strategic planning and management

Strategic planning &management. : 

Strategic planning &management. Case-The banking industry. Structure-6 main parts.PSBs,OPS,NPSBs,FBs,Cooperative banks and NBFCs Public sector banks Regime of reforms Other competing banks Customer is the king Emerging trends @Banking

Concept of strategy : 

Concept of strategy Strategy is the overall plan of a firm deploying its resources to establish a favourable position and compete successfully against its rivals Strategy describes a framework for charting a course of action Competitive advantage allows a firm to gain an edge over rivals while competing The essence of strategy is to match strengths and distinctive competence with terrain.

Features of strategy : 

Features of strategy Strategy is about winning Strategy offers broad guidelines Strategy is forward looking Strategys life span is limited Strategy is a product of top management thinking Strategy is a dynamic and flexible programme of action Strategy is an inherently creative process

Elements of a strategy : 

Elements of a strategy Goals-A strategy invariably indicates the long term goals towards which all efforts are directed Scope- A strategy defines the scope of the firm and the broad areas of activities Competitive advantage-A clear statement of what competitive advantages the firm will pursue and sustain Logic-is the core of and most important element of a strategy

Types of strategies : 

Types of strategies Master and grand strategies that cover the entire pattern of an organisations objectives Programme strategies are more specific and are concerned with the deployment of resources Sub-strategies are more detailed than programme strategies Tactics are action plans of specific step by step methods in executing strategies

Strategies vs Tactics : 

Strategies vs Tactics Developed by management and never delegated below a certain level Generally the focus is long –term The uncertainty level is quite high Affect various parts of an organisation significantly Employed and related to lower levels of management The focus is on short-term Decisions are more certain The reach is limited to only specific segments of an organisation

Case- Nirma detergents : 

Case- Nirma detergents Annual capacity of 6.5 lac tonne of detergents World largest detergent manufacturer Survived the onslaught from Levers Surf Nirma was low priced at 11 Rs per kg while Surf was at 32 Rs per kg They also launched toilet soaps later and achieved a 20% market share Low price,aggressive rural push,tapping export markets,brand ambassadors

Levels at which strategy operates : 

Levels at which strategy operates Many organisations develop strategies at three different levels Corporate level- It is the process of defining the overall character and purpose of the organisation The business it will enter and leave and how resources will be distributed among those businesses Strategy at this level is typically developed by the top management and are broad based carry greater risk and affect most parts of the organisation

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Business level –Its primarily concerned with how to manage the interests and operations of a particular unit within the organisation A strategic business unit(SBU) is a distinct business with its own set of competitors Generally the heads of respective business units develop business strategies with the top managements approval Deals with determining responses to market changes,allocating resources and coordinating functional level strategies

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Functional level- It’s the process of determining policies and procedures for different functions of an enterprise Different functions could be Marketing, finance,personnel etc. These are developed by functional managers and are reviewed by business unit heads

Approaches to strategic decision making : 

Approaches to strategic decision making The design approach- was proposed by Alfred Chandler in the early sixties Top managers generally formulate strategy after careful analysis of opportunities in the environment and the strengths and weaknesses in the organisation He concluded that changes in corporate strategy will preceede and cause changes in organisation structure

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He founded that all the companies studied and shifted their designs from a simple centralised pattern to elaborate pattern The influence of strategy on structure is Strategy determines organisational tasks Strategy influences the choice of technology and people Strategy determines the specific environment for the organisation to operate

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The analytical approach- was propounded by Igor Ansoff He tried to examine two things i,whether strategy had a distinct context of its own ii, whether it can be decribed in a structured way He felt that strategy can be examined from several angles Corporate level-what business should we be in

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Business level-How to function in a business once selected Functional level – How to manage internal operations such as manufacturing,finance etc Institutional level-How to manage external relationships in an ever changing dynamic, political world Ansoff felt that the strategy can be divided in to certain interrelated components helping managing growth through diversification

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The positioning approach-During the seventies the diversification moves of many large companies have failed to deliver the anticipated synergies In the place of diversification and growth,firms started putting more emphasis on achieving competitiveness Michael porter proposed that a firms profitability is dependent on five important forces ie,supplier power,buyer power,threat from new entrants,threat from substitutes and competitive rivalry within an industry

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Porter suggested three strategies to gain competitive advantage Overall cost leadership-Here the firm works hard to achieve the lowest cost of production and distribution Differentiation-Here the firm tries to offer something unique to the customers Focus-Here the firm focuses its effort in serving few market segments than whole

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Resource based view-In the 90’s there has been a surge of interest in the role of a firms resources and capabilities as a basis In a world where customer preferences are volatile and identity of customers and technologies serving them are changing Therefore the focus must shift to its own internal strengths and defend its strategy in terms of what it is capable of doing better than its rivals

The strategic management process : 

The strategic management process Case-The two wheeler industry The global scenario- Key players are Honda,Yamaha,suzuki and Kawasaaki Indian scenario- presence of global players Honda ,Yamaha ,and Suzuki Motor cycles constitute 75% of the market and 25% for scooters Scooters and mopeds have lost ground

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Bajaj still the leader in geared scooter market The follower is LML Ungeared scooters also hit the market Mopeds losing out Intense competition in the bike market The success brands are splendor and Pulsar Emerging picture-25% more sales every year

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Strategic management process-refers to the steps by which management converts a firms mission,objectives and goals in to workable strategy It has two parts;an information process and a decision process The information process involves collecting and analysing information about external and internal environments

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External factors are taken in to consideration to find major opportunities and threats that will now confront the organisation The decision process covers 4 important steps Development of alternatives , choice, implementation and assesment Based on the external and internal analysis, strategists first identify possible strategic alternatives In the next step the planners decide how to translate strategic choices in to action followed by the evaluation of the effectiveness

Purposes of strategic management process : 

Purposes of strategic management process Strategic management basically aims at formulating and implementing effective strategies Core competence-An organisations core competence is something it does exceptionally well in comparision to its competitors It provides the firm a, access to variety of products/markets b,contribute customer benefits in end products and c,is an exclusive and inimitable preserve of the firm that is inimitable,long lasting and cannot be copied easily by the competitors

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Synergy- When organisational parts interact to produce a joint effort that is greater than the sum of the parts acting alone,synergy occurs Managers need to achieve as market , technology and management synergy as possible when arriving at strategic decisions When one product or service strengthens the sales of one or more other products or services, market synergy occurs

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Wall marts new super centres and super K marts,that put a discount store and grocery store under one huge roof are good examples Cost synergy can occur in almost every dimension of organised effort Technology synergy involves transferring technology from one application to another thus opening up new markets.

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Value creation- Exploiting core competencies and achieving synergy help organisations create value for their customers Value is the sum total of benefits received and costs paid by the customer in a given situation Ideally the purpose of the strategy should be to create a long lasting value that is greater than the cost of resources used to create it.

Steps in strategic management process : 

Steps in strategic management process Strategic management process is the full set of commitments,decisions and actions These are needed for a firm to achieve strategic competitveness and earn above average returns When a firm creates such a strategy that other firms are unable to duplicate or find too costly to imitate,the firm has sustainable competitive advantage

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Embarking on environmental analysis-external Every organisation is a sub-system which works as a part of supra-system namely environment made of external forces The forces namely social,cultural,legal, tehnological,ecological are constantly changing and influencing the environment An organisation being part of the environment is subject to influence of different variables

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Debarking to corporate analysis(Internal)- The external environment releases opportunities studded with threats and the extent the company encashes it Its depend on its ability that its internal strengths and weaknesses Its corporate analysis which touches the measurment of these companys strengths and weaknesses

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Statement of corporate mission and objectives Organisations are deliberate creation of human beings having a definite mission towards which all resources are directed A mission is a fundamental and unique purpose by which it becomes outstanding or distinct from another Compared to mission which is long lasting,the objectives to attain results are of lesser value

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Identification of strategic alternatives- The exercise of exposing to the external environment and keeping updated of its own strengths and weaknesses This is to bolder and sharper to develop more alternatives Resultantly the manager is to choose between the alternatives for the best suited one

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Choice of right strategy-Once the strategic alternatives are available,there is need for right strategy to tackle the situation A strategy is sure to influence organisations working or working in any predetermined manner Though a manager,strategist is to be objective and open minded,not to be subjective

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Implementation-Once the strategists finalise the strategy and has the approval by the higher ups,this dream is to be translated in to a reality This is because the soundest strategy has no meaning unless it is put to action It calls for designing the suitable organisation structure,able and effective leadership, allocating resources and have a monitoring system

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Evaluating and controlling – Business being an ongoing activity,the function of control never ends The variation between what is expected and actual happening is measured,causes are traced and corrective action is being taken The variations are likely to be the areas of choice of strategy,change in the mission and objectives or change in the org. structure

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Strategic intent- The companies which have achieved global leadership began with an ambition out of line with their resources However this created a strong desire to win and they sustained the same over a long spell of time This desire or burning desire is known as strategic intent

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Strategic intent is really an energising dream which provides the emotional future It implies a significant leap beyond the current capabilities and resource base for attaining future leadership The strategic intent signifies the very purpose of the organisation which is striving for

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Definition- Strategic intent a phrase coined by CK Prahalad and G Hamel,They defined strategic intent as follows Strategic intent is an obsession with an organisation-an obsession with having ambitions that may be even out of proportion to their resources and capabilities.This obsession is to win at all levels of the org. while sustaining that obsession in the quest of global leadership

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Strategic fit-is the heart of the strategy where techniques like swot analysis are used to assess the organisational capabilities This means that the strategy becomes a compromise between what the environment has to offer and org. has to achieve Strategic fit is developing strategy by identifying opportunities in business environment and adapting competencies

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Strategic Intent –LIC of India Vision-To transform in to a transnational financial conglomerate of pride to India Mission-To enhance quality of life through financial security Values-Caring,courtsey,innovation,intergity Culture- Agility,adaptability,collaboration, empowerment and excellence

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Commitment To provide insurance cover and financial security to every insurable segment including the weaker sections and rural sector To provide prompt,efficient and courteous service to the customers To the employees a sense of participation making them the partners in progress

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Standards –for fair deal with customers and their grievances Objectives:- Spread life insurance to all segments Maximise mobilisation of savings Conduct business with utmost economy Promote amongst all agents and employees a sense of participation and job-satisfaction

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Strategic intent of IOC Unique distinctions- one of the very few public sector cos in the fortune 500 list,owns 40% of Indias total refining capacity,55% market share After the deregulation in 2002,issues like having no presence in exploration & production,dependance on ONGC for crude oil To prepare itself for surviving in the future,IOC has compiled its strategic intent

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IOCs vision- achieve intl.standards,customer delight through quality products &services Mission-Maintain national leadership Objectives-Focus on cost,quality&customer Corporate strategies- expansion,diversification, and integration through alliances&JVs Business strategies-Harnessing new opportunities in petro-chemicals and power Functional strategies- Focussing on R&D,training, exploration,production and fuel management

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Hierarchy of strategic intent-is the follow up of companys intensions ranging from vision percolating through mission This is followed by business definition,goals and objectives and ending at strategies These objective culminate to corporate level,business level and functional level strategies

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The implications of hierarchy of strategic intent are It serves as charter of the aims of the orgplans Helpful in laying down aims of different sub-systems within an org. Powerful means of communicating the org. intent down the flow Ensures the creation of a result oriented system to attain the mission and realise the vision

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Defining the company mission and objectives- It’s the starting point of strategy formulation Every org.is a deliberate and purposive creation They have one or other objectives constituting the end results for which they strive hard The end results are mission,purpose,objective, goal,target and so on

Vision : 

Vision The term vision is rather difficult to define as it is dreamt than articulated A vision articulates the position that an organisation intends to attain in the distant future Vision encapsulates the basic strategic intent Eg:Henry ford dreamt about making an affordable automobile for the masses

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Definition- Vision is the category of intentions that are broad,all-inclusive and forward thinking In strategic management,the word vision is strategic vision A strategic vision is a road map showing the route company intends to take in delivering and strengthening its business

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Charecteristics of a effectively worded vision- Graphic-a well stated vision paints a picture a picture of the kind of company the management is striving to create &market % Directional-says about the companys journey and signals the kinds of business&strategies Focussed- A well stated vision is specific enough to provide managers guidance in making decisions and allocating resources

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Flexible- Visions about a companys future path needs to change as events unfold and circumstances change Desirable-A well stated vision appeals to the long-term interests of the stake holders Easy to communicate- A well stated vision is explainable in less than 10 mts and ideally can be reduced to simple memorable slogan Eg:A car in every garage-vision of Henry Ford

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Vision statement of Aditya birla K M group How will we compete in future business ? What returns were available ? What are the major strengths and weaknesses Were do we see ourselves in a future data? What are the major opportunity and threats in the radar and How to overcome them

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Mission and purpose- The difference in both is synergy Mission has an external orientation and relates organisation to the society Mission amplifies what brings a firm to business or why it is there The mission statement helps the organisation to link its activities to requirements of the society

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HUL ,the no 1 consumer company has its mission as Commitment to national priorities Part of peoples life in the grass root level Making a difference to India and Indians Employment generation,development of backward areas,agricultural linkages,exports

What do mission statements do : 

What do mission statements do Mission statements establish boundaries to guide strategy formulation Mission statements acknowledge responsibilites to various stake holders and establish standards for organisational performance The dimensions are public responsibility, physical and financial resources,market standing,innovation,productivity&profitability

The need for explicit mission : 

The need for explicit mission Unity of purpose-unity in various sub systems Basis of motivation- for manpower&resources Foundation of standard- for performance, stanardisation of working conditions etc Creates organisational climate-invigorating better performance at all levels&culture Serves as a means of control- parameters are quality,quantity& definite time frame

Essential features of a mission statement : 

Essential features of a mission statement Mission stated is clear cut-in terms of words used and intentions smelt Mission stated is feasible-attainable&realistic Mission stated is niether too narrow or too broad Mission stated is distinctive-distinctive and stands out from others,contributions to the society

Goals and objectives : 

Goals and objectives Goals are attempts to make mision statements more specific as mission tries to make vision more specific,following are the features Financial and non-financial issues Facilitate reasoned trade offs They can be reached with a strech-camelpolicy Cut across functional areas-coordination and competition among departments

Objectives : 

Objectives Goals describe in fairly general terms what the organisation hopes to accomplish Objectives do it in more precise terms as to what will be done in order to reach the goal Objectives are short term and specific intensions of various operational units,often called as targets &key element in tactical plans The responsibility is shared by the middle and senior management

Charecteristics of objectives : 

Charecteristics of objectives They are measurable- They can be monitored and progress can be measured Each firm is keen about measuring the quality as it is a strategic goal or objective They incorporate the dimension of time- measurement has validity if its done with a definite time frame Eg: companys financial and non-financial performance is measured at the end of the year

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They reduce conflict- Clearly stated objectives reduce the possible rivalry among the organisation members Objectives encourage cooperative management behaviour The importance is to overall organisational objectives than personal objectives Facilitates benefitial intra organisational relationships like resource and info.strategy