STRATEGY – An STRATEGY – An IntroductionIntroduction
Sandeep ChoudharySandeep Choudhary
Book name - Strategic Planning Formulation Of
Corporate StrategyAuthors - Ramaswamy &
NamakumariPublisher - Macmillan
India Limited(Available in MBA
Library)
STRATEGYSTRATEGY“To fight and conquer in all your
battles is not supreme excellence; supreme excellence consists in breaking the enemy’s resistance without fighting.”
SUN TZU
Why do only some organizations survive?
Murphy Polson Butter Radio Ceylon J K Television Delhi Cloth Mills (DCM) Presidency Banks
MNCs surviving in IndiaMNCs surviving in India…… GOODYEAR – 1822GOODYEAR – 1822 STANCHART – 1858STANCHART – 1858 SIEMENS – 1867SIEMENS – 1867 HUL – 1888HUL – 1888 GE – 1902GE – 1902 CASTROL – 1910CASTROL – 1910 NESTLE – 1912NESTLE – 1912 PHILIPS – 1930PHILIPS – 1930 BATA - 1931BATA - 1931
Porter: “What is Strategy?”, 1996
Operational Effectiveness is a necessary but not a sufficient condition for sustained competitive advantage
OE means performing similar activities better than rivals perform them.
Any no. of practices that allow a company to better utilize its inputs by reducing defects in products or developing better products faster.
For SCA, company has to strategize!
Effectiveness vs. Efficiency Effectiveness indicators measure how much
your targets were reached. They relate actual to expected values.
Typical examples are: actual to expected sales saving on budget project cost
Effectiveness indicators require a plan: you can't measure effectiveness unless you have a target.
Effectiveness vs. Efficiency Efficiency indicators, measure how "well" your
resources (like people, machines and money) were to produced output (like products, services and profit).
Efficiency indicators include traditional financial ratios (profitability, turnover ...), but non-monetary efficiency measures are today recognized as a key factor to track cause-effect of business decisions.
Examples of such measures are: work hours per unit produced prospect close rate calls per prospect visits per prospect incidents per work-month.
Output vs Outcome
Outputs relate to "what we do." What pops out of the end of a process is an output. Eg. Meal
Outcomes refer to "what difference is there."
An OUTCOME is a level of performance, or achievement. Eg. too hot, or too cold
(Temperature) too much to eat
(Quantity) tasty, or disgusting
(Customer Perception)
STRATEGIC MANAGEMENT - STRATEGIC MANAGEMENT - DefinedDefined
Art & science of Art & science of formulatingformulating, , implementingimplementing, and , and evaluatingevaluating, cross functional decisions that enable an , cross functional decisions that enable an organization to achieve its objectives.organization to achieve its objectives.
In essence, the In essence, the strategic planstrategic plan is a company’s is a company’s game plan game plan
Three big strategic Questions: -Three big strategic Questions: -1.1. Where are we now?Where are we now?2.2. Where do we want to go? Where do we want to go?
Business(es) to be in and market positions to stake outBusiness(es) to be in and market positions to stake out Buyer needs and groups to serveBuyer needs and groups to serve
3. How will we get there?3. How will we get there?
What Business are you in: What Business are you in: Coca ColaCoca Cola
soft drinks? soft drinks? Competition is PepsiCompetition is Pepsi
beverages? beverages? Competition is tea, coffee, Competition is tea, coffee,
softdrinkssoftdrinks thirst -quenching?thirst -quenching?
Competition is water & all Competition is water & all liquids!liquids!
TWO RETAILERS AT A GLANCETWO RETAILERS AT A GLANCE
Sears Wal-Mart
Year founded 1891 1962
Stores 1980Stores 2004
8642026
6005289
Revenues 1980Revenues 2004
$25,194 million$36,100 million
$1,643 million$285,222 million
Net profits 1980Net profits 2004
$606 M$507 M
$55 M$10,267 M
Market capitalization 1980Market capitalization 2004
USD 4.8 billionUSD 12.2 billion
USD 1 billionUSD 200.2 billion
1414
FEATURES OF STRATEGYFEATURES OF STRATEGY Strategy is all about winningStrategy is all about winning
Strategy offers broad guidelinesStrategy offers broad guidelines
Strategy is forward lookingStrategy is forward looking
Strategy life span is limitedStrategy life span is limited
Strategy is generally a product of top management Strategy is generally a product of top management thinkingthinking
Strategy is a dynamic and flexible program of actionStrategy is a dynamic and flexible program of action
Strategy is an inherently creative process.Strategy is an inherently creative process.
STRATEGYSTRATEGYStrategy should specify:Strategy should specify:
What – objectives to accomplishedWhat – objectives to accomplished
Where – industries & product-market to Where – industries & product-market to focusfocus
How – resources to allocate to meet How – resources to allocate to meet opportunities & threatsopportunities & threats
Competitive AdvantageCompetitive Advantage What are you BEST AT ?What are you BEST AT ?
Why do your customers buy from you ?Why do your customers buy from you ?
Core/Essence of the CorporationCore/Essence of the Corporation Achieve a sustainable competitive advantageAchieve a sustainable competitive advantage
A A CA CA exists when a firm is able to deliver the exists when a firm is able to deliver the same benefits as competitors at a same benefits as competitors at a lower cost lower cost or or deliver benefits that deliver benefits that exceedsexceeds those of those of competing products.competing products. Thus CA enables the Thus CA enables the firm to create superior value for its firm to create superior value for its customers & superior profits for itself.customers & superior profits for itself.
VOLVO – Safety, VOLVO – Safety, HUL – Distribution channels, HUL – Distribution channels, HONDA – Engines & Powertrain, HONDA – Engines & Powertrain, CANON - optics, imaging, microprocessor CANON - optics, imaging, microprocessor
controls, controls, WALT DISNEY – Animation, storytelling & WALT DISNEY – Animation, storytelling &
efficient use of theme parks, efficient use of theme parks, MICROSOFT – IT software, MICROSOFT – IT software, INTEL – micro-processors,INTEL – micro-processors,
Three types of StrategiesThree types of Strategies Corporate – Mission, Goals & Corporate – Mission, Goals &
objectivesobjectives
Business – SBU objectives, Competitive Business – SBU objectives, Competitive strategy, Deployment of resourcesstrategy, Deployment of resources
Functional – Marketing, R&D, Functional – Marketing, R&D, Operational, Human resourcesOperational, Human resources
The Strategy Vocabulary Mission : the reason for existence,
fundamental idea on which the business is built
do we remember ?, is it short ? does it motivate/inspire? does it influence decision making ?
Good mission statements are like a unique signature
Characteristics – Short, memorable, Market focused, inspiring
Mission statements serve a very important purpose.
they are also the basis for a SWOT analysis
04/26/2304/26/23
Mission – What does mission do? How does it Mission – What does mission do? How does it help the firm?help the firm? Lends direction to corporate planning, it Lends direction to corporate planning, it
directs the formulation of the growth plan and directs the formulation of the growth plan and guides the nature and pace of growth.guides the nature and pace of growth.
·· Helps the firm to clarify what its aspirations are Helps the firm to clarify what its aspirations are and where exactly it would like to reach and and where exactly it would like to reach and what it would like itself to be.what it would like itself to be.
Or we can direct entire planning and Or we can direct entire planning and formulation of all objectives.formulation of all objectives.
· It prevents subsequent steps going topsy-turvy.· It prevents subsequent steps going topsy-turvy.
SAMPLE MISSION STATEMENTSAMPLE MISSION STATEMENT McDonald’sMcDonald’s To offer the fast food customerTo offer the fast food customer prepared in the same prepared in the same
high-quality manner world-wide, tasty and reasonably high-quality manner world-wide, tasty and reasonably priced, delivered in a consistent, low-key decor and priced, delivered in a consistent, low-key decor and friendly atmosphere.friendly atmosphere.
A MISSION STATEMENT should A MISSION STATEMENT should Set firm apart from others Set firm apart from others Arouse strong sense of organizational identity & Arouse strong sense of organizational identity &
business purposebusiness purpose
Eicher Consultancy: Eicher Consultancy: “To make India an economic “To make India an economic power in the lifetime, about 10 to 15 years, of its power in the lifetime, about 10 to 15 years, of its founding senior managers”.founding senior managers”.
Marico Industries: Marico Industries: “The three P’s of Marico: People, “The three P’s of Marico: People, Products, and Profits”Products, and Profits”
Ranbaxy Laboratories: Ranbaxy Laboratories: “To become a research based “To become a research based international pharmaceutical company.”international pharmaceutical company.”
Unit Trust of India: Unit Trust of India: “To keep the common man in “To keep the common man in sharper focus; to encourage an investment habits sharper focus; to encourage an investment habits among them . . .”among them . . .”
Mission statements…Mission statements…GOOGLE: GOOGLE:
To organize the world‘s information and make To organize the world‘s information and make it universally accessible and useful.it universally accessible and useful.
FACEBOOK:FACEBOOK: To give people the power to share and make To give people the power to share and make
the world more open and connected. the world more open and connected.
MICROSOFT:MICROSOFT: To help people and businesses throughout the To help people and businesses throughout the
world realize their full potential.world realize their full potential.
The Strategy Vocabulary Vision : what company aspires to become &
achieve, it could be personal dream of the CEO• CEO led Vision Statements
Characteristics: Future casting – 5 years ahead, clear & visible,
audacious (bold) – Think Big, descriptive Disneyland: “To be the happiest place on earth”.
Question : is the vision consistent with the mission ? does it result in consistent objectives and goals ?
The Sail StoryVision statements
“...to be the 3rd largest producer of iron and steel in the world...”
V Krishnamurthy, 1987
“ ...to be the technical leader in the steel industry...”
Dr S R Jain, 1990
“...focus on customer satisfaction...”M R R Nair, 1993
OBJECTIVES & GOALSOBJECTIVES & GOALS
GoalsGoals signifies a general statement of signifies a general statement of direction in line with the mission. It may be direction in line with the mission. It may be qualitative in nature.qualitative in nature.
Objectives Objectives are the ends that state are the ends that state specifically how the goals shall be achieved. specifically how the goals shall be achieved. They are concrete and specific to goals They are concrete and specific to goals which are generalized. In this manner which are generalized. In this manner objectives make the goals operational.objectives make the goals operational.
Example…Example…GOALGOALLive healthier and lower my cholesterol.Live healthier and lower my cholesterol.
STRATEGYSTRATEGYBetter food, less beer and more exercise.Better food, less beer and more exercise.
SMART OBJECTIVESSMART OBJECTIVES1) Participate in a challenge organized by one of my work colleagues 1) Participate in a challenge organized by one of my work colleagues
to lose 10 pounds in 10 weeks starting today, which means having a to lose 10 pounds in 10 weeks starting today, which means having a maximum weight of 192.4 pounds on March 18.maximum weight of 192.4 pounds on March 18.
2) Drink no beer from Sunday to Thursday until Easter.2) Drink no beer from Sunday to Thursday until Easter.3) Do exercise at least 3 times per week for a minimum of 30 minutes 3) Do exercise at least 3 times per week for a minimum of 30 minutes
each time until June 30.each time until June 30.4) Train for and run the 10K on May 25 during the Ottawa Race 4) Train for and run the 10K on May 25 during the Ottawa Race
Weekend.Weekend.5) Set other (3 to 5) objectives related to my goal by June 30 for the 5) Set other (3 to 5) objectives related to my goal by June 30 for the
last 6 months of the year.last 6 months of the year.
TACTICSTACTICSTactics to help achieve Objective 1:Tactics to help achieve Objective 1:- Plan weekly meals each Sunday to minimize the chances of - Plan weekly meals each Sunday to minimize the chances of
cooking last minute unhealthy food or ordering restaurant food.cooking last minute unhealthy food or ordering restaurant food.- Bring homemade lunches at work (prepare them the night before).- Bring homemade lunches at work (prepare them the night before).- No snacking after supper.- No snacking after supper.- Do a lot of exercise.- Do a lot of exercise.
Tactics to help achieve Objective 2:Tactics to help achieve Objective 2:- Avoid having cold beers in the fridge from Sunday to Thursday, - Avoid having cold beers in the fridge from Sunday to Thursday,
that way it will be less tempting to have a cold one after work.that way it will be less tempting to have a cold one after work.
Tactics to help achieve Objective 3 and 4:Tactics to help achieve Objective 3 and 4:- Use and take advantage of our brand new Octane Fitness Q35c - Use and take advantage of our brand new Octane Fitness Q35c
elliptical machine.elliptical machine.- Vary the exercise to not get bored and make it fun.- Vary the exercise to not get bored and make it fun.- Create a playlist of music to listen to during training.- Create a playlist of music to listen to during training.
The Strategy Vocabulary Policy : broad general guidelines/statements Plans and policies are guides to action. They
indicate how resources are to be allocated and how tasks assigned to the organization might be accomplished so that functional level mangers execute the strategy properly.
Ex. Employee conduct policy, Equal Opportunity, Attendance & time off, safety policy, Performance review etc.
Tactics : short term strategies
Tactics – using everydayTactics – using everyday Example 1: Planning a TripExample 1: Planning a Trip
We use strategy and tactics in very simple ways every day We use strategy and tactics in very simple ways every day without realizing it. For example, if you’re planning a trip from without realizing it. For example, if you’re planning a trip from Delhi to Dubai to London, you need a strategy to get there.Delhi to Dubai to London, you need a strategy to get there.
Strategy involves answering many questions, such as: How do Strategy involves answering many questions, such as: How do you plan to travel (airplane, ship, road etc.)? What resources do you plan to travel (airplane, ship, road etc.)? What resources do you have? When do you need to get there?you have? When do you need to get there?
If you decide to travel by airplane, the tactics of purchasing that If you decide to travel by airplane, the tactics of purchasing that plane ticket can be to:plane ticket can be to:
Call a travel agentCall a travel agent Use the website of a specific airlineUse the website of a specific airline Use a website that compares the rates of different airlines.Use a website that compares the rates of different airlines.
Tactics – using everydayTactics – using everyday Example 2: Finding a JobExample 2: Finding a Job Your goal is to find a new job as part of a long-term plan for financial Your goal is to find a new job as part of a long-term plan for financial
stability. There are several different strategies you can use to find a job, stability. There are several different strategies you can use to find a job, including:including:
Using your current skills to find a new jobUsing your current skills to find a new job Becoming an apprentice for a tradeBecoming an apprentice for a trade Going to college for a new career.Going to college for a new career.
If you decide on a strategy to use your current skills in a different job, then If you decide on a strategy to use your current skills in a different job, then your tactics might include:your tactics might include:
Updating your résuméUpdating your résumé Telling your friends that you want a new job so they can help youTelling your friends that you want a new job so they can help you Looking at job postings in newspapers or on the Internet.Looking at job postings in newspapers or on the Internet.
In this situation, as in most cases, you’ll probably use a few different tactics In this situation, as in most cases, you’ll probably use a few different tactics as part of your strategy to find a job. And in the process, you might decide as part of your strategy to find a job. And in the process, you might decide that some tactics don’t work well so you’ll abandon them and try new tactics.that some tactics don’t work well so you’ll abandon them and try new tactics.
The Strategy Vocabulary Strategy : response to uncertainty
if an event is dead certain, you don't need a strategy
A good strategist never reduces uncertainty he leverages it !
Win the battle without fighting!
The Strategy Focused The Strategy Focused Organization *Organization *
Mission:“Why we exist”
Core Values:“What we believe in”
Vision: “What we want to be”
Strategy: “Our game plan (how to win)”
Goals For Implementing Strategy (Metrics):“What we need to do”
OUTCOMES
SatisfiedShareholders
DelightedCustomers
EffectiveProcess
Motivated andPreparedWorkforce
* The Strategy Focused Organization, Robert Kaplan, David Notron, Harvard Business School Press, 2001
OrganizationsOrganizations Must have a visionary, meaningful Must have a visionary, meaningful
mission statement.mission statement. Must have a clear and simple strategy.Must have a clear and simple strategy. Must define how to delight customers.Must define how to delight customers. Must be committed to strategic moves Must be committed to strategic moves
and signal commitment to competitors.and signal commitment to competitors. Must continually innovate.Must continually innovate.
SWOTSWOT
STRENGTHS OPPORTUNITIES
WEAKNESSES THREATS
SWOT , Vision & Strategy
SWOT
What am I ?
VISION
Where do I want to go?
STRATEGY
How to get there?(choice)
Some very strange strategies…
Cherry Blossom wanting to get into the toothpaste market
Ferrari wanting to produce the most fuel efficient car in the world
DeBeers wanting to sell the cheapest diamonds in the world
Lesson for SurvivalLesson for Survival
Ability to adapt to different markets, Ability to adapt to different markets, policies & regulations, different policies & regulations, different cultures and ways of doing business.cultures and ways of doing business.
