Strategic Intent

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UNIT II

• Strategic Intent

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• Strategic management - a strategy is a unified,
  comprehensive integrated plan that relates the
  strategic advantages of the firm to the
  challenges of the environment.
• Strategic management is defined as a set of
  decisions actions resulting in formulation
  implementation of strategies designed to achieve
  the objectives of an organization

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Includes following areas

• Determining a mission including statement of its
  purpose
• Developing a company profile that reflects
  internal conditions capabilities
• Assessments of companys external environment
• Identifying the desired options and analyzing
  them
• Strategic choice of a particular set long term
  objectives grand strategies needed to achieve
  desired options.
• Implementation of strategic choice.
• Review or evaluation of the success of strategic
  process.

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SM involves 3 types of decisions

• Definitional decisions- defining business,
  identifying customer groups, functions
  technologies.
• Goalistic decisions - defining corporate
  functional objectives policies.
• Optimal decisions- strategies action programs
  tactics

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• Strategy of an organization Comprises of
• Business vision
• Mission
• Objectives and goals
• Business definition

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vision

• Vision articulates the position that the firm
  would like to attain in the distinct future.
• A vision is more dreamt of than it is articulated
  .
• Tata steel says about its mission - tata steel
  enters the new millennium with the confidence of
  learning, knowledge based happy organization.
• By its nature vision could be vague as a dream
  that one experienced last night is not able to
  perfectly recall it.
• It acts as a powerful motivation to action.

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definition

• Vision is a description of something (an
  organization corporate culture , business ,a
  technology an activity in future)
• Benefits of having a good vision-
• Are inspiring , exhilarating motivating.
• Represents discontinuity , a jump ahead
• Helps in creation of common identity and shared
  sense of purpose.
• Should be competitive, original unique.
• Fosters risk taking experimentation
• Represent integrity , are truly genuine can be
  used for the benefit of the people.

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Vision could be divided into two

• Core ideology- it defines the enduring character
  of an organization that remains unchangeable as
  it passes the changing environment
• It rests on the core values , mission purposes.
• Envisioned future- a 10- 30 year extremly
  confident goal.
• Descrition of what it will be like to achieve
  these goals.
• Encouraging supporting goals
• Description of the future.

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Effects of vision

• Learning acquiring knowledge information
• Leads to commitment motivation
• Emphasizing not only on profit makig but
  producing useful products services.
• Innovation encouraging
• Improving health wealth of an organization.

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Difficulties in creation of vision

• Culture attitude within an oraganization
• Uncertain unstable environment
• Restricted resources
• Resistance to change

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An enriching and inspirational vision must

• Contain memorable language
• Clearly maps the company
• Challenges motivated the workforce
• Provokes emotions

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• Mission (WHY WE EXIST)
• CORE VALUES (WHAT WE BELIEVE IN)
• VISION (WHAT WE WANT TO BE )
• STRATEGY (GAME PLAN)
• STRATEGIC IMPERATIVES(WHAT I MEAN TO DO )
• PERSONAL OBJECTIVES
• STARTEGIC OUTCOME

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mission

• Mission is a statement that defines the role that
  an organization plays in the society. Purpose is
  anything that organization strives for.
• Mission is essential purpose of the organization
  , concerning particularly why it is in
  existence., the nature of business.
• E.g. of mission statement
• Maruti building trust worldwide
• Modiluft miles smiles
• HCL world class competitor

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Elements of mission

• Clearly articulated
• Relevant
• Current
• Written with a positive tone/motivating
• Unique
• Adapted to target audience
• Feasible
• Precise
• Clear
• Indicate major components of strategy
• Indicate how objectives are to be achieved

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Objectives goals

• Objectives are open ended attributes that denote
  the future states or outcomes.
• Refer to the operational side of business
• Goals are the close ended attributes are
  précised expressed in specific terms.
• Objectives are the ends which state how the goals
  will be achieved.
• An organization tries to its purpose into long
  term objectives short term goals.
• Different objectives are pursued like continuity
  of profits, efficiency, product quality, employee
  satisfaction etc.

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• Goals are qualitative ,objectives are mainly
  quantitative
• Thus objectives are measurable comparable.
• An organization may pursue multiple objectives.
• Importance of objectives-
• Justify the organization
• Provide direction
• Basis for management by objectives
• Helps in strategic planning management
• Helps coordination
• Provides standards for assessment control
• Helps decentralization

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Characteristics of ideal objectives

• Formulation should involve participation
• They should be clear
• Realistic
• Flexibility
• Consistency
• Ranking (assigning priorities)
• Verifiability
• Balance
• Understandable
• Concrete specific
• Challenging
• Should be in the constraints

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What objectives are set

• Profit
• Employee welfare
• Marketing
• Growth
• Quality products services
• Power
• Social responsibility of business

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classification of objectives

• Economic social-
• Survival
• Return on investment
• Growth
• Market share
• Welfare of society
• Protect consumer rights
• Interest of workers
• Primary -
• Extension, development improvement
• Paying fair dividends to share holders.
• Payment of fair wages
• Reduction of prices

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• Secondary-
• Provide bonus for workers
• Promote education
• RD in techniques
• Long run short run-
• Official operative-

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Formulation of the environment

• Forces in the environment
• Value system of top executives
• Awareness of management.

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Business definition

• Dimensions of business-
• Customer functions-what is being satisfied
  freshness, germs fight, protection
• Customer groups- who is being satisfied oral
  care, dental protection
• Alternative strategies- how the need is being
  satisfied, paste powder, foam

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Business policy

• It involves all member of organization
• Explicit or implicit
• Decision making process
• Formulated for frequent happenings
• Pyramids of policies policies procedures ,
  standard operating plans all guide to act but
  differ in the degree of guidance

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Features of business policy

• Credibility
• Acceptability
• Feasibility
• Clear and consistent
• Proper communication
• Flexible
• Relative to objectives
• Policies should not be the result of
  opportunistic decisions

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Determinants of business policy

• Internal factors -
• Mission
• Objectives
• Strength and weakness
• Management value orientation
• External factors -
• Market structure
• Nature of industry
• Economic and government policies
• Technological social and political situation

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Importance of business policy

• For learning the course
• Integrates knowledge
• Deals with constraint and complexity of real life
  business
• Broad perspective
• Make study and practice of management more
  meaningful
• For understanding business environment
• Formulation of policies
• Makes management receptive
• Reduces feeling of isolation
• For understanding the organization
• Presents a basic frame work for understanding
  decision making
• Brings the knowledge in strategic decision making
• Importance of job performance
• For personal development
• Career choice
• Offers unique perspective to employees

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Purpose of business policy

• Integrate the knowledge in various functional
  areas of management
• Generalist approach (problem solving)
• Understand complex linkage with the operating
  system

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Formulation of business policy

• Goal specification and priorities
• Identification of policy alternatives
• Evaluation of policy alternatives
• Check the acceptability
• Choice of policy
• Impact of external and internal environment

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Function of business policy

• Policy establishes indirect control over
  independent actions
• Policy promotes uniform handling of similar
  activities
• Ensures quicker decision
• Institutionalize basic aspect of organization
• Reduces uncertainty
• Counter act resistance
• Mechanism of avoiding hasty and ill decisions

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Types of business policy

• Production policy purchasing policy , quality
  of RM used , choice of material , size of
  purchase
• Production process choice of technology ,
  extent of automation , size of decentralization ,
  extent of division labor
• Production capacity sales forecast , policy
  decision , equipment utilization
• Marketing and replacement
• Marketing policy
• Product mix
• Product differentiation
• Pricing policy

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• Distribution policy
• Geographical location
• Selection of customer
• Size of customer
• Channel design
• Choice of middle man
• Promotion policy
• Financial polity financial control
• Lease of buy
• Risk
• User of assets
• HR policy
• R and D

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Business environment

• It consists of both external internal
  environments
• Aggregate of all conditions , events, influences
  that surround effect it.
• Internal are controllable aspects
• External uncontrollable
• Success depends on the ability to design the
  internal variable to take advantage of the
  opportunities threats.

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Internal appraisal

• It provides the organization with its
  capabilities to capitalize an opportunity for
  protecting itself from threats present in the
  environment.
• Determine distant competencies
• What makes it unique
• What are its capabilities in future, competent in
  specific areas.

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Frame work for development of strategic advantage

• Strategic advantage
• Organization capability
• Competencies
• Synergistic effect
• Strength weaknesses
• Organization resources organization behavior

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• Organization resources- tangible, Intangible,
  assets capabilities, information knowledge.
• Organization behavior- forces influences
  operating in internal environment, values,
  culture, leadership, power politics.
• SW-inherent capability, inherent limitation or
  constraint.
• Synergistic effect- SW combine
• Competencies- special qualities possessed by
  organization that make them stand pressure of
  competition, a distinctive competence
• Strategic advantage- outcome of organizations
  capabilities, result of activities leading to
  reward, profits market share , reputation

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Internal factors to be analyzed-

• FINANCIAL ACCOUNTING-
• Financial resources strength, liquidity cash
  flow
• Cost of capital
• Relations with owners stock holders.
• Tax conditions
• Financial planning
• MARKETING DISTRIBUTUIN FACTORS-
• Product related variety, differentiation
• Price related
• Place logistics, channels of distribution
• Promotion advertising, sales promotion, PR
• Integrative system market research, packaging of
  product

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• PRODUCTION OPERATION FACTORS-
• Use of RM
• Production system, capacity
• Location
• Service design
• Operation control
• Product planning
• Material supply
• Quality control
• Lower cost, inventory
• Capacity utilization
• PERSONNEL CAPABILIY FCTORS-
• Use of HR skills
• Safety welfare, security appraisal
• Satisfaction morale, compensation, climate ,
  structure, trade unionism

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• INFORMATION CAPABILITY-
• Flow of information. Outside within
• DBMS, use of information
• Speed IT infrastructure
• GENERAL MANAGEMENT-
• Strategic analysis intent formulation
• Rewards incentives
• Goals competence
• CSR
• Organization climate regulations.
• R D ENGINEERING
• New improved production
• Material , processes
• Cost advantage
• Research capability

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Approaches to Internal Appraisal

• Systematic approach-
• Proactive measure to organizational formal
  planning
• Ad hoc-
• Reactive to response to a crisis

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SOURCES OF INFORMATION-

• Internal
• Employee opinion
• Company files documents
• Financial statements
• MIS
• Annual reports
• Functional area profile

• External
• Comparative appraisal
• Company reports magazine
• Through consultants

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Methods techniques

• INTENAL ANALYSIS-
• Value chain analysis
• Qualitative
• Quantitative
• Financial
• Non financial
• COMPARITIVE
• Historical
• Industry norms
• Bench marking
• COMPREHENSICE-
• Balanced score card
• Key factor rating

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• internal
• Value chain
• Set of interlinked value created activities
  preferred by organization.
• Porters generic value chain
• Primary activities-
• Inbound operations outbound marketing
  service
• logistics logistics
  sales
• Secondary
• Procurement HRD technology infrastructure
• development

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• Quantitative
• Financial analysis
• ratio analysis
• Nonfinancial analysis
• employee turn over, inventory units,
  absenteeism
• Qualitative
• Corporate culture
• Knowledge
• Moral

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• Comparative- strength weakness distinctive
  competencies
• Historical
• Industry norms
• Bench marking a point for purpose of meeting
  best practices performances, process.
• Comprehensive
• Balanced score card
• Key factor rating
• market product, service , price
• Financial source of funds, usage management
• operations production system, operation
  control
• personnel IR , employee characteristics
• information management acquisition, synthesis
  processing, usage
• general management OC general management system

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Structuring organization appraisal

• Organization capability profile
• Capability factors
• Weakness normal strength
• -5 0 5
• preparing strategic advantage profile
• Capability factors competitive strengths or
  weakness

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Criteria for determining S W

• Historical past performance
• Normative what ought to be
• Competition party
• Critical factors for success

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External appraisal

• Monitoring of economic, government, legal,
  market/ competitive , supplier/technological,
  geographic social setting to determine
  opportunities threats.
• Macro factors-
• International
• Economic
• Political
• Regulatory
• Demographic
• Socio cultural

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• Micro
• Suppliers
• Customers
• Competitor
• Inter mediaries
• Market
• Public
• Environment analysis is the process of
  identifying O T facing in an organization for
  the purpose of strategic formulation

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• Characteristics of environment
• Complex
• Dynamic
• Multi faceted
• Far reaching impact Market factors client needs,
  preferences
• Environmental sectors
• Product factors image, demand, price PLC
• Market intermediaries middle man, distribution
  channel
• Competitor related entry exit barriers, nature
  of competition

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• Various types of markets could be
• Consumer
• Industrial
• International
• Reseller
• Technological environment factors-
• Knowledge of goods services, future inventions
• Sources of technology
• Tech. development, stages, rate of change
• Impact of tech on humans
• Availability of tech.
• Foreign technology collaboration
• Strict rules regulations

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• Economic factors-
• Economic conditions level of income
• Economic policies restrictive liberalized
• Eco system
• Inflating deflating rates
• Monitory policy
• Eco structure
• Eco planning
• Regulatory factors-
• Constitutional framework, fundamental principles
• Policies related to licensing, foreign
  investements
• Imports exports policy
• Public sector , small scale

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• Political government
• Philosophy of govt.
• Structure , goals
• Election, budget
• Subsidies, protect unfair trade
• Socio cultural-
• Society, beliefs, traditions, education, pace of
  urbanization
• International factors-
• Global eco policies, global HR, global village
• Secure sources of funds
• Competitors
• Opposition from host country
• Political, social eco risk
• Natural factors-
• Geographical location, natural resources ,weather
  , climate

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micro

• Suppliers-
• Cost ,reliability, availability factors.
• Continuity of supply
• Customers-
• Individual govt. other commercial establishment
• Competitors-
• Same product
• Same market
• Market intermediaries-
• Promoting, selling distributing agents
• Vital link between consumer company
• Public-
• Media, citizens, local public

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Environmental scanning

• Environment is changing, so it is needed to be
  monitored
• Factors analyzed to determine conditions of
  threat opportunities.
• Factors in external environment
• Events specific occurrences
• Trends general tendencies courses of Action
• Issues concerns that arise
• Expectations demands made

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Approaches to scanning

• Systematic scanning-
• Information collected systematically
  continuously to monitor changes take relevant
  factor into consideration.
• Ad Hoc -
• Special surveys studies to deal with specific
  environment issues from time to time.
• Processed form approach-
• Uses information in processed form,
• available from different sources,
• highly systematic formal procedure
• Proactive measure for the anticipated change

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Techniques used for environmental scanning

• MIS- formulize line staff , gathering of
  information desired by strategists
• Develop strategic management system-
• by relying on responses by customers, suppliers,
  comptitors, environment condition
• Spying-determine trade secrets
• Formal forecasting-corporate plans, consultants
  , futurists.
• Quest- quick environmental scanning technique
• 4 step process
• Observation about major events trends
• Speculate on wide variety of issues
• Quest director prepares report summarizes major
  issues implications
• Reports scenarios are reviewed or redesigned to
  develop strategies

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• Scenario writing
• Simulation
• Game theory
• Cross impact analysis

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Description of ES

• Strategies more concerned with economic factors
  than the others
• Does not give significant time
• Psychologically unprepared for change

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Appraising the environment

• Be aware of the factors affecting the process of
  environmental appraisal(strategies, org.
  environment)
• Identify environmental factors
• Structuring the result of environmental appraisal
• Prepare an ETOP

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ETOP

• Evnt. sector nature of impact impact on each
  sector
• Market unstructured
  demand
• Tech.
  up gradation
• Suppliers
• Economic
• Regulatory
• Socio-cultural
• political

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Grand level strategies

• Environmental internal appraisal lead to the
  generation of strategic alternatives.
• the grand strategic alternatives are
• Stability
• Retrenchment
• Expansion
• Diversification
• Integration

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Dimensions of grand strategies

• Internal/external-
• When an organization adopts strategy independent
  to other its internal
• In association with other entity its external
• Related/unrelated-
• Related or unrelated to existing business.
• Horizontal/vertical-
• Serving additional CG or CF,
• Expansion or contraction of existing business
  startegy.AS
• Active/passive-
• Offensive strategy in anticipation of
  environmental threat
• Defensive strategy as a reaction to the
  environment

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Strategies are

• Stability-
• No change
• Pause/proceed with caution
• Profit strategies
• Expansion-
• Through concentration
• Through integration
• Through diversification
• Through cooperation
• Through internationalization
• Retrenchment-
• Turnaround
• Divestment
• liquidation
• Combination-
• Simultaneous
• Sequential
• Combination of both

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Stability strategy

• It is adopted by organization when it attempts at
  an incremental improvements of its functional
  performance by marginally changing one or more of
  its business in terms of their respective
• customer group
• customer function and
• alternative technologies.
• The company stays with the current business
  products , markets
• Maintains existing level of efforts
• Is satisfied with incremental growth

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Major reasons for adopting stability are

• Less risky
• Fewer changes
• Environment faced is relatively stable
• Expansion may be perceived as threatening
• Better deployment utilization of resources
• Not redefining business
• Safety oriented
• No fresh investments
• Does not nil growth, but it is incremental

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Conditions under which stability is adopted

• Enjoys comfortable position
• Future is ensured
• Growth ambitions are modest
• Niche's prefer mostly
• E.g.
• Copier machine provides better after sales
  service to its existing customer to improve its
  company image

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• No change strategy-
• Continues with the same business definition
• The environment is predictable certain
• No opportunities threats in environment
• No major strength weakness
• No new competitors
• No obvious threat of substitute

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Profit strategy

• No firm can identically continue with no change.
• Sometimes things do change the firm has to face
  situation where it has to do something.
• When there occur temporary changes or problems
  the firm tries to maintain the profits
• The problems could be economic recession, govt.
  attitude, industry downturn, competitive
  pressure.
• These problems are short run only
• If problem continues has to adopt another
  strategy

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Pause/proceed with caution

• Firms which wish too test the ground before
  moving ahead with full fledged strategy.
• Or may have had a blistering phase of expansion
  now wish to rest for a while before moving ahead.
• Purposes to let the strategic changes seep down
  the organization levels, allow structural changes
  to take place, and let the systems adopt new
  strategies.
• While profit strategies are enforced choices
  aimed at sustaining profitability
• Pause/proceed are deliberate and conscious
  attempt to adjourn major strategic changes to a
  more opportune time, or when the firm is ready to
  move on with rapid strides again

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Expansion strategy

• Conditions-
• Expansion becomes imperative when envt. Demands
  increase in the pace of activity.
• Increasing size may lead to more control over the
  market
• Advantages from experience curve economies of
  scale
• High risk
• Redefinition of business
• Fresh investments new business/ product/ market
• Highly versatile strategy

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• Through concentration-
• Converging resources in one or more firm s
  business
• 1st preferred strategy.
• Involves investment of resources in product line
  for an identified market.
• Existing
  market new market
• Existing product
• New product

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• Applies to situation where the firm finds
  expansion worth while.
• Its the 1st preferred strategy
• Entering into known business
• Advantages-
• Involve minimal org. change so there is less
  threatening
• Managers comfortable with present business
• enables the firm to master in business by the
  depth of the knowledge.
• Can develop competitive advantage.
• Past experience is valuable.

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• Limitations-
• Putting all eggs in one basket has his own
  problem
• Heavily dependent on industry
• If industry goes into recession firm finds
  difficult to save itself
• Its crowded with competitors its attractiveness
  decreases.
• Factors like product obsolescence, merging of new
  technologies are threats to firm.
• Lead to cash flow problems

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Through integration

• Works in present set of CF CG but the AS
  dimension of business undergoes a change
• Integration is combining activities on the basis
  of value chain
• A set of interlinked activities performed by firm
  right from procurement of basic raw material to
  marketing of finished products.
• Widening the scope of business.
• Petrochemicals steel hydrocarbons industry.
• Cost economics
• Forward or backward integration

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diversification

• Diversification may involve all dimensions of
  strategic alternatives
• Internal external, related unrelated,
  horizontal vertical.
• Involves a substantial change in business
  definition.
• Different types are -
• concentric diversification-
• Related to existing business definition either in
  terms of CG, CF or AS ,is called concentric
  diversification.
• May be of three types
• Marketing related-similar type of product is
  offered with help of unrelated technology .
  sewing machines produces diversify into
  kitchenware house hold appliances, sold to
  housewives through a chain of retail stores.
• Technology related- a leasing firm provides
  hire- purchase services.

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• Conglomerate-
• Unrelated to existing business definition.
• ITC
• Essar (shipping, marine construction, oil support
  services)
• Why are diversification strategies adopted-
• To minimize risk by spreading it over several
  business
• Capitalize organizations strength minimize
  weakness.
• Only way out if growth is blocked because of
  environmental or regulatory factors.

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• Advantages-
• Enables firm to attain synergy by exchange of
  resources skills.
• Avail economies of scale
• Reduction in risk by spreading risk
• Disadvantages-
• Increase risk commitment
• Diversion of resources concentration to other
  areas.

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Through cooperation

• Mergers
• Take overs
• Joint ventures
• Strategic alliances
• Merger-
• Combination of 2 or more than 2 entities involved
  in which one acquires the assets liabilities of
  other in exchange of cash or shares .
• Or both the organizations are dissolved assets
  liabilities combined new stock is issued.
• Objectives of the firms are matched

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Types of mergers

• Horizontal - same business
• Vertical mergers-complementary in terms of input
  or output
• Concentric-related CF,CG, AS
• Conglomerate- unrelated.

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Reasons for mergers

• Increase value of firms stock
• Increase growth rate make a good investment
• Improve stability of earning sales
• To balance, complete diversify product lines.
• Reduce competition
• Take advantages of synergy

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Takeover/ acquisition

• How t takes place-
• Spell objective
• Indicate how they will be achieved
• Assess managerial quality
• Check compatibility of business style
• Anticipate solve problems early
• Treat people with dignity concern

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reasons

• Quick growth
• Reducing competition
• Increasing market share
• Creating goodwill
• Friendly hostile
• Pros cons-
• Growth
• Mobility of resources
• Sick units betterment
• Stress strain

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Joint venture

• 2or more firm consolidation for temporary
  partnership
• Conditions for JV
• One cant do alone
• Risk is to be shared
• Competitive advantage of both can be brought
  together.
• Advantages-
• Foreign technology
• Govt. Policy support
• New fields
• Synergistic effect
• Disadvantages-
• Coordination lacking
• Foreign regulations
• Cultural behavioral differences

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Strategic alliance

• 2 or more firms unite to pursue a set of agreed
  upon goals but remain independent.
• Win win strategy
• Share strength
• Lend power to enterprise
• Pooling of resources
• Risk is mutual
• E.g. TVs Suzuki, Mahindra ford, bpl SANYO,
  Videocon Suzuki.

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Types of strategic alliance

• Pro active (low interaction/low conflict)
• Inter industry, vertical value chain integration
• Non competitive(high interaction/low conflict)
• Intra industry , non competitive firms
• Competitive (high interaction/high conflict)
• Rival firms to cooperation , inert/ intra
  industry
• Pre competitive (low interaction high conflict)
• Unrelated industries, new product development.

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reasons

• Entering new markets
• Reducing manufacturing costs
• Developing diffusing strategy

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Diversification through internationalization

• Competitive advantage of nations
• Factor conditions
• Demand conditions
• Related supporting industries
• Firm strategy, structure rivalry
• Beyond domestic market
• Asses environment
• Evaluate capabilities
• Devise strategy.
• Motives-
• Expansion
• Market potential
• Govt. policies
• resources

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• Matrix
• Cost pressure
• High
• Low
• low high
• Pressure for local
  responsiveness

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• International-
• Where the products are not available like MCD,,
  coca cola, IBM, Kellogg's
• Multi domestic-
• Matching products to national conditions.
  Customize products.
• Global-
• Standardized products ,
• Economies of scale
• Undifferentiated product
• Competitive price

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Entry modes

• Export entry mode
• Direct
• Indirect
• Contractual-
• Licensing
• Franchising
• Other forms (tech.)
• Investment
• JV, strategic alliance
• Independent ventures

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• Advantages-
• Sales profit
• Expansion
• Above average returns
• Disadvantages
• Risk
• Uncertainty of economic political environment
• Cultural diversity
• Trade barriers

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retrenchment

• Reducing scope of activity
• Demand saturation
• Govt. policies adverse
• Substitutes emerged
• Changing needs preferences
• Poor managt
• Wrong strategies
• Poor quality

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4 types of situation

• Realistic non recoverable
• Temporary recovery
• Sustained survival
• Sustained recovery

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Turn around

• Negative cash flow
• Profits
• Mismanagement
• Declining market share
• Uncompetitive products
• High turnover
• Approaches-
• Surgical
• Non surgical

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Divestment/cutback

• Sale or liquidation of portion of business .
• Liquidation strategies-
• Closing down a firm selling its assets
• Termination of employees
• Loss of employer
• Serious consequences.

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combination

• Mixture of all either applied simultaneously or
  sequentially

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Process of strategic management

• Establishing strategic intent-
• Vision, mission, business definition objectives
• Formulation of strategies-
• Environment organizational appraisal
• Swot analysis
• Corporate level strategies
• Business level strategies
• Strategic choice
• Strategic plan
• Strategy implementation-
• Project, procedural, resource allocation,
  structural, behavioral functional operational
• Strategic evaluation
• Strategic control

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Business level strategies

• Business strategies are those courses of action
  adopted by a firm for each of its business
  separately to serve identified CG, provide value
  to the customers by a satisfaction of their need.
• Porter says that factors that determine the
  choice of a competitive strategy are two
• Industry structure
• Positioning of a firm

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• Industry structure is determined by 5 competitive
  forces-
• Threat of new entrants
• Threat of substitutes products or services
• Bargaining power of suppliers
• Bargaining power of buyers
• Rivalry among exiting competitors in an industry.
• They vary from industry to industry they
  determine long term profitability.
• Positioning of the firm-
• Firms overall approach to competing, designed to
  gin sustainable strategic advantage.
• Two variables- competitive advatgae
• Lower cost differentiation

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• Competitive scope-
• Broad target narrow target
• Offers mass product distributed through mass
  marketing
• High priced products of a limited variety but
  intensely focused.
• Lower cost is based on the competence of a firm
  to design, produce market a comparable product
  more efficiently than its competitors.
• Differentiation is the competence of a firm to
  provide unique superior value to the buyers in
  terms of quality, special features or after sales
  services

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• Competitive scope-
• Range of products , distribution channels, types
  of buyers, geographical area served related
  industry.
• Industries are segmented having different needs
  and require different sets of competencies
  strategies to satisfy the needs of customers.
• Broad target approach-
• Full range of products/services
• Narrow target -
• Offers a limited product or area
• When the two factors are combined it results in a
  set of generic business level strategy

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• Porters generic business strategy-
• Competitive scope
• Broad target
• Narrow target
• low cost products/services
  differentiated products
• 
  Competitive advantage

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Cost leadership in business strategy

• CA of a firm lies in the lower cost of
  product/services
• High profit
• l\flexibility to lower price if market becomes
  stiff
• E.g.
• Gujarat cooperative milk marketing federation
• Amul branded ice cream market lower cost platform
  by backing of 180 diaries
• High quality
• Supply chain management
• Moser Baer manufactures CDs at lower cost, lower
  raw material cost lower labor costs

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Achieving cost leadership

• Costs are spread over entire value chain
  activities to reduce the cumulative cost ,
  analyze cost drivers identify areas of
  optimization of costs.
• Accurate demand forecasting
• High capacity utilization
• Attaining economies of scale leads to lower
  cost/unit
• High level of standardization uniform services,
  packaging
• Investments in cost saving techniques
• Withholding differentiation till it becomes
  necessary

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Conditions under which cost leadership is used

• Price based competition is vigorous making cost
  an imp. Factor
• Products are standardized
• Lesser customer loyalty cost of switching is low
• Few ways available for differentiation
• Buyers are price sensitive.

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benefits

• Best insurance against industry competition ,
  protects against the ill effects of competition
• Less effected by the price increase by the
  suppliers.
• Can offer prices reduction to the buyers
• Threat of cheaper substitute if off set
• Effective entry barrier
• Risks-
• Does not sustain for long time as can be copied
• Not a market friendly approach
• Can limit experimentation
• Technological shifts ,cheaper process
  technologies may be used by competitors

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Differentiation business strategy

• Special features incorporated in product/service
  which is demanded by customers who are willing to
  pay .
• The strategy which is then adopted is called
  differentiation strategy.
• Special features attributes
• A premium price is charged, customers gain
  additional value command customer loyalty
• Profit comes from difference in premium price
• But may fail if customers are not longer
  interested in differentiated products

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• E.g.-
• Orient fans offers premium ceiling fans based on
  product innovation superior technology.
• Extra wide blades, heavy duty motor
• Low voltage, high velocity maximum coverage
  area.
• Brand salt industry DCW home products made
  captain cook for quality conscious salt users,
  free flow, iodine content.
• Frooti tetra pack

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Achieving differentiation

• To create value to customer that is unmatched by
  competitors
• Offer utility for customers match their tastes
  preferences
• Incorporate features that can lower the cost
• Which can raise the performance
• Increase buyer satisfaction
• Promise high quality
• Enhance status prestige
• Full range of products is offered to satisfy

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Conditions under which differentiation is used

• Market is too large to be catered by few firms
  offering standardized products
• Customer needs preferences are too diversified
  to be satisfied by standardized products
• Is possible to change premium price
• Brand loyalty is possible to generate sustain
• Ample scope for increasing sales on basis of
  differentiated features

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benefits

• Lessoning competitive rivalry
• Customer brand loyalty acts as a safe guard
• Customers are generally less prices sensitive,
  can absorb price increases
• Powerful buyers do not negotiate price , special
  features attributes
• New entrants are not normally in a condition to
  offer similar differentiation
• Substitute products pose a negligible threat

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risks

• Difficult to sustain, first mover advantage
  associated
• Distinctiveness is gradually lessoned
  ultimately lost
• Failed if unnecessary features are added
• Price premiums too have a limit

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Focus business strategy

• These strategies rely on either cost leadership
  or differentiation but cater to an narrow segment
  of the local market.
• Used for identifying customer groups on the basis
  of demographic characteristics, geographic
  segmentation.
• Price is an imp consideration in piracy ridden
  industry
• T series offered cheap cassette of Hindi film
  songs while Sony music mega sound cater to the
  upper end niches
• Philips India launched flat TV plasma tech that
  enables distortion free pictures Dolby sound in
  the niche market of sophisticated tech. driven
  audience.

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Achieving focus

• Identifying a narrow target in terms of market
  customers. Locate a niche in the market
• Cost leader differentiators in an attempt to
  cover broad target tend to leave out segments
  which require special attention .
• E.g. truck tyres , airplane tyres
• A small no of buyers willing to pay higher price
  to get some king of special treatment .
• Automobiles for physically handicapped persons,
  specialized medical treatment for well to do
  persons.

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• Choosing specific niche by identifying gaps not
  covered by cost leader differentiates .
• Creating superior skills for catering niche
  market .
• Creating superior efficiency
• Developing innovative ways to manage the value
  chain

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Condition under which focus strategies are used

• Some types of uniqueness in the segment may be
  geographic demographic or based on life style .
• Specialized requirement
• Niche market is big enough to be profitable for
  the firm
• Promising potential for growth
• Major players are not interested in the niche
  market
• Necessary skills expertise to serve the niche
  segment.

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Benefits

• Protected from competition or they provide which
  would not be profitable for others to provide
• Price increase can be absorbed
• Powerful buyer may not shift
• Specialization in niche market acts as a barrier

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Risks

• Requires development of distinctive competencies
  , difficult process
• Being focused means committed to a narrow market,
  difficult to cater other segments
• Shift in customers need may make the niche
  disappear
• Become attractive enough for big players to shift
  .

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Tactics for business strategy

• Timing tactic first mover in mineral water is
  parley with biseleri. Late movers icici pru,max
  new York , hdfc standard life - LIC
• Advantages of first movers
• Market leaders
• Benefits of learning curve
• Cost advantages
• Customer loyalty
• Disadvantages
• Becomes costlier (create awareness )
• More risks
• Late movers can imitate technological advances
  and skills

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Market location tactics

• Market leaders
• Market challengers
• Market followers
• Marker nichers

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Process of strategic choice

• Focusing on alternatives-
• Narrow down a choice to a manageable number of
  feasible strategies.
• Start with business definition
• CG - cosmetic segment, fluoride segment
• CF- foam, freshness, flavor, dental care
• AS- paste, powder, diff. base material, diff.
  packaging, diff. flavoring material, addictives

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Gap analysis

• Strategies to be followed
• Performance desired performance
• 
  performance gap
• Present performance
• time

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• How wide or narrow is the gap.
• Where gap is narrow , stability strategy would
  seem to be better
• Gap is large due to expected environment
  opportunities expansion is feasible
• If due to past expected bad performance,
  retrenchment strategies may be suitable

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Considering the selection factors

• Determine the criteria on which evaluation of
  strategic alternative can be used.
• 2 groups-
• Objective- based on analytical techniques are
  hard facts or data used to facilitate strategic
  choice called ration/ normative/ prescriptive
  factors
• Subjective- based on personal judgments /
  collective or descriptive factors.

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Evaluation of strategic alternatives

• Bring together the results of analysis.
• Making the strategic choice-
• Most suitable choice under existing conditions
• Blue print has to be made..
• Objective factors are divided into two parts
• Corporate level strategic analysis
• Business level strategic analysis

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Corporate level analysis

• Treats corporate entity as a portfolio of
  business under a corporate umbrella
• Relevant in case of diversified business.
• In which analysis of a company as a collection of
  different business with a view to identify the
  status potential of the various business with
  regard to resource use resource generation
• Corporate portfolio analysis
• Bcg matrix
• Ge9 cell matrix
• Hofers product / market evolution matrix
• Directional policy matrix
• Strategic position action evaluation

128
BCG matrix

• Growth share matrix
• 2 variables - rate of growth of product / market
• Market share of the firm relative to its
  competitors
• Market growth indicates attractiveness of the
  firm
• Market share indicated the strength of the firm.

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• Matrix
• High
• Market growth
• Rate
• Low
• high relative market share low

130
GE 9 cell matrix

• Mckinsey group
• Vertical axis 8 different factors
• Industry attractiveness
• Market size
• Growth rate
• Industry profit margin
• Competitive intensity
• Seasonality
• Cyclicality
• Economies of scale
• Tech, social , legal human aspects

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• Horizontal axis-
• Business strength
• Relative market share
• Profit margins
• Ability to compete on price quality
• Knowledge of customer market
• Competitive SW
• Tech\ Capability ability of the firm

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• Zone
• Industry attractiveness
• High
• Medium
• Low
• strong
  avg weak
• 
  business strength/competitive position

133
Advantages of GE9

• Intermediate classification of medium avg.
• Large no. of variables
• Disadvantages
• Provides broad strategic prescription than
  specifying the business strategy.
• Limitation of BCG-
• Predicting profitability from growth rate of
  market share is difficult.
• Difficulty in determining market share
• No consideration to experience curve
• Disregard for human aspect

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Hofers product/market evolution matrix

• 15 cell matrix
• Considers the stages of development
• And competitive position
• Growth
• Development
• Shake out
• Maturity
• decline

135
Directional policy matrix

• Companys competitive abilities
• Strong avg. weak
• Business sector prospects
• Unattractive avg attractive

136
Corporate parenting analysis

• Fit between parenting opp. parenting
  characteristics x axis
• Misfit between CSF parenting characteristics. Y
  axis
• Focuses on fit of business with the corporate
  parent
• Heartland business-expansion strategy
• Edge of heartland- expansion strategy may suit
  by investing
• Ballast- like cash cows
• Alien territory- retrenchment
• Value trap- retrenchment

137

• SWOT analysis

138
Business level analysis

• Experience curve analysis
• Life cycle analysis
• Industry analysis-
• Michael porter 5 forces model
• Threat of new entrants-
• Higher entry barriers
• Economies of scale
• Capital requirements
• Switching costs
• Product differentiation
• Access to distribution channel
• Cost disadvantages
• Govt policies

139

• Rivalry among competitors-
• Competitive structure
• Demand conditions
• Exit barriers
• Bargaining power of buyers-
• Buyers are few in no
• Buyers place k\large orders
• Alternatives suppliers are present and supply at
  lower rates
• Switching cost of buyers is low
• Sensitive to price increases
• Has the ability to integrate backwards

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• Bargaining power of suppliers-
• Suppliers are few buyers are more
• Product is unique
• Substitutes are not available
• Switching cost of supplier is high
• Buyers buys in small quantity
• Has the ability to integrate forwardly
• Threat of substitutes-
• Level of price charged is reasonable

141
Strategic groups analysis

• Clusters of competitors that share similar
  strategies therefore compete with one another
  directly.
• Homogeneous heterogeneous because of their
  strategies
• Icici aimed at becoming a universal bank through
  attaining a large size
• HDFC at optimum revenue generation.

142
Competitor analysis

• It focuses on competitors directly
• Deals with actions reactions of individual firm
  
• Components of competitor analysis-
• Future goals of competitor- how our goall are
  compaed with others ?what is the attitude towards
  risk?
• Current strategy of competitor- does it suppoat
  changes?
• Key assumptions made by the competitor-
• Capabilities of competitor-

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Subjective factor in strategic choice

• Considerations for govt. policy
• Perception of CFF distinctive competencies
• Commitment to past strategic plans
• Strategic decisions style attitude to risk
• Internal political considerations
• Timing competitors consideration.
• Management philosophy
• Corporate ethics
• Social responsibility

144
Contingency strategies

• Strategic choice is made on certain conditions,
  assumptions premises. When conditions change
  strategy becomes partly irrelevant , if changes
  are drastic, strategies have to be modified
  continuously. strategies are formulated in
  advance to deal with certain conditions.
• Most changes occur in environment social, market
  , regulatory, international, where it occurs
  suddenly
• Eg FMCG, power, telecom, IT Insurance
• 3 scenario model
• Pessimistic
• most likely
• optimistic

145
Contingency planning process

• Identify the contingent event
• Establishing the trigger points
• Developing strategies tactics

146
Strategic plan

• A clear statement of strategic intent
• Results of environmental appraisal, major
  opportunities and threats, CSF
• Results of organization appraisal, major strength
  weakness core competencies.
• Strategies chosen the assumptions under which
  strategies would be relevant . Contingent
  strategies to be used for different conditions.
• Strategic budget for the purpose of resource
  allocation for implementing strategies
  schedule for implementation.
• Proposed organizational structure major
  organizations system
• Functional strategies mode of their
  implementation
• Measure to be used to evalaute performance
  assess the success of strategy implementation

147
Strategy implementationpyramid of strategy
implementation
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Project implementation

• strategies lead to plans, programs, projects.
• Knowledge related to projects is covered under
  project management
• A project is a one shot goal limited, time
  limited , major undertaking , requiring the
  commitment of various skills resources.
• Goals are derived from plans programs

149
Phases of project

• Conception phase
• Definition phase
• Planning organizing phase
• Implementation phase
• Clean up phase

150
Procedural implementation

• Formulation of a company
• Licensing procedures
• Securities exchange board of india
• Monopolies restrictive trade practices MRTP
• Foreign collaboration procedure
• Foreign exchange management act FEMA
• Import export requirements
• Patenting trademarks requirement
• Labor legislation requirement
• Environment protection pollution control
• Consumer protection requirements
• Incentives facilities benefits

151
Resource allocation

• deals with the procurement commitment of
  financial , physical HR to strategic tasks for
  the achievement of org. objectives.
• Both one time continuous process
• New project requires
• What sources are tapped
• What factors affect
• What approaches adopted
• How it takes place
• What are the difficulties

152
Procurement of resources

• Different types of resources are
• Financial
• Physical
• Human
• Finance considered as primary source is used
  for creation maintenance of other resources.
• 2 types of finances
• Long term- creation of capital assets
• Short term- working capital
• Both can be rocured froom internal external
  sources

153
Internal sources

• Retained earning
• Depreciation provision
• Development rebate
• Investment allowances reserve
• External sources
• Capital market sources
• Equity loans
• Money market sources
• Bank credit,
• Trade credit
• Fixed deposits
• Both have pros cons but company prefers
  internal sources

154

• 1st task is to distribute the resources within
  the org. to different SUBs , divisions,
  departments.
• Approaches to RA-
• Top- down approach- a process of segregation
  down to the operating level adopted (ceo ,
  management) in entrepreneul modes
• Bottom approach-
• Allocated after aggregation from operating level
• Mix of both

155
Means of RA

• Used as planning budgeting coordination control
  device
• BCG based budgeting- SBU identified as stars,
  cash cows.
• Plc based- stages of product or SBU may attract
  more resources, diverted from high yielding
  products at maturity.
• Capital budgeting- in case of restructuring or
  modernization
• Zero based budgeting- justify RA demand , on
  zero grounds, fresh cost calculation
• Parta system- indigenous for of control device,
  exercising control to access daily net cash
  inflow from operations, tax dividends, daily
  budgeting reporting system

156
Factors affecting RA

• Objectives of org
• Preference of dominant strategies
• Internal policies
• External influences

157
Difficulties

• Scarcity of resources
• Financial resources
• Physical assets , land , machinery
• Human resource
• Restriction on generating resources for newer
  units
• Over statement of needs

158
Structural implementation

• What is structure?
• Is the way in which the tasks sub tasks
  required to implement a strategy.
• Structures for strategy-
• Entrepreneur structure-

159
Advantages of entrepreneurial structure

• Quick decision making
• Timely respons