strategy-1 & 2

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STRATE GIC M AN AG EM EN TSess ion 1

D r. A na di S ara n P a n d eV i ce P r e si de n t, H R M , C o rp o ra te P la n nin g & Stra tegy

H ero H on da M oto rs L td .P ro f N rip en dra S in gh

A s s t. P ro fessor, Marke t ingExternal- General Presentation at JBS. Nolda

1 . P UR PO SE O F A B US IN ES S E NTE RPR IZEP ro fit M a x imiza t io n S u p p o rt & C ri tic ismT he t hre e lo gic al lin es o f re as on in g:

P ro pe rt y R ig hts to N ex us o f C on tra cts . J oh n L oc ke , 1 6 9 0F ro m In div id ua l P ro fits to S oc ia l W e lfare , A da m S mith , 1 7 7 6"Iro n C ag e' o f C om p etit io n , M ax W eb e r, 19 0 5

B h o p a l G a s T ra g e d yG oo d firm s d o n ot th in k in "E ith er o r' te rmino logy . T h e y do bo th . T h e ye m bra ce t he "G lo ry o f A N D " a nd re je ct th e "T yran ny o f O R"

F IS C A L R E S P O N S IB IL ITY : A P RE RE Q UIS IT E T O S O C IA L R E S P O N S IB IL IT Y

External- General Presentation at JBS

D EM YS TIF YIN G STRATEGY

1. What is the purpose of a business enterprise?2. What is Scarcity Value?3. What is Competit ive Advantage?4. What determines the performance of a firm?5. What is Strategy?6. Process and Content of Strategy

External - General Presentation at JBS

IN D US TR Y C O NC EN TR A TIO N C UR VES

12 1) 14 IS 11

191 Pr enteucn 01 JBSxternal General 25-Jul-ll

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2 . S C A R CIT Y V A L U E = A D DE D V A L U E

W illin gn es s to P ay : A c u s to m e r's wi ll ingness t o pay is th e m ax im um a mo u nt o fm on ey th at a c us to me r w o uld b e w illin g to p ar t w ith , in o rd er to o bta in th e p ro du ct o rs e r v i c e sO p p o r t u n ity C os t o f S up plie rs : It Is th e s ma lle st a mo un t th at a s up plie r w o uld a cc ep tto fo r t he s e rv ic e s an d r e so u rc e s r e qu ir e d to p r o d u c e a g o o d o r s e rv ic e. I t Is ca l l ed"opportunitycosf' b e ca u se It I s d ic ta te d by th e b e st o p po rtu n itie s th a t t he s u pp lie rsh av e to s ell th eIr re so urc es e ls ew he re.

Div i s i on o f V a lu eP r i ce?

S u p p l i e rO pp .C o s t

Wi l l i ngnessto P ayC o s t

Buyer S h a r e R s . 75 L

3 . C O M P ET IT IV E A D VA N TA G E: F O CA L P OIN T O F S T R AT EG Y

Over th e long ru n , the t o t a l amount of value a firm captures for its i nvest o rs (in the form ofEVA, cannot e xc e ed th e a m ou n t of value it creates for Its customers (In the fo rm ofcompet i t i ve advantage)

C om pe titiv e A dv an ta ge c an b e d efin ed a s th e a bility o f a fin n to o u tp er lo nn its in d us try ,t ha t is , to e arn h ig he r ra te s o f p ro fits th an th e in d us try n orm . A n d fo r a f irm to a c h ie v e ac o m p e titiv e a dv an ta ge , it m us t c re ate m ore v alu e fo r its c us to me rs th an its c om pe titio n.

In th e s im p le st te nn s, s uc h a c om pe titiv e a dv an ta ge is b as ed o n e xc ellin g In p ro vid in go n e o r m ore o f th re e fo rm s o f c u s to m er v a lu e . C us to m ers w a nt g o od s a n d s e rv ic e sw h ic h a re ;) better, ii) c he ap er a nd I ii) faster. T he se c orr es po nd in g fo nn s o f c om p etitiv ea dv an ta ge a re r efe rre d a s 1 ) D iffe re ntia tio n, 2 ) C o st L ea de rs hip a nd 3 ) Q u ic k r es p on s e.

Externa l- General Presentation at JBS

C ON CE P T O F A DD ED /S C AR CIT Y V AL U EA dd ed V alu e w ith C ra ne S up pl ie r a nd C om pe tit o r P rov id ing C r a n e

S O C o f C ra n e S u p p lie r ~ lIirJ ln .s s to= R s 2 0 L E?~CeJ llfthL- - - 1 ( T ot al V a lu e C r e at ed = R s . 5 5 L ) !

. l (T ota l V alu e C re ate d = R s. 5 5 L )S O C o f C o mp 'e tito r W iltin g n e s s to P a y

= R s 2 0 L ~ : a~~~~~ .i~ s'~C r a n eSu p p l i e r 's

I a d d ed V a lu e= O .O L

S O C o f C r an e S u pp lie r = R s 30 L(T ota l V alu e C re ate d = R s. 6 0 L )

W T P f o rS u p p l i e r's C ra n e= R s .9 0 LC r a n eS upp l i e r 's-....-- -- '- ------------....---- -- '-_ a d d e d V a lu e =5 .0 LT ota l V alu e C re ate d = R s. 55 L )

SOC o f C o mp 'e t i t o r= R s 2 0 L


C OM PE TIT IV E A D VA N TA G E: F O CA L P O IN T O F S TR AT E GYC o m p e t i t i v e n e s s F in a n c ia l P e rl or m a nc e - - - - - l I

IDi f f e ren t i a tio n

C o s t L e a d e rs h ip

Q u ic k R e s p o n seII___ _ ~--- V a lu e C a ptu re d fo r ---01

I nvest o rs I__ ___ V a lu e C re a te d fo r

C u s t o m e r sExternal- General PresentatJon at JBS

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T Y PE S O F C OM PE T IT IV E A DV AN TA GE

R s

l nIndus\JyAverageCompetltor Success fu lDiffentiatedCompetitor S uc ce ss fu l L o wC o s t C o m p e ti to r ;f~B~~~rAdvantage W ili in gn ess to P ayo SupplierOpportunilyColt


IN D U S T R Y C O N T E X TProfitability Difference Along Selected IndUltri

,~ : : : g , I , , , j I$y-~ I I' " ' .. ,I

ICoo,. ." I"-' ,

I. . '"I- ""' '"I I"' -G oo . "eo.. " . i,-- 12'1


4 . D ET E RM IN AN TS O F C OM PA NY P E RF OR MA NC E

In d u s t r y C o m p a n y R e s ou rc e s, N a t i o n a lapab i l i t i es &C o n t e x t S t r a t e g i e s C o n t e x t

I I IIC o m p a n yP e r f o r m a n c e

External- General Presentation et JBS

C O N T E X T O F C OM PA N Y R ES O UR CE S & S T R A T E G IE S1.lhlllRI.cbw~1~

c..llCl~l'

Op',alinlllnclfobi "-Is, 19M-20001" ' 1External- General Presentation at JBS

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C O N TE XT O F CO M PA N Y R E SO UR C E S & S T RA TE G IE S

_~l"'~32

~""'1.Jd.~3.0

I~"""Lid ~:::;::=:::;::===::;=:J

I,Exlernal- General 9 EPreSOA~~L"'.lt91-2000I't.j

IMPACT OF GENERAL ENVIRONMENTEnvironmental Opportunity Neutral ThreatTrendDemographics LUXU7\ -In c r e a s e d In c o m e o f TourisM id d le C la ssSocio-cultural Filne.. Equip ,.,),1 FarmE uipm nt

C o n c e rn f or F itn e s sP o l i t i ca l i Lega ! Airline TeleconD e r e g u la t ionTechnologica l Campa tDis E&C LPRee< re s

L as e r T ech n o log yM a c r oe c o n o m i c House o n s t etten Fast F{ ad Bankin

D ec lin in g In te re s t '\ 7atesGlobal Indian exule Phar~~ut1W TO InduSI~ Industry

1External- General Presentation at 11 M Rohtak

External Analysis

C om p et it iv e E nv iro nm e nt A na ly s isFive Forces Framework

TH R E A T O FE N T R Y1 .

R IV A L '

t B A R G AIN INGP O W E R O FB U Y E R SB A R G A I N I N GP O W ER O FS U P P L I E R S

S U B S T IT U T E S

16Presentation at JBSxternal- General 25-Jul-11

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VRIO:A Framework for Analysis Question of Value: Do the firm's resources' enable the firm torespond to environmental threats and opportunities?

Question of Rarity: Is the resource currently controlled by only asmall number of firms?

Question of Inimitability: Do firms without the resource face a costdisadvantage in obtaining it?

Question of Organization: Are the firm's other policies andprocedures organized to support the exploitation of its valuable,rareand costly to imitate resources?

External- General Pr es en t a tio n a t JB S

VRIO & Organizational Strengths &'IJeaknessesA re r es o urce sValuable? Rare? Costly Exploited by Strength or

to Imitate? Organization? Weakness

NO - - NO Weakness

YES NO .- Strength

YES YES NO Strength andCompetence

YES YES YES YES Strength andDistinctive

Competence

External- General Pre s ent a tio n at 1 1M R ohtak

1725-JI A -I'

"

VRIO FrameworkValuable? Rare Costly Exploi ted by Competitive E co no m ic

? 10Imitate? Organization? Implication pe rf o rm anc e

NO NO Competitive Below NormalDisadvantage

YES NO Competitive NormalParity

YES YES NO Temporary Above NormalCompetitiveAdvantage

YES YES YES S Sustained Above NormalCompetitiveAdvantage

"xternal- General P res en tatk> n a t 11 M R oh t ak

5 . W h at is S tra te gy?

P la n P o s itio n P e rs p e c ti v e P a tte rn

RIse and Fa ll o f P lanning , H e nr y M inuebergP res e nt at io n at JB Sxternal- General 20

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6 . C o n t e n t & P ro c e s s o f S tra t e g y

External- General Presentation a t JBS

Hierarchy of Strategic Intent

Vision IOefine V I S i on and MissionMission ~

Strategic Goals 1 Oefin~ .Iong term goals Identify Ia nd O b je ct ive s \ critical su cc e ss Fa cto r.

P la n s(P ro g r a m s I S tra teg ie s) I Oevelop strategies, eaccete Iresources and monitor progress


W h at b u s in es se s s ha ll w e b e in ?H ow s ha ll w e a llo cat e res o u rc e s to th e se bu s in e s s e s?

Hierarchy of Strategy

H o w s ha ll w e b u ild C om p et itiv e a d vanta g e in th eb u s iness?

H o w sha ll we e n h a n ce v a lu e co n tr ib ut ion b y th e fu nc tio nan d cr e a te fit w ith B u s in e ss S t ra te g y ?

External- General Presentat ion a t JBS

Examples of some quotable Vision & Mission

"

MO l'ck To transform the company Irom 1 1chemical manufacturer into one of thepreeminent drug-making companiesof the world, with researchcapabilities that rint' an)' majoruniveraity

To preserve andirnpruve human life

Sony Become the company most known forchanging the world image of Japaneseproducts as h('ing of poor quality.

To experience thesheer joy oftnuevation and Iheapplication oftechnology for IlH~benefit andpleasure of theeeneral mblic

Eatemat-. General Presentation at 11MRohtak23

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Strategy Formulation IGeneric Strategic Management ProcessStrategy ExecutionCorporate Strategy Portfolio of Businesses.Why1GOlls Strate v I 1 Plan/Budgcts/Policics-I ProgrammesBusiness Strategy 11orglnlzlttoll Structure,~~;:;:I Environment Tr ~~I~:: Industry Analysis EA T~ f

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FALLACY OF FORMALISATION

Hard information is often limited in scope, lacking richness andfailing to encompass important non-economic and non-quantitative factors.

Much hard information arrives too late to be of use in strategymaking.

Finally a surprising amount of hard information is unreliable.Henry Mintzeberg in "Rise and Fall of Rational Planning"

External-, General Presentation at JBS

A T Y P IC AL F O R M AL S T R A T E G IC P LA N N IN G P R O CE S S

Understanding Identifying Distributing Monitoring& Adjusting th resources to Resources Progressgaps close thegap

Corporate

B u s i n e s s

O pe ra t i ons

External- General Presentat ion at JBS

THIRDPERSPEC TIVEON STRATEGICMANAGEMENTPROC E SS

B)Organlsatlonallearnlng Perspective:" F e w if a n y s tr a te gie s c an b e p u rel y d e l ibe r a te , a n d fe w c a n b e p u rel y emergent. T h efo rm er su g g e sts n o learning, t he l at er , no c on t ro l . T he re a l w o rld s t r a teg ies n ee d toco m b in e th es e tw o ."M o v e from M e ch an is tic O rg an is at io n to O rg an ic O r ga n isa t io n .

toyna~m

Stable

E x ternal_G eRJmRle-eo,m "-,,p ,l e: 'e x>lii tty ,op:: ,.::C ,.:: n:; ;la" 'tio :: n;-;a"IJ "8;'

strategy-1 & 2

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