Post on 03-Apr-2018
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Strategic Management
- Refers to analysis, formulation and the
implementation of a specific Strategy
- Art & science of formulating, implementing &
evaluating decisions that enable an
organization to achieve its objectives
-To ensure success over all the operations
Strategic Management used synonymously
with Strategic Planning, whereas latter refers
to formulation of strategy only
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Strategy Defined
Strategy-Greek Strategia, directing military
-a game plan to oust the competition
-to attain competitive advantage-to scan the external & internal environment
-to make a choice for markets to compete
-how to stay clear of the threats-what is our business & what should it be
-what are our products & the markets
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Strategy Defined
As perPorter, a strategy is:
- A plan or a course of action or a set of decision
rules forming a pattern
- Is related to those activities which move an
organization from its current position to
desired future state
- Is concerned with the resources necessary for
implementation of a plan
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Strategic Management
A Capstone Course-Evolution
1911-Integrative course in BusinessManagement introduced in Harvard
1950-Research methodology introduced US
-Gordon Howell report recommended a courseon Business Policy
-American Assembly of collegiate schools of
Business made business policy mandatory-1990 title of Business Policy changed to SM
Term SM used as-subtitle for Capstone Course
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Strategic Management
Nature of Business Policy:
i) Study of functions & responsibilities of
senior management
ii) Determining future course of action
iii) To define what needs to be done to improve
identity of the organizationiv) Mobilization of resources
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Strategic Management
Importance of Business Policy
Business Policy acts as guide for executivedevelopment program for middle levelmanagers who aim to occupy top positions
4 areas where Business Policy is beneficial:i) For understanding the Organization
ii) For understanding business environment
iii) For personal developmentiv) To integrate knowledge & experience
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Strategic Management
Purpose of Business Policy
- To exploit & create new & different
opportunities for tomorrow
- To integrate knowledge gained in various other
functional areas
- To adopt a clear approach towards problem
solving
- To understand complexities among Internal &
External environment
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Strategic Management
Scope of Business Policy
-To integrate Intuition & Analysis
-Adaptation to the changes in external & internal
environment, by answering following
questions;?
-What kind of business should we become
-Are we in the right field-Should we reshape our business
-What new competitors are entering
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Strategic Management
Objectives of Business Policy
i) In terms of knowledge:
- Gain experience to find unique solution
- Gain information to determine Mission &Strategies
ii)In terms of Skills:
-To sharpen the skills of middle level
-To develop analytical ability thro cases
iii) In terms of Attitude:
-To do away Dogmatism approach
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Strategic Management
Levelsat which a Strategy operates:
3 levels i.e.
i) Corporate Level
ii) Business (SBU) level
iii) Functional Level
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Strategic Management
Concept of Strategies
a) Corporate Strategy- serves 3 initiatives
-Establish position & diversification
-Establish Investment Priorities
-Capture cross business units
b)Business Level Strategy: 2 factors
-deciding products that are winning
-Insulate business from rivals
c) Functional Strategy: to support above 2
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Strategic Decision Making
It is to make a specific choice from differentstrategic alternatives that help the Co. toachieve its objectives & realize its Mission
It is the domain of Senior managementProcess of Strategic Decision Making:
-It is continuous in nature
-It must align itself with the environment-must have Cross functional Interaction
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Strategic Decision Making
Issues in Strategic Decision Making: 6
i)Concept of Maximization & Satisficing
ii) Rationalityiii) Creativityby develop unique strategy
iv) Variability
v) Person Related Factors-age, educationvi) Individual vs. Group Decisions
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Strategic Decision Making-
Phases5 phases of Strategic Decision Making:
1) Establishing Hierarchy of Strategic Intent:
Creating & communicating VISION Designing MISSION
Defining the BUSINESS
Setting OBJECTIVES
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Strategic Decision Making-
Phases2) Formulation of Strategies:
Performing Environmental Scanning
Performing Organizational AppraisalSynergy, Core Competency, Capability factors
& Techniques
Formulating Strategies-Corporate, Business(Generic) & Functional
Preparing a Strategic Plan & its review
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Strategic Decision Making-
Phases3) Implementation of Strategies:
Designing Structures & Systems
Managing Behavioral Implementation Managing Functional Implementation
Operationalizing the Strategies
4) Strategic Evaluation5) Strategic Control
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Strategists & their Roles
A strategist can be an individual or a group ofindividuals who are responsible for the successor failure of the organization
Strategists are usually occupants in higher
hierarchies & generally possess a considerableauthority for decision making
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Types of Strategists & Roles
10 major types
1) Board of Directors:
- Appointed & elected by the stake holdersresponsible for framing policies & ensuring
Corporate Governance
- Also responsible for Acquisitions, Mergers,Collaborations
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Types of Strategists & Roles
2) Chief Executive Officer:
-Carries different names such as MD, President
or Executive Director,
-Has many roles to perform including defining
the Mission & objectives, interacting with
external environment, Implementation of the
strategies
- To provide a direction to the organization
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Types of Strategists & Roles
3) Role of Chief Operating Officer (COO):
i) Legal or Symbolic Head
ii) Leader
iii) Monitor
iv) Disseminator
v) Spokesman
vi) Resource Allocator
vii) Negotiator & Liaison
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Types of Strategists & Roles
4) Role of Entrepreneurs: He is normally theone who sets up the business, runs itsuccessfully & consolidates it into a big entity,
always being proactive & looking for a changecontinuously.
5) Role of Senior Management: dual role,mainly for implementation & evaluation butalso front runners for formulation of a strategy.Can also attend to expansions, diversificationor revamping technology
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Types of Strategists & Roles
6)Role of SBU level Executives: An SBUbeingan organized & independent unit of a multiproduct, multidimensional firm is often headedby a Chief Executive who is responsible forprofitability & operates with completeautonomy. Developing strategies for long termsuccess.
7)Role of Middle Managers: Attached withheads of functional deptts. to implementstrategies & to learn skills for a futurestrategists thro execution of policies.
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Strategists & Roles
8) Role of Corporate Level Planning Staff:
They are the support staff who provide
valuable information, that has been collected
through competitors strategies &environmental feed back, to the strategists for
decision making, implementation, evaluation
or even re-formulating the strategies.
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Strategists & Roles
9) Role of Consultants: These are individual orgroup of individuals from outside the firm who
provide unbiased strategic feed back on
SWOT, Technical matters, Future trends &Project evaluations for strategic decision
making.
10) Role of Executive Assistants: Secrecy &confidentiality of the information being top
responsibility
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Why firms dont do
Strategic Planning Poor Rewards
Waste of Time
Expensive Fear of Failure
Prior bad experience
Content with success Difference of opinion
Over confidence
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The Strategic Intent
It is a commitment to gain competitiveadvantage to become a leader by topplingexisting ones & to sustain a highly respected
status & desired leadershipIt thus clearly specifies What to do in future
thro 3 elements:
Vision Mission
Objectives
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Strategic Intent: VISION
Vision is a thought that needs to be translatedinto words & then to action to make dreams
come true
Vision talks about a position that anOrganization wishes to attain in future
Vision is a one sentence statement that defines
the path to be followed by an organization in
the future
Vision is more of thoughts than day to day
accomplishments
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Strategic Intent: VISIONCharacteristics of Vision:-Ongoing activity for leadership
-a pathway, not above reality
-not a Mission
-sets op direction for a Co. to proceed
Elements of Strategic Vision:-a clear one line statement to arouse
commitment-To convey Who we are, Where are we now,
Where we will be in future
-To answer What do we want to become
-must contain future goals & plans
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Strategic Intent: MISSION
It is a statement of purpose, beliefs & the
reasons for existence of a firm
Elements of a Mission: Mission statements to
include 3 basic elements:
Customer Needs- what is being satisfied
Customer Groups- who are being served
How to deliver values to consumers &
satisfying their needs
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Strategic Intent: Mission
How to develop Mission Statements:
Common & widely accepted approach is to
involve all Managers followed by appointing a
Facilitator to prepare Mission
Other common method is to use discussion
groups of Managers
Seeking unbiased advice from outside agencies
or Consultants
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Strategic Intent: Mission
Characteristics of Mission:
-Helps setting up feasible alternatives
-Statement should be broad-Statement not to be vague
-must provide high degree ofmotivation
-Should be enduring-Should be dynamic allowing additions &
modifications
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Strategic Intent: Mission
Components of Mission Statements:
i) Customers (who are our customers)
ii) Products (what are our main products)
iii) Markets (where do we compete)
iv) Technology (are we sound)
v) Philosophy (Beliefs, values & Ethics)
vi) Concern for public image
vii) Concern for employees
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Strategic Intent: Mission-
the Business Definition
The business definition of a Mission mustinclude all the 3 elements i.e. customer groups,customer needs & how to deliver value
Business definition of a Mission, thus, to beprovided at 2 levels i.e.
-at Corporate Level: 3 elements of Mission
will be wider in large Co.s than small ones-at SBU level: Mission to apply to each SBU
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Strategic Intent:
Objectives/ Goals
Objectives: close ended statements & not
stereo type statements, often the end result of
an activity or the end of planning, highlighting
what is to be achieved by when & how muchof what
Goals: open ended statements often used
interchangeably with objectives, laying notime frame for completion of a task or what is
desired to achieve with no measurement of
what is to be achieved
St t i I t t Obj ti
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Role of Objectives:
-to help a Co. to pursue Mission & Vision-Helps in performance appraisals
-Helps in Strategic Decision making
Characteristics of Objectives:-Must be time bound
-must be challenging
-must be quantifiable
-must be specific & clear to understand
-must integrate functional areas of Marketing &production
Strategic Intent- Objectives
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Strategic Intent: Objectives
Areas in Objectives Setting or(What objectives to be set?):
i) Efficiency (production targets, costs)
ii) Resource utilizationiii) Market Share (for leadership)
iv) Growth & Profitability
v) Employees welfare
vi) Society welfare
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Strategic Intent:
Objectives-Setting
4 aspects while setting Objectives:
i) Identify Needs for Objectives:- long term(market share) & short term (sales volumes)
ii) Need for Top down objective setting- toguide lower management to support overallobjectives
iii) Types ofObjectives-Strategic/Financialiv) Factors-Environment, Industry, Self
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Strategic Intent:
Critical Success Factors(CSF)
Also known Strategic Factors for success
Rockart suggested 3 step process for CSF
a) First generate success factors by asking what
does it take to be successful
b) Fine tuning these factors into Objectives
c) Identify measures of performance
Steiner: Brain Storming internally to develop
CSFs & answer what to do for success
Ohmae: suggested the need of careful allocation
of resources
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Strategy Formulation
Environment Assessment
It is the process of monitoring, evaluating &
disseminating of information from the external
& internal environment to the people who
shape the destiny of an organization.
It is thus the sum total of all the influences,
events or conditions that affect & surround the
organization.
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Environment Assessment
Characteristics of Environment:
- Ever Changing & Dynamic, never static
- Highly complex
- Has varying effect (for some it offers an
opportunity & for some it acts as a threat)
- Is unpredictable & hence can create chaos- Multidimensional
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ExternalEnvironment Opportunity: It is a favorable condition that
exists for a co. offering avenues for profitable
growth, building up of competitive edge
Imp. Opportunities are:
- Easy Trade barriers,
- Ability to acquire rival firms,
- Expansion of distribution network,- Expansion of product lines
- Expansion of customer base
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Threat: It is an unfavorable condition that can
cause a damage or can pose a great risk to the
well being of the organization.
Imp. Threats
- Rising Interest Rates
- Fluctuating Foreign Exchange Rates
- Threats of hostile take-over- New legal policies by change of Govt.
- Introducing better products by competition
External Environment
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Internal Environment It consists of :
a) Strengths: These are those skills in which a
company excels or exceeds
Important Strengths:
-Healthy financial conditions-Easy availability of capital for future use
-Cost Advantage
-Strong Brand Equity-Wide geographical coverage
-Strong R & D
-Strong Alliances & JVs
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Internal Environmentb) Weaknesses: These refer to something in which
a company lacks or restricts it to move ahead
Imp. Weaknesses:
-Old & Obsolete technologies-Very high cost of production
-Product line too thin & too narrow
-High employee content-Poor Distribution
-Under utilization of capacity
SWOT
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SWOT
Its Value: Kotler says managers who lack
imagination fail to identify opportunities &
can cause a disaster, thus value of SWOT
lies in a careful evaluation that can lead to
a clear formulation of a Strategy. How to formulate Strategy from SWOT:
-Match Co.s Strengths with opportunities
-Neutralize the effect of Threats
-To rediscover your unknown strengths
-Continue a constant SWOT re-evaluation
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How to make SWOT effective
SWOT to TOWS
-Converting Threats to Opportunities &
Overcoming the Weaknesses & convert them
into Strengths
- Exploit the Opportunities by carefully
avoiding the Threats
- Identifying which strength to be enhanced &
which Weakness to be reduced
e.g. Dell (Direct Mktg.), Wal Mart(EDLP)
PEST
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PEST
It is to carry out a scan of various forces/
factors that will help in shaping up the futurepath of the organization, such as
a) Customers- Need identification, Purchasing
powers, Buying Behaviors
b) Marketing Intermediaries: i) Middlemen
comprising of Wholesalers/Retailers &
ii) Facilitators made up of Transporters/Warehousing
c) Product Related factors; Price, Image
d Com etitors: Threats & their SWOT
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Also known as External Audit
It reveals to the organization the keyOpportunities to en-cash & potential Threats to
avoid, calling for study of external factors i.e.
Economic Factors Technological Factors
Political-Legal- Governmental Factors
Cultural & Social Factors
International Business Environment (WTO)
Supplier Environment
conom c ac ors
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conom c ac ors
The various Economic Factors include;
Money Supply & Inflation rates GDP Ratios & Industry Growth rates
Interest Rates
Stock Markets
Taxations & Monetary Policies
LPG concept ( Liberalization, Privatization &
Globalization) to pursue. Also study the
concept ofIndustrial Organization I/O to
know as to how to gain Competitive edge by
integrating external & internal factors
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Technological Factors
Factors affecting current & future business of an
organization due to advancements in
technology & machines such as:
Altering the relative competitive cost
Making existing products as obsolete
Reducing/Eliminating Cost barriers
Creating new competitive advantages thatare stronger than the existing ones
Creating new markets & new channels
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Political-Legal-Governmental
It consist of Laws & Regulations that limit or
influence organizations performance i.e
-Form of Government
-Stability of government-Strength of opposition
-Advertising bans
-Labor laws, ESI & PF-Weights & Measures act
-Environment protection laws
-Children employment
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Why a mgt. practice is successful in one nation & a failure in
the other, factors as identified by Hofstede are
1) Power Distribution(PD)-unequal b/w societies
2) Uncertainty Avoidance(AV)extent to which a
society feels threatened by uncertainties
3) Individualism-Collectivism(IC) extent to which asociety values the freedom
4) Masculinity- Feminity (5) LongTerm Orientations
Certain other Prominent Factors:a) Customs, Norms & Beliefs
b) Ethnocentrism, Work Ethics
c) Literacy Levels
International Business
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International Business
Environment
Factors affecting the co.s working due to:
-Globalization & Liberalization
-Financial Intermediaries: Banks, World Stock
markets & Bullion markets
-Trade barriers
-Cross Cultural boundaries-Varying conditions of Economy
-Racism, Layoffs & Recruitments
-R & D advancements
S i i
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Supplier Environment
Factors having a direct impact on business
-Raw Materials Suppliers: Availability, cost,
quality & continuity
-Human Resource Suppliers: Cost of hiring,training & development
-Finance Suppliers: Affordable, Interests
-Capital Goods Supplier: Spare parts, cost &availability
-Production Process Suppliers: Power, Gas,
Oil & Furnaces etc.
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Among the 3 most powerful institutions the other 2
being IBRD(International Bank for Reconstruction &Development or World Bank) & IMF
Founded on 1st Jan, 1995 as a successorGATT
(general agreement on Trade & Tariffs), specifies
major guidelines such as:-Trade without discrimination & fair Competition
-Access to National & International Markets by
removing Trade & Tariffbarriers-Prevention of unfairlow pricing
-To regulate Anti Dumping Duties
Establish legal framework forIP protection
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It is the process of identifying & monitoring
the potential changes in the general
environment that can make or mar the Co.
3 Factors for Scanning:
a) Identification ofEvents
b) Monitoring Emerging Trends
c) Forecasting Events & Outcomes
3 Approaches to Environment Scanning:a) Systematic- Regular collection & updating
b) Adhoc: Conduct special study on need
Environment Scanning
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Environment Scanning
Techniques
Most widely used techniques range from:
Statistical methods: such as Extrapolationmaking use of Historical Trends, Brain
Storming & Delphi Techniques
Other notable techniques are
-Scenario Writing
-QUEST
-ETOP
Environment Scanning
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Environment Scanning
Techniques
Scenario Writing:
It is most commonly used technique & is
presented in the form of a report based on
intuitions & judgments in the most
descriptive or narrative style.
It is compiled by the industry experts who are
experienced enough to forecast events
correctly.
Environment Scanning
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Environment Scanning
Techniques
Quick Environment Scanning (QUEST)
Technique:4 step process, by B. Nanus
-Observing major trends & events in the related
industry
-Speculating future impact by Envi. scanning
-3 to5 scenarios written by QUEST directorabout major issues & discussion themes
-Review of scenarios by Strategists & ranking
options in terms of feasibilities
Environment Scanning
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Environment Scanning
Techniques
Environment Threat & Opportunity
Profile (ETOP): This was proposed byGulieck toprepare an Opportunity & Threat
profile for the organization by-
-Splitting the environment into different
segments or sectors
-Making an analysis of each segment in terms of
its impact on the organization to help it to
understand where it stands
Internal Environment Scanning/
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Internal Environment Scanning/
Organizational Appraisal Unit II Internal scanning often referred to Organizational
Analysis is concerned with developing Organizational
Resources internally which can not be easily matched
or imitated by the competition.
A Resourcebecomes a Strength if it provides the
company with a competitive advantage & it becomes
a Weakness if it does not provide the company with
all that which its competitor has in abundance. Thus internal scanning or appraisal is all about the
Strengths & Weakness of a Co.
Internal Environment
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Internal Environment
Assessment
Evaluation of Key Resources: Barney in hisVRIO framework proposed 4 criteria:
1) Value: does resource provide competitive
advantage?2) Rareness: Do other competitors possess it?
3) Imitate ability: Is it costly for others to copy
4) Organization: Is the co. organized to exploit
the resource
Internal Environment
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Internal Environment
Assessment
Categories of Internal resources: 3 types1) Physical Resources: Plant & Machinery,
Raw materials, Technology,
2) Human Resources: Employees, Skills &abilities, Training & Development,
Experience, Intelligence & Knowledge
3) Organizational Resource: Copy right, Trademark, Patents, Formal/Informal Structures
More is the resource valuable, stronger is the
Competitive Advantage
Internal Appraisal
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Internal Appraisal
Strategic Advantage
Gaining a Competitive Advantage is also
known as Creating Strategic Advantage
Strategic Advantageis result of capabilities of
a Co. that offers reward in terms of increased
sales/profits/market share & Co. image, while
Strategic Disadvantageacts as a penalty in
terms of decreased market shares & profits. To create a Strategic Advantage2 aspects:
a)Synergy leading to build up ofCompetency
b Or anizational Ca abilit Factors
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Strategic Advantage
a) Synergy: It is an idea that whole is lesser or
greater than sum total of its parts i.e.
2+2=3 or 5, 1+1=11
Synergy is developed & exists only when every
one in organization pulls together as a team to
achieve both short term & long term objectives
of the organization, thus, leading to a build upof Competencies
Competency
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CompetencyMost valuable resource, is something a Co. is
good at doing & to withstand any oppositionin the mkt. by gaining competitive advantage
Competency is, therefore, a product of
experience & built-up efficiencies by learningover a period of time. Thus Competencies need
to be developed- as it does not happen on its
own, which are of 3 types
i) Core competency
ii) Distinctive competency
iii) Competitive Capability
Strategic Advantage
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Strategic Advantage
Competencyi) Core Competency: Something a Co. does well internally by
quick response to changes, adopting innovations & able
distribution of responsibilities.
It resides in its people & in its intellectual capital & not in
assets of balance sheets
It is a product of experience accumulated by learning over
time & is genuine strength
A word of caution Core competency not to get converted into
Core Rigidity as long spells of success often spoils &
expose weaknesses
Successbegets failure because the more you know a thing
works, the less likely is that it wont work
Strategic Advantage
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g g
Competencyii) Distinctive Competency: something a
Company does well in comparison to its
competitors & always depends upon
organizational capabilities
e.g. Sonys Trinitron Technology
4 ways to gain Distinctive Competency
1) Creating own Asset Endowment(Key Patent)
2) Acquired from others
3) Shared with alliance partner
4) Built & accumulated over a period of time
Strategic Advantage
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Strategic Advantage
Competency
iii) Competitive Capability: It is something by
the virtue of which a Co. gets differentiated
from its competitors .
It gets achieved when the customers of the Co.realize and feel the value as well as benefits by
getting associated with the company
It leads to building up of a highly sustainableadvantage over the competitors.
St t i Ad t P fil
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Strategic Advantage Profileb) Organizational Capability Factors:
These comprise of 6 types:
1) Financial Capability Factors: it include
Sources of Funds- Borrowings, Reserves &surpluses, capital requirements
Usage of Funds- Loans, Advances, Capital
investments, Dividends Management of Funds- Tax planning,
Budgeting, Financial Accounting
Organizational Capability
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Organizational Capability
Factors
2) Marketing Capability Factors:
Product Related: Positioning, Packaging,
Variety & Mix, Quality
Price Related: Pricing structure & changes
Place Related: Distribution & Logistics
Promotion Related: Advertising, DirectMarketing, Intermediaries
Other Factors: Co.s Image, MIS
Organizational Capability
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Organizational Capability
Factors
3) Operations Capability Factors:
Production Related: Installed vs. Utilized
capacity, Vertical Integration, R&D, Cost of
production
Operations & Control Factors: Inventory
management, Quality control & Maintenance,
Feed Forward Control systems
R&D related: People, facilities, level of
technology, New additions, Budgets
Organizational Capability
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Organizational Capability
Factors
4) Personnel Capability Factors:
Related to Personnel System: Manpower
planning, Selection, Training & Development,
Appraisals, Compensations
Related to Co.s & Employees' Character:
Corporate image, Perceptions, Working
conditions
Related to Industrial Relations: Unions, Safety
& Welfare
Organizational Capability Factors
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5) Management Information System
Factors Relating to Acquisition/Retention: Sources,
confidentiality, Timely
Related to Processing & Synthesis: Softwarecapabilities
Related to Retrieval & Usage: Speedy
availability Related to Transmission & Dissemination
Related to Support Systems: Infrastructure of
IT, Up-gradation & compatibility
Organizational Capability
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Organizational Capability
Factors
6) General Management Factors:
Related to Managerial Systems: Corporate
planning system, Rewards & Incentives,
Strategic management
Related to General Managers: Risk Taking
abilities, Competency, Retirements & Track
Records
Related to Organizational Climate: Culture,
Use of Power, Hierarchy
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Value Chain Analysis
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y
Support Activities: consisting of 4 types:
1) Firms Infra structure: Financial health,Corporate Planning, Organizational
Structures
2) Human Resource: Recruitments, Training &Development, Rewards, Terminations
3) Technology Developments: R&D, Process
Management4) Procurement: Machines, Resources, Raw
materials
Value Chain Analysis
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Value Chain Analysis
When a major competitor or a new entrant
offers products at a very low prices, it could be
mainly due to a cost advantage gained thro
value chain
A core competency is also a value chain
activity to gain & sustain competitive edge
An automobile Co.s value chain activities
include: Auto leasing, Insurance, Used Cars
sales & purchase, After sales Service
Quantitative Analysis
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Quantitative Analysis
Study offinancial & Non financial Factors:
Financial Factors: Study of imp. Ratios:
-Liquidity Ratio: ability to meet maturing short
term obligations
-Leverage Ratio: To know the extent to which a
co. is financed by debt
-Activity Ratio: To know effectiveness of a co.to use its resources
-Profitability Ratio: To measure overall
effectiveness on ROI
Financial Ratios
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Current Ratio= Cash & Securities
Current LiabilitiesQuick/Acid Test=Current AssetInventory
Current Liabilities
Debt/Equity Ratio= Total DebtTotal Equity
Fixed Asset Turnover= Total Sales
Fixed Assets
Operating Profit= Profit before Tax & Interest
Total Sales
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Quantitative Analysis
Non Financial Quantitative Analysis:The various factors studied under this are:
Market Shares
Employees Turnovers Production Cycles
Advertising Effectiveness
Trade Marks & Patents
MIS
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Qualitative Analysis
The various aspects under this, which can notbe measured in absolute figures or terms, are:
- Employee Satisfaction
- Motivation- Perception
- Work culture
- Work environment
- Organizational climate
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Comparative Analysis3 methods to evaluate strength & weakness:
1) Historical Analysis: To measure howwell or badly an organization has faired in
past. Conducted mainly thro balance sheets &
profit & loss statements.
Its analysis also reveals areas of consistent good
performance indicate area Strengths.
The major drawback is-it does not indicate any
comparison with competition & also does not
state any reasons for poor show
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Comparative Analysis
2) Industry Norms:An industry is definedas an aggregate of homogeneous firms.
The performance indices vary from industry
to industry & thus each firm in order toevaluate its performance must compare
with the norms & standards set up by the
industry so as to identify areas of
excellence or improvements.
Comparative Analysis
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3) Bench Marking: Bench mark is referencepoint to measure & evaluate performance:
1) To compare what? It includes:
Performance- Owns with other co's
Process- compare methods & processesStrategic-compare long term decisions
2) To compare against whom? It includes:
Internal-comparison b/w units of same co.Competitive-Own performance with competition
Functional- b/w non-competition in same sector
-
Comprehensive Analysis
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2 most popular methods:
1) Balance Score Card:Kaplan & Norton ofHarvard, to include customer viewpoint as
well in evaluating the performance & not only
the financial indices, to answer:
-How do customers rate us?
-What needs to be done to excel?
-Are we creating value?-How do we treat the shareholders?
2) Key Factor Rating- same as that of
Organizational Capability factors
Corporate StrategyU it III
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Unit III It is primarily about the choice of direction a
co. needs to follow, including decisionsregarding financial & other resources to form a
business unit or a companys product line, to
gain Competitive edge. Also known as Grandor Directional Strategy. 4 Grand Strategies-
1) Stability Strategies
2) Growth Or Expansion Strategies
3) Retrenchment Strategy
4) Combination Strategy
Corporate Strategy
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p gy1) Stability Strategies: adopted by Cos who
have found their niche segments & arerelatively happy content with achievement
The strategy is best when a Co. operates in a
reasonably predictable environment.
The drawback of this strategy is- it is too gud in
the short term but is fatal in long run.
Types of Stability Strategies:a) No Change Strategy
b) Profit Strategy
c) Pause/Proceed-Caution Strategy
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Stability Strategiesa) No Change Strategy:A strategy to do
nothing new & to continue with thepresent operations hoping that future will
remain as an extension of the present,
due to reasons such as:- No new competitor will enter the industry
- No immediate threat of substitute product
- No opportunities for growth- No obvious changes in strengths &
weakness of the organization