Strategic Mangmt

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Dec 2010 Strategic Management:

StrategicManagement

Main Text:Strategic Management & Business

Policy: Wheelen , Hunger & Rangarajan(Prentice Hall)

Course Facilitator:Bijoy S Guha

11Strategic Management:Dec 2010


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Case Studies:1. Encyclopaedia Britannica (A, B &

C) Case 2-1, 2-2,2-3 Management

Control System 12 edn

2. The Road Ahead for Shanghai VW

International Case: Pg.116+117,Essentials of Management 7 edn.(Tata McGraw Hill)

3. T.I. & H.P.Case 13-3; Management Control Systems 12 ednDec 2010 Strategic Management: 22

Strategic Management


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w Joined Philips Indiaas a Management Trainee(1969)

w After O-J-T of 18 months, became a Section In-

charge in a factoryw 18 months later, become Shop In-chargew 24 months later, took over as I/C Engineering &

Customer Supportw 18 months later, Project 2nd I/C for new Factoryw

18 months later, Manager Quality Controlw 42months later, Manager Innovation Groupw 42 months later seconded to Philips Germanyw 24 months later returned as Factory Manager,

Luminaire Centre/Calcuttaw 36 months later took over as Plant Manager, Kalwa

Lamp Factories/ Thane the largest Philips Productioncomplex first Indian Manager

w 54 months later took over as SBU head- ProfessionalLighting/India

w 36 months later took over as Head, CorporatePurchasing/India for 12 months;

w Started (1998) up a joint-venture between Tata

Who am I ?

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ic Management:Dec 2010


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Basic Concepts:Strategic Management &

Business Policy

Syllabus Topic:

1) Introduction to StrategicManagement



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Dec 2010 Strategic Management:Strategic Management:B S Guha55


Defined:

Set of managerialdecisions and actions thatdetermines the long-runperformance of a firm.

5

The primary role ofcorporate

management isfinding the future ...

Al ReisDec 2010


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Strategic Management:

B S Guha

66

Business Policy

Defined:General management

orientation that looks

inward for properlyintegrating the firmsfunctional activities.

Dec 2010


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Strategic Management:B S Guha

77

Four Phases towardsStrategic Management

Basic financial planning: serious planningfor next years budget limited horizon;

Forecast-based planning:many programsrun beyond a year; managers look at longer

time horizons, typically 5 years, but muchad-hocism in forecasts;

Externally-oriented planning (strategic):accent on reliable forecasts and centralizedformulation of strategic actions;

Strategic management:inclusion ofimplementation and control in strategicactions; involvement of all levels for realismand buy-in.

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Strategic ManagementHighly Rated Benefits:

Clearer sense of strategic vision for the firmSharper focus on what is strategically important

Improved understanding of a rapidly changingenvironment

Not always a formal process:Where is the organization now? (Not wheredo we hope it is!)

If no changes are made, where will theorganization be in 1 year, 2 years, 5 years,10 years?

What specific actions should managementundertake? What are the risks and payoffsinvolved?

Dec 2010


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High Intuitivebased strategy

Negligiblestrategy

High Logic ,HighIntuitionstrategy

High Logicbased strategy

Compromise strategy

Strategicgrid

Logic

Intuiti

on

H

H



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Challenges to

Strategic ManagementGlobalization

Internationalization of markets andcorporations

Global (worldwide) markets rather thannational markets

Electronic CommerceUse of the Internet to conduct business

transactionsBasis for competition on a more strategic

level rather than traditional focus onproduct features and costs

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Strategic Management:B S Guha

1111

E-Commerce

7 Trends:Internet forcing companies to

transform themselvesMarket access and branding are

changing, causing disintermediationof traditional distribution channels

Balance of power shifting to theincreasingly savvy consumer

Competition is changing(convergence!)

Pace of business increasingdrasticallyInternet purchasing corporations out

of their traditional boundariesKnowledge becoming a key asset and

source of competitive advantageDec 2010


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Adaptation to Changing

EnvironmentalConditions

Strategic flexibility:

Demands a long-term commitment to thedevelopment and nurturing ofcriticalresources

Demands that the firm become a learningorganization

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Learning OrganizationsDefined:

An organization skilled atcreating, acquiring, andtransferring knowledge and atmodifying its behavior to reflect

new knowledge and insights.

Four Main Activities:Solving problems systematically

Experimenting with new approaches Learning from their won experiences and

that of others

Transferring knowledge quickly andefficiently throughout the organization

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Basic Model of


Four Basic Elements

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Environmental Scanning

Defined:

The monitoring, evaluating, and

disseminating of information fromthe external and internalenvironments to key people withinthe firm.

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Identify strategic factors

SWOT AnalysisStrengths, Weaknesses

Opportunities, Threats

Internal Environment

Strengths & Weaknesses

Within the organization but not subject to short-run control of management

External EnvironmentOpportunities & Threats

External to the organization but not subject toshort-run control of management

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Strategy Formulation

Defined:

Development of long-range

plans for the effectivemanagement of environmentalopportunities and threats in lightof corporate strengths and

weaknesses.

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Dec 2010 Strategic Management:Strategic Management:B S Guha 1919


Mission StatementPurpose or reason for the

organizations existence

Promotes shared expectations amongemployees

Communicates public image importantto stakeholders

Who we are, what we do, what wed

like to become

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ObjectivesThe end results of planned activityWhat is to be accomplished

Time in which to accomplish it

Quantified when possible

Corporate goals and objectivesinclude:

Profitability (net profits)

Growth (increase in total assets, etc.)

Utilization of resources (ROE or ROI)Market leadership (market share)

A goal is anopen-endedstatement ofwhat one wantsto accomplishwith noquantification ofwhat is to beachieved and notime criteria forcompletion.

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B S Guha

2121

Strategies

Defined:

A strategy of a corporationforms a comprehensive master

plan stating how the corporationwill achieve its mission andobjectives. It maximizescompetitive advantage andminimizes competitivedisadvantage.

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B S Guha

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Policies

Defined:

Broad guidelines for decisionmaking that link the formulation

of strategy with itsimplementation.

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Strategy Implementation

StrategyImplementati

on

Programs

Budgets

Procedures

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Strategic ManagementModel



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B S Guha

2525

Initiation of Strategy

Triggering

event

New CEO

Externalintervention

Threat of change inownership

Performance gap

Strategic inflectionpoint

Stimulusfor

change

instrate

gy

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The four phases of Business: Starts with the introduction of a product/service,

Obtains a market position through R&D/ Range extensions/Improvements,

Establishes dominance through Customer Satisfaction/Technology/ positioning strategies,

Shrinks with influx of innovations/changing Customer needs/

environmental conditions.

Introduction Growth Maturity Decline

Bio-Tech.

Telecom.Automotive

Steel

Textile

+ Clothing

Point ofInflection

Dynamics ofStrategy


Business Life-cycle

i if l


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Dec 2010 Strategic Management:Dec 2010 Strategic Management: 2727

Time

Perfor

manc

e

The S-Curve of a Firms life e.g. Tata Motors

Initiation/Start-up TELCO

Locomotive

Trucks, Buses &

Constr. Equip.

Tata Motors

Automobiles

?

Product/Technologyled Points of Inflection

Business Life-cycle &Strategy


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Strategy: Types &Hierarchy

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Strategic DecisionMaking

Strategic Decisions

Rare:seldom haveprecedents

Consequential: commit

great deal of resourcesand demand high degreeof commitment from

peopleDec 2010


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Strategic DecisionMaking

Mintzbergs ModesEntrepreneurial mode: made by a powerful individual,with opportunities as the primary focus and problemssecondary. Characterized by founders vision and bold,

large decisions for growth. Adaptive mode: characterized by reactive, fragmented

solutions to existing problems more than proactivesearch for opportunities.

Planning mode: characterized by data-collection, analysis

and logical selection. It is both proactive & reactive. Logical incrementalism: combines all the above and is

both intraprenureal and top-led, allowing for both visionand experimentation to thrive.

Dec 2010

Strategic Decision Making


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Dec 2010



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Dec 2010



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Dec 2010 Strategic Management:Strategic Management: 3333


Dec 2010

St t i M t


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Strategic management as a disciplineoriginated in the1950s and 60s; the most influential pioneerswereAlfred D. , Philip , Igor , andPeter .

Chandler showed that a long-term coordinated strategy was

necessary to give a company structure, direction, and focus.He says it concisely, structure follows strategy.

In 1957, Selznickintroduced the idea of matching theorganization's internal factors with external environmentalcircumstances. This core idea was developed into what we nowcall SWOT analysis.

Ansoffadded a range of strategic concepts and invented awhole new vocabulary! He developed the gap analysisstillused today in which we must understand the gap betweenwhere we are currently and where we would like to be, thendevelop what he called gap reducing actions.


St t i M t td
http://en.wikipedia.org/wiki/Structure_follows_strategyhttp://en.wikipedia.org/wiki/SWOT_analysishttp://en.wikipedia.org/wiki/Gap_analysishttp://en.wikipedia.org/wiki/Gap_analysishttp://en.wikipedia.org/wiki/SWOT_analysishttp://en.wikipedia.org/wiki/Structure_follows_strategy


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Strategic Management ctd

Drucker was a prolific strategy theorist, author of twenty-two of management books, with a career spanning fivedecades. His contributions to strategic management weremany but two are most important.

Firstly, he stressed the importance of objectives. As early as

1954 he gave the theory of (MBO).

His other contribution was in predicting the importanceintellectual capital. He predicted the rise of what he called theknowledge worker and explained the consequences of this

for management.He said that knowledge work is non-hierarchical.

Work would be carried out in teams with the person mostknowledgeable in the task at hand being the temporary leader.


St t i M t td
http://en.wikipedia.org/wiki/Cross-functional_teamhttp://en.wikipedia.org/wiki/Cross-functional_team


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Strategic Management ctd

In 1985, Ellen-Earle Chafee summarized what she thoughtwere the main elements of strategic management theory of

the 1970s: Strategic management involves adapting the organization to

its business environment. Strategic management is fluid and complex. Change creates

novel combinations of circumstances requiring unstructurednon-repetitive responses.

Strategic management affects the entire organization byproviding direction; is done at several levels: overallcorporate strategy, and individual business strategies.

Strategic management is partially planned and partiallyunplanned; involves both conceptual and analytical thoughtprocesses.

Strategic management is both strategy formation (content)and also strategy implementation (process).



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Case Study: EncyclopaediaBritannica (A, B & C)

Case 2-1, 2-2,2-3 Management Control System 12 edn




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Environmental Scanning &Business Strategy

Syllabus Topics:(6) Process of Strategy Formulation

(2) Competitive Strategy ,(5a) Recent advances: core

competencies(7a)Analytical framework for strategy

formulation: Input stage matrices



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Environments

Environmental uncertainty:

The degree of complexityplus the degree of changeexisting in an

organizations externalenvironment.

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Environments

Environmental scanning:

The monitoring, evaluating, anddisseminating of information from theexternal and internal environments tokey people within the corporation toavoid strategic surprise and ensure thelong-term health of the firm.

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External EnvironmentExternal Environmental Variables:

Societal environment:

General forces that do not directlytouch on the short-run activities but ofteninfluence its long-run decisions.

Task environment:Those elements or groups that directly

affect the corporation and, in turn, are

affected by it. The task environment is theindustry within which that firm operates.

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B S Guha

4242

External Environment

Dec 2010

P.E.S.T

Analy

sis



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Issues Priority Matrix

High

Priority

HighPriori

ty

High

Priority

Medium

Priority

Medium

Priori

ty

Medium

Priority

Probable Impact onCorporation

Low

Priority

Low

Priority

Low

Priority

Low

Medium

High

Me d i u

m

H

i g

h

Lo

w

ProbabilityofOccurrence



Environmental Scanning: External


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Critical changes induce a change in a firmsstrategy: Reactive, Proactive or both. The

approach often used is the Issue Prioritizationmatrix to better assess the impact and timingof the of an event followed by thedevelopment of an appropriate responsestrategy.

Somehow the management must determinethe probability of their occurrence andthe degree ofimpact (profitability/market share etc..) of each event. An Example: (Trends for a Telecom Company)

1. Wireless communication technologywill make networks based on fiber andconductor redundant.

2.Technology will enable storage andaccessing of vast quantity of data at

affordable cost;





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This example contains 4 events, worthy of concernin the first decade of 2000.The probability of each occurring by the year 2010was rated, as was the impact on the company interms of market-share and profitability.

Occurrence by2010Hig

h

Lo

w

Impac

t

Hig

h

Lo

Wireless technologywill make

fibers & conductorsredundant

Technology willprovide cheap

data storage &handling.

Prices of large-screenTVs will

drop by 50%

Telephone firms &systemsoperators will

emerge as thedominant force.





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External Strategic FactorsDefined:Key environmental trends that arejudged to have both a medium to

high probability of occurrence and amedium to high probability of impacton the corporation.

Dec 2010



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Societal EnvironmentImportant Variables

Economic

GDP trends

Interest rates

Money supply

Inflation ratesUnemploymentlevels

Wage/pricecontrols

Devaluation/rev

aluation

Energyavailability andcost

Disposable anddiscretionary

income

Technological

Totalgovernmentspending forR&D

Total industryspending forR&D

Focus oftechnologicalefforts

Patentprotection

New products

Newdevelopmentsin technology

transfer fromlab to

Political-Legal

Antitrustregulations

Environmentalprotection laws

Tax laws

Specialincentives

Foreign traderegulations

Attitudestoward foreigncompanies

Laws on hiringand promotion

Stability of

government

Socio-cultural

Lifestylechanges

Careerexpectations

Consumeractivism

Rate of familyformation

Growth rate ofpopulation

Age distributionof population

Regional shiftsin population

Life

expectancies





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Strategists must monitor the major forcesand their interactive effects, for theiropportunity and threat potential:

Example of interactive effects: explosive population growth (demo-graphic)

leads to more resource depletion and pollution

(natural) which, in-turn, leads consumers to call for more preventive

laws (political-legal).This could stimulate new solutions and

products (technological), which if they are affordable (economic) may actually change attitudes and behaviours

(socio-cultural).

Societal Environment





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External Strategic FactorsFactors influencing the choice:

Personal values of managers

Functional experience of managersSuccess of current strategiesStrategic myopia

Willingness to reject unfamiliar as well asnegative information

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Industry analysis:

An in-depth examination

of key factors within acorporations taskenvironment.

Dec 2010

I d t A l i


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Industry

A group of firms producing asimilar product or service, suchas soft drinks, Automobiles orfinancial services.

wThe principal determinant of the TaskEnvironment is the IndustryAnalysis:

What is the structure of the industry inwhich the business unit operates?

How should the business unit exploit theindustry structure?

What will be the basis of the business units

competitive advantage?

Industry Analysis



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Porters approach:

Assess the six forces -- Threat of new entrants Rivalry among existing firms Threat of substitute products Bargaining power of buyers Bargaining power of suppliers Relative power of other

stakeholders

Industry Analysis



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Industry Analysis



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Industry Analysis

Threat of New Entrants --

Barriers to entry:

Economies of ScaleProduct DifferentiationCapital RequirementsSwitching CostsAccess to Distribution Channels

Cost Disadvantages Independent of SizeGovernment Policy

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Industry Analysis

Rivalry Among Existing Firms --

Intense rivalry related to:

Number of competitorsRate of Industry GrowthProduce or Service CharacteristicsAmount of Fixed CostsCapacity

Height of Exit BarriersDiversity of Rivals

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Industry Analysis

Threat of Substitute Products/Services

Substitute Products:

Those products that appear to bedifferent but can satisfy the same needas another product. To the extent thatswitching costs are low, substitutes canhave a strong effect on an industry. E.g.

Entertainment Industry: T20 vs. Movies

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Industry Analysis

Bargaining Power of Buyers --

Buyer is powerful when:Buyer purchases large proportion of sellers products

Buyer has the potential to integrate backwardAlternative suppliers are plentifulChanging suppliers costs very littlePurchased product represents a high percentage of a

buyers costs

Buyer earns low profitsPurchased product is unimportant to the final quality or

price of a buyers products

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Industry Analysis


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Industry Analysis

Bargaining Power of Suppliers --

Supplier is powerful when:Supplier industry is dominated by a few companies

but sells to many Its product is unique and/or has high switching costsSubstitutes are not readily availableSuppliers are able to integrate forward and compete

directly with present customersPurchasing industry buys only a small portion of the

suppliers goods.

Dec 2010

I d t A l i


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Industry Evolution

Fragmented Industry

No firm has large market share andeach firm serves only a small piece of thetotal market in competition with others.

Consolidated Industry

Dominated by a few large firms, eachof which struggles to differentiate itsproducts from the competition.

Multi-domestic/International Global

Industry Analysis


Industry Analysis


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Continuum of International Industries

Multi-domesticIndustry in whichcompanies tailor theirproducts to the specificneeds of consumers in aparticular country.

Retailing Insurance Banking

GlobalIndustry in whichcompaniesmanufacture and sellthe same products,with only minor

adjustments made forindividual countriesaround the world.

Automobiles Tires Television sets

Industry primarily multi-domestic or primarily globalbased on:

Pressure for coordination Within the multinationals in that industry

Pressure for local responsiveness Individual country markets

Industry Analysis


Industry Analysis


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Strategic GroupsDefined:

A set of business units or firmsthat pursue similar strategies withsimilar resources.

Strategic TypesDefined:

Category of firms based on acommon strategic orientation and acombination of structure, culture,

and processes consistent with thatstrategy.

Industry Analysis


Industry Analysis


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Industry AnalysisStrategic groups

Can be mapped by selecting broad characteristics thatdifferentiate companies in an industry and plottingthemon two lowly correlated dimensions to understandstrategic

(competitive) issues and business models.

Price

Product-line

breadth

Restaurants in 5-star

Hotels

KFCMcDona

lds etc.

Low

High

Small

Large

Tapris,

Etc.

Speciality

Restaurant

Multi-cusine

Restaurant

Anotherdimension

e.g. Servicequality canbe added to

convert thisinto a 3-D

plot.


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Industry Analysis ctd.


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Relationship

Bmarking

Partnering

Compa

ny

Custo

mer

Competitor

Supplier

Key Analytical Information:- w.r.t major Customers- (of

Competitors)- of suppliers 6464Strategic Management:Dec 2010


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Industry Analysis


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Industry Analysis

Forecasting Techniques:

Extrapolation Brainstorming

Expert opinion Statistical modeling Scenario writing

Dec 2010

External Factor Analysis Summary


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External Factor Analysis Summary (EFAS)

ExternalFactors

Weight Ratin

g

WeightedScore

Comments

1 2 3 4 5

1.00

Opportunities

Threats

Total WeightedScore

Notes: 1. List opportunities and threats (510) in column 1. 2. Weight each factor from 1.0 (MostImportant) to 0.0 (Not Important) in Column 2 based on that factors probable impact on the companysstrategic position. The total weights must sum to 1.00. 3. Rate each factor from 5 (Outstanding) to 1 (Poor) inColumn 3 based on the companys response to that factor. 4. Multiply each factors weight times its rating toobtain each factors weighted score in Column 4. 5. Use Column 5 (comments) for rationale used for eachfactor. 6. Add the weighted scores to obtain the total weighted score for the company in Column 4. This tellshow well the company is responding to the strategic factors in its external environment.Source: T. L. Wheelen and J. D. Hunger, External Strategic Factors Analysis Summary (EFAS). Copyright 1991 by Wheelen and Hunger Associates. Reprinted by permission.

Max: 5 on how well thecompany is currentlydealing with factor

8 to10,prioritize

d

Ranke

d

e a ac o a ys s Su a y


External Factor Analysis Summary (EFAS)


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Dec 2010 Strategic Management:Strategic Management:B S Guha

6868

Maytag Example

External FactorsWeight Ratin

g

WeightedScore

Comments

1.00

Opportunities

Economic integration of European Community

Demographics favor

quality appliances Economic development

of Asia

Opening of EasternEurope

Trend to Super Stores

Threats

Increasing governmentregulations

Strong U.S. competition

Whirlpool and Electroluxstrong globally

New product advances

Japanese appliancecompanies

Total Scores

.20

.10

.05

.05

.10

.10

.10.15

.05

.10

4

5

1

2

2

4

43

1

2

.80

.50

.05

.10

.20

.40

.40.45

.05

.20

Acquisition ofHoover

Maytag quality

Low Maytagpresence

Will take time

Maytag weak in thischannel

Well positioned

Well positioned

Hoover weakglobally

Questionable

Only Asian presenceis Australia

3.15

1 2 3 4 5

Dec 2010


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Internal (organization)


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Using resources to gain competitive advantage is a 5-step process:1. Identification & classification of a firms resources as

strengths & weaknesses;

2. Combining the firms strengths into specific capabilities.Corp. capabilities(Competencies) are things that thefirm does exceedingly well.

3. Appraisal of the Profit Potential, in terms ofsustainablecompetitive advantage, of these resources.

4. Selection of the strategy that best exploits the firmscapabilities in relation to the (external) opportunities.

5. Identification ofresource-gaps and investment inupgrading weaknesses

Internal (organization)Analysis



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Slow CycleResources

Stronglyshielded Patents,

Brandse.g. GilletteSensor

Std. CycleResources

MassProduction Scale,

complexprocess

e.g. DTSIEngine

Fast CycleResources

Easilyduplicated idea drivene.g. SONYWalkman

Level of Resource

SustainabilityHard toimitate Easy toimitate

A core competency is a specific factor that abusiness sees as being central to the way it,

or its employees work. It fulfils three keycriteria: It provides consumer benefits It is not easy for competitors to imitate It can be leveraged widely to many

products and markets.

gAnalysis




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Competencies are easy to acquire if they comefrom explicit knowledge:

Since readily articulated and communicated, thisknowledge is easily acquired by commercial intelligence;

Core Competencies come from tacit knowledge(or knowing): Not easily communicated or imitable since they come from

shared knowledge i.e. deeply rooted in experiences andcorporations culture;

Often they are not very formalized or are derived from acomplex web of elements which cannot be distinctlydefined by the management;

Top management are very reluctant to intervene! (dont fixit if it aint broke)

gAnalysis


Core Competence


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Core CompetencePrahalad & Hamel introduced this term in their paperTheCore Competence of the Corporation(HBR, 1990). In highlight:

CC represents the collective learning and coordinationcapabilities/skills behind the firms manifest product lines

CC leads to the development of core products which in turnspawn a host of end-user products/services

The core products are not traded and thus lead to sustainable

competitive advantage. Business Units tap into the core todeliver the market-beating end products

The intersection of market opportunities with the CC forms thebasis of launching new products

Without CC, a corporation is just a collection of discreet

businesses It is not necessarily expensive to develop CC since it is more

about coordination rather than elaborate R&D, verticalintegration etc.


Core Competence ctd


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Core Competence ctd

To be world-class, a company must identify andbuild on a few core competencies, precisely, whatis it? Honda, for example, has a core competence in small

engine design and manufacturing (core product):

manifest in multiple products;Sony has a core competence in miniaturization (core

process), leading to many firsts e.g. Transistor Radio;Walmart has a core competence in logistics & SCM

(core service) leading to outstanding variety on offer at

lowest cost.Typically, a core competence refers to a set of skills orexperience in some activity, rather than physical or financialassets.


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Core Competence ctd

Strong core competencies:are well-organized special skills, technologies,

processes, knowledge, expertise, or abilities.

are typically achieved by long-term development

processes and experiences.create customer value because they areconsidered by your customers to be unique anddistinguishable, and they are not equallyaccessible to all competitors.

are extremely difficult for other companies toimitate, if they can at all.

can be transferred to other markets



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Internal (organization)l i


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The Business Organization Model:

Value Chain (Porter,1985)

Margin

Margin

FirmInfrastructur

eHuman ResourceManagementTechnology

DevelopmentProcurement

Inbound

Logistics

Operations

Outbound

Logistics

Marketing&

Sales

Service

S

upport

Activities

Primary

Activities

Analysis




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Value Chain Analysis:Examination of each product/service lines corecompetencies and core deficiencies

Examination of the linkages between the value-elements: the value/cost trade-offs and interactive

effectsE.g. using Brand Ambassadors may improve marketingbut make a dent in the budget allocation for technologicaldevelopment initiatives in e-marketing.

Finding synergies across product-lines and

businesses to gain Economies of ScopeE.g. use of common distribution channel by Unilever for the

wide variety of product/business lines: Personal care,Hygiene & Cookery

Analysis



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Internal (organization)Analysis

Managing

Direct

orOperations

Director

Marketing

Director

Finance

Director

Produc

tionManag

erMateri

alsManag

er

Sales

Manager

Logistics

Manag

er

Functional Structure

C.E.O

C.O.OPublishing

C.O.OFin.

Serv.

C.O.OExport

s

Techni

calManag

erMarketing

Manag

er

Operat

ionsManag

erFinanc

eManag

er

Divisional Structure




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Analysis

C.E.O

C.O.OPublishi

ng

C.O.OFin.

Serv.

C.O.OExports

Technical

ManagerMarketi

ngManage

r

Operations

ManagerFinance

Manager

Divisional Structure: Matrixed

FinanceManage

r

Finance

Manager

C.F.O

Manager FinControl

ManagerTreasury



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Network Structure

Packagers

Designers Suppliers

Distributors

CorporateHeadquarters

(Broker)

Promotion/AdvertisingAgencies

Manufacturers

( g )Analysis


Internal (organization)A l i


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Impact of Corporate Culture :Definition

is the collection of beliefs, expectations and valueslearned and shared its members, transmitted from onegeneration of employees to another

This is who we are, what we do and what we stand forHas two attributes, shaping behaviours and

influencing strategy:

Intensity: degree of acceptance of norms, manifest in

acceptance of sub-cultures within each unit the depth ofculture: leading to shared value e.g. Tata Motors

Integration: commonality across the lines of business/units,

manifest in an all-pervasive culture the breadth of culture:

leading to consistent behaviours e.g. Army

Analysis



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Internal (functions)


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Analysis

Marketing:

Primary link to Customers & Competition

Positioning: Who are our Customers?

Segmentation: Niches, new products &

USPs?

Marketing Mix: 4Ps to use to for gaining competitive advantage

Links & leverages vis--vis costs

Product Life-cycle considerations 8989Strategic Management:Dec 2010

Internal (functions)


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Financial: Funds - Source, Use & Control?

Capital Structure:

Leverage (debt/asset ratio)? High is good with

upswings, low under recession & downswings

Capital Budgeting:

Return on Capital: Shareholders value

Hurdle rates for Project Pay-back and Profitability

Analysis



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Internal (functions)A l i


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Operations: must meet/better the Q-C-Trequirements of business, consistently:

Set-ups & systems: geared to the nature of demand:High-volume/Low variety Or Low-volume/High varietyIntermittent systems, e.g. Job-shopsContinuous systems, e.g. robotized assembly lines

Experience Curve: Costs decrease with cumulativeunits made industry normsEstimating/cost-projections for start-upsGuideline for target setting

Mass Customization: combining economies of scopeand scaleCAD/CAMFlexible manufacturing systems

Lean manufacturingJIT, TPM and allied systemsSCM

Analysis



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Internal Factor AnalysisS IFAS


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Summary - IFAS


Internal Factor AnalysisS IFAS


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InternalFactors Weig

ht Rating

WeightedScore

Comments

1 2 3 4 5

1.00

Strengths

Weaknesses

Total WeightedScore

Notes: 1. List strengths and weaknesses (510) in column 1. 2. Weight each factor from 1.0 (Most Important) to 0.0 (NotImportant) in Column 2 based on that factors probable impact on the companys strategic position. The total weights must sum to 1.00.3. Rate each factor from 5 (Outstanding) to 1 (Poor) in Column 3 based on the companys response to that factor. 4. Multiply eachfactors weight times its rating to obtain each factors weighted score in Column 4. 5. Use Column 5 (comments) for rationale used foreach factor. 6. Add the weighted scores to obtain the total weighted score for the company in Column 4. This tells how well thecompany is responding to the strategic factors in its internal environment.Source: T. L. Wheelen and J. D. Hunger, Internal Strategic Factors Analysis Summary (IFAS). Copyright 1991 by Wheelen andHunger Associates. Reprinted by permission.

Experienced topmanagementVertical Integration

Current AssetManagementDistribution NetworkInternationalOrientation

IndustryknowledgeComponent

manufactureInventory controlsystemDedicated dealersGrowing supplySE Asia

0.050.

050.150.100.15

2.52.

04.03.53.5

0.130.

100.600.350.52

GlobalPositioningProductPortfolio

EmployeerelationsManf. facilitiesR&D

Brand nameunattractiveDomestic segmentfocus

Health & safetyconcernsOld plant & m/csSpeed

0.150.15

0.050.100.05

3.54.0

2.52.02.0

0.530.60

0.130.200.103.2

66

Summary - IFAS



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Environmental Scanning& Business Strategy


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51 2 3 4

Strategic Factor Analysis Summary (SFAS)

StrategicFactors

(Select the most importantopportunities/threats fromEFAS Table & the most

important strengths andweaknesses from IFASTable )

Total Score

Weight Rating

Weighte

dScore Comments

SHORTIN

TERMEDI

ATE

LONG

Duration

6

& Business Strategy



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Strategic Factors

(Select the most importantopportunities/threats from EFAS, Tableand the most important strengths and

weaknesses from IFAS, Table)

S1 Quality Maytag culture (S)

S3 Hoovers international orientation(S)

W3 Financial position (W)

W4 Global positioning (W)

O1 Economic integration of

European Community (O)

O2 Demographics favor quality (O)

O5 Trend to super stores (O + T)

T3 Whirlpool and Electrolux (T)

T5 Japanese appliance companies (T)

Total Score

Weight Ratin

g

Weighte

dScore

Comments

1.00

S

H

O

RTI

NTERMEDI

ATE

LONG

Duration

3.05

.10

.10

.10

.15

.10

.10

.10

.15

.10

Quality key to success

Name recognition

High debt

Only in N.A., U.K., andAustralia

Acquisition of Hoover

Maytag quality

Weak in this channel

Dominate industry

Asian presence

5

3

2

2

4

5

2

3

2

.50

.30

.20

.30

.40

.50

.20

.45

.

Strategic Factor Analysis Summary

(SFAS): Maytag as Example

X

X

X

X

X

X

X

X

& Business Strategy



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SWOT analysis & TOWS Matrix

& Business Strategy

Environmental Scanning& i S


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Situational AnalysisNiche:

A need in the marketplace that iscurrently unsatisfied.

Goal for the CorporationFind a propitious niche

An extremely favorable niche

Strategic windowUnique market opportunity available for a

limited time

& Business Strategy



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Dec 2010 Strategic Management:Dec 2010 Strategic Management:

Business Strategy:

Focuses on improving the

competitive position of a companysor business units products or

services within the specific industryor market segment that the firmserves.

& Business Strategy



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Porters CompetitiveStrategiesCompetitive Strategy:

Low cost?Differentiation?

Compete head to head inlarge market?

Focus on niche?


& Business Strategy

Porters Competitive


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Generic CompetitiveStrategies:Lower cost strategy

Design, produce, market moreefficiently than competitors Differentiation strategy

Unique and superior value in

terms of product quality,features, service


Porter s CompetitiveStrategies

Porters CompetitiveStrategies


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Generic Competitive Strategies


Strategies

Porters Competitive


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pStrategies

Cost Leadership:Low-cost competitive strategyAimed at broad mass market

Aggressive construction ofefficient-scale facilities

Cost reductions

Cost minimization

Porters CompetitiveSt t i


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StrategiesDifferentiation:

Broad mass marketUnique product or serviceCharge premiumsLower customer sensitivity toprice

Porters CompetitiveSt t i


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StrategiesCost focus:

Low cost competitive strategyFocus on particular buyergroup or market

Niche focusedSeek cost advantage in targetmarket


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Consolidated

Industry

Mature industrydominated by a few

large companies

Cost Leadership orDifferentiation

predominate

FragmentedIndustry

Many small andmedium-sized localcompanies competefor small shares of

total marketFocus strategies

predominate

Influence of Industry Structure


Strategies

Porters CompetitiveS i


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Strategic rollup: developed in the90s to quickly consolidatefragmented industry Money from venture capital Entrepreneur acquires hundreds of owner-

operated firms Creates large firm with economies of scale

& scope, brings in higher managerial

proficeiency Differ from Conventional M &As

Large number of firms Owner-operated firms

Goal to reinvent entire industry 117Strategic Management:Dec 2010

Strategies



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Generic Strategy Dynamics

Lowest Cost

Customization/FocusFeatures/Differentiation

Lowest Cost

DifferentiationCustomization

Past:SingledimensionalCurrent:

MultidimensionalIts aSONY

Lowest Priceevery dayWALMART Jack Welch:No1 or No2

in chosen line of Business

Car for everypurpose,pocket,

person GM

Strategies



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Service

Global

Impact ofIT

Strategies



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Competitive Strategy: Hyper-

competition

It is becoming increasingly difficult to

sustain competitive advantage forvery long : Stability threatened by short product life

cycles

New Technologies Convergence:

Frequent entry of outsiders Repositioning by incumbents Redefinitions (tactical) of market boundaries


Strategies

Competitive Tactics


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Tactic:

Specific operating plandetailing how a strategy is tobe implemented in terms of

when and where it is to be putinto action.

Timing tactics

Market location tactics

Competitive Tactics

i i i


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Timing Tactics:

First mover (pioneer)Reputation as industry leaderHigh profitsSets standards for subsequent products in

the industry

Late moverAble to imitate technologicaladvances of others

Keeps R&D costs down

Keeps risks down

Competitive Tactics

k i i


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Market Location Tactics:

Offensive TacticsFrontal assault

Flanking maneuver

Bypass attack

Encirclement

Guerrilla warfare


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Cooperative Tactics


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Used to gain competitiveadvantage within an industry by

working with other firms e.g.Star Alliance (airlines)

Friendly competition can raise the

industry standard and provide abarrier for entry e.g. Japaneseauto firms (70s & 80s)


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Cooperative Tactics


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Strate

gicAllianc

e

Access tomarkets

Achievecompetitiveadvantage

Obtain

technology

Reducefinancial risk

Reducepolitical risk

Continuum of StrategicCooperative Tactics


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Continuum of StrategicAlliances

MutualService Consortia

Joint

Venture LicensingArrangement

Weak and

Distant

Value-

Chain Partnership

Strong and

CloseSource: Suggested by R. M. Kanter, Collaborative Advantage: The Art of Alliances, Harvard Business Review(July-August 1994), pp. 96108.



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Igor Ansoffs Product-Market Matrix

Is the classical business growth strategy, advocatingthe sticking to the knitting principle to grow

profitably. It is more prescriptive, than analytical. Assumes growth is strategy driven and minimally, if

at all, influenced by market forces and businesscycles; Profitability is ensured by the learning curveprinciple. However: Links with the core-competence proposition, through

core-product principle e.g. Honda

For single-industry firms e.g. Coca-Cola, there isrelevance in the concentration prescription.

Dec 2010 Strategic Management: 129

& Business Strategy

Ansoffs Product-MarketM i


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MatrixPRODUCT/

MARKET

Existing New

ExistingMarket

Penetration

ProductDevelopment

New MarketDevelopment

Diversification

Ansoffs Product-MarketM t i


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Matrix

Market

Penetration

MarketDevelopme

nt

ProductDevelopme

nt

Diversification

Time

Revenue


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Click to edit Master subtitle style


Corporate Strategy

Syllabus Topics:3) Corporate Strategy,5) Recent advances,7b) Analytical framework for strategyformulation: Matching stages


Corporate StrategyHierarchy of Strategy


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Hierarchy of Strategy

Corporate Strategy

Business

(Division Level)Strategy

FunctionalStrategy

What mix of

businessesshould we bein?

How do we

ensureprofitablegrowth?

How do wesupport the

Growth &Profit

objectives?

Corporate Strategy


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Prentice Hall, 2004 Chapter 6Wheelen/Hunger

134

Three Key Issues:

Firms directional strategy Firms portfolio strategy Firms parenting strategy

Whatroute?

What linesof

Business?

What tosynergize

?

Corporate StrategyDirectional Strategy:Three Grand Strategies:


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Three Grand Strategies:Growth strategies

Stability strategies

Retrenchment strategies

Orientation toward growthExpand, cut back, status quo?

Concentrate within current industry,diversify into other industries?

Growth and expansion throughinternal development oracquisitions, mergers, or strategicalliances?

Corporate Directional


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pStrategies


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Corporate StrategyConcentration


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Backward

Integration:assuming afunctionpreviouslyprovided by asupplier.

ForwardIntegration:assuming afunctionpreviouslyprovided by a

distributor

Concentration


Vertical growth

Vertical integration

Full integration

Taper integration

Quasi-integration

Backward integration

Forward integrationHorizontal GrowthHorizontal integration

Expansion to

othergeographical

locationsand/or

increasingrange of

offerings

Corporate StrategyConcentration


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Dec 2010 Strategic Management: 140Strategic Management:Dec 2010

Corporate StrategyDiversification


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Diversification


Concentric DiversificationGrowth into related industry

Search for relatedness

Conglomerate DiversificationGrowth into unrelated industry

Concern with financial considerations

Corporate StrategyDiversification


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Diversification

Degree ofRelatedne

ss

Extent of Diversification

Single Industry: (Wrigley,Coca Cola)

Related Diversified:

(Unilever, Sony)

Conglomerates:

(Tata, GE, Mitsubishi)

Corporate Strategy


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Internationa

lEntryOption

s

Exporting

Licensing

Franchising

Joint VenturesAcquisitions

Green-Field

Production Sharing

Turnkey Operations

BOT Concept

Management


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Corporate Strategy

Retrenchment Strategies:


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Retrenchment Strategies:

Turnaround Characterized by rapid return to profitability,usually in contraction (i.e. cutback in size andcosts), followed by consolidation (i.e.stabilization of leaner organization )phases.

Usually not sustainable nor desirable for alongperiod of time.

Sets the tone for a more radical change e.g.Restructuring and/or Reengineering.

Captive Company Strategy

is giving up independence for security;become a supplier to a more dominantcompany. Usually resorted by poorly competitiveand fund-strapped firms.

Allows for cost cutting (activity) and better cashflows

Corporate Strategy


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Selling out

Resorted to under uncompetitive and no-fundconditions, but with a buyer in place e.g. Sell-out of Tata Oil Mills (TOMCo) to HindustanLevers (HLL).

In selling out lines of businesses with poor fit or

low growth potential, this act is termedDivestment e.g. sell out of Dalda andrelated brands worldwide (hydrogenated Oil) byUnilever to American Bunge Co.

Bankruptcy/Liquidation

Bankruptcy means giving up management ofthe firm to court appointed receivers for settlingobligations and extend the life of the firm e.g.General Motors

Liquidation implies the termination of a firmsactivity, wherein assets are sold off to meet the

An approach to work out an appropriate strategic intent( h i ) St t i P iti & ACti E l ti A l i

Corporate Strategy


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(choice) Strategic Position & ACtion Evaluation Analysis(SPACE):

CompetitiveAdvantageMarket Share

Product QualityProduct Life Cycle(position)

Customer LoyaltyCompetitions capacityutilizn.

Technology, know-howVertical Integration

Financial StrengthReturn on InvestmentLeverageLiquidity

Capital required/ capitalavailable

Cash flowEase of exit from marketRisk involved in business

Industry StrengthGrowth potentialProfit potential

Financial stabilityResource UtilizationCapacity Intensity

Ease of entry into themarket

Productivity, capacity

utilzation

Environmental StabilityTechnology Changes

Rate of Inflation

Demand variabilityPrice range of competing

productsBarriers to entry into market

Competitive pressurePrice elasticity of demand


Leading to the Strategic Postures in a

Corporate Strategy


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g gmatrix:

FinancialStrength

EnvironmentalStability

In

dustrial

St

rengt h

Competitive

advantage

FOCUSConservativ

e

GAMESMANSHIPDefensive

COST LEADERSHIPAggressive

DIFFERENTIATION

Competitive

Arrows indicateincreasingValues for the dimension.

-6

-6

6

6

0


And associated actions:

Corporate Strategy


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And associated actions:

DIFFERENTIATION

Competitive

COST LEADERSHIP

Aggressive

FOCUSConservative

GAMESMANSHIP

Defensive

FinancialStrength

Environmental

Stability

In

dustr

ial

St

rength

Competitive

advantage

Status Quo

ConglomerateDiversification

Diversification

Divestment

Liquidation

Retrenchment

RelatedDiversification

Concentration

VerticalIntegration

Mergers/acquisitions(related)

Mergers/acquisitions(unrelated)

Turnaround


Arrows indicateincreasingValues for the dimension.

CompetitiveAdvantage

Financial StrengthPrimary Capital Ratio 7 23%

e.g.SPACE matrix for aBank:


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AdvantageData processing for > 450

Customers, c/wide - 2Rapid entry of foreignbanks/institutions- 5Large, old Cust. Base -2 - 9

Primary Capital Ratio 7.23%,>6% avg. + 1RoA 0.77,


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DIFFERENTIATION

Competitive

COST LEADERSHIP

Aggressive

FOCUSConservative

GAMESMANSHIP

Defensive

FinancialStrength

EnvironmentalStability

Indust

rial

Streng

th

Competitiv

e

advantage

X

DirectionalVector

The bank should follow Competitive

Strate

Corporate Strategy


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Portfolio Analysis

How much of our time and moneyshould we spend on our best productsto ensure that they continue to be

successful?

How much of our time and moneyshould we spend developing new

costly products, most of which maynever be successful?

Corporate Strategy


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Portfolio AnalysisBCG (Boston Consulting Group)

MatrixProduct life cycle and funding

decisionsQuestion marksStarsCash cowsDogs

GE Business Screen Long-term industry attractiveness

Business strength/competitive position

BCG Matrix


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Demarcates

Leaders

Demarcates

DominanceIdentifies

businessesand theirrelative

size


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BUILD: The mission implies A i f k t h

BCG Matrix


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An increase of market share, a possible decrease in short-term earnings & cash-flows.

e.g. Tata Motors

HOLD: The mission is geared to Protection of Market Share

Retain competitive position under aggressive challenge.e.g. HLL Detergents

HARVEST: The mission aims at Maximizing short-term earnings & cash-flow, Possible market-share sacrifice,

e.g. Tata Steel

DIVEST: The mission is to Withdraw from the business through sale or slow

liquidation.e.g. HLL Vanaspati Business (Dalda).


BCG matrix singles out Market Share as the

BCG Matrix


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BCG matrix singles out Market Share as the

primary strategy variable:Based on the experience curve i.e. cost per unitdecrease predictably with the number of unitsproduced (cumulative)

The Market-share leader would have the greatest

accumulated experience;Thus they should have the lowest cost; resulting inhighest profitin the industry.

Empirically supported by PIMS (Profit Impact ofMarketing Strategies) data base.

Concept applies well to relatively mature and lowlydifferentiated products. For these products,becoming a low cost playeris critical.


Firms pursuing uniqueness (niche players) could

BCG Matrix


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Firms pursuing uniqueness (niche players) couldhave high profits with low overall market share e.g.

Harley Davidson, Porsche.

There could be many drivers of cost, apart fromexperience e.g. Technology breakthroughs canprovide significant reduction in per unit costs, notavailable through cumulative experience, e.g.Internet marketing vis--vis direct selling viasalesmen.

Over focus/dependence on experience curve leadsto loss of flexibility in the Market: with shifts inwants/ demands (emerging technologies and/orlifestyles) e.g. Bajaj Scooters.


General Electrics Business Screen

Portfolio Analysis


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A

Winner

s

Winner

sB

C

Question

Marks

D

F

Average

Businesse

s

EWinners

Losers

GLosers

H

Losers

Profit

Producers

Strong

Average

Weak

Low

Medium

High

Business Strength/CompetitivePosition

Ind u s t ry

Attra c tiv e ne

s s

Business

UnitIdentityIndustry/MarketSize Sha

re


The GE Business Screen is an improvement

Portfolio Analysis


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pover the BCG Matrix:

Based on many more variables than thesimplistic uni-dimensional measure

Industry attractiveness is assessed more completely(than just growth rate in BCG): Market growth rate,Industry profitability, Size, Pricing practices, Possible

Opportunities (& Threats)

Business Strength/Competitive Position isdetermined by: Market Share, distribution strengths,engineering capabilities and other factors givingcompetitive edge.

But suffers from lacking hard measures manyjudgemental elements for assessing the majorparameters.


International PortfolioAnalysis


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Analysis

2 Factors:

Countrys attractiveness Market size, rate of growth,

regulation

Competitive strength Market share, product fit,

contribution margin, market support

Portfolio Matrix for Plotting Products byCountry

Competitive Strengths


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Dec 2010 Strategic Management:Dec 2010 Strategic Management:162

Harvest/Divest Combine/License

Invest/Grow

Dominate/Divest JointVenture

Lo

w

Hi g

h

Hig

h

Lo

w

Co u nt ry At tra

c ti v e n

e s s

Selective Strategies

Advantages:

Disadvantages:

Portfolio Analysis


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gTop management

evaluates each offirms businessesindividually

Use of externally-oriented data to

supplementmanagement

judgmentRaises issue of

cash flow

availabilityFacilitates

communication

gDifficult to define

product/marketsegments

Standardstrategies canmiss opportunities

Illusion of scientificrigor though

subjective

Value-laden terms


Corporate Strategy


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Corporate Parenting:

Views the corporation in terms ofresources and capabilities that can beused to build business unit value as wellas generate synergies across businessunits.

Corporate Strategy


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Corporate Parenting: Strategic factorsThose elements of a company that

determine its

Strategic success or failurePerformance improvement

Analyze fit: Parenting-Fit MatrixSummarizes the various judgments

regarding corporate/business unit fitfor the corporation as a whole.

2 Dimensions Positive contributions parent can make Negative effects parent can have

Parenting-Fit MatrixCorporate Strategy


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Edgeof

Heartland

Heartland

Alien

Territory

Low

Hig

h High

Low

FIT between parentingopportunities

and parentingcharacteristics

M

ISFITbetwee

ncriticalsucc

ess

f

actors

andparenting

characteristics

Ballast

Value

Trap

Corporate Strategy

i l S


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Horizontal Strategy:

Corporate strategy thatcuts across business unitboundaries to buildsynergy across businessunits to improve thecompetitive position ofone or more businessunits

Corporate Strategy


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Horizontal Strategy:When used to leverage synergy, e.g.distribution strength of Unilever, this isCorporate Parenting;

When used to improve the competitive positionof a business with the support of others, it isforms a part of the Corporate competitivestrategy

Multipoint Competition when largeconglomerates compete in different businessesin different markets using corporate assistance,e.g. Pricing (subsidised) for new products, cross-holding for investment purposes etc.



169/208

Dec 2010 Strategic Management:Dec 2010

Case Study: T.I. & H.P.Case 13-3; Management Control Systems 12 edn

169Strategic Management: B S Guha

Corporate Strategy


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Recent Advances

The Blue Ocean Strategy

Sustainability & The Triple Bottom Line


Corporate StrategyBlue Ocean Strategy


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Promoted by W. Chan Kim & ReneeMauborgne, the approach suggests thatCompetition be made redundant by side-stepping it!

You will never ever see competition in quite the

same light. Kim & Mauborgne present a compellingcase for pursuing strategy with a creative, notcombative, approach.Carlos Ghosn, CEO: NissanMotor Co.

Our research confirms that there are no

permanently excellent companies just as there areno permanently excellent industries. And we havefound, we all, like corporations do smart things andnot-so-smart things. To improve the quality of oursuccess, we must study what made the difference

and how to re licate it Kim & Maubor ne

Corporate Strategy

Blue Ocean Strategy: Basic premises


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Red Oceans Represents all the industries in existence today: this

is the known market space; boundaries are definedand competitive rules of are known;

Companies try to outperform their rivals in thisspace: cut-throat competition turns ocean Red.

Blue Oceans. Are defined by the untapped market space, demand

creation and highly profitable growth

Created beyond existing industry boundaries as wellas from within the Red Oceans by expanding theexisting boundary.

Corporate Strategy



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gy p

Value Innovation the corner stone:Equal emphasis on value & innovation:

Value w/o innovation = transient value creation

Innovation w/o value = Futuristic or hobbyism

Value innovation occurs only when companiesalign innovation with utility, price & cost positionssimultaneously.

bleeding-edge technology and/or marketpioneering paves way for others.

Defies value-cost trade-off: differentiation vs.low-cost;

Blue Oceans are created in the AND world!

Corporate Strategy

Blue Ocean Strategy: Quick Comparison


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Align systems to bothdifferentiation andlow Cost

Align firm todifferentiation or Lowcost

Break the valuecost

trade-off

Make the value-cost

trade-off

Create & Capture newdemand

Exploit existing demand

Make the competitionirrelevantBeat the Competition

Create uncontestedmarkets

Compete in existingmarkets

Blue Ocean StrategyRed Ocean Strategy

gy p

Corporate StrategyBlue Ocean Strategy: Case Study


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o

Case in point Strategy Canvas for Southwest Airlines:n Line of business: short-haul passenger transportn Customers trade-offs: speed of airplanes vis--vis the

economy and flexibility of carsn

Rules of airline business: hub and spoke model,connectivity (un)certainties, multiple flights, schedules

with built-in wait , lounges, meals etc. provided, cost

high.n Southwests offer: Speed of air-travel, flexibility of

schedules via point-to-point routing, friendly butaustere service, low cost

= unprecedented utility for air travelers and a leap

in value for a lowcost model.

The Strategy canvas

Corporate Strategy


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LowPrice

Meals Lounge Seatchoice

Hubconnect

FriendlyService

Speed Freq. Departpoint to Point

X

X X X X X

X

X

Cars

o

o

o

o

o

oo

o

NormalAirlines

++

+

+ +

+

+

+

SWestAirlines

Corporate Strategy

Blue Ocean Strategy: Prognosis


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Red Oceans will always be a fact of Business.But with Supply outstripping Demand, operatingstrategies for this while necessary, will not besufficient for sustained high performance;

To seize new profit and growth opportunities,Blue Oceans need to be created. Though theterm Blue Oceans is new, their existence isnot.

Business launch profiling (108 companies):86% were line extensions; accounting for 62% ofrevenue and 39% of profits;14% were in blue oceans; 38% of revenues and 61% ofprofits.

If I listened to customers, Iwould try to make a faster

horse!Henry Ford.

Corporate StrategySustainability


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Earths resources are exhaustible they will run outsome day:

How will we run our power-plants, cars and stoves?

Life-forms are disappearing & rapidly: There are just about 1400 tigers left in India!

Human Life expectancies are rising so are newer, deadlierdiseases !

Recent survey in US, post economic meltdown, showsthat >80% wealth is with < 20% people: People in US polled a 50-50 balance is fair

Is the World and Life-style that we take for grantedbe there forever i.e. Sustain?

Sustainability: viewpoints

Corporate Strategy


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y p

Sustain:DICTIONARY

Sustainability

To endure withoutyielding: withstand

To keep up ormaintain

Synonyms: Aid,

Carry, Endure,Keep, Preserve,Support

Is being used more

in the sense of

The most widelyquoted definition issustainabledevelopment isdevelopment thatmeets the needs of

the present withoutcompromising theability of futuregenerations to meet

The definition contains two key concepts:

Sustainability: viewpointsCorporate Strategy


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The definition contains two key concepts:

Needs: in particular the essential needs of theworlds poor to which overriding priority should begiven

Limitations: imposed by the state of technology andsocial organizations on the environments ability tomeet present and future needs

The definition was extended to Business: for a business enterprise, sustainable development

means adopting strategies and activities that meet the

needs of the firm and its stakeholders today whileprotecting, sustaining and enhancing the human andnatural resources needed for the future.



181/208


Economy

Society Envmental

ShiftingPriorities

IndustrialAge

NewAge



182/208


A universally accepted definition of sustainabilityis difficultbecause it is expected to achievemany things:

factual and scientific: a clear statement of a specificdestination. The simple definition "sustainability is

improving the quality of human life while living within thecarrying capacity of supporting eco-systemsconveysthe idea of sustainability having quantifiable limits.

call to action: a task in progress or journey,

therefore apolitical process, so some definitions setout common goals and values e.g.The Earth Charter.

The idea of sustainability is age-old; societies overtime have learnt to balance social, environmental

Corporate Strategy


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,

and economic concerns. At its core, sustainable development is aboutcreating an interactive and appropriate balancebetween:

Social Equity: i.e. Human rights, peace, justice, gender

equity, cultural diversity etc. Environmental protection: referring to natural

environment i.e. Air, water, biodiversity, forests, energyetc.

Economic development: understanding the limits andpotential of economic growth factoring in povertyreduction, responsible consumption, corporateresponsibility, employment and allied themes.

Dec 2010 Business Sustainability 183

The triple bottom line (abbreviated as"TBL" or "3BL" and also known as

Corporate Strategy


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TBL or 3BL , and also known as

"people, planet, profit") captures anexpanded spectrum of values and criteriafor measuring organizational (and societal)success.

The concept of TBLdemands that acompany's responsibilitylies with Stakeholders notShareholders. Here,"stakeholders" refers toanyone who is influenced,directly or indirectly, bythe actions of the firm.Accordingly, the businessentity should be used as avehicle for coordinating SustainAbi

lty

Triple bottom line score-card means expanding thetraditional reporting framework to take into account

TBL contd


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p gecological and social performance in addition to financialperformance. "People, planet and profit" clearly describesthe triple bottom lines and the goal:

"People" (human capital) pertains to fair and beneficialbusiness practices toward labour and the community and

region in which a corporation conducts its business. "Planet" (natural capital) refers to sustainable environmental

practices. A TBL endeavor reduces the ecological footprint.

"Profit" is the economic value created by theorganisation after deducting the cost of all inputs,including the cost of the capital tied up.



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Case Study: Hindustan LeverCase 15-4; Management Control Systems 12 edn.

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Strategy Implementation


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