Strategic ManagementStrategic ManagementThe Un-Corporational The Un-Corporational

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Manish AwasthiManish Awasthi

Defining Strategies:Defining Strategies:

The term strategy is derived The term strategy is derived from the Greek word strategos from the Greek word strategos which means generalship- the which means generalship- the actual direction of military force.actual direction of military force.

It also means planning which It also means planning which are long term in terms of are long term in terms of achieving predetermined achieving predetermined business objectives.business objectives.

Need for Strategies:Need for Strategies:

Threats:Threats: Emergence of competitorsEmergence of competitors

Opportunities:Opportunities: New opportunities that are New opportunities that are

available or emerge in the available or emerge in the environment.environment.

Importance of strategy:Importance of strategy:

It is one of the most significant It is one of the most significant concept to emerge in the subject concept to emerge in the subject of management studies.of management studies.

Critical input to organizational Critical input to organizational success.success.

It helps reduce ambiguity and It helps reduce ambiguity and provide a solid foundation as a provide a solid foundation as a theory to conduct business.theory to conduct business.

Different Level of Strategies:Different Level of Strategies:

Corporate Level (Corporate Corporate Level (Corporate Office)Office)

Business Level (SBUs)Business Level (SBUs)

Functional Level ( finance, Functional Level ( finance, marketing, operations, marketing, operations, personnel, information etc)personnel, information etc)

Strategic Decision Making:Strategic Decision Making:

It means making a choice It means making a choice regarding the course of action to regarding the course of action to adopt.adopt.

Fundamental strategic Decision Fundamental strategic Decision relates to the choice of a relates to the choice of a mission of the organization.mission of the organization.

Issues in Strategic Decision Issues in Strategic Decision Making:Making:

Criterion for decision making.Criterion for decision making. Rationality in decision making.Rationality in decision making. Creativity in decision making.Creativity in decision making. Variability in decision making.Variability in decision making. Person related factors in Person related factors in

decision making.decision making. Individual versus group decision Individual versus group decision

making.making.

Phases in Strategic Phases in Strategic Management:Management:

Establishing the hierarchy of Establishing the hierarchy of Strategic Intent.Strategic Intent. Creating & Communication of Creating & Communication of

Vision.Vision. Designing a Mission statement.Designing a Mission statement. Defining the Business( CG, CF & Defining the Business( CG, CF &

AT).AT). Setting Objectives.Setting Objectives.

Contd…Contd…

Formulation of Strategies:Formulation of Strategies: Performing environmental appraisals.Performing environmental appraisals. Doing Organizational appraisalsDoing Organizational appraisals Considering corporate level strategiesConsidering corporate level strategies Considering business level strategiesConsidering business level strategies Undertaking strategic analysisUndertaking strategic analysis Exercising strategic choiceExercising strategic choice Formulating strategies.Formulating strategies. Preparing Strategic Plan.Preparing Strategic Plan.

Contd…Contd…

Implementation of strategies:Implementation of strategies: Activating StrategiesActivating Strategies Designing structures & systemsDesigning structures & systems Managing Behavior Managing Behavior

ImplementationImplementation Managing Functional Managing Functional

ImplementationImplementation Operationalizing Strategies.Operationalizing Strategies.

Contd…Contd…

Performing Strategy Evaluation Performing Strategy Evaluation & Control:& Control: Performing Strategic Evaluation.Performing Strategic Evaluation. Exercising Strategic ControlExercising Strategic Control Reformulating Strategies.Reformulating Strategies.

Comprehensive Model Of Comprehensive Model Of S.M:S.M: Establishing strategic IntentEstablishing strategic Intent

Vision, Mission, Business Definition & Vision, Mission, Business Definition & Objectives.Objectives.

Formulation of StrategiesFormulation of StrategiesEnvironmental appraisals/Organizational Environmental appraisals/Organizational

AppraisalsAppraisals SWOT AnalysisSWOT Analysis

Corporate Level StrategiesCorporate Level Strategies Business Level StrategiesBusiness Level Strategies

Strategic choiceStrategic choice Strategic PlanStrategic Plan

Strategic Implementation: Project, Procedural, Strategic Implementation: Project, Procedural, Resource Allocation, Structural, Behavioral, Resource Allocation, Structural, Behavioral, Functional & OperationalFunctional & Operational

Strategic Evaluation.Strategic Evaluation.

Strategic

Control

Strategic Intent:Strategic Intent:

VisionVision MissionMission Business Definition keeping in Business Definition keeping in

mind customer function, mind customer function, Customer Groups & Alternative Customer Groups & Alternative Technologies.Technologies.

Environmental Appraisals:Environmental Appraisals:

Environment means the Environment means the surroundings, external objects, surroundings, external objects, influences or circumstances influences or circumstances under which someone or under which someone or something exists.something exists.

Types of Environment:Types of Environment: Internal Environment.External Environment.

Characteristics of Characteristics of Environment:Environment:

Environment is ComplexEnvironment is Complex Environment is DynamicEnvironment is Dynamic Environment is MultifacetedEnvironment is Multifaceted Environment has a far reaching Environment has a far reaching

impact.impact. Environment is difficult to Environment is difficult to

control.control.

Different Environmental Different Environmental Sectors:Sectors: Market EnvironmentMarket Environment Technological EnvironmentTechnological Environment Supplier EnvironmentSupplier Environment Economic EnvironmentEconomic Environment Regulatory EnvironmentRegulatory Environment Political EnvironmentPolitical Environment Socio-Cultural EnvironmentSocio-Cultural Environment International EnvironmentInternational Environment

Grand Strategies:Grand Strategies:

It helps in making decisions It helps in making decisions related to allocating resources related to allocating resources among the different businesses among the different businesses of a firm, transferring resources of a firm, transferring resources from one set of Business to from one set of Business to others and managing and others and managing and nurturing a portfolio of Business nurturing a portfolio of Business in such a way that the overall in such a way that the overall corporate objectives are corporate objectives are achieved.achieved.

4 types of Grand strategies:4 types of Grand strategies:

Stability strategies:Stability strategies: It is adopted when there is an It is adopted when there is an

attempt at an incremental attempt at an incremental improvement of its functional improvement of its functional performance by marginally performance by marginally changing the one or more of its changing the one or more of its business in terms of their business in terms of their respective customer group, respective customer group, customer function and alternative customer function and alternative technologies.technologies.

Contd…Contd…

Expansion strategies:Expansion strategies:

It is followed when an organization It is followed when an organization aims at high growth by substantially aims at high growth by substantially broadening the scope of one or broadening the scope of one or more of its businesses in terms of more of its businesses in terms of their customer groups, customer their customer groups, customer functions and alternative functions and alternative technology. technology.

Contd…Contd…

Retrenchment Strategies:Retrenchment Strategies: It is followed when an organization It is followed when an organization

aims at a contraction of its activities aims at a contraction of its activities through substantial reduction or through substantial reduction or elimination of the scope of one or elimination of the scope of one or more of its businesses in terms of more of its businesses in terms of their respective customer group, their respective customer group, customer function and alternative customer function and alternative technologies.technologies.

Contd…Contd…

Combination Strategies:Combination Strategies: It is followed when an organization It is followed when an organization

adopts a mixture of stability, adopts a mixture of stability, expansion and retrenchment expansion and retrenchment either at the same time in different either at the same time in different businesses or at different times in businesses or at different times in the same businesses with the aim the same businesses with the aim of improving its performance.of improving its performance.

Stability Strategies:Stability Strategies:

No Change Strategies.No Change Strategies.

Profit Strategy.Profit Strategy.

Pause/Proceed with caution Pause/Proceed with caution StrategyStrategy

Expansion Strategies: Expansion Strategies:

Expansion Through :Expansion Through :

Concentration.Concentration. Integration.Integration. Diversification.Diversification. Cooperation.Cooperation. Internationalization.Internationalization.

Retrenchment strategies:Retrenchment strategies:

It is followed when an It is followed when an organization substantially organization substantially reduces the scope of its reduces the scope of its activities.activities.

They are:They are: Turnaround StrategiesTurnaround Strategies Divestment StrategiesDivestment Strategies Liquidation StrategiesLiquidation Strategies

Strategic Evaluation & Strategic Evaluation & Control:Control: Nature of Strategy Evaluation:Nature of Strategy Evaluation:

To evaluate the effectiveness of strategy To evaluate the effectiveness of strategy in achieving organizational objectives.in achieving organizational objectives.

S.E & C can be defined as a process of determining the effectiveness of a given strategy in achieving the organizational objectives and taking corrective actions whenever required.

Through the process of S.E & C the strategists attempt to answer two sets of following questions:

S.E & C:S.E & C:

1.1. Are the premises made during strategy Are the premises made during strategy formulation proving to be correct? Is the formulation proving to be correct? Is the strategy guiding the organization towards strategy guiding the organization towards its intended objectives? Are the its intended objectives? Are the organization & Managers doing things organization & Managers doing things which ought to be done? Is there a need which ought to be done? Is there a need to change and reformulate the strategy.to change and reformulate the strategy.

2.2. How is the organization performing? Are How is the organization performing? Are the time schedules being adhered to? the time schedules being adhered to? Are the resources being utilized Are the resources being utilized properly? What needs to be done to properly? What needs to be done to ensure that resources are utilized ensure that resources are utilized properly and objectives met?properly and objectives met?

Importance of Strategic Importance of Strategic Evaluation:Evaluation: It helps in segregation of key It helps in segregation of key

managerial tasks which leads to a managerial tasks which leads to a situation where individual managers situation where individual managers are required to perform a small are required to perform a small portion each of the overall tasks portion each of the overall tasks required to implement a strategy.required to implement a strategy.

The importance of S.E lies in its The importance of S.E lies in its capacity to coordinate the tasks capacity to coordinate the tasks performed by individual managers performed by individual managers and also groups, divisions or SBUs and also groups, divisions or SBUs through the control of Performance.through the control of Performance.

Contd…Contd…

It provides feedback and thus also It provides feedback and thus also helps in appraisals of the employees helps in appraisals of the employees at different levels.at different levels.

It also helps to keep a check on the It also helps to keep a check on the validity of a strategic choice.validity of a strategic choice.

It provides a considerable amount of It provides a considerable amount of information & experience to information & experience to strategist that can be useful in new strategist that can be useful in new strategic planning.strategic planning.

Participants in S.E:Participants in S.E:

The Board of Directors.The Board of Directors. Chief Executives.Chief Executives. SBU Heads.SBU Heads. Financial Controllers.Financial Controllers. Audit & Executive Committees.Audit & Executive Committees. Middle level Managers.Middle level Managers.

Barriers in Strategy Barriers in Strategy Evaluation:Evaluation:

Limits in Control.Limits in Control. Difficulties in Measurement.Difficulties in Measurement. Resistance to evaluation.Resistance to evaluation. Short-termism.Short-termism. Relying on efficiency rather than Relying on efficiency rather than

effectiveness.effectiveness.

Requirements for effective Requirements for effective control:control: Control should involve only the minimum Control should involve only the minimum

amount of information.amount of information. It should control only managerial activities It should control only managerial activities

and results.and results. It should be timely.It should be timely. Both long term and short term controls Both long term and short term controls

should be used.should be used. Controls should aim at pinpointing Controls should aim at pinpointing

exceptions as nitpicking does not result in exceptions as nitpicking does not result in effective evaluation.effective evaluation.

Rewards for meeting or exceeding Rewards for meeting or exceeding standards should be emphasized. standards should be emphasized.

Strategic Control:Strategic Control:

Premise Control:Premise Control: Every strategy is based on certain Every strategy is based on certain

assumptions about the environmental assumptions about the environmental and organizational factors.and organizational factors.

It is necessary to identify the key It is necessary to identify the key assumptions and keep track of any assumptions and keep track of any change in them so as to assess their change in them so as to assess their impact on strategy and its impact on strategy and its implementation.implementation.

It serves the purpose of continually It serves the purpose of continually testing the assumptions to find out testing the assumptions to find out whether they are still valid or not.whether they are still valid or not.

Contd…Contd…

The responsibility for premise The responsibility for premise control can be assigned to the control can be assigned to the corporate planning staff who can corporate planning staff who can identify key assumptions and identify key assumptions and keep a regular check on their keep a regular check on their validity.validity.

Implementation Control: Implementation Control:

It aims at evaluating whether the plans, It aims at evaluating whether the plans, programmes and projects are actually guiding programmes and projects are actually guiding the organization towards its predetermined the organization towards its predetermined objectives or not.objectives or not.

Implementation control may lead to strategic Implementation control may lead to strategic Rethinking.Rethinking.

It may be put into practice through the It may be put into practice through the identification and monitoring of strategic identification and monitoring of strategic thrust such as an assessment of the thrust such as an assessment of the marketing success of a new product after marketing success of a new product after pre-testing or checking the feasibility of a pre-testing or checking the feasibility of a diversification programmes after making initial diversification programmes after making initial attempts at seeking technological attempts at seeking technological collaborations.collaborations.

Strategic Surveillance:Strategic Surveillance:

It aims at more generalized and It aims at more generalized and overarching control.overarching control.

It is designed to monitor a broad range of It is designed to monitor a broad range of events inside and outside the company that events inside and outside the company that are likely to threaten the course of a firms are likely to threaten the course of a firms strategy.strategy.

It can be done through a broad based, It can be done through a broad based, general monitoring on the basis of selected general monitoring on the basis of selected information sources to uncover events that information sources to uncover events that are likely to affect the strategy of the are likely to affect the strategy of the organization.organization.

Special Alert Control:Special Alert Control:

It is based on a trigger mechanism for rapid It is based on a trigger mechanism for rapid responses and immediate reassessment of responses and immediate reassessment of strategy in the light of sudden and strategy in the light of sudden and unexpected events.unexpected events.

It can be exercised through the formulation It can be exercised through the formulation of contingency strategies & assigning the of contingency strategies & assigning the responsibility of handling unforeseen responsibility of handling unforeseen events to crisis management terms.events to crisis management terms.

Examples of such events can be the Examples of such events can be the sudden fall of a government at central or sudden fall of a government at central or state level, instant change in competitors state level, instant change in competitors posture, an unfortunate industrial disaster posture, an unfortunate industrial disaster or a natural catastrophe.or a natural catastrophe.

Techniques of S.E & C :Techniques of S.E & C :

The two most common and best The two most common and best suited techniques used for S.E suited techniques used for S.E & C are:& C are:

Strategic Momentum Control.Strategic Momentum Control.

Strategic Leap Control.Strategic Leap Control.

Strategic Momentum Control:Strategic Momentum Control:

Aims at ensuring that the Aims at ensuring that the assumptions on whose basis assumptions on whose basis strategies were formulated are still strategies were formulated are still valid and finding out what needs to valid and finding out what needs to be done in order to allow be done in order to allow organization to maintain its existing organization to maintain its existing strategic momentum.strategic momentum.

The three techniques which could be The three techniques which could be used to achieve these aims are:used to achieve these aims are: Responsibility control centersResponsibility control centers The underlying success factorsThe underlying success factors The generic strategies.The generic strategies.

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Responsibility control Centers Responsibility control Centers form the core of management form the core of management control system and are of four control system and are of four types – revenue, expense, profit types – revenue, expense, profit and investment centers.and investment centers.

Each of these centre is Each of these centre is designed on the basis of the designed on the basis of the measurement of inputs and measurement of inputs and outputs.outputs.

Contd…Contd…

The underlying success factors The underlying success factors enables organization to focus on enables organization to focus on CSFs in order to examines the CSFs in order to examines the factors that contribute to the success factors that contribute to the success of strategies.of strategies.

By managing on the basis of CSFs , By managing on the basis of CSFs , the strategists can continually the strategists can continually evaluate the strategies to assess evaluate the strategies to assess whether or not these are helping the whether or not these are helping the organization to achieve its organization to achieve its objectives.objectives.

Contd…Contd…

The generic strategies is based on The generic strategies is based on the assumption that the strategies the assumption that the strategies adopted by a firm similar to another adopted by a firm similar to another firm are comparable.firm are comparable.

Based on such a comparison a firm Based on such a comparison a firm can study why and how other firms can study why and how other firms are implementing strategies and are implementing strategies and assess whether or not its own assess whether or not its own strategy is following a similar path or strategy is following a similar path or not.not.

Strategic Leap Control:Strategic Leap Control:

Where the environment is relatively Where the environment is relatively unstable, organizations are required unstable, organizations are required to make strategic leaps in order to to make strategic leaps in order to make significant changes.make significant changes.

There are four techniques of There are four techniques of evaluation used to exercise Strategic evaluation used to exercise Strategic Leap control:Leap control: Strategic Issue Management.Strategic Issue Management. Strategic Field Analysis.Strategic Field Analysis. Systems Modeling.Systems Modeling. Scenarios.Scenarios.

Strategic Issue Management:Strategic Issue Management:

It is aimed at identifying one or more It is aimed at identifying one or more strategic issues and assessing their impact strategic issues and assessing their impact on the organization.on the organization.

A strategic issue is a forthcoming A strategic issue is a forthcoming development, either inside or outside of the development, either inside or outside of the organization which is likely to have an organization which is likely to have an important impact on the ability of the important impact on the ability of the enterprise to meet its objectives.enterprise to meet its objectives.

By managing strategic issues one can By managing strategic issues one can overcome the environmental changes and overcome the environmental changes and design contingency plans to shift strategies design contingency plans to shift strategies whenever required.whenever required.

Strategic Field analysis:Strategic Field analysis:

It is a way of examining the It is a way of examining the nature and extent of synergies nature and extent of synergies that exists or are lacking that exists or are lacking between the components of an between the components of an organization.organization.

Whenever synergies exists the Whenever synergies exists the strategists can assess the ability strategists can assess the ability of the firm to take advantage of of the firm to take advantage of those.those.

Systems Modeling:Systems Modeling:

It is a computer based model that It is a computer based model that simulate the essential features of the simulate the essential features of the organization and its environment.organization and its environment.

By this organization may exercise By this organization may exercise pre-action control by assessing the pre-action control by assessing the impact of environment on impact of environment on organization because of the adoption organization because of the adoption of a particular strategy.of a particular strategy.

Scenarios:Scenarios:

These are perceptions about the These are perceptions about the likely environment a firm would likely environment a firm would face in the future.face in the future.

Different types of systems in Different types of systems in Evaluation:Evaluation:

Information Systems.Information Systems. Control Systems.Control Systems. Appraisal Systems.Appraisal Systems. Motivation Systems.Motivation Systems. Development Systems.Development Systems. Planning Sysytems.Planning Sysytems.

Business Unit Strategies:Business Unit Strategies:

These are the course of action adopted by a firm for each of its business separately to serve identified customer groups and provide value to the customer by satisfaction of their needs.

These are classified in 3 types:a) Cost Leadership.b) Differentiation.c) Focus.

Cost Leadership:Cost Leadership:

When the competitive advantage of When the competitive advantage of a firm lies in a lower cost of the a firm lies in a lower cost of the products or services relative to what products or services relative to what the competitors have to offer it is the competitors have to offer it is termed as cost leadership.termed as cost leadership.

Cost leadership offers a flexibility to Cost leadership offers a flexibility to the firm to lower the price if the the firm to lower the price if the competition becomes stiff & yet earn competition becomes stiff & yet earn more or less the same level of profit.more or less the same level of profit.

How to achieveHow to achieve Cost leadership??? Cost leadership???

Accurate demand forecasting & high capacity Accurate demand forecasting & high capacity utilization is essential to realize cost advantages.utilization is essential to realize cost advantages.

Attaining economies of scale leads to lower per unit Attaining economies of scale leads to lower per unit cost of product/service.cost of product/service.

High level of standardization of products and offering High level of standardization of products and offering uniform service packages using mass production uniform service packages using mass production techniques yields lower unit costs.techniques yields lower unit costs.

Aiming at the average customer makes it possible to Aiming at the average customer makes it possible to offer a generalized set of utilities in a product/service offer a generalized set of utilities in a product/service to cover greater number of customers.to cover greater number of customers.

Investments in cost saving technologies can help a Investments in cost saving technologies can help a firm to squeeze every extra paisa out of the cost, firm to squeeze every extra paisa out of the cost, making the product/service more competitive in the making the product/service more competitive in the market.market.

Benefits of Cost Leadership:Benefits of Cost Leadership:

It is best insurance against industry It is best insurance against industry competition.competition.

Powerful suppliers possess a higher Powerful suppliers possess a higher bargaining power to negotiate price bargaining power to negotiate price increase for inputs.increase for inputs.

Powerful buyers possess a higher Powerful buyers possess a higher bargaining power to effective price bargaining power to effective price reduction.reduction.

The threat of cheaper substitutes can be The threat of cheaper substitutes can be offset to some extent by lowering prices.offset to some extent by lowering prices.

Cost advantage acts as an effective entry Cost advantage acts as an effective entry barrier for potential entrants who cannot barrier for potential entrants who cannot offer the product/services at a lower price.offer the product/services at a lower price.

Risks in Cost Leadership:Risks in Cost Leadership:

It is ephemeral.It is ephemeral. It is not a market friendly approach.It is not a market friendly approach. Sometimes less efficient producers Sometimes less efficient producers

may not choose to remain in the may not choose to remain in the market owing to the competitive market owing to the competitive dominance of the cost leader.dominance of the cost leader.

Technological shifts are a great Technological shifts are a great threat to a cost leader as these may threat to a cost leader as these may change the ground rules on which an change the ground rules on which an industry operates.industry operates.

Differentiation Business Strategies:

When the competitive advantage of a firm lies in special features incorporated into the product/service, which are demanded by the customers who are willing to pay for those, then the strategy adopted is the differentiation Business Strategies.

How to achieve Differentiation:

A firm can incorporate features that offer utility for the customer and match their tastes & preferences.

A firm can incorporate features that lower the overall costs for the buyer in using the product/services.

A firm can incorporate features that raise the performance of the product.

A firm can incorporate features that increase the buyer satisfaction in tangible or non-tangible ways.

A firm can incorporate features that can offer the promise of a high quality of product/service.

A firm can incorporate features that enable the customers to claim distinctiveness from other customers and enhance their status and prestige among the buyer community.

A firm can offer the full range of products or services that customer require for their need satisfaction.

Benefits:Benefits:

Distinguishing factor.Distinguishing factor. Powerful suppliers can negotiate price Powerful suppliers can negotiate price

increase that the firm can absorb to some increase that the firm can absorb to some extent as it has brand loyal customers extent as it has brand loyal customers typically less sensitive to price increase.typically less sensitive to price increase.

Powerful buyers do not usually negotiate Powerful buyers do not usually negotiate price decrease as they have fewer options. price decrease as they have fewer options.

It is an expensive proposition.It is an expensive proposition. In case of new entrants, substitute In case of new entrants, substitute

product/service suppliers too pose a product/service suppliers too pose a negligible threat to established negligible threat to established differentiator firms.differentiator firms.

Risks:Risks:

In growing market product tends to become In growing market product tends to become commodities.commodities.

In case of several differentiators adopting In case of several differentiators adopting similar differentiation strategies the basis of similar differentiation strategies the basis of differentiations is gradually lessened and differentiations is gradually lessened and ultimately lost.ultimately lost.

It fails to work if its basis is something that It fails to work if its basis is something that is not valued by the customer.is not valued by the customer.

Price premiums too have a limit.Price premiums too have a limit. Failure on the part of the firm to Failure on the part of the firm to

communicate the benefit arising out of communicate the benefit arising out of differentiation adequately.differentiation adequately.

Focus Business Strategy:Focus Business Strategy:

It rely on either cost leadership or It rely on either cost leadership or differentiation but cater to a narrow differentiation but cater to a narrow segment of the total market.segment of the total market.

In terms of the market, therefore In terms of the market, therefore focus strategies are niche strategies.focus strategies are niche strategies.

For the identified market segment a For the identified market segment a focused firm uses either the lower focused firm uses either the lower cost or differentiation strategy.cost or differentiation strategy.

Benefits:Benefits:

A focused firm is protected from competition to the extent that the other firms which have a broader target do not possess the competitive ability to cater to the niche markets.

Focused firm buys in small quantities, so powerful suppliers may not evince much interest.

Powerful buyers are less likely to shift loyalties as they might not find others willing to cater to the niche markets as the focused firms do.

The specialization that focused firms are able to achieve in serving a niche market acts as a powerful barrier to substitute products/services that might be available in the market.

The competence of the focused firms acts as an effective entry barrier to potential entrants into the niche market.

Risks:Risks:

Being focused means commitment to Being focused means commitment to a narrow market segment.a narrow market segment.

A major risk for the focused firms lies A major risk for the focused firms lies in the cost configuration.in the cost configuration.

Niches are often transient.Niches are often transient. Rivals in the market may sometimes Rivals in the market may sometimes

out focus the focused firms by out focus the focused firms by devising ways to serve the niche devising ways to serve the niche markets in a better manner.markets in a better manner.

Tactics for Business Tactics for Business Strategies:Strategies: Tactic is a sub strategy.Tactic is a sub strategy. It is a specific operating plan It is a specific operating plan

detailing how a strategy is to be detailing how a strategy is to be implemented in terms of when implemented in terms of when and where it is to be put into and where it is to be put into action.action.

There are two tactics:There are two tactics: Timing Tactics.Timing Tactics. Market location Tactics.Market location Tactics.

Strategy Implementation:Strategy Implementation:

Interrelationship between formulation Interrelationship between formulation and implementation:and implementation: The formulation and implementation The formulation and implementation

processes are intertwined.processes are intertwined. Two types of linkages exist between Two types of linkages exist between

these two phases of SM.these two phases of SM. The forward linkages deal with the The forward linkages deal with the

impact of the formulation on impact of the formulation on implementation.implementation.

The backward linkages are concerned The backward linkages are concerned with the impact in the opposite direction. with the impact in the opposite direction.

Pyramid of Strategic Pyramid of Strategic Implementation:Implementation:

Strategies -> Strategies -> Plans -> Plans -> Programmes ->Programmes -> Projects <- Projects <- Budgets.Budgets.

Project Implementation:Project Implementation:

Conception Phase.Conception Phase. Definition Phase.Definition Phase. Planning & Organizing Phase.Planning & Organizing Phase. Implementation Phase.Implementation Phase. Clean Up Phase.Clean Up Phase.

Resource Allocation:Resource Allocation:

It deals with the procurement and It deals with the procurement and commitment of financial, physical commitment of financial, physical and human resource to strategic and human resource to strategic tasks for the achievement of tasks for the achievement of organizational objectives.organizational objectives.

It is both a one time and continuous It is both a one time and continuous process.process.

When a new project is implemented When a new project is implemented it requires resource allocation.it requires resource allocation.

An ongoing concern would also An ongoing concern would also require a continual infusion of require a continual infusion of resources.resources.

Factors affecting Resource Factors affecting Resource Allocation:Allocation:

Objectives of the organization.Objectives of the organization. Preference of dominant Preference of dominant

strategists.strategists. Internal Politics.Internal Politics. External influences.External influences.

Difficulties in Resource Difficulties in Resource Allocation:Allocation:

Scarcity of Resources.Scarcity of Resources. Restrictions on generating Restrictions on generating

Resources.Resources. Overstatement of needs.Overstatement of needs.

Structural Implementation:Structural Implementation:

Structure: It is the way in which the Structure: It is the way in which the tasks and subtasks required to tasks and subtasks required to implement a strategy are arranged.implement a strategy are arranged.

The diagrammatical representation The diagrammatical representation of structure could be an of structure could be an organization chart but the chart organization chart but the chart shows only skeleton.shows only skeleton.

What is Structural Mechanism:What is Structural Mechanism:

Defining the major task required to implement a Defining the major task required to implement a strategy.strategy.

Grouping tasks on the basis of common skill Grouping tasks on the basis of common skill requirements.requirements.

Subdivision of responsibility & delegation of Subdivision of responsibility & delegation of authority to perform tasks.authority to perform tasks.

Coordination of divided responsibility.Coordination of divided responsibility. Design and administration of the information Design and administration of the information

system.system. Design and administration of the appraisal system.Design and administration of the appraisal system. Design and administration of the motivation system.Design and administration of the motivation system. Design and administration of the development Design and administration of the development

systems.systems. Design and administration of the planning system.Design and administration of the planning system.

Structures for Strategies:Structures for Strategies:

Entrepreneurial Structure.Entrepreneurial Structure. Functional Structure.Functional Structure. Divisional Structure.Divisional Structure. Matrix Structure.Matrix Structure. Network Structure.Network Structure. Product based Structure.Product based Structure. Customer based Structure.Customer based Structure. Geographic Structure.Geographic Structure. Intrapreneurial Structure.Intrapreneurial Structure.

Organization Systems:Organization Systems:

Another way of looking at organizational Another way of looking at organizational structure is to view it as a means of structure is to view it as a means of subdividing the total authority and subdividing the total authority and responsibility among different responsibility among different organizational units and positions.organizational units and positions.

Since the organization has to perform a set Since the organization has to perform a set of tasks designed to achieve its objectives, of tasks designed to achieve its objectives, a need arises to evolve systems that would a need arises to evolve systems that would bind the different units and positions, so bind the different units and positions, so that the performance of activities takes that the performance of activities takes place in a coordinated manner.place in a coordinated manner.

these systems could be collectively these systems could be collectively referred to as organization systems.referred to as organization systems.

Six organizational systems Six organizational systems are:are:

Information System.Information System. Control System.Control System. Appraisal System.Appraisal System. Motivation System.Motivation System. Development System.Development System. Planning System.Planning System.

Behavioral Implementation:Behavioral Implementation:

The five major issues involved in The five major issues involved in Behavior Implementation are:Behavior Implementation are: Leadership.Leadership. Corporate Culture.Corporate Culture. Corporate policies & use of power.Corporate policies & use of power. Personal Values & Ethics.Personal Values & Ethics. Social Responsibility.Social Responsibility.

Leadership Implementation:Leadership Implementation:

The role of appropriate leadership in The role of appropriate leadership in strategic success is highly strategic success is highly significant.significant.

Leadership plays a critical role in the Leadership plays a critical role in the success and failure of enterprise.success and failure of enterprise.

It is considered as one of the most It is considered as one of the most important elements affecting important elements affecting organizational performance.organizational performance.

Theory of leadership states: Theory of leadership states: A leader must:A leader must: Develop new qualities to perform Develop new qualities to perform

effectively.effectively. Be a visionary.Be a visionary. Exemplify the values, goals and Exemplify the values, goals and

culture of the organization.culture of the organization. Pay attention to strategic thinking Pay attention to strategic thinking

and intellectual activities.and intellectual activities. Lead by empowering others.Lead by empowering others. Create leadership at lower levels.Create leadership at lower levels. Delegate authority and place Delegate authority and place

emphasis on motivation.emphasis on motivation.

Styles of Leadership:Styles of Leadership:

Risk Taking: Willing to take risks.Risk Taking: Willing to take risks. Technology: Use of planning, Technology: Use of planning,

qualified personnel and techniques.qualified personnel and techniques. Organicity: Extent of organizational Organicity: Extent of organizational

structural flexibility.structural flexibility. Participation: Involvement of Participation: Involvement of

managers.managers. Coercion: Domination by Top Coercion: Domination by Top

Management.Management.

Corporate Culture:Corporate Culture:

The phenomenon that often The phenomenon that often distinguishes good organization from distinguishes good organization from bad organization is termed as bad organization is termed as Corporate Culture.Corporate Culture.

The well managed organizations The well managed organizations apparently have distinct cultures that apparently have distinct cultures that are in some way responsible for are in some way responsible for their ability to successfully implement their ability to successfully implement strategies.strategies.

Composition of Corporate Composition of Corporate Culture:Culture:

It is the set of important assumptions- often It is the set of important assumptions- often unstated – that members of an organization share unstated – that members of an organization share in common.in common.

There are two major assumptions in common:There are two major assumptions in common: Beliefs.Beliefs. Values.Values.

Beliefs are assumptions about reality & are derived Beliefs are assumptions about reality & are derived and reinforced by experience.and reinforced by experience.

Values are assumptions about ideals that are Values are assumptions about ideals that are desirable and worth striving for.desirable and worth striving for.

When beliefs and values are shared in an When beliefs and values are shared in an organization, they create a corporate culture. organization, they create a corporate culture.

Corporate politics and use of Corporate politics and use of power:power: All corporate cultures include a All corporate cultures include a

political component and political component and therefore all organizations are therefore all organizations are political in nature.political in nature.

Organizational members bring Organizational members bring with them their likes, dislikes, with them their likes, dislikes, views, opinions, prejudices and views, opinions, prejudices and inclinations when they enter inclinations when they enter organization.organization.

Understanding Power & Understanding Power & Politics:Politics: Power is defined as the ability to Power is defined as the ability to

influence others and corporate influence others and corporate politics is the carrying out of the politics is the carrying out of the activities not prescribed by the activities not prescribed by the policies for the purpose of policies for the purpose of influencing the distribution of influencing the distribution of advantages within the organization.advantages within the organization.

Politics is related to the use of Power Politics is related to the use of Power but it is not simillar.but it is not simillar.

Functional & Operational Functional & Operational Implementation:Implementation: Functional strategies deal with a relatively Functional strategies deal with a relatively

restricted plan which provides the restricted plan which provides the objectives for a specific function, for the objectives for a specific function, for the allocation of resources among different allocation of resources among different operations within the functional area and operations within the functional area and for enabling a coordination between them for enabling a coordination between them for an optimal contribution to the for an optimal contribution to the achievement of the business and corporate achievement of the business and corporate level objectives.level objectives.

Functional strategies are derived from Functional strategies are derived from business and corporate strategies and are business and corporate strategies and are implemented through functional and implemented through functional and operational implementation.operational implementation.

Vertical fit:Vertical fit:

It leads us to define functional It leads us to define functional strategies in terms of their capability strategies in terms of their capability to contribute to the creation of a to contribute to the creation of a strategic advantage for the strategic advantage for the organization.organization.

Types of Functional Strategies:Types of Functional Strategies: Strategic marketing management.Strategic marketing management. Strategic financial management.Strategic financial management. Strategic operations management.Strategic operations management. Strategic human resource management.Strategic human resource management. Strategic information management. Strategic information management.

Horizontal fit:Horizontal fit:

It means that there has to be an It means that there has to be an integration of the operational integration of the operational activities undertaken to provide activities undertaken to provide a product or service to a a product or service to a customer.customer.

These have to take place in the These have to take place in the course of operational course of operational implementation.implementation.

Organizational AppraisalsOrganizational Appraisals

The appraisal of the external environment of a firm helps it to think what it might choose to do.

The appraisal of the internal environment enables a firm to decide about what it can do.

Internally an organization has to deal with resource – related behavior, weaknesses and strengths, synergy, competency etc.

Organisational Resources + Organisational Behaviour

Strength and Weaknesses

Synergistic Effects

Competencies

Organisational Capability

Strategic Advantage

Method and Technique inMethod and Technique inOrganisational AppraisalOrganisational Appraisal

1. Internal Analysis

2.Comparative Analysis

3.Comprehensive Analysis

• Application of these methods results in highlighting strengths and weaknesses that exist in different functional areas.

• The internal environment provides an organisation with capability to capitalise on opportunities and protect itself from the threats that are present in external environment.

The balancing factor of external and internal environment is key to success of business strategy.

An organisation uses different types of resources and exhibits a certain type of behaviour:

Organisational AppraisalOrganisational Appraisal

WHAT ARE ORGANISATIONAL RESOURCESWHAT ARE ORGANISATIONAL RESOURCES

The theory of strategy is developed by BARNEYBARNEY (1991): ‘A firm is a bundle of resources’

The theory of strategy is developed by BARNEYBARNEY (1991): ‘A firm is a bundle of resources’

1.Tangible.2. Intangible.

This include all assets, capabilities, organisational processes, information and knowledge.

Organisational AppraisalOrganisational Appraisal

Resources:

1. Physical Resources: Technology, plant & equipment geographic location, access to raw materials etc.

2. Human Resources: Education, experience, skills, intelligence, judgment, relationship etc.

3. Organisational Resources: Structure, formal systems and procedures, informal relations among groups.

Possessing the resources but not utilising does not make any sense. The usage depends on organisational behaviour.

Possessing the resources but not utilising does not make any sense. The usage depends on organisational behaviour.

Organisational AppraisalOrganisational Appraisal

• Barney said ‘ These resources can lead to strategic advantage if following four characteristics are present:

1. Valuable

2. Rare

3. Costly to imitate

4. Non-Substitutable

• Most organisation have to acquire these resources in hard way. The cost and availability of resources are important factors on which success of an organisation depends.

Organisational Behaviour: It is affected by internal forces and influences.

Organisational AppraisalOrganisational Appraisal

i. Quality of Leadership.ii. Management Policy.iii. Shared Values & Culture.iv. Work Environment.v. Organisational Climate.vi. Organisational Politics.vii. Use of Power.

Strength & Weakness of an organisation depends upon tackling above factors. S&W do not exist in isolation but combine within functional area and also across different functional area to create synergistic effect.

Strength & Weakness of an organisation depends upon tackling above factors. S&W do not exist in isolation but combine within functional area and also across different functional area to create synergistic effect.

Organisational AppraisalOrganisational Appraisal

Synergistic Effects:

Two strong points in a particular functional area add up to some thing more than two or more than double the strength. Likewise, two weaknesses in tandem result in more than double damage –

Two + Two = FiveFive

Synergy is the idea that the whole is greater or lesser than the sum of its parts.

Synergy is the idea that the whole is greater or lesser than the sum of its parts.

Or one + one = Zero

Organisational AppraisalOrganisational Appraisal

Competencies:

Competencies are special qualities possessed by an organisation that make it with stand pressures of competition in market place. It is also known as core-capabilities, invisible assets or embedded knowledge.

When a specific ability is possessed by a particular organisation exclusively, or relatively large measures, it is called Distinctive Competence.

Many organisations achieve strategic success building Distinctive Competence around Core

Strategic Functions.

Many organisations achieve strategic success building Distinctive Competence around Core

Strategic Functions.

Organisational AppraisalOrganisational Appraisal

Organisational Capability:

• Organisational Capability means the capacity or potential of an organisation to utilise its resources to manage & use its strengths and over-come its weaknesses in order to exploit opportunities and face threats in its external environment.

• As an attribute, it is sum total of resources and behaviour, strength and weakness, synergistic effects occurring in and the competence of an organisation.

• Capability is out-come of an organization's knowledge base, i.e. the skills and knowledge of its employees. This develop the concept of “LEARNING ORGANISATION”.

ORGANISATIONAL STRATEGIC ADVANTAGEORGANISATIONAL STRATEGIC ADVANTAGE

1. It aims at improvement in organisational capability. That in turn improves functioning of the organisation and results into generation of higher revenue and profit.

2. It has to be positive in nature. The strategic advantage is measurable feature for realistic assessment.

3. OSA is applied in all the functional areas of the organisation for better results.

4. Financial, Marketing, Production, Procurement & Logistics, Personnel Management and General Management

ORGANISATIONAL STRATEGIC ADVANTAGEORGANISATIONAL STRATEGIC ADVANTAGE

Financial Capability:

It is availability, usage and management of funds. Following factors are for consideration:

1. Factors related to source of funds.

2. Factors related to usage of funds.

3. Factors related to management of funds.

Marketing Capability:It rests on and relate to product, its promotion &

distribution and pricing etc. 1. Product related factors.2. Price related factors.3. Place related factors.4. Promotion related factors.5. Integrative & System factors.

Method and Technique used forMethod and Technique used forOrganisational AppraisalOrganisational Appraisal

1. Internal Analysisi. Value Chain Analyses.ii. Quantitative Analysis

a. Financial Analysisb. Non-Financial Analysis.

iii. Qualitative Analysis.

2. Comparative Analysis i. Historical Analysis ii. Industry Norms iii. Benchmarking

3. Comprehensive Analysis i. Balance Scorecard ii. Key factor rating

VALUE CHAIN ANALYSIS:

ORGANISATIONAL STRATEGIC ADVANTAGEORGANISATIONAL STRATEGIC ADVANTAGE

Porter (1985) is credited with the introduction of the frame work called VALUE CHAINVALUE CHAIN.. A value chain is a set of interlinked value-creating activities performed by an organisation.

Porter divided the value chain of a manufacturing organisation into PRIMARY and SUPPORT activities.

Primary activities are directory related to the flow of the product to the customer.

COMPREHANSIVE ANALYSIS

Balance Scorecard: Robert S Kaplan and David P Norton

Balance scorecard identifies four key performance measures

1. Customer perspective – How do customer see us?

2. Internal Business Perspective – What must we excel at?

3. Innovation and Learning Perspective – Can we continue to improve and create value?

4. Financial Perspective – How do we look at share holders?Key Factor Rating: It is an analysis of organisational key area functions in association with financial analysis. It determines the capability of organisation in performing in some area with financial gain or loss.