Planning & Strategic Management

PLANNING AND STRATEGY

Introduction to planning Difference between strategic and operational plans Evolution of strategy The strategic management process Types of strategy corporate level strategy business level strategy Functional level strategy

 Seven S model Operational sing strategy Case study Federal Express

PLANNING

3 main concepts
1. Planning 2. Strategy 3. Strategy management

Wal-Mart EDPC BMW,Hen-Blane High Price Apple Free Replacement EBay B2B Marketing

Introduction & Importance of Planning

Its 1st of the 4 major activities in management process (planningorganizing-leading-controlling). it is process of setting goals and choosing the means to achieve them

Goals importance
1. 2. 3. 4. Goals provide a sense of direction Goals focus our efforts Goals guide our plans and decisions Goals help us evaluate our progress

The hierarchy of plan

1. Mission statement (organizations goal) 2. Strategic plans (way to achieve the goal) 3. Operational plans (way to acieve strategic plan)

mission

Strategic plans

Operational plans

Strategic v/s Operational Plans

STRATEGIC PLAN OPERATIONAL PLAN

Long term Affects widely Generic Orgs people and people of other org

Short term Narrow/limited scope Detailed Within orgs people

The evaluation on the concept of strategy

From Greek straregeia art or science of being a general Most important outcome of planning process the broad program for defining and achieving an orgs objectives; the response to its environment

Strategy management
Its an ongoing practice of establishing a broad program of orgs goal and the means to achieve them

EXAMPLES

Strategy used by colors channel

Launching a high profile program on day 1 opening with khatron ke khiladi

Content Reality show

Fiction shows

Mythology

 Reality shows on weekdays

Achieving distribution and TRP Rating

Hindi general entertainment channel share Sep-Oct 2008

Channel 1) Star plus 2)Colors 3) Zee tv 4) Sony tv Market share as on sep 28oct 4 2008 (%) 22 20 17 8

5) Star one
6) NDTV Imagine 7) Sahara one 8) 9X 9)SAB 10)DD1 11)Star utsav

8
6 6 5 3 3 2

Strategies used in telecom industry

1) TATA DOCOMO

A 1 second pulse instead of the usual 1 minute pulse offered by other mobile service providers.

 How much can you really save? Explaining how it works. The VAS (value added service) like 24 hour Music, Voice Chat, Caller Tune Search etc are being charged on per second pulse rate.

2) Virgin mobile :

Get paid for INCOMING calls 10 paisa/min

3) Reliance communication:

50 paisa/min in all over India for LIFE-TIME just in Rs.48

Strategy used while promotion of movie Ghajini

 The Look-Haircut & Tattoos

Tied up with Many Multiplex like Big Cinemas, PVR & Cinemax to give distinctive Buzz-Cut to ushers and ticketsellers. Aamir Personally went to Delhi for Buzz Cut to his fans Find Ghajini Game & 3D Games

Getting media involved (online) Release Date-25th December Tata Sky (Contest & Asin-New Brand Ambassador) Tata Indicom(10 Million Customers)

Samsung Launched Ghajini Edition Phones

Model No- L700 & M200 Phone Number issue

Strategies used by AMUl

 Wide range of product categories caters consumers across all market segments. For example, Amul Kool is targeted at children, while teenagers prefer Kool Caf.
High profile locations: Amul parlors are today present on campuses of Infosys, Wipro, IIM-A, IIT-B, Temples, Metro rail and railway stations in Gujarat. Amuls approach is to promote its brands in a rotational cycle of 2 to 3 years. Ice-cream 1996, category re-visited in 1999, in order to improve availability of the product and make it affordable. Cheese in 2001, Amul Masti Chaas in 2004-05, Nutramul and Kool Kafe in 2006 Amul Koko cold chocolate drink in 2009

 Umbrella brand strategy use of common brand for most product categories Food festival competition Technology and e-initiative
1st firm in India implementing B2C commerce

Amul butter girl is one of the longest run ad campaigns in the country for 41 years

Strategy used by Britannia

Britannia has adopted a three-pronged strategy. Freshness (lower pipeline stock), Availability (improve distribution network) Visibility (more shelf space at modern trade). It have entered some fresh milk markets, such as Delhi and Kolkata, where AMUL does not have a presence. It is concentrating on just 30 cities, and that too through select class A & B outlets Butter and Cheese

(2) Analyze the environment

(1)

(3) Identify the Opportunites and threats

Identify the Org.s current mission and strategies

(6) Formulate strategies

(7) Implement strategies

(8) Evalute result

(4) Analyze the Org.s ` resources

(5) Identify strengths and weaknesses

STEP 1:IDENTIFYING THE ORGANISATIONS CURRENT MISSION,OBJECTIVES AND STRATEGIES

 Mission statement :- A statement of the purpose of an organisation. It give answer the question what is our reason for being in business

Componentes of mission statement

(1)Customers (2)Products or services (3)Markets (4)Technology (5)Philosophy (6)Self concept (7)Concern for public image (8)Concerns for employee (9)Concern for survival growth and profitability

(1) Customers
Who are the organizations customer For Amul For Parle-G `Teenagers Children all age group people

(2) Products or services

AMULS main products are - Amul Milk - Amul Pizza - Amul Butter - Amul Chocolates - Amul Cheese - Amul Shrikhand -Amul ice cream - Amul Curd - Amul chaas -Amul koko

(3)Markets
Where does organization compete geographically?

E.G.---Amul emphasis is on whole india.

(4)Technology (5)Philosophy
What are the organizations basic belief,values,and ethical priorities?

(6)Self concept
What is the organizations major competitive advantage and core competencies?

(7)Concern for public image

How responsive is organization to societal and environmental concern?

(8)Concerns for public employee

Dose the organization consider employee a valuable asset?

CURRENT OBJECTIVE
Reliance communications current objective is to capture 30% indian market share

CURRENT STRATEGIES
50 paisa/min in all over India for LIFE-TIME just in Rs.48

STEP:- 2 ANALYZING THE ENVIRONMENT

STEP:-3 IDENTIFYING OPPORTUNITIES AND THREATS

`. OPPORTUNITIES:-positive trends in external environmental factors

THREATS:- Negative trends in external environmental factors

STEP-4
Analyzing the organizations resources and capabilities

Skills and abilities of employee Available resources Financial position Quality of its product and services

Example:Every day Amul collects 7 million litres of milk from 2.6 million farmers (many illiterate), converts the milk into branded, packaged products, and delivers goods to over 500,000 retail outlets across the country

 Core competencies: The main ideas about Core Competencies were developed by C K Prahalad and G Hamel through a series of articles in the Harvard Business Review followed by a best-selling book - Competing for the Future. An organizations major value creating skills,capabilities,and resources that determine its competitive weapons

 Example 1:Tesco have been successful in capturing leadership of the market for online grocery shopping
Reasons for it: (1) Designing and implementing supply systems that effectively link existing shops with the Tesco.com web site (2) Ability to design and deliver a "customer interface" that personalises online shopping and makes it more efficient (3) Reliable and efficient delivery infrastructure (product picking, distribution, customer satisfaction handling)

 Example 2: Dell have a strong position in the personal computer market

Reasons for it: (1)Minimisation of working capital in the production process (2)High manufacturing and distribution quality

(3) Reliable products at competitive prices

STEP-5 Identifying strengths and weaknesses

 Strengths:Any activity the organisation does well or any unique resources that it has

Weaknesses:Activity the organisation does not well or any resources It needs but does not posses

Pepsi
Strength
Pepsi has a broader product line and outstanding reputation. Increasing market share and revenues. Availability of large free cash flow

o Great brands, strong distribution, innovative capabilities

o Number one maker of snacks, such as corn chips and potato chips PepsiCo sells three products through the same distribution channel. For example, combining the production capabilities of Pepsi, Gatorade and Tropicana is a big opportunity to reduce costs, improve efficiency and smooth out the impact of seasonal fluctuations in demand for particular product.
`

 Weakness
(1)PepsiCo is far away from leader Coca-cola in the international market - demand is highly elastic. (2) Pepsi had to inspire vision and direction for large global company. (3)Not all PepsiCo products bear the company name

 Opportunity
(1) Food division should expand internationally

(2) Noncarbonated drinks are the fastest-growing part of the industry (3) There are increasing trend toward healthy foods
(4) Focus on most important customer trend "Convenience".

 Threats
(1) Pepsi is blamed for pesticide residues in their products in one of their most promising emerging market e.g in India (2) PepsiCo now competes with Cadbury Schweppes, Coca-Cola, and Kraft foods (because of broader product line) which are well-run and financially sound competitors. (3) Size of company will demand a varied marketing program; Social, cultural, economic, political and governmental constrains. `

STEP 6
FORMULATING STRATEGIES Established at corporate, business and functional level Follows the decision making process Strategy formulation for competitive advantage

STEP 7
IMPLEMENTING STRATEGIES

Top managers should act as leaders For better implementation managers should seek advise Motivation to the workforce

STEP 8
EVALUATING THE RESULTS
Assessing the results of the current strategy with the previous ones Adjustments should be made if necessary.

LEVELS OF STRATEGY

3 LEVELS OF STRATEGY CORPORATE LEVEL BUSINESS LEVEL FUNCTIONAL LEVEL

 Corporate level strategy

management of activities which define the overall character

& mission of the orgnisation,the product/service segment it will enter or leave and allocation of resources & management of synergy among its SBU.

Business level strategy plans & actions that firm devise to complete in a given
product or market scope or setting; it addressees a questions like how do we compete within an industry.

Functional level strategy management of relatively narrow areas of activities,which

are of vital, pervasive or continuing importance to the total organization

Difference between Corporate,Business & Functional Strategy

Characteristics
Scope Source & Motivation/Direction

Corporate level
Entire Org. Board of directors/ CEO

Business level
SBU or single business co. Corporate strategy

Functional level
Functional Area SBU strategy

Responsibility

Top level corporate managers

Long term

Top level SBU managers or Top level single business co. managers
Medium to long term

Functional level managers

Time Horizon

Short to long term

Specificity

General statements Concrete & of overall direction Operationally oriented & intent
Conceptual High Mixed Medium

Action & implementation oriented

Operational Low

Type Flexibility

Cooperation Required
Cost

Considerable
Major

Moderate
Medium

Little
Modest

Profit Potential

Large

Medium
Mixed Moderate Medium

Small
Supplementary Low High

Relation to present activity Innovative Risk Adoptability Wide range Low

CORPORATE STRATEGY
Management of activities which define the overall character and mission of the organisation, the product/service allocation of resources and management of synergy among its SBU.
Big picture view of organization SCOPE Entire Organization RESPONSIBILITY- TOP LEVEL Corporate Managers TIME HORIZON - Long-Term ISSUES ADDRESSED Diversification, acquisition, divestment, formulation of new business ventures

Critical questions answered by corporate-level strategists

1. scope what business should the firm be in? 2. How should the firm allocate its resources among existing businesses? 3. What level of diversification should the firm pursue? 4. Which kind of diversification? Related or Unrelated

 STABILITY STRATEGY GROWTH STRATEGY RETRENCHMENT STRATEGY

STABILITY STRATEGY
A corporate-level strategy characterized by an absence of significant change. i.e. continuing to serve the same clients by offering the same product or service, maintaining market share, and sustaining the organization's return-on investment.

when should managers pursue stability?

When companies find stable environment,

when firm is making a comfortable income

GROWTH STRATEGY
Growth Strategies are designed an orgs performance, use as measured by sales, profits, product mix, market coverage, market share. Growth through:- Direct expansion Vertical integration Horizontal integration Diversification

Horizontal Integration
E.g. TATA-CORUS BRUKEBOND INDIA LTD-LIPTON TEA

DIVERSIFICATION

DIVERSIFICATION
RELATED DIVERSIFICATION
When a co. grows by merging with or acquiring firms in different but related industries.

FOR e.g. VIDEOCON Walt Disney Theme Parks, Movie Production, Videos, Childrens apparel, Toys, TV Broadcasting

 UNRELATED DIVERSIFICATION TATA, RELIANCE ITC:- HOTEL&TOURISM

CIGARETTES BISCUITS FMCG AGRI BUSINESS PAPER BOARD & PACKAGING

RETRENCHMENT STRATEGY
It is a corporate-level strategy designed to address organizational weaknesses that are leading to performance declines.

BCG-MATRIX BOSTON CONSULTANCY GROUP

DEF: A strategy tool that guides resource allocation decisions on the basis of market share and growth rate of SBUs. Helps to evaluate companys position in terms of its range of products. Helps to make decision regarding which product/service to be kept, which it should let it go and in which it should invest in further.

STARS:
High market growth rate High market share Huge cash generation Huge cash consumption Huge investment in growing market Becomes cash cows when market growth rate declines

CASH COWS:
Low market growth rate High market share LEADER in mature market. Huge cash generation than consumption Low prospects for future growth-so no new investment in this category. Investment into STARS and QUESTION MARKS.

QUESTION MARKS:
High market growth rate Low market share Low cash generation than cash consumption. Analyze carefully the market situation Investment into high growth potential market. critical decision making for managers.

DOG:
Low market growth rate Low market share Neither large cash generation nor consumption. Also known as CASH TRAPS. Dogs should be sold off or liquidated.

BCG Matrix for ITC

STARS - INVEST QUESTION MARKS HOTELS PAPERBOARDS/PACKAG ANALYZE
ING AGRI-BUSINESS FMCG OTHERS ITC INFOTECH

CASH COWS MILK

FMCG CIGARETTES

DOGS DIVEST

BCG Matrix for Bajaj Two-wheelers

STARS
CT 100 XCD 125 cc AVENGER

QUESTION MARKS
KRISTAL PULSAR 200 PULSAR 220

CASH COWS
PULSAR 150 cc DISCOVER 110 cc

DOGS
PLATINA PULSAR 180

LIMITATIONS OF BCGMATRIX:
It considers market growth rate as the only factor in industry attractiveness and market share as the only factor in competitive advantage. Sometimes even DOGS help in gaining competitive advantage over other products of the company.

 Can we apply Same strategy on the product which is being sold in all over India or, say, all over the World? -North, East, West, South. => Should we apply same strategy for those products which are different in nature but are being sold in same Region?

When an organization is in several different business, these single different business that are Independent and that formulate their own strategies are called SBU
In Other words, SBU is grouping of related Business based on same strategic application.

It is useful for multi-product and multi related enterprise Each SBU will have different Mission, Vision, Objectives etc Each SBU will have its own set of competitors and own set of strategy SBU may be of -Functional based -Product based Each SBU will have CEO who has responsibility for strategic planning and profit performance. Examples

-Meaning
-Ways to Acquire Competitive Advantage *Core Competencies *Assets & Resources *Quality *Product innovation

Lowest Cost Producer in the industry Firms do everything to cut the cost

You dont give unnecessary Extra Features (Frills).

Product should be comparable in Quality

Exceptionally High Quality

Extraordinary Service Innovative Design Technological Capability Unusually Brand Image

Cost Focus or Differentiation Focus Narrow Segment It Can be based on

-Variety -Type of End Buyer -Distribution Channel -Geographical location

Where it can succeed?

 Porter Says Successful Organizations end up here Dual Emphasis on Cost & Differentiation Should Maintain Quality in Differentiation It will lead to Increase Sell

Economies of Scale & Lower Cost

Competitive strategy
Purpose: The purpose of five forces analysis is to diagnose the principal competitive pressures in a market and assess how strong and important each one is.

Michael Porters Five Forces Model

1.Threat of new entrants 2.Bargaining power of buyers(customers) 3.Bargaining power of suppliers. 4.Threat of substitute product 5.Rivalry among existing firms

Threat of New Entrants

Some of the Common Important Entry Barriers 1.Government Policy 2.Economies of Scale 3.Cost Disadvantages Independent of Scale 4.Product Differentiation 5.Monopoly Elements 6.Capital Requirements

Example of Aviation Industry

History of Aviation Industry 1932-launch of TATA Airlines 1948-Air India International 1953-Nationalizaton of aircraft industry 1986-Private sector players permitted as Air taxi 1994-Private carriers permitted to operate scheduled services 2003-Entry of low cost airlines

Threat of New Entrants For Aviation Industry

High start up costs-capital Intensive Industry Over-crowded low cost airline market(too many budget airlines in the Indian skies) Dearth of aviation professionals(pilots, aviation engineers) Limited infrastructure facilities Price wares against newcomers. Exit Barriers Long gestation period Net impact-Low

Bargaining power of buyers

Buyers have the potential customers. The important determinants of the buyers power: 1.the volume of purchase relative to the total sale of the seller. 2.Differentiation of the product. 3.Profitability of the buyer. 4.Importance of the industry product with respect to the quality of buyers product or services. 5.Extent of buyers information.

 Price dominated short-haul market with little or no product differentiation. Low switching costs Price conscious consumers-little or customer loyalty. Net impact-High

Bargaining power of Buyers(Customers) in Aviation Industry

Bargaining power of Suppliers

The important determinants of supplier power are as follows: 1.Extent of concentration and domination in the supplier industry. 2.Importance of the product to the buyer. 3.Importance of the buyer to the supplier. 4.Extent of substitutability of the product. 5.Switching cost. 6.Standardisation of the product.

Bargaining Power of Suppliers in Aviation Industry

No control over ATF(Aviation Turbine fuel)prices Negotiate favourable deals with most of their suppliers(eg., Airline operators do not have their own catering department for on-flight consumables.) Leased aircrafts Specialized spare parts and limited number of manufacturers Net impact-High

Threat of Substitute products

Factor such as switching cost and buyer loyalty determine the degree to which customers are likely to buy a substitute product.

Threat of substitute products in aviation industry

Video conferencing and other telecommunication technologies Super fast trains for short haul flights Net impact-law

Rivalry among firms

1.Number of firms and their relative market shares, strength etc. 2.State of growth of industries 3.Fixed or storage costs. 4.Indivisibility of capacity augmentation. 5.Product standardization and switching costs. 6.Strategic stake. 7.Exit barrier. 8.Diverse competitors. 9.Swithing cost. 10.Expected retaliation.

Rivalry among existing firms in aviation industry

Competitive and overcrowded market. Commoditized nature of productaggressive pricing, efficient distribution and innovative communication maximize. Differentiation- e. g. narrow v/s wide customer base. Regional towns v/s main cities.

Rivalry among existing firms in aviation industry

Competition with conventional careerswith low fairs but higher level of service(more frills and main airport servicing.)they are a big threat. Consolidation in the market- mergers , acquisions and alliance(e .g .kingfisher airlines acquired air deccan,jet airways acquired air Sahara and merger of air India with Indian airlines. Net impact-high

Functional level strategy

An organizational strategy that seeks to determine how to support business level strategy.

FIRST PHASE Transformation of company from small package delivery service into major force in overnight delivery--- information delivery Competitors--- UPS (United parcel services), U.S. Postal Service, MCI, AT&T They make overnight-delivery service of a great importance of doing business and become profitable and leader in the industry Technology and the attitude of innovation... (40 packages 1.7 million) 1. Post office and UPS prices were a direct challenge 2. Threat of offering of new methods by competitors International business became more common, informationtransfer system have to keep pace. (recognizing needs of tomorrows business, anticipating them and implement strategy to meet them were major decisions for them)

SECOND PHASE Fed Ex failed in its ZapMail innovation (Fred Smiths responsiveness) which was introduced to compete with MCIs mail system. (MISTAKE)

Therefore to be at top and become market player---it concentrated on foreign market and acquisition. 2 major moves which made it UNDISPUTED LEADER 1.acqired Tiger International 2.built a new facility in Anchorage. Alaska which were transportation triad THIRD PHASE New services---logistic planning for global companies center of