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Introduction
Strategy
strategy -derived from a Greek wordstrategos -meaning-
General
Prof. DEBASISH DUTTA/Strategic Management/MITCOM 3
Strategy
Oxford Dictionary Meaning Strategy
The art of war The management of an army or armies in campaign Plan of action in policy of business or politics
The word Strategy was first used in the English language in 1656. The development and usage of the word suggests that it is composed of stratos (army) and agein (to lead).
Prof. DEBASISH DUTTA/Strategic Management/MITCOM 4
Strategy
Strategy refers determination of the Purpose or Mission and Basic Long Term Objectives or Vision of an enterprise, and adoption of courses of action or Strategy and allocation of resources necessary to achieve these aims.
Management process from the way that managers capitalize on an normally shall centre upon can be very short. Management decisions work together within the the opportunity). all activities which affect Time scales structure can result in organization. Structure of the organization strategic change. Activities of the organization
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Strategic Planning
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3.
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It is concerned with goal 1. It is concerned with new derived from established objectives and strategies. objectives 2. It combines activities that It is concerned with form an unique value chain individual objectives 3. It is performed by top May be carried out lower management management 4. It is integrated and have It is more functional or corporate level and business unit wise or departmental level approach wise approach. 5. It has less procedures and It deals with goals that is may trade in unchartered validated through past path experiences Prof. DEBASISH DUTTA/Strategic
Management/MITCOM
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The evaluation may be enclosed in a report, or a live between the advocates of the plan and confrontation conference may be set up between counter plan and then make judgement the administrator and the critic, with key decisionof which plan will lead to higher performance. makers as observers. Finally, the decision makers then accept, modify This exercise helps thecan strategic mangers in or re-develop the proposal. forming a new conceptualization of the
problem.
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Expert Plan
Devils Advocacy
Final Plan
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Expert Plan
Expert Plan
Dialectic Enquiry
Debate Analysis
Final Plan
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McKinsys 7 S Framework
Structure
Systems
Skills Staff
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Style
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McKinsys 7 S Framework
Strategy: Systematic action and allocation of resources to achieve organizational objectives. Structure: Organizational structure and authority/responsibility relationships. Systems: Procedures and processes such as information systems, manufacturing processes, budgeting and control process. Style: the way management behaves and collectively spends time to achieve organizational goals. Staff: The people in the enterprise and their socialization into the organizational culture. Shared values (superordinate goals): The values shared by the members in the organisation Skills: Distinctive capabilities of an enterprise.
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Step 2
Step 3
Step 4
IMPLEMENTATION
Step 5
EVALUATION
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Role of Strategist
An efficient strategist play the following roles: The Forecaster - a person who sees the future. The Sculptor a person who carves a form out of raw material. He shapes the future of organization. The Diplomat a person who skilled in the art of maneuvering and manipulation. The Guru a person who gives personal spiritual guidance to his disciples. The Jail Buster a strategist shows employees how to escape from the captivity of boredom and fear thus unlocking their talent and energy.
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Strategic Intent
Vision Mission
Business definition
Strategy Implementation Project Procedural Resource allocation Structural Behavioural Functional & Operational
Strategic Evaluation
Strategic Control
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Strategic Intent
Strategic Intent
Strategic intent is a high-level statement of the means by which your organization will achieve its vision. It is a statement of design for creating a desirable future (stated in present terms). A strategic intent is your company's vision of what it wants to achieve in the long term. Strategic intent refers to the purposes the organization strives for. They may be expressed in terms of a hierarchy of strategic intent. The framework within which firms operate, adopt a predetermined direction and attempt to achieve their goal is provided by a strategic intent.
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Strategic Intent
Strategic Intent
Vision
Mission
Priorities
Aims
Objectives
Decision Criteria
Strategic Initiatives
Strategies
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Strategic Intent
Defining a Mission Statement
Mission is a statement which defines the role that an organization plays in the society. Thompson (1977) defines mission as the essential purpose of the organization, concerning particularly why it is in existence, the nature of the businesses it is in and customers it seeks to satisfy. Hunger and Wheelen (1999) say that mission is the purpose of reason for organizations existence.
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Strategic Intent
Characteristics of Mission Statement
It should be feasible It should be precise It should be clear It should be motivating It should be distinctive it should be major component of strategy It should indicate how objectives are to be accomplished
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Strategic Intent
Defining a Vision statement
Vision articulates the position that a firm would like to attain in the distant future. Kotter (1990) defines it as description of something (an organization, a corporate culture, a business, a technology, an activity) in the 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.
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Strategic Intent
Benefits of Vision Statement
Good visions are inspiring Vision represents discontinuity, a step function and a jump ahead so that the company knows what it is to be. Good vision help in creation of a common identity. Good visions are competitive, original, and unique Good vision foster risk taking and experimentation. Good vision foster long term thinking. Good vision fosters long term creativity.
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Business Definitions
Business may be defined as human activity directed towards producing or acquiring wealth through buying and selling goods.
-Lewis H. Haney
Business means any trade, commerce or manufacture or any adventure in the nature of trade, commerce or manufacture - Section 2(13) of the Indian Income Tax Act 1971
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Business Definitions
Nature of Business
Business is an essential economic activity Business is a human activity Business is a social process Business is a system
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Commerce
Aid to Trade
Internal Trade
External Trade
Transport Banking
Wholesale
Retail
Import
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Export
Insurance
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Characteristics of Business
Exchange or Sale Creation of Utilities Social Institution Profit Motive Risk and Uncertainty Customer Satisfaction
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Business Goals
Goals describe desired future. There may be number of goals We measure goal to evaluate success of a business Goals are derived from mission statements Goals are task oriented Goals are short tem in nature Goals are challenging Goals must specify conditions necessary for its attainment
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Objectives of Business
Economic Objectives
Profit Growth
Social Objectives
Service to Society
Better product More employment Better environment Better living standards Fair wages Growth and promotion Employee partnership Human objectives
Service to Employees
National Objectives
Social justice Skill development Development of entrepreneurs Export development Prof. DEBASISH DUTTA/Strategic Law abidance
Management/MITCOM
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Mission
Reason for Existence
Objectives
Strategies
Policies
Broad guide lines for decision making
programs
Budgets
Cost of the
programs
Procedures
Sequence
Performance
Actual Results
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Internal Appraisal
Internal Environment s
Corporate Structure Corporate Culture Corporate Resources
Marketing Finance R&D Operations and logistics Human Resource Management Information Technology
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Internal Environment
Internal environment therefore, can be explained in terms of resources and behavior, strengths and weaknesses, synergist effects and competencies. These factors help in development of strategic advantage of the organization. And therefore a framework for development of strategic advantage can be made.
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Organizational Capability
Competencies
Synergistic Effects
Organizational Resources
Organizational Behavior
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Marketing capability
Product, price, place, promotion and integrative & systematic factors
Operational capability
Production, operation & control and R&D systems
Organizational Appraisal
It is also known as internal appraisal or company appraisal. It is essential as internal strength and weaknesses need to be associated with external threats and opportunities.
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Organizational Appraisal
Factors affecting organizational appraisal:
The ability of the strategist The size of the organization The internal environment including political forces and power game, and consistency in management team
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Organizational Appraisal
Approaches to organizational appraisal:
Approaches to organizational appraisal may be highly systematic or an ad hoc one. Systematic approach is usually used when strategist approach for formal strategic planning system. An ad hoc measure is used in response to a crisis. Organization uses both systematic as well as ad hoc system to appraise their internal environment.
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Organizational Appraisal
Sources of information for organizational appraisal:
Internal sources
Employee opinion Company files Financial statements Management information systems Similar organization Company reports of other organizations Trade journals Magazines
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External sources
Strengths-Opportunities (SO)
Weaknesses-Opportunities (WO) Strengths-Threats (ST) Weaknesses-Threats (WT)
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SWOT Analysis
SO Strategies
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SWOT Analysis
WO Strategies
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SWOT H Analysis
ST Strategies
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SWOT Analysis
WT Strategies
Defensive tactics aimed at reducing internal weaknesses & avoiding environmental threats
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SWOT Analysis
SWOT Matrix
Strengths S
Leave Blank Opportunities O
List Opportunities List Strengths
Weaknesses W
List Weaknesses
SO Strategies
Use strengths to take advantage of opportunities
WO Strategies
Overcoming weaknesses by taking advantage of opportunities
Threats T
List Threats
ST Strategies
Use strengths to avoid threats Prof. DEBASISH DUTTA/Strategic
Management/MITCOM
WT Strategies
Minimize weaknesses and avoid threats
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value chain
R&D
Procur ement
Design
Prodn
value chain Buyer value chain
Techno logy
Mktg
Distri
Infrastr ucture Service
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Disposal
value chain
Value Chain Analysis is one way of identifying which activities are best undertaken by a business and which are best provided by others ("out sourced").
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Technology Development
(R&D, Product and process improvement)
Procurement
(Purchasing of raw material, machines, supplies)
Profit Margin
Inbound Logistics
(Raw material
handling and warehousing)
Operations
(Machining, assembling, testing)
Outbound Logistics
(Warehousing and distribution of finished product)
Service
(Installation, repair, parts)
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Quantitative Analysis
The technique involves using financial figures This method used when it not possible and non financial figure to measure the Evaluation ofis performance isis carried out in to express in monetary various functional with in organization strength and weaknesses ofareas theterms. organization. Non financial are mainly It may be any quantifications or more of the following Quantitative analysis can be stated in: done for the following: Financial Ratio Goodwill Assessment of profitability, liquidity, and Financial analysis Employee morale leverage of the organization.
Attrition and absenteeism Economic Value Added Analysis(EVA) Market Activity ranking Based Cost Analysis (ABC) Non-financial analysis Production cycle time etc.
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Qualitative Analysis
Qualitative analysis is used to cover the limitations of quantitative analysis, which is based on figures only There are many strengths and weaknesses of an organization which cannot be expressed in quantitative terms
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Comparative Analysis
Comparative analysis is the basis of assessment of strength and weaknesses of an organization It helps in comparing strength and weaknesses and other competencies of an organization to that of its competitors It can be done in the following ways:
Historical analysis Industry norms Benchmarking
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Historical Analysis
It is a measure of assessing how well an organization has progressed with respect to its own past performance. It is judged by the comparative figures like balance sheet, profit and loss account and other financial ratios and non-financial figures. Figures that pose consistently good over a period of time are indicator of strengths and those pose consistently bad over a period of time are indicators of weaknesses.
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Industry Norms
It is a comparison with the rival organization to know about the strength and weaknesses of the organization Various parameters can be considered such as:
Cost structure Advertisement Budget
Limitations
Erroneous conclusions Industry norms are aggregated figure of several organization but comparison is done only with similar organization Difficult obtain the actual industry norms as companies close guard its annual reports
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Benchmarking
It helps us to find out the best performer in an area so that performance of our organization can be compared with that organization. Benchmarking is the practice of being humble enough to admit that someone else is better at something and being wise enough to learn how to match and even surpass them at it.
American Productivity and Quality Center
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Benchmarking
Types of Benchmarking This compares the performance of one
Competitive benchmarking Functional benchmarking Generic benchmarking
This analysis is helps to compare the long benchmarking This analysis isdecisions used to of compare the organization with that another and out Performance term strategic actions carried analysis is helps to compare the units methods and practices followed to perform confirm how good one organization is This This analysis is a comparison made bydepartment other organization to attain their Process benchmarking or within the same processes with that of other organization comparing with other It involves the comparison processes or between the performance of our of our objectives with strategic decisions Much similar to competitive organization functions against non-competitive organization with the best competitors Strategic benchmarking organization benchmarking. it uses comparison of a organizations with in the same sector or process of an organization to the best Internal benchmarking technological process in any area other organization
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Comprehensive Analysis
It is a set of technique used to evaluate the strength and weaknesses of an organization. The techniques are: Balanced Scorecard Key Factor Rating Critical Success Factor
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The Balanced Scorecard Measures that Drive Performance January - February 1992 Putting the Balanced Scorecard to Work September - October 1993 Using the Balanced Scorecard as a Strategic Management System January - February 1996 1996
The Balanced
Scorecard is translated into 18 languages
Selected by Harvard
Business Review as one of the most important management practices of the past 75 years.
2000
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The balanced scorecard suggests that we view the organization from FOUR perspectives.
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The Balanced Scorecard Is Based on an Understanding of the Basic Building Blocks of the Strategy
Financial Perspective
Revenue Strategy Return on Investment Productivity Strategy
Sources of Growth
Sources of Productivity
Customer Perspective
Value Proposition
Price Quality Time Function Image Relatioship
Service Exceptionally
Technology Infrastructure
Financial Results
Customer Benefits
Internal Capabilities
BSC Terminology
Strategy Map: Diagram of the cause-and-effect relationships between strategic objectives
Strategic Theme: Operating Efficiency
Financial Profitability More customers
Statement of what strategy must achieve and whats critical to its success
Flight Is on time
Objectives
Lowest prices
Measurement
Target
Initiative
Fast ground
turnaround
30 Minutes 90%
Cycle time
optimization
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Objectives
Measurement
Target
Initiative
Profitability More
Customers
Lowest Prices
Fast ground
turnaround
Ground crew
alignment
% Ground crew
stockholders
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2. Cause-and-Effect Relationships
A good Balanced Scorecard will tell the story of your strategy in actionable terms. Every objective selected should be part of a chain of cause and effect linkages that represent the strategy
Provide a generic framework to translate strategy into operational terms Create a systems approach to form an integrated Strategic Management Process Provide a clear line of sight to the vision and strategy of the company Provide a tool for communicating the :
strategy, and
processes and systems required for implementing the strategy Draw a cause and effect roadmap to stakeholder value shareholder, customer, and employee.
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How Does the Scorecard Benefit Your Organization? Improves management effectiveness by having a shared and actionable view of the strategy
Review/Summary
The Balanced Scorecard is a framework that helps organizations translate strategy into operational objectives that drive both behavior and performance
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Threat of Substitutes
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Difficult to Enter
If the supplier forces up the price paid for inputs, profits will be reduced. It follows that the more powerful the customer (buyer), the lower the price that can be achieved by buying from them.
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Threat of Substitutes
A substitute product can be regarded as something that meets the same need Substitute products are produced in a different industry but crucially satisfy the same customer need. If there are many credible substitutes to a firms product, they will limit the price that can be charged and will reduce industry profits.
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Threat of Substitutes
The extent of the threat depends upon
The extent to which the price and performance of the substitute can match the industrys product The willingness of customers to switch Customer loyalty and switching costs
If there is a threat from a rival product the firm will have to improve the performance of their products by reducing costs and therefore prices and by differentiation.
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All these activities are likely to increase costs and lower profits.
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