Strategy Implementation

Implementation of strategy

Session objectives

Implementation of strategy

though

SWOT Analysis Focus on Execution Value chain analysis Balanced Score Card

Amazon.com

Amazon invented the retailing business modelthat all other dot - coms are struggling to copy

While Amazon. com is price competitive, it is not largest web retailerby having the lowest prices on all the items all the timeIt does’nt guarantee to match or beat other’s prices.

Instead, Amazon has won the loyalty of millions by building onlineStore that is friendly, easy to use and inspires a sense of confidenceand community among customers.

People trust Amazon, partly because it knows their tastes and does what it promises. For me and many others, it would not be worth roaming all over the web to save a few bucks shopping elsewhere

Walter Mossberg -technology commentator for The wall Street Journal

Amazon.com— list of items

BooksMovies ,Music & GamesElectronics & ComputersHome & GardensGroceryToys ,Kids, Baby CareApparel, Shoes & JewelryHealth& BeautySports & Outdoors

SWOT Analysis

It is a systematic procedure for identifying a firm’s critical success factors:its internal strengths and weaknesses and its external opportunities and threats

Critical Success Factors

Computer aidedDesign &

Manufacturing

Target Costing Value ChainBalanced

Score card

Bench Marking

TotalQuality

Management

ContinuousImprovement

Activity BasedCosting &

Management

ReengineeringTheory of

ConstraintsJust in Time

MassCustomization

Core Competencies

Skills or competencies that the firm employs especially well are calledcore competencies

Core Competencies

Strengths

Weaknesses

Core competences

Lack of Skills&competences

Product lines Management R & DProduct lines Management R & D

Manufacturing Marketing Strategy

Evaluating internal Strengths & Weaknesses and its Resources

External Opportunities & Threats

Barriers toEntry

BargainingPower of

Customers

Intensity ofRivalryAmong

Competitors

BargainingPower ofSuppliers

PressureFrom

SubstituteProducts

Quantifying Critical Success Factors

Financial Factors

•Profitability•Liquidity•Sales•Market Value

Critical Success Factors How to Measure the CSF


Financial Factors

•Profitability


Earning from operations

Earnings Trends


Financial Factors

•Liquidity


Cash FlowInterest CoverageAssets TurnoverInventory TurnoverReceivable Turnover


Financial Factors

•Sales


Level of sales in Critical ProductsSales Trends% of Sales from new productsSales forecast Accuracy


Financial Factors

•Market Value


Share Value


Customer Factors

Customer SatisfactionDealer & DistributorMarketing & SellingTimeliness of DeliveryQuality



Customer Factors

Customer Satisfaction

Customer Returns & ComplaintsCustomer Survey

Measuring CSF


Customer Factors

Dealer & Distributor

Coverage Strengths of channelNo. of Dealers in StateNo. in Region

Measuring CSF


Customer Factors

Marketing & Selling

Trends in salesTrainingMarket ResearchSales per Area/SM

Measuring CSF


Customer Factors

Timeliness of Delivery

On time deliveryLead time

Measuring CSF


Customer Factors

Quality

Customers ComplaintsWarranty Expenses

Measuring CSF



Internal BusinessProcesses

QualityProductivityFlexibilityEquipment ReadinessSafety


Measuring C S F


Quality

No. of defectsNo. of ReturnsCustomer SurveyAmount of ScrapAmount of ReworkField Service ReportWarranty Claims


Measuring C S F


Productivity

Product Cycle (RM to Finished Product)Labour EfficiencyMachine EfficiencyAmount of WasteRework and Scrap


Measuring C S F


Flexibility

Setup timeCycle time


Measuring C S F


Equipment Readiness

DowntimeOperator experienceMachine capacityMaintenance activities


Measuring Critical Success Factors

Internal BusinessProcesses •Safety

No. of Accidents

Effects of accidents



Learning &

Innovations

Product InnovationTimeliness of New ProductSkill DevelopmentEmployee DevelopmentCompetence


Measuring CSF

Learning &

Innovations

Product Innovation

No. of Design changesNo .of new Patents or copyrightsSkill of R& D Staff


Measuring CSF

Learning &

Innovations

Timeliness of New Product

No of days over or under the announced date of new product


Measuring CSF

Learning &

Innovations

Skill Development

No. of Training hoursAmount of skill

performance improvement


Measuring CSF

Learning &

Innovations

Employee Morale

Employee TurnoverNo. of ComplaintsEmployee Survey


Measuring CSF

Learning &

Innovations

Competence

TrainingExperienceAdaptabilityFinancial & Operating Performance Measures

Execution of Goals

Execution is really the critical part of a successful strategyGetting it done….Getting it done right….Getting it done better than the the next person is far moreImportant than dreaming up new visions of the future

Louis V Gerstner, JrIBM

Execution of Goals

StrategyCost

Leadership

Required Skills &Resources

Capital InvestmentsProcess ReengineeringLabour SupervisionProduct Designing

Execution

Tight Cost ControlFrequent Control ReportsStructured OrganizationStructured PoliciesTarget Based IncentivesStrong coordination Research Product Development Manufacturing Marketing

Strategy

Differentiation

Required Skills &Resources

Strong Mkt AbilitiesProduct EngineeringCorporate ReputationUniqueness

Execution

Tight Cost ControlFrequent Control ReportsStructured OrganizationStructured PoliciesTarget Based IncentivesStrong coordination Research Product Development Manufacturing Marketing

Strategy and Execution Skills

Value ChainAnalysis

Value ChainAnalysis

VCA is a strategic analysis tool used to better understandthe firm’s competitive advantage, to identify where valueto customers can be increased or costs reduced and to better understand the firm’s linkages with suppliers, customers and other firms in the industry.

The Activities include all steps necessary to provide a competitive product or service to the customer

VCA has two steps

Identify the value chain Activities

Develop a competitive Advantage by Reducing Cost or adding Value

1

2

VCA has two steps

Identify the value chain Activities1

ValueActivities

Value Activities are activities that a firm in industrymust perform in the processof converting raw materialsto final product, including customer service

Val

ue

add

ed

Re

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arc

h De

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As

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ly

Sa

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Ser

vice

Value Chain For Computer Manufacturing Industry

Step2RM Acquisition

Step 3Materials

Assembled intoComponents

Step 1Design

Step8Customer

Service

Step 6WholesalingWarehousingDistribution

Step 7Retail Sales

Step5Computer

Manufacturing

Step 4Intermediate

Assembly


Step2RM Acquisition

Mining, developmentand Refining

Silicon, Plastic,Various metals

Step 3MaterialsAssembled intoComponents

Converting RM intoComponents andParts to makeComputers

Desired componentsand parts

Step 1Design

Activities

Performing Research andDevelopment

Expected OutputOf Activities

Completed ProductDesign


Step 6WholesalingWarehousingDistribution

Moving products toRetail locations andWarehouses asNeeded

Rail, track and Airshipment

Step5ComputerManufacturing

Final Assembling,Packaging andShipping the finalProduct

Completed Computers

Step 4IntermediateAssembly

Converting,Assembling,Finishing, testingAnd Grading

Boards, Higher Levelcomponents


Step8CustomerService

Processing returns,Inquiries, and repairs

Service and restackedcomputers

Step 7Retail Sales

Making Retail Sales

Cash Receipts

VCA has two steps

Develop a competitive Advantage by Reducing Cost or adding Value2

4 options may be considered

Competitive advantage

1 Identify competitive advantage (cost leadership or differentiation)

2 Identify opportunities for added Value Wal-mart using computer based technology for supplies Reduction in transaction cost by banks

3 Identify opportunities for Reduced Cost Material Substitution, Change in Production Process

4 Exploit Linkages among activities in the value-chain Changing location of Factory near to suppliers

scorecardbalanced

A balance scorecard translate a organization’s mission and strategy into set of performance measures that provide the framework for

implementing its strategy

4Perspectives

Financial

Perspective Customer

PerspectiveInternal

BusinessProcess

Perspective

Learning &Growth

Perspective

Develop Strategic Goals

Mission VisionClarify mission & Vision statement

Strategic Goals

Derive Sub-Goals

Sub-Goals

Map Sub-Goals to each quadrant of the Balanced Score Card

Apply Statistical techniques to: - identify measurement areas - develop measurement goals - pose relevant questions - postulate indicators - identify data elements

For each BSC Quadrant

Data Elements

Module

Tro

ub

le R

epo

rts

Indicators

Balanced Scorecard

Internal Business• Sub-Goals

Learning & Growth• Sub-Goals

Customer• Sub-Goals

Financial• Sub-Goals

Internal Business• Sub-Goals

Learning & Growth• Sub-Goals

Customer• Sub-Goals

Financial• Sub-Goals

MethodologyOverview

Ob

ject

ive

Me

asu

res

Ta

rge

tsIn

itia

tive

sCUSTOMER

How do our customers see us?

Ob

ject

ive

Me

asu

res

Ta

rge

tsIn

itia

tive

sLEARNING andGROWTH

Can we continue to improve and create value?

Ob

ject

ive

Me

asu

res

Ta

rge

tsIn

itia

tive

sFINANCIAL

How do we look to shareholders?

Ob

ject

ive

Me

asu

res

Ta

rge

tsIn

itia

tive

s

INTERNAL BUSINESSPROCESS

What must we excel at?

Visionand

Strategy

Ob

ject

ive

Me

asu

res

Ta

rge

tsIn

itia

tive

sCUSTOMER

How do our customers see us?

Ob

ject

ive

Me

asu

res

Ta

rge

tsIn

itia

tive

sLEARNING andGROWTH

Can we continue to improve and create value?

Ob

ject

ive

Me

asu

res

Ta

rge

tsIn

itia

tive

sFINANCIAL

How do we look to shareholders?

Ob

ject

ive

Me

asu

res

Ta

rge

tsIn

itia

tive

s

INTERNAL BUSINESSPROCESS

What must we excel at?

Visionand

Strategy

Visionand

Strategy

A Balanced Scorecard Perspective on Performance

4Perspectives

Financial

Perspective

Financial Perspective Evaluate the Profitability of the Strategy

4Perspectives Customer

Perspective

Customer Perspective identifies Targeted Customer and market Segments and Measures the Company’s success in these Segments

4Perspectives

InternalBusinessProcess

Perspective

This perspective focuses on internal operationsthat create value for customers that ,in turn,furthers the financial perspective by increasingthe shareholder value

4Perspectives

InternalBusinessProcess

Perspective

3 subProcesses

Innovation Process

Creating ProductsServices &ProcessesTo meet the demandOf Customers

Operations Process

Producing & deliveringExisting products thatWill meet the needs Of Customers

Post sales-ServiceProcessProviding service andSupport to the customerAfter the sale of a product or service

4Perspectives

Learning &Growth

Perspective

This perspective identifies the capabilities theorganization must excel at to achieve superior internal processes that create value for Customers and shareholders

Target ActualObjective Measures Initiatives Perform Perform

FinancialPerspective

IncreaseShareholdervalue

Operating incomeFrom ProductivityGain

Operating IncomeFrom Growth

Revenue Growth

Manage CostAnd UnusedCapacity

Build StrongCustomerRelationship

Rs 20 Cr Rs 20.12Cr

Rs 30 Cr Rs 34.20 Cr

6% 6.48%

FINANCIAL PERSPECTIVE


CustomerPerspective

IncreaseCustomerSatisfaction

Market Share inCommunicationNetwork Segment

Number of NewCustomers

CustomerSatisfactionRating

Identify futureNeeds ofCustomers

Identify newTargetCustomer Seg

Increase Customers

Focus of Sales

6% 7%

1% 2%

90% give 87%Gave Top two top twoRatings Rating

Customer Perspective


ReduceDelivery Time

Meet SpecifiedDelivery dates on time delivery

Improve postSales Services

ImproveProcesses

ImproveManufacturingCapability

Order DeliveryTime

Re-engineer orderDelivery process

Re-engineer order 92% 90%Delivery process

Improve CustomerService process

30 days 30 days

Service ResponseTime

Number of Impv.In BusinessProcesses

% of processesWith AdvancedControls

Within4 hrs

Within3 hrs

Organize teams from Sales & Manuf

Organize R&D/MfgTeams to implementAdv. control

5 5

75% 75%

INTERNAL BUSINESS PROCESS PERSPECTIVE


Align EmployeeAndOrganizationalGoals

DevelopProcessSkill

EmpowerWorkForce

Learning and Growth Perspective

Employee Satisfac-tion Rating

% Employees Trained in Process& Quality Mgt

% WorkersEmpowered to ManageProcesses

EmployeeParticipation toBuild Team Work

EmployeesTrainingProgramme

Supervisors asCoaches ratherDecisionMakers

80% 88%EmployeesGive topTwoRatings

90% 92%

80% 80%

Features of Balance Score Card

Indicate Organizational strategy and its link with perspectives

Strategy is communicated to all

Strategy translated into measurable targets

Motivates Managers to achieve targets

BS limits the measures to only four

Highlights effect of one perspective on another

Pitfalls in Implementing Balanced Score Card

Difficult to establish Fin-Non financial Linkages

Improvements at all levels may not be possible

Both subjective-objective measures Consideration

Considering Cost & benefits of initiatives

Non-financial Achievements are ignored

Balanced Scorecard for an Electronics Firm

Own quality & industry standard, delivered qualityQUALITY

Competitor Price, Customer willing to Pay, Market PricePRICE

Actual vs Planned, No. of on time deliveriesDelivery

Sales Growth, No.Of customers making 90% shipmentsShipment

No. Of New Products, Technology innovations,% of sales from new products

NewProducts

Shipment

Response time, customer satisfaction surveySupport

Customer Perspective

Balanced Scorecard for an Electronics FirmInternal Capabilities

Efficiency ofManufacturing

Cycle timeLead timeMfg. OverheadAutomation Rate

New ProductIntroduction

Rate of new ProductIntroduction perQuarter/year

New ProductsSuccess

New products Y/Q salesNo. of Orders

Sales Penetration

Actual vs PlanIncrease in Rs 1 Crore customers Per year/quarter

New Businesses

No. of New Business each year

Balanced Scorecard for an Electronics FirmInnovation

Technology Leadership

Product Performance –• Competition• No. of new products with patented technology

Cost Leadership

Manufacturing Overhead per quarter as percent of sales; rate of increase in cost of quality per quarter

Market Leadership

Market share in all major markets• No. of systems developed to meet customer requirements

Research andDevelopment

No. of new products• No. of new patents

Balanced Scorecard for an Electronics FirmFinancial Perspective

Sales

Annual growth in sales and profits

Cost of Sales

Extent it remainsflat or decreases each year

Profitability

Return on totalcapital employed

Prosperity

Cash Flows

Balanced Scorecard for an Electronics FirmEmployees & Community Perspective

Competitive benefits& Salaries

Salaries comparedto norm in local area

Opportunity

• Individual contribution• Personal satisfaction in job

Citizenship

Company Contributions to Community & Institutions thatgenerate environment

A Strategy Map for Dell Computer

Learning and Innovation

Measures (by product segment)

• Training dollars per employee

• Number of emerging technologies evaluated

• No. of new manufacturing processes developed

• No. of new manufacturing processes under developed


Internal Processes


- Product manufacturing time

- Raw materials inventory

- Order processing time

- Manufacturing defects


Customer


• Customer perception of order-taking convenience & accuracy

• Customer perception of product quality

• Customer retention

• Customer satisfaction with speed of service


Financial Performance


• Revenue growth

• Gross Margin

• Operating Cost ratio

• Selling expense to sales ratio

Strategy Implementation

Documents

balanced score card

internal business processes

computer manufacturing industry

step8 customer service

financial perspective

customer perspective

competitive advantage

balanced scorecard