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Introduction:
Stratcgy is a broad concept that covers a multitude of different issues, concepts, and methods.
Many topics are considered in the formulation and implementation of strategy including industrl, analysis, competitors analysis, ethics, strengths/weakness, value creation, tcchnology, innovation, product development, diversification, balancing the needs of various
stakeholdcrs, strategic alliancc, organizations design, virtual organization, rcward corporate culturcs and corporate governance.
systcm,
i,.
Evcry busincss organization of all sizes must prepare for an increaiingly complcx futurc,
companies must deal with variety of strategic, technological and organizational forces on a
daily bases. All these forces work together to redefine the economics and competitive
landscape o1'the industry. l;orward looking tirms
will
of
compctitivc advantagc by participating and shaping how industries evolve in the times ahead. Yct somc challcngcs also thrcatcn to crodc the long held competitive advantage of companies
that arc slow to rcacl or unable to mount an effective response.
Iror practicing managcrs and lcadcrs, stratcgy is at thc centcr of thc effort to crcatc valuc lor
customers, to respond to competitive challenge, and to build strong organizations.
Globalization has bccomc ctchcd in our compctitive landscapc, including new opportunitics
and thrcats from emcrging and developing countries that are fast becoming vibrant
cornpetitors. Companies are continuing to innovate breakthrough products and services and tcohnologics to servc customers at cver faster rates. They arc planning and organizing thcir activities using new methods, tcchniques and modes of operations, especially with the
pervasiveness of tlre Internet arrd the rise of
are
rcaching to nerv custonrers in new parts of the world they never previously entered.
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develop a competitive advantage in its strategy that enables it to compete effectivcly. Stratcgy refers to the ideas, plans, and support that forms employs to compcle suoccssfully against their rivals, Strategy is designed to help firm to gain an edge over its rivals which
generates successful performance over an extended period.
Dclinition of strategy:
Ilarvard's Alfred Chandler" Strategy is a determination of the basic long torm goals
ancl
objectives ofan action and allocation ofresources necessary for carrying ou1 these goals"
Jamcs.B.Quinn "Strategy is a pattern or plan that integrates an organization's major goals, policics. action sequences into a cohesive whole."
IIcnry Mintzberg"
opporturity and internal capacity. It is a pattem in a stream of decisions and action" Fcaturcs of a Stratcgv:
Strategy is course of action through which an organization relatcs itself with thc
Stratcgy Iinks thc organization to its cnvironmcnt.-Strategy relales the organization with
its environment, to judge the feasibility of new products, to set objectives etc, environment
and the
firm influence each other in a systems approach, so it is very crucial to take changing
lt
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3. 4.
Stratcgy is forward looking: Business situations are changing in their entire dimcnsioh
making prcscnt situation obsolete, warranting new and creative approach to solve the
problems that arises.
5.
A stratew is comrrlex and highlv undependable for renetition. Gray Hamel has quoted the 'Ycstcrday's succcss will not guarantcc today good performance, and today's success will not
bc hclp to bc
will
l.
3. To dcvclop measures to judge opportunities. 4. 'l'o havc an assurance that the firm's overall resources allocation 5. 'l'o have and develop internal ability to anticipate change. 6. 'l'o save timc, money and executive talent. 7. 'l'o idcntily devclop and exploit potential opportunities. 8. Improvcd intcgration.
'
put,.rn is efficient.
9.
10. Increase the probability of better performance. I I . 'fo take system atized business decisions. 12. 'l'o improve communication and coordination in business. 13. lniproves allocation of resources.
X x X
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x X
Position: location of thc orgairization rclative to competitors and othcr cnvironmcntal factors,
Pcrspective: personality of the organization
l.rl.:r.--..
I= - r --.
-\ - ,I
a very
Delibcrate strategy: strategist will want to take advantage if new opportunity prescnted by
the environment even
if it
is not the part of intended strategy, they are secondary set of plans
to support and maneuver the intentions. For eg, when government gave subsidies fbr solar powcr gcncrations, many busincss havc incrcased thcir invcstr4ent and hiring in this scctor.
Emcrgcnt strategy: the complete new strategy or changes in the cxisting stratcgy bccausc of
unlbrcseen events in the external environment can be termed as emergent strategy. l"or cg:
Lr>
avoid the saturated markets in the cities for Flat TVs Toshiba concentrated to incrcasc salcs in rural markcts of India.
llealized strategy: strategy which organizational decisions are determined by both analysis
and untbreseen environmental developments.
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i':
a..,i
=-
' X
Levels of Strategy: Strategy operation takes place at different levels namely. corporate.
busincss and functional levels,
(lorporate tevel strategv: decisions making machinery consists of mainly members of IIOD.
(llios,
'l'hey are responsible for financial and non-financial and administrative members.
a) b)
c) Allocating rosoutccs among differenl business areas. d) l;ormulating stratcgies that span individual business. e) I)roviding I-eadership to tl're organization.
l) !t
Busincss tcvct
stra
*1g*1 * *
intcnt gencrated at the corporate level into solid functional obiectivcs and
strategies Ibr indivicluals business division or SBUs. These level strategies determirre tlie basis on which a lirm can compete in the selected product market filed. For eg: -l'CS, 'l'ata 'l'ata
Stccl.
rnotors,
TCL etc.
b) Dcsign dccision on which a llrm can compete in the selected markct. C) Conccrncd with stratcgics thal is spccific to a particular busincss.
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l'unctional level stratesy: their basic responsibility lies in developing annual objectives
basically which is functional for fulfilling
departmental functioning like
and
short term strategies in the areas of production and operations research and developments,
the
rcsponsible 1br implementation or execution of company's strategic plans. 'l'hc rolcs thcy play arc: Designing functional strategy in tune with business and corporate strategy, Provide information and feedback upwards to formulate realistic and attainable stratcgics.
'l'hcy arc rcsponsiblc for strategy implementation and cxccution of corporate stratcgy.
ln shoft, corporate level strategy occupies the highest level of strategic decisions making,
which is more value oriented, conceptual. At business level, strategies are morc
comprehcnsive.related to the business portfolio, of resource allocation and coordinating
lunctional arcas in SBIJ's and at thc functional level are restricted plan accommodating
objcctivcs lbr specilic function and coordinating different operations in achicving SIStJ's and
corporatc objcctivcs.
Dffirence
Il rrsirtess lc.-'el
busincss co, Corporate strategy
- -.--'-
SBu or sirrgle
cEo
Boarcl of directors/
I SBU srrutegy
ll)
l{.csporlsibility
-,
lrunc(iorral at ttargcrs
levcl
'l'ilrc
/\ction &
Couceplrral
lrlcx ibil it Cooperarion
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Stratcgic managemcnt is a process! directed by top management, to determine the tundamcntal aims or goals of the organization and ensure a range of decisions which will
allow lor the achievement of those aims in the long term. while providing for adoptive
rcsponscs in the shofl tcrm.
Strategic Management is defined as the set of decisions and actions resulting in forntation and
Richard. X *
Art & science of.formtlating, irnplementing, and evaluating, cross-functional decisions that
enable un orS4anizalbn lo achieve ils obiectives (David 2005)
X X X X x x X X
Stratcgic dccisions warrant top management support. Stratcgic issucs involvc allocation of large amount of resources.
Strategic issues have a long term impact on the firm.
2. 3. 4.
SM not only helps organization to respond to the environment, but also influence its
environntent by exerting control over its destiny.
SM hclps organization to achieve understanding and commitment of all managers. SM achicvcs participativc managcmcnt.
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5. SM leads to long-run commitment to high performance c f business. 6. sM cnhanccs problcm-prcvcntion capabilitics of thc organizalion. 7. SM allows identif-rcation, prioritization and exploration of opporturnitics. 8. SM helps to integrate the behavior of individual into total effort. 9. SM encourages favorable attitude towards change.
Modcl of stratcgic managcmcnt rrroccss:
Strategic management process is the steps, by which management converts a firm's valucs.
=valute resu lt
l i
Lqkshmo^
..
'l-his plocess is most applicable to strategic management at the business turit lcvel of thc
organization. For large corporation strategy at the corporate level is more concerned with
managing a portfblio of business, involves strategy decisions about which business units to
gro\\', rcsourccs allocation among the business units, taking advantagc of syncrgics among thc
busincss units, and mergcrs and acquisitions
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MISSION: A company's mission is its reason for being. The mission often is expressed in the
fbrm o1'a mission statement, which conveys a sense of purpose to employees and projects a company imagc to customcrs.
l. Inject sense of purpose into tlrm's purpose. 2. l)rovide long tcrm dircction.
3. 4.
Givc thc tirm an idcntity, Dccidc' who wc arc', whal wc do', & whcrc we are headcd'.
ComDoncnts of mission statcmcnt
For
Amul :
'l-ecnagers, Children
or scn,ices
(4)'l'cchnolosv: Oompany should update with the technology with ref'erence to the product
ancl scrvicc thcy r1ffcr
(5)Philosonhv: What arc thc organization's basic belicf,valucs,and cthical priorities? (6)Sclf conccnt: What are thc organization's major competitive advantage and core
compctcncics?
(7)Conccrn filr Dublic imagc: How responsive is organization to societal and environmental
crltrccrtr
?
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0II.IECTIVES:
Objcctives are concrete goals that the organization seeks tn reach, lor examplc an carnings
as needcd.
2. Create yardsticks to track performance. 3. Establish performance goals required for the task. 4. Push firm to be inventive, intentional, and focused.
lig: Strategic objective of the firm:
l.
2. Overlake rivals on quality/customer service. 3. Attain lower overall costs. 4. Ilccomc leader in new product introduction. 5. Achicvc tcchnological supcriority
'l'his step address how organization must have clearly articulate goals and objcctivcs in ordcr to Channel the eftbrts of individuals throughout the organization towards common g<lals.
Goals and Objectives also provide a means of allocating resollrces eflbctively.
A llrm's
vision. mission, and strategic objectives form a hierarchy of goals that range from broad
statements of intent and bases tbr competitive advantage to specitic measurable strategic
objcctives.
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X X
30Yo Indian
Currcnt stratcsies: 50 paisa/min in all over India for LIFE-TIME just in Rs.48
StCN 2
idcntity available opportunities. A firm must also know its internal strength and limitations to
pursue the opportunity lor viable success. The situation analysis involves both the external and internal scan. 'l'he environmental scan includes the following components:
l.
2. Analysis of the firm's industry (task environment) 3. Ilxtcrnal macro environment (PEST analysis)
Managers must scan and monitor the environment as well as analyze competitors. Such
inforrnatiorr is critical; in determining the opponunity and threats in the external environment.
'l'hc intcrnal analysis can identify the firm's strength and weakness and the extemal analysis
rcvcals
tiamework
dcvclopcd by Michacl Portcr known as Porter's Five Forces. A situation analysis can gcncratc
a largc amount of information, which can bc sclcctivc managed to crcatc a modcl of SWOI' analysis.
. Ol'l'OR'ItlNI'l'IllS:. 'l'lIltllA'l'S:-
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profitability of ICICI Growth in general insurance industry will help increasing the market
sharc
'l'hreats
Opening of Indian banking sector in 2009 would cause intense competition
(ilobal and domestic economic slow down could affect financial perfbrmance of ICICI
milk into branded, packaged products, and delivers goods to over 500,000 retail
- ldentifv
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
Examrlle : Pcpsi
l
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.
Strcngth
. Pcpsi has a broader product line and outstanding reputation. . Increasing market share and revenues.
. Availability ol'large fiee cash flow
. .
l)l'epsiCo is Iar away fiorn leader Coca-cola in the international market - demand is highly
clastic.
i
(2) t'epsi had to inspire vision and direction tbr large global company. (3)Not all I')epsiCo products bear the company name
A finn's strategy tbrmulation is developed at several levels; first business level strategy
addrcsscs thc
a given business
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't'hc firm must determine the best method to develop international strategies as it ventures
bcyond its national boundaries, managers must formulate effective entrepreneurial initiatives
to succccd in highly compctitivc and dynamic environment.
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if they
involves ensuring proper strategic control and organizational designs, which include cstablishing effective means to coordinate and integrate activities within the tinn as well as
with its suppliers, customers, and alliance partners, Leadership plays a central rclc, including
ensuring that the organization is committed to excellence and cthical bchavior. It also promotes learning and continuous improvement and acts entrepreneurially in crcating and
organizations continually monitor and scan the environment and responds to thrcats and opportunities. Second. behavioral control involves the profer balance of rewards and incentives as well as cultures and boundaries. Successlul lirms practice ell'ective corporate.
governance. 'l'hey must create mechanisms to ensure that the actions of the managers at'c consistent with the interests of the owners of the firms. These include an ef-tective board
of
directors, actively cngagcd shareholders and proper managcrial rcwards and inccntivc
systems, various exlernal mechanisms such as market olcorporatc control. auditors, banks. analysts, and the financial press often help to ensure good govcrnancc.
All
leads to another decision which has major or minor effecl on thc organizations. Appropriate
dccisions making
is
o[thc llrms.
abilities lor stratcgic decision making; It is a major choicc of actions conccrning allocation ol'
rcsoLrrces and
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Strategic dccisions contribute directly to the organizational goals,they have a long term
impact.
It
has
to consider various other alternatives to buffer against the volatile environment. All
Stratcgic dccision are Lrade-ofls between the costs and risks and time, competitive
l"o
Ibrmalized and structured to informal and unstructured, process, managerial power relationships ctc. Tlcnry Mintzbcrg has identified three different approaches of decisions making:
less ccntralizcd. whcre rich experience and past sound judgrnent plays a vital role in making
the head as conrpetent authority to make decisions, they are both growth and expansions oricntcd. 'l'hc1,
kg.,
Adarltivc annroach: this approach is rcactive rather than proactive and tries to collect
mix thc variant factors influcncing stratcgic dccisions. It is morc of problcm solving which arc
cncountered lor survival in business.' Decisions making is the hands of many people evolved
in the process. and priority based decisions are taken into considerations.
organizations.
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liability
wher-r things
do not tbll in the right quadrant, even after a lot of thorough analysis, there are certain
limitations which are to be taken into account before one is concluding strategic managcmcnl
is bc always succcsslul.
o r o o
Short-term focus of the organization: long terms changes will not be apprcciatcd as today
organizations lbcus in short term results,
lrvcr changing, complex and dynamic environment: l{eview process is dit}icult and time consuming activity.
Reasons fbr
lail, especially:
a. Failurc to undcrstand
the customcr
. . .
b.
Why do they buy is there a real need for the product inadequate or incorrect marketing research
o . . .
will competitors do
. .
l{eporling and control relationships not adequate Organizational structure not flexible enough
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Ncw stratcgy not wcll cxplained to employees No inccntivcs givcn to workers to embrace th,e new strategy [Jnder-estimation of time requirements No critical path analysis done
. . .
No lbllow tlrrough after initial planning No tracking of progress against plan No consequences lbr above
.. j. . .
Inadequate understanding
I'oorcommunications
Insufficicnt information sharing among stakeholders ljxclusion ol stakeholders and delegates
diversified. multi business firms, the executives in charge of individual business (electronic,
semiconductors. serves) are business managers, these executives go by many designations like gcncral manager, division manager! strategic business manager.
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prcsidcnt or chairperson, are corporate manager, they oversee the surbset of the lirm's total
portfblio of business.
Iloth these business and corporate managers play pivotal roles in the strategic managcmcnt
process, they are key people who bring all other assets into play when competing
with othcr
lirms.'lhe1, s1to represent the highest level of authority within the tirm or subunit, As a result,
thcy cxcrt enormous influence over the company's capital expenditure to build new plants ore to accluirc othor companies, chart thc future direction of thc firm's growth and dircct thc
firm's cfforts towards cmcrging market opportunities. I'op managcrs oftcn scrvc as thc
spokespersons for their firms when dealing with the media over such issues as brcakthrough technologies, new products rollouts, or potential allegations against the company by shareholders, customers or communities. Thus top managers perfbrm mr"rltiple lasks at thc highest level of an organization and bear the highest responsibility for their
and actions.
firm's strategies
At the same time, customers, investors, employees and even the public at large depend on thc
judgement, experience and skills of these managers to compete both tairly and within the law.
Iror thc vast majority of compeuries in India, senior managers continue t<l work long hours
lbrmulating stratcgics and action plans that aim to satisfy thcir customcrs, rcwards thcir
invcstors, develop thcir employees, and foster a largc sensc of public trust. I-Iowcvcr busincss
is not immune from scandalous activities that can mar the reputation of entire industries for an extended period.
Middlc-lcvcl managers.
l.rlrvcr
le
vcl managcr
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l'>age
1ti
a. Intcrrrcrsonal
Rolcs:
. . .
l;igurc I Icad.
Lcadcr.
l,iaison
b.
Informational llole:
. o
Negotiator.
X x x x !t x
llstablishinq thc Mission: 'l'he strategist decides on the business engagement and guidanc<:
for continuous growth. A mission is usually enduring and timeless.
and
l)cvclopins stratdsv: dcvcloping concepts, ideas and plans for achieving objectivcs
successfully and meeting and beating competition.
Plannins thc orsanizational structurc: developing the plan of the organization and thc
activities that help people work to perform activities in accordance.
.: organrzatton.
.strictly
people to
fill
f"; P;l;;;
Circulation
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X x X
ancl
l'roviding carrital: making sure the business has the money, and credit needcd fbr working
capital and physical facilities.
will
particular objective.
Providinq control inlbrmation: providing tbcts and tigures to help people fbllow slrategy,
policies, procedures and programme to keep alert fbr the workfbrce. It also measures ovorall
company performance against plans and standards.
Conclusion: An organization strategy must be appropriate for its resources, environment, circumstanccs
and core objectives. The process involves matching the company's stratcgic advantagc to business environment the organization faces.
Onc objcctive of overall corporate stage is to put the organization into a position to carry out its mission elfectively and elliciently.
organizational goals, policies and action sequence (tactics) into a cohcsivs wholc, and must bc
based on business realities. Business enterprise may
thc:
world changes in a way they fail to understand. Strategy must connect with vision. Pulposc
and
l'hilips Elcctronics is one of the world's biggest producers of medical equiprncnt, consumcr
electronics, semi-conductors, f-lat screen technologies. and home appliances. A liuropcan company rvith a very product tradition of innovation, Philips has consislentll, Ied thc rvorld in
dcvcloping rnany important technologies. F-or example. it helpeu pionecr mcdical X-ra,r, tcchnologl,, thc audio-casscttc, thc clcctric shavcr, and today currcnt compact discs Strictly for Private Circulation )U
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A big lactor bchind Philip' outstanding record of innovation is that the company has long
oncouragcd scicntific rcscarch and big projects that yield potentially big payoffs. Whilc cr.rltivating innovations, Philips has traditionally marketcd its products in different parts of thc
world separately. Although Philips originated in the Netherlands. the company has historically
looked to larger nrarkets in the US. l,atin America. Asia and the rest of Europe for much of its
growth. Philips was one of the first companies to fbrmulate and implement a worldwide
stratcgy that witncsscd thc steady growth and profitability of local operations, Many
of
t'hilips innovations ovcr timc camc fiom large labs located throughout the US, Lurope.
Australia arrd Canada. Over time, Philips relied heavily on its regional affiliated to
manulacLuro many
'l'hc innovation drivcn strategy worked fbr Philips for many decades. Japanese rivals such
Matsushita Fllcctric. Sony. JVC. and Toshiba began producing consumer clcctronics and othcr high tcchnology products at lower unit costs. Unlike Philips, .lapanese firms were able to construct largc factories that were ultra effici,ent. They were able to overlake Philips' markct
position in many markets. Philips also faced competition, and difficulties building up a wellrccognized brand namc r.r,ith global reach.
l'hilips atternpted to restructure its operations to compete more effectively with these rivals
ovcr the past two dccadcs, lts current CF,O Gerard Kleisterlee is overseeing a major rcorganizations of l'hilips that sccks to combine disparate operations and organizational practiccs into a cohcsivc systcm. Klcistcrlcc wants Phillips traditionally scparatc busincss units to communicatc and to coordinate their activities to achieve significant cost savings and to deliver leading edge products to market faster. At the same time. the company has decided to allocate more resources to high growth opportunities in its core medical, electronics, and
company known as LG I'}hilips of LCD screens that are found in flat screen TVs and Cell Strictly for l)rivatc Circulation
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c Management
phones and digital cameras. Philips teamed with Chinese maker of rnedical equipment known
as Neusoft,
will
produce medical imaging equipment tbr use in china. In the liled of advanced
integrated circuits, Philips joined with'l'aiwan Semiconductor company to co design and co-
producc lcading cdgc chips that will power next generation applicants and consumcr elcctronics. It is also working with Samsung Electronic to creatc "elcctronic wallct", it has
also an ambition to be an important supplier of new digital technologies for luture homc entertarnment centers.
1o compele
connected global marketplace. However the process of chaining Philips organizational practices represents a long term ongoing eftbrt that has already helped the company becomc rnorc profitable and faster moving,
Summary:
Strategy is a powerful concept designed to help firm gain a cornpetitive advantage over rivals.
A firm's choiccs must rcflcct its strcngth and weakness rclativc to rivals and thc opportunitics
and thrcats prcscntcd by its cxternal cnvironment. Analysis of thcsc four clcmcnts is rcl'crccd as SWOT analysis.
All lirms
i
must deal w'ith the strategic imperatives facing them according to thcir own
nclividual situations. 'l'he management process designed to satisfy strategic imperatives fbr building compctitivc
advantage is called strategic management process. It consists o1 lbur rnajor stcps: analysis,
lranagcrs gcnerally play a prirnary role in determining such dccisions. lixecutives most directly responsible tbr strategic decisions are business managers and
corporate managers.
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Important Questions:
.
a
Dcfinc Strategic management? Discuss its importance and relevance in today's volatile
cnvironmcnt? Who is a stratcgist? What thc rolc and responsibilities he plays? What is strategic management process? Explain in detail the steps involved? What is strategic decision making? What is the importance of decision making? What arc rcasons lor stratcgic dccision failure? Give relevant examples.
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