Planning and Strategic Management

Goals
A pre-decided, desirable future outcome or event:
Goals provide a sense of direction. Goals focus our efforts. Goals guide our plans and decisions. Goals help us evaluate our progress

Plans
Deciding a future course of action to achieve pre-decided goals is called planning. Strategic Plans Operational Plans Mission Statement

How Strategic and Operational Plans Differ

Time Horizon Scope
Degree of Detail

Evolution of the concept of Strategy

Igor Ansoff Henry Mintzberg Peter Drucker Michael Porter Alfred D Chandler

Strategy
Plans which are designed to achieve organizational objectives are called Strategies.
The broad program for defining and achieving an organizations objectives; the organizations response to its environment over time.

Strategic Management
The set of decisions and actions resulting in formulation and implementation of strategy/strategies designed to achieve the objectives of the organization is called Strategic Management. The management process that involves an organizations engaging in strategic planning and then acting on those plans.

What it deals with?

Objectives Competition Environment Future

The Strategic Management Process

Strategic Planning STRATEGY FORMULATION GOAL SETTING

Strategy implementation

ADMINISTRATION

STRATEGIC CONTROL

Levels of Strategy
Corporate Strategy

Corporate Level Strategy

SBU 1 Strategy

SBU 2 Strategy

SBU 3 Strategy

SBU or Business Level Strategy

Marketing Strategy

Operations Strategy

Finance Strategy

HRM Strategy

Functional Level Strategy

Corporate Level Strategy

Stability Growth Renewal Combination

Portfolio Framework BCG Matrix & GE 9 cell. Five Forces corporate strategy

Stability Strategy
The organization continues to serve the customers in the same product or service, market and functional sectors as defined in its business definition, or in a very similar sector. Its main strategic decisions incremental improvement of performance. focus on functional

Reasons for Stability Strategy

Doing fairly well and hopeful of the same in future. Nepotism. Safety and security is priority. The organization lacks resources. Core Competence. Lack of mind-set.

Reasons for Growth Strategies

Current business has no future. Current business is very volatile. Resources are not adequately utilized. Risk diversification. Retaliation. Imitating competitors. Risk invasive management. Growth and dominance.

Growth
Organic or Inorganic Integration or Diversification Market Development or Product Development

Organic or Inorganic
Organic Growth: Development of new markets or facilities, entirely through expansion of firms own infrastructure and not by acquiring, taking partownership or jointly with any other organization is called organic growth. Inorganic Growth: Using the infrastructure not originally a part of the firms ownership, for expansion purposes, is called Inorganic Growth.

Inorganic Growth
Mergers and Acquisitions Tender Offers Joint Ventures

Mergers
A merger can be defined as any transaction through which two or more firms integrate their operations on a relatively co-equal basis. Thereby forming one economic unit from two or more previous ones. They are of three types - Horizontal - Vertical - Conglomerate

Acquisition
A merger where one of the firms is comparatively much larger than the other candidates. Therefore, gains greater rights of control after the transaction. Normally leads to continuance of the larger firms brand names, logos, management policies etc.

Tender Offer
Taking permission from the target company and asking its share-holders to submit or tender their shares of stock to the acquiring firm is called a Tender Offer. An alternate is the Bear Hug.

Joint Ventures
In a Joint Venture the participants continue to exist as separate firms with the JV representing a newly created entity. Partners share proportional capital, distinctive skills, personnel, reporting systems and technologies to gain competitive advantage and to create new value.

Integration
Vertical - Forward - Backward Horizontal

Diversification
Diversification is the process of entering into different industries either to exploit untapped potential or to minimize the risk of changing business trends. There are two major types of diversification: - Concentric - Conglomerate

Market Development
This process involves marketing existing products with little or no modification to customers in related or unrelated market segments. Segmentation could be on the basis of: - Age - Geography - Income

Product Development
This process involves the modification of existing products or the creation of new items in a related category. This strategy has two objectives. One is to increase the life-cycle of the existing products; the other is to utilize the favorable reputation and brand name of the firm.

Renewal Strategies
The organization drops product line(s), market(s), market segment(s) or function(s).
Focuses on functional improvements or reversing certain deteriorating trends.

Renewal Strategy
Certain divisions, product lines, or markets are not profitable. Profit is less than target rate. Shift in business strategy. Organization has become too diversified. Financial problems. Turnaround or restructuring.

Renewal Strategic Options

Divestiture Liquidation Becoming a captive Turnaround Strategy

Divestiture
A divestiture strategy is pursued when a company sells or divests itself of a business or part of a business. It may be because of loss, less than target rate of return, urgency to mobilize funds, managerial problems, or redefinition of the business of the company.

Liquidation
Liquidation occurs when an entire company is sold or dissolved. The reasons for liquidation could be the same as the reasons for divestiture. When there are no buyers for the company its assets may be sold and the company may be wound up.

Becoming a Captive
A firm becomes a captive of another firm when it subjects itself to the decisions of the other firm in return for a guarantee that a certain amount of the captives product will be purchased by the other firm or incase of a White Knight association.

Danger Signals
Performance Indicators
Decreasing Market Share Consistently Decreasing Rupees Sales Decreasing Profitability

Financing Problems
Increasing Reliance on Debt Restrictive Dividend Policy

Danger Signals
Investment Policy
Inadequate Reinvestment in Business Proliferation of New Ventures at the expense of the Priority Business

Lack of Planning

Danger Signals
Problems at the Top Management Levels
Lack of receptiveness of CEO Management Succession Problems Ineffective Directors
Ineffective Management Team

Turnaround Management
Turnaround Management refers to the management measures which reverse the negative trends in the performance indicators of the company. In other words, turning a sick company into a healthy one.

Turnaround Management Factors

Management Factors Human Resource Factors Production Facilities Finance Management Product Mix Modification Marketing Strategy Miscellaneous

Elements of Turnaround Management

Change in Top Management Initial Credibility building actions Neutralizing External Pressures Initial Control Identifying quick pay-off activities

Elements of Turnaround Management

Quick Cost Reduction Revenue Generation Asset liquidation for generating cash Mobilization of the Organization Better Internal Coordination

Combination Strategy
A company pursues a combination strategy when it adopts more than one grand strategy simultaneously or sequentially. They could be:
Stability and growth. Stability and retrenchment. Growth and retrenchment. Growth, retrenchment and Stability.

Reasons for Combination Strategy

The reason for pursuing a combination strategy is the existence of a combination of reasons for any two or more of the other three generic strategies. A combination strategy can also be the result of continuous environmental change and redefinition of the business.

Thank You