Unit-1 Strategic Management Final

8/15/2019 Unit-1 Strategic Management Final

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Unit-1Introduction toStrategicManagement

Dr. Prashant KalaskarDr. Prashant Kalaskar

What is Strategy..???What is Strategy..???

Why Strategy..???Why Strategy..???Dr. Prashant Kalaskar


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Why Strategy…??

•• The ultimate goal of the organizations isThe ultimate goal of the organizations isto be successfulto be successful –– SU !SSSU !SS is:is:•• SurvivalSurvival (long(long--term success)term success)•• chievement ofchievement of !oals!oals•• bove average returns"#rofitabilitybove average returns"#rofitability ($robably($robably

most im$ortant% because it &etermines themost im$ortant% because it &etermines theability to achieve the above t'o)ability to achieve the above t'o)

•• To $rovi&e * to the investors.To $rovi&e * to the investors.•• To create a favorable environment for ca$italTo create a favorable environment for ca$ital

raiseraise

Dr. Prashant Kalaskar

"eed o# Strategy..$$

•• +ar,et has become !lobal+ar,et has become !lobal•• +ar,et has become ynamic+ar,et has become ynamic•• ver /hanging Technologyver /hanging Technology•• !ro'ing /om$etition in &omestic as 'ell as in global!ro'ing /om$etition in &omestic as 'ell as in global

mar,etmar,et•• *nformation base& +ar,et*nformation base& +ar,et

•• /ustomer &ominate& mar,ets/ustomer &ominate& mar,ets



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What is Strategy..???

Strategy%Strategy%The unifying theme that givescoherence &reason'&reason' an& &irection to the&ecisions of any organization

Strategic Management%Strategic Management% /onsisting of theanalysis% &ecisions% an& actions anorganization un&erta,es in or&er to create

an& sustain com$etitive a&vantages.


(rigin o# Strategy..$$$•• Strategy comes from the !ree, 'or&Strategy comes from the !ree, 'or& S)*+)!,(SS)*+)!,(S % 'hich is% 'hich is

forme& fromforme& from stratosstratos%% meaningmeaning armyarmy% an&% an& ––agag%% meaning tomeaning tolea&lea&

StrategyStrategy D #initionD #initionStrategiesStrategies -- 0000 SystematicallySystematically $lanne&$lanne& course of actionscourse of actionsforfor achievementachievement ofof organizationalorganizational b1ectives or !oals22b1ectives or !oals22

,lueck,lueck :: 02 n02 n 3nifie&3nifie&%% /om$rehensive/om$rehensive 4 4 integrate&integrate& $lan%$lan%&esigne&&esigne& to assureto assure thatthat the basic ob1ectives of thethe basic ob1ectives of theenter$riseenter$rise areare achieve&achieve&



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More *ecent istorical De/elo0ment o#usiness Strategy

•• 5ot until very5ot until very large com$anieslarge com$anies 'ith the ability to'ith the ability toinfluence the com$etitive environment 'ithin theirinfluence the com$etitive environment 'ithin theirin&ustriesin&ustries &i& strategic thin,ing&i& strategic thin,ing in the business 'orl&in the business 'orl&begin to be articulate&.begin to be articulate&.

•• lfre& Sloan% / of !+%lfre& Sloan% / of !+%12341234 55 12671267 -- ne of the firstne of the firstto analyze com$etitionto analyze com$etition- - 06or&2% an&06or&2% an& &evise a strategic&evise a strategic$lan base& on its strengths an& 'ea,nesses.$lan base& on its strengths an& 'ea,nesses.

•• /hester 7arnar&% Senior 8ecutive of 5e' 9ersey 7ell%/hester 7arnar&% Senior 8ecutive of 5e' 9ersey 7ell%;$ersonal or$ersonal ororganizational actionorganizational action. .


More *ecent istorical De/elo0ment o#usiness Strategy•• Wartime (WW* an& WW**) efforts also im$acte&Wartime (WW* an& WW**) efforts also im$acte&

strategic thin,ing an& use of formal strategicstrategic thin,ing an& use of formal strategictools an& conce$ts:tools an& conce$ts:

•• llocation of scarcellocation of scarce resourcesresources•• 3se of @uantitative3se of @uantitative analysis in $lanninganalysis in $lanning•• The conce$t of >The conce$t of >learning curveslearning curves

•• The conce$t of >The conce$t of >&istinctive com$etence&istinctive com$etence -- first mentione&first mentione&by #hili$ Selznic,% a sociologist.by #hili$ Selznic,% a sociologist.



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More istorical De/elo0ment

•• These conce$ts serve as the foun&ation of strategicThese conce$ts serve as the foun&ation of strategicmanagement stu&y:management stu&y:–– #revious#revious 8 usiness Policy98 usiness Policy9 $ers$ectives loo,e& at$ers$ectives loo,e& at

maintaining a >balance in accor& 'ith the un&erlying $oliciesmaintaining a >balance in accor& 'ith the un&erlying $oliciesof the business as a 'hole.of the business as a 'hole. – – Aarvar&Aarvar&

–– Benneth n&re'sBenneth n&re's2 2SW() +nalysisSW() +nalysis 'as &evelo$e&'as &evelo$e& –– still instill inuse to&ay.use to&ay.

–– Theo&ore Cevitt2sTheo&ore Cevitt2s8Marketing Myo0ia98Marketing Myo0ia9 argue& that 'henargue& that 'hencom$anies fail ty$ically% it is because firms focus on thecom$anies fail ty$ically% it is because firms focus on the$ro&uct rather than the changing $atterns of consumer$ro&uct rather than the changing $atterns of consumernee&s an& tastes.nee&s an& tastes.

8: $$le intro&uce& a music $layer 'ith name of i#o& an& not8: $$le intro&uce& a music $layer 'ith name of i#o& an& not1ust as another m$< $layer.1ust as another m$< $layer.


More istorical De/elo0ment–– *gor *gor nsoffnsoff argue&%argue&% inin res$onseres$onse toto Cevitt%Cevitt% thatthat aa firm2sfirm2s

missionmission shoul&shoul& e8$loite8$loit anan e8istinge8isting nee&nee& inin thethe mar,etmar,et%%rather rather thanthan usingusing thethe consumer consumer asas thethe commoncommon threa&threa& ininbusinessbusiness.. >*n>*n reality%reality% aa givengiven ty$ety$e ofof customer customer 'ill'illfre@uentlyfre@uently havehave aa rangerange ofof $ro&uct$ro&uct missionsmissions or or nee&snee&s..CorporateCorporate StrategyStrategy %% ;DE;DE..

–– 7/!7/! &evelo$e&&evelo$e& thethe >e8$erience>e8$erience curvecurve an&an& $ortfolio$ortfolioanalysisanalysis conce$tsconce$ts. .

–– +cBinsey+cBinsey 44 /om$any2s/om$any2s &evelo$ment&evelo$ment ofof S73sS73s an&an& thetheninenine--bloc,bloc, matri8matri8..–– +intzberg2s+intzberg2s > eliberate%> eliberate% mergentmergent 44 ealize&ealize& StrategiesStrategies–– #orter2s#orter2s !eneric!eneric StrategiesStrategies



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Pattern in Stream o# Decisions& . Mint:;erg < =. Waters'


*eali:edStrategyUnreali:ed

Strategy

!mergentStrategy

>>"ormally emergent strategy comes #romlearning and dissemination ithin the organi:ation.

Intended & Deliberate•• #lanne& strategies start 'ith intentions% mostly#lanne& strategies start 'ith intentions% mostly

from the chief strategists of the firm. *n this regar&from the chief strategists of the firm. *n this regar&intentions &efine the $ur$ose in $erformingintentions &efine the $ur$ose in $erformingstrategic actions. #lanning% ho'ever% also involvesstrategic actions. #lanning% ho'ever% also involves&eliberation% 'hich 'oul& mean analyzing the&eliberation% 'hich 'oul& mean analyzing the$ur$ose for action an& evaluating systematically$ur$ose for action an& evaluating systematically

&ifferent courses of action. *n this sense% intention&ifferent courses of action. *n this sense% intentionan& &eliberation is not the same. To $ut it sim$le:an& &eliberation is not the same. To $ut it sim$le:intention is $ur$oseintention is $ur$ose%% &eliberation stan&s for&eliberation stan&s forconscious analysis.conscious analysis.


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@orms o# Strategy

•• *nten&e& strategy*nten&e& strategyecisions are &etermine& only by analysisecisions are &etermine& only by analysis

•• ealize& strategyealize& strategyecisions are &etermine& by both analysis an&ecisions are &etermine& by both analysis an&

unforeseen environmental &evelo$ments%unforeseen environmental &evelo$ments%unantici$ate& resource constraints% an&"orunantici$ate& resource constraints% an&"orchanges in managerial $referenceschanges in managerial $references


)he )hree ig Strategic 8+nalysis9Auestions•• . Where are 'e no'? What is our situation?. Where are 'e no'? What is our situation?•• F. Where &o 'e 'ant to go?F. Where &o 'e 'ant to go?•• 7usiness(7usiness(eses) 'e 'ant to be in an& mar,et $ositions 'e) 'e 'ant to be in an& mar,et $ositions 'e

'ant to obtain.'ant to obtain.•• 7uyer nee&s an& grou$s 'e 'ant to serve7uyer nee&s an& grou$s 'e 'ant to serve•• utcomes 'e 'ant to achieveutcomes 'e 'ant to achieve

••


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Di##ering Pers0ecti/es o# the StrategicManagement Process


!Bternal !n/ironment

Industry +ttracti/eness

Strategy @ormulation

I/O Model

+ssetsCSkills +ssessment

Im0lementation

*esources

a0a;ility

Sustaina;le +

RBV Model


Im0lementation

)he Strategy once0tLevels of Analysis


CorporateStrategy

BusinessStrategy

FunctionalStrategy

Choice of ProductsChoice of Markets

Choice of Competitors

• Where to om0ete?

• o to om0ete?

• o to ontri;ute?

• ,rand Strategies

• ,eneric Strategies

• @unctional Strategies• &Mktg. MiB

(0erational @inancialetc.'


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De#inition o# Strategic Management..$$

ecisions an& actions 'here organizationsecisions an& actions 'here organizations

nalyze current situationnalyze current situation

evelo$ a$$ro$riate strategiesevelo$ a$$ro$riate strategies

#ut strategies into action#ut strategies into action

valuate% mo&ify% or change strategiesvaluate% mo&ify% or change strategies


haracteristics o# Strategic Management ..$$


or0orate-le/eldecisions

,reater risk costand 0ro#it 0otential

,reater need #or#leBi;ility

Eonger time hori:ons


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usiness-le/eldecisions

ridge decisions atcor0orate and #unctional

le/els

+re less costly risky and0otentially 0ro#ita;le thancor0orate-le/el decisions

+re more costly risky and

0otentially 0ro#ita;le than#unctional-le/el decisions



@unctional-le/el

decisions

Im0lement o/erall strategy

In/ol/e action-orientedo0erational issues

+re relati/ely short rangeand lo risk

Incur only modest costs


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Strategy% Partly Proacti/e Partly *eacti/e


Company’sExperiencesKnowHow's,Strength &WeaknessesCompetitiveCapabilities

ActualCompany’s

Strategy

Adaptive Reactions toAdaptive Reactions toChanging CircumstancesChanging Circumstances

Planned StrategyPlanned Strategy

New Initiatives Plus OngoingNew Initiatives Plus OngoingStrategy, Features ContinuedStrategy, Features Continuedfrom Prior Periodsfrom Prior Periods

Strategy is ho an organi:ation intendsto create /alue #or its stakeholders.


FI# e succeed ho ill elook to our shareholders?9

)he StrategyPri/ate Sector (rgani:ations

@inancial Pers0ecti/e

F)o achie/e our /ision homust e look to ourcustomers?9

ustomer Pers0ecti/e

F)o satis#y our customers athich 0rocesses e must

eBcel?9

Internal Pers0ecti/e

F)o achie/e our /ision homust our organi:ation learn

and im0ro/e

Eearning < ,ro th

IntroducingIntroducingStrategy Ma0sStrategy Ma0s

A simple model of A simple model ofthe value creationthe value creation

processprocess


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Strategic Management Process

•• There are t'o &imensions of every actionThere are t'o &imensions of every action – –substantivesubstantive an&an& $roce&ural.$roce&ural.

•• SubstantiveSubstantive &imension involves &etermination&imension involves &eterminationofof hathat to &o (to &o (StrategyStrategy) an&) an&

•• #roce&ural &imension#roce&ural &imension is concerne& 'ithis concerne& 'ith&etermination of&etermination of hoho to &o (to &o (StrategicStrategic+anagement #rocess+anagement #rocess). ).



•• The Term Strategic +anagement refers to the setThe Term Strategic +anagement refers to the setof managerial $rocess of formingof managerial $rocess of forming- -

•• -- a strategic vision%a strategic vision%•• -- setting ob1ectives%setting ob1ectives%•• -- crafting strategy (Strategy 6ormulation)%crafting strategy (Strategy 6ormulation)%•• -- im$lementing 4 e8ecuting the strategy%im$lementing 4 e8ecuting the strategy%

•• 4 then overtimes initiating 'hatever corrective4 then overtimes initiating 'hatever correctivea&1ustments in the vision% ob1ectives% strategies% 4a&1ustments in the vision% ob1ectives% strategies% 4e8ecutions are &eeme& to be a$$ro$riatee8ecutions are &eeme& to be a$$ro$riate



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Eet us understand some terms…

•• GisionsGisions-- What /om$any 'ants to achieve in futureWhat /om$any 'ants to achieve in future•• +ission+ission-- The reason for com$any2s e8istenceThe reason for com$any2s e8istence

•• !oals!oals-- What /om$any 'ante& to achieve in general inWhat /om$any 'ante& to achieve in general inconstraint to G*S* 5constraint to G*S* 5

•• b1ectivesb1ectives-- are s$ecific goals to be achieve& in futureare s$ecific goals to be achieve& in future

•• GisionGision -- big $icture i&ea of 'hat you 'ant to achieve.big $icture i&ea of 'hat you 'ant to achieve.

•• MissionMission -- general statement of ho' you 'ill achievegeneral statement of ho' you 'ill achieveyour visionyour vision



The $rocess of Strategic +anagementThe $rocess of Strategic +anagementinvolves H ste$s:involves H ste$s:

•• Strategic *ntentStrategic *ntent•• nvironmental nalysis 4 Strategy 6ormulationnvironmental nalysis 4 Strategy 6ormulation•• Strategy *m$lementationStrategy *m$lementation

•• Strategy valuation an& /ontrolStrategy valuation an& /ontrol



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Strategic IntentGision% +ission%7usiness

efinition%b1ectives

Strategy @ormulation*nternal 4 8ternal

$$raisalSW T nalysis/or$orate 4 7usinessCevel StrategiesStrategic nalysis 4 choice

StrategyIm0lem-entation#ro1ect 4#roce&ural*m$lementation

S t r a t e g

i c ! / a

l u a t

i o n

ontrolontrol



Defining Vision,Mission & Business

Objectives

EnvironmentalAnalysis

OrganizationalAnalysis

Setting Objectives &Goals

Identifying AlternativeStrategies

Choice of Strategy

StrategyImplementation

Evaluation & Control

Feedback

Reformulate ifReformulate ifRequiredRequired

ReRe--implement ifimplement ifRe quiredRequired

Choice of Strategy


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Strategic Management

• Strategic +anagement is the fiel& that &eals 'ithma1or inten&e& 4 emergent initiatives% ta,en u$ by theTo$ +anagers on behalf of com$any.

• *t involves utilization of resources to enhance$erformance of the firm% in their e8ternal com$etitiveenvironment.

• *t involves organization2s Gision% +ission 4 b1ectives4 then%

• evelo$ing #lans (Strategies) 4 #olicies% so as to

achieve set ob1ectives% then%• llocation of resources


Strategic Management• Strategic +anagement $rovi&es overall &irections to

the organization.

• Strategic +anagement involves not only the+anagement Team but can also inclu&es 7oar& of

irectors% Sta,ehol&ers% &e$en&ing u$onorganizational Structure IsizeJ.

• Strategic +anagement is an ongoing $rocess that

evaluates 4 controls the business.• *t allo's com$anies to assess their com$etitors 4

hel$s to set goals 4 $lan strategies to out'it e8isting4 $otential com$etitors.



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•• Strategic +anagement also allo's reassessing ofStrategic +anagement also allo's reassessing ofim$lemente& strategies onim$lemente& strategies on @uarterly% half yearly or@uarterly% half yearly orannuallyannually basis.basis.

•• This hel$s to un&erstan&% 'hether im$lemente&This hel$s to un&erstan&% 'hether im$lemente&strategies are succee&e& accor&ing to the $lans orstrategies are succee&e& accor&ing to the $lans ornee&s the strategies to be mo&ifie& or re$lace&.nee&s the strategies to be mo&ifie& or re$lace&.

•• *f nee&e&% ne' strategies can be im$lemente& so as to*f nee&e&% ne' strategies can be im$lemente& so as tomeet the change& circumstances% ne' com$etitors%meet the change& circumstances% ne' com$etitors%ne' # ST factors etc.ne' # ST factors etc.


Strategic Management• 6ormulation of Strategy:*t involves < main $rocessesK..- #erforming situation analysis% self evaluation 4

com$etitors analysis (*nternal 4 8ternal nalysis)

- Simultaneously% the ob1ectives are set% some ob1ectivesare short term 4 some are long term.

- These ob1ectives set (must be in the light of situationanalysis) suggest strategic $lans. The $lan $rovi&es the&etails of ho' to achieve those ob1ectives



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•• Strategy Evaluation:Strategy Evaluation:Johnson,Johnson, SchulezSchulez & Whittington presented a model to& Whittington presented a model to

evaluate strategic decisionsevaluate strategic decisions- -

-- SuitabilitySuitability ( ill it or!"( ill it or!"

-- #easibility#easibility (can it be made to or!"(can it be made to or!"

-- $cceptability$cceptability ( ill they (employees" or! on it"( ill they (employees" or! on it"


Strategic Management•• Suitability of StrategySuitability of Strategy::Suitability &eals 'ith the overall rationale of StrategySuitability &eals 'ith the overall rationale of Strategy-- Woul& it be suitable in terms of environment 4Woul& it be suitable in terms of environment 4

rganizational ca$abilitiesrganizational ca$abilities•• 6easibility of Strategy:6easibility of Strategy:*t is concerne& 'ith 'hether the resources re@uire& to*t is concerne& 'ith 'hether the resources re@uire& to

im$lement the strategy are available% or can beim$lement the strategy are available% or can be&evelo$e& or obtaine&.&evelo$e& or obtaine&.

-- oes it ma,e economic senseoes it ma,e economic sense-- Woul& the organization obtain economies of scaleWoul& the organization obtain economies of scale

esources can be $eo$le% fun&s% time% information%esources can be $eo$le% fun&s% time% information%machines etc.machines etc.



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Strategic Management•• $cceptability o% Strategy:$cceptability o% Strategy:

o !no , hether the sta!eholders ill accept the strategies itho !no , hether the sta!eholders ill accept the strategies ithits e'pected per%ormance output, hich can include:its e'pected per%ormance output, hich can include:

-- eturn:eturn: )ene%its e'pected by Sta!eholders)ene%its e'pected by Sta!eholders financial or non financial!financial or non financial!E':E': Shareholders ould e'pect increase in their ealthShareholders ould e'pect increase in their ealth

Employees ould e'pect improvement in their careersEmployees ould e'pect improvement in their careers*ustomers ould e'pect good value to their money*ustomers ould e'pect good value to their money

-- is!:is!: +t deals ith the probability & conse uences o% %ailure o%+t deals ith the probability & conse uences o% %ailure o%strategystrategy

-- Sta!eholders eactionSta!eholders eaction: : eals ith li!ely reactions li!eeals ith li!ely reactions li!e- -Shareholders can oppose %rom ne investmentShareholders can oppose %rom ne investment

Employees can oppose outsourcing %or %ear o% loosing their .obsEmployees can oppose outsourcing %or %ear o% loosing their .obs*ustomers could have concern over a /&$ ith regard to*ustomers could have concern over a /&$ ith regard to

uality & Supportuality & SupportDr. Prashant Kalaskar

Im0ortance o# Strategic ManagementStrategic /anagement is must %or all thoseorganizations, ho dreams to gro 01Survival o% #ittest2, does not mean a Strong or 3argecompany ill survive0)usiness has to %ollo ar rule- 1Win or 3ose2*ompanies need to have *ompetitive $dvantage

hese all characteristics o% a success%ul businessorganizations is possible to have i% it %ollo s-Strategic /anagement- Strategic $nalysis, Strategy#ormulation & Strategy +mplementation0



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Im0ortance o# Strategic Management

• Strategic +anagement has follo'ing benefits-a) *t hel$s organization to be $roactive than being reactive(e8: $$le% Sony)

b)Strategic +anagement $rovi&es a frame'or, for all&ifferent &ecisions of business li,e- #ro&uct% +ar,ets%+anufacturing% resources 4 investment

c) Strategic +anagement $erforms a role of #ath 6in&er byma,ing organizations able to i&entify o$$ortunities inthe mar,et 4 $rocess ho' to reach them.

&)Strategic +anagement serves as a cor$orate &efensemechanism against mista,es 4 $itfalls

e) Strategic +anagement hel$s to &evelo$ corecom$etency 4 com$etitive a&vantage for survival 4!ro'th


Stakeholders in usinessWhat are Sta,ehol&ers?What are Sta,ehol&ers?> Sta,ehol&ers are those in&ivi&uals or grou$ of> Sta,ehol&ers are those in&ivi&uals or grou$ of

$eo$le%$eo$le% 'ho can affect 4 are affecte& by the'ho can affect 4 are affecte& by theStrategic utcomesStrategic utcomes achieve& 4 'ho haveachieve& 4 'ho haveenforceable claims on /om$any2s #erformanceenforceable claims on /om$any2s #erformance

-- These $eo$le have sta,es in Strategic utcome of theThese $eo$le have sta,es in Strategic utcome of the/om$any/om$any

-- These $eo$le can be $ositively or negatively affecte& byThese $eo$le can be $ositively or negatively affecte& bythese outcomesthese outcomes

-- These Strategic utcomes is &e$en&ent u$on theThese Strategic utcomes is &e$en&ent u$on thesu$$ort or active $artici$ation of certain Sta,ehol&erssu$$ort or active $artici$ation of certain Sta,ehol&ers



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Stakeholders in usiness


Sta,ehol&ers /an 7e /lassifie& as:Sta,ehol&ers /an 7e /lassifie& as:- -

@irm

a0ital marketStakeholders

(rgani:ationalStakeholders SecondaryStakeholders

Product marketStakeholders

Stakeholders in usiness

/a$ital mar,et Sta,ehol&ers:/a$ital mar,et Sta,ehol&ers:- -Stoc, +ar,et *nvestors% ebt Su$$liers"7an,sStoc, +ar,et *nvestors% ebt Su$$liers"7an,s#ro&uct +ar,et Sta,ehol&ers:#ro&uct +ar,et Sta,ehol&ers:- -/ustomers% etailers% Su$$liers/ustomers% etailers% Su$$liers

rganizational Sta,ehol&ers:rganizational Sta,ehol&ers:- -'ner% m$loyees% +anagers% Staff'ner% m$loyees% +anagers% Staff

Secon&ary Sta,ehol&ers:Secon&ary Sta,ehol&ers:--/ommunity% /om$etitors% !overnment/ommunity% /om$etitors% !overnment



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Stakeholders !B0ectations in usiness


Stakeholder ,rou0 Mem;ershi0 Primary !B0ectationsa0ital Market

StakeholdersShareholders

Eenders

Wealth !nhancement

Wealth Preser/ation

Product MarketStakeholders

ustomers

Su00liers

*elia;le Products at Eo Price

*ecei/e ighest Sustaina;le Price

(rgani:ationalStakeholders

!m0loyees

Unions

Secured Dynamic *e arding areer

Ideal Working onditions < =o; Security

SecondaryStakeholders

ommunity or!n/ironment

,rou0

,o/ernment

"ot a##ecting !n/ironment

onest )aB Payment Sa#ety o# Pu;licPro0er utili:ation o# *esources

Stakeholders in usinessifferent Ty$e of Sta,ehol&ers have &ifferentifferent Ty$e of Sta,ehol&ers have &ifferente8$ectations or &eman&s from the com$anye8$ectations or &eman&s from the com$any

-- +ainly+ainly-- Wealth +a8imization 4 to get better * orWealth +a8imization 4 to get better * orGalue for their +oney"*nvestmentGalue for their +oney"*nvestment

-- *f /om$any $rovi&es * by +a,ing Short Term*f /om$any $rovi&es * by +a,ing Short Term&ecisions% the com$any can negatively affects the&ecisions% the com$any can negatively affects thesta,ehol&erssta,ehol&ers

*f com$any is ma,ing above average $rofitability% then*f com$any is ma,ing above average $rofitability% thenthe com$any can satisfy its sta,ehol&ersthe com$any can satisfy its sta,ehol&ers

!B% *educing in/est in * < D < gi/ing di/idends to in/estors as!B% *educing in/est in * < D < gi/ing di/idends to in/estors asshort term o;Hecti/esshort term o;Hecti/es



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Strategic Intent

•• Strategic *ntent is the leveraging a firm2s internalStrategic *ntent is the leveraging a firm2s internalresources% ca$abilities an& core com$etencies toresources% ca$abilities an& core com$etencies toaccom$lish the firm2s vision% mission an& ob1ectives inaccom$lish the firm2s vision% mission an& ob1ectives ina com$etitive environment. ( eason behin&a com$etitive environment. ( eason behin&formulation of strategy)formulation of strategy)

•• *t is all about 'inning com$etitive battles an&*t is all about 'inning com$etitive battles an& gaininggaininglea&ershi$lea&ershi$ $osition by $utting organizational$osition by $utting organizational resourcesresourcesto best useto best use. .


Strategic Intent

•• When establishe& effectivelyWhen establishe& effectively-- a strategic intent cana strategic intent cancausecause $eo$le turn out e8cellent $erformance.$eo$le turn out e8cellent $erformance.

•• Strategic intent tries toStrategic intent tries to establish the $arametersestablish the $arameters thatthatsha$es thesha$es the- -GaluesGalues%% +otives+otives an&an& ctionsctions of $eo$le throughoutof $eo$le throughout

their organization.their organization.



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)he ierarchy o# strategic Intent

) broa&) broa& GisionGision of 'hat theof 'hat theorganizations shoul& be.organizations shoul& be.F) The organization2sF) The organization2s +ission.+ission.


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Gision

/learly/learly articulate&articulate& StrategicStrategic Gision%Gision% thatthatcommunicatescommunicates management2smanagement2s as$irations toas$irations tosta,ehol&erssta,ehol&ers 44 hel$shel$s steer steer thethe energiesenergies ofofcom$anycom$any $ersonnel in$ersonnel in commoncommon &irections.&irections.

8.8.-- AenryAenry 6or&2s6or&2s Gision of a car inGision of a car in everyevery garagegarage ha&ha& a $o'era $o'erbecausebecause itit ca$ture&ca$ture& the imagination ofthe imagination of othersothers%% ai&e&ai&e&internalinternal efforts toefforts to mobilizemobilize the 6or&the 6or& +otor +otor /om$any2s/om$any2sresourcesresources 44 serve&serve& as aas a referencereference $oint of$oint of guagingguaging thethemeritsmerits ofof /om$any2s/om$any2s StrategicStrategic ctionsctions


!Bam0les o# Gision Statements‘‘ There 'ill be a $ersonal com$uter on every &es, running2There 'ill be a $ersonal com$uter on every &es, running2

::+icrosoft soft'are+icrosoft soft'are. .0 ur vision is every boo, ever $rinte& in any language all0 ur vision is every boo, ever $rinte& in any language all

available in D= secon&s2:available in D= secon&s2: mazon Bin&lemazon Bin&le!+:!+: >to be the 'orl& lea&er in trans$ortation $ro&ucts an&>to be the 'orl& lea&er in trans$ortation $ro&ucts an&

relate& services. We 'ill earn our customers2% enthusiasmrelate& services. We 'ill earn our customers2% enthusiasmthrough continuous im$rovement &riven by the integrity%through continuous im$rovement &riven by the integrity%team'or,% an& innovation of !+ $eo$le.22team'or,% an& innovation of !+ $eo$le.22

>To be the number one athletic com$any in the 'orl& :>To be the number one athletic com$any in the 'orl& : 5i,e5i,e



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Mission

0202 +ission+ission isis thethe StatementStatement%% ty$icallyty$ically focuse&focuse& onon itsits$resent$resent businessbusiness sco$e%sco$e% 0202WhoWho WeWe rere 44 WhatWhat WeWe

o22o22..0+ission is nothing but the $ur$ose or reasonbehin& e8istance of the business2ThusThus +ission+ission statementsstatements broa&lybroa&ly &escribes&escribes anan

rganization2srganization2s $resent$resent ca$abilitiesca$abilities%% customer customer focuse&focuse&%% activitiesactivities 44 businessbusiness ma,eu$ma,eu$

((3n&erta,en3n&erta,en) )..


MissionMissionMission isis aa statementstatement hichhich de#inesde#ines thethe rolerole thatthat anan organi:ationorgani:ation

0lays0lays in society.in society.!B!B..-- ad;urryad;urry IndiaIndia-- )o)o attainattain leadershi0 0osition in theleadershi0 0osition in the

con#ectionarycon#ectionary marketmarket


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om0onents o# Mission Statement

•• /ustomers/ustomers: Who are the firm2s customers: Who are the firm2s customers•• #ro&uct"Services#ro&uct"Services: What are firm2s ma1or: What are firm2s ma1or $&ts$&ts."Services.."Services.•• +ar,ets+ar,ets: !eogra$hically% 'here &oes firm com$etes: !eogra$hically% 'here &oes firm com$etes•• TechnologyTechnology: Which technology firm is using: Which technology firm is using•• /oncern for !ro'th"Survival/oncern for !ro'th"Survival: *s the firm committe& to: *s the firm committe& to

gro'th 4 6inancial soun&nessgro'th 4 6inancial soun&ness•• Self /once$tSelf /once$t: 6irm2s ma1or com$etitive a&vantage: 6irm2s ma1or com$etitive a&vantage•• /oncern for #ublic *mage/oncern for #ublic *mage: *s the firm res$onsive to: *s the firm res$onsive to nvnv.%.%

Society etc.Society etc.•• /oncern for m$loyees/oncern for m$loyees : : We value our /ustomersWe value our /ustomers


Mission

rganizationsrganizations shoul&shoul& have mission:have mission:--a)a) ToTo ensureensure unanimityunanimity ofof $ur$ose$ur$ose 'ithin'ithin thethe

organizationorganization..b)b) #rovi&es#rovi&es basis forbasis for motivatingmotivating the use of thethe use of the

organizationsorganizations resourcesresources. .c)c) ToTo &evelo$&evelo$ a basis or stan&ar& fora basis or stan&ar& for allocatingallocating

organizationalorganizational resourcesresources&)&) ToTo facilitatefacilitate translation of ob1ective 4 goalstranslation of ob1ective 4 goals intointo aa

'or,'or, structurestructure involvinginvolving thethe assignmentassignment ofof tas,stas,s totores$onsibleres$onsible elementselements 'ithin'ithin thethe organizationorganization..



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haracteristics o# ,ood Mission Statement.. *t shoul& be feasible*t shoul& be feasible: *t shoul& be realistic 4 achievable on: *t shoul& be realistic 4 achievable on

the basis of available resourcesthe basis of available resourcesF.F. *t shoul& be $recise*t shoul& be $recise: 5either too small or too short: 5either too small or too short


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!Bam0le o# GM(S++griculture usiness De/elo0ment om0any

•• Gision%Gision% vibrant rural economy &riven by value vibrant rural economy &riven by value--a&&e& agriculture.a&&e& agriculture.•• MissionMission: To create an& facilitate the &evelo$ment of value: To create an& facilitate the &evelo$ment of value- -a&&e&a&&e&

agricultural businesses.agricultural businesses.•• ,oal,oal : ecruit local farmers intereste&"e8$erience& in business: ecruit local farmers intereste&"e8$erience& in business

&evelo$ment.&evelo$ment.•• (;Hecti/e(;Hecti/e : /reate a membershi$ of t'enty farmers by 6ebruary .: /reate a membershi$ of t'enty farmers by 6ebruary .•• StrategyStrategy : 3se local farmer lea&ers 'ith business &evelo$ment: 3se local farmer lea&ers 'ith business &evelo$ment

s,ills to &evelo$ the businesses.s,ills to &evelo$ the businesses.•• +ction Plan+ction Plan : 6orm a membershi$ committee to recruit local farmer: 6orm a membershi$ committee to recruit local farmer

lea&ers. *&entify forty farm lea&ers in the area. Cist theirlea&ers. *&entify forty farm lea&ers in the area. Cist their

@ualifications. /ontact them in&ivi&ually 'ith the e8$ectation that@ualifications. /ontact them in&ivi&ually 'ith the e8$ectation thathalf of them 'ill 1oin.half of them 'ill 1oin.


usiness De#inition

7usiness efinition7usiness efinition--•• 7usiness &efinition is a clear statement of the business% 7usiness &efinition is a clear statement of the business%

the firm is engage& in or is $lanning to enter.the firm is engage& in or is $lanning to enter.•• *t ans'ers the @uestion: What is our business in a $recise*t ans'ers the @uestion: What is our business in a $recise

'ay.'ay.•• !Bam0les%!Bam0les%

>We are in the beauty>We are in the beauty- -enriching businessenriching business –– Aelen an&Aelen an&/urtis/urtis

>We are in the business of com$uter technology>We are in the business of com$uter technology – – *ntel*ntel> We are in the trans$ortation business> We are in the trans$ortation business – – T C/T C/



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D.@ +;ell suggested ;usiness along threedimensions

. /ustomer grou$s – 'ho is being satisfie& (customer)

F. /ustomer nee&s – 'hat nee& is being satisfie&($ro&ucts)


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Peter Drucker s usiness De#inition Gie

#ro&ucts may come an& go but basic nee&s anro&ucts may come an& go but basic nee&s an&customer grou$s en&ure forever.customer grou$s en&ure forever.

ccor&ing to him business &efinition shoul& cover threeccor&ing to him business &efinition shoul& cover threevital as$ects.vital as$ects.

.. #ro&uct" Service conce$t#ro&uct" Service conce$tF.F. /ustomer segment/ustomer segment


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ritical Success @actors & S@'

Cets 3n&erstan& /S6 for aCets 3n&erstan& /S6 for a Shoe +anufacturerK.Shoe +anufacturerK.)) Aigh Nuality +anufacturing of ShoesAigh Nuality +anufacturing of ShoesF)F) /ost fficiency/ost fficiency


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4 Ste0 Procedure #or determining S@

)) !enerate the Success 6actors (*&entification of /S6)!enerate the Success 6actors (*&entification of /S6)(What &oes it ta,e to be successful)(What &oes it ta,e to be successful)

F) efining of /S62s into b1ectivesF) efining of /S62s into b1ectives(6ormulating ob1ectives(6ormulating ob1ectives '.r.t'.r.t. i&entifie& /S62s). i&entifie& /S62s)


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+ Shoe Manu#acturer s KPI

•• shoe manufacturer has /S6 of Aigh Nuality $ro&uct% shoe manufacturer has /S6 of Aigh Nuality $ro&uct%cost efficiency etc. Then its B#* 'ill becost efficiency etc. Then its B#* 'ill be)) 7ran& ecall ate by /ustomers7ran& ecall ate by /ustomers

F)F) e&uce& #ro&uct e1ection atee&uce& #ro&uct e1ection ate


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Key *esult +rea s &K*+ s'

•• B 2s are those functions or functional &ivisions" rea2sB 2s are those functions or functional &ivisions" rea2sof #erformance in 'hich rganization must continuallyof #erformance in 'hich rganization must continuallyim$rove to be successfulim$rove to be successful

•• efinitionefinition: M*n sim$le terms it may be &efine& as the: M*n sim$le terms it may be &efine& as the$rimary res$onsibility of an in&ivi&ual% the core area in$rimary res$onsibility of an in&ivi&ual% the core area in'hich each $erson is accountableM'hich each $erson is accountableM

8am$les of B 2s8am$les of B 2s-- ustomerustomer : Galue% Satisfaction: Galue% Satisfaction-- MarketingMarketing : To reach ultimate consumers: To reach ultimate consumers

-- ProductionProduction : /ontinuity of Su$$ly: /ontinuity of Su$$ly-- @inance@inance: *% vailability of 6un&s% #rofits etc.: *% vailability of 6un&s% #rofits etc.


--ProductProduct : Nuality 4 eman&: Nuality 4 eman&

!Bam0le o# K*+ s #or uman *esource)) StaffingStaffing

F)F) m$loyee elationsm$loyee elations


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!Bternal !n/ironmental +nalysis

•• nvironment outsi&e the com$any in 'hich it isnvironment outsi&e the com$any in 'hich it iso$eratingo$erating•• This environment may containThis environment may contain various factorsvarious factors % 'hich% 'hich

maymay affect the strategic decisionaffect the strategic decision ma,ing 4 strategicma,ing 4 strategicoutcome of the com$any.outcome of the com$any.

•• These factors can be classifie& as:These factors can be classifie& as:1)1) MacroMacro nvironmental factors 4nvironmental factors 42)2) MicroMicro nvironmental factorsnvironmental factors

*t is &e$en&ing u$on the overall im$act of these factors*t is &e$en&ing u$on the overall im$act of these factorson any com$any.on any com$any.


"eed o# !Bternal !n/. +nalysis.

•• *t $rovi&es an i&ea for the com$any to un&erstan&:*t $rovi&es an i&ea for the com$any to un&erstan&:)) /urrent 4 future tren&s in the mar,et/urrent 4 future tren&s in the mar,et

F)F) $$ortunities 4 Threats for the organization$$ortunities 4 Threats for the organization


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"eed o# !Bternal !n/. +nalysis.


)he !Bternal!n/ironment

Strategic IntentStrategic Mission <


Analysis of general environmentAnalysis of industry environment

Analysis of competitorenvironment

(00ortunities

> $$ortunities are the chances or favorable con&itions> $$ortunities are the chances or favorable con&itionsfor the organization2s gro'th or $erformancefor the organization2s gro'th or $erformance

•• GizGiz::)) merging or !ro'ing nee&s of customersmerging or !ro'ing nee&s of customers

F)F) Nuality 4 Technology im$rovementsNuality 4 Technology im$rovements


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)hreats

> n 8ternal factor that $oses anger or is, to its> n 8ternal factor that $oses anger or is, to itsWellbeing or #erformanceWellbeing or #erformance

•• GizGiz::)) /hange in emogra$hic " eman&/hange in emogra$hic " eman&

F)F) mergence of /hea$er Technologymergence of /hea$er Technology


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!Bternal !n/ironmental @actors

•• +acro 6actors+acro 6actors)) ##olitical 6actorsolitical 6actors

F)F) conomical 6actorsconomical 6actors


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P!S)E! +nalysis

efinitions:efinitions:

># ST analysis># ST analysis –– an analysis of the $olitical% economic%an analysis of the $olitical% economic%social an& technological factors in the e8ternalsocial an& technological factors in the e8ternalenvironment of an organization% 'hich can affect itsenvironment of an organization% 'hich can affect itsactivities an& strategic $erformance.activities an& strategic $erformance.

># ST C mo&el involves the collection an& $ortrayal of># ST C mo&el involves the collection an& $ortrayal ofinformation about e8ternal factors 'hich have% or mayinformation about e8ternal factors 'hich have% or mayhave% an im$act on business.have% an im$act on business.


Political @actors

•• 6actors relate& to the #olitics or !overnment of that6actors relate& to the #olitics or !overnment of that5ation.5ation.

•• ifferent #olitical 6actors 'ill have &ifferential im$actsifferent #olitical 6actors 'ill have &ifferential im$acts#olitical factors li,e:#olitical factors li,e:-- 5ature of #olitical System% *&eology5ature of #olitical System% *&eology-- #olitical Structure 4 its !oals 4 Stability#olitical Structure 4 its !oals 4 Stability

-- lections% 6un&ing of lections% *n&ustrial #romotionlections% 6un&ing of lections% *n&ustrial #romotion-- !overnment2s ole in 7usiness evelo$ment 4 #olicies!overnment2s ole in 7usiness evelo$ment 4 #olicies-- SocioSocio--#olitical factors#olitical factors



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!conomical #actors

•• conomic factors are relate& to the $ro&uction 4conomic factors are relate& to the $ro&uction 4&istribution of 'ealth% 'hich have its im$act on&istribution of 'ealth% 'hich have its im$act onbusiness of an organization.business of an organization.

•• conomic factors li,eQconomic factors li,eQ-- conomic stage of that country at that $oint of timeconomic stage of that country at that $oint of time-- conomic Structureconomic Structure-- /a$italistics/a$italistics"Socialistic"+i8e&"Socialistic"+i8e&-- #olicies li,e *n&ustrial"6iscal"monetary $olicies#olicies li,e *n&ustrial"6iscal"monetary $olicies-- conomic #lansQ E Rrs $lan or nnual 7u&getsconomic #lansQ E Rrs $lan or nnual 7u&gets

-- #er ca$ita income% &is$osable income% ! #% !5#% 7 ##er ca$ita income% &is$osable income% ! #% !5#% 7 #-- 6inancial *nstitutions% mo&e of trans$ortation etc.6inancial *nstitutions% mo&e of trans$ortation etc.


Socio- ultural #actors•• 6actors relate& to Auman elationshi$s% human6actors relate& to Auman elationshi$s% human

behaviors etc.behaviors etc.•• SocioSocio--/ultural factors li,e:/ultural factors li,e:-- emogra$hic: #o$ulation% &ensity 4 its &istribution% ageemogra$hic: #o$ulation% &ensity 4 its &istribution% age

com$osition% inter com$osition% inter--state migration% income &istributionstate migration% income &istribution-- /oncern of environment on $ollution% corru$tion 4 role/oncern of environment on $ollution% corru$tion 4 role

of me&iaof me&ia-- Galues li,e e8$ectations of society from business% ritualGalues li,e e8$ectations of society from business% ritual

beliefs% changing lifestyle $atternsbeliefs% changing lifestyle $atterns-- 6amily Structure% role of family members in $urchasing6amily Structure% role of family members in $urchasing

&ecision% e&ucation level etc.&ecision% e&ucation level etc.Dr. Prashant Kalaskar


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)echnological @actors

•• 6actors relate& to Bno'le&ge a$$lie& 4 materials 46actors relate& to Bno'le&ge a$$lie& 4 materials 4machines use& for $ro&uction $ur$ose% 'hich canmachines use& for $ro&uction $ur$ose% 'hich canaffect the business.affect the business.

•• 6actors li,eQ6actors li,eQ-- Sources of Technology: *nternal or 8ternal% /ost ofSources of Technology: *nternal or 8ternal% /ost of

ac@uisition of technology% /ollaboration etc.ac@uisition of technology% /ollaboration etc.-- Technology &evelo$ment stage% +anTechnology &evelo$ment stage% +an--+achine System+achine System-- /ommunication 4 *nfrastructural Technology in/ommunication 4 *nfrastructural Technology in

+anagement+anagement


*egulatory @actors•• 6actors relate& to #lanning% egulation 4 #romotion of6actors relate& to #lanning% egulation 4 #romotion of

economic activities by government that affectseconomic activities by government that affectsbusiness.business.

6actors such as:6actors such as:-- /onstitutional 6rame'or,% 6un&amental ights%/onstitutional 6rame'or,% 6un&amental ights%-- #olicies relate& to Cicensing% +ono$olies% 6 * etc.#olicies relate& to Cicensing% +ono$olies% 6 * etc.

-- #olicies relate& to &istribution 4 #ricing 4 their control.#olicies relate& to &istribution 4 #ricing 4 their control.-- #olicies relate& to *m$ort 4 8$ort#olicies relate& to *m$ort 4 8$ort-- ther $olicies relate& to sic, in&ustries% consumerther $olicies relate& to sic, in&ustries% consumer

$rotection etc.$rotection etc.



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Su00liers !n/ironment

•• Su$$liers are associate& 'ith the &istribution 4Su$$liers are associate& 'ith the &istribution 4$ro&uction system of the organization$ro&uction system of the organization

6actors li,e:6actors li,e:-- /ost% vailability 4 continuity of ra' material su$$ly/ost% vailability 4 continuity of ra' material su$$ly-- /ost 4 vailability of 6inance for im$lementing $lans/ost 4 vailability of 6inance for im$lementing $lans-- /osts% vailability 4 su$$ly of nergy ($o'er"6uel)/osts% vailability 4 su$$ly of nergy ($o'er"6uel)-- /ost% vailability of +achineries% s$ares 4 +aintenance/ost% vailability of +achineries% s$ares 4 +aintenance-- 7argaining $o'er of su$$liers 4 availability of7argaining $o'er of su$$liers 4 availability of

SubstitutesSubstitutes


o to 0er#orm the analysis?

•• The $rocess of carrying out # STC analysis shoul&The $rocess of carrying out # STC analysis shoul&involve as many managers as $ossible to get the bestinvolve as many managers as $ossible to get the bestresults. *t inclu&es the follo'ing ste$s:results. *t inclu&es the follo'ing ste$s:

•• Ste$ . !athering information about $olitical%Ste$ . !athering information about $olitical%economic% social an& technological changes anyeconomic% social an& technological changes anyother factor(s)other factor(s)

•• Ste$ F. *&entifying 'hich of the # STC factorsSte$ F. *&entifying 'hich of the # STC factorsre$resent o$$ortunities or threats.re$resent o$$ortunities or threats.



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!)(P Model

Why to $re$are an T #..?Why to $re$are an T #..?•• Ael$s organization to i&entify $$ortunities an&Ael$s organization to i&entify $$ortunities an&

ThreatsThreats•• To consoli&ate an& strengthen organization2s $ositionTo consoli&ate an& strengthen organization2s $osition•• #rovi&es the strategists% 'hich sectors have a#rovi&es the strategists% 'hich sectors have a

favorable im$act on the organizationfavorable im$act on the organization•• rganization ,no's 'here its stan&s 'ith res$ect torganization ,no's 'here its stan&s 'ith res$ect to

its environmentits environment

•• Ael$s in formulating a$$ro$riate strategyAel$s in formulating a$$ro$riate strategy


Pre0aring an !)(P

•• ivi&ing the environment into &ifferent sectors.ivi&ing the environment into &ifferent sectors.

•• nalysingnalysing the im$act of each sector on thethe im$act of each sector on theorganization.organization.

•• Sub&ivi&ing each environmental sector into sub factor.Sub&ivi&ing each environmental sector into sub factor.

•• *m$act of each sub sector on organization in form of a*m$act of each sub sector on organization in form of astatement.statement.



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Im0act alculation


L3 8tremely favorable im$act8tremely favorable im$actL1+o&erately favorable im$act

5o im$act

-1+o&erately unfavorable im$act-3 8tremely unfavorable im$act

)rends Pro;a;ility o#(ccurrence

Im0act on StrategiesS1 S3 S4

Pro;a;ility o# (ccurrence

igh

Medium

Eo

!)(P Pr 0aration


)rends Pro;a;ility o#(ccurrencesIm0act on Strategies

S1 S3 S4

Income Ee/el igh 3 1

S0ending a0a;ility igh 3 -1 -1

+ttitudes o# Work +/erage -1 3+da0tion to hange Eo -3

Social @actor 3 1 1


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!)(P #or +utomo;ile Industry


S."o. !n/ironmental @actors

(00ortunityC)hreats *emarks

1 Macro-!conomic @actors

a Per a0ita Income (00ortunity *ising P I means more a##orda;ility.&SiBth Pay ommission'

; Eoans +/aila;ility (00ortunity anks are ready #or gi/ing loans.

c Interest *ates (00ortunity Peo0le can t 0ay easy installments

Industry !n/ironment +nalysis

•• *n&ustry is a grou$ of com$anies% manufacturing*n&ustry is a grou$ of com$anies% manufacturingsimilar $ro&ucts % 'hich can be substitute& 'ith eachsimilar $ro&ucts % 'hich can be substitute& 'ith eachother 4 all the com$anies are targeting to the sameother 4 all the com$anies are targeting to the sameset of customers.set of customers.

•• *n&ustry nalysis allo's:*n&ustry nalysis allo's:•• ) ne' com$any to ma,e a strategic &ecision) ne' com$any to ma,e a strategic &ecision

'hether to enter (invest) in a $articular in&ustry or not'hether to enter (invest) in a $articular in&ustry or not•• F) ol& com$any alrea&y $resent in the in&ustry toF) ol& com$any alrea&y $resent in the in&ustry toma,e a strategic &ecision% 'hether to remain (invest)ma,e a strategic &ecision% 'hether to remain (invest)in the in&ustry or to e8it out (&ivest) from the in&ustry.in the in&ustry or to e8it out (&ivest) from the in&ustry.



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PorterNs O @orce Model

#orter s E 6orce +o&el (suggeste& by +ichael . #orter of Aarvar& 7usiness School in ;L;) is a frame'or, toanalyze level of com$etition 'ithin an in&ustryan& business strategy &evelo$ment.

ttractiveness in this conte8t refers to the overallin&ustry gro'th 4 $rofitability 'ith less is,.

n MunattractiveM in&ustry is one in 'hich thecombination of these five forces acts to &rive &o'noverall $rofitability 4 $ro&uces ris,.



•• TheThe 6ive6ive 6orces6orces mo&elmo&el ofof #orter #orter isis anan outsi&eoutsi&e--ininbusinessbusiness unitunit strategystrategy tooltool thatthat isis use&use& toto ma,ema,e anananalysisanalysis ofof thethe attractivenessattractiveness (value(value......)) ofof anan in&ustryin&ustrystructurestructure. .

•• *t*t ca$turesca$tures thethe ,ey,ey elementselements ofof in&ustryin&ustry com$etitioncom$etition. .

•• 6ive6ive forcesforces thatthat &etermine&etermine thethe intensityintensity ofof com$etitioncom$etitioninin thethe an&an& thereforetherefore ttractivenessttractiveness ofof aa +ar,et+ar,et. .



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• #orter s five forces inclu&e –• Three forces from J ori:ontalN com0etition :

) Threat of substitute $ro&ucts%F) The threat of establishe& rivals% an&


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PorterNs O @orces o# om0etition


)hreat #romom0etition

ustomerargainingPo er

)hreat o#Su;stitutes

Su00lierargainingPo er

)hreat o# "e!ntrants

PorterNs O @orces o# om0etition


uyersSu00liers

Su;stitute0roducts

Potentialentrants

Industry com0etitors

*i/alry among

eBisting #irms

!hreat of ne" entrants

#argaining po"er of suppliers

#argaining po"er

of $uyers

!hreat of su$stitutes


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Porter s O @orce Model•• #orter2s E force mo&el allo's a com$any to un&erstanorter2s E force mo&el allo's a com$any to un&erstan&

current com$etitive environment of the in&ustrycurrent com$etitive environment of the in&ustry(((00ortunities < )hreats(00ortunities < )hreats ))

•• Then /om$anies can better un&erstan& itsThen /om$anies can better un&erstan& its Strength


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)hreat o# "e !ntrant

•• To &o so% 5e' ntrants &o try to &ifferentiate overTo &o so% 5e' ntrants &o try to &ifferentiate overe8isting com$any2s $ro&ucts bye8isting com$any2s $ro&ucts by--•• &&ing ne' $ro&uction ca$acity&&ing ne' $ro&uction ca$acity•• 7rings in substantial resources in 4 2s7rings in substantial resources in 4 2s•• Technological a&vancement over com$etitorsTechnological a&vancement over com$etitors

The e8tent of threat of by the ne' entrant by theThe e8tent of threat of by the ne' entrant by theavailable com$etitors can be re&uce& either byavailable com$etitors can be re&uce& either by- -

.. ntry 7arrier ntry 7arrier F.F. etaliation by the available com$etitorsetaliation by the available com$etitors



•• ntry 7arrier:ntry 7arrier:•• *n this metho&% the available com$anies can create a*n this metho&% the available com$anies can create a

barrier for a ne' com$any to enter in the in&ustry.barrier for a ne' com$any to enter in the in&ustry.

•• ither theither the entry 0rocedure is di##icultentry 0rocedure is di##icult- - so that ne'so that ne'com$any can2t enter in the in&ustry or com$any can2t enter in the in&ustry or

•• TheThe entryentry in the in&ustryin the in&ustry is costlyis costly% 4 re@uire huge% 4 re@uire hugeinvestment% 'hich the ne' com$any 1ust can2t affor&investment% 'hich the ne' com$any 1ust can2t affor&•• So that e8isting com$anies 'ill en1oy their sales 4So that e8isting com$anies 'ill en1oy their sales 4

+ar,et share+ar,et share



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!ntry arrier%!ntry arrier%•• The t'o most im$ortant barriers to entry are:The t'o most im$ortant barriers to entry are:•• /a$ital re@uirements/a$ital re@uirements•• !overnment $olicy an& regulations!overnment $olicy an& regulations•• There are $lenty of other $otential barriers thatThere are $lenty of other $otential barriers that

might scare ne' entrants a'ay:might scare ne' entrants a'ay:•• #ro$rietary $ro&ucts an& ,no'le&ge#ro$rietary $ro&ucts an& ,no'le&ge•• ccess to in$uts an& &istributionccess to in$uts an& &istribution•• conomies of scale an& other cost a&vantagesconomies of scale an& other cost a&vantages


)hreat o# "e !ntrant*etaliation ;y the a/aila;le com0etitors%*etaliation ;y the a/aila;le com0etitors%•• etaliation is nothing but aetaliation is nothing but a strong reactionstrong reaction ma&e byma&e by

the available com$anies% 'hich is li,e not e8$ecte& bythe available com$anies% 'hich is li,e not e8$ecte& bythe ne' entrant com$any.the ne' entrant com$any.

•• This 'ill not let the ne' com$any to s$rea& their rootsThis 'ill not let the ne' com$any to s$rea& their rootsin the in&ustryin the in&ustry

•• -- The retaliation is generally seen in consoli&ate&The retaliation is generally seen in consoli&ate&in&ustry than in fragmente& in&ustryin&ustry than in fragmente& in&ustry



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*etaliation ;y the a/aila;le com0etitors%*etaliation ;y the a/aila;le com0etitors%•• The retaliation can be offere& by the com$anies inThe retaliation can be offere& by the com$anies in

either of the follo'ing 'ayseither of the follo'ing 'ays- -•• Aeavier investments as com$are to ne' entrantAeavier investments as com$are to ne' entrant

com$any% so that the machinery% technology or assetcom$any% so that the machinery% technology or asseta&vancement can be achieve&.a&vancement can be achieve&.

•• 7y offering variety 4 im$rove& @uality $ro&ucts7y offering variety 4 im$rove& @uality $ro&ucts•• Through economies of scale% re&ucing the $rices of theThrough economies of scale% re&ucing the $rices of the

$ro&ucts% belo' 'hich com$etitors 1ust can2t affor&%$ro&ucts% belo' 'hich com$etitors 1ust can2t affor&%to re&uce their $ricesto re&uce their $rices


)hreat o# "e !ntrantIndustries with high barriers of entry:• Car making :- high u$front ca0ital investment in manufacturing

e@ui$mentQ- /om$liance 'ith safety an& emission rules and

regulation

- ccess to $arts su$$liers% &evelo$ment of a net'or, ofcar dealershi0s % big mar,eting cam$aign to establish ane car ;rand 'ith consumers.

- Low barriers of entry: com$uter har& 'are in&ustry



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argaining Po er o# Su00lier

•• *t is the situation% 'hich in&icates that the mar,et is*t is the situation% 'hich in&icates that the mar,et isconsisting ofconsisting of fe" % potential suppliers fe" % potential suppliers 44 largelargecustomer basecustomer base. .

•• Aence the terms 4 con&itions of the su$$liers are veryAence the terms 4 con&itions of the su$$liers are veryhighhigh to be han&le& by the com$any.to be han&le& by the com$any.

•• The su$$liers may bargain in&ivi&ually or collectivelyThe su$$liers may bargain in&ivi&ually or collectively(through associations) or com$any &irect selling is(through associations) or com$any &irect selling isrestricte&.restricte&.



•• The bargaining may be forThe bargaining may be for $urchasing$urchasing the $ro&ucts bythe $ro&ucts bythe su$$liers at lo'er $ricethe su$$liers at lo'er $rice 'ith high margins'ith high margins

•• SellingSelling the $ro&ucts"servicesthe $ro&ucts"services at higher $ricesat higher $rices to theto thecustomers.customers.

•• Selling the $ro&ucts ofSelling the $ro&ucts of inferior @ualityinferior @uality to theto thecustomerscustomers



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6ollo'ing are the con&itions % 'here su$$liers6ollo'ing are the con&itions % 'here su$$liersbargaining $o'er can be high:bargaining $o'er can be high:

•• WhenWhen su$$liers are fe'su$$liers are fe' 4 buyers are in large number 4 buyers are in large number •• When theWhen the $ro&ucts are uni@ue$ro&ucts are uni@ue 4 not commonly4 not commonly

availableavailable•• When theWhen the substitutes of the $ro&ucts are not easilysubstitutes of the $ro&ucts are not easily

availableavailable to the customersto the customers•• When theWhen the su$$liers are not critically &e$en&ent on thesu$$liers are not critically &e$en&ent on the

earnings of $ro&ucts"services su$$lie&earnings of $ro&ucts"services su$$lie&



6ollo'ing are the con&itions % 'here su$$liers6ollo'ing are the con&itions % 'here su$$liersbargaining $o'er can be high:bargaining $o'er can be high:

•• When theWhen the buyers buys in limite& @uantitybuyers buys in limite& @uantity% 'hich is not% 'hich is notim$ortant to the su$$liers.im$ortant to the su$$liers.

•• *f the*f the su$$liers can have a for'ar& integrationsu$$liers can have a for'ar& integration 'ith the'ith theretailers% 'ith 'hich they can ma,e their o'nretailers% 'ith 'hich they can ma,e their o'n

$ro&ucts.$ro&ucts.•• Where theWhere the association of the su$$liers is strongassociation of the su$$liers is strong 4 4com$any is &e$en&ent on su$$liers to su$$ly theircom$any is &e$en&ent on su$$liers to su$$ly their$ro&ucts 4 services$ro&ucts 4 services



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8am$les:8am$les:•• The #/ ma,ing in&ustryThe #/ ma,ing in&ustry faces the almost mono$olisticfaces the almost mono$olistic

$o'er of o$erating system su$$lier.$o'er of o$erating system su$$lier. +icrosoft+icrosoft hashasabuse& its $o'er a number of times.abuse& its $o'er a number of times.

•• *n&ustries using*n&ustries using &iamon&s&iamon&s% such as 1e'elry an&% such as 1e'elry an&electronics% face the huge $o'er ofelectronics% face the huge $o'er of e7eerse7eers% that% thatta,es a&vantage of the su$$ly concentration tota,es a&vantage of the su$$ly concentration toachieve &ominant mar,et shareachieve &ominant mar,et share

•• Eess argaining Po er%Eess argaining Po er% Su$$liers of 6oo& #rocessingSu$$liers of 6oo& #rocessingin&ustries has less 7# from farmersin&ustries has less 7# from farmers


argaining Po er o# uyers

•• 7argaining $o'er of buyer means% the buyers7argaining $o'er of buyer means% the buyersin&ivi&ually or collectively can $ut con&itions" &eman&sin&ivi&ually or collectively can $ut con&itions" &eman&sof $urchasing $ro&ucts "services.of $urchasing $ro&ucts "services.

•• 7argaining $o'er is the ability to influence the setting7argaining $o'er is the ability to influence the settingof $rices.of $rices.The bargaining may be for The bargaining may be for: :

•• Nuality in $ro&ucts " services (Aotel *n&ustry)Nuality in $ro&ucts " services (Aotel *n&ustry)•• #rices of the $ro&ucts" Services lo'er as they &esire#rices of the $ro&ucts" Services lo'er as they &esire•• 8$ecting more value against 'hat they $ay8$ecting more value against 'hat they $ay



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The bargaining $o'er of the buyer is more 'hen:The bargaining $o'er of the buyer is more 'hen:•• When the buyers are in limite& in number When the buyers are in limite& in number

•• When the buyers are the $otential buyer in volumeWhen the buyers are the $otential buyer in volume

•• When the buyers have alternatives for su$$ly 4 'hereWhen the buyers have alternatives for su$$ly 4 'heresu$$lier can su$$ly U buyer2s con&itions.su$$lier can su$$ly U buyer2s con&itions.

•• S'itching cost is lo'% but can affect the su$$liers to aS'itching cost is lo'% but can affect the su$$liers to agreat e8tentgreat e8tent



The bargaining $o'er of the buyer is more:The bargaining $o'er of the buyer is more:•• )) When the buyers itself has the ability to integrateWhen the buyers itself has the ability to integrate

bac,'ar& to create o'n ca$acity su$$ly source.bac,'ar& to create o'n ca$acity su$$ly source.•• 8.8.-- 7uil&ing constructor 4 material su$$liers7uil&ing constructor 4 material su$$liers•• -- Schools 4 colleges 'ith uniforms or otherSchools 4 colleges 'ith uniforms or other

material su$$liersmaterial su$$liers

•• Aence the customers can &eman&s for the re&ucingAence the customers can &eman&s for the re&ucingthe $rices% 'hich may affect the total $rofitability ofthe $rices% 'hich may affect the total $rofitability ofthe su$$liersthe su$$liers



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)hreat o# Su;stitute Products

•• Substitutes are those $ro&ucts 'hich can beSubstitutes are those $ro&ucts 'hich can besubstitute& 'ith each others.substitute& 'ith each others.

•• When the $ro&ucts has a large number of substitutes%When the $ro&ucts has a large number of substitutes%the $rices of the $ro&ucts &oesn2t move highthe $rices of the $ro&ucts &oesn2t move high

•• vailability of close substitutes $ro&uces% negativevailability of close substitutes $ro&uces% negativecom$etitive im$act.com$etitive im$act.

•• ny in&ustry% 'here close substitutes are not available%ny in&ustry% 'here close substitutes are not available%

the com$any sales their $ro&ucts at higher $ricesthe com$any sales their $ro&ucts at higher $rices


)hreat o# Su;stitute Products!hreats of u$stitute products is high "hen&!hreats of u$stitute products is high "hen&•• When the s'itching cost is lo'When the s'itching cost is lo'•• #rices of substitute $ro&ucts are lo'er #rices of substitute $ro&ucts are lo'er •• Nuality 4 $erformance of the substitute& $ro&ucts are eitherNuality 4 $erformance of the substitute& $ro&ucts are either

e@ual or little or greater than ma1or in&ustry $ro&uctse@ual or little or greater than ma1or in&ustry $ro&ucts•• *n such cases% com$anies can offset the effect of substitute*n such cases% com$anies can offset the effect of substitute

$ro&ucts% by &ifferentiation over com$etitors i.e. by$ro&ucts% by &ifferentiation over com$etitors i.e. by$rovi&ing$rovi&ing ––

•• igher Auality Eo er Pricesigher Auality Eo er Prices•• etter +#ter Sales Ser/icesetter +#ter Sales Ser/ices•• Eocation +d/antage etc.Eocation +d/antage etc.



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)hreat o# Su;stitute Products

•• 6ull substitute $ro&ucts are $ro&ucts from6ull substitute $ro&ucts are $ro&ucts from&ifferent manufacturers that fulfill the e8act same&ifferent manufacturers that fulfill the e8act same$ur$ose.$ur$ose.

8.8.--Bellog sBellog s corn fla,es an& generic bran& corncorn fla,es an& generic bran& cornfla,es.fla,es.

•• #artial substitutes are $ro&ucts that only $artially#artial substitutes are $ro&ucts that only $artiallysubstitute each other.substitute each other.

8.8.-- holi&ay in holi&ay in #u,het#u,het is not e8actly the same as ais not e8actly the same as a

holi&ay inholi&ay in 7an,o,7an,o,% even though they are both cities% even though they are both citiesan& they both feature channels.an& they both feature channels.


Protecting against su;stitution

•• istributorsistributors may try to $rotect themselves againstmay try to $rotect themselves againstsubstitution 'ith e8clusive &istribution agreements.substitution 'ith e8clusive &istribution agreements.7uyers circumvent them 'ith so calle& grey mar,et7uyers circumvent them 'ith so calle& grey mar,etim$orts.im$orts.

•• #ro&ucers#ro&ucers may try to $rotect their $ro&ucts 'ithmay try to $rotect their $ro&ucts 'ithstrong bran&ing% tra&e mar,s% $atents an& otherstrong bran&ing% tra&e mar,s% $atents an& other$sychological an& legal barriers against substitutes.$sychological an& legal barriers against substitutes.

•• nother 'ay to $rotect from substitution is to ma,enother 'ay to $rotect from substitution is to ma,ethe $ro&ucts incom$atible 'ith com$eting $ro&ucts.the $ro&ucts incom$atible 'ith com$eting $ro&ucts.

n e8am$le are the &ifferent lens systems forn e8am$le are the &ifferent lens systems forSC cameras.SC cameras.



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)hreat o# Su;stitute Products!Bam0les o# Su;stitution%• Washing $o'&er- &ozen of bran&s sitting on the shelves

an& 'aiting for consumers to $ic, them u$. /onsumer 'illoften $ic, u$ the one that is on s$ecial on sho$$ing &ay.

• il. lthough alternative forms of energy are beingstu&ie& an& intro&uce&% most engines to&ay run ongasoline. !asoline can not be re$lace& that @uic,ly on alarge scale.

• #harmaceuticals in the short term% because they are$rotecte& by $atents. *n the long term% generics can &enttheir mar,et share an& $rofits.


Intensity o# *i/alry among com0etitors•• *n every in&ustry% a goo& number of com$anies are*n every in&ustry% a goo& number of com$anies are

$resent% 'ho com$etes 'ith each other for creating a$resent% 'ho com$etes 'ith each other for creating acom$etitive $osition in the in&ustrycom$etitive $osition in the in&ustry

•• e$en&ing u$on the nature of the in&ustry 4 stage ofe$en&ing u$on the nature of the in&ustry 4 stage ofin&ustry% the number of com$etitors in the in&ustry 4in&ustry% the number of com$etitors in the in&ustry 4intensity of com$etition is &e$en&ent.intensity of com$etition is &e$en&ent.

Dimensions o# *i/alry among com0etitors%Dimensions o# *i/alry among com0etitors%+ om0etiti/e Structure+ om0etiti/e StructureDemand onditionsDemand onditions!Bit arriers!Bit arriers



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Intensity o# *i/alry among com0etitors

/om$etitive Structure: This refers to /om$etitive Structure: This refers to- -•• 5o. of /om$etitors5o. of /om$etitors•• Sizes 4 iversity of the com$anySizes 4 iversity of the com$any•• ifferent ty$es of com$etitive structures haveifferent ty$es of com$etitive structures have

&ifferent im$lications for e8isting firms 4 for ne'&ifferent im$lications for e8isting firms 4 for ne'entrant.entrant.

•• Structure of the in&ustry vary from /onsoli&ate& toStructure of the in&ustry vary from /onsoli&ate& to6ragmente& in&ustry6ragmente& in&ustry



eman& /on&itions:eman& /on&itions: This refers toThis refers to--•• 5ature of the com$anies 45ature of the com$anies 4•• eman& of e8isting customers in the in&ustryeman& of e8isting customers in the in&ustry•• high &eman& high &eman&% increasing &eman& ten&s to% increasing &eman& ten&s to mo&eratemo&erate

com$etitioncom$etition% as each com$any can earn res$ective +S% as each com$any can earn res$ective +S&e$en&ing u$on their com$etency levels.&e$en&ing u$on their com$etency levels.

•• stagnant &eman& stagnant &eman& or &eor &e--gro'ing mar,et lea& togro'ing mar,et lea& tointensity of com$etitionintensity of com$etition% so as to ta,e over as much% so as to ta,e over as much$ossible mar,et share from the com$etitors$ossible mar,et share from the com$etitors



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8it 7arriers:8it 7arriers: This refers to situation in the in&ustry%This refers to situation in the in&ustry%'hich $revents the com$anies from leaving the'hich $revents the com$anies from leaving thein&ustry% even though% the $rofitability% * isin&ustry% even though% the $rofitability% * isless"negative in the in&ustry.less"negative in the in&ustry.

The e8it barriers may beThe e8it barriers may be- -•• conomic e8it barriersconomic e8it barriers•• motional e8it barriersmotional e8it barriers•• Strategic 6actors% 'hich $revent com$anies to e8itStrategic 6actors% 'hich $revent com$anies to e8it

from the in&ustryfrom the in&ustry



8it 7arriers:8it 7arriers:•• 7arriers to e8it are obstacles to mar,et $layers 'ho7arriers to e8it are obstacles to mar,et $layers 'ho

realize that they 'ill not turn a $rofit an& 'oul& li,e torealize that they 'ill not turn a $rofit an& 'oul& li,e to@uit the mar,et.@uit the mar,et.

•• The &ifficulties of e8iting a mar,et can force a $layer toThe &ifficulties of e8iting a mar,et can force a $layer to,ee$ com$eting as the least ba& alternative.,ee$ com$eting as the least ba& alternative.

•• The increase& com$etition affects negatively the otherThe increase& com$etition affects negatively the otherincumbents.incumbents.



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8it 7arriers: 8am$les8it 7arriers: 8am$les) *n&ustries 'ith high barriers to e8it:) *n&ustries 'ith high barriers to e8it:

•• Wireless TelecomWireless Telecom: the $ro&uction of an a&&itional: the $ro&uction of an a&&itionalminute of 'ireless call costs virtually nothing% mostminute of 'ireless call costs virtually nothing% mostcosts being u$ front investment in e8$ensivecosts being u$ front investment in e8$ensivee@ui$ment &e$loyment.e@ui$ment &e$loyment.

•• ir Travelir Travel: a&&ing a $assenger to a sche&ule& air$lane: a&&ing a $assenger to a sche&ule& air$lanecost 1ust a little bit of fuel% as o$$ose& to the huge costcost 1ust a little bit of fuel% as o$$ose& to the huge costof i&le air$lanes.of i&le air$lanes.



8it 7arriers: 8am$les8it 7arriers: 8am$lesF) *n&ustries 'ith Co' barriers to e8it:F) *n&ustries 'ith Co' barriers to e8it:•• etailetail: inventory can be move& to more $rofitable: inventory can be move& to more $rofitable

mar,ets or li@ui&ate&.mar,ets or li@ui&ate&.•• #ersonal care services#ersonal care services: labor is the most im$ortant: labor is the most im$ortant

$rice factor for these services.$rice factor for these services.



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@or +ny Auery..$$$$

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Unit-1 Strategic Management Final

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