Strategic Mgnmt.docx

What is Strategy ? What is Vission and Mission ? And importance of Strategy ?

Ans In business, corporate strategy refers to the overall strategy of an organization that is made up of multiple business units, operating in multiple markets. It determines how the corporation as a whole supports and enhances the value of the business units within it.

A strategy is a plan of action designed to achieve a specific goal. Strategy is all about gaining or at least attempting to gain, a position of advantage over adversaries or competitors.

Importance of Vision and Mission 

To ensure unanimity of purpose within organisation.

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To provide a basis for allocating organisational resources.

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To establish a general tone and climate.

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It guides the company forward

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Mission statements spark new ideas

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Mission statements establish consistency

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Mission statements send out a powerful message to the public

Q2) Strategic Management Process - Meaning, Steps and Components The strategic management process means defining the organization’s strategy. It is also defined as the process by which managers make a choice of a set of strategies for the organization that will enable it to achieve better performance. Strategic management is a continuous process that appraises the business and industries in which the organization is involved; appraises it’s competitors; and fixes goals to meet all the present and future competitor’s and then reassesses each strategy. Strategic management process has following four steps: Environmental Scanning- Environmental scanning refers to a process of collecting, scrutinizing and providing information for strategic purposes. It helps in analyzing the internal and external factors influencing an organization. After executing the environmental analysis process, management should evaluate it on a continuous basis and strive to improve it. Strategy Formulation- Strategy formulation is the process of deciding best course of action for accomplishing organizational objectives and hence achieving organizational purpose. After conducting environment scanning, managers formulate corporate, business and functional strategies. Strategy Implementation- Strategy implementation implies making the strategy work as intended or putting the organization’s chosen strategy into action. Strategy implementation includes designing the organization’s structure, distributing resources, developing decision making process, and managing human resources. Strategy Evaluation- Strategy evaluation is the final step of strategy management process. The key strategy evaluation activities are: appraising internal and external factors that are the root of present strategies, measuring performance, and taking remedial / corrective actions. Evaluation makes sure that the organizational strategy as well as it’s implementation meets the organizational objectives. These components are steps that are carried, in chronological order, when creating a new strategic management plan. Present businesses that have already created a strategic management plan will revert to these steps as per the situation’s requirement, so as to make essential changes.

Mintzberg 5 P’s for Strategy

Mintzberg provides five definitions of strategy:     

Plan Ploy Pattern Position Perspective.

Plan Strategy is a plan - some sort of consciously intended course of action, a guideline (or set of guidelines) to deal with a situation. By this definition strategies have two essential characteristics: they are made in advance of the actions to which they apply, and they are developed consciously and purposefully. Ploy As plan, a strategy can be a ploy too, really just a specific manoeuvre intended to outwit an opponent or competitor. Pattern Defining strategy as plan is not sufficient; we also need a definition that encompasses the resulting behaviour: Strategy is a pattern - specifically, a pattern in a stream of actions. Strategy is consistency in behaviour, whether or not intended. The definitions of strategy as plan and pattern can be quite independent of one another: plans may go unrealised, while patterns may appear without preconception. Plans are intended strategy, whereas patterns are realised strategy; from this we can distinguish deliberate strategies, where intentions that existed previously were realised, and emergent strategies where patterns developed in the absence of intentions, or despite them. Position Strategy is a position - specifically a means of locating an organisation in an "environment". By this definition strategy becomes the mediating force, or "match", between organisation and environment, that is, between the internal and the external context. Perspective Strategy is a perspective - its content consisting not just of a chosen position, but of an ingrained way of perceiving the world. Strategy in this respect is to the organisation what personality is to the individual. What is of key importance is that strategy is a perspective shared by members of an organisation, through their intentions and / or by their actions. In effect, when we talk of strategy in this context, we are entering the realm of the collective mind - individuals united by common thinking and / or behaviour.

Q5) Mckinsey’s 7 S Model for Strategy.

In the 7S Framework the so-called hard and soft elements are incorporated, in which hard elements aim at matters an organization can influence directly. The soft elements are present in an organization in a more abstract way and can be found in the organizational culture.

Strategy By using mission and vision the organization’s objectives become clear.The plan devised to maintain and build competitive advantage over the competition Structure represents the way business divisions and units are organized and includes the information of who is accountable to whom. In other words, structure is the organizational chart of the firm. It is also one of the most visible and easy to change elements of the framework. Systems are the processes and procedures of the company, which reveal business’ daily activities and how decisions are made. Systems are the area of the firm that determines how business is done and it should be the main focus for managers during organizational change.

Skills are the abilities that firm’s employees perform very well. They also include capabilities and competences. During organizational change, the question often arises of what skills the company will really need to reinforce its new strategy or new structure. Staff element is concerned with what type and how many employees an organization will need and how they will be recruited, trained, motivated and rewarded. Style represents the way the company is managed by top-level managers, how they interact, what actions do they take and their symbolic value. In other words, it is the management style of company’s leaders. Shared Values are at the core of McKinsey 7s model. They are the norms and standards that guide employee behavior and company actions and thus, are the foundation of every organization.

Q6 ) Business and Corporate Level Strategies. Explain Swot Analysis. What is core competancy ?

Many companies have one overarching goal: to earn a profit and create a return for shareholders. To achieve their goals, corporations may own multiple business units in various industries. Business-level strategy is used to obtain a customer base and sell a product at a profit. Corporate-level strategy, on the other hand, is used when deciding what business units to sell and purchase, and how to integrate operations and find synergies between them. Business-Level Strategy Business-level strategy focuses on how to attain and satisfy customers, offer goods and services that meet their needs, and increase operating profits. To do this, business-level strategy focuses on positioning itself against competitors and staying up to date on market trends and technology changes. A business can also integrate these two strategies. Cost Leadership and Differentiation Cost leadership is the tactic of winning over customers through aggressive pricing and making profits through high efficiency. For example, a car manufacturing company like Kia that prices its vehicles on the lower end of the price spectrum is employing a cost leadership strategy. A company that differentiates adds unique features or services that command a higher selling price. A car company like Tesla that offers premium electric vehicles is using differentiation to create a competitive advantage in the market. Although cost leadership and differentiation may seem like opposite ends of the spectrum, many

businesses use aspects of both strategies. For example, Toyota offers a hybrid electric vehicle that offers unique features but maintains a modest price point. Corporate-Level Strategy Compared to business strategy, corporate strategy examines success from a higher level. Corporate strategy is focused on obtaining a mix of business units that will allow the company to succeed as a whole. Improve Efficiency Corporate strategy seeks to make a set of business units more than the sum of its parts. It can do this by developing relationships between business units, which allows them to share resources and avoid duplication of efforts. A corporation may also choose to take over one of its suppliers, which ensures it has more control over the availability and pricing of supplies. This is referred to as vertical integration. Company Portfolio An important consideration of corporate strategy is the diversity of the corporation's portfolio of businesses. For example, if a financial services company only owns businesses that focus on tax preparation, the whole corporation could go under if tax laws change. By purchasing companies in slightly different industries, like financial accounting and personal finance services, it can decrease its risk of losses. It can also shield the company from liquidity risk by purchasing companies with complimentary cash flows. For example, a tax preparation company makes most of its revenue in tax season, so a business that earns revenue year-round can provide support during slow times.

Core competency is an organization's defining strength, providing the foundation from which the business will grow, seize upon new opportunities and deliver value to customers. A company's core competency is not easily replicated by other organizations, whether existing competitors or new entries into its market.

Q7) Porter’s Five Force Model

Please Mention the level for Each Force like HIGH , LOW , MEDIUM. Follow same format for any company. E.g Threat of New Entrants - high etc.

Q8 ) Porter’s Value Chain Analysis

Porter’s Value Chain Analysis consists of a number of activities, namely primary activities and support activities. Primary activities have an immediate effect on the production, maintenance, sales and support of the products or services to be supplied. These activities consist of the following elements:

Inbound Logistics

These are all processes that are involved in the receiving, storing, and internal distribution of the raw materials or basic ingredients of a product or service. The relationship with the suppliers is essential to the creation of value in this matter. Production These are all the activities (for example production floor or production line) that convert inputs of products or services into semi-finished or finished products. Operational systems are the guiding principle for the creation of value. Outbound logistics These are all activities that are related to delivering the products and services to the customer. These include, for instance, storage, distribution (systems) and transport. Marketing and Sales These are all processes related to putting the products and services in the markets including managing and generating customer relationships. The guiding principles are setting oneself apart from the competition and creating advantages for the customer. Service This includes all activities that maintain the value of the products or service to customers as soon as a relationship has developed based on the procurement of services and products. The Service Profit Chain Model is an alternative model, specific designed for service management and organizational growth. Support activities of the Value Chain Analysis Support activities within the Porter’s Value Chain Analysis assist the primary activities and they form the basis of any organization. Firm infrastructure This concerns the support activities within the organization that enable the organization to maintain its daily operations. Line management, administrative handling, financial management are examples of activities that create value for the organization.

Human resource management This includes the support activities in which the development of the workforce within an organization is the key element. Examples of activities are recruiting staff, training and coaching of staff and compensating and retaining staff. Technology development These activities relate to the development of the products and services of the organization, both internally and externally. Examples are IT, technological innovations and improvements and the development of new products based on new technologies. These activities create value using innovation and optimization. Procurement These are all the support activities related to procurement to service the customer from the organization. Examples of activities are entering into and managing relationships with suppliers, negotiating to arrive at the best prices, making product purchase agreements with suppliers and outsourcing agreements. Organizations use primary and support activities as building blocks to create valuable products, services and distinctiveness.

Q9) ANSOFF MATRIX

Ansoff’s product/market growth matrix suggests that a business’ attempts to grow depend on whether it markets new or existing products in new or existing markets. The output from the Ansoff product/market matrix is a series of suggested growth strategies which set the direction for the business strategy. These are described below: Market penetration Market penetration is the name given to a growth strategy where the business focuses on selling existing products into existing markets.

Market penetration seeks to achieve four main objectives:    

Maintain or increase the market share of current products Secure dominance of growth markets Restructure a mature market by driving out competitors Increase usage by existing customers – for example by introducing loyalty schemes

A market penetration marketing strategy is very much about “business as usual”. The business is focusing on markets and products it knows well. It is likely to have good information on competitors and on customer needs. It is unlikely, therefore, that this strategy will require much investment in new market research. Market development Market development is the name given to a growth strategy where the business seeks to sell its existing products into new markets. There are many possible ways of approaching this strategy, including:    

New geographical markets; for example exporting the product to a new country New product dimensions or packaging: for example New distribution channels (e.g. moving from selling via retail to selling using e-commerce and mail order) Different pricing policies to attract different customers or create new market segments.

Market development is a more risky strategy than market penetration because of the targeting of new markets. Product development Product development is the name given to a growth strategy where a business aims to introduce new products into existing markets. This strategy may require the development of new competencies and requires the business to develop modified products which can appeal to existing markets. A successful product development strategy places the marketing emphasis on:   

Research & development and innovation Detailed insights into customer needs (and how they change) Being first to market

Diversification

Diversification is the name given to the growth strategy where a business markets new products in new markets. For a business to adopt a diversification strategy, therefore, it must have a clear idea about what it expects to gain from the strategy and an honest assessment of the risks. However, for the right balance between risk and reward, a marketing strategy of diversification can be highly rewarding. Q9) B Expansion by concentration. The Expansion through Concentration is the first level form of Expansion Grand strategy that involves the investment of resources in the product line, catering to the needs of the identified market with the help of proven and tested technology. when an organization coincides its resources into one or more of its businesses in the context of customer needs, functions and technology alternatives, either individually or collectively, is called as expansion through concentration.

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Market penetration strategy: The firm focusing intensely on the existing market with its present product.

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Market Development type of concentration: Attracting new customers for the existing product.

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Product Development type of Concentration: Introducing new products in the existing market. The firms prefer expansion through concentration because they are required to do things what they are already doing. Due to the familiarity with the industry the firm likes to invest in the known businesses rather than a new one. Also, through concentration strategy, no major changes are made in the organizational structure, and expertise is gained due to an in-depth knowledge about one or more businesses. However, the expansion through concentration is risky since these strategies are highly dependent on the industry, so any adverse conditions in the industry can affect the business drastically. CONTINUED

Expansion by Integration ? The Expansion through Integration means combining one or more present operation of the business with no change in the customer groups. This combination can be done through a value chain.

Vertical integration: The vertical integration is of two types: forward and backward. When an organization moves close to the ultimate customers, i.e. facilitate the sale of the finished goods is said to have made a forward integration. Example, the manufacturing firm open up its retail outlet. Whereas, if the organization retreats to the source of raw materials, is said to have made a backward integration. Example, the shoe company manufactures its own raw material such as leather through its subsidiary firm. Horizontal Integration: A firm is said to have made a horizontal integration when it takes over the same kind of product with similar marketing and production levels. Example, the pharmaceutical company takes over its rival pharmaceutical company.

EXPANSION BY DIVERSIFICATION The Expansion through Diversification is followed when an organization aims at changing the business definition, i.e. either developing a new product or expanding into a new market, either individually or jointly. A firm adopts the expansion through diversification strategy, to prepare itself to overcome the economic downturns. Generally, the diversification is made to set off the losses of one business with the profits of the other; that may have got affected due to the adverse market conditions. There are mainly two types of diversification strategies undertaken by the organization.

Concentric Diversification: When an organization acquires or develops a new product or service that are closely related to the organization’s existing range of products and services is called as a concentric diversification. For example, the shoe manufacturing company may acquire the leather manufacturing company with a view to entering into the new consumer markets and escalate sales. Conglomerate Diversification: When an organization expands itself into different areas, whether related or unrelated to its core business is called as a conglomerate diversification. Simply, conglomerate diversification is when the firm acquires or develops the product and services that may or may not be related to the existing range of product and services. Generally, the firm follows this type of diversification through a merger or takeover or if the company wants to expand to cover the distinct market segments. ITC is the best example of conglomerate diversification.

Short Note on Mergers & Acquisition.

VUCA ENVIRONMENT

VUCA is an acronym that stands for volatility, uncertainty, complexity and ambiguity, a combination of qualities that, taken together, characterize the nature of some difficult conditions and situations. The term is also sometimes said to stand for the adjectives: volatile, uncertain, complex and ambiguous. Volatility is the quality of being subject to frequent, rapid and significant change. In a volatile market, for example, the prices of commodities can rise or fall considerably in a short period of time, and the direction of a trend may reverse suddenly. Uncertainty is a component of that situation, in which events and outcomes are unpredictable. Complexity involves a multiplicity of issues and factors, some of which may be intricately interconnected. (Some models also include chaotic, making the acronym VUCCA.) Ambiguity is manifested in a lack of clarity and the difficulty of understanding exactly what the situation is.

BCG MODEL

The Boston Consulting group’s product portfolio matrix (BCG matrix) is designed to help with long-term strategic planning, to help a business consider growth opportunities by reviewing its portfolio of products to decide where to invest, to discontinue or develop products. It's also known as the Growth/Share Matrix. 1. Dogs: These are products with low growth or market share. 2. Question marks or Problem Child: Products in high growth markets with low market share. 3. Stars: Products in high growth markets with high market share. 4. Cash cows: Products in low growth markets with high market share Considering each of these quadrants, here are some recommendations on actions for each: Dog products: The usual marketing advice here is to aim to remove any dogs from your product portfolio as they are a drain on resources. However, this can be an over-simplification since it's possible to generate ongoing revenue with little cost. For example, in the automotive sector, when a car line ends, there is still a need for spare parts. As SAAB ceased trading and producing new cars, a whole business emerged providing SAAB parts. Question mark products: As the name suggests, it’s not known if they will become a star or drop into the dog quadrant. These products often require significant investment to push them into the star quadrant. The challenge is that a lot of investment may be required to get a return. For example, Rovio, creators of the very successful Angry Birds game has developed many other games you may not have heard of. Computer games companies often develop hundreds of games before

gaining one successful game. It’s not always easy to spot the future star and this can result in potentially wasted funds. Star products: Can be the market leader though require ongoing investment to sustain. They generate more ROI than other product categories. Cash cow products: The simple rule here is to ‘Milk these products as much as possible without killing the cow! Often mature, well-established products. The company Procter & Gamble which manufactures Pampers nappies to Lynx deodorants has often been described as a ‘cash cow company’.

GE 9 cell Matrix The GE McKinsey Matrix comprises two axes. The attractiveness of the market is represented on the y-axis and the competitiveness and competence of the business unit are plotted on the x-axis. Both axes are divided into three categories (high, medium, low) thus creating nine cells. The business unit is placed within the matrix using circles. The size of the circle represents the volume of the turnover. The percentage of the market share is entered in the circle. An arrow represents the future course for the business unit

GE McKinsey Matrix factors It is possible to determine in advance whether a market is attractive enough to enter. This can be done by using the following factors:  Market

size  Historical and expected market growth rate  Price development  Threats and opportunities (component of 聽 SWOT Analysis)  Technological developments  Degree of competitive advantage

Other factors are used to determine competitiveness:  Value

of core competences  Available assets  Brand recognition and brand strength  Quality and distribution  Access to internal and external finance resources Application Three different strategies can be distinguished and adopted using the GE McKinsey Matrix: Grow/Invest: Units that land in this section of the grid generally have high market share and promise high returns in the future so should be invested in. Hold/Selectivity: Units that land in this section of the grid can be ambiguous and should only be invested in if there is money left over after investing in the profitable units. Harvest/Divest: Poor performing units in an unattractive industry end up in this section of the grid. This should only be invested in if they can make more money than is put into them. Otherwise they should be liquidated.

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