest quality, freshest farm produce, from farm to customer in under 24 hours on 75% of our range and with 98% customer satisfaction.” </li></ul><ul><li>&quot;Our goal is simply stated. We want to be the best service organization in the world.&quot; ( IBM ) </li></ul><ul><li>&quot;To give ordinary folk the chance to buy the same thing as rich people.&quot; ( Wal-Mart ) </li></ul>
  79. 79. Mission Statements <ul><li>&quot;FedEx is committed to our People-Service-Profit Philosophy. We will produce outstanding financial returns by providing totally reliable, competitively superior, global, air-ground transportation of high-priority goods and documents that require rapid, time-certain delivery.&quot; ( Federal Express ) </li></ul><ul><li>&quot;Our mission is to earn the loyalty of Saturn owners and grow our family by developing and marketing U.S.-manufactured vehicles that are world leaders in quality, cost, and customer enthusiasm through the integration of people, technology, and business systems.&quot; ( Saturn ) </li></ul><ul><li>&quot;In order to realize our Vision, our Mission must be to exceed the expectations of our customers, whom we define as guests, partners, and fellow employees. (mission) We will accomplish this by committing to our shared values and by achieving the highest levels of customer satisfaction, with extraordinary emphasis on the creation of value. (strategy) In this way we will ensure that our profit, quality and growth goals are met.&quot; ( Westin Hotels and Resorts ) </li></ul>
  80. 80. Values <ul><li>Values are traits or qualities that are considered worthwhile; they represent an individual’s highest priorities and deeply held driving forces. (Values are also known as core values and as governing values; they all refer to the same sentiment.) </li></ul><ul><li>Value statements are grounded in values and define how people want to behave with each other in the organization. They are statements about how the organization will value customers, suppliers, and the internal community. Value statements describe actions which are the living enactment of the fundamental values held by most individuals within the organization. </li></ul>
  81. 81. Values <ul><li>The values of each of the individuals in your workplace, along with their experience, upbringing, and so on, held together to form your corporate culture. The values of your senior leaders are especially important in the development of your culture. These leaders have a lot of power in your organization to set the course and environment and they have selected the staff for your workplace. </li></ul><ul><li>If you think about your own life, your values form the cornerstones for all you do and accomplish. They define where you spend your time, if you are truly living your values. Each of you makes choices in life according to your most important top ‘ten’ values. It is necessary to take the time to identify what is most important to you and to your organization. </li></ul>
  82. 82. Developing a Values Statement <ul><li>Values represent the core priorities in the organization’s culture, including what drives members’ priorities and how they truly act in the organization, etc. Values are increasingly important in strategic planning. They often drive the intent and direction for “organic” planners. </li></ul><ul><li>Developing a values statement can be quick culture-specific, i.e., participants may use methods ranging from highly analytical and rational to highly creative and divergent, e.g., focused discussions, divergent experiences around daydreams, sharing stories, etc. Therefore, visit with the participants how they might like to arrive at description of their organizational values. </li></ul><ul><li>Establish four to six core values from which the organization would like to operate. Consider values of customers, shareholders, employees and the community. </li></ul>
  83. 83. Developing a Values Statement <ul><li>Notice any differences between the organization’s preferred values and its true values (the values actually reflected by members’ behaviours in the organization). Record each preferred value on a flash card, then have each member “rank” the values with 1, 2, or 3 in terms of the priority needed by the organization with 3 indicating the value is very important to the organization and 1 is least important. </li></ul><ul><li>Then go through the cards again to rank how people think the values are actually being enacted in the organization with 3 indicating the values are fully enacted and 1 indicating the value is hardly reflected at all. Then address discrepancies where a value is highly preferred (ranked with a 3), but hardly enacted (ranked with a 1). </li></ul><ul><li>Incorporate into the strategic plan, actions to align actual behaviours with preferred behaviours. </li></ul>
  84. 84. Samples of Values and Value Statements <ul><li>&quot;To preserve and improve human life.&quot; ( Merck ) </li></ul><ul><li>At Merck, &quot;corporate conduct is inseparable from the conduct of individual employees in the performance of their work. Every Merck employee is responsible for adhering to business practices that are in accordance with the letter and spirit of the applicable laws and with ethical principles that reflect the highest standards of corporate and individual behaviour... </li></ul><ul><li>&quot;At Merck, we are committed to the highest standards of ethics and integrity. We are responsible to our customers, to Merck employees and their families, to the environments we inhibit, and to the societies we serve worldwide. In discharging our responsibilities, we do not take professional or ethical shortcuts. Our interactions with all segments of society must reflect the high standards we profess.&quot; </li></ul><ul><li>Patriot Ledger ( &quot;We have a total commitment to these values, shaping the way we do business for our employees, our customers and our company. </li></ul><ul><li>Our employees are the most valued assets of our company, essential participants with a shared responsibility in fulfilling our mission. </li></ul><ul><li>We recognize that the quality, motivation and performance of our employees are the key factors in achieving our success. </li></ul>
  85. 85. Goals, Objectives and Action Plans <ul><li>After you have developed the key strategies, turn your attention to developing several goals that will enable you to accomplish each of your strategies. Goals should be </li></ul><ul><li>S M A R T : S pecific, M easurable, A chievable, R ealistic and T ime-based. </li></ul><ul><li>Once you have enabled strategy accomplishment through setting SMART Goals, you will want to develop action plans to accomplish each goal. You will need to follow an action plan: </li></ul><ul><li>Establish a cross section of professionals as a committee and meet to plan the sessions. </li></ul><ul><li>Determine budget. </li></ul><ul><li>Select topics based on member needs assessment. </li></ul><ul><li>Plan advertising strategies, and so forth. </li></ul><ul><li>Make action plans as detailed as you need them to be and integrate the individual steps into your planning system. An effective planning system, whether it uses a personal computer, a paper and pen system, a handheld computer or a Palm, will keep your goals and action plans on track and on target. </li></ul>
  86. 86. Areas of Objectives <ul><li>Objectives represent managerial commitment to achieve specific results in specific period of time. Objectives could be </li></ul><ul><li>: Profitability </li></ul><ul><li>: Markets </li></ul><ul><li>: Productivity </li></ul><ul><li>: Innovation </li></ul><ul><li>: Product </li></ul><ul><li>: Financial Resources </li></ul><ul><li>: Physical facilities </li></ul><ul><li>: Organisation Structure & Activities </li></ul><ul><li>: Manager Performance & Development </li></ul><ul><li>: Employee performance & Activities. </li></ul><ul><li>: Customer Service </li></ul><ul><li>: Social Responsibility. </li></ul>
  87. 87. Defining the business <ul><li>A clear-cut statement of the business, the firm is engaged in or planning to enter. It is elaboration of the business arena and the boundaries in which it will play. </li></ul><ul><li>What is our business? What will it be? What should it be? </li></ul><ul><li>Defining business involves three dimensions, namely “Customer Functions”, “Customer Groups” and “Alternative technologies”. </li></ul><ul><li>Business Definition sets and limits the contours of the business. It clarifies the opportunities business can pursue and the areas in which these opportunities are to be looked for. It clarifies to the firm the various sources from which threats and competition will come for. </li></ul><ul><li>Defining Customer functions and Customer groups provides Blue Print and a reference point for Product-market strategy. Mission Statement provides the basic inputs for Business definition and provides a broad frame work. </li></ul>
  88. 88. Objectives of Business Policy: <ul><li>Understand various concepts, like. Strategy, policies, plans, programmes. </li></ul><ul><li>Knowledge of internal and external environment and how it affects the functioning of the organisation. </li></ul><ul><li>Application of generalised approach to deal with wide variety of situations. </li></ul><ul><li>Development of analytical ability to understand situation. Identify factors relevant to decision making. Analyse strength, weakness, opportunities and threats to organisation. Development of attitude of generalist and asses a situation from all angles. </li></ul>
  89. 89. Some Business definitions : Modi Zerox : Focus as a service organisation rather than vendor of zerox machines. Customer focus : Office Communication with high priced and low priced equipments, marketing services of maintenance and per copy price. Customer Function: Availability of spares, Drums, Toner, good after sales service. Technology : Collaboration with “Rank Zerox” Helen Curtice : We are in beauty enriching business. We will pursue ideas that would generate products enhancing beauty and youthfulness of men and women. Intel : We are in the business of computing technology and to consistently develop the artifice/building blocks of computing technology for the entire computer industry of the world is our business.
  90. 90. Attributes of a good business definition: <ul><li>It must be related to human needs which the product seeks to satisfy and should not be limited to just the product. </li></ul><ul><li>It must be related to basic benefits the product offers. </li></ul><ul><li>It should not be narrow. A wrong and or narrow concept could reduce the life span of organisation. </li></ul><ul><li>It must be related to the functions performed by the product and not limited to just the product. </li></ul><ul><li>It must encompass in its fold, as many related function / benefits as possible. </li></ul><ul><li>It must go beyond the immediate product, beyond the immediate competitors, beyond the immediate market boundaries. </li></ul><ul><li>It must be wide enough to embrace new opportunities. </li></ul><ul><li>It must be wide enough to give a vision of latent sources of competition from say, substitute products. </li></ul><ul><li>Business boundaries keep changing and defining Business is a dynamic situation and becomes an exacting exercise and it needs to be re-casted over time again and again. </li></ul>
  91. 91. Benefits of Business Policy <ul><li>Business Policy seeks to integrate the knowledge and experience gained in various functional areas of Management. Normally functional areas are aloof of complexities of real life business situations. Business Policy cuts across the narrow functional boundaries. Business Policy helps us to create an understanding of how policies are formulated. </li></ul><ul><li>Managers become more receptive to the ideas and suggestions of senior Management. Managers feel themselves to be a part of a greater design. </li></ul><ul><li>Understanding Business Policy provides a basic framework for understanding strategic decision making and Improvement in Job Performance. </li></ul><ul><li>Study of business policy leads to personal development. Managers understand the impact of policy shifts on the status of one’s department and on the positions one occupies. </li></ul><ul><li>Understanding Business Policy enables manger to avail the an opportunity or avoid a risk to career planning and development </li></ul><ul><li>Understand senior management’s view point. </li></ul>
  92. 92. Social Responsibility & Strategic Management <ul><li>Social Responsibility along with ethics becomes a stated or un-stated requirement. It gets attended in Strategic Planning through environmental appraisals. It has differing views, while some do not want it to be considered in business operations, others boast around it. However, most business houses observe a balance and undertake to deliver social responsibility and business objectives without contradicting each other. </li></ul><ul><li>Social Responsibility extends beyond the workforce and stakeholders and many business houses take up activities for community welfare, rural development, sports etc. </li></ul><ul><li>Presently, with ISO:14001:2004 which concerns Environment Management Systems, it has become a necessity to address the mode and means of delivering social responsibility. </li></ul>
  93. 93. Social Responsibility <ul><li>Scope of Social Responsibility is defined in terms of Social concern. Business organisation depending on its nature, size, and breadth of activity, could extend social responsiveness to the problems of the whole world, nation, local community, industry and to itself. Business organisations could also classify Social Responsibilities in terms of relatedness to its own activities. </li></ul><ul><li>Like any other strategic functions, for successful implementation, Organisations need to allocate resources, create Organisations Structure and evaluate its effectiveness. But all said and done, the society in large remains a major stake holder and we cannot escape our dues to society and towards social responsibility. </li></ul>
  94. 94. <ul><li>Corporate Governance : Social Responsibility </li></ul><ul><li>Business provides goods & services to Society for which it receives the price. </li></ul><ul><li>Society provides goods and services to Business for which it receives the price. </li></ul><ul><li>Business rewards to society for its inputs by paying wages/profits/dividends </li></ul><ul><li>Society and Business are interdependent. Their growth & welfare is dependent on this mutuality. Business owes responsibility towards society. A firm carrying very positive image in society has very strong probability of lasting growth. </li></ul>Society Business
  95. 95. Corporate Governance : Social Responsibility <ul><li>“ Sole aim of a business is and should be maximisation of Shareholders’ value”, as stated by Milton Friedman, does not hold good anymore. </li></ul><ul><li>All modern large corporate have attained their present size due to support of society in terms of shareholders, suppliers, lenders, employees, government, local community and society at large. </li></ul><ul><li>Every business unit of the country must aim at becoming good corporate citizen of the country and the world as whole. World Class Quality of goods and services, reasonable prices is minimum requirement. With this companies would enjoy excellent image within area, country and world. Indian examples are Tatas, Birlas, Reliance, Bajaj, L&T, Hero Honda, HDFC, Dr. Reddy Laboratories. TCS, etc. </li></ul><ul><li>Industrial Corporate Citizens are trustees and should utilise their wealth for the welfare of the society / community. Trusteeship invokes code of discipline, ethical behaviour and strong principle of accountability. Capital and Labour have to have mutual, peaceful co-existence. </li></ul>
  96. 96. Corporate Governance : Social Responsibility <ul><li>Common feature they all posses is their image not only as value creator but more as Top Class Corporate citizen of India and of the world. They are asset to the share holders, country and society at large by creating world class products at competitive prices and price and providing these products to society at desired time and space. Many of them provide non-core social activities for benefit of society in quest of their becoming good Corporate Citizens. </li></ul><ul><li>They realise their dependence on Society for their needed inputs like money, men and skills, society as a market for their outputs and realise that they cannot exist without unreserved support from Society. The more closely a company concentrates on solving societal problems, the better it is able to solve its own problem of growth and prosperity. </li></ul>
  97. 97. Corporate Governance : Social Responsibility <ul><li>Capital and labour should supplement and assist each other. Capital being trustees should look after welfare of labour not only material but also moral welfare. Principle of mutually cherishing each other should be developed. Capital should look after the workers and workers should look after productivity and profit of the organisation. Presently, capital has been replaced by knowledge in newer industries like IT & Pharma. Knowledge workers (professionals) like Bill Gates, Narayan Murthy are paving the way towards social responsibilities. </li></ul><ul><li>Social Responsibilities have foundation of Business Ethics, the moral principles of good & bad, right & wrong or Just & unjust. Peter Drucker has stated that there are no separate ethics of business. What is unethical and immoral in society is also applicable to business. The trick is to put your-self in shoes of those, against whom a particular action is being planned / taken, which is known as empathy. Corporate ethics refers to set of rules, code of conduct acceptable to society at large without any reservations. The concept of Business ethics is global phenomenon and is recognised throughout the world. </li></ul>
  98. 98. Corporate Governance : Social Responsibility <ul><li>Code of Ethics for Indian Business (by PHD Chambers) </li></ul><ul><li>It is believed that the best way to promote high standards of business practice is through self regulation. </li></ul><ul><li>Business should be conducted in a manner that earns the goodwill of all concerned through Quality, efficiency, transparency & good values with objectives as under: </li></ul><ul><li>a) Be faithful and realistic in stating claims. </li></ul><ul><li>b) Be responsive to customer need and concerns. </li></ul><ul><li>c) Treat all stakeholders fairly and with respect </li></ul><ul><li>d) Protect and promote the Environment and Community interests </li></ul>
  99. 99. Stakeholder Definition <ul><li>Stakeholders are defined as &quot;those groups without whose support the organization would cease to exist. </li></ul><ul><li>A corporate stakeholder is a party that affects or can be affected by the actions of the business as a whole. </li></ul><ul><li>Person, Group, or Organization that has direct or indirect Stake in an organization because it can affect or be affected by the Organisation’s actions, Objectives, and Policies. </li></ul><ul><li>Key stakeholders in a Business Organization include Creditors, Customers, Directors, Employees, Government ( and its Agencies) Owners, Shareholders, Suppliers, Unions, and the Community from which the business draws its Resources. </li></ul><ul><li>Although stake-holding is usually self-legitimizing (those who Judge themselves to be stakeholders are de facto so), all stakeholders are not equal and different stakeholders are entitled to different Considerations. </li></ul><ul><li>For example, a firm's customers are entitled to fair trading practices but they are not entitled to the same consideration as the firm's employees. </li></ul>
  100. 101. External Stakeholder : Definition: <ul><li>Entities such as Customers , Suppliers , Lenders, or the wider society which influence and are influenced by an Organisation but are not its 'internal part' </li></ul><ul><li>Stakeholder: Any party that has an interest in an organization. Stakeholders of a company include stockholders, bondholders, customers, suppliers, employees, and so forth. </li></ul><ul><li>&quot;The stakeholders in a corporation are the individuals and constituencies that contribute, either voluntarily or involuntarily, to its potential wealth-creating capacity and activities, and that are therefore its beneficiaries and/or risk bearers.&quot; </li></ul>
  101. 102. Stakeholders <ul><li>Any individual, group or business with a vested interest (a stake) in the success of an organization is considered to be a Stakeholder . A Stakeholder is typically concerned with an organization delivering intended results and meeting its financial objectives. In general, a Stakeholder can be one of two types: internal (from within an organization) or external (outside of an organization). Examples of a Stakeholder are an owner, manager, Shareholder , Investor , employee, customer, partner and/or supplier, among others. A Stakeholder may contribute directly or indirectly to an organization’s business activities. Other than traditional business, a Stakeholder may also be concerned with the outcome of a specific project, effort or activity, such as a community development project or the delivery of local health services. A Stakeholder usually stands to gain or lose depending on the decisions taken or policies implemented. </li></ul>
  102. 103. Types of stakeholders <ul><li>People who will be affected by an endeavour and can influence it but who are not directly involved with doing the work. In the Private Sector ,*People who are (or might be) affected by any action taken by an organization or group. Examples are parents, children, customers, owners, employees, associates, partners, contractors, suppliers, people that are related or located near by. Any group or individual who can affect or who is affected by achievement of a group's objectives. </li></ul><ul><li>An individual or group with an interest in a group's or an organization's success in delivering intended results and in maintaining the viability of the group or the organization's product and/or service. Stakeholders influence programs, products, and services. </li></ul><ul><li>Any organization, governmental entity, or individual that has a stake in or may be impacted by a given approach to environmental regulation, pollution prevention, energy conservation, etc. </li></ul><ul><li>A participant in a community mobilization effort, representing a particular segment of society. School board members, environmental organizations, elected officials, chamber of commerce representatives, neighbourhood advisory council members, and religious leaders are all examples of local stakeholders </li></ul>
  103. 104. Examples of a company stakeholders Jobs, Involvement, Environmental issues, Shares Local Community Credit score, New contracts, Liquidity Creditors Value, Quality, Customer Care, Ethical products Customers Working conditions, Minimum Wages , Legal requirements Trade Unions Rates of pay, Job Security Non-Managerial staff Performance, Targets , Growth Senior Management staff Taxation, VAT , Legislation , Low unemployment Government Profit , Performance, Direction Owners private/shareholders Examples of interests Stakeholder
  104. 105. Syllabus: 3 . Strategic analysis: <ul><li>Analyzing Company’s Resources and Competitive Position- </li></ul><ul><li>Organizational Capability Profile – </li></ul><ul><li>Strategic Advantage Profile – </li></ul><ul><li>Core Competence – Distinctive competitiveness. (4) </li></ul>
  105. 106. Competitive Strategy According to Michael Porter <ul><li>In a 1996 Harvard Business Review article and in an earlier book, Porter argues that competitive strategy is &quot;about being different.&quot; He adds, &quot; It means deliberately choosing a different set of activities to deliver a unique mix of value“. </li></ul><ul><li>In short, Porter argues that strategy is about competitive position, about differentiating yourself in the eyes of the customer, about adding value through a mix of activities different from those used by competitors. </li></ul><ul><li>In his earlier book, Porter defines competitive strategy as &quot;a combination of the ends (goals) for which the firm is striving and the means (policies) by which it is seeking to get there.&quot; Thus, Porter seems to embrace strategy as both plan and position. (It should be noted that Porter writes about competitive strategy, not about strategy in general.) </li></ul>
  106. 107. Identification and Assessment of firm’s Competitive Edge & Core Competencies <ul><li>A Competence is something an Organisation is good at doing. It results out of accumulated learning and built-up proficiencies. Examples are Proficiency in Merchandising, Working with Customers, Proficiency in specific technology, Proven capabilities. </li></ul><ul><li>A Core Competence is a proficiently performed activity that is central to the Organisation Strategy. These are important activities in which Company is better than other internal activities. Examples are : Good after sale service, Skills in Manufacturing, High quality product at low Cost. </li></ul><ul><li>A Core Competence is knowledge & skill based residing in people, and in Company’s intellectual capital. (Does not appear in Balance Sheet) </li></ul>
  107. 108. Distinctive Competence <ul><li>A Distinctive Competence is a competitively valuable activity that Company performs better than its rivals. It is Competitive superiority in performing Core activity generating competitively superior resource strength. </li></ul><ul><li>A strength that is superior / distinctive to competition is competitive advantage . </li></ul><ul><li>Competitive advantage is a back-up for strategy without which strategy will not work. </li></ul><ul><li>Competitive advantage finally results in either cost advantage or differentiation advantage. </li></ul><ul><li>Creating entry barrier is also a way to built up competitive advantage. </li></ul><ul><li>Building Competitive advantage is a conscious and long term process. </li></ul><ul><li>Preparing Competitive Advantage Profile for the organisation is based on internal appraisal and industry-competition. </li></ul>
  108. 109. Core Competency <ul><li>An enduring competency that cannot be easily duplicated by imitation is Core Competency . Core Competency lies at the root of products. </li></ul><ul><li>Techniques used are : SWOT Analysis </li></ul><ul><li>: Bench marking </li></ul><ul><li>: Value chain analysis </li></ul><ul><li>: Value to customers – Competitive approach </li></ul><ul><li>: Competitive strength assessment. </li></ul>
  109. 110. Internal Appraisal of the firm: <ul><li>Purpose: </li></ul><ul><li>To know one’s organisational capabilities, Strengths and Weaknesses. </li></ul><ul><li>To select the most suitable Opportunities as per already appraised capabilities. </li></ul><ul><li>To assess the “Capability GAP” for the opportunity in hand and also for the Objectives and Goals. </li></ul><ul><li>To take steps to elevate the capability to achieve Objectives and Goals. </li></ul><ul><li>To select the Product / business in which organisation can grow as per potentials appraised. </li></ul><ul><li>Factors considered for Internal Appraisal: </li></ul><ul><li>Assessment of the Strengths-Weaknesses in different functions/areas </li></ul><ul><li>Identification and assessment of firm’s Competitive Edge and Core Competencies. </li></ul><ul><li>Appraisal of the individual business, product lines of the firm and firm’s know-how status. </li></ul>
  110. 111. Assessing strengths and weaknesses: <ul><ul><li>How well is the company’s present Strategy working? </li></ul></ul><ul><li>1. Evaluate company’s competitive approach. Compare cost effectiveness of the Company products with its rivals. Are we low cost? Or does our product have distinctive features? What value for money is offered to the customers? What is the perception of Customers about our Product and the Company. </li></ul><ul><li>2. Core competencies, distinctive competencies are building blocks of Strategy. They give the strength. Similarly resource weaknesses make company vulnerable and need to be corrected. Strength allows Company to take advantage of opportunities and guard against threats. </li></ul><ul><li>3. Check Value Chain analysis. Do we competitively manage value additions in Value chain? Are we competitively stronger or weaker than our key rivals? </li></ul>
  111. 112. Main Functions: <ul><li>Check what strategic issues need managerial attention. Find out gaps and take remedial actions. Conduct Industry analysis and competitive situation analysis and prepare a “worry list”. Good company situation analysis, good industry & competitive analysis are valuable pre-condition for good strategy making. </li></ul><ul><li>Marketing: Market growth, market share of the firm and its competitors, Production capacity and GAP between market potential, brand equity, Product’s life cycle and estimating safe period. Customer’s perception for the product and level of satisfaction there of. Synergy of the product-mix, Prices, margins, new product capability, Advertising, Sales promotion, </li></ul>
  112. 113. Main Functions: <ul><li>Marketing audit: Market share analysis, Price-volume relationship, Cost analysis, Product line wise profits, Consumer satisfaction index, Brand monitoring surveys. </li></ul><ul><li>Finance: Level of financial performance – profitability and productivity, analysis of Assets & Costs, DSCR (debt service coverage ratio), analysis & efficiency of Cash flow, liquidity, Appreciation of long term financial plans as per Cost of capital, adequacy of Capital Expenditures, Tax administration, dynamism in Tax planning, payback, IRR & BE analysis, earning ratios like EPS, etc. </li></ul><ul><li>Manufacturing/Operations: Appropriateness of manufacturing processes, skills, faci