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STRATEGICMANAGEMENT

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SONY' S FUTURE .???

Sony Corp. announced that it will eliminate 10,000 jobs after forecasting its

first loss in more than a decade. In addition to the jobs cut, constituting about6 percent of its global work force, the company said it plans to close 11 plants

and shrink or terminate 15 unprofitable operations. Sonys Chief ExecutiveOfficer, Howard Stringer, said at a press conference in Tokyo that he predicted

a 10 billion yen ($90 million) annual loss, thereby reversing a July profit

forecast.

Despite the turnaround plan announced by Mr. Stringer, the first foreigner to

head Sony, the prospects remain uncertain for the company which has lostmoney in its electronics sector for two straight fiscal years. The companys

financial difficulties follow its inability to establish a strong presence in thedigital home appliance market, particularly in the business of flat TVs. Sony

was late in adopting LCD TV technology and bringing out flat-panel models.Facing stiff competition from Sharp and Matsushita

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Electric Industrial Co. it has seen its market share steadily erode in thetelevision industry. Sony has also lost market share to Apple whose

iPod player has proven far more popular than Sonys Walkmanproducts, which to many appear old and tired.

The job cuts announced by Stringer's job-cut is half the size of hispredecessor Nobuyuki Idei's three-year plan announced in 2003. That

plan failed to prevent the company's electronics business fromenduring two years of losses. Still, some investors doubt that the latest

plan will lead to the desperately needed reversal of the companysfinancial woes. "Cost cuts are one thing, having good products is

another," said Masse, who helps manage $12 billion of Asian equities atAberdeen Management Asia Ltd. in Singapore. "If there are no killerproducts to come out of the pipeline, this won't make much of a

difference."

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Likewise, John Yang, analyst with Standard & Poor's in Tokyo, wasn'timpressed, noting that cost cuts are merely a continuation of a plan laidout by Stringer's predecessor. Also disturbing, according to John Yang,

was Sony's unchanged mentality of wanting to be an all-around king,instead of focusing on key areas. "If I had to give a grade to Howard

Stringer, I'd give him a C-plus," Yang said. "He talks a lot aboutrestructuring in cost reduction. He doesn't really talk about stirring

growth.

Under Stringers plan, Sony will cut costs by 200 billion yen ($1.8 billion)

by the end of March 2008. The company will reduce 4,000 workers inJapan and 6,000 outside the country, while the number of factories will

be cut from the current 65 to 54. Sony also intends to cut the number ofproducts it offers by 20 percent, and will consider selling, downsizing orforming alliances with other firms in 15 non-strategic business

categories.

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Under the new turnaround plan, the group also plans to list shares ofSony Financial in the year to March 2008, as well as shares of Sony

Communication, in the current fiscal year. The company intends toincur a total of 210 billion yen in restructuring charges through to March2008, and says it now believes it will incur a net loss of 10 billion yen

and operating loss of 20 billion yen in the current fiscal year to March2006.

In the meantime, in order to grow its business, Sony said it will bespending some 340 billion yen over the next two years, predominantlyon semiconductor chips and electronics devices. Sony also pledged to

turn around its limping television business, aiming to make it profitable

by the second half of fiscal year 2006.

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Strategic management starts with three keyquestions:

(1)Where is the organization now? (Not where do

we hope it is ! )

(2) If no changes are made, where will theorganization be in a one year? Two years? Five

years? Ten years?

(3) If the answers are not acceptable, whatspecific actions should managementundertake? What are the risks and payoffs

involved?

UNIT 1

STRATEGIC MANAGEMENT

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Strategic Management Tasks

Strategic Management is a set of organization-widemanagerial decisions and actions that determine

the long-run performance of a corporation

(Early beginning as a BUSINES POLICY course at Harvard Business

School Current concern on International Business Management

initiated by global changes)

Strategic Management includes:

1. Environmental Scanning

2. Strategy Formulation

3. Strategy implementation

4. Evaluation and Control

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Strategic Management is not:

- a Rule Book

-a Blueprint

-a set of Programmed Instructions

The content of strategic management

- concepts, frameworks and techniques that areimmensely useful in formulating and implementing

effective strategies that can help the organization

survive the test of competition and growth

BUT

Strategic Management assumes that there are:

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Research reveals that companies engaging in strategic management

tend to outperform those organizations which do not.

A firm cannot afford to follow intuitive strategies once it becomes

large, has layers of management, or its environment changessubstantially. As the world's environment becomes increasingly

complex and changing, strategic management is used by today's

corporations to make the environment more manageable

Strategic Management Why?

The strategic management model proceeds from environmentalscanning to strategy formulation (including establishing mission,

objectives, strategies, and policies) to strategy implantation

(including developing programs, budgets, and procedures) to

evaluation and control.

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Strategy formulation is typically not a regular, continuous process

but is often initiated by triggering events, such as a new CEO or a

performance gap.

Nature of Strategic Management

Strategic decisions deal with the long-run future of the entire

organization and have three characteristics which differentiate

them from other types of decisions: (1) They are rare. Strategic

decisions are unusual and typically have no precedent to follow;

(2) They are consequential. Strategic decisions commit substantial

resources and demand a great deal of commitment; (3) They are

directive. Strategic decisions set precedents for lesser decisions and

future actions throughout the organization

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Evolution of Strategic Management(Gluck, Kaufman and Walleck)

Basic Financial Planning

Strategic Management

Externally-oriented Planning

(Strategic Planning)

Forecast-based Planning

Strategic management in a corporation evolves through four sequential phases.

Beginning with basic financial planning, it develops into forecast-based planning, andthen into externally-oriented planning, and finally into a full-blown strategic

management system. The evolution is most likely caused by increasing change and

complexity in the corporation's external environment. The phases are thus a change

from primarily an inward-looking orientation in the first phase to primarily an outward-

looking orientation in the third phase, and to a more integrative orientation in the final

strategic management phase with equal emphasis on both the external and internalenvironments.

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Strategic Management and the Learning Organization

Traditional top- down strategic planning assumes that top management has all theinformation and knowledge needed to properly understand the firms external and

internal environments and to formulate and implement strategic plans. This approach

may be appropriate when the organization is in a stable and fairly simple environment,

but not when the situation is complex and quickly changing.

Increasing environmental uncertainty means that corporations must develop strategicflexibilitythe ability to shift from one dominant strategy to another. It also demands

that the company become a learning organization: an organization skilled at creating,

acquiring, and transferring knowledge, and at modifying its behavior to reflect new

knowledge and insights. Learning organizations avoid stability through continuous

self-examination and experimentation.

In a learning organization, people at all levels, not just top management, are involved

in strategic management: scanning the environment for critical information, suggesting

changes to strategies and programs to take advantage of environmental shifts, and

working with others to continuously improve work methods, procedures, and evaluation

techniques.

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Hierarchical Levels of Strategic Decisions

The hierarchy of strategy is a term used to describe the interrelationships among

the three levels of strategy (corporate, business, and functional ) typically found

in large business corporations.

Beginning with the corporate level, each level of strategy forms the strategic

environment of the next level in the corporation. This means that corporate levelobjectives, strategies, and policies form a key part of the environment of a

division or business unit.

The objectives, strategies, and policies of the business division or unit must

therefore be formulated so as to help achieve the plans of the corporate level.

The same is true of functional departments which must operate within the

objectives, strategies, and policies of a division or unit.

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The planning mode of strategic decision making

The planning mode is generally superior to the entrepreneurial and

adaptive modes when the organization is fairly large, when knowledge is

spread throughout the organization, and when the organization has at least

a moderate amount of time to engage in strategic planning.

The planning mode is more rationaland thus a better way of making moststrategic decisions than are the other modes. It may not, however, always

be possible.

The entrepreneurial mode can be very useful when time is short, one

person or group is able to grasp the essentials of the business and its

environment, and that person or group is able to influence the rest of the

organization to accept the strategic decision.

The adaptive mode is generally not considered to be very effective in most

situations, but seems to be the fallback mode when entrepreneurial or

planning modes can't operate effectively because of political infighting or

lethargy. It is a typical mode in not-for-profit organizations.

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Does every business firm have business strategies?

Every business firm should have a business strategy for every industry

or market segment it serves.

A business strategy aims at improving the competitive position of a

business firm's products or services in a specific industry or market

segment. Firms must therefore have business strategies even if they are

not organized on the basis of operating divisions.

Nevertheless, it is still possible that some business firms do not have

clearly stated business strategies. If they hope to be successful, however,

they must have at least some rudimentary (even though unstated)position they take in terms of getting and keeping customers or clients

through competitive and/or cooperative strategies.

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What information is needed for the proper formulation of strategy?

In order to properly formulate strategy, it is essential to have information onthe important variables in both the external and internal environments of

the corporation.

This includes general forces in the societal environment as well as the

more easy-to-identify groups such as customers and competitors in the task

(industry) environment. A corporation needs to have this information in

order to identify a need it can fulfill via its corporate mission.

It is also important to have information on the corporation's structure,

culture, and resources. A corporation needs to have this information in

order to assess its capabilities to satisfy a customer's need by making and/ordistributing a product or service.

Information on both the internal and external environments can also help a

corporation to assess its organizational strengths and weaknesses and to

predict likely opportunities and threats. Long-term strategies can be

designed with these in mind.

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The art of war, especially the planning oftroops and ships etc., into favorable

positions; plan of action or policy inbusiness or politics etc,

Oxford Pocket Dictionary

The determination of the long run goals and objectives of

an enterprise, and the adoption of courses of action and

the allocation of resources necessary for carrying out these

goals

Alfred D. Chandler Jr., Strategy and structure: Chapters in thehistory of industrial enterprise

UNIT 2MEANING OF STRATEGY

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Meaning of Strategy-contd.

The pattern or plan that integrates an organization'sgoals, policies, and action sequences into a cohesive

whole. based upon its relative internal competencesand shortcomings, anticipated changes in theenvironment, contingent moves by intelligent

opponents.

Pattern of objectives, purposes or goals and the major

policies and plans for achieving these goals, stated in such a

way as to define what business the company is in or is to be

in and the kind of company it is or is to be.

James Brian Quinn, Strategies for Change: Logical

Incrementalism

Kenneth Andrews, The Concept of Corporate Strategy

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The strategic management model proceeds from environmental scanning (external

and internal environment) to strategy formulation (including establishing mission,

objectives, strategies, and policies) to strategy implantation (including developing

programs, budgets, and procedures) to evaluation and control.

Strategic Management Process

Environmental

Scanning

Strategy

Formulation

Strategy

Implementation

Evaluation

&Control

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Corporate Performance Evaluation

Environmental Scanning

O

T

S

WVision

Mission

Goals

Objectives

STRATEGIES

BusinessFunctional

Corporate

Policies

Programs

Budgets

Procedures

Evaluation

STRATEGIC MANAGEMENT PROCESS

External

Environment

Internal

Environment

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O

T

S

WVision

Mission

Goals

Objectives

STRATEGIES

BusinessFunctional

Corporate

Policies

Programs

Budgets

Procedures

Evaluation

SONY - STRATEGIC AUDIT

External

Environment

Internal

Environment

Market Performance.?Financial Performance?

Market share toSharp/ Panasonic

Substitutes- LCD

TV, i-Pod

Technology changing

fast

Poor Market

Intelligence

Weakening R&D

Financial Loss

Worlds leading home

electronics company

To provide superior quality

Video and Audio

experience to Sony

customers

Develop technology to

provide products with

highest quality and

innovative features

Always keep finances strong

to be the provider of industry-best products

To grow

through

International

Expansion

Related

Diversification

Differentiate

products

through

Quality

Product

Features

Develop superior production

capabilities that deliver industrys

highest quality

Maintain advanced R& D system that

guarantees quality and innovation in

all the products

Attract and retain industry-best

talents in management and

technology

To be the QUALITY LEADER In all the markets whereSONY competes and in all the products the company

sells

No cost reduction in value chain

management at the cost of quality

Gather market/consumer intelli

and be updated on

market/consumer trends

Monitor financial ratios and take correctiveactions

Sony has many

strengths ?????

Market development programs in

different countries

Finance mobilization programs

for expansion/diversification

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O

T

S

WVision

Mission

Goals

Objectives

STRATEGIES

BusinessFunctional

Corporate

Policies

Programs

Budgets

Procedures

Evaluation


External

Environment

Internal

Environment

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O

T

S

WVision

Mission

Goals

Objectives

STRATEGIES

BusinessFunctional

Corporate

Policies

Programs

Budgets

Procedures

Evaluation


External

Environment

Internal

Environment

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ENVIRONMENT

strengths

Threats

Opportunities

SOCIETAL

-economic

-socio-

cultural

-techno.

-pol /legal

INDUSTRY

-new

entrants

-substitutes

-suppliers

-buyers

-rivals

Structure

Culture

Resources

Capabilities

Strengths

Threats Weaknesses

Strategy Formulation

EXTERNAL

ENVMNT

INTERNAL

ENVMNT



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Vision

Mission

Goals

Objectives

VISION, MISSION, GOALS , OBJECTIVES

Strat.vision of firmsfuture

What we want to beWhere we are heading

for

Unique purpose

Fundamental reason

for existenceWho we are

What we do

Long-term and timelessaspirations of the firm

No quantificationNo time-frame

End result of plannedactivities

Results in fulfillment ofmission & vision

Should be SMART

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Examples: Vision and MissionExamples: Vision and MissionStatementsStatements

Empower people through

great software anytime,

anyplace, and on anydevice.

Microsoft Corporation

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Examples: Vision and MissionExamples: Vision and MissionStatementsStatements

To be Americas best quick service restaurant chain. We willprovide each guest great tasting, healthful, reasonably priced fish,

seafood, and chicken in a fast, friendly manner on every visit.

The mission is to extend and enhance human life by providing thehighest quality health and personal care products. We intend to be

the preeminent global diversified health and personal carecompany.

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Goals

Objectives

Profitability (NetProfit)

Efficiency (low cost)

Growth (Increase intotal assets/sales

Utilization of resources(ROE/ROI)

Stakeholder wealth

( Dividend/stock priceappreciation)

Reputation (Being atop firm)

Market Leadership

(Market share)

Technical Leadership

(Innovation/Creativity)

Contribution to society(Taxes/Charity, etc.)

Strategic Goals and Objectives-some generic examples

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Setting ObjectivesSetting Objectives

Converts strategic vision and mission intoConverts strategic vision and mission into

specific performance targetsspecific performance targets

Creates yardsticks to track performanceCreates yardsticks to track performance Pushes firm to be inventive and focusedPushes firm to be inventive and focused

on resultson results

Helps prevent complacencyHelps prevent complacency

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Types of Objectives RequiredTypes of Objectives Required

Outcomes focused onOutcomes focused on

improvingimprovingfinancialfinancialperformanceperformance

Outcomes focused onOutcomes focused on

improvingimproving longlong--term,term,competitivecompetitive businessbusiness

positionposition

Financial Objectives Strategic Objectives

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Examples of Financial ObjectivesExamples of Financial Objectives

Grow earnings per shareGrow earnings per share 1515% annually% annually

Boost annual return on investment fromBoost annual return on investment from 1515% to% to2020% within three years% within three years

Increase annual dividends per shareIncrease annual dividends per shareto stockholders byto stockholders by 55% each year% each year

Strive for stock price appreciationStrive for stock price appreciationequal to or above the S&Pequal to or above the S&P 500500 averageaverage

Maintain a positive cash flow every yearMaintain a positive cash flow every year

Achieve and maintain a AA bond ratingAchieve and maintain a AA bond rating

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Examples of Strategic ObjectivesExamples of Strategic Objectives

Increase firms market shareIncrease firms market share

Overtake key rivals on quality or customer service orOvertake key rivals on quality or customer service or

product performanceproduct performance

Attain lower overall costs than rivalsAttain lower overall costs than rivals Boost firms reputation with customersBoost firms reputation with customers

Attain stronger foothold in international marketsAttain stronger foothold in international markets

Achieve technological superiorityAchieve technological superiority

Become leader in new product introductionsBecome leader in new product introductions

Capture attractive growth opportunitiesCapture attractive growth opportunities

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What type of objectives are the following?

To satisfy our customers by providing

Quality cars and trucks, Developing new products,

Reducing the time it takes to bring newvehicles to market,

Improving the efficiency of all our plants &processes, and

Building on our teamwork with employees,unions, dealers, and suppliers.

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Exam ple: Strategic Objectives

To satisfy our customers by providing

Quality cars and trucks, Developing new products,

Reducing the time it takes to bring newvehicles to market,

Improving the efficiency of all our plants &processes, and

Building on our teamwork with employees,unions, dealers, and suppliers.

unit 1 and 2 (97-2000 version)

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