Intro to Stg Mgmt

8/3/2019 Intro to Stg Mgmt

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STRATEGIC MANAGEMENT

At the end of this module the learning outcomes are

What is Strategic Management?

Scope of Strategic Management

Why Organizations focus on strategic planning?

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SUGGESTED READINGS

1.Strategic Management

byPearce & Robinson, 3rd Edition Chapter 1

2. Exploring Corporate Strategy

by

Johnson & Scholes, Chapter 1.

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Bharti Enterprises

Telecom market Second largest market of the world

Highly competitive

Low ARPU Severe competition

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Bharti Enterprises

Market leader

Started by Sunil Mittal

In 1995

Started from Delhi Circle First-generation entrepreneur

From Punjab

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Bharti Enterprises

Once got the license

Created ambitious plans

Make Bharti as globally admired

telecommunication company

Created a team of professionals

Responsible for day to day management

Three SBUs 5


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Bharti Enterprises

Each SBU headed by President

Functional heads report to President

Corporate office

Focuses on new initiatives/opportunities Subsequently entered into retailing and

financial services

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Bharti Enterprises

Where it stands now

Leader in mobile services in India

Entered African market

Collaboration with Zain Collaborated with Wal-Mart for

retailing/wholesaling.

Aiming to be leader in retailing 7


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Bharti Enterprises

What do we observe

An element of planning

Long-term

How businesses will grow Leadership and vision of Mr Sunil Mittal

A process of Strategic Management

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WHAT DO YOU THINK?

Should Bajaj Auto diversify into cars business

ITC bidding for Indian Airlines

ITC entry into garment retailing

HLLs foray into food business

Anchor (Switch maker) into toothpaste

Nestle into mineral water

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ORGANIZATION FACE

Dynamic Environment Global competition

Increasingly discerning customers

How should organization cope?

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NEED FOR PLANNING

- Deal with changing environment- Anticipate changes

- Long term approach

- Forecast

- Preempt competition

Need for Strategic Planning

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STRATEGIC MANAGEMENTPROMINENT COMPANIES/GROUPS - INDIA

1970s 2010s

- Birlas - Infosys

- Tatas - Vedanta

- Thapars - Wipro

- Singhanias(JK) - Reliance

- Shriram group - Ranbaxy

- Mafatlal - HCL

- HLL - HLL

- Bangurs - Adani

- Escorts - A.V. Birla

- ACC - TCS

- Goenkas - Mahindras 12


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WHAT DO WE FIND

- Decline in traditional groups

- Some have strengthenedOld Economy

AV Birla

Ranbaxy Reliance

Tatas

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Some have strengthened

New Economy

Infosys

Wipro (reshaped)

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WHAT DO WE FIND

- Some are evergreen

HLL Nestle

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The Nature and Value

of Strategic Management

Strategic management:The set of decisions and actions that

result in formulation and implementation

of plans designed to achieve a companys

objectives

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Nine Critical Tasks of Strategic

Management -- Tasks 1-5:

Formulate the companys mission

Conduct an internal analysis

Assess the external environment competitive and

general contexts

Analyze the companys options by matching its

resources with the external environment Identify the most desirable options in light of the

mission

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Nine Critical Tasks of Strategic

Management -- Tasks 6-9:

Select a set of long-term objectives and grand

strategies that will achieve the most desirable

options Develop annual objectives and short-term

strategies that are compatible with long-term

objectives and grand strategies

Implement the strategic choices

Evaluate the success of the strategic process for

future decision making

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What is Strategy?

Large-scale, future-oriented plan

Used to interact within competitiveenvironment to achieve company goals

Provides a framework for managerial

decisions Reflects a companys awareness of the

main elements of competition

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Dimensions of Strategic

Decisions Strategic issues require top-management

decisions

Strategic decisions overarch severalareas of a firms operations

Usually only top management has the

perspective needed to understand their

broad implications

Usually only top managers have the

power to authorize necessary resource

allocations20


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Dimensions of Strategic

Decisions Strategic issues require large amounts of the

firms resources

They involve substantial allocations ofpeople, physical assets, and money

Strategic decisions commit the firm to actions

over an extended period

In highly competitive firms, achieving and

maintaining customer satisfaction frequently

involves commitment from every facet of the

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STRATEGIC DECISIONS DIMENSIONS

ITC Ltd

- Started as tobacco company

- Later diversified into hotels, travel, otherFMCG products

- Allocation of large amount of resources

- Significant long term implications

- Future oriented

- Major multifunctional / multi-business

consequences

- Consideration of external environment 22


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Alternative Strategic Management

Structures

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LEVELS OF STRATEGY

Three Levels

1. Corporate2. Business

3. Functional

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Three Levels of Strategy

Corporate level:board of directors,

CEO & administration [Highest] Business level:business and corporate

managers [Middle]

Functional level:Product, geographic,and functional area managers [Lowest]

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CORPORATE LEVEL- Board of Directors

- CEO

- Responsible for

Financial performance

Nonfinancial goals

- What businesses to be in?

- Activities of each business

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CORPORATE LEVEL

ITC

Should we be in Hotels? Should we be out of financial services?

Should we get into stationery?

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Characteristics of Strategic

Management Decisions: Corporate

Often carry greater risk, cost, and

profit potential

Greater need for flexibility

Longer time horizons

Choice of businesses, dividendpolicies, sources of long-term

financing, and priorities for growth28


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BUSINESS LEVEL- CEO. Each business

- How to compete in each business?

- Basis, which segments

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BUSINESS LEVEL

ITC Tobacco Division

How do we compete

Low price or high price cigarettes

Make or buy cigarettes

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Management Decisions: Business

Help bridge decisions at the corporate and

functional levels

Less costly, risky, and potentially profitable

than corporate-level decisions

More costly, risky, and potentially

profitable than functional-level decisions

Include decisions on plant location,

marketing segmentation, and distribution31


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STRATEGIC MANAGEMENTFUNCTIONAL LEVEL

- Managers of each functional area

Head of Marketing

Head of Production

- Develop annual objectives

- Focus on implementation.

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STRATEGIC MANAGEMENTFUNCTIONAL LEVEL

ITC Tobacco Division

Marketing Objectives for 2010-11

Sales : 6000 Crores

Market share : 70%

Brand Awareness : 90%

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Management Decisions:Functional Implement the overall strategy formulated

at the corporate and business levels

Involve action-oriented and operational

issues

Relatively short range and low risk

Modest costs: depend upon available

resources

Relatively concrete and quantifiable34


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STRATEGY MAKERS

- Depends on Organization

Size

Structure

Formal

- Many Organizations

Separate department Coordinates entire function

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Strategy Makers

Ideal strategic team includes decision

makers from all three levels Top managers must give final approval

Strategic decisions coincide with

managers responsibilities

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Formality in Strategic

Management

Formality is the degree to which participation,

responsibility, authority, and discretion in decision-

making are specified in strategic management

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Strategy Makers: The CEO

A firms CEO plays a dominant role in

strategic planning

The CEOs principal duty is giving long-

term direction to the firm

The CEO bears ultimate responsibility for

the firms success and strategic success

CEOs are typically strong-willed,

company-oriented individuals

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STRATEGIC MANAGEMENT BENEFITS

Problem Prevention

Better decisions

Collective participation

Higher employee motivation

Fosters creativity

Activates change management

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STRATEGIC MANAGEMENT BENEFITS

Managers at all levels interact in planning and

implementing strategy Similar to participative decision making

Assessing strategy formulation requires looking at

nonfinancial evaluations as well as financial ones

Promoting positive behavioral consequences

enables achievement of financial goals

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Risks of Strategic Management

Managers time away from other

responsibilities

Unrealistic expectations promised by strategy

formulators

Possible disappointment of participatingsubordinates if goal is not reached

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Strategic Management Process

Businesses vary in formulation and other

processes

The basic components of the models used to

analyze strategic management are similar

Strategic management is aprocessa flow

of information through interrelated stages ofanalysis toward the achievement of some

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Strategic Management Model

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Components of Strategic

Management Model Company Mission

External Analysis

Long-Term Objectives

Short-Term Objectives

Policies Empowering

Action Strategic Control &

Continuous

Improvement

Internal Analysis

Strategic Analysis &

Choice Generic & Grand

Strategies

Functional Tactics

Restructuring,Reengineering &Refocusing


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COMPANY MISSION

- Purpose of existence

- Statement of purposeExample

IBM

Storage and handling of data.

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INTERNAL ANALYSIS

- Quality

- Quantity

Financial

Human

Physical Resources

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EXTERNAL ANALYSIS

- PEST

- Competitive

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STRATEGIC ANALYSIS & CHOICE

To achieve mission

Various alternatives

Choosing alternative Criteria

Qualitative

quantitative

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LONG TERM OBJECTIVES- Results over a multiyear period

- Following areas

E.g.

Profitability

ROI

Productivity

Technological Leadership

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LONG TERM OBJECTIVES

INTEL

- To produce a chip after every 18 months which has double the processing capability

is produced at half of the cost

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GRAND STRATEGY

- Indicates how long term objectives will be

achieved

- Comprehensive general approach that guidesmajor actions

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GRAND STRATEGY

INTEL

- Innovation Leadership

- Focus on R & D

- Commitment to quality

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STRATEGIC MANAGEMENTGRAND STRATEGY

15 basic approaches

- Concentration

- Market development

- Product development

- Innovation

- Horizontal integration

- Vertical integration- Joint venture

- Concentric diversification

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GRAND STRATEGY

15 basic approaches

- Conglomerate diversification

- Retrenchment

- Divestiture

- Liquidation

- Consortia- Turnaround

- Bankruptcy

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SHORT-TERM OBJECTIVES

- Specific

- Less than one year frame

- Four quarterly objectives

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FUNCTIONAL STRATEGIES

- Each functional area

Marketing Strategy

HR Strategy

Finance Strategy

- In line with business strategy

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POLICIES

Standard operating procedures

Guidelines

GE

Not hire people from direct competitors

Xerox

Every employee signs performance agreement.

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INSTITUTIONALIZING THE STRATEGY

- How it should permeate the very day to day

life of the company- Fundamental elements

Structure

Leadership

Culture

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CONTROL AND EVALUATION

Implementation

Monitoring

Early signs critical

COKE

- New formula in 1985- Failed miserably

- Back to old within 6 months.

- Effective controls 59


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Restructuring, reengineering

Steps

Within organization

Make strategy successful

Helpful in implementation

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Intro to Stg Mgmt

Documents

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