Strategic management for epipl managers
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Transcript of Strategic management for epipl managers
Strategic Management for upcoming Corporate
Managers of EPIPL
Let us start from young you, Say you decide to date with a girl of your dream You groom well, Dress attractively, Go in a nice bike You pump your purse full of money Impress her, Take her outing Convince her and finally steal her heart or get beaten !!?? When you do so many actions well planned to date with your girl DID YOU EVER THOUGHT how carefully and precisely have to plan your business / professional activities where several million rupees are invested trusting that you will handle and execute it properly to reach the organisation’s goals ?? This is where strategic planning comes into action. However like a coin strategic planning cannot succeed and cannot be properly executed without equal participation of top + senior management and YOU mid level managers along with your downstream workforce.
What is all about
Art and science of formulating, implementing, and
evaluating cross-functional decisions that enable an
organization to achieve its objectives.
What is Strategic Management
Strategic management
•Strategy Formulation
•Execution
•Evaluation ( evaluation of execution )
Strategic Planning
•Strategy Formulation
Strategic Management Vs Strategic Planning
Prelude to Strategic Planning Why startegeic Planning is required
Forms the blueprint of an organisations character Provides cohesive platform for all stake holders to
understand organisations goals Shows the organisation the proper direction to grow
o Sets Goals o Highlight what we do now o Predicts Future Scenarios o Determines best responses to future threats o Prioritises resources
Basics of Strategic Planning • Strive to understand the future • Builds a shared vision among all key stake
holders • Participatory process • Sensitive to external environment • Based on data • Openness to questioning the status quo • Key part of effective management system
Planning Vs Strategic Planning • Planning – an Analytical process which involves an
assessment of the future, the determination of desired objectives in the context of that future, the development of alternative courses of action to achieve such objectives, and the selection of a course(s).
• Strategic Planning - Strategic planning differs from other forms of planning in that it deliberately attempts to concentrate the organisation’s resources in those areas that can make a substantial difference in future performance and capability
Strategy Formulation • Define Vision & Mission • Impart right work culture among work force • Assess Opportunities and Threats
– Tools : SWOT, PEST, RBV • Assess Strength and Weakness of existing or
future Product(s) / Service(s) – Tools : BCG Matrix, COPE/POSE Analysis
• Define Long term Objectives • Analyse Alternative Strategies • Select the Right Strategy
Strategy Execution It is the discipline of getting things done as per the formulated
corporate Vision Mission & Goals Execution must be an core element of an organisations culture –
should be injected to genes of workforce of entire organisation. The Right execution system has two characters – Long term static
character in line with Visison and Goals and short term Dynamic character in line with Mission
Execution is discussed in detail in a separate presentation
Confused with Static and Dynamic Execution Character ??
Let me explain in a easy way in the lighter side You plan to date a girl – achieving this target is the long
term Goal and Vision and this is the static character of your plan
While you try to date you manipulate so many facts
points and figures to achieve your vision without toppling the goal, this the dynamic character of your plan (or tactical planning )
Static and Dynamic Characters in Real Situation
Most managements plan precisely their strategic requirements but end up in confusing with Static and Dynamic goals
Managements should understand that their dynamic decisions does not alters the course in reaching the set out Vision otherwise it sends wrong signals to mid level managers who get confused and end up achieving nothing
Should management feels there is a paradigm shift in vision due to various external factors, all downstream stake holders should be called for a brainstorming session to explain the situation and to find a solution to re-chart the vision and goals, without this there will be drift
Management should also allow a decent time frame to test / re-call a strategy. A decent time frame would be 6 to 12 months depending on the nature of industry
Strategy Evaluation
Similar to PDCA cycle a separate monitoring group shall watch whether the corporate / business / functional / operating strategies are being executed in the designated course and advise top management for corrective actions to achieve the set out goals
Contents
1. Five Tasks of Strategic Planning
2. Factors Shaping the Choice of Strategy
3. Three Tests of Best Strategy
4. Analyzing Industry Environment and Crafting
competitive Strategy
5. Strategy Implementation and Execution
Principles of Strategic Management
Five Tasks of Strategic Planning
Five Tasks of Strategic Planning
Forming a strategic vision
Setting objectives
Crafting a strategy to achieve the desired outcomes
Implementing and executing the chosen strategy
Evaluating performance, monitoring new developments, and initiating corrective adjustments
Forming a Strategic Vision
Forming a strategic vision
• Very early in the strategy-making process,
company managers need to pose a set of
questions:
• "What is our vision for the company —
where should the company be headed,
what should its future technology-
product-customer focus be, what kind
of enterprise do we want to become,
what industry standing do we want to
achieve in five years?"
Setting Objectives
Setting objectives
• The purpose of setting objectives is to convert
managerial statements of strategic vision and
business mission into specific performance
targets — results and outcomes the organization
wants to achieve.
• Setting objectives and then measuring whether
they are achieved or not help managers track an
organization's progress.
Improve Cost Efficiency
Enhance Long-term Shareholder Value
Increase Revenue Growth
Enhance Brand Image
Build High Performance Products
Achieve Operational Excellence
Develop Strategic Competencies
Drive Demand through best CRM policies
Manage Dramatic & Sustained Growth
through Innovation
Implement Good Environmental Policy
Build Learning Culture
Expand Capabilities with Technology
Strategic Objectives in Four Perspectives
Financial
Customer
Internal Process
Learning & Growth
Expand Market Share
Crafting Strategy
Crafting a strategy to achieve the desired outcomes
• A company's strategy represents management's
answers to such fundamental business questions
as :
• whether to concentrate on a single business or build a
diversified group of businesses
• whether to cater to a broad range of customers or focus
on a particular market niche
• whether to develop a wide or narrow product line
• how to respond to changing buyer preferences
• how big a geographic market to try to cover
• how to react to newly emerging market and competitive
conditions
• how to grow the enterprise over the long term.
What Does a Company's Strategy Consist of
Crafting a strategy to achieve the desired outcomes
• Company strategies concern how:
• how to grow the business
• how to satisfy customers
• how to outcompete rivals
• how to respond to changing market
conditions
• how to manage each functional piece of the
business and develop needed organizational
capabilities
• how to achieve strategic and financial
objectives
Strategy Implementation and Execution
• Strategy implementation concerns the
managerial exercise of putting a freshly chosen
strategy into place
• Strategy execution deals with the managerial
exercise of supervising the ongoing pursuit of
strategy, making it work, and showing
measurable progress in achieving the targeted
results.
Implementing and executing the chosen strategy
Strategy Evaluation and Monitoring
• It is management's duty to stay on top of the
company's situation, deciding whether things are going
well internally, and monitoring outside developments
closely.
• Marginal performance or too little progress, as well as
important new external circumstances, will require
corrective actions and adjustments.
Evaluating performance, monitoring new developments, and initiating corrective adjustments
Strategy Hierarchy
Corporate Strategy
Segment Business Strategies – Frozen / Puree / Commodities....
Functional Strategies (NPD, Marketing, Manufacturing, HR,
Finance....
Operating Strategies (regions, plants, departments within
functional areas)
Strategy Hierarchy
Corporate Strategic Vision
Functional Areas Visions
Operating Unit Visions
Business-Level Strategic Vision
Corporate Strategic Objectives
Functional Areas Objectives
Operating Unit Objectives
Business-Level Strategic Objectives
Corporate Strategic Strategy
Functional Areas Strategies
Operating Unit Strategies
Business-Level Strategy
Factors Shaping the Choice of Strategy
Factors Shaping the Choice of Strategy a simple view based on RBV tool
Capability : Financial, Human resource,
technical....
Competitive Advantage :
Innovative products, superior technology, best cost benefit....
Factors Shaping the Choice of Strategy an extensive view
Economic, societal, political, and government regulations
Competitive conditions and
industry attractiveness
Company opportunity and
threat
Company strengths and weaknesses,
competencies and capabilities
Personal ambitions and business philosophies
of key executives
Shared values and company culture
External Factors
Internal Factors
The mix of considerations that determines a company’s strategic situation
Factors Shaping the Choice of Strategy
• What an enterprise can and cannot do
strategy wise is always constrained by what
is legal, by what complies with government
policies and regulatory requirements, by
what is considered ethical, and by what is
in accord with societal expectations and
the standards of good social and
community citizenship.
Economic, societal, political, and government regulations
Factors Shaping the Choice of Strategy
• An industry's competitive conditions and
overall attractiveness are big strategy-
determining factors.
• A company's strategy has to be tailored to
the nature and mix of competitive factors
in play—price, product quality,
performance features, service, warranties,
and so on.
Competitive conditions and
industry attractiveness
Factors Shaping the Choice of Strategy
• A company's strategy needs to be
deliberately aimed at capturing its best
growth opportunities, especially the ones
that hold the most promise for building
sustainable competitive advantage and
enhancing profitability.
• Strategy should also provide a defense
against external threats to the company's
well-being and fu-ture performance.
Company opportunity and threat
Factors Shaping the Choice of Strategy
• One of the most pivotal strategy-shaping
internal considerations is whether a company
has or can acquire the resources,
competencies, and capabilities needed to
execute a strategy proficiently.
• The best path to competitive advantage is
found where a firm has competitively valuable
resources and competencies, where rivals
can't develop comparable capabilities except
at high cost or over an extended period of
time.
Company strengths and weaknesses,
competencies and capabilities
Factors Shaping the Choice of Strategy
• Managers do not dispassionately assess what
strategic course to steer.
• Their choices are typically influenced by their
own vision of how to compete and how to
position the enterprise and by what image and
standing they want the company to have.
Personal ambitions and business
philosophies of key executives
Factors Shaping the Choice of Strategy
• An organization's policies, practices, traditions,
philosophical beliefs, and ways of doing things
combine to create a distinctive culture.
• The stronger a company's culture, the more
that culture is likely to shape the company's
strategic actions, sometimes even dominating
the choice of strategic moves.
Shared values and company culture
Strategic Analysis and Strategic Choices
Analyzing strategically about
industry and competitive conditions
Analyzing strategically about a company’s own
situation
What strategic options does the company realistically have?
What is the best strategy?
Strategic Analysis and Strategic Choices
Analyzing strategically about
industry and competitive conditions
The Key Questions
• What are the industry’s dominant economic features?
• What is causing the industry’s competitive structure and business environment to change?
• Which companies are in the strongest/weakest positions?
• What strategic moves are rivals likely to make next?
• What are the key factors for competitive success?
• Is the industry attractive and what are the prospects for above-average profitability?
Strategic Analysis and Strategic Choices
Analyzing strategically about a company’s own
situation
The Key Questions
• How well is the company’s present strategy working?
• What are the company’s strengths, weaknesses, opportunities, and threats?
• Are the company’s prices and costs competitive?
• How strong is the company’s competitive position?
• What strategic issues does the company face?
Three Tests of Best Strategy
Three Tests of Best Strategy
The Performance Test
The Competitive Advantage Test
The Goodness of Fit Test
The Best Strategy
• A good strategy has to be well matched to industry and competitive conditions, market opportunities and threats, and other aspects of the enterprise's external environment.
• At the same time, it has to be tailored to the company's resource strengths and weaknesses, competencies, and competitive capabilities.
Three Tests of Best Strategy
The Goodness of Fit Test
• A good strategy leads to sustainable competi-tive advantage.
• The bigger the competitive edge that a strategy helps build, the more powerful and effective it is.
Three Tests of Best Strategy
The Competitive Advantage Test
• A good strategy boosts company performance.
• Two kinds of performance improvements are the most telling of a strategy's caliber: gains in profitability and gains in the company's competitive strength and long-term mar-ket position.
Three Tests of Best Strategy
The Performance Test
Analyzing Industry Environment and Designing Competitive Strategy
Porter’s Five Forces
Rivalry
Buyer Power
Supplier Power
Threats of Substitutes
Barriers to Entry
The Intensity of Rivalry
1. A larger number of firms 2. Slow market growth 3. High fixed cost 4. High storages costs or highly
perishable products 5. Low switching cost 6. Low level of product differentiation 7. Strategic stakes are high 8. High exit barriers 9. A diversity of rivals 10. Industry shakeout
The intensity of rivalry is influenced by the following industry characteristics:
Barriers to Entry
Entry barriers are influenced by the following factors :
1. Absolute cost advantages 2. Proprietary learning curve 3. Access to inputs 4. Government policy 5. Economies of scale 6. Capital requirements 7. Brand identity 8. Switching costs 9. Access to distribution 10. Expected retaliation 11. Proprietary products
Threats of Substitutes
Threats of substitutes are influenced by the following factors :
1. Switching costs
2. Buyer inclination to substitute
3. Price-performance trade-off of substitutes
Buyer Power
Buyer power is influenced by the following factors :
1. Bargaining leverage
2. Buyer volume
3. Buyer information
4. Brand identity
5. Price sensitivity
6. Threat of backward integration
7. Product differentiation
8. Buyer concentration vs. industry
9. Substitutes available
10. Buyers' incentives
Supplier Power
Supplier power is influenced by the following factors :
1. Supplier concentration
2. Importance of volume to supplier
3. Differentiation of inputs
4. Impact of inputs on cost or differentiation
5. Switching costs of firms in the industry
6. Presence of substitute inputs
7. Threat of forward integration
8. Cost relative to total purchases in industry
Dominant Economic Characteristics of the Industry Environment (market size and growth rate, geographic scope, number and sizes of buyers and sellers, pace of technological change and innovation, scale economies, experience curve effects, capital requirements, and so on)
Competitive Analysis • Rivalry among competing sellers • Threat of potential entry • Competition from substitutes • Power of suppliers • Power of consumers
Competitive Position of Major Companies/ Strategic Groups. • Those that are favorably positioned and why • Those that are unfavorably positioned and why
Competitor Analysis • Strategic approaches/predicated moves of key competitors • Whom to watch, and why
Industry Key Success Factors
Industry Prospects and Overall Attractiveness • Factors making the industry attractive • Factors making the industry unattractive • Special industry issues/problems • Profit outlook (favorable/unfavorable)
Sample Format for an Industry Competitive Analysis Summary
Five Generic Competitive Strategies
Overall Low Cost Leadership Strategy
Differentiation Strategy
Focused Low Cost
Strategy
Focused Differentiation
Strategy
Low Cost
Differentiation
Broad Market Segment
Narrow Market Segment
Best Cost Strategy
Five Generic Competitive Strategies
Overall Low Cost Leadership Strategy
Broad Differentiation Strategy
Appealing to a broad spectrum of customers based on being the overall low-cost provider of product and service
A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers and that customers perceive to be better than or different from the products of the competition
Five Generic Competitive Strategies
Best Cost Strategy
• Giving customers more value for the money by incorporating good-to-excellent product attributes at a lower cost than rivals
• The target is to have the lowest (best) costs and prices compared to rivals offering products with comparable upscale attributes
Generic Strategies and Industry Forces
Industry Force
Generic Strategies
Cost Leadership Differentiation Focus
Entry Barriers
Ability to cut price in retaliation deters potential entrants.
Customer loyalty can discourage potential entrants.
Focusing develops core competencies that can act as an entry barrier.
Buyer Power
Ability to offer lower price to powerful buyers.
Large buyers have less power to negotiate because of few close alternatives.
Large buyers have less power to negotiate because of few alternatives.
Supplier Power
Better insulated from powerful suppliers.
Better able to pass on supplier price increases to customers.
Suppliers have power because of low volumes, but a differentiation-focused firm is better able to pass on supplier price increases.
Threat of Substitutes
Can use low price to defend against substitutes.
Customer's become attached to differentiating attributes, reducing threat of substitutes.
Specialized products & core competency protect against substitutes.
Rivalry Better able to compete on price.
Brand loyalty to keep customers from rivals.
Rivals cannot meet differentiation-focused customer needs.
BCG Matrix / COPE / POSE / VOCI Analysis....
• In the evolution of management tools numerous methods have evolved to measure the performance Vs market conditions. The primary and oldest being SWOT
• Later Porter’s Five forces analysis, apostle model created a new wave succeeding SWOT
• However most of the analysis are abstract in assuming market conditions and environment and other performance variables and left to mercy of the analyser, BCG matrix is an exception where a few numerical calculations were performed.
• Latest budding development in management tools series is the evolution of COPE (Condition X Performance), POSE (Position X Strength) and VOCI (adVOcates X CrItics). While First two measures about product’s condition and performance in market and positioning strength, the later analyses the brand loyalty and customer satisfaction. All the three tools use extensive numerical methods and proves to reflect reality.
Best Strategy
Selecting the Best
Strategy
Best strategy shall be the outcome of the organisation head’s comprehensive understanding of the nature of business backed with a rich experience of handling difficult situations combined with the forces of right management tools + inputs of brainstorming sessions with the mid level managers + feedback of downstream work force and at last hearing to the realistic market competitive analysis.
The new management paradigm – TOC or Theory of Constraints based on the common idiom “A Chain is no stronger than its weakest Link” insists that no strategy can be well planned without identifying the underlying constraints and finding solutions to overcome them.
Be realistic while selecting the strategy never be over confident based on abstract assumptions.
Strategy Implementation and Execution
Strategy Implementation
Building a capable organization
Designing strategy-supportive reward system
Creating a strategy-supportive corporate culture
Exerting strategic leadership
Linking budget to strategy
Establishing strategy-supportive policies and procedures
Instituting best practices and commitment to continuous
improvement
Installing information system to support strategy execution
HR & Organization Development Factor
System Factor
Effective Strategy
Execution
Building a Capable Organization
Building a
capable organization
Staffing the organization • Putting together a strong management team • Recruiting and retaining talented employees
Building Core Competencies and Capabilities • Developing competence/capability portfolio suited
to current strategy • Updating and reshaping the portfolio as external
conditions and strategy change
Structuring the Organization and Work Effort • Organizing business function and processes, value
chain activities, and decision making
Strategy - Supportive Reward System
Designing strategy -
supportive reward system
• Strategy - supportive motivational practices and reward systems are powerful management tools for gaining employee buy-in and commitment.
• The key to creating a reward system that promotes good strategy execution is to make strategically relevant measures of performance the dominating basis for designing incentives, evaluating individual and group efforts, and handing out rewards.
Strategy - Supportive Corporate Culture
Creating a strategy-
supportive corporate
culture
• Building a strategy - supportive culture is important to successful strategy execution because it produces a work climate and organizational esprit de corps that thrive on meeting performance targets and being part of a winning effort.
Strategic Leadership
Exerting strategic
leadership
• Strategic leaders encourage people to be innovative in order to keep the organization responsive to changing conditions, alert to new opportunities, and anxious to pursue fresh initiatives.
• Strategic leaders also actively push corrective actions to improve strategy execution and overall strategic performance.
Linking Budget to Strategy
Linking budget to strategy
• Reworking the budget to make it more strategy-supportive is a crucial part of the implementation process because every organization unit needs to have the people, equipment, facilities, and other resources to carry out its part of the strategic plan.
Strategy - Supportive Policy – Changes in QMS
Establishing strategy -
supportive policies and procedures
• Prescribing new or freshly revised policies and operating procedures in QMS aids the task of implementation (1) by promoting consistency in how particular strategy-critical activities are performed in geographically scattered operating units and (2) by helping to create a strategy-supportive work climate and corporate culture.
Continuous Improvement
Instituting best practices
and commitment to
continuous improvement
• Competent strategy execution entails visible, unyielding managerial commitment to best practices and continuous improvement.
• Benchmarking, the discovery and adoption of best practices, and six sigma initiatives all aim at improved efficiency, better product, and greater customer satisfaction.
Information Support System
Installing information
system to support strategy
execution
• Company strategies can’t be implemented well without a number of support system to carry on business operations.
• Well-conceived, state-of-the-art support system not only facilitate better strategy execution but can also strengthen organizational capabilities enough to provide a competitive edge over rivals.
References used in this presentation
Strategic Management : Concepts & Cases, Fred R David – Prentice Hall
Strategic Management : In the Innovation Economy, T.H.Davenport, M.Liebold, S.Voelpel
Blue Ocean Strategy : Kim & Rene, Havard Business School Press
Works of my in-flight friend Mr Rudd de Keijzer, the Netrherlands
Any Questions ?? Shoot a mail to me Raghavan VP [email protected]
End of Presentation
Thank you all for watching this presentation
If I have created a spark in your mind then I have succeeded and wish to see that you all contribute for betterment of EPIPL