ALLIANCE UNIVERSITY

EPGDM Program
Term III
Jun. - Sep 2016
BUSINESS STRATEGY
Module 2
Prof. Krishna Kumar V Rao

Strategic Intent

Each one of us, as individuals, have our dreams and

aspirations which we may desire to achieve
What do we want to become, in future
Organisations also have their own dreams and
aspirations
What they want to become, in future
The purposes the organisation strives for

Hierarchy of Strategic Intent

The hierarchy of strategic intent lays the foundation for

strategic management process.
In this hierarchy,
Vision
Mission
Business definition
Business model
Goals and
Objectives

are established.
Formulation of strategies is possible only when strategic
intent is clearly set up.
This will have long term impact on the organization

Strategic Intent - Reliance

In 1970s, Dhirubhai Ambani told one of his close colleagues, do

you know who these Tatas and Birlas are? We have to get past
them one day. I have inherent desire to become number one
industrialist of the country
This intent of Dhirubhai became the strategic intent of RIL
RIL pursued its growth strategy relentlessly.

Strategic Intent - Reliance

RIL always believed, If you want to become world-class

company, you must have world-class technology and world-class
people
For world-class technology, RIL acquired best-in-class technology
For people mobilization, RIL adopted the approach, If you are a
big fish, small pond will not suit you. Come and join the best-inclass company
The result is: RIL has a very high percentage of Indian repatriate
employees
For mobilizing financial resources, RIL relied on public
participation and it came in huge measure

Strategic Intent Indian Oil Corporation

IOC is the largest Indian company engaged in the business of

crude oil refining and offers a variety of products related to oil
sector
IOCs strategic intent consists of the following elements in the
order given below:
Vision : IOC aims to achieve international standards of excellence
in all aspects of energy and diversified business with focus on
customer delight through quality products and services
Mission : Maintaining national leadership in oil refining,
marketing, and pipeline transportation
Objectives : Focusing on cost, quality, customer care, value
addition, and risk management.

Strategic Intent
Expressed in the form of
Vision & Mission Statements at the corporate level
Business Definition & Business Model at the
business level
In precise terms, as Goals and Objectives
- expression of aims to be achieved - operationally

Dabur India

Vision Statement
Dedicated to the health and well being of every
household

Vision Statement
Should

answer the basic question

What do we want to become?
Lays out some desired future state
Articulates in bold terms what the
company would like to achieve
Ambitious but achievable
'An Image of the future we seek to create'.

Vision: FORD

To become the worlds leading consumer company

for automotive products & services
Challenging but achievable if stretched to maximum
Now it occupies No.3 position behind Toyota &
General Motors

Vision Statements

GE: Our key goal is to be either #1 or #2 in every

industry GE is in.
Harley-Davidson :Our key goal is to fulfill dreams
through the experiences
of motorcycling

EXAMPLES VISION
Starbucks:
To inspire and nurture the human
spirit one person, one cup and one
neighborhood at a time

Nike:
To bring inspiration and innovation to
every athlete in the world. If you have a
body, you are an athlete

Mission Statement

A Mission is defined as 'Purpose, reason for being'.

Defined simply "Who we are and what we do".
A sentence or short paragraph which reflects its core
purpose, identity, values and principle business aims

Mission Statement

A Mission statement:
Defines the present state or purpose of an organization;
Answers three questions about why an organization exists WHAT it does;
WHO it does it for; and
HOW it does what it does
Having a clearly defined Mission statement also helps employees
better understand things like company-wide decisions,
organizational changes, and resource allocation, thereby
lessening resistance and workplace conflicts

Mission Statement

Ford Motors: We are a global family with a proud

heritage passionately committed to providing
personal mobility for people around the world.
We anticipate consumer need and deliver outstanding
products and services that improve people's lives

Parle Agro

Vision
"To be the leaders in our business. We will stand apart
from the competition by being the first in the market to
innovate"
Mission
"We will be leaders in our business by maintaining high
quality, introducing new and innovative products,
reaching every part of India, remaining customer centric,
constantly upgrading our knowledge and skills"

IIM Ahmedabad

Vision
A globally respected Institute that shapes management practices
in India and abroad by creating new frontiers of knowledge and
developing ethical, dependable, entrepreneurial, and socially
sensitive leader-managers committed to excellence
Mission

IIMA's mission is to help India and other developing countries

improve their managerial practices both in the private and in the
public sectors, and adopt superior public policies
It seeks to do this through producing risk-taking leadermanagers who will pioneer new managerial practices and set
new standards; through producing teachers and researchers who
will generate new ideas of International significance; and
through purposeful consulting aimed at helping client
organizations scale new heights.

Assignment

Alliance University - Vision & Mission ?

Your Organisation - Vision & Mission ?

Ginger Hotels Group

Vision
Ginger is a fresh and warm experience, of an
unsurpassed value.
Mission
We provide smart, clean and safe hospitality offerings
by adopting best-practices that constantly enhance
value for our patrons.
We are driven by respect for people and nature and
passion for our stakeholders.

Vision & Mission

Vision is a formal declaration of what the

organisation aims to be and achieve in future.
Mission is about the existence of an organisation and
how the organization views the claims of its various
stakeholders
Organisations Mission is not Making Profits but it
is the answer to What will we do to make Profit?

Business Definitions

Is the clear-cut statement of the business, the firm is engaged in or

planning to enter
It is elaboration of the business arena and the boundaries in which
it will play.
What is our business? What will it be? What should it be?
Defining business involves three dimensions, namely Customer
Functions, Customer Groups and Alternative technologies
Mission Statement provides the basic inputs for Business
definition and provides a broad frame work

Business Definitions

Modi Xerox : Focus as a service organisation rather than vendor of

Xerox machines. Customer focus: Office Communication with high
priced and low priced equipments, marketing services of
maintenance and per copy price. Customer Function: Availability
of spares, Drums, Toner, good after sales service. Technology:
Collaboration with Rank Xerox
Garnier: In beauty enriching business. Pursue ideas that would
generate products enhancing beauty and youthfulness of men and
women.
Intel: In the business of computing technology and to consistently
develop the building blocks of computing technology for the entire
computing and data analysis & interpretation industry of the world

Hero Honda Business Definition

Business Definition: World-class quality auto products that

provide the highest level of customer satisfaction
Customer segment: Individuals who enjoy riding motorcycles
with perfection, like speed, styles, and fuel economy, located
across the country
Product : It emphasizes world-class quality auto productspresently motorcycles, leaving the scope for adding similar other
products in future. Initially, it concentrated on fuel-economy and
introduced CD-100 with the slogan fill it, shut it, forget it. Later
additional features have been added

Hero Honda Business Definition

Technology: The JV with Honda of Japan with core competency in

automobile engines provided the needed technological edge
Product-delivery and after-sales activities have been ensured through a
network of dealers armed with service centres backed up by qualified
technicians trained by the company.
(Though Hero Honda launched several new products from time to time,
Honda was reportedly reluctant to share its technology with Hero
Honda, though it had an agreement to do so. Company insiders were of
the view that Hero Honda was unable to bring out new bikes with
better technology while competitors came out with better versions, as
innovation was solely in the hands of Honda...
Eventually JV broke and Hero ended 4 years back. Each Co.is on its
own)

Business Model

The business model concentrates on value creation - Describes

how an organisation creates, delivers value to customers and
generate value for stakeholders in the form of revenue and
profitability

Companies follow different business models depending on their

products and services

McDonald, Pizza Hut, Starbucks

Toyota, Honda
Wal-mart, eBay, Amazon
Fedex, DHL

Business Model is the blueprint of how a company does business

Business Model

Companies follow different business models depending on

their products and services. The model determines
the sales and marketing strategies of the company, including
branding, pricing, sales channels and potential partners
Technological advances have resulted in new business
models pioneered by leading companies such as Google,
Apple and e-Bay.

Business Model

For instance, U.S. mobile phone carriers most often choose to sell
mobile phone sets at very low prices and to generate most of
their revenues from user plans which are based on services
consumed, such as minutes spent on calls
This model is attractive to investors as it generates an
ongoing revenue stream along with the potential to offer new
services and features in the future, for additional revenues.
Another example: Wal-Mart follows a business model
of offering the lowest possible price, so it can sell more products
-- maximizing its profit that way.

Constructing goals by an organisation

After formulating the mission statement, the next step for the company
is the establishment of major goals.
The goals designate specific results the businesses want to achieve
In this context, the purpose of goals is to specify, as accurately as
possible, as to what is to be done, if the company is to attain its mission
Key Question: Suitable? - Does the goal/objective fit with the mission
Goals, in general, can be long term or short-term
Short term goals generally cover a period of about one year
Long term goals cover a time period beyond one year - Mostly 2 to 4
years. Long term goals are usually related to such issues as customer
satisfaction, improvements in product quality, worker efficiency and
productivity, innovation and so on

Goal Setting

Setting goals is a fundamental component to long-term

success
The basic reason for this is that you cant get where you
are trying to go until you clearly define where that is
Research studies show a direct link between goals and
enhanced performance in business
Goals help you focus and allocate your time and
resources efficiently, and they can keep you motivated
when you feel like giving up.

What are the four main characteristics of

well-constructed goals by an organization?

According to M.D. Richards, meaningful goals should have four

characteristics.
First, goals should be sufficiently specific so that they could be
tracked and measured. It would assist management in monitoring
the progress towards achievement of these goals at each specific
point in time

What are the four main characteristics of

well-constructed goals by an organization?

The second characteristic is concerned with the issues that a goal addresses
A goal should only address important or critical issues/parameters
Acceptable?: Is the objective acceptable to managers and KEY
stakeholders?
Understandable?: Will managers at all levels understand what senior
managers are trying to accomplish and achieve by setting the specific longterm objective?
Such important issues as reducing costs or improving quality should be
included in goals, which are to be achieved by top or middle management.
Example: Boeings goal of being a market leader in aircraft business by
maintaining a minimum of 60 percent market share is an important issue
that a goal addresses.

What are the four main characteristics of

well-constructed goals by an organization?

The third characteristic of well constructed goals is that they should

be realistic and challenging
Challenging goals motivate managers to be innovative and ambitious
about improving the operations
However, the goals have to be realistic and compatible with the
resources available. An unrealistic goal would cause resentment
among employees.
For example, Boeing Company decided to achieve a 30 percent
unit cost reduction by improving efficiency of operations
However, the time period they projected in achieving this goal was 6
years Perhaps, the goal would have been unrealistic and unachievable
if they had projected the time period for such cost reduction much less
than 6 years
.

What are the four main characteristics of

well-constructed goals by an organization?

The fourth characteristic is the right specification of time period in

which a given goal is to be achieved
For example, when Boeing decided to cut the per unit cost by 30
percent, they put the time frame to be 6 years
This goal was considered challenging and realistic. The goal would
have been unrealistic and unachievable if they had projected the
time period for such cost reduction much less than 6 years
Deadlines, if realistic, can inject a sense of urgency into goal
attainment and can motivate employees to work hard and with
dedication
The dedication becomes even higher when appropriate rewards are
related with the timely goal attainment.

Goals

Goals are always tied to an organizations mission and they

help you map out future plans.

Increasing market share

Lowering production costs
Developing new product line(s)
Increasing the efficiency of manufacturing
Expanding into new markets
Improving the level of customer relations

Setting Objectives

OBJECTIVES should be

SPECIFIC
MEASURABLE
ATTAINABLE
REALISTIC
TIME BOUND

SMART Objectives

Specific What type of company do you want to be the best at?

On what scale do you want to compete? Do you want to be the
best company in your area or in the world?
Measurable How will you know when you have achieved your
objective? What benchmarks are you going to use to measure your
success?
Attainable Is this objective achievable given your resources?
What are the obstacles that you are going to encounter and can
you get past the hurdles?
Realistic How realistic is this objective to the company and its
employees? Will it benefit your organization?
Time bound When do you want to achieve this objective by?

SMART Objectives - Caselet

For example, you are a new company, based on

technology area, in Delhi and your goal is to be
recognized as the best company in your industry in India
Instead of setting your organizational objective as
Being recognized as the best company
you would apply the SMART model to your objectives
and ask yourself these following questions:

Class Assignment

Apply the SMART model to the Caselet and Define

the Objective in your own words

Setting up SMART Objectives

Taking into consideration the SMART model,

your objective can be defined as
To focus, during 2016, on mid-scale buyers in North &
West Region, in Control Systems area, to become
preferred suppliers and
Getting the Best High Tech Start-up Company 2016
Award from the Govt.of India .

Types of Objectives Required

Financial Objectives

Strategic Objectives

Outcomes focused
on improving
financial
performance

Outcomes focused
on improving longterm competitive
business position

Examples: Financial Objectives

X % increase in annual revenues

X % increase annually in after-tax profits
X % increase annually in earnings per share
Annual dividend increases of X %
Profit margins of X %
X % return on capital employed (ROCE)
Increased shareholder value by 30% in 2 years
Sufficient internal cash flows to fund 100% of new capital
investment, within 2 years

Examples: Strategic Objectives

Obtaining an X % market share in North market by next FY

Achieving lower overall costs than the No.1 rival by 10% in 2
years
Overtaking 2 key competitors on customer service next FY
Deriving X % of revenues, next FY, from sale of new products
introduced in past 2 years
Strengthening companys brand name appeal to obtain No.1
Position in Industry Sub Sector by JD Power Ranking Next
Year

Unilevers Strategic and Financial Objectives

Grow annual revenues by 5-6% annually next 2 years

Increase operating profit margins from 11% to 16%

within 5 years

Trim companys 1200 food, household, and personal

care products down to 400 core brands next 2 years

Focus sales and marketing efforts on those 3 brands with

potential to become respected,
market-leading global brands in the next 3 years

Streamline companys supply chain to improve SCM

ROI to 15% by the end of next FY

Objectives Are Needed at All Levels

1. First, establish organization-wide objectives and
performance targets
2. Next, set business and
product line objectives
3. Then, establish functional
and departmental objectives
4. Individual objectives are established last

Competitive Advantage

Competitive Advantage

Equipping the Firm to perform better than the

Competitors in sustained Value creation and Value
delivery
Operating with an attribute or set of attributes that
allows an organization to outperform its rivals.
Happens when the firms strategy is formulated well,
implemented properly and continuously monitored and
evaluated so that the firms performance is better than
most competitors in that industry

Risk & Return

Risk
Investors uncertainty about economic gains/losses
resulting from a particular investment
Returns
Return= Net Profit divided by Capital Invested
Above Average Returns: Firms Return on Invested Capital
is better than the Industry Average
Strategic Management Process (SMP) helps a firm to gain
competitive advantage and earn above average returns

Key Points to take note in Strategic Planning

Strategic Planning is not forecasting Product Sales & then determining

what should be done to assume the fulfilment of the forecasts with
respect to such things as material purchases, facilities, manpower etc.
Strategic Planning goes beyond present forecasts of much more
fundamentals such as:
Are we in the right business?
What are our basic objectives?
When will our present become obsolete?
Are our markets accelerating or eroding? Gap Analysis from present
to future.
Strategic Planning is not a simple aggregation of functional plans or an
extrapolation of current budgets
It is a systems approach to taking the enterprise over time, through the
uncertain waters of its changing environment.

Strategic Planning What is & What is not?

It is essential to recognize what strategic planning is not

It is NOT a quick fix. It is NOT a magic wand to pull off rabbits
out of a hat
It is a long-term investment with payoffs that increase over time
It must be accompanied by commitment and action if it is to
achieve results
Strategic planning is visionary yet realistic; it anticipates a future
that is both desirable and achievable
It provides a structure for inspired, but practical, decision making
and follow-through.
It helps the executive to manage the future, rather than be
managed by it

Uniting the Companys Strategy-Making Effort

A firms strategy is really a collection of initiatives

undertaken by managers at all levels in the organizational
hierarchy

All the various strategic initiatives must be unified into

a cohesive, company-wide action plan

Pieces of strategy should fit

together like the pieces of a puzzle

From Creative Thinking to Strategic Planning

Bill Gates, CEO of Microsoft, has said that his company is always
two years away from failure. At any time, a competing firm may
develop a software product that is perceived to be superior to
whatever version of Windows Microsoft is selling, and, within a
couple of years, could even become the market leader
Indeed, Microsoft almost missed a huge opportunity with the Internet
and had to play catch - up to Netscape
Strategic thinking does not mean that a firm should randomly try new
things, until something works
Instead, it allows creative thought to emerge, which should then be
accompanied by systematic analysis to determine what should
actually be done
That is Strategic Management

Benefits of doing
Strategic Management correctly

Leads to better guidance for the business

Leads to making managers more alert to new opportunities and
threats
It helps to align all members to pursue the same goals
It helps to make management become more proactive rather than
reactive
It challenges the economic model of the business to be forwardlooking, to ensure sustained profits
It facilitates the decision-making process of allocating resources

Summary of Strategy
in simple terms

Stage 1: Where are we now : reality check

Stage 2: Where we want to be : the end goal
Stage 3: In what ways, we might reach there:
the means
Stage 4: Which is the best way : evaluation
Stage 5: How do we ensure we reach there:
implementation process
Stage 6: What if there are impediments and
difficulties en route: feedback & control

Strategic Management Process

The Environment Threats & Opportunities

Managements values &

attitude toward risk

Execution/
Implementation

GOAL

STRATEGY

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Control
Mo
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Organizations capabilities Strengths & Weaknesses

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Performance