strategic management for epipl managers

Strategic Management for upcoming Corporate

Managers of EPIPL

Let us start from young you, Say you decide to date with a girl of your dream You groom well, Dress attractively, Go in a nice bike You pump your purse full of money Impress her, Take her outing Convince her and finally steal her heart or get beaten !!?? When you do so many actions well planned to date with your girl DID YOU EVER THOUGHT how carefully and precisely have to plan your business / professional activities where several million rupees are invested trusting that you will handle and execute it properly to reach the organisation’s goals ?? This is where strategic planning comes into action. However like a coin strategic planning cannot succeed and cannot be properly executed without equal participation of top + senior management and YOU mid level managers along with your downstream workforce.

What is all about

Art and science of formulating, implementing, and

evaluating cross-functional decisions that enable an

organization to achieve its objectives.

What is Strategic Management

Strategic management

•Strategy Formulation

•Execution

•Evaluation ( evaluation of execution )

Strategic Planning

•Strategy Formulation

Strategic Management Vs Strategic Planning

Prelude to Strategic Planning Why startegeic Planning is required

Forms the blueprint of an organisations character Provides cohesive platform for all stake holders to

understand organisations goals Shows the organisation the proper direction to grow

o Sets Goals o Highlight what we do now o Predicts Future Scenarios o Determines best responses to future threats o Prioritises resources

Basics of Strategic Planning • Strive to understand the future • Builds a shared vision among all key stake

holders • Participatory process • Sensitive to external environment • Based on data • Openness to questioning the status quo • Key part of effective management system

Planning Vs Strategic Planning • Planning – an Analytical process which involves an

assessment of the future, the determination of desired objectives in the context of that future, the development of alternative courses of action to achieve such objectives, and the selection of a course(s).

• Strategic Planning - Strategic planning differs from other forms of planning in that it deliberately attempts to concentrate the organisation’s resources in those areas that can make a substantial difference in future performance and capability

Strategy Formulation • Define Vision & Mission • Impart right work culture among work force • Assess Opportunities and Threats

– Tools : SWOT, PEST, RBV • Assess Strength and Weakness of existing or

future Product(s) / Service(s) – Tools : BCG Matrix, COPE/POSE Analysis

• Define Long term Objectives • Analyse Alternative Strategies • Select the Right Strategy

Strategy Execution It is the discipline of getting things done as per the formulated

corporate Vision Mission & Goals Execution must be an core element of an organisations culture –

should be injected to genes of workforce of entire organisation. The Right execution system has two characters – Long term static

character in line with Visison and Goals and short term Dynamic character in line with Mission

Execution is discussed in detail in a separate presentation

Confused with Static and Dynamic Execution Character ??

Let me explain in a easy way in the lighter side You plan to date a girl – achieving this target is the long

term Goal and Vision and this is the static character of your plan

While you try to date you manipulate so many facts

points and figures to achieve your vision without toppling the goal, this the dynamic character of your plan (or tactical planning )

Static and Dynamic Characters in Real Situation

Most managements plan precisely their strategic requirements but end up in confusing with Static and Dynamic goals

Managements should understand that their dynamic decisions does not alters the course in reaching the set out Vision otherwise it sends wrong signals to mid level managers who get confused and end up achieving nothing

Should management feels there is a paradigm shift in vision due to various external factors, all downstream stake holders should be called for a brainstorming session to explain the situation and to find a solution to re-chart the vision and goals, without this there will be drift

Management should also allow a decent time frame to test / re-call a strategy. A decent time frame would be 6 to 12 months depending on the nature of industry

Strategy Evaluation

Similar to PDCA cycle a separate monitoring group shall watch whether the corporate / business / functional / operating strategies are being executed in the designated course and advise top management for corrective actions to achieve the set out goals

Contents

1. Five Tasks of Strategic Planning

2. Factors Shaping the Choice of Strategy

3. Three Tests of Best Strategy

4. Analyzing Industry Environment and Crafting

competitive Strategy

5. Strategy Implementation and Execution

Principles of Strategic Management

Five Tasks of Strategic Planning

Five Tasks of Strategic Planning

Forming a strategic vision

Setting objectives

Crafting a strategy to achieve the desired outcomes

Implementing and executing the chosen strategy

Evaluating performance, monitoring new developments, and initiating corrective adjustments

Forming a Strategic Vision

Forming a strategic vision

• Very early in the strategy-making process,

company managers need to pose a set of

questions:

• "What is our vision for the company —

where should the company be headed,

what should its future technology-

product-customer focus be, what kind

of enterprise do we want to become,

what industry standing do we want to

achieve in five years?"

Setting Objectives

Setting objectives

• The purpose of setting objectives is to convert

managerial statements of strategic vision and

business mission into specific performance

targets — results and outcomes the organization

wants to achieve.

• Setting objectives and then measuring whether

they are achieved or not help managers track an

organization's progress.

Improve Cost Efficiency

Enhance Long-term Shareholder Value

Increase Revenue Growth

Enhance Brand Image

Build High Performance Products

Achieve Operational Excellence

Develop Strategic Competencies

Drive Demand through best CRM policies

Manage Dramatic & Sustained Growth

through Innovation

Implement Good Environmental Policy

Build Learning Culture

Expand Capabilities with Technology

Strategic Objectives in Four Perspectives

Financial

Customer

Internal Process

Learning & Growth

Expand Market Share

Crafting Strategy


• A company's strategy represents management's

answers to such fundamental business questions

as :

• whether to concentrate on a single business or build a

diversified group of businesses

• whether to cater to a broad range of customers or focus

on a particular market niche

• whether to develop a wide or narrow product line

• how to respond to changing buyer preferences

• how big a geographic market to try to cover

• how to react to newly emerging market and competitive

conditions

• how to grow the enterprise over the long term.

What Does a Company's Strategy Consist of


• Company strategies concern how:

• how to grow the business

• how to satisfy customers

• how to outcompete rivals

• how to respond to changing market

conditions

• how to manage each functional piece of the

business and develop needed organizational

capabilities

• how to achieve strategic and financial

objectives

Strategy Implementation and Execution

• Strategy implementation concerns the

managerial exercise of putting a freshly chosen

strategy into place

• Strategy execution deals with the managerial

exercise of supervising the ongoing pursuit of

strategy, making it work, and showing

measurable progress in achieving the targeted

results.

Implementing and executing the chosen strategy

Strategy Evaluation and Monitoring

• It is management's duty to stay on top of the

company's situation, deciding whether things are going

well internally, and monitoring outside developments

closely.

• Marginal performance or too little progress, as well as

important new external circumstances, will require

corrective actions and adjustments.

Evaluating performance, monitoring new developments, and initiating corrective adjustments

Strategy Hierarchy

Corporate Strategy

Segment Business Strategies – Frozen / Puree / Commodities....

Functional Strategies (NPD, Marketing, Manufacturing, HR,

Finance....

Operating Strategies (regions, plants, departments within

functional areas)

Strategy Hierarchy

Corporate Strategic Vision

Functional Areas Visions

Operating Unit Visions

Business-Level Strategic Vision

Corporate Strategic Objectives

Functional Areas Objectives

Operating Unit Objectives

Business-Level Strategic Objectives

Corporate Strategic Strategy

Functional Areas Strategies

Operating Unit Strategies

Business-Level Strategy

Factors Shaping the Choice of Strategy

Factors Shaping the Choice of Strategy a simple view based on RBV tool

Capability : Financial, Human resource,

technical....

Competitive Advantage :

Innovative products, superior technology, best cost benefit....

Factors Shaping the Choice of Strategy an extensive view

Economic, societal, political, and government regulations

Competitive conditions and

industry attractiveness

Company opportunity and

threat

Company strengths and weaknesses,

competencies and capabilities

Personal ambitions and business philosophies

of key executives

Shared values and company culture

External Factors

Internal Factors

The mix of considerations that determines a company’s strategic situation


• What an enterprise can and cannot do

strategy wise is always constrained by what

is legal, by what complies with government

policies and regulatory requirements, by

what is considered ethical, and by what is

in accord with societal expectations and

the standards of good social and

community citizenship.

Economic, societal, political, and government regulations


• An industry's competitive conditions and

overall attractiveness are big strategy-

determining factors.

• A company's strategy has to be tailored to

the nature and mix of competitive factors

in play—price, product quality,

performance features, service, warranties,

and so on.

Competitive conditions and

industry attractiveness


• A company's strategy needs to be

deliberately aimed at capturing its best

growth opportunities, especially the ones

that hold the most promise for building

sustainable competitive advantage and

enhancing profitability.

• Strategy should also provide a defense

against external threats to the company's

well-being and fu-ture performance.

Company opportunity and threat


• One of the most pivotal strategy-shaping

internal considerations is whether a company

has or can acquire the resources,

competencies, and capabilities needed to

execute a strategy proficiently.

• The best path to competitive advantage is

found where a firm has competitively valuable

resources and competencies, where rivals

can't develop comparable capabilities except

at high cost or over an extended period of

time.

Company strengths and weaknesses,

competencies and capabilities


• Managers do not dispassionately assess what

strategic course to steer.

• Their choices are typically influenced by their

own vision of how to compete and how to

position the enterprise and by what image and

standing they want the company to have.

Personal ambitions and business

philosophies of key executives


• An organization's policies, practices, traditions,

philosophical beliefs, and ways of doing things

combine to create a distinctive culture.

• The stronger a company's culture, the more

that culture is likely to shape the company's

strategic actions, sometimes even dominating

the choice of strategic moves.

Shared values and company culture

Strategic Analysis and Strategic Choices

Analyzing strategically about

industry and competitive conditions

Analyzing strategically about a company’s own

situation

What strategic options does the company realistically have?

What is the best strategy?


Analyzing strategically about

industry and competitive conditions

The Key Questions

• What are the industry’s dominant economic features?

• What is causing the industry’s competitive structure and business environment to change?

• Which companies are in the strongest/weakest positions?

• What strategic moves are rivals likely to make next?

• What are the key factors for competitive success?

• Is the industry attractive and what are the prospects for above-average profitability?


Analyzing strategically about a company’s own

situation

The Key Questions

• How well is the company’s present strategy working?

• What are the company’s strengths, weaknesses, opportunities, and threats?

• Are the company’s prices and costs competitive?

• How strong is the company’s competitive position?

• What strategic issues does the company face?

Three Tests of Best Strategy


The Performance Test

The Competitive Advantage Test

The Goodness of Fit Test

The Best Strategy

• A good strategy has to be well matched to industry and competitive conditions, market opportunities and threats, and other aspects of the enterprise's external environment.

• At the same time, it has to be tailored to the company's resource strengths and weaknesses, competencies, and competitive capabilities.


The Goodness of Fit Test

• A good strategy leads to sustainable competi-tive advantage.

• The bigger the competitive edge that a strategy helps build, the more powerful and effective it is.


The Competitive Advantage Test

• A good strategy boosts company performance.

• Two kinds of performance improvements are the most telling of a strategy's caliber: gains in profitability and gains in the company's competitive strength and long-term mar-ket position.


The Performance Test

Analyzing Industry Environment and Designing Competitive Strategy

Porter’s Five Forces

Rivalry

Buyer Power

Supplier Power

Threats of Substitutes

Barriers to Entry

The Intensity of Rivalry

1. A larger number of firms 2. Slow market growth 3. High fixed cost 4. High storages costs or highly

perishable products 5. Low switching cost 6. Low level of product differentiation 7. Strategic stakes are high 8. High exit barriers 9. A diversity of rivals 10. Industry shakeout

The intensity of rivalry is influenced by the following industry characteristics:

Barriers to Entry

Entry barriers are influenced by the following factors :

1. Absolute cost advantages 2. Proprietary learning curve 3. Access to inputs 4. Government policy 5. Economies of scale 6. Capital requirements 7. Brand identity 8. Switching costs 9. Access to distribution 10. Expected retaliation 11. Proprietary products

Threats of Substitutes

Threats of substitutes are influenced by the following factors :

1. Switching costs

2. Buyer inclination to substitute

3. Price-performance trade-off of substitutes

Buyer Power

Buyer power is influenced by the following factors :

1. Bargaining leverage

2. Buyer volume

3. Buyer information

4. Brand identity

5. Price sensitivity

6. Threat of backward integration

7. Product differentiation

8. Buyer concentration vs. industry

9. Substitutes available

10. Buyers' incentives

Supplier Power

Supplier power is influenced by the following factors :

1. Supplier concentration

2. Importance of volume to supplier

3. Differentiation of inputs

4. Impact of inputs on cost or differentiation

5. Switching costs of firms in the industry

6. Presence of substitute inputs

7. Threat of forward integration

8. Cost relative to total purchases in industry

Dominant Economic Characteristics of the Industry Environment (market size and growth rate, geographic scope, number and sizes of buyers and sellers, pace of technological change and innovation, scale economies, experience curve effects, capital requirements, and so on)

Competitive Analysis • Rivalry among competing sellers • Threat of potential entry • Competition from substitutes • Power of suppliers • Power of consumers

Competitive Position of Major Companies/ Strategic Groups. • Those that are favorably positioned and why • Those that are unfavorably positioned and why

Competitor Analysis • Strategic approaches/predicated moves of key competitors • Whom to watch, and why

Industry Key Success Factors

Industry Prospects and Overall Attractiveness • Factors making the industry attractive • Factors making the industry unattractive • Special industry issues/problems • Profit outlook (favorable/unfavorable)

Sample Format for an Industry Competitive Analysis Summary

Five Generic Competitive Strategies

Overall Low Cost Leadership Strategy

Differentiation Strategy

Focused Low Cost

Strategy

Focused Differentiation

Strategy

Low Cost

Differentiation

Broad Market Segment

Narrow Market Segment

Best Cost Strategy


Overall Low Cost Leadership Strategy

Broad Differentiation Strategy

Appealing to a broad spectrum of customers based on being the overall low-cost provider of product and service

A differentiation strategy calls for the development of a product or service that offers unique attributes that are valued by customers and that customers perceive to be better than or different from the products of the competition


Best Cost Strategy

• Giving customers more value for the money by incorporating good-to-excellent product attributes at a lower cost than rivals

• The target is to have the lowest (best) costs and prices compared to rivals offering products with comparable upscale attributes

Generic Strategies and Industry Forces

Industry Force

Generic Strategies

Cost Leadership Differentiation Focus

Entry Barriers

Ability to cut price in retaliation deters potential entrants.

Customer loyalty can discourage potential entrants.

Focusing develops core competencies that can act as an entry barrier.

Buyer Power

Ability to offer lower price to powerful buyers.

Large buyers have less power to negotiate because of few close alternatives.

Large buyers have less power to negotiate because of few alternatives.

Supplier Power

Better insulated from powerful suppliers.

Better able to pass on supplier price increases to customers.

Suppliers have power because of low volumes, but a differentiation-focused firm is better able to pass on supplier price increases.

Threat of Substitutes

Can use low price to defend against substitutes.

Customer's become attached to differentiating attributes, reducing threat of substitutes.

Specialized products & core competency protect against substitutes.

Rivalry Better able to compete on price.

Brand loyalty to keep customers from rivals.

Rivals cannot meet differentiation-focused customer needs.

BCG Matrix / COPE / POSE / VOCI Analysis....

• In the evolution of management tools numerous methods have evolved to measure the performance Vs market conditions. The primary and oldest being SWOT

• Later Porter’s Five forces analysis, apostle model created a new wave succeeding SWOT

• However most of the analysis are abstract in assuming market conditions and environment and other performance variables and left to mercy of the analyser, BCG matrix is an exception where a few numerical calculations were performed.

• Latest budding development in management tools series is the evolution of COPE (Condition X Performance), POSE (Position X Strength) and VOCI (adVOcates X CrItics). While First two measures about product’s condition and performance in market and positioning strength, the later analyses the brand loyalty and customer satisfaction. All the three tools use extensive numerical methods and proves to reflect reality.

Best Strategy

Selecting the Best

Strategy

Best strategy shall be the outcome of the organisation head’s comprehensive understanding of the nature of business backed with a rich experience of handling difficult situations combined with the forces of right management tools + inputs of brainstorming sessions with the mid level managers + feedback of downstream work force and at last hearing to the realistic market competitive analysis.

The new management paradigm – TOC or Theory of Constraints based on the common idiom “A Chain is no stronger than its weakest Link” insists that no strategy can be well planned without identifying the underlying constraints and finding solutions to overcome them.

Be realistic while selecting the strategy never be over confident based on abstract assumptions.

Strategy Implementation and Execution

Strategy Implementation

Building a capable organization

Designing strategy-supportive reward system

Creating a strategy-supportive corporate culture

Exerting strategic leadership

Linking budget to strategy

Establishing strategy-supportive policies and procedures

Instituting best practices and commitment to continuous

improvement

Installing information system to support strategy execution

HR & Organization Development Factor

System Factor

Effective Strategy

Execution

Building a Capable Organization

Building a

capable organization

Staffing the organization • Putting together a strong management team • Recruiting and retaining talented employees

Building Core Competencies and Capabilities • Developing competence/capability portfolio suited

to current strategy • Updating and reshaping the portfolio as external

conditions and strategy change

Structuring the Organization and Work Effort • Organizing business function and processes, value

chain activities, and decision making

Strategy - Supportive Reward System

Designing strategy -

supportive reward system

• Strategy - supportive motivational practices and reward systems are powerful management tools for gaining employee buy-in and commitment.

• The key to creating a reward system that promotes good strategy execution is to make strategically relevant measures of performance the dominating basis for designing incentives, evaluating individual and group efforts, and handing out rewards.

Strategy - Supportive Corporate Culture

Creating a strategy-

supportive corporate

culture

• Building a strategy - supportive culture is important to successful strategy execution because it produces a work climate and organizational esprit de corps that thrive on meeting performance targets and being part of a winning effort.

Strategic Leadership

Exerting strategic

leadership

• Strategic leaders encourage people to be innovative in order to keep the organization responsive to changing conditions, alert to new opportunities, and anxious to pursue fresh initiatives.

• Strategic leaders also actively push corrective actions to improve strategy execution and overall strategic performance.

Linking Budget to Strategy

Linking budget to strategy

• Reworking the budget to make it more strategy-supportive is a crucial part of the implementation process because every organization unit needs to have the people, equipment, facilities, and other resources to carry out its part of the strategic plan.

Strategy - Supportive Policy – Changes in QMS

Establishing strategy -

supportive policies and procedures

• Prescribing new or freshly revised policies and operating procedures in QMS aids the task of implementation (1) by promoting consistency in how particular strategy-critical activities are performed in geographically scattered operating units and (2) by helping to create a strategy-supportive work climate and corporate culture.

Continuous Improvement

Instituting best practices

and commitment to

continuous improvement

• Competent strategy execution entails visible, unyielding managerial commitment to best practices and continuous improvement.

• Benchmarking, the discovery and adoption of best practices, and six sigma initiatives all aim at improved efficiency, better product, and greater customer satisfaction.

Information Support System

Installing information

system to support strategy

execution

• Company strategies can’t be implemented well without a number of support system to carry on business operations.

• Well-conceived, state-of-the-art support system not only facilitate better strategy execution but can also strengthen organizational capabilities enough to provide a competitive edge over rivals.

References used in this presentation

Strategic Management : Concepts & Cases, Fred R David – Prentice Hall

Strategic Management : In the Innovation Economy, T.H.Davenport, M.Liebold, S.Voelpel

Blue Ocean Strategy : Kim & Rene, Havard Business School Press

Works of my in-flight friend Mr Rudd de Keijzer, the Netrherlands

Any Questions ?? Shoot a mail to me Raghavan VP [email protected]

mailto:[email protected]

End of Presentation

Thank you all for watching this presentation

If I have created a spark in your mind then I have succeeded and wish to see that you all contribute for betterment of EPIPL

strategic management for epipl managers

Business

planning vs strategic

basics of strategic

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tactical planning

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tasks of strategic planning2

strategic requirements

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