Professional Documents
Culture Documents
will adopt? As individual, and as Company? Is it recession? - mindset ? Cs Margins - P/Pr/Q/D/S/Diff. Business Process
processes, a broad knowledge of these processes a minimum must Understanding processes, and creativity to doing things differently (Seeking alternates / routes / solutions) Challenging status quo Creativity in VA An ability to eliminate NVA activities / processes Control (vigilance) on operations / Critical information Alertness to happening around Knowledge and managing knowledge (KM) Seeking improvements in procedures / system Relationship management / Team building capacity .. Contd
next day Internal customer focus Cross functional skills, mobility for instantaneity and flexibility Technology (iPod, mobile) to compress time (retrieval of info and its feedback and consequent coordinating efforts Learn and unlearn re-relearn basics Managing Internal organization to ensure strategy execution, modification, review, revision, if any To be aware of best practices in a cross section of industries To incorporate flexibility in the design strategies to understand variables Innovation novelties creativity making them a habit- A vision Any problems or issues Ask WHY 5 times R C A BALANCED LIFE.
A nose for the right news Events affecting business horizon Events, impacting way of life Affecting Supply / Demand equation To create your own impact on the External environment for business in general Alertness in scenting opportunities First / Quick to respond (better your internal capabilities the easier it is) Be able to adapt to changes contd
stop any further loss KM Ability to create alternate models for different contingencies An established BCP which meets the test of time and adverse circumstances A perception to discern and verify the veracity of information An inane ability to anticipate moves of competitors and create your own move AN ABILITY TO CREATE A BIG PICTURE AND MESSAGE ABSORBED BY THE ENTIRE VALUE CHAIN OF THE FIRM. YOU CAN ADD MANY MORE
(Questions to Ask)
Planning : Why Purpose The Drivers : Why, What, When, Where, Who, & HOW - 5W & 1 H WHAT ARE
You aiming / Gain expected The products / services Your strengths / Weaknesses Your competitors HOW are you different
What value different competitors offer Where is your competitor located Who is your customer Why are they different and how? v/v competitors Which market does your customer have Where does he operate What is your CC v/v others What is happening around you? Is there any perceptible change in the breeze Is that an opportunity or a threat
(Questions to Ask)
Scope
How much money is needed to implement new plans / strategies Concerns When do you wish to act What processes I should strengthen How am I going to go about Where can I value innovate v/v Products change v/v competition What mechanism to achieve the TASK The RICE principle (reduce, improve, create, eliminate)
(Questions to Ask)
Vision
What is the horizon 5 10 - 15 yrs?? Ahead Does the customer wants a change Follow up How do I ensure plans are monitored to meet targets Quick midstream course changes A to B straight line / Min. resources / function/value Customer expectations / Compression of cycle time & cost Processes
systems under control / well tested system for scanning - an established and proven MIS
An overview
1. Basic Concept: A Cos Strategy consists of the combination of competitive
moves and business approaches that managers employ to please customers, compete successfully, and achieve organizational objectives. A strategy thus entails managerial choices among alternatives and signals organizational commitment to specific markets, competitive approaches, and ways of operating. Business models, therefore, are Plans for making money in a particular business. Deals with Revenue-Cost-Profit cycle. A bus. Model is whether a given strategy makes sense from a money-making perspective. So, strategy demonstrates the viability of the enterprise as a whole.
An overview
2. The most trustworthy signs of Good Management Dont deserve a Gold Star just designing a potentially brilliant
strategy, but to carry it out in high-caliber fashion. Weak implementation paves the way for shortfalls in Customer Satisfn. And Co. performance. SO, EXCELLENT EXECUTION. Linux: Zero product development costs. So Operating System free who wish to download it, (make the Source Code open & make their own customized version), but charge money to users who prefer to buy the CD-RO, (a bit of hand holding so make money on technical support services) Ooh, MS Window- Source code hidden from consumer, so sell the OS to PC makers and users at relatively attractive prices. Costs fixed, variable costs (producing and packaging the CDs only a couple of dollars per copy. Provide technical support to users at no cost. )
WHAT DO YOU THINK WHICH MODEL IS GOOD?
STRATEGIC MANAGEMENT ELEMENTS AND PROCESSES AUTHORS HAVE THEIR OWN VERSIONS BUT ARGUABLY MOST INCLUDE WHAT IS GIVEN IN THE NEXT PAGE SO LET US NOT SPLIT HAIR OVER IT BUT UNDERSTAND NUANCES OF EACH OF THE ELEMENTS & PROCESSES ON ITS MERIT.
1. Defining Vision, Mission & Business definition 2. Environmental Analysis External Social Responsibility 3. Internal Appraisal / Analysis Analyzing Industry & Competition Competitive Advantage & Core Competencies 4. Strategy formulation Setting objectives and goals, business definition 5. Identifying Alternative Strategies Generic, Expansion (Intensification, Diversn, Divestment, etc.) ) 6. Choice of Strategy SWOT Analysis 7. Implementation of Strategy Strategic Structure, Routes (M&A, JV, T/O, St.All, Globalization, etc.) 8. Strategy Evaluation & Control Monitoring, assigning responsibilities, etc 9. Feedback RESET REFORMULATE AND REIMPLEMENT IF?? WHEN REQUIRED NEXT THE 5 TASKS OF STRATEGIC MANAGEMENT
Vision: (Task 1)
A Roadmap to future Providing specifics about technology and customer focus The geographic and product markets to be pursued The capabilities it plans to develop The kind of company the management is trying to create.
TASK 1 contd.
Mission Statement It is typically focused on its present business scope Who
we are and what we do describes present capabilities, customer focus, activities, and business make up. In practice, however, because the big majority of company mission statements say more about what our business is now than what our business will be later the distinction between Co. mission and strategic vision has pragmatic relevance. Vision greater direction-setting and strategy making value i.e. looking beyond today, the impact of changing environment. Lesson Think strategically, do not drift aimlessly and thus lose any claim to being an industry leader.
If u want to have Oh-hum results, have ho-hum objectives. Performance targets yardsticks for tracking perf. And progress. Constant improving competitive strength if not so, it is less inspiring. Financial objectives: Earnings growth, an acceptable RoI, dividend growth, stock price appreciation Overall business position, and competitive vitality. E.g. Safely deliver hot pizza in 28 minutes fair price and reasonable profit. Providing quality cars, trucks reducing time (design to commercial), building on team (stakeholders) Focus globally on those businesses in health & personal care, where we will be no. 1 or 2 through delivering superior value to the customer. To be one of the top 3 banking companies in terms of MS To be the lowest cost producer of aluminum and get mentioned in S&P ratings. Return on Stockholders equity of 20-25%..
results in light of organizations situation and prospects. Objectives ends / strategies means The means or hows blend of deliberate actions and asneeded reactions to unanticipated developments, and collective learning of organization over time. Capable of taking a new face responding to changes SO BOTH PROACTI VE AND REACTIVE (deliberate and adaptive) SM are partly visible and partly hidden to outside view. (those who watch from outside can only speculate about the as-yet-unrevealed strategic actions co. is intending to launch.
satisfying customers better than rivals thru o/standing Q, service, cleanliness and value. Strategic priorities : continued growth, exceptional customer care, quality producer, developing people at every level of the organization, sharing best practices across all units wwide, re-invent FF concept by innovation in menu, marketing, operation and technology.
hours (some owned, some franchised 90% outside US establish leading market position ahead of competitors. Promote > frequent customer visits addl. Attractive menu, low-price specials, Extra Value meals, childrens play areas. Exploit Global CC of supplier infrastructure and multi-unit Rest. Management, site location, unit construction, and product marketing.
Franchising strategy:
entrepreneurs with integrity, bus. Experience, -- train them to be active, onpremise owners. NO FRANCHISES WERE GRANTED TO COPORATIONS, PARTNERHSIPS OR PASSIVE INVESTORS)
the spur customers (e.g. Rly Stations). US Co. supplemented its traditional suburban and urban locations with satellite outlets in food courts, airports, hospitals, universities, large shopping establishment. (Wal Mart, Home Depot), and service stations. Outside US initial presence in center cities, then open freestanding units with drive-thrus outside center cities. Reduce site costs & bldg. costs by using standardized, cost-efficient store designs and by consolidating purchases of equipment and materials via a globalsourcing system. Make sure Res. R attractive and pleasant
(sandwiches), expand product offerings into new categories of FF (chicken, Mexican, pizza, adultoriented s/w) and items for health conscious customers. Roll out new, potentially appealing ones quickly, and as quickly drop those that fail. (a departure from past practice of extensive testing to ensure consistent high quality before rolling out new menu 7 years to develop Chicken McNuggets).
Store Operations:
equip. cleanliness, R.Op.procedures, friendly courteous counter service. Made for YOU concept involved installation of advanced equip. sophisticated computer technology, and new preparation methods to allow items to be prepared to customer order.
merchandising: Above image through heavy media advtsg and in-store merchandise promotions funded with fees tied to a percentage of sales revenues at each restaurant. Mc prefix to reinforce connection of items to Company. Project an attitude of happiness and interest in children.
job skills, reward individual and team performance, career opportunities, flexible work hours for student employees. Crews with good work habits/courteous train promote promising. Training on delivering customer satisfaction (World Wide selected instructors) Promote a global mind setgood & new ideas shared ax all chains.
neighbourhood spirit, promote educational excellence. Sponsor Ronald McDonald Houses a home away from home for families of seriously ill children receiving treatment at nearby hospitals. Promote workforce diversity, voluntary affirmative action, and minority-owned franchises. Student scholarships, teacher awards, and free instructional resources. Adopt environment friendly practices. Nutritional info. To Customers. THE ITC EXAMPLE IN INDIA
matching external and internal developments so it is an ongoing process, not a one-time event.
RAPID REVOLUTIONARY CHANGE REACTIVE / FOLLOWER Rushing to catch up to keep from being swamped by the waves PROACTIVE / LEADER Aggressively altering strategy to make waves and drive Change GRADUAL REVOLUTIONARY CHANGE REACTIVE / FOLLOWER Revising strategy (hopefully in time) to catch the waves PROACTIVE / LEADER Anticipating change and initiating strategic actions To ride the crest of the waves. Since strategy life cycles are growing shorter, not longer more updates may be necessary than being satisfied with an annual event).
Bldg. an orgn. Capable of carrying out strategy successfully Allocating Co. resources sufficient funds and people Establish strategy supporting policies & operating procedures Putting a freshly chosen strategy into place. Motivating people, if needed, modifying their duties & job behavior as a strategic fit for successful execution. Reward system Create a conducive Co. culture / work climate. Installing info. Communication and operating systems no obstacles while carrying out strategies Exerting internal leadership to drive implementation. In short a strategic fit between how things are done internally and what it will take for the strategy to succeed. St. execution an action oriented, make it happen process, interplay of competencies and capabilities, budgeting, policy making, motivating, culture building and leadership.
Evaluating Performance, Monitoring new Developments and initiating corrective adjustments. (5th Task)
Instituting best practices for continuous
improvement. A monitoring apparatus alert to internal and external changes. Above will require corrective actions and adjustments Revising budgets, changing policies, organizational restructure, revamping activities, work processes, bldg. new competencies and capabilities, efforts to change work culture, compensation packages, hasten implementation. Progress reviews, ongoing searches, corrections.
IN SUMMARY, THEN
Serves as a route map for the corporation Lends a framework for systematic handling of corporate decisions
Lays down growth objectives of the firm and also provides strategies needed for achieving them / Ensures the firm remains a prepared organization / Ensures that the firms business, products and markets are chosen wisely Ensures best utilization of the firms resources among the product-market opportunities / Serves as a hedge against uncertainty arising from environmental turbulence Helps the firm understand trends in advance and provides the benefit of a lead time for taking crucial decisions and actions Helps avoid haphazard response to environment / Provides the best possible fit between the firm and the external environment Helps build competitive advantages and core competencies Draws from both intuition and logic / Prepares the firm to not only face the future but even shape the future in its favor Seeks to influence the firms mega environs in its favor, working into the environs and shaping it.
tasks Growth - direction, extent, pace and timing of growth Environment - the fit between the business and its environment Portfolios of business product-market scope and postures Strategy - strategy is its concern; not the operational activities Integration - integration is its concern; not a particular function Creating core competencies/competitive advantages creating long-term, sustainable organizational capability is its concern
Clarifying the mission of the corporation Defining the business Surveying the environment Internal appraisal of the firm Setting the corporate objectives Formulating the corporate strategy Monitoring the strategy The strategic planning process Clarifying the mission of the corporation Defining the business
Industry & Competition / Market/Customer / Technology Supplier Factors / Govt. Policies Spotting the opportunities & threats Checking the attractiveness and probability position of these opportunities Highlighting those opportunities the pursuit of which will help the firm bridge its strategic planning gap Developing the opportunities-threats profile (OTP)
General Management Developing the strength-weakness profile Appraising the individual businesses/strategic business units (SBUs) of the firm Identifying the competitive advantages and core competencies and developing the competitive advantage profile (CAP) Examining the capability gap (gap between existing capabilities and the ones needed for pursuing the spotted opportunities)
Framing the broad aims of the corporation, using the corporate mission as the guide Examining the strategic planning gap and checking the growth-scope Fixing the growth objective Setting specific objectives in all major areas:
Growth in Assets, Sales, Profits, Market Shares Profitability Competitive Position Technology Productivity R&D and Innovation Human
Resources Corporate Image Social Responsibilities Prescribing the hierarchy/rank/priorities of the objectives
alternatives
Stability? Expansion? Divestment? Combination? Understanding the effect of the alternatives in terms of changes/additions/deletions to the firms existing product-market posture Clarifying the competitive advantage and synergy which each alternative would require/use
Evaluating the strategy alternatives Keeping the O-T profile, the growth objective and CAP as the reference frame, examining what strategy would be the best Reviewing the existing businesses
Assessing the prospects of each SBU Examining what to do with each SBU Build? Maintain? Harvest? Divest? To what extent? At what pace? Examining which new businesses are to be taken up Examining the resource requirement of the different strategy options and checking the resource availability Making the final choice of the strategy/strategy spectrum Translating the strategy in terms of what is to be done with each SBU Assigning the priorities to the SBUs, existing as well as new ones Clarifying what is expected of each SBU Allocating resources to the SBUs Monitoring the strategy
THE 5 TASKS ARE A TIGHTLY KNIT PROCESS, THE BOUNDARIES BETWEEN THEM ARE CONCEPTUAL, NOT FENCES THAT PREVENT SOME OR ALL OF THEM BEING DONE TOGETHER.
STRATEGIC PLANNING
CONSEQUENCES OF LPG
Changes in technology / Proliferation of new products Faster commercialization of new product ideas and patents Business boundaries getting blurred due to the overarching technology / Socio-political changes Governments becoming bargainers in the conduct of businesses Emergence of global markets / Emergence of global firms Emergence of global brands / The new affluence of the consumer / The changing tastes and preferences of the consumer.
New demands the firms had to face, consequent to the environmental changes
To be strategically alert To be future-oriented To be able to take risks in tapping opportunities To be insulated against environmental threats To develop the competence for assimilating changes faster To respond effectively and more economically To grow big To be able to generate large resources To gain expertise in technology, marketing and decision support systems.
Liberalisation Measures New Industrial Policy Liberalisation of industrial licensing / FERA liberalization / MRTP liberalization / Curtailment of public sector
1.
Lowering of import tariffs Abolition of import license A more open exim regime Convertibility of rupee Encouragement to foreign investment Integrating Indias economy with the global economy Fiscal and monetary reforms Banking sector reforms Capital market reforms Phasing out subsidies Dismantling of price controls and introduction of market driven price environment Public sector restructure disinvestments Exit policy
investment / Liberalization import No MRTP clearance Abolition of threshold assets needed for expansions, mergers Curtailment of Public Sector Only eight core Several industries hitherto reserved for public sector extended to private sector
alters the industrial scene Rush of entrepreneurs Spate of mergers and acquisitions/takeovers The diversification rush Multinationals consolidate their position MNCs acquire majority equity in their Indian enterprises and JVs Many MNCs enter India afresh through new JVs MNC entry and investment alters even core sectors like power, oil and telecom Imports go out of government domain and become entrepreneurial activity Companies import materials free of licensing hassles and bypassing the canalizing agencies Import trade emerges as a separate business opportunity
Capital markets undergo radical change Capital markets gain a new buoyancy FIIs enter Indian capital markets in a big way Foreign brokers follow the FIIs NBFCs register rapid growth and strike alliances with global finance companies Entry and growth of private mutual funds Indian firms raise global capital and strike alliances with global financial firms Indias capital markets getting integrated with global capital markets Banking sector comes under a competitive environment Deregulation of interest rates leads to competition in deposits Disinvestments of government equity in nationalized banks New private banks with new technology, new products and aggressive marketing usher in new competition Banks face new competition from capital markets, FIs, MFs & NBFCs Banking services get marketed as branded consumer products Banks have to now operate as viable, commercial institutions
Financial services emerges as a major new business Funding options multiply as capital can be raised in many ways A large basket of financial instruments Emergence of many new financial services Firms not only start utilizing financial services but also recognize the scope of financial services as a separate business and float financial services companies of their own Ascendancy of the private sector Private sector enters all core industries Oil, mining,telecom Road building, railways, ports, civil aviation EPZ, SEZ now etc
General Motors enters through a JV with HM Ford enters through a JV with M&M Honda enters through a JV with SIEL GE Appliances enters through a JV with Godrej GE Capital promotes a consumer finance JV with Godrej GE Capital promotes another consumer finance JV with HDFC GE Capital promotes a third JV in consumer finance in which GE-HDFC and Maruti are the partners GE Plastics enters through a JV with IPCL GE India promotes a JV with Fanuc Ltd and Voltas GE Medical Systems (GEMS) enters with Wipro as partner GE Medical Systems (GEMS) promotes another JV with Eipro JP Morgan enters through a tie-up with ICICI Orix Corporation enters in alliance with IL&Fs Merrill Lynch enters with DSP Financial as partner Rothschld sets up a JV with Prime Securities Reebok enters in collaboration with Phoneix IBM enters with Tatas as partner Mobil enters through a tie-up with IOC Caltex enters through a tie-up with IBP Shell enters through a tie-up with BPCL
List of MNCs who have entered Indian telecom market through JVs Radio Paging Motorola enters through a JV with Page Point Services Korea Mobile Telecom enters with DSS Paging Services NTT International enters through a JV with RPG Paging Services Korea Telecom enters through a JV with Modi Paging Shinawatra enters through a JV with HFCL (Microwave)
Cellular Phones
Motorola enters with Essar Cellphone Hutchison Telecom enters with Max India Telstra enters with BK Modi group Telstra promotes another JV with SPIC Bellsouth promots Skycell in alliance with Crompton Greaves Cellular Corporation International enters with Sterling/Essar US-WEST enters through a JV with BPL
Basic Services
AT&T enters through a JV with Tatas AT&T promotes another JV with Aditya Birla group NTT enters through a JV with RPG group Telstra enters through a JV with SPIC Northern Telecom and GTE enter through a JV with Escorts Nynex enters through a JV with Reliance Deutsche Telekom enters through a JV with PCL/Punwire Sprint International enters through a JV with RPG Telecom Qualcomm enters through a JV with Modi Telecom
Switching Systems
group AT&T enters through a JV with the Tatas GEC-Plessey Telecom (GPT) enters through a JV with Vam Organic Fujitsu enters through a JV with Punjab State EDC
Cocoon of protection enjoyed so far by existing players disappear Existing notions on economic size are challenged Industry structure too alters radically in many businesses, forcing players to change gear Economic Darwinism becomes the order The MNC onslaught With majority equity stake for the parent MNCs, their Indian subsidies gain a new strategic advantage MNCs also gain majority equity stake in their JVs with Indian firms and start controlling the show The takeover threat The overall unequal battle
The all-pervasive competition Competition from Indian players Competition from MNCs Competition from imports Competition on account of easier access to technology Competition is now global in character The exacting demands of buyers market From shortage to surplus; the challenge of being price competitive Buyers market causes sharp change in business style From shoddy products to excellent products; the quality challenge
Challenges on the technology front Competitive advantage and core competence become technology
based Investment in R&D and innovation becomes inescapable Corporate vulnerability A variety of factors led to vulnerability Vulnerability due to capital inadequacy Lack of product clout and brand power PSUs become vulnerable due to a combination of factors Problem of one product syndrome Vulnerability due to loss of monopoly The challenge of discontinuity Past ceases to be an indication of the future It is no longer business as usual; management at the crossroads Problem of managing mega change; need for new approaches, new systems and structures, new leadership
Challenges the public sector banks had to face in the open regime
Competitive existence forced by deregulation Competition in deposits due to deregulation of interest rates Loss of business due to disintermediation Loss of pre-eminence in merchant banking Competition from the capital markets, the Fis, NBFCs and MFs II The onslaught from New Private Sector Banks (NPSBs) A chain of NPSBs enter the scene NPSBs bring in competition and differentiation Niche marketing Innovative banking products and solutions Collaboration with the worlds leading financial firms III The compulsion to fashion many new financial products / banking services and to market them as branded consumer products Convenience banking IV The compulsion to absorb state-the art banking technology V The compulsion to change and become viable banking institutions The compulsion to go through painful internal reforms
FIIs and global investment banks who entered India in the post-reform period
Schroder / Morgan Stanley / Jardine Fleming / Barclays (BZW) / Kleinwort Benson / JP Morgan / Smith New Court / Lazard Brothers The foreign brokers who followed suit James Capel / Klein Benson / Credit Lyonaise Securities / Marlin Partners / Citicorp/ Lehman Brothers / Crosby Securities / Jardine Fleming / Baring Securities
Indian NBFC Global Partner Unit Trust of India Alliance Capital of the US IDBI Asian Capital Partners, HKong ICICI Prudential of the UK IFCI ABN Amro Bank NV Credircapital Finance Corp Lazard Brothers of UK ILFS Orix Corporation of Japan 20th Century Finance Kemper Corporation of the Us Rajan Rahejas Hathway InvestmentsTempleton Worldwide Inc
Global AMC Investment Trust of Ind The Pioneer group of USA Credit Capital International Finance Corporation, Edinburgh Fund Managers, UK 20th Century Finance Kemper Corporation of USA CRB Keystone of USA ICICI Prudential of UK Birla Growth Fund Capital International of USA
With Foreign currency For capital - GDR- ADR Foreign Partners in JVs Foreign private investors Foreign institutional investors For debt - External commercial borrowing For working capital - Suppliers credit, long and short term FCNR(B) loans Yankee bonds / Floating rate notes Alpine bonds- Euro bonds / Exim bank loans- With Indian Rupee For capital - Equity share Preference shares. For debt Term loans Asset credit NCDs For working capital Structured obligation Trade credit CP Floating rate notes -Leasing and hire purchase
NEW SECTION
Globalization
Foreign markets 6. Pursuing CA by competing multinationally 7. Profit Sanctuaries and cross market subsidization 8 Competing in Emerging Foreign Markets
shaped by globalization and the Information revolution. There are only two options: Adapt or Die Andrew Grove, Chairman, Intel Corp. You do not choose to become global. The market chooses for you; it forces your hand Alain Gomez , CEO, Thomson. S.A. There is no purely domestic industry anymore. Morgan Stanley
worldwide through increasing volumes and variety of cross border transactions in goods and services and of International capital flows and also through a more rapid and widespread diffusion of technology. IMF DEFINiTION
Shift towards more integrated and interdependent
world economy
business strategies aimed at enhancing Global competitiveness. Stop thinking of National boundaries or markets.The whole world is market. Transform into worldwide manufacturing facilities, marketing, financial flows and logistical systems. To develop genuine equidistance of perspective. (All customers are equidistant from the corporate centre and there is nothing like overseas)
Nokia To achieve lower costs And Enhance firms competitiveness e.g. Nestle moving to Asia To spread its business risk across a wider market base
Product Strategy
Potential for locational advantages stemming
from country to country cost variations Fluctuating FX rates Host country restrictions
country variations in cultural, demographic and market conditions poses a much bigger strategy making challenge than competing at home. Market demographics and customer tastes : Washing machines : French prefer Top loading and Europeans prefer Front loading. USA appliances run at 110 V and Europeans at 240 V Refrigerators : Indians prefer brighter colours. Korea has 4 high as the top is used as something else. Hong Kong prefers compact, European style appliances but Taiwan prefers large American style appliances.
national channels for distribution through about 3 million retailers. By contrast, China distribution is primarily, local and provincial. The biggest concern of firms competing in foreign markets is whether to customize their offerings in each country market to match the tastes and preferences of local buyers or whether to offer standardized products worldwide.
Product Strategy
Soft sell
Germany Hard sell Mexico
Potential for locational advantages stemming from country to country cost variations
A companys potential for gaining CA based on
where it locates its foreign activities or being at a disadvantage because the rivals have lower cost locations is a matter of serious strategic concern. Wage rates, inflation, energy costs, tax rates, Govt. regulations, unique natural resources (Malaysia) for manufacturing locations. Ireland, worlds most pro business environment and hence Intels largest chip plant with investment of US $ 2.5 bn and employs 4000 personnel. Short delivery times and low shipping costs (Singapore) for Distribution centres.
Local RM content Tariffs and quotas on imports Restrict exports to ensure adequacy to meet domestic needs. Ownership pattern Interest and tax rates for domestic and foreign companies
Multi country
Global competition
each country market is self sustained with buyers having different expectations and like different styling and features and each national market is independent. E.g. Banking industry with competitive battles being fought in each country independent of other countries. Each country market is separate. And hence reputation, customer base and competitive position in one country has little relevance on the other country. Hence power of a firms strategy in a nation and CA gained remains confined to that nation. Beer, Life Insurance, metal fabrication, food products
Multi country
Global competition
conditions across national markets are linked strongly enough to form a true international market and when leading competitors compete head on in many different countries. Companys competitive position in one country both affects and gets affected by its position in the other country. In global competition, a firms overall CA grows out of its worldwide operations. Automobiles, TV, Copiers, watches, commercial aircrafts etc.
Multi country
Global competition
market shares /leadership positions Global competition the rivalry is attain global leadership. An industry may have some segments which are globally competitive and some segments are country to country competition. E.g. Hotels. Lubricants for marine are globally competitive and for automotives, it is country to country. Hence Pennzoil is the leader in USA & Castrol in the UK
This section will deal with some of the best companies languishing when market conditions change despite creating best strategic planning. They plummet from the pinnacle of success, because they are paralyzed? On the contrary, they engage in too much activity of the wrong kind. Suffering from ACTIVE INERTIA. Because they insist on doing only what has worked in the past.
IN THE FACE OF DRAMATIC SHIFTS IN THE ENVIRONMENT. INSTEAD OF DIGGING THEMSELVES OUT OF THE HOLE, THEY DIG THEMSELVES IN DEEPER. Such companies are victims of their own success. They have been so successful, they assume theyve found the winning formulae. But these same formulas become rigid and no longer work when the market changes significantly. Instead of asking what they should do, they should ask what hinders us? They shd look deeply on the assumptions they make about their business and industry. Pay particular attention to hall marks of active inertia; Strategic frames becoming blinders, processes hardening into routines, relationships becoming shackles, and values hardening into dogmas. LET US SEE SOME EXAMPLES
they help managers stay focused. But these frames can also blind managers to new options and opportunities. Example:
reigned supreme in the US tire industry in the 1970s. Then Michlein introduced the safer and more economical radial tire. FS competed with M h-h in Europe, but was blind to the threat to its core US market, and so continued to produce conventional tires only. FS lost significant market share and was acquired a decade later
even when theyre no longer effective. People overlook better ways of working. Example:
processes, all dictated by HQ. By rigidly following these procedures into the 90s Mac lost MS to Burger King and Taco Bell, who were much quicker to meet customers changing desires for healthier foods.
customers, suppliers, employees, society, etc. When conditions change, however, these relationships can restrict flexibility. Example:
freewheeling culture attracted the worlds most creative engineers. Once computers became commodities, however, the Cos health depended on cutting costs and speeding up production time. But Apples engineers refused to change, and the cos relationship with the star employees soured, and damaged its ability to respond to market changes.
Over time, however, they can harden into rigid, selfdefeating rules and regulations. Example:
research to the point of defining itself by that research. Eventfully, that value turned into dogmatic disdain for marketing, finance and even customer preferences. The Cos single-mindedness nearly destroyed it.
values became a hindrance. Dominated by a Nazi sympathizer, a strong leader, a strong imprint on the co. for central control. When he was forced out, the distaste for central control was replaced by fiercely independent country managers. But when oil prices fell during the 1990s the belief in decentralized authority prevented the company from quickly rationalizing its operations and cutting costs.
active inertia. She spent her youth in Wales she tried to recreate the mood of the British Countryside, and introduced designs to evoke a romantic vision of English ladies. They also established close relationships with franchises, and generous benefits to employees, avoiding labor unrest which crippled England at those times. Hwr, as more women entered the workforce, they felt the womanly garb was too uncomfortable, and better suited to 1980 milkmaids than CEOs in the 1990s. At the same time apparel mfg. was undergoing a transformation with trade barriers falling. Fashion houses were rushing to move production offshore (outsourcing), but old values were too difficult for LAshley and its group and suffered a deep fall.
often replaced by a rigid devotion to the status quo. Leading cos can become stuck in the modes of thinking and working that brought them their initial success. When business conditions change, their once winning formulas instead bring failure. LET US AGAIN GO THROUGH THE 4 DYNAMICS OF FAILURE.
Blinders The set of assumptions that determine how managers view the business PROCESSES Routines The way things are done RELATIONSHIPS Shackles The ties to employees, Stake Holders VALUES Dogmas The act of shared beliefs that determine corporate culture.
SHARP LCDs (flat panel display tech); Toyoto-Honda low cost, high quality mfg, design-to-mkt
short cycles for new models Intel semi-conductor chips development Starbucks store ambience and innovative coffee drinks Motorla 6-sigma defect free manufacture Rubbermaid innovative rubber and plastic products HP three in one Printer technology Vodofone / Reliance / Mittal leaders / MS / Funds / Clout Parke Davis R&D on ethical drugs Capsugel Exceptional tech in high quality capsule manufacture
Backward into sources of supply and/or forward towards end users of the final product. Make or Buy or Outsourcing decisions. discuss Appeals only if it provides Competitive adv. (RIL) Backward to achieve greater competencies, and Forward to enhance competitiveness. Depends on product lines Specs, capacity, skills, price factors, etc. also product lines logistics costs.
deeply into its VC, and unless this is proven to be effective (C/B analysis), it is not worthwhile.
Last decade many have felt the need to collaborate and formed Strategic alliances, partnerships thru SPV, JVs etc. basically to strengthen domestic and global markets They are therefore in the midst of 2 demanding competitive races:
The global race to find a market world wide The technology race to capitalize on todays IT age.
Alliances:
Tata-Corus, RIl-DOW, Mittal-Ancelor, Vodafone-Essar, Wal-Mart-Bharati, TataFiat, FIs, Stock Exchanges (BSEDeutsche), M&M-Ford-Renault, Pharma Dr.Reddy, Glenmark, Pfizer-J&J, IT Cos.,
Bundle competencies and resources that are more valuable in a joint effort than hen kept separate Very beneficial in racing against rivals for global market leadership To build the expertise and market position needed to win a strong position in the industries of the future. A Co. That is racing for global market leadership needs alliances to help it do what it cannot do alone: For example:
Get into critical country markets quickly and build a potent global market presence Gain inside knowledge about unfamiliar markets and cultures Access valuable skills and competencies that are concentrated in particular geographic locations (S/W)
A Co. wanting this has to ally: To establish a beach head for participating in the target industry Master new tech. and build new expertise and comp. faster than through internal efforts Open up expanded opportunities in the target industry by melding the firms own capabilities with the expertise and resources of partners. Example:
Joint Research, Tech know-how, collaborate or complement new tech., products, ally with parts and component suppliers (SCM) Volvo, Renault, distribution synergy (p176 Ill.cap.24, some SA)
No company can ignore this avenue of new opportunity Combining operations offer considerable cost-saving. The advantages can be more or less the same as outlined above in JVs etc.
This is Vertical Disintegration, or Unbundling. Q. asked is which activity should be brought within the fold and which outsourced O/S makes strategic sense if:
An activity can be performed better or cheaply O/S Activity is not crucial to the firm, and dont hollow out competency Reduces the cos risk exposure to changing technology and/or changing buyer preferences Enables organizational flexibility, cut cycle time, speed decisionmaking and reduce coordination costs Allows to concentrate on its core business and do what it does best. Socially complex organizational considerations can be avoided. Well, it can be disadvantages to roll back an arrangement, or it can pose a legal problem. Sometimes an alliance or o/s could be better than acquisition.
The pitfalls of Outsourcing: Possibility of farming out too many wrong types of activities Hollow out its own capabilities, CC Loses sometimes with key activities over which it had expertise and determines its success III Party Pharma -- NK discuss.
marginalization of poor rural people (Single) will not be an isolated incident. While urban India shines in terms of best amenities.. rural India is bound to impugn them for a slice of the cake or some modest improvement in their dreary existence. Its no wonder therefore that ITC (TO $19 bn. Market capitalization, and $5 bn. Turnover with a diversified portfolio ranging from FMCG, hotels, paperboards, packaging, agri business, has forged unique business models that focuses on rural India and attracted universal approval. Lets see what they are doing.
market linkages Social forestry scheme Has greened over 80000 hectares R&D projects Have evolved high-yielding, site specific, disease-resistant clones Comprehensive package of plantation mgmt practices Watershed development Projects which benefit 333111 farmers in 24 districts
internally with > 24% generated from renewable resources. ITC has been a water positive firm and today the co. generates three times more freshwater harvesting potential than it consumes and sequesters almost twice the amount of carbon its plants emit.
100% benchmark in recycling solid waste in several of its operations. Also A total of 2178 water harvesting structures have been created, providing critical irrigation to 18,482 hectares of farmland.
its sustainable development initiatives would continue to provide thrust to identified triple interventions viz. natural resource management (wasteland, watershed and agri. Development), sustainable livelihoods comprising genetic improvement in livestock and econ. Empowerment of women and community development with focus on primary education, health and sanitation.
corporate social responsibility (CSR) is taken by all companies earnestly with a view to building PPP for sustainable and inclusive growth, the simmering tensions and resistance to industrial development through setting up economic enclave (SEZ) or big project would gradually fade as rural people would hopefully find a decent way out of their dire predicament of penury.
Rapid transit system, and Metro Rail. Outstanding, especially for the concession agreement under the PPP.Really the way America was build over the last 100 years. The US govt. granted land for taking up infrastructure development by the private parties and now we see it here.A/g to him, it was outstanding to have private sectors dollars to spend for public service without casting any burden on the tax payers money.The AP govt. would enter into a MoU with the FTA on public transport, which would involve strengthening and sharing of knowledge, science and technology in the sector.
rail technology, manufacture and supply of coaches, automatic fare collection points, etc.
GO TO WLG PRESENTATION
Started with Ch 1.
1.1. INTRODUCTION
objective. Involves program of action, deployment of resources, coordination between strategies and objectives. Without an appropriate strategy the future is unclear (dark), and hence more the chances of failure.
Glueck Strategy is the unified, comprehensive and integrated plan tha relates the strategic advantage of the firm to the challenges of environmen and is designed to ensure that basic objectives of the enterprise are achieved through proper implementation process
Definition lays stress on Unified comprehensive and integrated plan Strategic advantage related to challenges of environment Proper implementation ensuring achievement of basic obj.
Strategy is organizations pattern of response to its environment over a period of time to achieve its goals and mission
Strategy as action, inclusive of objective setting: Chandler 60 the determination of basic long term
goals and objectives of an enterprise and the adoption of the courses of action and allocation of resources necessary for carrying out these goals. 3 types of action (a) determination of LT g/0, (b) adoption of courses of action, and allocation of resources. the Co is strategically positioned performs different activities from rivals or performs similar activities in different ways. So, a unified comprehensive and integrated plan. Involves, thinking of alternate plans and eventually take the best choice.
Factors) to facilitate actions Blend of internal and external factors to meet OT Aimed to meet a particular condition, o solve, or meet a desired end. Actions diff. for diff. situations. Due dependence on environmental variables, may involved a contradictory action either immediately or with a gap of time. (closing down same time, expanding) Future oriented, requiring actions for new situations and require systems and norms. Provides overall framework for guiding employees thinking and action. Well defined, guides managerial action and thought. Integrated approach meeting challenges posed by environment.
Competitive Advantage While working out plans competition may be ignore, but in making strategies, competitors are given due importance. Vector
Series of decisions are directed to a same objective. Clarity provides the momentum,
making. Course of action chosen, written or implied. Clear and consistent. Policies need to be integrated for success of strategy E.g. Buy wisely, quality & economic considerations Str: concerned with direction in which human efforts and resources are deployed. Action oriented and everyone empowered. Cannot be delegated downwards. Strategy is a rule for making decision while policy is contingent decision.
V Programs
V Procedures Rules
Corporate Level
Business Level
Functional Level E.G. Distinct Business Areas (DBAs) GEC SBU, Ashok Leyland Reliance Tatas
Enables take decisions on long range fcsts. Allows meet new trends and competitions Becomes flexible to meet unanticipated changes. Financial benefits increased profits Ognzl effectiveness implementation Satisfaction to personnel motivation, habit of thinking, paves the way to shape their work in the context of shared goals Enables mgmt to involve different levels of mgmt. Improves corp. communication, coordination and allocation of resources. STRATEGY LIFEBLOOD OF BUSINESS ACTIVIIES.
Unit 2
PROCESS OF STRATEGY
Development, Implementation, Monitoring phases Pr. Of Str. Prahlad: comprises 5 Steps Strategic Intent Environmental Analysis Evaluation of strategic alternatives and choice Strategy implementation Strategy evaluation and control. In our Book, Str Intent / Env & Org. analysis / Identification of Str. Alternatives / Choice of strategy / implementation of strategy / evaluation and control
point hierarchy of str. Intent is the foundation Reflected through Vision, mission, business definition and objectives. Vision serves the purpose of stating what an organization wishes to achieve in long run. The process of assigning a part of a mission to a particular department and then further sub dividing the assignment among sections and individuals creates a hierarchy of objectives, each sub unit contributing to the larger unit From Spv must define Why it exists, how it justifies that existence, and when it justifies the reason for its existence. Ans. To these Q lies in the org. mission, bus. Defn, obj. and goals. P 18 19 Flow chart for Single SBU and multiple SBUs.
Environment-Strategy Interface
Corporate Planning Corporate Management
Corporate Planning
Corporate planning is a comprehensive planning
process which involves continued formulation of objectives and the guidance of affairs towards their attainment. It is undertaken by top management for the company as a whole on a continuous basis. According to Hussey Corporate long range planning is not a technique. It is a complete way of keeping the companys eyes open.
Failure to keep the corporate planning system simple Failure to develop awareness about corporate planning process Corporate planning tries to do all planning by itself Chief Executive gives planner a low status Failure to modify the corporate planning structure system with the charging conditions Planner has only a part time interest in planning There is conflict between available soft database and managers need for hard answers Top management engrossed in current problems spends little time on corporate planning process
Scarcity of resources Fast Technological Changes Changing Human Values Multiplicity of stake holders Growing Competition Liberalisation,Privatisation and globalization Growing scale of business operations Faster and Quicker Modes of Transportation and communication Professionalism in management
organization from its current position to a desired future state It is concerned with the requisite resources to implement a plan
set up, administration of organizational process It offers a technique to manage changes. Gives equal importance to present and future opportunities It provides the management with a mechanism
Corporate policy
According to Koontz and ODonnell
Policies are plans in that they are general statement of principals which guide the thinking ,Decision making and action in an organization.
Corporate Mission
Corporate objectives
The Resources Management Values
External determinants
Industry Structure
Economic Environment
Political Environment
Social Environment
Technology
Choice of Policy
Introduction
The major players in the area of corporate
governance, within the co-operation are corporation are corporate board, shareholders and employees. Externally, the pace for corporate governance is set by the government as the regulator, customers and lenders of finance and social ethos of our times.
mission,objective,strategy and policies Review management actions and financial performance of the company Hire and fire the principal executive and officers of the company
Role Of A chairman
To manage the board and ensure that its
policies are put into practice by management To work closely with the company secretary to address legal issues
To act as a representative of the company
To ensure that policies and practices are in place To act firmly in times of crisis To upgrade the competence of directors so as to
directors Assist the executive directors in formulating strategies and proposals that have to be endorsed by the board Be a source of inspiration, leadership and direction to all employees, customers and suppliers Take firm decision when situation demands
Report
channel partners Exploiting the supply chain in the early stages of the industry Exploiting their innovations and building an enduring long run competitive advantage based on low cost differentiation Appropriate Timing of Entry
Product Proliferation Rationalizing the product Mix Process Innovation Price cutting Excess capacity Buying cheap assets Competing internationally Market penetration Product Development Market development Product Proliferation
Strategic Choice
International Strategy Multidomestic strategy Global Strategy Transitional Strategy
Perfect competition
The product is homogeneous There is free entry and exit in the industry Every firms action is independent of the other
firm In this market there is perfectly mobility of factors The sellers operate in conditions of certainty having complete knowledge of costs demand price and quantities
Monopoly
There is only one firm selling the product The firm has no rivals or direct competitors. Substitutes may exist.However,close substitutes are non
existent. Difficult entry for no other firms The monopolist is the price maker and tries to take the best of whatever demand and cost conditions Monopoly is not a permanent situation
expenses,etc,selling expenses but the decisions depend upon the strategies of the competitor Product differentiation is the entry barrier and also the firm dominating the market can pose as an entry barrier.
Oligopoly
Oligopoly-is a situation where a few large firms compete against one
Characteristics
There are small number of large sellers. The product they sell can be differentiated or
homogeneous. The policies of each seller have a noticeable impact due to the extent of influence of each seller. The element of interdependence exists Cross elasticity of demand is very high due to the close substitutes of the product. Existence of rigidity. The firms may enjoy some monopoly power.
Open or closed Partial or Full When the firms follow a common price policy, it is known as collusive oligopoly