strategy and management 4th sem
TRANSCRIPT
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STRATEGY AND
MANAGEMENT
ININTERNATIONALORGANIZATI
ON
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STRATGEIC MANAGMENT
STRATEGIC MANAGEMNET IS THE
COMBINATION OF THREE PROCESS :
STARGEY FORMULATION
STRATEGY IMPLEMENTATION
STARTEGY EVALUATION
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The Strategic Planning process
3
Strategic
Vision &
Mission
External
environment
Analysis
(opportunity &Threat analysis)
Internal
Environment(strengths/
Weakness
Analysis)
GoalFormulation
&
Strategy
Formulation
ImplementationSWOT Analysis
Feedback and control
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Concept of strategic Management
4
Strategy : Goal indicate what Organization wants to achieve
Strategy is a game plan for getting there. It can be marketing
Strategy , technology strategy and sourcing strategy etc.
Business Policy : It includes the determination and
Evaluation of different alternative to achieve the
Objective of the company. It helps in decision making.
Planning :It include corporate planning , division planning ,
Business planning , Product planning.
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Assessment of the business environment
Internal environment
Analysis of each functional areas such asfinance , marketing human resources etc.
Study of management areas
Study of human side
Analysis of organizational strength and
weaknesses.
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External Environment Analysis
Social factors
Demographic characteristics : population ,age , rural & urban mobility,income distribution. For example baby boom in US after 1980¶s world war.
S ocial attitude and values : customs , beliefs ,ritual , changing life styles,purchasing power .
R ural India : rise in purchase power, education levels , increasing awareness due to media. For example LG developed ³no frill´ TV for rural areas named ´Sampoorna .́
F amily structure and changes in family values : both parents are working .
E ducation levels : awareness and consciousness of rights and work ethics ,consumer rights awareness and Law.
C hange in ethical environment : increasing consumption of liquor and tobacco .
S ocial responsibilities of business : treatment to reduce pollution , forest degradation , ban in use of plastic , companies adopting villages , creating facilities for general public , health services.
N on conventional energy sources : use of wind energy and solar energy as a alternative source of energy , environment friendly practices.
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Economic Factors
Capitalistic
Socialist or mixed economies
National economic policies such as annual budgets ,liberalization , protection , taxation , fiscal and monetary
policies , rate of savings and investment , export ±import
policies.
National economic indicators such as rate of growth of GDP , National Income , inflation , per capita income
&disposable incomes.
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T echnology) revolution
Impact of IT (Information
Cutting edge technologies
ERP enterprise resources planning systems
For example :
Change from black and white TV to Plasma TV
Normal tyres to Radial tyres
Form narrowband to wireless broadband.
Fixed landline to mobile
Technological Factors
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Political & Regulatory Factors
U nderstanding of political and government regulatory philosophy
Political stability.
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Competitor Analysis
Identifying competitors and the threats they pose ?
Strategy of the competitors
Strength and weakness of the competitors
Competitive advantage and disadvantages of
relative competitors
Competittors ,past , present and future strategies. Competitors respond to a new product or pricing
strategy.
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Internal Analysis
Basic strategic management tools to evaluatecompany resources and internal environment are :
Present strategy
Company¶s resources
SWOT analysis
Value chain analysis Strategic cost analysis
Competitive strength analysis
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STRATEGY
IMPLEMENTATION
Allocation of sufficient resources (financial ,personnel , time , technology support)
Establishing a chain of command or somealternative structure cross functional teams)
Managing process which includes monitoringresults , comparing to benchmarks and bestpractices , evaluating the efficacy and efficiencyof the process , controlling variances and
making adjustment to the process , controllingfor variances and making adjustment to theprocess as necessary.
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Strategy evaluation
Measuring the effectiveness of theorganizational strategy
There are two approaches , the industrialorganization approach based on economictheory and deals with issues like competitiverivalry , resource allocation , economies of scaleassumptions ±bounded rationality ,self disciplinebehavior, profit maximization. The socialapproach deals primarily with humaninteractions assumptions ±bounded rationality ,satisfying behavior, profit sub-optimality
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Core competencies
A Core competencies is the company¶s key strengthwhich includes a number of constituent skills. For example core competencies of Eureka Forbes is itsexpertise in door-to-door selling. They are called
distinctive competencies. To be considered a distinctive competencies , the
competency must meet three test : Customer value
Competitor unique
Extendibility (developing new product/services or enter newmarket)
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Cooperative strategies
Cooperative strategies is used like competitive strategies to gain competitiveadvantage within an industry by working with other firm.
The two general types of cooperative strategies are collusion and strategicalliances.
Collusion is the active cooperation of firms within an industry to reduce output andraise prices in order to get around the normal economic law of supply and demand.Collusion may be explicit , in which firms cooperate thr ough direct communicationand negotiation , or tactics in which firms cooperate indirectly through an informalsystem of signals.
A strategic alliances is a partnership of two or more corporations or business units toachieve strategically significant objectives that are mutually beneficial.
Mutual service consortia is a partnership of similar companies in similar industrieswho pool their resources to gain a benefit that is too expensive to develop alone ,such as advanced technology.
Joint venture is a ³cooperative business , activity , formed by two or more separateorganizations for strategic purpose
Licensing arrangement is an arrangement in which the licensing firms grant rights toanother firm in another country or market to produce and /or sell a product .
Value chain partnership is a strong and close alliance in which one company or unit
forms a long-term arrangement with a key supplier or distributor for mutualadvantage.
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Business level strategy
Business level strategies details actions taken
to provide value to customers and gain a
competitive advantage by exploiting core
competencies in specific , individual product or service markets.
business level strategy is concerned with firm¶s
position in an industry , relative to competitors
and to the five forces of competition
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Porters Principles of industry Competition
Michael Porter in 1980 developed this
principle to evaluate industry competitive
intensity .
There are five fundamental forces which
determine the intensity of competition
Intensity of rivalry among existing competitors
Barriers to entry by new competitors
Availability of substitute products and services
Buyers bargaining power
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The five forces model of competition :
Firms in other industries
Offering substitute products
Rivalry among
Competing sellersCompetitive pressures
Jockeying for better market
Position and competitive
advantage
Potential new
entrants
Suppliers
Of key
inputs
Buyers
Competitive pressures coming from the market
Attempts of outsiders to win buyers over to their productsCompetitive
Pressures
Growing out
Of supplier
Ability to
Exercise
Bargaining
power and
leverage
Competitive
Pressures
growing out
Of supplier
Ability to
Exercise
Bargaining
Power and
leverage
Competitive pressure
coming from the threat
of entry of new rivals
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Crafting A Strategy
20
Strategies are converted into objectives which in turns are converted into
action plan and finally it is implemented, results are evaluated and
control measures are taken or changes are made responding to
unpredictable happenings in the surrounding environment.
Corporate strategy : to establish a business positions in diversified
industries and to improve market share.
Business strategy :it is concern with the performance of a specific
business line in the competitive market.
Functional strategy :it is concern with the strategy for various
department like R&D, production, marketing etc
Operating strategy : it is concern with frontline organizational units
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Study of the Cultural background of the country and their
people can have significant influence on the organizational
decision and strategy policies.Global sourcing and global markets
V alue chain of multinational corporations such as GM , Ford
Motors car company , Hyundai have Globalize for competitive
advantage.
Satellite TV and other information systems have made us all
global citizens.
MNC¶s firm spreading their operation all over world.
Cultural differences and Globalization
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Theory of international trade
From the ancient time people belonging to different countries havecarried on trading activities . History records with many instances of maritime trade of ancient India with several far east countries of theglobe , beside trading with Greece and Rome.
The technology and the techniques connected with maritime tradewould have been different in different periods of history ; but thefundamental objectives remains the same, namely , enriching thenations by means of foreign trade. Study of international trade has thefollowing benefit and importance It broadens the mental outlook of the people
It helps to develop international outlook It emphasizes the need for international co-operation
It helps to study specific problem such as artificial tariff barriers , exchangecontrol , international immobility of factors of production and differentnational policies.
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International trade :nature ,
scope and importance
During 16th middle age , foreign trade was highly reguated and controlled by thestate which was considered to be omnipotent and omniscient . Every efforts wasmade to accumulate gold by exporting manufactured goods in order to create afavorable external balance of payment for massive gold inflows.
The classical theory : Adam and Smith , the father of political economy , developedthe concept of free trade of economic liberalism , the philosophy being calledLaissez faire.
During the course of 20th century , after world war I the nature of international tradeunderwent substantial changes and refinement of the old theory becameindispensable. Abandonment of the gold standard , appearance of internationalmonopolies and cartels , post war hyper inflation and the great depression of thethirties caused serious imbalance in the external balance of payment position of several countries.
New and modern literature : Jacob Viner¶s book on ³studies in the theory of international trade´ is a monumental and scholarly treatment of the history of thedoctrine.
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CORPORATE GOVEREANCE
ORGANIZATION STRUCTURE
Organizational structure depends upon the product to bedeveloped. Wheel Wright and Clark define a continuum of organizational between two extremes functional organizationsand project organizations
Functional organizations are organized according to thetechnological disciplines. Senior functional managers are
responsible for allocating resources. A project organization exists of product oriented flows : projectand teams. The project members leave their functionaldepartment and devote all their time to the project
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Classification of organization
structure The product to be developed is comprehensible for one
person. one person likely to have all the knowledgeneeded to develop manufacturing and assembly.
The product to be developed has a fairly low complexity,
but total work is high. These kind of product are likely tobe developed within one functional department.
The product to be developed consists of a lot of differentelements , such as software , PCB , power supply andmechanical structure.
The product is complex . Total work is very high .Employees can thus participate on a full time basis.
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Human Organization structure
According to the management science , most human organizationsfall roughly into four categories : Pyramid or hierarchies : an arrangement with leader who leads leaders. In
a hierarchy every employee tends to rise to his level of incompetence.
Committees or juries : these consist of peers who decide as a group,perhaps by voting. Committee are usually assigned to perform or leadfurther actions after the group comes to a decision, whereas members of a jury come to a decision.
Matrix organization : this organizational type assigns ach worker twobosses in two different hierarchies . One hierarchy is ³functional ³ andassures that each type of expert in the organization is well trained, and
measured by a boss who is super-expert in the same field and the other direction is ³executive´ and tries to get project completed using theexperts.
Ecologies : this organizational has intense competition. Bad parts of theorganization starve . Good part get more work. Every body is paid for what they actually do, and runs a tiny business that has to show a profit ,or they are fired.
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Business strategy implementation
Implementation strategy entails converting theorganization¶s strategic plan into action through thedevelopment of programs, budgets and procedures .It is
job of whole management team. all managers becomestrategy implementers in their area of authority andresponsibility, and all employees are participants. Program : it is statement of the activities or step needed to
accomplish a single-use plan. It may involve restructuring thecorporation , changing company¶s internal culture , or beginning a
new research \efforts. Budgets : is a statement of a corporation's programs in terms of dollars.
Procedures : (SOP) standard operating procedures are system of sequential steps or techniques that describe in detail how aparticular task or job is to be done.
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Global strategic management
A well defined global strategy can help a firm to gain competitive advantage .This advantage can arise from the following resources : Efficiency
Economics of scale from access to more customers and markets.
Exploit anther country¶s resources ±labor , raw material Extend the product life cycle
Operational flexibility ± shift production as costs , exchange rates
Strategic
First mover advantage and only provider of a product to a market
Cross subsidization between countries.
Transfer prices
Risk Diversify macroeconomic risk (business cycle not perfectly correlated among
countries)
Diversifying operational risks (labor problems, earthquakes), war)
Learning
Broaden learning opportunities due to diversity of operating environment
Reputation
Crossover customers between markets
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Framework of strategic
objectives
Strategic objectives
Efficiency operations
Flexibility
Innovation And learning
Sources of Competitive Advantage
Nationaldifferences
Scale of economies
Exploit factorscost differences
Scale in eachactivity
Sharinginvestmentsand costs
Scope
economies
Market or policy-induced changes
Balancing scalewith strategic &operational risks
Portfoliodiversification
Societal differencesin management andorganization
Experience cost reduction andinnovation
Sharedlearningacross
activities
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The nature of competitive advantage in
global industries
A global industry have a potential to compete in all markets of thatproduct or services.
A global firm¶s competitive advantage depends on economies of scaleand economies of scope gained across markets.
Differences in country cost
Common Customer needs favor globalization
The existence of many global competitors will have a cost advantageover local competitors and industry is ripe for globalization.
Country comparative advantage resides in the factor endowments andcreated endowments of particular region which includes land, naturalresources , labor.
The following drivers determine an industry¶s globalization potential : Cost drivers
Location of strategic resources
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Global strategy
Multi-domestic strategy
Product customized for each market
Product is same in all countries
Centralized control little decision makingauthority on the local level
Effective when differences between countriesare small
Advantage : cost , coordinated activities , faster product development