11. strategy.ppt
TRANSCRIPT
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Managing Strategy Managing Strategy
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Strategic PlanningStrategic Planning
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StrategyStrategy A plan for accomplishing organization’s goals. A plan for accomplishing organization’s goals.
Strategic ManagementStrategic Management A management process aimed at formulating and A management process aimed at formulating and
implementing effective strategies. implementing effective strategies.
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The Nature of Strategic ManagementThe Nature of Strategic Management
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Component of StrategyComponent of Strategy
Distinctive Distinctive CompetenceCompetence
ScopeScope Resource Resource DeploymentDeployment
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Ansoff Growth Matrix….Ansoff Growth Matrix….
Existing
New
Existing NewProduct
Market
MarketPenetration
New ProductDevelopment
MarketExtension
Diversification
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The Nature of Strategic ManagementThe Nature of Strategic Management
Types of Strategic AlternativesTypes of Strategic Alternatives11 Business-Level StrategyBusiness-Level Strategy The set of strategic alternatives that an organization chooses from as it conducts The set of strategic alternatives that an organization chooses from as it conducts
business in a particular industry or a particular market.business in a particular industry or a particular market.
22 Corporate-Level StrategyCorporate-Level Strategy The set of strategic alternatives that an organization chooses from as it manages its The set of strategic alternatives that an organization chooses from as it manages its
operations simultaneously across several industries and several markets.operations simultaneously across several industries and several markets.
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The Nature of Strategic ManagementThe Nature of Strategic Management
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Strategy Formulation and ImplementationStrategy Formulation and Implementation11 Strategy FormulationStrategy Formulation The set of processes involved in creating or determining the The set of processes involved in creating or determining the
organization’s strategies.organization’s strategies.
22 Strategy ImplementationStrategy Implementation The methods by which strategies are operationalized or The methods by which strategies are operationalized or
executed within the organization.executed within the organization.
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Using SWOT Analysis to Formulate StrategyUsing SWOT Analysis to Formulate Strategy
• StrengthsStrengths• WeaknessesWeaknesses• OpportunitiesOpportunities• ThreatsThreats
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Using SWOT Analysis to Formulate StrategyUsing SWOT Analysis to Formulate Strategy
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Evaluating Organization’s StrengthEvaluating Organization’s StrengthOrganizational StrengthOrganizational Strength Skills and abilities enabling an organization to Skills and abilities enabling an organization to
conceive of and implement strategiesconceive of and implement strategies..11 Common Organizational StrengthsCommon Organizational Strengths
A skill or capability held by numerous competing firmsA skill or capability held by numerous competing firms22 Distinctive CompetenciesDistinctive Competencies Useful for competitive advantage and superior Useful for competitive advantage and superior
performance.performance.33 Sustained Competitive AdvantageSustained Competitive Advantage Occurs when a distinctive competence cannot be easily Occurs when a distinctive competence cannot be easily
duplicated and is what remains after all attempts at duplicated and is what remains after all attempts at strategic imitations have ceased.strategic imitations have ceased.
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Using SWOT Analysis to Formulate StrategyUsing SWOT Analysis to Formulate Strategy
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Evaluating Organization’s WeaknessEvaluating Organization’s Weakness A skills and capabilities that do not enable an A skills and capabilities that do not enable an
organization to choose and implement strategies that organization to choose and implement strategies that support its mission.support its mission.
Way to overcome:Way to overcome: 11 Investments to obtain the strengths needed.Investments to obtain the strengths needed.
e.g. Asian Paints TINTING Machines at Retailer e.g. Asian Paints TINTING Machines at Retailer LocationsLocations
22 Modification of the organization’s mission Modification of the organization’s mission e.g. IBM from Hardware to Softwaree.g. IBM from Hardware to Software
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Using SWOT Analysis to Formulate StrategyUsing SWOT Analysis to Formulate Strategy
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Evaluating Organization’s OpportunitiesEvaluating Organization’s Opportunities Areas in the organization’s environment that may Areas in the organization’s environment that may
generate high performance.generate high performance.
Evaluating Organization’s ThreatsEvaluating Organization’s Threats Areas in the organization’s environment that Areas in the organization’s environment that
make it difficult for the organization to achieve make it difficult for the organization to achieve high performancehigh performance
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Formulating Business-Level StrategiesFormulating Business-Level Strategies
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Porter’s Generic StrategiesPorter’s Generic Strategies
Strategy TypeStrategy Type DefinitionDefinition ExamplesExamplesDifferentiationDifferentiation Distinguish Distinguish
product or product or servicesservices
Rolex (watches)Rolex (watches)Mercedes-BenzMercedes-Benz(automobiles)(automobiles)
Overall cost Overall cost leadershipleadership
Reduce Reduce manufacturing manufacturing and other costsand other costs
SonataSonataMarutiMaruti
FocusFocus Concentration Concentration on specific on specific regional market, regional market, product market, product market, or group of or group of buyersbuyers
Ashok Masale, Ashok Masale, Bagh-Bakri ChaiBagh-Bakri ChaiChandrika SoapChandrika Soap
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Formulating Business-Level StrategiesFormulating Business-Level Strategies
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The Miles and Snow TypologyThe Miles and Snow Typology
Strategy TypeStrategy Type DefinitionDefinition ExampleExampleProspectorProspector Innovative and Innovative and
growth orientedgrowth orientedAmazon.comAmazon.com
DefenderDefender Protect current Protect current market, maintains market, maintains stable growthstable growth
eBay.comeBay.com
AnalyzerAnalyzer Maintains current Maintains current markets and markets and customer customer satisfactionsatisfaction
IBMIBMYahooYahoo
ReactorReactor Reacts to changes Reacts to changes in the in the environmentenvironment
HMT watchesHMT watchesAmbassadorAmbassador
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Formulating Business-Level StrategiesFormulating Business-Level Strategies
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Strategies Based on the Product Life Cycle
Introduction
Stages
Growth Maturity Decline
High
Low
Sale
s V
olum
e
Introduction Growth Maturity Decline
Time
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Implementing Business –Level StrategiesImplementing Business –Level Strategies
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Implementing Porter’s Generic StrategiesImplementing Porter’s Generic StrategiesDifferentiation StrategyDifferentiation Strategy ● ● Marketing and sales emphasize high quality. Marketing and sales emphasize high quality. (Sony)(Sony) ● ● Accounting and finance control the flow of money.Accounting and finance control the flow of money.
Overall Cost Leadership StrategyOverall Cost Leadership Strategy ● ● Marketing and sales focus on simple product attributes Marketing and sales focus on simple product attributes
and how they meet customer needs.and how they meet customer needs. ● ● Accounting and finance control the flow of money.Accounting and finance control the flow of money. ● ● Management for reducing cost. Management for reducing cost. (Big Bazaar)(Big Bazaar) ● ● Manufacturing for standard product. Manufacturing for standard product. (Cello pens)(Cello pens)
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Implementing Business –Level StrategiesImplementing Business –Level Strategies
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Implementing Miles and Snow’s strategiesImplementing Miles and Snow’s strategiesProspector StrategyProspector Strategy ● ● Encouraging creativity. Encouraging creativity. (Apple)(Apple) ● ● Encouraging flexibility. Encouraging flexibility. (3M)(3M)
Defender StrategyDefender Strategy ● ● Attempts to protect market from new competitors.Attempts to protect market from new competitors.
(Maruti & LIC)(Maruti & LIC) ● ● Focus on reducing cost.Focus on reducing cost. ● ● Focus on improving performance of products.Focus on improving performance of products.
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Implementing Business –Level StrategiesImplementing Business –Level Strategies
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Implementing Miles and Snow’s strategies Implementing Miles and Snow’s strategies Analyzer StrategyAnalyzer Strategy ● ● Maintain current business. Maintain current business. (Mother Dairy)(Mother Dairy) ● ● Focus on innovation.Focus on innovation. ● ● Strong accounting and financial control.Strong accounting and financial control. ● ● Provide high flexibility.Provide high flexibility. ● ● Provide high creativity and low cost.Provide high creativity and low cost.
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Formulating Corporate-level StrategiesFormulating Corporate-level Strategies
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DiversificationDiversification Describes number of different business and relation among Describes number of different business and relation among
business. business. (ITC)(ITC)
Single-Product StrategySingle-Product Strategy Organization manufactures one product and sells it in single Organization manufactures one product and sells it in single
geographic market. geographic market. (Harvest Gold)(Harvest Gold)
Disadvantage:Disadvantage: If the product is not accepted then company will suffer.If the product is not accepted then company will suffer.
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Related DiversificationRelated Diversification Organization operates in several different businesses, Organization operates in several different businesses,
industries, or markets that are somehow linked.industries, or markets that are somehow linked.
Bases of Relatedness for ImplementationBases of Relatedness for Implementation
Basis of RelatednessBasis of Relatedness ExamplesExamplesSimilar technologySimilar technology Phillips, BoeingPhillips, BoeingCommon distribution and Common distribution and marketing skillsmarketing skills
HUL, NestleHUL, Nestle
Common name brand and Common name brand and reputationreputation
AMUL, MaggiAMUL, Maggi
Common customersCommon customers AirtelAirtel
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Formulating Corporate-Level StrategiesFormulating Corporate-Level Strategies
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Unrelated DiversificationUnrelated Diversification Organization operates multiple businesses that are not logically Organization operates multiple businesses that are not logically
associated with one another. associated with one another. (ITC)(ITC)
AdvantagesAdvantages ●●Stable corporate-level performance over time. Stable corporate-level performance over time. ● ● Resources can be allocated to areas with the highest return Resources can be allocated to areas with the highest return
potentials to maximize corporate performance.potentials to maximize corporate performance. DisadvantagesDisadvantages ●● Strategy does not usually lead to high performance.Strategy does not usually lead to high performance. ● ● Firms with unrelated strategies fail to exploit important Firms with unrelated strategies fail to exploit important
synergies, putting them at a competitive disadvantage to firms synergies, putting them at a competitive disadvantage to firms with related diversification strategies.with related diversification strategies.
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Implementing Corporate-Level StrategiesImplementing Corporate-Level Strategies
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Becoming Diversified FirmBecoming Diversified Firm
3 ways:3 ways: 11. .
2.2.
3. 3.
Internal Development of New Products
(HONDA)Replacement of Suppliers and
Customers
Mergers and Acquisitions (Dabur
with Balsara)
Forward Vertical Integration (CCD)
Backward Vertical Integration (Reliance)
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……helps fill the Strategic Planning Gaphelps fill the Strategic Planning Gap
Targetedsales
Diversification
New Markets
New Products
Do nothingscenario
Sales
Time (yearsTime (years)
Strategicplanning
gap
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Market penetration1
2
3
4
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Implementing Corporate-Level StrategiesImplementing Corporate-Level Strategies
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Managing DiversificationManaging Diversification 1.1. Organization StructureOrganization Structure 2.2. Portfolio Management TechniquesPortfolio Management Techniques Make decision aboutMake decision about ● ●What businesses to engage inWhat businesses to engage in ● ●How to manage these multiple businesses to maximize How to manage these multiple businesses to maximize
corporate performance.corporate performance.
Two important portfolio management techniquesTwo important portfolio management techniques● ● The BCG Matrix The BCG Matrix ● ● The GE Business ScreenThe GE Business Screen
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BCG MatrixBCG Matrix
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Concept of Relative Market ShareConcept of Relative Market Share Let us suppose the size of the Paint Industry market is Let us suppose the size of the Paint Industry market is Rs. 10,000 crores.Rs. 10,000 crores.The share of the various companies is as follows:The share of the various companies is as follows:
CompanyCompany Revenue (Rs. Crores)Revenue (Rs. Crores) Market ShareMarket Share
Asian PaintsAsian Paints 50005000 50%50%
NerolacNerolac 25002500 25%25%
Rajdoot Rajdoot 15001500 15%15%
BergerBerger 10001000 10%10%
TotalTotal 10,00010,000 100%100%
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BCG MatrixBCG Matrix
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Concept of Relative Market Share and Market GrowthConcept of Relative Market Share and Market Growth
Market Share of Asian Paints = Market Share of Asian Paints = Revenue of AP/Total Revenue of the marketRevenue of AP/Total Revenue of the market
Market Share = Market Share = 5000/10000 = 50%5000/10000 = 50%
Relative Market Share = Relative Market Share = Revenue of AP/ Revenue of the biggest player (Nerolac in this case)Revenue of AP/ Revenue of the biggest player (Nerolac in this case)
= = 5000/2500 5000/2500 = = 22
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BCG MatrixBCG Matrix
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Concept of Relative Market Share and Market GrowthConcept of Relative Market Share and Market Growth
Market Share of Nerolac = Market Share of Nerolac = Revenue of Nerolac/Total Revenue of the marketRevenue of Nerolac/Total Revenue of the market
Market Share = Market Share = 2500/10000 = 25%2500/10000 = 25%
Relative Market Share = Relative Market Share = Revenue of Nerolac/ Revenue of the biggest player (Asian Paints in this case)Revenue of Nerolac/ Revenue of the biggest player (Asian Paints in this case)
= = 2500/5000 2500/5000 = = 0.50.5
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BCG MatrixBCG Matrix
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Concept of Relative Market Share and Market GrowthConcept of Relative Market Share and Market Growth
Market growth is the rate at which the market is growing:Market growth is the rate at which the market is growing:
e.g. Let us say the total market of bathing soaps was Rs. 5000 e.g. Let us say the total market of bathing soaps was Rs. 5000 crores in 2006 i.e In India all companies put together were crores in 2006 i.e In India all companies put together were able to sell Rs. 5000 crores worth of soaps.able to sell Rs. 5000 crores worth of soaps.
And in year 2007 the total market was Rs. 5500 crores which And in year 2007 the total market was Rs. 5500 crores which
means that the growth of the market is means that the growth of the market is 10% 10%
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Implementing Corporate-Level StrategiesImplementing Corporate-Level Strategies
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The BCG MatrixThe BCG Matrix Evaluate businesses relative to the growth rate of their Evaluate businesses relative to the growth rate of their
market and the organization’s share of the market.market and the organization’s share of the market.
Relative market share
Cash cows Dogs
High
Low
Questionmarks
Stars
Mar
ket g
row
th r
ate
HighLow
10%10%
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Implementing Corporate-Level StrategiesImplementing Corporate-Level Strategies
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The GE Business Screen Evaluate business in a diversified portfolio along two dimensions, each of
which contains multiple factors:● Industry attractiveness.● Competitive position (strength) of each firm in the portfolio.
Loser
Competitive Position
Low
Winner
Medium
High
Good PoorMedium
Winner
Profit producer
Winner
Average business
Questionmark
Loser
Loser
Indu
stry
gro
wth
ra
te
1.Market share2.Technological know-how3.Product quality4.Service network5.Price competitiveness
6.Operating costs
Industry Attractiveness1.Market Growth 2.Market Size3.Capital Requirements
4.Competitive Intensity
Competitive position
Loser
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The GE Business ScreenThe GE Business Screen
1.1. Market shareMarket share2. 2. Technological know-howTechnological know-how3. Product quality3. Product quality4. Service network4. Service network5. Price competitiveness5. Price competitiveness6. Price competitiveness6. Price competitiveness
1. Market growth1. Market growth2. 2. Market sizeMarket size3. Capital requirements3. Capital requirements4. Competitive intensity4. Competitive intensity
Competitive positionCompetitive position Industry attractivenessIndustry attractiveness