Strat Mgmt NM PP 0908

							Strategic Management

  NM – 2 Nov 2008

  N.Krishnamoorthy
THE FLOW OF PRESENTATION

 Good Morning, Introduction
 Business Scenario today – what strategy you
  will adopt? As individual, and as Company?
 Is it recession? - “mindset” ?
 Cs – Margins - P/Pr/Q/D/S/Diff.
 Business Process –
     Plan – Buy – Make – Sell – Service?
     contd
THE FLOW OF PRESENTATION

 Qualities required of a Manager for Strategic thinking
 Elements, Process of Strategic Management
 The Five Tasks of Strategic Management
 The SM evolution in India – post LPG
 Porter’s 5 forces model & External environment factors
 STRATEGIC PLANNING IN ACTION
 An exercise by you. Executive Summary
 Major Presentation leading through SM aspects
 Some Key Models
 Strategies e.g. Global, JV, M&A, SAlliances, etc.
 Why some companies fail?
 What a few companies do to society as a Strategy.
Qualities required of a MANAGER for Strategic
Management

 A. Internal (To firm)
 Exceptional skills on current function / responsibility handled
 DTRFTAT
 Purposeful, confident, ability to interact with other functional
    processes, a broad knowledge of these processes a minimum
    must
   Understanding processes, and creativity to “doing things
    differently” (Seeking alternates / routes / solutions)
   Challenging status quo
   Creativity in VA
   An ability to eliminate NVA activities / processes
   Control (vigilance) on operations / Critical information
   Alertness to happening around
   Knowledge – and managing knowledge (KM)
   Seeking improvements in procedures / system
   Relationship management / Team building capacity .. Contd…
Qualities required for Strategic Management

 Art of delegating
 Increasing use of IT / Network / Data management
 Creating a culture where people enjoy working – returning to work
    next day
   Internal customer focus –
   Cross functional skills, mobility for instantaneity and flexibility
   Technology (iPod, mobile) to compress time (retrieval of info and
    its feedback and consequent coordinating efforts
   Learn and unlearn – re-relearn basics
   Managing Internal organization to ensure strategy execution,
    modification, review, revision, if any
   To be aware of best practices in a cross – section of industries
   To incorporate flexibility in the design strategies to understand
    variables
   Innovation – novelties creativity –making them a habit- A vision
   Any problems or issues – Ask WHY 5 times – R C A
   BALANCED LIFE.
Qualities required for Strategic Management

 B . External (to Firm)
 A nose for the right news
 Events affecting business horizon
 Events, impacting way of life
 Affecting Supply / Demand equation
 To create your own impact on the External
  environment for business in general
 Alertness in scenting opportunities
 First / Quick to respond (better your internal
  capabilities the easier it is)
 Be able to adapt to changes … contd …
Qualities required for Strategic Management

 Be able to move fast to mitigate or nullify adverse impact /
    stop any further loss
   KM
   Ability to create alternate models for different
    contingencies
   An established BCP which meets the test of time – and
    adverse circumstances
   A perception to discern and verify the veracity of
    information
   An inane ability to anticipate “moves” of competitors and
    create your own move
   AN ABILITY TO CREATE A BIG PICTURE AND MESSAGE
    ABSORBED BY THE ENTIRE VALUE CHAIN OF THE FIRM.
   YOU CAN ADD MANY MORE
     STRATEGIC PLANNING – DERIVING THE BIG PICTURE
                               (Questions to Ask)

   Planning : Why – Purpose
   The Drivers : Why, What, When, Where, Who, & HOW - 5W & 1 H
   WHAT ARE
        You aiming / Gain expected
        The products / services
        Your strengths / Weaknesses
        Your competitors – HOW are you different
   What value different competitors offer
   Where is your competitor located
   Who is your customer
   Why are they different and how? v/v competitors
   Which market does your customer have
   Where does he operate
   What is your CC v/v others
   What is happening around you?
   Is there any perceptible change in the breeze
   Is that an opportunity or a threat
STRATEGIC PLANNING – DERIVING THE BIG PICTURE
      (Questions to Ask)

 Scope
  How much money is needed to implement new
  plans / strategies
Concerns
  When do you wish to act
  What processes I should strengthen
  How am I going to go about
  Where can I value innovate v/v Products change
  v/v competition
  What mechanism to achieve the TASK
The RICE principle (reduce, improve, create,
  eliminate)
STRATEGIC PLANNING – DERIVING THE BIG PICTURE
        (Questions to Ask)

 Vision
      What is the horizon – 5 – 10 - 15 yrs?? Ahead
      Does the customer wants a change
 Follow up
      How do I ensure plans are monitored to meet
      targets
      Quick midstream course changes
A to B straight line /– Min. resources /
      function/value – Customer expectations /
      Compression of cycle time & cost
 Processes –
      systems under control / well tested system for
       scanning - an established and proven MIS
     THE STRATEGIC MANAGEMENT PROCESS
                      – An overview
 1. Basic Concept:
 A Co’s Strategy consists of the combination of competitive
  moves and business approaches that managers employ to
  please customers, compete successfully, and achieve
  organizational objectives.
 A strategy thus entails managerial choices among
  alternatives and signals organizational commitment to
  specific markets, competitive approaches, and ways of
  operating.
 Business models, therefore, are Plans for making money in
  a particular business. Deals with Revenue-Cost-Profit cycle.
  A bus. Model is whether a given strategy makes sense from
  a money-making perspective. So, strategy demonstrates
  the viability of the enterprise as a whole.
THE STRATEGIC MANAGEMENT PROCESS
– An overview
 2. The most trustworthy signs of Good Management
 Don’t deserve a Gold Star just designing a potentially brilliant
  strategy, but to carry it out in high-caliber fashion. Weak
  implementation paves the way for shortfalls in Customer Satisfn.
  And Co. performance. SO, EXCELLENT EXECUTION.
 Linux: Zero product development costs. So Operating System
  free who wish to download it, (make the Source Code open &
  make their own customized version), but charge money to users
  who prefer to buy the CD-RO, (a bit of hand holding – so make
  money on technical support services)
 Ooh, MS Window- Source code hidden from consumer, so sell the
  OS to PC makers and users at relatively attractive prices. Costs
  fixed, variable costs (producing and packaging the CDs only a
  couple of dollars per copy. Provide technical support to users at
  no cost. )

 WHAT DO YOU THINK – WHICH MODEL IS GOOD?
Strategic Management – the elements & Process


 NOW LET’S UNDERSTAND THE
  STRATEGIC MANAGEMENT ELEMENTS
  AND PROCESSES
 AUTHORS HAVE THEIR OWN VERSIONS
  BUT ARGUABLY MOST INCLUDE WHAT
  IS GIVEN IN THE NEXT PAGE
 SO LET US NOT SPLIT HAIR OVER IT BUT
  UNDERSTAND NUANCES OF EACH OF
  THE ELEMENTS & PROCESSES ON ITS
  MERIT.
Strategic Management – the elements & Process

   1. Defining Vision, Mission & Business definition –
   2. Environmental Analysis – External – Social Responsibility
   3. Internal Appraisal / Analysis –
      Analyzing Industry & Competition
      Competitive Advantage & Core Competencies
   4. Strategy formulation
      Setting objectives and goals, business definition
   5. Identifying Alternative Strategies
      Generic, Expansion (Intensification, Diversn, Divestment, etc.) )
   6. Choice of Strategy
      SWOT Analysis
   7. Implementation of Strategy
      Strategic Structure, Routes (M&A, JV, T/O, St.All, Globalization, etc.)
   8. Strategy Evaluation & Control
   Monitoring, assigning responsibilities, etc
   9. Feedback
   RESET REFORMULATE AND REIMPLEMENT IF?? WHEN REQUIRED
   NEXT – THE 5 TASKS OF STRATEGIC MANAGEMENT
Strategic Management – the elements & Process




 LET US NOW UNDERSTAND THE 5 TASKS

   ASSOCIATED WITH THESE ELEMENTS
          The 5 Tasks of Strategic Management
    (A bird’s eye view of the subject) - These tasks are inter-related



      1. Forming a Strategic Vision of where the organization
       is headed.
      2. Setting objectives – converting Str. Vision into
       specific performance outcome.
      3. Crafting a strategy to achieve the desired outcomes
      4. Implementing and executing the chosen strategy
       efficient and effectively.
      5. Evaluating performance and initiating corrective
       adjustments in vision, long-term direction, objectives,
       strategy, or execution in the light of actual experience,
       changing conditions, new ideas and new opportunities.
      LET’S LOOK INTO EACH OF THESE 5 TASKS.
The 5 TofSM - Strategic   Vision: (Task 1)

     A Roadmap to future
     Providing specifics about technology and
      customer focus
     The geographic and product markets to be
      pursued
     The capabilities it plans to develop
     The kind of company the management is
      trying to create.
TASK 1 – contd.

 Mission Statement
 It is typically focused on its present business scope – “Who
  we are and what we do” – describes present capabilities,
  customer focus, activities, and business make up.
 In practice, however, because the big majority of company
  mission statements say more about “what our business is
  now” than “what our business will be later” the distinction
  between Co. mission and strategic vision has pragmatic
  relevance.
 Vision – greater direction-setting and strategy making value
  – i.e. looking beyond today, the impact of “changing
  environment”.
 Lesson – Think strategically, do not drift aimlessly and thus
  lose any claim to being an industry leader.
Setting objectives (2nd Task)

   If u want to have “Oh-hum” results, have “ho-hum” objectives.
   Performance targets – yardsticks for tracking perf. And progress.
   Constant “improving competitive strength” – if not so, it is less inspiring.
   Financial objectives: Earnings growth, an acceptable RoI, dividend
    growth, stock price appreciation
   Overall business position, and competitive vitality.
   E.g. Safely deliver hot pizza in 28 minutes – fair price and
    reasonable profit.
   Providing quality cars, trucks… reducing time (design to
    commercial), building on team (stakeholders)
   Focus globally on those businesses in health & personal care,
    where we will be no. 1 or 2 through delivering superior value to
    the customer.
   To be one of the top 3 banking companies in terms of MS…”
   To be the lowest cost producer of aluminum and get mentioned in
    S&P ratings.
   Return on Stockholders’ equity of 20-25%..
Crafting a Strategy (3rd task)

 Critical managerial issue of how to achieve the targeted
  results in light of organizations situation and prospects.
  Objectives – “ends” / strategies – “ means”
 The means or “hows” – blend of deliberate actions and as-
  needed reactions to unanticipated developments, and
  collective learning of organization over time. Capable of
  taking a “new face” responding to changes -
 SO BOTH PROACTI VE AND REACTIVE (deliberate and
  adaptive)
 SM are partly visible and partly hidden to outside view.
  (those who watch from outside can only speculate about –
  the as-yet-unrevealed strategic actions co. is intending to
  launch.
Crafting a Strategy (3rd task)


 Being the best – i.e. consistently
  satisfying customers better than rivals
  thru o/standing Q, service, cleanliness and
  value. Strategic priorities : continued
  growth, exceptional customer care, quality
  producer, developing people at every level
  of the organization, sharing best practices
  across all units wwide, re-invent FF
  concept by innovation in menu, marketing,
  operation and technology.
Crafting a Strategy (3rd task)


 Growth Strategy of Mc Donald:
 Penetrate – 1750 new outlets annually – 1 every 5
  hours (some owned, some franchised – 90%
  outside US – establish leading market position
  ahead of competitors.
 Promote > frequent customer visits – addl.
  Attractive menu, low-price specials, Extra Value
  meals, children’s play areas.
 Exploit Global CC of supplier infrastructure and
  multi-unit Rest. Management, site location, unit
  construction, and product marketing.
Crafting a Strategy (3rd task)


      Franchising strategy:
 Only to highly motivated, talented
  entrepreneurs with integrity, bus.
  Experience, -- train them to be active, on-
  premise owners. NO FRANCHISES WERE
  GRANTED TO COPORATIONS,
  PARTNERHSIPS OR PASSIVE
  INVESTORS)
Crafting a Strategy (3rd task)

 Store Location & Construction Strategy:
 Sites convenient to customers – (research all visitors “on
  the spur” customers (e.g. Rly Stations). US – Co.
  supplemented its traditional suburban and urban locations
  with satellite outlets in food courts, airports, hospitals,
  universities, large shopping establishment. (Wal Mart,
  Home Depot), and service stations. Outside US – initial
  presence in center cities, then open freestanding units with
  drive-thrus outside center cities.
 Reduce site costs & bldg. costs by using standardized,
  cost-efficient store designs and by consolidating
  purchases of equipment and materials via a global-
  sourcing system.
 Make sure Res. R attractive and pleasant
Crafting a Strategy (3rd task)


 Product Line strategy;
 Limited menu, improve taste appeal
  (sandwiches), expand product offerings into new
  categories of FF (chicken, Mexican, pizza, adult-
  oriented s/w) and items for health conscious
  customers.
 Roll out new, potentially appealing ones quickly,
  and as quickly drop those that fail. (a departure
  from past practice of extensive testing to ensure
  consistent high quality before rolling out new
  menu – 7 years to develop Chicken McNuggets).
Crafting a Strategy (3rd task)


 Store Operations:
 Stringent standards – food quality, store &
  equip. cleanliness, R.Op.procedures,
  friendly courteous counter service.
 “Made for YOU” concept – involved
  installation of advanced equip.
  sophisticated computer technology, and
  new preparation methods – to allow items
  to be prepared to customer order.
Crafting a Strategy (3rd task)


 Sales promotion, marketing and
  merchandising:
 Above image through heavy media advtsg
  and in-store merchandise promotions
  funded with fees tied to a percentage of
  sales revenues at each restaurant.
 Mc prefix to reinforce connection of items
  to Company.
 Project an attitude of happiness and
  interest in children.
Crafting a Strategy (3rd task)


 Human resource and training:
 Equitable wage rates – non discriminatory – teach
  job skills, reward individual and team
  performance, career opportunities, flexible work
  hours for student employees.
 Crews with good work habits/courteous – train –
  promote promising.
 Training on delivering customer satisfaction
  (World Wide selected instructors)
 Promote a global mind set—good & new ideas
  shared ax all chains.
Crafting a Strategy (3rd task)

 Social Responsibility and Community Citizenship
 Active community role – local charities, create
    neighbourhood spirit, promote educational excellence.
   Sponsor Ronald McDonald Houses – a home away from
    home for families of seriously ill children receiving
    treatment at nearby hospitals.
   Promote workforce diversity, voluntary affirmative action,
    and minority-owned franchises.
   Student scholarships, teacher awards, and free
    instructional resources.
   Adopt environment friendly practices.
   Nutritional info. To Customers.
   THE ITC EXAMPLE IN INDIA
Crafting a Strategy (3rd task)


 Please note that Co. Strategies evolve,
  matching external and internal
  developments – so it is an ongoing
  process, not a one-time event.
                 COMPANY APPROACHES
               FUTURE MARKET CONDITIONS

 I am adding a new element here before we go to the 4th task.

   RAPID REVOLUTIONARY CHANGE
         REACTIVE / FOLLOWER
                   Rushing to catch up to keep from being swamped by the
                    waves
         PROACTIVE / LEADER
                   Aggressively altering strategy to make waves and drive
                   Change
   GRADUAL REVOLUTIONARY CHANGE
         REACTIVE / FOLLOWER
                   Revising strategy (hopefully in time) to catch the waves
         PROACTIVE / LEADER
                   Anticipating change and initiating strategic actions
                   To ride the crest of the waves.
   Since strategy life cycles are growing shorter, not longer – more updates
    may be necessary – than being satisfied with an annual event).
 Implementing and Executing the Strategy: (4 task)

 This is primarily a hands-on close-to-the-scene administrative
   task, and includes following aspects:
       Bldg. an orgn. Capable of carrying out strategy successfully
       Allocating Co. resources – sufficient funds and people
       Establish strategy supporting policies & operating procedures
       Putting a freshly chosen strategy into place.
       Motivating people, if needed, modifying their duties & job
        behavior – as a strategic fit for successful execution.
       Reward system –
       Create a conducive Co. culture / work climate.
       Installing info. Communication and operating systems – no
        obstacles while carrying out strategies
       Exerting internal leadership to drive implementation.
       In short a “strategic fit” between how things are done internally
        and what it will take for the strategy to succeed.
       St. execution – an action oriented, make it happen process,
        interplay of competencies and capabilities, budgeting, policy
        making, motivating, culture building and leadership.
     Evaluating Performance, Monitoring new
Developments and initiating corrective adjustments.
                     (5th Task)
 Instituting best practices for continuous
  improvement.
 A monitoring apparatus alert to internal and
  external changes.
 Above will require corrective actions and
  adjustments
 Revising budgets, changing policies,
  organizational restructure, revamping activities,
  work processes, bldg. new competencies and
  capabilities, efforts to change work culture,
  compensation packages, hasten implementation.
  Progress reviews, ongoing searches, corrections.
IN SUMMARY, THEN
Nature and scope of strategic planning

   Serves as a route map for the corporation
   Lends a framework for systematic handling of corporate decisions

  Lays down growth objectives of the firm and also provides strategies
   needed for achieving them / Ensures the firm remains a prepared
   organization / Ensures that the firm’s business, products and markets are
   chosen wisely
 Ensures best utilization of the firm’s resources among the product-market
   opportunities / Serves as a hedge against uncertainty arising from
   environmental turbulence
 Helps the firm understand trends in advance and provides the benefit of a
   lead time for taking crucial decisions and actions
 Helps avoid haphazard response to environment / Provides the best
   possible fit between the firm and the external environment
 Helps build competitive advantages and core competencies
 Draws from both intuition and logic / Prepares the firm to not only face the
   future but even shape the future in its favor
Seeks to influence the firm’s mega environs in its favor, working into the
   environs and shaping it.
In summary then, Concerns of Strategic Planning


 Future - long-term dynamics is its concern; not day-to-day
    tasks
   Growth - direction, extent, pace and timing of growth
   Environment - the fit between the business and its
    environment
   Portfolios of business – product-market scope and
    postures
   Strategy - strategy is its concern; not the operational
    activities
   Integration - integration is its concern; not a particular
    function
   Creating core competencies/competitive advantages
   creating long-term, sustainable organizational capability is
    its concern
 in one word, corporate strategy is its concern
In summary, then, The tasks in strategic planning



 Clarifying the mission of the corporation
    Defining the business
    Surveying the environment
    Internal appraisal of the firm
    Setting the corporate objectives
    Formulating the corporate strategy
    Monitoring the strategy
 The strategic planning process
    Clarifying the mission of the corporation
    Defining the business
In summary, Tasks (contd)

 Surveying the environment
     Marco environmental factors
 Demographic         Socio-cultural Economic          Political
 Natural             Technological Legal              Govt.
  Policies
    Environmental factors specific to the business concerned
           Industry & Competition / Market/Customer / Technology
           Supplier Factors / Govt. Policies
           Spotting the opportunities & threats
           Checking the attractiveness and probability position of these
            opportunities
           Highlighting those opportunities the pursuit of which will help
            the firm bridge its strategic planning gap
           Developing the opportunities-threats profile (OTP)
In summary, Tasks (contd)

 Internal appraisal of the firm
        Assessing the firm’s capabilities/strengths &
         weaknesses in the various areas:
 Finance / Marketing/ Human Resources / Operations/ R & D /
    General Management
   Developing the strength-weakness profile
   Appraising the individual businesses/strategic business units
    (SBUs) of the firm
   Identifying the competitive advantages and core competencies
    and developing the competitive advantage profile (CAP)
   Examining the capability gap (gap between existing capabilities
    and the ones needed for pursuing the spotted opportunities)
In summary, Tasks (contd)

 Setting the corporate objectives
       Framing the broad aims of the corporation, using the
        corporate mission as the guide
       Examining the strategic planning gap and checking the
        growth-scope
       Fixing the growth objective
       Setting specific objectives in all major areas:
 Growth in Assets, Sales, Profits, Market Shares
 Profitability        Competitive Position     Technology
 Productivity         R&D and Innovation       Human
  Resources
 Corporate Image       Social Responsibilities
 Prescribing the hierarchy/rank/priorities of the objectives
In summary, Tasks (contd)

 Formulating the Corporate strategy: exploring generic
    alternatives
       Examining which generic strategy the firm should opt
        for:
 Stability?
 Expansion?
 Divestment?
 Combination?
 Understanding the effect of the alternatives in terms
  of changes/additions/deletions to the firms existing
  product-market posture
 Clarifying the competitive advantage and synergy
  which each alternative would require/use
In summary, Tasks (contd)

   Formulating the corporate strategy: strategy choice
        Evaluating the strategy alternatives
        Keeping the O-T profile, the growth objective and CAP as the reference
         frame, examining what strategy would be the best
        Reviewing the existing businesses
   Assessing the prospects of each SBU
   Examining what to do with each SBU
   Build? Maintain? Harvest? Divest? To what extent? At what pace?
   Examining which new businesses are to be taken up
   Examining the resource requirement of the different strategy options and
    checking the resource availability
   Making the final choice of the strategy/strategy spectrum
   Translating the strategy in terms of what is to be done with each SBU
   Assigning the priorities to the SBUs, existing as well as new ones
   Clarifying what is expected of each SBU
   Allocating resources to the SBUs
   Monitoring the strategy
    THE FIVE TASKS – NOT ISOLATED,
           COMPLEMENTARY



  THE 5 TASKS ARE A TIGHTLY KNIT
PROCESS, THE BOUNDARIES BETWEEN
THEM ARE CONCEPTUAL, NOT FENCES
THAT PREVENT SOME OR ALL OF THEM
      BEING DONE TOGETHER.
STRATEGIC PLANNING –




                THE INDIA
              EVOLUTION OF
                STRATEGIC
              MANAGEMENT
                         CONSEQUENCES OF LPG


   Environmental changes which forced firms to adopt a strategic
    perspectives
        Changes in technology / Proliferation of new products
        Faster commercialization of new product ideas and patents
        Business boundaries getting blurred due to the overarching technology / Socio-political changes
        Governments becoming bargainers in the conduct of businesses
        Emergence of global markets / Emergence of global firms
        Emergence of global brands / The new affluence of the consumer / The changing tastes and
         preferences of the consumer.
   New demands the firms had to face, consequent to the environmental
    changes
        To be strategically alert
        To be future-oriented
        To be able to take risks in tapping opportunities
        To be insulated against environmental threats
        To develop the competence for assimilating changes faster
        To respond effectively and more economically
        To grow big
        To be able to generate large resources
        To gain expertise in technology, marketing and decision support systems.
THE NEW ECONOMIC POLICIES
   Liberalisation Measures
      New Industrial Policy
             Liberalisation of industrial licensing / FERA liberalization / MRTP
              liberalization / Curtailment of public sector

           1.   Macro-Economic Reforms & Structural Adjustments
   Lowering of import tariffs
   Abolition of import license
   A more open exim regime
   Convertibility of rupee
   Encouragement to foreign investment
   Integrating India’s economy with the global economy
   Fiscal and monetary reforms
   Banking sector reforms
   Capital market reforms
   Phasing out subsidies
   Dismantling of price controls and introduction of market driven price environment
   Public sector restructure disinvestments
   Exit policy
THE NEW ECONOMIC POLICIES
 The new industrial policy
 The Main Components
 Liberalization of Industrial Licensing
 Deli censing
 Abolition of registration
 Decontrol
 Broad banding
 Deregulation
THE NEW ECONOMIC POLICIES
 FERA Liberalization
 Liberalization of foreign of technology
  investment / Liberalization import
 No MRTP clearance
 Abolition of threshold assets needed for
  expansions, mergers
 Curtailment of Public Sector – Only eight core
 Several industries hitherto reserved for public
  sector extended to private sector
            The sea change in the environment


 Entrepreneurial freedom release the growth impulse and
    alters the industrial scene
   Rush of entrepreneurs
   Spate of mergers and acquisitions/takeovers
   The diversification rush
   Multinationals consolidate their position
   MNCs acquire majority equity in their Indian enterprises and JVs
   Many MNCs enter India afresh through new JVs
   MNC entry and investment alters even core sectors like power,
    oil and telecom
   Imports go out of government domain and become
    entrepreneurial activity
   Companies import materials free of licensing hassles and
    bypassing the canalizing agencies
   Import trade emerges as a separate business opportunity
The sea change in the environment

   Capital markets undergo radical change
   Capital markets gain a new buoyancy
   FIIs enter Indian capital markets in a big way
   Foreign brokers follow the FIIs
   NBFCs register rapid growth and strike alliances with global finance companies
   Entry and growth of private mutual funds
   Indian firms raise global capital and strike alliances with global financial firms
   India’s capital markets getting integrated with global capital markets
   Banking sector comes under a competitive environment
   Deregulation of interest rates leads to competition in deposits
   Disinvestments of government equity in nationalized banks
   New private banks with new technology, new products and aggressive
    marketing usher in new competition
   Banks face new competition from capital markets, FIs, MFs & NBFCs
   Banking services get marketed as branded consumer products
   Banks have to now operate as viable, commercial institutions
The sea change in the environment


   Financial services emerges as a major new business
   Funding options multiply as capital can be raised in many ways
   A large basket of financial instruments
   Emergence of many new financial services
   Firms not only start utilizing financial services but also recognize
    the scope of financial services as a separate business and float
    financial services companies of their own
   Ascendancy of the private sector
   Private sector enters all core industries
   Oil, mining,telecom
   Road building, railways, ports, civil aviation
   EPZ, SEZ now etc
    Many MNCs enter India afresh through new JVs


   General Motors enters through a JV with HM
           Ford enters through a JV with M&M
           Honda enters through a JV with SIEL
   GE Appliances enters through a JV with Godrej
   GE Capital promotes a consumer finance JV with Godrej
   GE Capital promotes another consumer finance JV with HDFC
   GE Capital promotes a third JV in consumer finance in which GE-HDFC and Maruti are the
    partners
   GE Plastics enters through a JV with IPCL
   GE India promotes a JV with Fanuc Ltd and Voltas
   GE Medical Systems (GEMS) enters with Wipro as partner
   GE Medical Systems (GEMS) promotes another JV with Eipro
   JP Morgan enters through a tie-up with ICICI
   Orix Corporation enters in alliance with IL&Fs
   Merrill Lynch enters with DSP Financial as partner
   Rothschld sets up a JV with Prime Securities
   Reebok enters in collaboration with Phoneix
   IBM enters with Tatas as partner
   Mobil enters through a tie-up with IOC
   Caltex enters through a tie-up with IBP
   Shell enters through a tie-up with BPCL
Many MNCs enter India afresh through new JVs


   List of MNCs who have entered Indian telecom market through JVs
            Radio Paging
   Motorola enters through a JV with Page Point Services
   Korea Mobile Telecom enters with DSS Paging Services
            NTT International enters through a JV with RPG Paging Services
            Korea Telecom enters through a JV with Modi Paging
            Shinawatra enters through a JV with HFCL (Microwave)
        Cellular Phones
          Motorola enters with Essar Cellphone
          Hutchison Telecom enters with Max India
          Telstra enters with BK Modi group
          Telstra promotes another JV with SPIC
          Bellsouth promots ‘Skycell’ in alliance with Crompton Greaves
          Cellular Corporation International enters with Sterling/Essar US-WEST enters through a JV
           with BPL
   Basic Services
   AT&T enters through a JV with Tatas
   AT&T promotes another JV with Aditya Birla group
   NTT enters through a JV with RPG group
   Telstra enters through a JV with SPIC
   Northern Telecom and GTE enter through a JV with Escorts
   Nynex enters through a JV with Reliance
   Deutsche Telekom enters through a JV with PCL/Punwire
   Sprint International enters through a JV with RPG Telecom
   Qualcomm enters through a JV with Modi Telecom
Many MNCs enter India afresh through new JVs



 Switching Systems
 Alcatel enters through a JV with the BK Modi
  group
 AT&T enters through a JV with the Tatas
 GEC-Plessey Telecom (GPT) enters through
  a JV with Vam Organic
 Fujitsu enters through a JV with Punjab State
  EDC
    Business challenges of the liberalized economy


 The destabilization arising from entrepreneurial freedom
       Cocoon of protection enjoyed so far by existing players
        disappear
       Existing notions on “economic size” are challenged
       Industry structure too alters radically in many businesses,
        forcing players to change gear
       Economic Darwinism becomes the order
   The MNC onslaught
   With majority equity stake for the parent MNCs, their Indian
    subsidies gain a new strategic advantage
   MNCs also gain majority equity stake in their JVs with Indian
    firms and start controlling the show
   The takeover threat
   The overall unequal battle
Business challenges of the liberalized economy


 The all-pervasive competition
 Competition from Indian players
 Competition from MNCs
 Competition from imports
 Competition on account of easier access to technology
 Competition is now global in character
 The exacting demands of buyer’s market
 From shortage to surplus; the challenge of being price
  competitive
 Buyer’s market causes sharp change in business style
 From shoddy products to excellent products; the quality
  challenge
Business challenges of the liberalized economy


 Challenges on the technology front
 Competitive advantage and core competence become technology
    based
   Investment in R&D and innovation becomes inescapable
   Corporate vulnerability
   A variety of factors led to vulnerability
   Vulnerability due to capital inadequacy
   Lack of product clout and brand power
   PSUs become vulnerable due to a combination of factors
   Problem of “one product syndrome”
   Vulnerability due to loss of monopoly
   The challenge of discontinuity
   Past ceases to be an indication of the future
   It is no longer business as usual; management at the crossroads
   Problem of managing mega change; need for new approaches, new
    systems and structures, new leadership
    Challenges the public sector banks had to face in the open
                             regime

   Competitive existence forced by deregulation
   Competition in deposits due to deregulation of interest rates
   Loss of business due to disintermediation
   Loss of pre-eminence in merchant banking
   Competition from the capital markets, the Fis, NBFCs and MFs
   II    The onslaught from New Private Sector Banks (NPSBs)
   A chain of NPSBs enter the scene
   NPSBs bring in competition and differentiation
   Niche marketing
   Innovative banking products and solutions
   Collaboration with the world’s leading financial firms
   III   The compulsion to fashion many new financial products / banking services
    and to market them as branded consumer products
   Convenience banking
   IV    The compulsion to absorb state-the art banking technology
   V     The compulsion to change and become viable banking institutions
   The compulsion to go through painful internal reforms
FIIs and global investment banks who entered India
             in the post-reform period

 Fidelity / Templeton / Soros / Tiger and
  Schroder /     Morgan Stanley / Jardine
  Fleming / Barclays (BZW) / Kleinwort Benson
  / JP Morgan / Smith New Court / Lazard
  Brothers
 The foreign brokers who followed suit
 James Capel / Klein Benson / Credit Lyonaise
  Securities / Marlin Partners / Citicorp/
  Lehman Brothers / Crosby Securities /
  Jardine Fleming / Baring Securities
     Alliances of Indian NBFCs with global finance
                       companies

   Indian NBFC                Global Partner
   Unit Trust of India        Alliance Capital of the US
   IDBI                       Asian Capital Partners, HKong
   ICICI                      Prudential of the UK
   IFCI                       ABN Amro Bank NV
   Credircapital Finance Corp Lazard Brothers of UK
   ILFS                       Orix Corporation of Japan
   20th Century Finance       Kemper Corporation of the Us
   Rajan Raheja’s Hathway InvestmentsTempleton Worldwide Inc
Alliances of Indian mutual funds with global AMCs


 Indian Mutual funds       Global AMC
   Investment Trust of Ind The Pioneer group of USA
   Credit Capital          International Finance
                            Corporation, Edinburgh
                            Fund Managers, UK
   20th Century Finance Kemper Corporation of USA
   CRB                     Keystone of USA
   ICICI                   Prudential of UK
   Birla Growth Fund       Capital International of USA
                  Funding options multiply

   With Foreign currency
   For capital - GDR- ADR
   Foreign Partners in JVs
   Foreign private investors
   Foreign institutional investors
   For debt - External commercial borrowing
   For working capital - Suppliers credit, long and short term
   FCNR(B) loans
   Yankee bonds / Floating rate notes
   Alpine bonds- Euro bonds /
   Exim bank loans- With Indian Rupee For capital - Equity share -
    Preference shares. For debt Term loans Asset credit NCDs For
    working capital         Structured obligation Trade credit CP
    Floating rate notes -Leasing and hire purchase
PORTER’S 5 FORCES MODEL & ANAL. EXT. ENVIRONMENT




 For this we will go to a new PPP
Strategic Management - Globalization


 NEW SECTION




Globalization
Strategic Management – Globalization - AGENDA


1. Globalization
2. Why companies expand into foreign markets?
3. Cross country differences
4. Multi country and Global competition.
5. Strategic options for entering and competing in
   Foreign markets
6. Pursuing CA by competing multinationally
7. Profit Sanctuaries and cross market subsidization
8 Competing in Emerging Foreign Markets
Strategic Management – Globalization


 You have no choice but to operate in a world
  shaped by globalization and the Information
  revolution. There are only two options: Adapt or
  Die       Andrew Grove, Chairman, Intel Corp.

  You do not choose to become global. The market
  chooses for you; it forces your hand
           Alain Gomez , CEO, Thomson. S.A.

  There is no purely domestic industry anymore.
                        Morgan Stanley
Strategic Management – Globalization


 Growing economic interdependence of countries
  worldwide through increasing volumes and variety of
  cross border transactions in goods and services and
  of International capital flows and also through a more
  rapid and widespread diffusion of technology.
                    …… IMF DEFINiTION

 Shift towards more integrated and interdependent
  world economy
Strategic Management – Globalization


 Adopting a global outlook for the business and
    business strategies aimed at enhancing Global
    competitiveness.
   Stop thinking of National boundaries or markets.The
    whole world is market.
   Transform into worldwide manufacturing facilities,
    marketing, financial flows and logistical systems.
   To develop genuine equidistance of perspective.
       (All customers are equidistant from the corporate
    centre and there is nothing like “overseas”)
Why companies expand into foreign markets?


 To gain access to new customers e.g. Toyota
 To capitalize on its core competencies e.g.
  Nokia
 To achieve lower costs And Enhance firm’s
  competitiveness e.g. Nestle’ moving to Asia
 To spread its business risk across a wider
  market base
Cross country differences


 Cultural, Demographic and Market conditions
 Product Strategy
 Potential for locational advantages stemming
  from country to country cost variations
 Fluctuating FX rates
 Host country restrictions
Cross country differences

 Competing in foreign markets where there are significant cross
    country variations in cultural, demographic and market
    conditions poses a much bigger strategy making challenge than
    competing at home.
   Market demographics and customer tastes : Washing machines
    : French prefer Top loading and Europeans prefer Front loading.
   USA appliances run at 110 V and Europeans at 240 V
   Refrigerators : Indians prefer brighter colours. Korea has 4’ high
    as the top is used as something else.
   Hong Kong prefers compact, European style appliances but
    Taiwan prefers large American style appliances.
Cross country differences


 India has efficient and well developed
  national channels for distribution through
  about 3 million retailers. By contrast, China
  distribution is primarily, local and provincial.
 The biggest concern of firms competing in
  foreign markets is whether to customize their
  offerings in each country market to match the
  tastes and preferences of local buyers or
  whether to offer standardized products
  worldwide.
Product Strategy


 Technically consistent ( 250 V & 50 Hz.)
 Compliance to Safety and Efficacy norms
 Use conditions (tropicalized)
 Propensity to buy. (Amino acid and fat
  combination)
 Education levels
 Customers’ taste and preferences ( Barbie in
  Japan)
Different countries
Different ways

 Orient
 Make a point but do not let the adversary loose face
 Italy
 Argue to win and thus be taken seriously
 UK
 Soft sell
 Germany
 Hard sell
 Mexico
 Emphasize on the price
 Switzerland
 Speak precisely and therefore be taken literally
Potential for locational advantages stemming from
country to country cost variations

 A company’s potential for gaining CA based on
  where it locates its foreign activities or being at a
  disadvantage because the rivals have lower cost
  locations is a matter of serious strategic concern.
 Wage rates, inflation, energy costs, tax rates, Govt.
  regulations, unique natural resources (Malaysia) for
  manufacturing locations.
 Ireland, world’s most pro business environment and
  hence Intel’s largest chip plant with investment of US
  $ 2.5 bn and employs 4000 personnel.
 Short delivery times and low shipping costs
  (Singapore) for Distribution centres.
Fluctuating FX rates and host country restrictions


 Volatility of FX rates complicates the issue of
  geographical cost advantages.
 Restrictions may be in the form of
      Local RM content
      Tariffs and quotas on imports
      Restrict exports to ensure adequacy to meet
       domestic needs.
      Ownership pattern
      Interest and tax rates for domestic and foreign
       companies
Multi country    Global competition

 Multi country or multi domestic competition where
  each country market is self sustained with buyers
  having different expectations and like different styling
  and features and each national market is
  independent. E.g. Banking industry with competitive
  battles being fought in each country independent of
  other countries.
 Each country market is separate. And hence
  reputation, customer base and competitive position in
  one country has little relevance on the other country.
 Hence power of a firm’s strategy in a nation and CA
  gained remains confined to that nation.
 Beer, Life Insurance, metal fabrication, food products
Multi country   Global competition


 Global competition exists when competitive
  conditions across national markets are linked strongly
  enough to form a true international market and when
  leading competitors compete head on in many
  different countries.
 Company’s competitive position in one country both
  affects and gets affected by its position in the other
  country.
 In global competition, a firm’s overall CA grows out of
  its’ worldwide operations.
 Automobiles, TV, Copiers, watches, commercial
  aircrafts etc.
Multi country    Global competition


 Multi country competition, rivals vie for national
  market shares /leadership positions
 Global competition the rivalry is attain global
  leadership.
 An industry may have some segments which are
  globally competitive and some segments are country
  to country competition. E.g. Hotels.
 Lubricants for marine are globally competitive and for
  automotives, it is country to country. Hence Pennzoil
  is the leader in USA & Castrol in the UK
 NEXT SECTION
 WHY GOOD COMPANIES GO BAD?
     This section will deal with some of the best
      companies languishing when market conditions
      change despite creating best strategic planning.
     They plummet from the pinnacle of success,
      because they are paralyzed?
     On the contrary, they engage in too much activity –
      of the wrong kind. Suffering from ACTIVE
      INERTIA.
     Because they insist on doing only what has
      worked in the past.
WHY GOOD COMPANIES GO BAD?


 THEY GET STRUCK IN THEIR TRIED AND TRUE ACTIVITIES, EVEN
    IN THE FACE OF DRAMATIC SHIFTS IN THE ENVIRONMENT.
   INSTEAD OF DIGGING THEMSELVES OUT OF THE HOLE, THEY
    DIG THEMSELVES IN DEEPER.
   Such companies are victims of their own success. They have been so
    successful, they assume they’ve found the winning formulae.
   But these same formulas become rigid and no longer work when the
    market changes significantly.
   Instead of asking “what they should do”, they should ask “what hinders
    us?”
   They shd look deeply on the assumptions they make about their
    business and industry. Pay particular attention to hall marks of active
    inertia;
   Strategic frames becoming blinders, processes hardening into routines,
    relationships becoming shackles, and values hardening into dogmas.
   LET US SEE SOME EXAMPLES
WHY GOOD COMPANIES GO BAD?
Strategic frames become blinders.

 Strategic frames shape how managers view their business;
  they help managers stay focused. But these frames can
  also blind managers to new options and opportunities.
 Example:
 After 7 decades of uninterrupted growth Firestone
  reigned supreme in the US tire industry in the 1970s.
  Then Michlein introduced the safer and more
  economical radial tire. FS competed with M h-h in
  Europe, but was blind to the threat to its core US
  market, and so continued to produce conventional
  tires only. FS lost significant market share and was
  acquired a decade later
WHY GOOD COMPANIES GO BAD?
Processes harden into routines.

 Established processes can become ends in themselves,
  even when they’re no longer effective. People overlook
  better ways of working.
 Example:
 McDonald’s built its success on standardized
  processes, all dictated by HQ. By rigidly following
  these procedures into the 90’s Mac lost MS to Burger
  King and Taco Bell, who were much quicker to meet
  customers’ changing desires for healthier foods.
WHY GOOD COMPANIES GO BAD?
Relationships become shackles

 Every Company needs strong relationships with its constituencies
  – customers, suppliers, employees, society, etc. When conditions
  change, however, these relationships can restrict flexibility.
 Example:
 Apple vision of technically elegant computers and its
   freewheeling culture attracted the world’s most
   creative engineers. Once computers became
   commodities, however, the Co’s health depended on
   cutting costs and speeding up production time. But
   Apple’s engineers refused to change, and the co’s
   relationship with the “star” employees soured, and
   damaged its ability to respond to market changes.
WHY GOOD COMPANIES GO BAD?
Values harden into dogmas

 A company’s vibrant values unify and inspire its people.
  Over time, however, they can harden into rigid, self-
  defeating rules and regulations.
 Example:
 Polaroid placed very high value on cutting-edge
  research – to the point of defining itself by that
  research. Eventfully, that value turned into dogmatic
  disdain for marketing, finance and even customer
  preferences. The Co’s single-mindedness nearly
  destroyed it.
WHY GOOD COMPANIES GO BAD?


 Royal Dutch/Shell is another co. whose
  values became a hindrance. Dominated by a
  Nazi sympathizer, a strong leader, a strong
  imprint on the co. for central control. When he
  was forced out, the distaste for central control
  was replaced by fiercely independent country
  managers. But when oil prices fell during the
  1990’s the belief in decentralized authority
  prevented the company from quickly
  rationalizing its operations and cutting costs.
WHY GOOD COMPANIES GO BAD?


 The women’s apparel maker Laura Ashley also fell victim to
  active inertia. She spent her youth in Wales she tried to
  recreate the mood of the British Countryside, and introduced
  designs to evoke a romantic vision of English ladies.
 They also established close relationships with franchises, and
  generous benefits to employees, avoiding labor unrest which
  crippled England at those times.
 Hwr, as more women entered the workforce, they felt the
  “womanly garb” was too uncomfortable, and better suited to
  1980 milkmaids than CEOs in the 1990s. At the same time
  apparel mfg. was undergoing a transformation with trade
  barriers falling. Fashion houses were rushing to move
  production offshore (outsourcing), but old values were too
  difficult for LAshley and its group and suffered a deep fall.
The Dynamic of Failure


 ALL WERE VICTIMS OF ACTIVE INERTIA
 The fresh thinking that led to a company’s initial success is
  often replaced by a rigid devotion to the status quo.
 Leading cos can become stuck in the modes of thinking
  and working that brought them their initial success. When
  business conditions change, their once winning formulas
  instead bring failure.
 LET US AGAIN GO THROUGH THE 4 DYNAMICS OF
  FAILURE.
The Dynamic of Failure


 STRATEGIC FRAMES                      Blinders
    The set of assumptions that determine how managers view
     the business
   PROCESSES                            Routines
    The way things are done
   RELATIONSHIPS                        Shackles
     The ties to employees, Stake Holders
   VALUES                               Dogmas
     The act of shared beliefs that determine corporate culture.
Examples of Core Competencies



 SHARP – LCDs (flat panel display tech);
 Toyoto-Honda – low cost, high quality mfg, design-to-mkt
    short cycles for new models
   Intel – semi-conductor chips development
   Starbucks – store ambience and innovative coffee drinks
   Motorla – 6-sigma defect free manufacture
   Rubbermaid – innovative rubber and plastic products
   HP – three in one Printer – technology
   Vodofone / Reliance / Mittal – leaders / MS / Funds / Clout
   Parke Davis – R&D on ethical drugs
   Capsugel – Exceptional tech in high quality capsule
    manufacture
VERTICAL INTEGRATION STRATEGIES – A PLUS
OR A MINUS:


      Backward into sources of supply and/or forward
       towards end users of the final product.
      Make or Buy or Outsourcing decisions. – discuss
      Appeals only if it provides Competitive adv. (RIL)
      Backward – to achieve greater competencies, and
      Forward to enhance competitiveness.
      Depends on product lines – Specs, capacity, skills,
       price factors, etc. also product lines – logistics
       costs.
 The disadvantage mainly is: if it locks a firm
  deeply into its VC, and unless this is proven to be
  effective (C/B analysis), it is not worthwhile.
Strategies based on M&A, SA, JV et al


      Last decade many have felt the need to
       collaborate – and formed Strategic
       alliances, partnerships thru SPV, JVs etc.
       basically to strengthen domestic and
       global markets
      They are therefore in the midst of 2
       demanding competitive races:
           The global race to find a market world wide
           The technology race to capitalize on today’s
            IT age.
      To build a strong global presence.
Strategies based on M&A, SA, JV et al


 The Increasingly pervasive use of
  Alliances:
      Tata-Corus, RIl-DOW, Mittal-Ancelor,
       Vodafone-Essar, Wal-Mart-Bharati, Tata-
       Fiat, FIs, Stock Exchanges (BSE-
       Deutsche), M&M-Ford-Renault, Pharma
       Dr.Reddy, Glenmark, Pfizer-J&J, IT Cos.,
           This has shifted competition to groups of
            companies against groups of companies.
Strategies based on M&A, SA, JV et al

 Why and How Strategic Alliances are Advantageous:
      Bundle competencies and resources that are more
       valuable in a joint effort than hen kept separate
      Very beneficial in racing against rivals for global market
       leadership
      To build the expertise and market position needed to
       win a strong position in the industries of the future.
      A Co. That is racing for global market leadership needs
       alliances to help it do what it cannot do alone: For
       example:
           Get into critical country markets quickly and build a potent
            global market presence
           Gain inside knowledge about unfamiliar markets and
            cultures
           Access valuable skills and competencies that are
            concentrated in particular geographic locations (S/W)
Strategies based on M&A, SA, JV et al


      A Co. wanting this has to ally:
         To establish a beach head for participating in the

          target industry
         Master new tech. and build new expertise and

          comp. faster than through internal efforts
         Open up expanded opportunities in the target

          industry by melding the firm’s own capabilities
          with the expertise and resources of partners.
          Example:
             Joint Research, Tech know-how, collaborate or
              complement new tech., products, ally with parts and
              component suppliers (SCM) – Volvo, Renault,
              distribution synergy (p176 – Ill.cap.24, some SA)
Strategies based on M&A, SA, JV et al


 Why many alliances are unstable or Break Apart
    Stands the test of time depends on Frictions and
     conflicts
    Partners should value the R / C / Skills etc. each
     one brings.
    P&G – HLL – many “divorce rates”
    Ongoing commitment, mutual learning, and
     continued close collaboration are essential to
     keeping alliances
    No-confidence on “secrecy” clauses
 So relying heavily on SA is also bad. A firm has
  to create its own strength and competitive
  capabilities.
Strategies based on M&A, SA, JV et al


 MERGERS & ACQUISITION STRATEGIES
      No company can ignore this avenue of new
       opportunity
      Combining operations offer considerable
       cost-saving.
      The advantages can be more or less the
       same as outlined above in JVs etc.
Strategies based on M&A, SA, JV et al

 UNBUNDLING & OUTSOURCING STRATEGIES –
 NARROWING THE BOUNDARIES OF BUSINESS
      This is Vertical Disintegration, or Unbundling.
      Q. asked is which activity should be brought “within the fold” and
       which “outsourced”
      O/S makes strategic sense if:
           An activity can be performed better or cheaply O/S
           Activity is not crucial to the firm, and don’t hollow out
            competency
           Reduces the co’s risk exposure to changing technology and/or
            changing buyer preferences
           Enables organizational flexibility, cut cycle time, speed decision-
            making and reduce coordination costs
           Allows to concentrate on its core business and do what it does
            best.
           Socially complex organizational considerations can be avoided.
           Well, it can be disadvantages to roll back an arrangement, or it
            can pose a legal problem.
           Sometimes an alliance or o/s could be better than acquisition.
Strategies based on M&A, SA, JV et al


 The advantages of Outsourcing:
    obtaining higher quality or cheaper components
     than internal sources can provide
    Inter-acting ability with “best-in-world” suppliers
    Enhance strategic flexibility should customer
     needs and market conditions suddenly shift –
     seeking out outside suppliers having this
     capabilities is much easier
    Increasing the firm’s ability to assemble diverse
     kinds of expertise speedily and efficiently
 Allowing the Co. to do better what it does best,
  and within its own strategic control.
Strategies based on M&A, SA, JV et al


 The pitfalls of Outsourcing:
    Possibility of farming out too many wrong
     types of activities
    Hollow out its own capabilities, CC
    Loses sometimes with key activities over
     which it had expertise and determines its
     success
    III Party – Pharma -- NK discuss.

Strategy– The ITC way – business models
focused on Rural India
 The vocal of the SH of the land and the growing
  marginalization of poor rural people (Single) will
  not be an isolated incident.
 While urban India shines in terms of best
  amenities.. rural India is bound to impugn them
  for a slice of the cake or some modest
  improvement in their dreary existence.
 It’s no wonder therefore that ITC (TO $19 bn.
  Market capitalization, and $5 bn. Turnover with a
  diversified portfolio ranging from FMCG, hotels,
  paperboards, packaging, agri business, has
  forged unique business models that focuses on
  rural India and attracted universal approval.
 Let’s see what they are doing.
Strategy– The ITC way – business models
focused on Rural India
 e-choupal initiative
 is designed to enhance farm productivity and provide
    market linkages
   Social forestry scheme
   Has greened over 80000 hectares
   R&D projects
   Have evolved high-yielding, site specific, disease-resistant
    clones
   Comprehensive package
   of plantation mgmt practices
   Watershed development
   Projects which benefit 333111 farmers in 24 districts
Strategy– The ITC way – business models
focused on Rural India

 Renewable energy
 96% energy required by Co. planned out
  internally with > 24% generated from
  renewable resources.
 ITC has been a water positive firm and today
  the co. generates three times more
  freshwater harvesting potential than it
  consumes and sequesters almost twice the
  amount of carbon its plants emit.
Strategy– The ITC way – business models
focused on Rural India

 Recycling solid waste
 In 2007-08 the co. also compassed he
  100% benchmark in recycling solid waste
  in several of its operations.
 Also
 A total of 2178 water harvesting structures
  have been created, providing critical
  irrigation to 18,482 hectares of farmland.
Strategy– The ITC way – business models
focused on Rural India

 ITC’s “Mission Sunehra kal” encompassing
 its sustainable development initiatives would
 continue to provide thrust to identified triple
 interventions viz. natural resource
 management (wasteland, watershed and agri.
 Development), sustainable livelihoods
 comprising genetic improvement in livestock
 and econ. Empowerment of women and
 community development with focus on
 primary education, health and sanitation.
Strategy– The ITC way – business models
focused on Rural India

 Social policy analysts contend that if
  corporate social responsibility (CSR) is taken
  by all companies earnestly with a view to
  building PPP for sustainable and inclusive
  growth, the simmering tensions and
  resistance to industrial development through
  setting up economic enclave (SEZ) or big
  project would gradually fade as rural people
  would hopefully find a decent way out of their
  dire predicament of penury.
Hyderabad Metro Rail/Bus project

 Gets US authority boost from FTA US – Bus
  Rapid transit system, and Metro Rail.
 “Outstanding, especially for the concession
  agreement under the PPP.Really the way America
  was build over the last 100 years. The US govt.
  granted land for taking up infrastructure development
  by the private parties and now we see it here”.A/g to
  him, it was outstanding to have private sector’s
  dollars to spend for public service without casting any
  burden on the tax payers’ money.The AP govt. would
  enter into a MoU with the FTA on public transport,
  which would involve strengthening and sharing of
  knowledge, science and technology in the sector.
Hyderabad Metro Rail/Bus project

 Other opportunities for business:
 Head-hardened rails, high speed rails, metro
  rail technology, manufacture and supply of
  coaches, automatic fare collection points, etc.
z


            NEXT SECTION


     STRATEGIC PLANNING IN ACTION


       GO TO WLG PRESENTATION
a


 The next few are BLOCKS NM
 Started with Ch 1.
Z


          BLOCK 1

           UNIT 1

    CONCEPT OF STRATEGY
1.1. INTRODUCTION


 Overall plan to move towards a desired, set
  objective.
 Involves program of action, deployment of
  resources, coordination between strategies
  and objectives.
 Without an appropriate strategy the future is
  unclear (dark), and hence more the chances
  of failure.
1.2. Meaning of Strategy


 Associated with military services.
 “Strategos” greek word (generalship)
   Glueck “ Strategy is the unified, comprehensive and integrated plan tha
    relates the strategic advantage of the firm to the challenges of environmen
    and is designed to ensure that basic objectives of the enterprise are
    achieved through proper implementation process”
 Definition lays stress on
 Unified comprehensive and integrated plan
 Strategic advantage related to challenges of environment
 Proper implementation ensuring achievement of basic obj.
   “Strategy is organization’s pattern of response to its environment over a
    period of time to achieve its goals and mission”
 Again here it is the same stress as per earlier definition
 Strategy as action, inclusive of objective setting:
 Chandler 60 “ the determination of basic long term
  goals and objectives of an enterprise and the
  adoption of the courses of action and allocation of
  resources necessary for carrying out these goals.
 3 types of action – (a) determination of LT g/0, (b)
  adoption of courses of action, and allocation of
  resources.
 “the Co is strategically positioned performs different
  activities from rivals or performs similar activities in
  different ways.” So, a unified comprehensive and
  integrated plan. Involves, thinking of “alternate plans”
  and eventually take the best choice.”
1.3 NATURE OF STRATEGY

 A major course of action – relates to environment, (spec. Ext
    Factors) to facilitate actions
   Blend of internal and external factors to meet O’T
   Aimed to meet a particular condition, o solve, or meet a desired
    end. Actions diff. for diff. situations.
   Due dependence on environmental variables, may involved a
    contradictory action – either immediately or with a gap of time.
    (closing down same time, expanding)
   Future oriented, requiring actions for new situations and require
    systems and norms.
   Provides overall framework for guiding employees thinking and
    action. Well defined, guides managerial action and thought.
   Integrated approach meeting challenges posed by environment.
1.4 Essence of Strategy


 Evaluation of alternative paths to an established mission – has 4
  important aspects
 Long term objectives
           Future oriented, LT perspective
 Competitive Advantage
      While working out plans competition may be ignore, but in

       making strategies, competitors are given due importance.
 Vector
           Series of decisions are directed to a same objective. Clarity
            provides the momentum,
 Synergy
       Associated benefits due to certain positive factors of the

        organization.
1.5 Strategy vs. Policies


 Not a synonym.
 Both are means towards end.
 Policy: o/all guidance, commonly accepted u/s of decision
    making.
   Course of action chosen, written or implied. Clear and
    consistent.
   Policies need to be integrated for success of strategy
   E.g. Buy wisely, quality & economic considerations
   Str: concerned with direction in which human efforts and
    resources are deployed. Action oriented and everyone
    empowered. Cannot be delegated downwards.
   Strategy is a rule for making decision while policy is contingent
    decision.
Strategy vs. Tactics


 1.6
 V Programs
 V Procedures
 Rules
1.7 Levels of Strategy


 Corporate Level
 Business Level
 Functional Level
 E.G. Distinct Business Areas (DBAs)
 GEC – SBU, Ashok Leyland – Reliance
 Tatas
1.7 Levels of Strategy (contd)


 Strategic decisions at different levels:
 Dimensions: Corp./Business & functional lvls:
 Impact – significant, major, insignificant
 Risk involved – high, medium and low
 Profit Potential – high, medium and low
 Time horizon – long, medium and low
 Flexibility – high, medium and low
 Adaptability – insignificant, med., significant.
1.8 Importance of Strategy

 Good companies have become extinct.
 Some new ones, are market leaders.
 Strategy provides various benefits to users:
       Enables take decisions on long range fcsts.
       Allows meet new trends and competitions
       Becomes flexible to meet unanticipated changes.
       Financial benefits – increased profits
       Ognzl effectiveness – implementation
       Satisfaction to personnel – motivation, habit of thinking,
        paves the way to shape their work in the context of shared
        goals
       Enables mgmt to involve different levels of mgmt.
       Improves corp. communication, coordination and allocation
        of resources.
       STRATEGY – LIFEBLOOD OF BUSINESS ACTIVIIES.
Unit 2
 PROCESS OF STRATEGY
2.1 Process of Strategy


 Structure – elements
 No unanimity among various authors about the elements and
  their interaction.
 Also, their sequential arrangement.
2.2. Process of Strategy

 It is cyclical in nature.
 Discussed say, in terms of: 4 phases: Identification,
    Development, Implementation, Monitoring phases
   Pr. Of Str. Prahlad: comprises 5 Steps
   Strategic Intent
   Environmental Analysis
   Evaluation of strategic alternatives and choice
   Strategy implementation
   Strategy evaluation and control.
   In our Book,
   Str Intent / Env & Org. analysis / Identification of Str. Alternatives
    / Choice of strategy / implementation of strategy / evaluation and
    control
2.3 Strategic Intent

 Setting org. vision, mission, purpose, goals, target, objectives starting
    point – hierarchy of str. Intent is the foundation
   Reflected through Vision, mission, business definition and objectives.
   Vision – serves the purpose of stating what an organization wishes to
    achieve in long run.
   The process of assigning a part of a mission to a particular department
    and then further sub dividing the assignment among sections and
    individuals creates a hierarchy of objectives, each sub unit contributing
    to the larger unit
   From Spv – must define Why it exists, how it justifies that existence,
    and ‘when” it justifies the reason for its existence.
   Ans. To these Q lies in the org. mission, bus. Defn, obj. and goals.
   P 18 – 19 Flow chart for Single SBU and multiple SBUs.
 The next few are Adv. S M
Nature and Scope of Corporate
Management

 Adhocism
 Planned Policy
 Environment-Strategy Interface
 Corporate Planning
 Corporate Management
Corporate Planning

 Corporate planning is a comprehensive
  planning process which involves
  continued formulation of objectives and
  the guidance of affairs towards their
  attainment. It is undertaken by top
  management for the company as a whole
  on a continuous basis.
 According to Hussey “Corporate long
  range planning is not a technique. It is a
  complete way of keeping the company’s
  eyes open.
    Reasons Attributed to the failure

 Failure to keep the corporate planning system
    simple
   Failure to develop awareness about corporate
    planning process
   Corporate planning tries to do all planning by
    itself
   Chief Executive gives planner a low status
   Failure to modify the corporate planning structure
    system with the charging conditions
   Planner has only a part time interest in planning
   There is conflict between available soft database
    and manager’s need for hard answers
   Top management engrossed in current problems
    spends little time on corporate planning process
Need for corporate
Management
 Scarcity of resources
 Fast Technological Changes
 Changing Human Values
 Multiplicity of stake holders
 Growing Competition
 Liberalisation,Privatisation and globalization
 Growing scale of business operations
 Faster and Quicker Modes of Transportation and
  communication
 Professionalism in management
Concept and Nature of
corporate Strategy
 It is plan or course of action or a set of
  decision rules
 It is derived from its policies, objectives
  and goals
 It is related to pursue those activities
  which move an organization from its
  current position to a desired future
  state
 It is concerned with the requisite
  resources to implement a plan
Functions of corporate
Strategy
 Dual approach to problem solving
 Focuses attention upon changes in the
  organizational set up, administration of
  organizational process
 It offers a technique to manage changes.
 Gives equal importance to present and
  future opportunities
 It provides the management with a
  mechanism
Corporate policy
 According to Koontz and
  O’Donnell
“Policies are plans in that they are
  general statement of principals
  which guide the thinking ,Decision
  making and action in an
  organization.”
Determinants of
Corporate Policy


 Corporate Mission
 Corporate objectives
 The Resources
 Management Values
External determinants
 Industry Structure
 Economic Environment
 Political Environment
 Social Environment
 Technology
Policy Formulation
Process
 Environmental Analysis
 Identification of Policy
  Alternatives
 Evaluation of Alternatives
 Choice of Policy
Introduction
 The major players in the area of
  corporate governance, within the co-
  operation are corporation are
  corporate board, shareholders and
  employees.
 Externally, the pace for corporate
  governance is set by the government as
  the regulator, customers and lenders of
  finance and social ethos of our times.
Role of Board of
Directors
 Oversee the management of the
  company’s assets
 Establish or approve the company’s
  mission,objective,strategy and policies
 Review management actions and
  financial performance of the company
 Hire and fire the principal executive and
  officers of the company
Role Of A chairman
 To manage the board and ensure
  that its policies are put into
  practice by management
 To work closely with the company
  secretary to address legal issues
 To act as a representative of the
  company
 To ensure that policies and practices are
  in place
 To act firmly in times of crisis
 To upgrade the competence of directors
  so as to meet the current and future
  The role of CEO

 Present the company to major investors
 Provide leadership and direction to all
  executive directors
 Assist the executive directors in
  formulating strategies and proposals that
  have to be endorsed by the board
 Be a source of inspiration, leadership and
  direction to all employees, customers and
  suppliers
 Take firm decision when situation demands
Reports Of Committees on
Corporate Governance

 Cadbury Committee Report
 CII Committee Report
 Kumara Mangalam Birla
 Narayana Murthy
 Committee Report
Strategic Choices In a
Dynamic Environment
 Changing the orientation of its
  suppliers and channel partners
 Exploiting the supply chain in the
  early stages of the industry
 Exploiting their innovations and
  building an enduring long run
  competitive advantage based on
  low cost differentiation
 Appropriate Timing of Entry
Strategies in a stable
industry environment
   Product Proliferation
   Rationalizing the product Mix
   Process Innovation
   Price cutting
   Excess capacity
   Buying cheap assets
   Competing internationally
   Market penetration
   Product Development
   Market development
   Product Proliferation
Strategic Choice


 International Strategy
 Multidomestic strategy
 Global Strategy
 Transitional Strategy
  Perfect competition
 The product is homogeneous
 There is free entry and exit in the
  industry
 Every firm’s action is independent of
  the other firm
 In this market there is perfectly
  mobility of factors
 The sellers operate in conditions of
  certainty having complete
  knowledge of costs demand price and
  quantities
    Monopoly

 There is only one firm selling the product
 The firm has no rivals or direct
    competitors.
   Substitutes may exist.However,close
    substitutes are non existent.
   Difficult entry for no other firms
   The monopolist is the price maker and tries
    to take the best of whatever demand and
    cost conditions
   Monopoly is not a permanent situation
Duopoly and Oligopoly
Duopoly-the duopoly market structure has
  the following characteristics
Characteristics:
 The number of sellers in this market
  structure is only two
 The decision of the sellers is not
  independent of each other
 The change in price and output by one
  seller affects the other seller who
  reacts to the change
 The product can be homogeneous or
  differentiated
 The decision variables include price,product
  differentiation, selling expenses,etc,selling
  expenses but the decisions depend upon the
  strategies of the competitor
 Product differentiation is the entry barrier and
  also the firm dominating the market can pose as an
  entry barrier.


Oligopoly
 Oligopoly-is a situation where a few large firms
  compete against one another and are independent
  with respect to decision making
Characteristics
 There are small number of large sellers.
 The product they sell can be differentiated
    or homogeneous.
   The policies of each seller have a
    noticeable impact due to the extent of
    influence of each seller.
   The element of interdependence exists
   Cross elasticity of demand is very high due
    to the close substitutes of the product.
   Existence of rigidity.
   The firms may enjoy some monopoly power.
 Strategies available to an oligopolist
 include advertising, quality improvement
 etc.

 Oligopoly can be classified as Perfect and
 imperfect
 Open or closed
 Partial or Full

When the firms follow a common price policy,
 it is known as collusive oligopoly