Strategy: CORPORATE INTENT & ACTIONS To Mobilize Resources, To Direct
Strategy: CORPORATE INTENT & ACTIONS To Mobilize Resources, To Direct
Strategy: CORPORATE INTENT & ACTIONS To Mobilize Resources, To Direct
•Evaluating company's
progress, assessing the
impact of new external
developments, making
corrective adjustments
Strategic Intent:- it refers to purposes of what they want
to do and why they want to do. It gives an idea of what
the organization desires to attain in future.
It indicates the long term position which the organization
desires.
STRATEGIC INTENT
• VISION:- It implies the blue print of the company future position. It describes
where the organization wants to land. It depicts the aspirations and provides a
glimpse of what the organization would like to become in future. Every sub
system of the organization is required to follow its vision.
• MISSION:- A company's mission statement is typically focused on its present
business scope- “who we are and what we do”. It broadly describe an
organizations present capabilities, customer focus, activities and business
makeup.
• Business definition:- it seeks to explain the business undertaken by the firm,
with respect to the customer needs, target markets, alternate technologies.
• Business Model:- Strategy for the effective operation of the business,
ascertaining sources of income. Desired customer base, financial details. Rival
firms, operating in the same industry rely on different business models.
• Goals and objectives:- these are the base of measurement. Goals are the end
result, that an organization attempts to achieve. Objectives are time-based
measureable targets, which help in accomplishment of goals.
Environmental Scanning
INTERNAL EXTERNAL
MACRO MICRO
•Organizational structure •Demographic
•Policies, procedures, rules •Consumers
•Economic •Competitors
•Corporate culture
•Government •Organization
•Financial resources
•Quality of Human resources
•Legal •Market
•Plant and machinery •Political •Suppliers
•Labour management •Cultural •Intermediaries
relationship •Technological
•Global
SWOT ANALYSIS
• Tangible resources:-
Intangible Resources
Conditions Affecting Managerial Decisions about Resources,
Capabilities, and Core Competencies
Components of Internal Analysis Leading to Competitive
Advantage and Value Creation
Benchmarking
• Performance benchmarking. It is
concerned with comparing your company’s
products and services. The tool mainly
focuses on product and service quality,
features, price, speed, reliability, design
and customer satisfaction, but it can
measure anything that has the measurable
metrics, including processes.
• Performance benchmarking determines
how strong our products and services are
compared to our competition.
Benchmarking
•Step 1. Identify the firm’s primary and support •Step 1. Identify the customers’ value-creating
activities. activities.
•Step 2. Establish the relative importance of •Step 2. Evaluate the differentiation strategies for
each activity in the total cost of the product. improving customer value.
•Step 3. Identify cost drivers for each activity. •Step 3. Identify the best sustainable differentiation.
•Step 4. Identify links between activities.
•Step 5. Identify opportunities for reducing
costs.
STRATEGIC ANALYSIS & CHOICE
BCG GROWTH – SHARE matrix is the simplest way to portray a firms
portfolio of investments.
•The vertical axis represents market growth rate and provides a
measure of market attractiveness.
•The horizontal axis represents relative market share and serves as a
measure of company strength in the market.
• Stars – are products that are growing rapidly. They also need
heavy investment to maintain their position and finance their
rapid growth potential.
• They are closely to the growth stage of PLC.
• They represent best opportunities for expansion.
• E.g.. Electronics, telecommunication, fast foods.
Old New
Product Development
Market Penetration
Stylish Clothes for differently abled
Bow Ties and other accessories
(handicaps)
Selectivity/Earnings box.
• Should invest into these BUs only if you have the money leftover the
investments in invest/grow business units group and if you believe that
BUs will generate cash in the future.
• These business units are often considered last as there’s a lot of
uncertainty with them.
• The general rule should be to invest in business units which operate in
huge markets and there are not many dominant players in the market, so
the investments would help to easily win larger market share.
• Harvest/Divest box. The business units that are operating in
unattractive industries, don’t have sustainable competitive
advantages or are incapable of achieving it and are performing
relatively poorly fall into harvest/divest boxes.
• Step 1. Determine industry attractiveness of each business unit
Make a list of factors
• Assign weights - Weights indicate how important a factor is to
industry’s attractiveness. A number from 0.01 (not important) to
1.0 (very important)
• Rate the factors. The next thing you need to do is to rate each
factor for each of your product or business unit. Choose the
values between ‘1-5’ or ‘1-10’, where ‘1’ indicates the low
industry attractiveness and ‘5’ or ‘10’ high industry
attractiveness.
• Calculate the total scores. Total score is the sum of all weighted
scores for each business unit. Weighted scores are calculated by
multiplying weights and ratings. Total scores allow comparing
industry attractiveness for each business unit
• Step 2. Determine the competitive strength of each business
unit
Industry Attractiveness
Expansion
Diversification
Concentric Conglomerate
• Concentric Diversification: When an organization acquires or
develops a new product or service that are closely related to the
organization’s existing range of products and services
• For example, the shoe manufacturing company may acquire the
leather manufacturing company with a view to entering into the
new consumer markets and escalate sales.
• Conglomerate Diversification: When an organization expands
itself into different areas, unrelated to its core business is called
as a conglomerate diversification. ITC. A cigarette company
diversifying into hotel industry.
Expansion through Cooperation
• It is a strategy followed when an organization enters into a
mutual agreement with the competitor to carry out the business
operations and compete with one another at the same time, with
the objective to expand the market potential.
• It expresses the idea of simultaneous competition and
cooperation among rival firms for mutual benefits.
• It is based on the assumption that companies compete in the
market for a limited market share.
• Merger: The merger is the combination of two or more firms
wherein one acquires the assets and liabilities of the other in the
exchange of cash or shares, or both the organizations get
dissolved, and a new organization came into the existence.
• The firm that acquires another is said to have made an
acquisition, whereas, for the other firm that gets acquired, it is a
merger.
• 1. Horizontal merger
• A merger occurring between companies in the same industry. It is
a business consolidation that occurs between firms who operate
in the same space, often as competitors offering the same good
or service.
2. Vertical Merger:-
• A merger between two companies producing different goods or
services for one specific finished product.
• A vertical merger occurs when two or more firms, operating at
different levels within an industry's supply chain, merge
operations.
• Most often the logic behind the merger is to increase synergies
created by merging firms that would be more efficient operating
as one.
• An automobile company joining with a parts supplier.
• Such a deal would allow the automobile division to obtain better
pricing on parts and have better control over the manufacturing
process. The parts division, in turn, would be guaranteed a
steady stream of business
3. Concentric merger:
• It refers to combination of two or more firms which are related
to each other in terms of customer groups, functions or
technology.
• Combination of a computer system manufacturer with a UPS
manufacturer.
4. Conglomerate merger:
• It refers to the combination of two firms operating in industries
unrelated to each other. In this case, the business of the target
company is entirely different from those of the acquiring
company.
• Takeover: Takeover strategy is the other method of expansion
through cooperation. In this, one firm acquires the other in such a
way, that it becomes responsible for all the acquired firm’s
operations.
• Tender offer :- It is a public bid made by the acquiring company
for a large segment of the target company’s stocks at a fixed
price.
• The price quoted is usually higher than the market value of the
stock.
• The premium price is offered so as to convince the shareholders
to sell their shares.
• The bid holds a specific time limit and may have conditions
which the target company must follow if the offer gets approval.
• The acquiring company must file required documents with the
regulatory body and should disclose their plans for the acquired
company.
• PROXY FIGHT
The buyer tries to influence the shareholders to vote out the
current management in favour of the team who will support the
takeover.
The new structure is necessary to meet the increased co-ordination and decision making
requirements that result from increased diversity and size. This allows decision-making
in response to varied competitive environments and enables corporate management to
concentrate on corporate-level strategic decisions
SBU
Therefore the change in organization strategy triggers the need to adopt a new
structure for effective implementation of the strategy. It provides a way for the
largest companies to regain focus in different parts of their business.
strategic business unit (SBU)
• SBU, is a fully-functional unit of a business that has its own vision and
direction. Typically, it operates as a separate unit, but it is also an
important part of the company.
• It is a profit center which focuses on product offering and market segment.
• SBUs typically have a discrete marketing plan, analysis of competition,
and marketing campaign.
• This principle works best for organizations which have multiple product
structure.
Features:-
• They are present in the organizational structure,
• They are small businesses with a high functional and decision-
making autonomy.
• They are organizational units without separate legal personality,
• They utilize "product-market" strategy,
• SBU has divisional structure, which is determined by the size of
production, technology and research activities financial and
accounting processes, and marketing activities.
• E.g. Proctor and Gamble, LG. These companies have different
product categories under one roof. LG as a company makes
consumer durables.
• It makes refrigerators, washing machines, air-conditioners as well as
televisions. These small units are formed as separate SBUs so that
revenues, costs as well as profits can be tracked independently.
• Once a unit is given an SBU status, it can make its own decisions,
investments, budgets etc. It will be quick to react when the product
market takes a shift or changes start happening before the shift
happens.
MATRIX
It is a two directional structure where individual works under both vertical and
horizontal lines of command.
It is a combination of structures which could take the form of product and
geographical divisions or functional and divisional structures operating together.
Such structures are used in large companies where there is increased diversity that
leads to numerous products and project efforts of major strategic significance.
It will allow effective knowledge management since separate areas of skills and
resources will be integrated across organizational boundaries.
Thus, the matrix structure simplifies and increases the focus of resources on a
narrow but strategically important product, project or market
RESOURCE ALLOCATION
Instrumentality is the belief that if you perform well that a valued outcome will
be received. The degree to which a first level outcome will lead to the second level
outcome. i.e. if I do a good job, there is something in it for me. This is affected by:-
Valence is the importance that the individual places upon the expected outcome.
For the valence to be positive, the person must prefer attaining the outcome to
not attaining it. For example, if someone is mainly motivated by money, he or she
might not value offers of additional time off.
Unit 6
• It is one of the most effective ways for companies to stand out from
the competition and thus secure the existence of the company,
especially in instable times.
• Critical success factors (CSF) are the key areas, which must be
performed at the highest possible level of excellence if
organizations want succeed in the particular industry.
• They vary between different industries or even strategic groups
and include both internal and external factors.
• The more critical success factors are included the more robust and
accurate the analysis is.
Market Share Union relations Power over suppliers
Management qualification
Cash reserves Complementary products
and experience
Revenue per new product Variety of distribution channels Sales per outlet
1. Profitability Standards: These standards include how much gross profit, net
profit, return on investment, earning per share, percentage of profit to sales the
company should
earn in a given time period.
• The strategists compare the performance with standards. If they find any
deviation
between the standards and performance, they should take corrective action.
• Causes of Deviations:
Was the cause of deviation internal or external?
Was the cause random, or should it have been anticipated?
Is the change temporary or permanent?
Are the present strategies still appropriate?
• Corrective Action:
Strategies that do not achieve standards produce three possible
responses.
To revise strategies
To change standards
To take corrective action in the existing process without
changing standards and strategies.