Strategic Management

Topic 1 remaining and 2 The Strategic Management Process, Environmental Analysis,Vision,Mission,Objectives,Goals,Corporate Philosophy, Corporate governance

Objectives
1. 2. 3. 4. 5. 6. 7. 8. Understanding Vision,Mission,objectives and goals Understand Strategic Management Process Environmental analysis Vision Mission Definition of Goals Corporate philosophy Corporate Governance

Vision and Mission

To become research based International Pharmaceutical company To provide total lifetime care to every pet, every parent, every time To provide world class cardiac care in India at reasonable cost

Samsung Vision:Samsung is dedicated to developing innovative technologies and efficient processes that create new markets, enrich people's lives, and continue to make Samsung a digital leader. Vision 2020 "Inspire the World, Create the Future."

Difference between Vision and Mission-1

For MISSION think: managing with greatness and untamed strength, improving everything daily.
For VISION think: leading with inspiration and courage, obsessed with future possibility, in a love affair with change.

Vision
Outlines what the organization wants to be, or how it wants the world in which it operates to be (an "idealized" view of the world). It is a long-term view and concentrates on the future. It can be emotive and is a source of inspiration. "A World without Poverty. Providing jobs for the homeless and unemployed".

Vision
VISION creates that momentum of growing anticipation about the future, where change is embraced.

Vision
UNDERSTANDING VISION A vision is more dreamt of than it is articulated. This is the reason why it is difficult to say what vision an organization has. DEFINING VISION Kotter defines it as a description of something (an organization, corporate culture, a business, a technology, an activity) in the future.

What a vision should be & shouldn't be

A vision should be oAn organizational charter of core values & principles oThe ultimate source of our priorities, plans and goals oA puller (not pusher) into the future oA determination and publication of what makes us unique oA declaration of independence

 A vision should not be

A high concept statement, or an advertising slogan A strategy or our plan A history of our proud past A soft business issue Passionless

THE BENEFITS OF HAVING A VISION

Parikh and Neubauer says: Good visions are inspiring and exhilarating Visions represent a discontinuity, a step function and a jump ahead so that the company knows what it is to be Good visions help in the creation of a common identity and a shared sense of purpose. Good visions are competitive, original and unique. They make sense in the in the marketplace as they are practical. Good visions foster risk taking and experimentation Good vision foster long term thinking Good visions represent integrity , they are truly genuine and can be used for the benefit of people

THE PROCESS OF ENVISIONING

According to Collings and Porras, a wellconceived vision consists of two major components: 1.Core Ideology & 2.Envisioned Future
Many organizations term word as corporate philosophy, corporate values that are used to convey what they stand for and what principles guide them in strategic and day to day decision making.

Mission
UNDERSTANDING MISSION Mission is a statement which defines the role that an organizations existence. DEFINING MISSION Thompson (1997) defines as essential purpose of the organisation, concerning particularly why it is in existence, the nature of the business(es) it is in, and the customers it seeks to serve and satisfy.

HOW ARE MISSION STATEMENTS FORMULATED & COMMUNICATED? Mission statement could be formulated on the basis of the vision that an entrepreneur decides on in the initial stages of an organization's growth.

Characteristics of mission statement

A Mission Statement define the basic reason for the existence of that organization (p39) Features 1.It Should be Feasible A mission should always aim at high but it should not be an impossible statement. 2.It Should be precise A mission Statement Should not be narrow as to restrict the organization's activities & nor it be too broad to make itself meaning less. 3. It should be clear A mission should be clear enough to lead action. 4.It should be motivating A mission statement should be motivating for members of the organization and of society 5. Distinctive 6.Indicate how objectives should be accomplished

Ranbaxy Daichi Sankyo

Mission: 2000-To become 5 Billion U.S. Dollar pharma company by 2012 2012-'Enriching lives globally,with quality and affordable pharmaceuticals'.

Vision & Mission

Shared Vision - Creates commonality of interests Reduce daily monotony Provides opportunity & challenge

Vision & Mission

Profit & vision are necessary to effectively motivate a workforce

Importance of Mission
Benefits from a strong mission
Unanimity of Purpose

Resource Allocation

Mission
Organizational Climate Focal point for work structure

Vision & Mission

Research results are mixed, however, firms with formal mission statements --

2x average return on shareholders equity Positive relationship to company performance 30% high return on certain financial measures

Customers

Products Services

Markets

Technology Employees

Mission Elements
Survival Growth Profit Self-Concept Philosophy

Public Image

Ben & Jerrys Mission

Ben & Jerrys mission is to make, distribute and sell the finest quality all-natural ice cream and related products in a wide variety of innovative flavors made from Vermont dairy products. To operate the Company on a sound financial basis of profitable growth, increasing value for our shareholders, and creating career opportunities and financial rewards for our employees. To operate the Company in a way that actively recognizes the central role that business plays in the structure of society by initiating innovative ways to improve the quality of life of a broad communitylocal, national and international.

Goals and objectives

Goals What an organization hopes to achieve in a future period of time Qualitative Long term aims Non measurable Reduce attrition Objectives How the goals shall be achieved Quantitative Concrete Measurable Reduce attrition by 10%

Characteristics of Objectives
Should be understandable Specific Time frame Measurable and controllable Challenging Correlate with each other Should be set within constraints

Issues in Objective setting

Specificity Multiplicity Periodicity Verifiability Reality Quality

Balance score card approach to objective setting

Critical success factors crucial for organizational success

Generate success factors
Refining CSFs in to an objective

Basic strategy to compete in any industry

CSFs= Goals

KPI
MEASURES IN TERMS OF CRITICAL SUCCESS FACTORS ARE EVALUATED

KPIs=Objectives

Strategic Management Process

It refers to the steps by which management converts a firms Vision,Mission,objectives,goals in to workable strategy. In dynamic environment each firm needs to tailor its SMP in ways that best suits its own capabilities and situational requirements. Has 2 parts: a) Information process b) Decision process INFORMATION PROCESS: Collecting and analyzing information about the external and internal environments. It provides strategic long run direction and performance. Covers four important process a) Development of alternatives b) Choice c) implementation d) assessment.

Stages of Strategic Management process

Dynamic in nature, the strategic management process is the full set of commitments, decisions and actions needed for a firm to achieve strategic competitiveness and earn above average returns. Sustainable competitive advantage Achieve above average returns Strategic inputs from analyses of the internal and external environments are needed for effective strategy formulation, implementation and evaluation.

SMP-5 DIFFERENT COMPONENTS

1. Selection of Corporate Vision ,Mission and major corporate goals ,objectives 2. Analysis of the organizations external competitive environment to identify the opportunities and threats 3. Analysis of organizations internal operating environment to identify the organizations strengths and weaknesses 4. The selection of strategies that build on the organizations strengths and weaknesses in order to take advantage of external opportunities and counter external threats. 5. Strategy implementation (Strategy into action)
5Ms

Strategy formulation-processes or steps

Developing a Vision ,Mission and objectives Identifying external opportunities and threats Determining internal strengths and weaknesses Establishing long term objectives Generating alternative strategies Choosing particular strategies to pursue.

Strategy formulation issues

Deciding what new business to enter What businesses to abandon How to allocate resources Whether to expand ?? Diversification? Joint venture? How to avoid hostile take over?

Commit an organization to specific products,markets,resources and technologies for an extended period of time

Steps/processes in under strategy formulation

1. Vision, mission and objectives 2. External Analysis :Remote environment, industry environment, operating environment 3. Internal Analysis: Competitive Advantage 4. Levels of strategy 5. Corporate level strategies (Grand strategies):Growth,stability,retrenchment and combination strategies 6. Business level strategies 7. Functional level strategies

Strategy formulation

SWOT ANALYSIS FACTS

Proper Organizational Fit Matching Organizational factors with environment factors WOTS-UP Analysis ,SCOT,INTRNAL ANALYSIS ,EXTERNAL ANALYSIS,(ETOP),EFE,IFE

Strengths-Marketing
Strengths Strong brand image (IKEA) ,ITC Fiama DJ Wills, SONY , STRONG Distribution Network (HUL) Deep product Mix (Big Bazaar) mega mall Efficient and motivated sales force (Pharma-Ranbaxy FMCGCadbury ) High quality Product (Mercedes) Weakness Poor Brand Image (Home Depot) ,Cinthol,AKAI . WEAK Distribution Network (J & J) Narrow product mix ( any niche shop like Bata Shoes) Demotivated sales force ( Galpha Labs)
Poor quality products (Tata Nano burned )

Strengths-Production
Strengths
Economies of scale (Ashok Leyland) State of the art technology (Toyota-Prius) Efficient input sourcing Efficient inventory management Strong R&D support

Weakness
High cost due to small size Obsolete technology Inefficient input sourcing Poor inventory management No R&D support

Strengths-Finance
Strengths Weakness Comfortable Debt to equity Lop-sided capital structure ratio Large internal accruals Very high interest payments High dividends and market Poor reserves capitalization High credit rating Low credit rating/poor receivables mgt Assets more than liabilities Liabilities more than Assets

Strengths-HR
Strengths Qualified and experienced Human Resource Motivated human resource Good industrial relations GOOD HRM Weakness Redundant Human resource
Excess Manpower Poor IR WEAK HRM

STRENGTHS-MANAGEMENT
Strengths EFFICIENT BOARD OF DIRECTORS EFFICIENT AND MOTIVATED MANAGERS Weaknesses INEFFICIENT BOARD OF DIRECTORS Conflicts between BOD and Managers Inefficient demotivated managers

Opportunities and Threats-Regulatory

Opportunities Delicensing Dereservations MRTP relaxations Import Liberalization Price decontrol Liberalization of FDI AND Technology policy Capital Market reforms Threats Delicensing Dereservations MRTP relaxations Import Liberalization Price decontrol Liberalization of FDI AND Technology policy Political Instability

Economic
Opportunities BOOM Steady and fast increase in income Threats Recession Economic instability

Social/Demography
Strengths Weaknesses Favorable change in consumer Unfavorable change in attitude consumer attitude Increasing population Change in population mix Growth of consumerism Growth of environmentalism Stagnating/declining population Change in population mix Growth of consumerism Growth of environmentalism

Techniques of environment analysis

Verbal and written information
Search and Scanning Spying Forecasting

Relating SW and OT
S/W Large internal accruals and high credit ratings Gaps in product mix Obsolete technology Accumulating losses and no prospect of improvement in one of the business Have everything but no international marketing capability O/T Fast future growth Strategy Acquisition/Establish Greenfield units in industry A competitor product can fill Acquisition the gap Increasing competition Increasing competition Acquire modern thru JV Drop the business

Good demand for product in Strategic alliance with foreign markets foreign firm

TOWS Strategic Alternatives Matrix

A Administrative Reforms Commission C Central Vigilance Commission Commission of Railway Safety Competition Commission of India D Delimitation Commission of India E Election Commission of India Central Electricity Regulatory Commission F Finance Commission of India Forward Markets Commission (India) I Indian Geophysical Union Indian National Commission for Co-Operation with UNESCO Indian Pharmacopoeia Commission Investment commission of India K Kalelkar Commission Kapur Commission

M Mandal Commission N Narendran Commission National Commission for Backward Classes National Commission for Denotified, Nomadic and SemiNomadic Tribes National Commission for Minorities National Commission for Minority Educational Institutions National Commission for Protection of Child Rights National Commission for Religious and Linguistic Minorities National Commission for Safai Karamcharis National Commission for Scheduled Castes National Commission for Scheduled Tribes National Commission for Women National Commission on Agriculture National Commission on Cattle National Commission on Farmers National Commission on Labour

N cont. National Consumer Disputes Redressal Commission National Human Rights Commission of India National Knowledge Commission National Statistical Commission NCEUS P Pay Commission Planning Commission (India) S Sarkaria Commission Second Administrative Reform Commission Sixth Central Pay Commission Staff Selection Commission States Reorganisation Commission U Union Public Service Commission University Grants Commission (India)

Political and legal factors

Two basic philosophies Political system: a) Legislature b) Executive or Government c) Judiciary Government responsibilities to Business: a) Establishment and enforcement of Laws b) Maintenance of order c) Money and credit d) Orderly growth e) Infrastructure f) Information g) Assistance to small industries h) Transfer of technology i) Government competition j) Inspections and licenses k) Tariffs and quotas

Business responsibilities to government

Tax payment Voluntary programs -CSR Providing information Manesar Plant Government contracts Government service-serve various advisory boards Political activity Birlas,Tatas

Industrial policy
Self-reliance Encouragement to Indian entrepreneurs Development of indigenous technology Removing the regulatory system and other weakness Increasing competitiveness to benefit common man Incentives for backward areas Enhanced support to small scale sector Ensure PSUs running with profit Abolish the monopoly of any sector in any field Link Indian economy to the global market

Government initiatives
Industrial licensing (DEVELOPMENT AND REGULATION ACT 1951) Foreign investment Foreign technology agreements Public sector policy MRTP Act

Comprehensive list for which industrial licensing is compulsory: Coal and lignite Petroleum (other than crude) and its distillation products. Distillation and brewing of alcoholic drinks Sugar Animal fats and oils, partly or wholly hydrogenated Cigars and cigarettes of tobacco and manufactured tobacco substitutes Asbestos and asbestos-based products Plywood, decorative veneers, and other wood-based products such as particle board, medium density fiber board, and black-board Raw hides and skins, leather chamois and patent leather Tanned or dressed furskins Motor cars Paper and Newsprint except bagasse-based units (i.e. except units based on minimum 75% pulp from agricultural residues, bagasse and other non conventional raw materials) Electronic aerospace and defence equipment: all types Explosives including detonating fuses, safety fuses, gunpowder, nitrocellulose and matches Hazardous chemicals Drugs and Pharmaceuticals (according to Drug Policy) Entertainment electronics (VCR's, color TV's, CD players, tape recorders) White goods (domestic refrigerators, domestic dishwashing machines, programmable domestic washing machines, microwave ovens, air conditioners)

An industrial undertaking is defined as a small scale unit if the investment in fixed assets in plant and machinery does not exceed Rs 10 million. The Small Scale units can get registered with the Directorate of Industries/District Industries Centre in the State Government concerned.

ECONOMIC FACTORS
MONETARY AND FISCAL POLICIES BALANCE OF PAYMENT DISTRIBUTION OF INCOME ECONOMIES OF SCALE COSUMER DISPOSABLE INCOME AFFECTED BY INTEREST RATE ,INFLATION

Economic factors
National income :GNP,GDP PERSONAL DISPOSABLE INCOME Personal Consumption Savings Personal savings Corporate savings Investment :FDI,Industry Investment Prices,wages,productivity: inflation rate, Raw material Index changes , LABOR Productivity Capital market: Equity Market, Bond market Policy initiatives:Fiscal,Monetary policy,Labour policy and employment policy International transactions: Exchange rates,exports,imports,BOP Sector Growth: Agriculture,Infrastructure,Services

Income class
Households Estimated population Households Estimate d populati on 30 432 472 117 95

Rich Consuming class Climbers Aspirants Destitute

1.2 32.5 54.1 44 33

7 186 312.2 253.9 190.4

5.2 75.5 81.7 20.2 16.5

Social /cultural/socio-cultural factors

Culture creates people Culture and globalization Culture determines goods and services Peoples attitudes to Business Attitude to work Collectivism and individualism
Customs

Traditions
Taboos Tastes Preferences Values, belief

Ambitions
Education Family ,religion

Language

Demographic environment
Market Size Growth rate of Market Size Age composition Gender Composition Population Mix Family Size Caste Religion Education Language

Natural environment
Geographical Ecological Weather Topographical Location Port facilities
Conservation of non-replenishable resources Pollution Depletion of Natural resources

Consumer environment segmentsNewyork

True Blue greens(30%) Greenback greens (10%)

Sprouts (26%)
Grousers (15%) Apathetics (18%)

Technological factors
Products Process Change in usage patterns Outsourcing

Helping in decision making process and planning generally. It's a tool to assess the Basis for change and evolution within the company. To anticipate the opportunities. To identify and predict the trends and coming opportunities in the international markets. To reconsider the physical and financial resources. To foresee and consider any Political, Economical, Regulatory changes and make the implementation successfully. In forecasting the potential supply and demand from the market and supply chain.

Pestle factors from last week

India-Mauritius trade pact put on hold (POLITICAL/Government) Government also bound by Law of limitation (Legal) Punes Ambegaon on the Rise (Economic)

Culture goes POP-UP (Socio -cultural )

GOT BAD ONLINE REVIEWS? ( Technological )

Environmental variables

Strategy implementation
It is the process of translation of strategies and policies into action through the development of programmes,budgets and procedures. Typically conducted by Middle and lower level management

Reviewed by top management

Programmes and procedures are simply more detailed plans for the implementation of the strategy. Process control

Requirements of strategy implementation

Organization structure Staffing Directing Motivational techniques Supportive culture Budget: Planning and control

Strategy evaluation and control

Final stage of strategic management Monitoring and evaluating the strategy management process Obtain unbiased information from the employees Ensures all steps of Strategy management process are appropriate, compatible and functioning properly

Strategic control process

1. Measuring the performances 2. Comparing performance to goals and standards 3. Corrective action

Who are the strategists?

CEO President Owner Chairman Executive Director General manager SBU Heads Consultants or professional planner

Strategic Decision MAKING

Deals with the long run future of the entire organization Commits substantial resources and demands a great deal of commitment from people at all levels Acts as directive

Modes of strategic decision making

Henry mintzberg has classified in to 3 different modes: 1. Entrepreneurial mode 2. Adaptive mode 3. Planning mode

Practical limitations of the strategic management

1. Holistic versus tactical 2. Analytical Vs Prescriptive

3. Non-political