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Agenda10:30 Strategy Development
01:00 Lunch
02:00 Strategy Implementation
03:45 Case Presentations
05:30 The Forgotten Customer
07:00 End
3:30Tea
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Sujit Das Strategy Consultant
Education: B.Tech; PGDBM
Experience:
44 years
* Manufacturing * Marketing
* SCM * Quality *Consulting
Siemens Fujitsu-ICIM TMTC
Areas of Interest: Strategy; Business Performance
An Approach to Strategy Development
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I believe that lack of Strategic Planning hasa profound influence on the position of a Business Organization in the market placeAnd most of the problems of theorganization can usually be traced to lack of Planning
- Ratan Tata
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Somewhere between the hallucinations of senior management and the cold reality of the market lies something called the Business Plan. There are two major steps to building a Business Plan:
• Gather information
• Ignore it
- Scot Adams, The Dilbert Principle
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Management Evolution
OperationalPerformance
ConformanceQuality
Strategy DrivenPerformance
Customer ValueManagement
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Presentation Coverage
What is Strategy?
Developing a Strategy
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What is a Strategy?
Business Concept
Where to compete How to compete
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What is a Strategy?
Where to compete
• Customer segments
• Product segments
• Market segments
• Channel segments
• Vertical integration
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What is a Strategy?
How to compete
• Value proposition
• Competitive advantage
• Partner relationships
• Relationship with other stakeholders
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What is a Strategy?
Integrated set of actions to create and capture value
ValueSelection
ValueManagement
ValueEnhancement
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What is a Strategy?Value Selection
TargetCustomers
KeyCustomer
Benefits
KeyCustomer
Costs
Comparisonwith
Competition
Leading to
Value PropositionClear, viable, achievable
Evidence of acceptable return
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What is a Strategy?Value Management
Design Manufacture Distribution Pricing
Leading to
Value Creation & DeliveryAs per Value Proposition
defined earlier
Service
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What is a Strategy?Value Enhancement
ContactManagement
RelationshipManagement
Leading to
Customer Loyalty & Positive Referral
ImageManagement
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What is a Strategy?Business Concept
Where tocompete
How tocompete
Int-e-grat-ed set of actions
ValueSelection
ValueManagement
ValueEnhancement
Leading to Leading to Leading to
Value Proposition Value Creation & Delivery
Customer Loyalty& Referral
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Steps in Strategy Development
Step 1: Visit the company purpose: Mission & Vision
Step 2: Assess the demand
Step 3: Understand the competition
Step 4: Understand the operating environment
Step 5: Summarize the Industry/ Segment scenario: current & likely
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Steps in Strategy Development (contd)Step 6: Identify the CSFs and their measures
Step 7: Determine the company’s ability to compete with respect to the CSFs
Step 8: Develop Strategic Options
Step 9: Develop the chosen strategy
Step 10: Develop key initiatives and short & long term targets of performance, with appropriate comparisons.
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Developing a Strategy
Step 1: Visit the company purpose:
Mission and Vision
The vision and mission statement sets the context for the development of a strategy. It defines a direction for the company, which the strategy builds on and translates into action.
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Developing a StrategyExample: Role of purpose in developing a strategy
To be a dominant player in time-keeping business
Dominance in watches, table clocks wall clocks
To be a dominant player in personal accessoriesbusiness
Diversification into jewelry, spectacle frames, pens
Leading to
Leading to
Mission 1
Mission 2
-----------------------
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Developing a Strategy
Step 2: Assess the demand
Demand assessment is best done by suitable segmentation of the market. Market segmentation enables the company to understand the relative potential of various segments in terms of volume, growth and margins.
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Developing a Strategy
Demand assessment steps:
1. Select the basis for segmenting the market2. Estimate segment size and growth3. Identify key demand drivers and their impact4. Understand price trends
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Example: Toothpaste market segmentation
Segment: Sensory Sociable Worrier
Benefit Flavour Brightness DecaySought of teeth prevention
Demographic Children Teens LargeStrengths Families
Lifestyle: Hedonistic Active Conservative
Ref: RJ Haley, “ Benefit Segmentation: A decision Oriented Research Tool”
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Developing a Strategy
Step 3: Understand the competition
The strategies adopted by competition need to be understood, both for current competition and as well as anticipated competition. Suppliers of substitute products also need to be included, as appropriate.
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Developing a Strategy
Competitive strategies need to be understood in terms of:
Corporate Initiatives: mergers, collaborations etc Marketing: Price, product offerings, volumes,
promotions, distribution etc Internal Efficiencies: cost control, logistics, R&D etc Manufacturing Strategies: vertical integration,
outsourcing etc
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Developing a Strategy
Step 4: Understand the operating environment
The operating environment consists of and is influenced by: Suppliers, distributors, technology changes, Government policies, society and macroeconomic conditions.
(P-E-S-T-E)
The operating environment consists of players and events which influence the behaviour and performance of the customer, the company and the competition.
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Developing a Strategy – Industry Scenario
Political
Economic
Social
Technological
Environmental
Customer
Company Competition
Distributors
Suppliers
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Developing a Strategy
Step 5: Assess the attractiveness of the industry/ segment
Industry/ segment attractiveness is assessed in terms of:
Size
Growth
Margins
Potential
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Developing a Strategy
Step 6: Identify the Critical Success Factors (CSF) and their measures
Critical Success Factors are those factors on which a company needs to excel in, for it to be successful in the chosen industry or segment. The set of CSF should not only reflect current reality but also take into account future industry scenarios.
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Developing a Strategy
Critical Success Factors are largely dependant on and influenced by:
Customers needs and desires: stated and latent Competitor actions: current and anticipated Events in the operating environment: current and
anticipated
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Developing a Strategy
Step 7: Determine the company’s ability to compete with respect to the CSF
A company’s ability to compete is determined by the company’s current and projected performance relative to competition as well as industry benchmarks. While assessing its ability to compete, a company must consider the strengths it currently possesses or is confident of developing within a reasonable time frame.
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Developing a Strategy
Step 8: Develop strategic options:
- Where to compete
- How to compete
Based on attractiveness of the segment as determined in Step 5 and the company’s ability to compete, as determined in Step 7, various strategic options (where to compete and how to compete) need to be generated. These are then viewed from the point of view of risk and return, leading to selection of the most appropriate strategic option.
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Developing a StrategyTypical Risk-Return Plot
Industry/ SegmentAttractiveness
Ability to compete
High risk,High return
High risk,Low return
Low risk,High return
Low risk,Low return
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Developing a Strategy?
Step 9: Develop the Chosen Strategy
Where tocompete
How tocompete
Key Action Plans
ValueSelection
ValueManagement
ValueEnhancement
Leading to Leading to Leading to
Value Proposition Value Creation & Delivery
Customer Loyalty& Referral
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ExampleValue Selection
TargetCustomers
KeyCustomer
Benefits
KeyCustomer
Costs
Comparisonwith
Competition
BlueCollar
Reliability • Reasonable price premium• Low service cost
Superiorquality
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Example:Value Management
Design Manufacture Distribution Pricing Service
Trouble free workingin various operatingenvironment
Outsource to control costs
• Wide coverage• Prominent presence
MaintainPricepoints
Set up dealer service network
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Example:Value Enhancement
ContactManagement
RelationshipManagement
ImageManagement
Brand leverageon the Tata name
Manage customer interfacesthrough dealer network
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Developing a Strategy
Step 10: Develop key initiatives and short and long term targets and projections of performance, with appropriate comparisons
Key initiatives, responsibilities and resource requirements are worked out in order to meet the targets set. Key departmental strategies, action plans and KRAs emerge out of these initiatives and are then deployed throughout the company
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Time FrameStep 1: Visit the company purpose: Mission & Vision
Step 2: Assess the demand
Step 3: Understand the competition
Step 4: Understand the operating environment
Step 5: Summarize the Industry/ Segment scenario: current & likely
1 week
3 weeks
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Time Frame (contd)
Step 6: Identify the CSFs and their measures
Step 7: Determine the company’s ability to compete with respect to the CSFs
Step 8: Develop Strategic Options
Step 9: Develop the chosen strategy
Step 10: Develop key initiatives and short & long term targets of performance, with appropriate comparisons.
4 weeks
4 weeks
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Outcome of Strategy Development Process
StrategyDevelopment
Process
• Finalization of CSFs
• Key Strategies andAction Plans
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