Strategic Management 3

STRATEGIC MANAGEMENT AFTERSCHO☺OL – DEVELOPING CHANGE MAKERS CENTRE FOR SOCIAL ENTREPRENEURSHIP PGPSE PROGRAMME – World’ Most Comprehensive programme in social entrepreneurship & spiritual entrepreneurship OPEN FOR ALL FREE FOR ALL

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STRATEGIC MANAGEMENT Dr. T.K. Jain.

AFTERSCHO☺OL Centre for social entrepreneurship Bikaner M: 9414430763 [email protected] www.afterschool.tk, www.afterschoool.tk 10/14/09

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The difference between Horizontal integration and Vertical integration can be best explained in terms of: • Vertical : adding vertical activities : like distributorship, or supplier’s work. • Horizontal : taking over competitors • In the case of vertical integration, we are able to increase value addition possibility, but in the case of horizontal integration, we are able to increase our market / geographic coverage. Thus the difference is of perspective 10/14/09

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BSNL's plan behind introduction of "Internet Plan 99". ISDN, Virtual Private Network etc, would be an example of: (a) Utilisation of newer technologies; (b) Portfolio generation; (c) Diversification of business; (d) Encash new opportunities. • (c) here the target markets are different, the cusomers are different, thus BSNL is able to reach different cusomers. 10/14/09

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Mckinsey's 7-s framework consists of: (a) Structure, strategy, software, skills, styles, staff and supervision. (b) Structure, strategy, systems, skills, styles, syndication and shared values. (c) Structure, strategy,systems, skills, steering power, styles and shared values. (d) Structure, strategy, staff, skill, systems, shared values, super ordinate goals. • (d) answer 10/14/09

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The maturity stage of the PLC is most often associated with: (a) Rapid growth; (b) Uncertainty in market; (c) Improvements in manufacturing processes; (d) high exit barriers; (e) Re-alignment of competitive structure. • (c) 10/14/09

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The BCG growth matrix is based on two dimensions; (a) Market size and competitive intensity; (b) Relative market share and market/industry growth rate; (c) Profit margins and market size; (d) Market size and market share; (e) Relative market share and profitability margin. • (b) 10/14/09

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The corporate governance framework should ensure: (a) Equitable treatment of all shareholders; (b) Rights of stakeholders as established by law; (c)Timely and accurate disclosure of all material matters including finance, Performance and ownership of the company; (d) All of the above and social responsibility; (e) Ethical business practices with growth.

• (d) 10/14/09

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The strategy of preplanned series of relaunches is: (a) Harvesting strategy; (b) Offensive strategy; (c) Defensive strategy; (d) Pruning strategy; (e) Repositioning strategy. Please turn over • (e) 10/14/09

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Diversification strategy involves development of products or services; (a) That caters to the overseas markets; (b) That serves similar customers in new markets; (c) That are different from present product line and nurture new markets; (d) That serves existing markets only. • (c )

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TISCO's famous advertising campaign of "we also make steel" was meant to: (a) Gain buyer loyalty to its products; (b) Charge a price premium; (c) Inform new buyers about its product portfolio; (d) Enhance product quality perception; (e) Achieve corporate's social responsibility. • ( d) 10/14/09

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Conceptually, strategy of a firm consists of two inseparatable parts: business strategy and corporate strategy. (a) Distinguish between business strategy and corporate strategy. (b) Identify the key elements considered to develop and formulate such master strategy. 10/14/09

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Solution… • Corporate strategy is the master strategy prepared for the group as a whole. It gives strategic direction to the company. It is for long term to very long term. Business strategy is based on corporate strategy, and defines businesses withing one or few SBUs. It is for medium to long range. It is not radically different from present. • These strategies are prepared on the basis of various aspects like ETOP, SWOT , and analysis of various options in the environment. 10/14/09

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What are the various strategic options available to the companies pursuing a restructuring strategy? • A company pursuing restructuring strategy may go for the following options : • 1. financial restructuring (switching debt for equity or reducing debt/ equity or increasing debt / equity) • 2. HR restructing (including outsourcing, BPR, right sizing etc.) • 3. Organisational restructuring (including changing the organisational structures) • Other options 10/14/09

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What is "Situation audit" in strategic planning? • Study of the environmental forces is called situation audit. The basic purpose of this is to study the aspects of the environment and prepare appropriate action plan.

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In India in early 80s many companies became too much vertically integrated or excessively diversified. In the 90s one witnessed a dramatic shift from this pattern. •

Yes, in 80s due to restrictions by the government on capacity, companies took diversification route for growth and some companies entered into many lines of businesses In 90s, due to liberalisation, the companies again started focussing on their core businesses and retrenched from their unrelated businesses. They decided to attain no. 1 or 2 rank in their businesses.

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Why did the firms choose to refocus their business by looking at their core businesses? • In 90s the firms in India started focussing on core businesses. This would give them strategic advantages over their competitors and would enable them to attain superior position. Core businesses related to the main product / technology / market served by company in superior form in comparison to competitors. Tata started focussing on engineering and related sectors as their core businesses. 10/14/09

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Experience curve • Over the period of time, the costs of (average cost) of the firm reduces and quality increases, this is called experience curve. This is due to knowledge base and expertise that is built over a period of time. Experience curve tells us that we should be patient and over a period of time, the company would be able to contribute to market and would reach a profitable stage.

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GE MODEL • GE model classifies SBUs in 9 different categories. This classification is based on two aspects : • 1. relative market strength • 2. relative industry attractivelness • A firm which is superior in both the dimensions, must continue and grow. Investment must be made in such SBUs. However, if the SBU is in less market / industry atractiveness, then retrenchment strategy should be adopted. 9 Cells are classified in three categories : 1 build 2. retan 3. quit - a firm should build high market strength and high industry attractiveness model. Ans. 10/14/09

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Discuss the stages of strategy formulation • 1. discuss and decide the vision and mission of the organisation • 2. discuss and decide objectives • 3. study environment, (both external and internal) and prepare SWOT analysis • 4. formulate strategic alternatives and scenarios (do write your assumptions) • 5. choose the best strategy and forulate implementation plan and schedule & evaluate the strategy • 6. implement the strategy • 7. review the strategy implementation 10/14/09

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What is the difference between mission and vision • Vision is what you see in the future. Vision is the perspective about the ubusiness in next 5 or 10 years. Vision is what the entrepreneurs see about the organisation in next 5 years / 10 years. • Mission is the ultimate purpose of the organisation. • Example: We want to provide free management education to over 1000 students in next 5 years (vision of AFTERSCHO☻OL) • MISSION : To build true enterprising and business capabilities in the youth and help them in achieving their dreams along with the goals for social development.

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Strategy is partly proactive and partly reactive, explain… • Strategy is evolved out of history and based on past, and links the present to the future. Thus strategy create the future of the organisation. It is proactive, because it links the present to the future. It prepares for the future. Due to change in environment, strategy is also changed. Strategy helps the organisation to adapt to the changing environment, therefore it is reactive. 10/14/09

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Turnaround… • To convert a sick unit into a profitable unit is called turnaround. Here we try to build profit making capability in an organisation. We try to restructure, develop and revitalise the organisation. We use tools for cost cutting, better management, better planning and better marketing.

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Conglomerate … • When a company wants to grow, it has many options, it can go for expansion (same business, same technology, same products and markets). It can also go for vertical and horizonal integration. It can also go for conglomerate diversification ( when the firm adopts new business). It may change technology / products / markets and redefine its business in the new sectors. 10/14/09

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Explain how the concept of strategic business units (SBUs) is useful for a multi-business enterprise? • One organisation may be very large, where it become conglomerage of diverse businesses, each looking after distinct business. Each of these may be called an SBU. 10/14/09

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Portfolio management • When a business operates in diverse businesses, it has many portfolios. These are distinct set of businesses, with a unique combination of product, market and technology. An SBU is one which serves a unique business definition. The company has to decide which business to strengthen and which business to retrench. This is called portfolio management, when we decide about allocation of resources between various SBUs. 10/14/09

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Discuss how the BCG growth martix helps a firm in product portfolio choice. • BCG stands for Boston Consultancy Group. BCG suggests that we should invest in an SBU, which has high growth rate and high market share (called STAR) We should withdraw from a business which is in low market share and low growth industry (called DOG). We should strengthen or quit a business with high growth but low market share (called QUESTION MARK) and reap benefits from a business with high market share but low growth rate (called CASH COW) 10/14/09

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TOWS matrix • Analysing a business in terms of threats (T), opportunities (O), Weaknesses (W) and strengths (S) is called TOWS matrix. Here we study the impact of the external environment on the business.

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Functional strategy • We first of all prepare corporate strategy, later we prepare functional and SBU level strategy. In functional strategy, we prepare strategies and policies for a particular function like : market policies, financial strategy etc. These help us in achieving our objectives. Functional strategies have to be within the broad corporate guidelines. 10/14/09

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Difference between 6 sigma and TQM • TQM is an overall philosophy for quality management, HRD and organisational improvement. TQM helps the organisation to develop itself and bring quality at all level. It uses many tools and techniques in the process. 6 Sigma is a tool of quality management, where we try to minimise errors. The possibility of error is less than 3.4 per million after 6 sigma. 10/14/09

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Value chain analysis • In operations / production management, we study value chain process. The value chain starts from the suppliers and ends at the level of ultimate consumer. We try to see the possibility of value addition at each step. Our objective is to maximise the value addition possibility at each point in the value chain. 10/14/09

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BCG Matrix. • It was proposed by Boston Consulting group. It advocates that every organisation must allocate resources properly. Different SBUs should be divided in different groups like CASH COW, DOG, STAR, QUESTION MARK. Funds must be withdrawn from dogs and cash cows and must be invested in stars and question mark. The business with high growth rate and high market share is star, high growth rate but low market share is question mark, high market share but low growth rate is cash cow and low market share and low growth rate is dog.

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Porters Generic Strategies • Michael Porter has given three generic strategies : • 1. differentiation • 2. cost leadership • 3. focus • Besides, a company has four options : • 1. expansion, 2. diversification 3. stability 4. retrenchment. 10/14/09

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Continued… • Differentiation : make your product different from those of competitors in some unque sense • Cost leadership: reduce your cost, and reduce prices so that it is below the prevailing cost and prices of competitors • Focus : develop products and services tailor made for the specific requirements of the customers. 10/14/09

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The SWOT analysis is a simple and useful tool of environmental analysis • In this we study the environmental forces and their impact on the business. Here we study the impact of business on various aspects. We are able to study the strengths, weaknesses, opportunities and threats regarding a business and decide about strategy for the business. 10/14/09

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Mergers and acquisition • These help a company to progress. Here a company acquires another company for achieving market dominance and business growth. Here the company tries to build business growth through large scale operations. Example: Mittal group took over Arcellor for its growth. Merger means two companies combined to form one company. Acquisition means purchase of controlling stake in another company. 10/14/09

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Gap analysis • Here the company tries to study the gap between where the company should be and where the company is likely to be. The gap helps the company in formulating strategy for bridging the gap. The company can identify the gap and try to bridge the gap.

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Discuss the five forces model of Porter with reference to the automobile industry • Suppliers : include suppliers of components, technology, spare parts, etc. • Substitute products : railways, transportation system, air plane, new alternative technologies are developing like battery operated cars etc. • Buyers : the lifestyle of buyers is changing and they are becoming more demanding. 10/14/09

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Continued… • New entrants : many new companies are planning to enter this industry. • Competitors : all the players who are operating in this industry are competitors like Tata, Suzuki, Honda, etc. • Every company should thoroughly analyse these five forces affecting it before formulating the strategy. 10/14/09

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how the concept of strategic business units (SBUs) is useful for a multi-business enterprise • An SBU is a distinct unit of an enterprise, which is empowered to take strategic decisions regarding products, markets, technologies and services that it offers. It serves a unique set of market or offers a unique product or has a unique business definition. Business definition is the description of products, markets, technologies. 10/14/09

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difference between strategic alliances and joint ventures • Strategic alliances are agreements with other companies for sharing technology, resources, products and processes • Joint ventures are collaborations between companies on important issues, where the two companies work together for achieving some common objectives. Joint ventures could be based on equity participation or other means of collaboration. It gives a new company which operates over a long term period. 10/14/09

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Mckinsey's framework. • As per McKinsey, there are 7 important factors which are interrelated and interdependent regarding a business. These factors are : • 1. staff 3. shared values 3. system 4. strategy 5. superordinate goals 6. structure 7.style

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Continued…

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Benchmarking • Benchmarking can be external or internal. In internal benchmarking, we compare one department / unit to another department / unit. In external benchmarking, we identify a comparison unit out of organisation. Here we compare our company with any other company. We look at the best practices and try to learn them and implement in our company. It is a tool for development of the company.

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TQM • Total quality management is the process of inplementing quality at every process in the organisation. Here we document all the processes and train workers in that process. We try to consider the customer expectations and as per that we define our quality standards and try to be consistent in our quality implementation. 10/14/09

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BPR • Business process reengineering is the process to study the processes and redifining them. When existing business processes become outdates / lenghy/ long / cumbersome, BPR is the best approach, where we don’t repair/ modify them but completely alter them. BPR uses latest technology in its implementation process and reshape the business processes. 10/14/09

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SIX SIGMA • Sigma stands for deviations. Standard deviations are denoted by Sigma. Sigma of 1 denotes a standard deviation. Sigma of 2 reduces the possibility of errors – as there will be very less events out of the range. Similarly 6 sigma reduces the possibility of errors. a process must not produce more than 3.4 defects per million opportunities. A Six Sigma defect is defined as anything outside of customer specifications. A Six Sigma opportunity is then the total quantity of chances for a defect. It is the highest level of quality management tool. It uses black belt training in quality management so that people are able to manage the quality to the best possible extent 10/14/09

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Continued… • A black belt in six sigma is an expert in quality management, team building, team work allocation, identification of deviations, lean manufacturing, and in process improvement.

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Vision, mission and objective • Vision : it is your understanding about your future. It is the statement regarding where you want to be after 5 years or after 10 years. It is futuristic. It is your understanding about your future. • Mission is the ultimate purpose of the organisation. It is not time bound – but perennial in nature. It is the basic guiding principle of the organistion. • Objective is a time bound goal, that we want to achieve. It is defined with reference to the environment. It helps the organisation in achieving its long term vision and journey. Generally objectives are defined in time frame from 1 to 5 years It may be defined in terms of market share, quantitative targets regarding sales etc. 10/14/09

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Why such a programme? • To promote people to take up entrepreneurship and help develop the society • To enable people to take up franchising and other such options to start a business / social development project • To enable people to take up social development as their mission • To enable people to promote spirituality and positive thinking in the world 10/14/09

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Who are our supporters? • Afterschoolians, our past beneficiaries, entrepreneurs and social entrepreneurs are supporting us. • You can also support us – not necessarily by money – but by being promotor of our concept and our ideas.

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About AFTERSCHO☺OL PGPSE – the best programme for developing great entrepreneurs Most flexible, adaptive but rigorous programme Available in distance learning mode Case study focused- latest cases Industry oriented practical curriculum Designed to make you entrepreneurs – not just an employee • Option to take up part time job – so earn while you learn • The only absolutely free course on internet • • • • •

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Workshops from AFTERSCHO☺OL • • • • • • • • •

IIF, Delhi CIPS, Jaipur ICSI Hyderabad Branch Gyan Vihar, Jaipur Apex Institute of Management, Jaipur Aravali Institute of Management, Jodhpur Xavier Institute of Management, Bhubaneshwar Pacific Institute, Udaipur Engineering College, Hyderabad

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Flexible Specialisations: • • • • • • • • • •

Spiritualising business and society Rural development and transformation HRD and Education, Social Development NGO and voluntary work Investment analysis,microfinance and inclusion Retail sector, BPO, KPO Accounting & Information system (with CA / CS /CMA) Hospital management and Health care Hospitality sector and culture and heritage Other sectors of high growth, high technology and social relevance

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Salient features: • The only programme of its kind (in the whole world) • No publicity and low profile course • For those who want to achieve success in life – not just a degree • Flexible – you may stay for a month and continue the rest of the education by distance mode. / you may attend weekend classes • Scholarships for those from poor economic background • Latest and constantly changing curriculum – keeping pace with the time • Placement for those who are interested • Admissions open throughout the year • Latest and most advanced technologies, books and study material

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Components • • • • • • • • • • • • • •

Pedagogy curriculum and approach based on IIM Ahmedabad and ISB Hyderabad (the founder is alumnus from IIMA & ISB Hyderabad) Meditation, spiritualisation, and self development EsGotitial softwares for business Business plan, Research projects Participation in conferences / seminars Workshops on leadership, team building etc. Written submissions of research projects/articles / papers Interview of entrepreneurs, writing biographies of entrepreneurs Editing of journals / newsletters Consultancy / research projects Assignments, communication skill workshops Participation in conferences and seminars Group discussions, mock interviews, self development diaryng Mind Power Training & writing workshop (by Dr. T.K.Jain)

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Pedagogy • • • • • • • • • •

Case analysis, Articles from Harvard Business Review Quiz, seminars, workshops, games, Visits to entrepreneurs and industrial visits PreGotitations, Latest audio-visuals Group discussions and group projects Periodic self assessment Mentoring and counselling Study exchange programme (with institutions out of India) Rural development / Social welfare projects

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Branches • AFTERSCHO☺OL will shortly open its branches in important cities in India including Delhi, Kota, Mumbai, Gurgaon and other important cities. Afterschooolians will be responsible for managing and developing these branches – and for promoting social entrepreneurs.

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Case Studies • We want to write case studies on social entrepreneurs, first generation entrepreneurs, ethical entrepreneurs. Please help us in this process. Help us to be in touch with entrepreneurs, so that we may develop entrepreneurs.

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Basic values at AFTERSCHO☺OL • • • • • •

Share to learn more Interact to develop yourself Fear is your worst enemy Make mistakes to learn Study & discuss in a group Criticism is the healthy route to mutual support and help • Ask fundamental questions : why, when, how & where? • Embrace change – and compete with yourself only

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www.afterschoool.tk social entrepreneurship for better society

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