Strategy

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STRATEGIC MANAGEMENT : 

STRATEGIC MANAGEMENT

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START-UP CHALLENGE Think Big Start Small Scale-up

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PROGRESS CHALLENGE Forget Borrow Learn

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Evaluation of Management Concerns

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The Evolution of Strategic Management Principle Concepts & Techniques

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The Evolution of Strategic Management Organizational Implications

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SOME DEFINITIONS OF STRATEGY “Strategy, the art of war, is especially the planning of movement of troops and ships, into favorable positions; plan of action or policy in business or policies” Oxford Pocket Dictionary

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SOME DEFINITIONS OF STRATEGY “Strategy is determination of long term goals and objectives of an enterprise and the adoption of courses of action and the allocation of resources necessary for carrying out these goals” Alfred Chandler ‘Strategy & Structure’

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SOME DEFINITIONS OF STRATEGY “Strategy is a set of managerial decisions and actions involved in making a major market-creating business offering” W. Chan Kim ‘INSEAD Faculty’

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SOME DEFINITIONS OF STRATEGY “What Business Strategy is all about is, in one word – Competitive Advantage. The sole objective of Strategic Planning is to enable a company to gain, as efficiently as possible, a sustainable edge over its competitors. Corporate Strategy thus implies an attempt to alter a company’s strength relative to that of its competitors in the most efficient way” Kenichi Ohmae ‘The Mind of the Strategist’

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STRATEGY IS DEFINED AS THOSE ACTIONS THAT A COMPANY PLANS, IN RESPONSE TO, OR IN ANTICIPATION OF, CHANGES IN ITS EXTERNAL ENVIRONMENT, ITS CUSTOMERS AND ITS COMPETITORS. STRATEGY IS A WAY COMPANY AIMS TO IMPROVE ITS POSITION VIS-À-VIS COMPETITION.

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Strategy narrowly defined as “ the art of general “(Greek StratAgos). It defines “what we want to achieve” & chart out course action, to survive & sustain growth in changing environments. Strategy is a set of Key decisions made to meet Objectives. Strategy is the determination of the basic long term goal of an enterprise, and the adoption of courses of action and allocation of resources necessary for carrying out goals.

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STRATEGY IS ABOUT WINNING

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VOCABULARY OF STRATEGICMANAGEMENT VISION : Desired future state; the aspiration of the Organization What are our Dreams and Aspirations? What do we want to look like in 5, 10, 15 years? Where do we want to go?

VOCABULARY OF STRATEGICMANAGEMENT : 

VOCABULARY OF STRATEGICMANAGEMENT MISSION :It is the unique purpose or reason for organization’s existence. Overriding purpose in line with the values or expectations of the stakeholders Who are we? What business are we in?

Good Mission Statements : 

Good Mission Statements Focus on limited number of goals Stress major policies and values Define major competitive spheres within which the company will operate by defining the: Industry. Products and applications. Competence. Market-segment Geographical Vertical limit

eBay : 

eBay We help people trade anything on earth. We will continue to enhance the online trading experiences of all – collectors, dealers, small businesses, unique item seekers, bargain hunters, opportunity sellers, and browsers.”

VOCABULARY OF STRATEGICMANAGEMENT : 

VOCABULARY OF STRATEGICMANAGEMENT OBJECTIVE : Quantification or more precise statement of objective Definable: It should defined to compare the performance Quantifiable: It should be expressed in terms of “Value Or Market share” ( Avoid Vague terms such as “increase, improve or maximize”) Achievable: e.g. To increase sales of product globally by 30% in real terms within 5yrs. To increase market share for the product in the India from 10%-15% over 2yrs

VOCABULARY OF STRATEGICMANAGEMENT : 

VOCABULARY OF STRATEGICMANAGEMENT GOAL: General statement of Aim or Purpose. It is an open ended statement of what one wishes to accomplish with no quantification and no time frame for completion.

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GOAL OBJECTIVE STRATEGY To be No. 1in the market Increase market share by 15% in three years Increase product promotion Design product pricing Penetration New market development Product-Service mix Quality improvement

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VOCABULARY OF STRATEGICMANAGEMENT CORE : Resources, Processes, Skills COMPETENCE and Experience, which provide superior Competitive Advantage STRATEGY : Long Term Direction STRATEGIC : Combination of Resources, ARCHITECTURE Processes and Competencies to put strategy in action

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VOCABULARY OF STRATEGICMANAGEMENT CONTROL : Monitoring of Action Steps to : (a) Assess effectiveness of Strategies & Action (b) Modify Strategies & Action as necessary

Strategy Types : 

Strategy Types Broadly Classified as Corporate Strategy. Business Strategy. Functional Strategy.

Corporate Strategy. : 

Corporate Strategy. Over all attitude of corporation towards its various businesses and product lines in terms of Stability growth & management. e.g.. Corporate Strategy of growth diversifying base in retailing into delivery business.

Business Strategy. : 

Business Strategy. Usually occurs at business unit & product level. It is composed of Competitive & Cooperative Strategies e.g.. Differentiation Competitive that emphasizes innovative products with creative design. Cooperative Strategies promotes alliance, technical collaborations, etc.

Functional Strategy : 

Functional Strategy It is the approach taken by a functional area, such as Marketing or R&D to achieve corporate and business unit Objectives & strategies by maximizing recourse productivity.. e.g.. Dell directly selling Computers to consumers to reduce distribution cost & increase customer service.

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NINE COMPLEX AND INTERRELATED ELEMENTS OF STRATEGY 1. VISION What are our Dreams and Aspirations? Where do we want to go? What do we want to look like in 5, 10, 15 years?

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NINE COMPLEX AND INTERRELATED ELEMENTS OF STRATEGY 2. MISSION Who are we? What business are we in?

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NINE COMPLEX AND INTERRELATED ELEMENTS OF STRATEGY 3. VALUES What do we prize? What drives our business? What are our criteria for making ethical decisions?

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NINE COMPLEX AND INTERRELATED ELEMENTS OF STRATEGY 4. MARKETS Which markets should we be in? Which markets do we need to create? What should be our basic Customer Orientation?

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NINE COMPLEX AND INTERRELATED ELEMENTS OF STRATEGY 5. CORE COMPETENCIES What are we good at? What do we need to be good at? How can we leverage our competencies into products and services for market we serve?

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NINE COMPLEX AND INTERRELATED ELEMENTS OF STRATEGY 6. PRODUCTS & SERVICES What kinds of products and services should we provide for the markets we serve? How do we use these products to carve out a market niche?

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NINE COMPLEX AND INTERRELATED ELEMENTS OF STRATEGY 7. BUSINESS ENVIRONMENT What Threats and Opportunities do we face from Environmental Factors? How do we track Key Environmental Activities and Trends?

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NINE COMPLEX AND INTERRELATED ELEMENTS OF STRATEGY 8. STAKEHOLDERS Which group of individuals are affected by the way we do business? How do we establish win-win relationship with our stakeholders?

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NINE COMPLEX AND INTERRELATED ELEMENTS OF STRATEGY 9. CRITICAL RESOURCES Which are the Critical Resources do we need to do business? What should we do to ensure a steady supply of these Resources?

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ECONOMIC PERFORMANCE IS THE FUNDAMENTAL REASON FOR ANY ORGANISATION TO EXIST CONSTITUENTS OF ECONOMIC PERFORMANCE ARE : To make present business effective; To identify potential and realise it; To make different business for a different future.

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CORPORATE OBJECTIVE : ECONOMIC PERFORMANCE TO MAKE PRESENT BUSINESS EFFECTIVE Maximizing Opportunities Maximizing Resources Maximizing Results

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CORPORATE OBJECTIVE : ECONOMIC PERFORMANCE TO IDENTIFY POTENTIAL AND REALISE IT Environment Scanning SWOT Analysis Turning obstacles into opportunities

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CORPORATE OBJECTIVE : ECONOMIC PERFORMANCE TO MAKE A DIFFERENT BUSINESS FOR A DIFFERENT FUTURE Focus on Core Competencies Creation of Learning Organization Redrawing Industry Boundaries

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STRATEGIC MANAGEMENT PROCESS STRATEGIC ANALYSIS STRATEGIC CHOICE STRATEGIC IMPLEMENTATION

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THE STRATEGIC PROCESS Establish Vision, Mission, Goals & Objectives Analyze External Environment Identify Strategic Alternatives Secure Acceptance of Decision Analyze Internal Environment Evaluate Strategic Alternatives Select Best Alternative/s Implement Selected Strategies Evaluate Strategies

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EXTERNAL ENVIRONMENT INTERNAL CULTURE OTHER RESOURCES STRUCTURE, SYSTEM, STYLES, SKILLS PURPOSE  VALUE  VISION  MISSION  STRATEGY POLITICAL ECONOMIC LEGAL TECHNICAL COMPETITION SOCIAL & CULTURAL RESULT

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Characteristics of Strategic Management and General Management Strategic Management General Management Fundamental Long Term Implications Complex Ambiguous Organization Wide Routinised Short Term Implications Operationally Specific

HIERARCHY OF STRATEGY : 

HIERARCHY OF STRATEGY FUNCTIONAL STRATEGY: Maximize Resource Productivity It is concerned with developing & nurturing a distinctive competence to provide a company or business unit with a competitive advantage CORPORATE STRATEGY: Overall Direction of Company and Management of Businesses BUSINESS STRATEGY: Competitive & Cooperative Strategies It occurs at Business unit or Product level. It emphasizes on improvement of competitive position of Corporations product & services Functional Strategy supports Business Strategy which in turn supports the Corporate Strategy

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ORGANIZATIONAL STRUCTURE & LEVELS OF STRATEGY Business Strategy Corporate Strategy Functional Strategy Div-A Div-B Div-C Prod. HR Fin. Marketing CorporateHead Office

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BUSINESS AND CORPORATE STRATEGIES Industry Attractiveness Which Industry should we be in? Competitive Advantage How Should we Compete? Rate of Return above the Cost of Capital How do we make money? BusinessStrategy Corporate Strategy

Corporate Strategy. : 

Corporate Strategy. Over all attitude of corporation towards its various businesses and product lines in terms of Stability growth & management. e.g.. Big Bazaars Corporate Strategy of growth diversifying base in retailing into delivery business.

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Directional Strategy: CORPORATE STRATEGIES Growth Strategies: To expand company’s activities Concentration: Growth potential & concentration of resources on current product lines. Vertical Growth: Taking over Suppliers/Distributors Function Back Ward Integration: Take over supplier’s fn. Forward Integration: Take over Distributor’s fn. Amount of Vertical Integration Full Integration Internally 100%own key supplies & distribution Taper Integration Internally less than 50% own key supplies Outsourcing Long term contract for key supplies & distribution Horizontal Growth: Expanding in the geographical location & increasing Product & Services in current markets b. Horizontal Growth: Popular methods to horizontal growth internationally. Exporting Licensing Franchising Joint Ventures Acquisitions Green Field Development Production Sharing Turnkey operations Management contracts Build, Operate, Transfer (BOT)

Corporate Strategy. : 

I. DIRECTIONAL STRATEGY: A. Growth Strategies: 2. Diversification: Less growth potential in current product lines a. Concentric Diversifying in related product or services.the search for synergy, the concept for two business can generate more profits together than separately. The point may be similar technology, customer usage, distribution, managerial skills, or product similarity . b. Conglomerate Diversifying in unrelated product or services. It is concerned primarily with financial considerations of cash flow or risk reduction. To transfer its excellent management system into less well managed acquired firm. Corporate Strategy.

Corporate Strategy. : 

B. Stability: Make no changes in company’s activities Pause Strategy: No Change Strategy: Profit Strategy: C. Retrenchment Strategy: Turn around: Contraction ‘Stop the Bleeding’ Cut back Size & Cost. Consolidation: Stream Line the company IBM Computer Service Provider Captive company: Company becomes another company’s sole Supplier or Distributor. Sell out/ Divestment: hotmail, Ranbaxy etc. Bankruptcy / Liquidation: Corporate Strategy.

Corporate Strategy. : 

II. Portfolio Strategy How individual product lines & business units can gain competitive advantage in the marketplace by using competitive & cooperative Strategies. III. Parenting Strategy: Mgt. Coordinates activities & transfers resources & cultivates capability among product lines & business units. Corporate Strategy.

Business Strategy. : 

Business Strategy. Usually occurs at business unit & product level. It is composed of Competitive & Cooperative Strategies e.g.. Apple uses computer Differentiation Competitive Strategy that emphasizes innovative products with creative design. Cooperative Strategies promotes alliance, technical collaborations, etc.

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Business Strategy is concerned with how the firm competes within a particular industry or market. To prosper within an industry, the firm must establish competitive advantage over its rivals

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BUSINESS LEVEL STRATEGY FACTORS FIRM’S INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT PROCUREMENT VALUE-CHAIN

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BASED ON COMPETITIVE ADVANTAGE MARKET FOCUS MARKET LIFE-CYCLE AND COMPETITIVE ADVANTAGE BUSINESS LEVEL STRATEGY

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BUSINESS POSITION FACTORS Level of Differentiation. Cost Position. Response Time. Financial Strength. Human Assets. Corporate Image.

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STRATEGIC MANAGEMENT PROCESS STRATEGIC ANALYSIS STRATEGIC CHOICE STRATEGIC IMPLEMENTATION

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ELEMENTS OF STRATEGIC MANAGEMENT STRATEGIC ANALYSIS STRATEGIC CHOICE STRATEGIC IMPLEMENTATION BASIS OF STRATEGIC CHOICE STRATEGYOPTIONS STRATEGY, EVALUATION & SELECTION RESOURCE ALLOCATION & CONTROL MANAGING STRATEGIC CHANGE RESOURCES, COMPETENCIES PURPOSE & EXPECTATIONS EXTERNAL ENVIRONMENT

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COMMON ELEMENTS IN A SUCCESSFUL STRATEGY Long Term Objectives Profound Understanding of Business Environment Objective Appraisal of Resources Evolution of Strategy Effective Implementation

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RESOURCES, BUSINESSES AND PROFITABILITY Business Opportunity Corporate Strategy Resources Profitability