Unit 1
Understanding Strategy
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What is strategy
?
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A method or plan chosen to bring about a desired
future, such as achievement of a goal or solution to a
problem.
The art and science of planning and marshalling
resources for their most efficient and effective use. The
term is derived from the Greek word for generalship
or leading in an army.
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Alfred Chandler
The determination of basic long term goals
and objectives of an enterprise and the
adaptation of the course of action and the
allocation of resources necessary to carry
out these goals.
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Art & science of formulating, implementing,
and evaluating, cross- functional decisions
that enable an organization to achieve its
objectives.
Corporate
Business
Functional
Corporate Corporate Strategy
Strategy
Business you should be IN
Operational/
Busines Business Strategy
Functional
Strategy s Tactics to beat the Competition
Strategy
Operational/ Functional Strategy
Operational methods to implement the Tactics
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Strategic Management – Defined
Art & science of formulating,
implementing, and
evaluating, cross-functional
decisions that enable an
organization to achieve its
objectives
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Strategic Management
In essence, the strategic plan is a company’s game
plan
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Strategic Management achieves a firm’s success through
integration
M anag ement Marketing
Finance/Accounting Production/Operations
Research & Development MIS
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Strategic Decisions…
Have a long-term impact on the business
Have an impact on the whole organization
On its future direction
On the scope of its activities
On the boundaries of the firm
Define the basis on which the firm competes or co-operates
(USP)
Based on which competencies and / or advantages
In which markets 13
By providing which value for the customer
Strategic Decisions…
Are taken at top-management level
Implemented by Lower Levels
Lower levels can be the part of strategic decisions;
participation in management
Have a significant impact on resource allocation
Require irreversible commitments and hence risk some sunk
cost investments
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Strategy is overarching plan or set of goals. Changing strategies is like
trying to turn around an aircraft carrier—it can be done but not quickly.
Tactics are the specific actions or steps you undertake to accomplish your
strategy. Tactics tend to be short-term considerations about how to deploy
resources to win a battle.
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1. Identification of Business Objectives and Purpose (PEST)
2. Formulation of Strategies
a. Strengths b.
Weaknesses
c. Opportunities d.
Threats
a. Resource Implementation b.
3. ImplementationImplementation
Organizational c. Functional Policy Implementation
4. Evaluation of Strategies
a. Fixing Standards b. Measuring Performance
c. Analysing Variations d. Taking Corrective Action 20
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• Internal
• External
• Interfac
e
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Establishment of
strategic Formulation of Implementation Strategic
strategies of strategies evaluation
intent
Strategic
control
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• Strategic intent is the purpose for which an organisation strives for. These could be in the
form of
vision and mission statements for the organisation as acorporate whole.
• At the business level of firms these could be expressed as the business definition and
business
model.
• In precise terms, as an expression of aims to be achieved operationally, these
may be the goals
and objectives.
• Strategic intent lays down the framework within which firms would operate, adopt a
predetermined
direction and attempt to achieve theirgoal.
It is what the firm would ultimately like to become.
An organization, corporate culture, a business, a
technology, an activity in the future. The definition
itself is comprehensive and states clearly the futuristic
position.
Category of intentions that are broad, all inclusive and
forward thinking
It is more of a dream than articulated idea
It is an aspiration of organization. Organization has to
strive and exert to achieve it.
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Vision articulates the position that a firm would like to attain in distant future.
El-Namaki (1992) considers it as a "mental perception of the kind of environment
an individual, or an organization, aspires to create within a broad time horizon and
the underlying conditions for the actualization of this perception".
Miller and Dess (1996) view it simply ashe "category of intentions that are broad,
all-inclusive, and forward thinking".
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Mission is what an organisation is and why it exists.
Mission is a statement which defines the role that an organisation plays in
the society.
Thompson (1997) defines mission as the "essential purpose of the organization,
concerning particularly why it is in existence, the nature of the business(es) it is in,
and the customers it seeks to serve and satisfy".
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A mission statement defines the basic reason for the existence of the
organisation. Such a statement reflects the corporate philosophy, identity,
character, and image of an organisation. It may be defined explicitly or
could be deduced from the management's actions, decisions or the chief
executive's press statements: Some of the characteristicsinclude:
– It should befeasible
– It should be precise
– It should beclear
– It should be motivating
– It should bedistinctive
– It should include major components of strategy
– It should indicate how objectives are tobe accomplished
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Strategic Management
S No. Vision Mission
1 Its is like destination Mission is the path
2 Vision can change Mission cannot be changed
3 Vision is a statement of some desired Mission statement should be informational
future state
4 Vision starts with value It should talk about what you do, how you deliver
it and who your clients are.
5 Vision is where you want to go Mission is how you want to reach your goal
6 Vision is a broad and an inspiring A mission statement is the reason for the
statement of what the organization existence of the organization
intends to become in the future
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Strategic Management
• Specificity
• Multiplicit
y
• Periodicity
• Verifiability
• Reality
• Quality
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Strategic Management 3
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Customer functions:
Utility / ornamental
Alternative technologies:
Mechanical / quartz
technology
Customer groups: children,
men or women
Based on: D.F. Abell: Defining the Business: The Starting Point of Strategic Planning Englewood Cliffs,
N.J. Prentice-Hall, 1980
Abell
Business
D efinition
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E.g. Car
M anufacturing
Compan
y
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Critical Success
Factors
• Critical success factors (CSFs)are crucial for organisational success.
• Rockart has applied the CSFs approach to several organisations through a three-step procedure for
determining CSFs.
• These steps are:
• to generate the success factors (`what does it take to be successful in business?'), refining CSFs into objectives
(`what should the organisation's goals and objectives be with respect to CSFs?) identifying measures of
performance (`how will we know whether the organisation has been successful on this factor?').
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Key Performance
Indicators
• Key performance indicators(KPIs) are the metrics or measures terms of which the
in
critical success factors areevaluated.
• KPIshelp an organization define and measure progress toward its objectives.
• They give everyone in the organization a clear picture of what is important and what
they
need to do to accomplish objectives.
• They are a helpful tool for organizations to motivate their employees towards
achievement
of objectives.
• KPIsare applied in business intelligence to gauge business trends.
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Strategic Management
• Key Result Area
• Identified out of the day to day routine
activities
• Primary Job objectives or Major Goals
• Outcomes or Expectations of a Job Position
• Groups relevant activities under one
cluster forming a KRA
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SPECIFIC –KRA’s should be specific and logical.
MEASURABLE –KRA’s should be quantifiable and measurable.
ACHIEVABLE –KRA’s framed should be achievable.
RELEVANT– KRA’s should be associated to job.
TIME BOUND –KRA’s framed should be defined for a specific
period
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Environmental Threat and Opportunity Profile
ETOP?
•Helps organization to identify opportunities and threats
•To consolidate and strengthen organizationsposition
•Provides the strategists of which sectors have a
favorable impact on the organization
•Help organization know where it stands with respect to
its environment
•Helps in formulating appropriate strategy
•Helps in formulating SWOTanalysis (Strategic weakness,
opportunities and threats)
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1.5 Analysing Company’s External Environment
Environmental Threat and Opportunity Profile
FACTORS COULD INCLUDE
Political international trade, taxation policy
Economic interest rates, exchange rates, national
income, inflation, unemployment, Stock
Market
Social ageing population, attitudes to work,
income distribution
Technological innovation, new product development, rate
of technological obsolescence
Environmental global warming, environmental issues
Legal competition law, health and safety,
employment law
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Porter's 5 Forces
Model.
Born in 1947.
Professors in Harvard
Business School.
Introduced Porter's 5
Forces Model.
Written 18 books & over
125 Articles.
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• Barriers to entry seek to protect the power of existing
firms and maintain supernormal profits and increase
producer surplus.
• Economies of scale
• Brand Image
• Capital Requirements
Strategic and Statutory Entry Barriers
1. Structural barriers ('innocent' entry barriers)
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2. Strategic barriers
3. Statutory barriers
4. Exit barrier
