2The concept of strategy Strategy is the great work of organisation. In situations of life or death it is the tao of survival or extinction. Its study cannot be neglected.----SUN TZU, The Art of War.2500 B.CStategy is about winning.Stratey is not a detailed plan or program of instructions,it is a unifying theme that gives coherance and direction to the actions and decisions of an individual or an organisation.
3Characteristic of a winning strategy Goals that are simple, consistent, and long term.Profound understanding of the competitive environment.Objective appraisal of resources.Effective implimentation.ExamplesKochouseph & V GuardViswanathan AnandGeneral GiapDheerubhai Ambani
4Origin of the wordStrategia means generalship in Greek.Stratos means “ army “. Ag means “ to lead” .The concept of strategy was first given in the ART OF WAR by SUN TZU in China 500 BCThere are 13 chapters in the book.Laying plansOn waging warThe sheathed swordTacticsEnergyWeak points and strong pointsManeuveringVariations of tactics (cont..)
5The army on the marchTerrainThe nine situationsAttack by fireThe use of spies.What is there in these chapters that can be adopted to Business ?
6Sun Tzu saysIf you know the enemy and yourself, you need not fear the result of a hundred battles.If you know yourself but not the enemy, for every victory gained you will also suffer a defeat.If you know neither the enemy nor yourself , you will succumb in every battle
7SUN TZU says , Know the other and know yourself Triumph without peril Know nature and know the situationTriump completely.
8Some definitions of strategy The art of war, especially the planning of movements of troops and ships etc, into favourable positions ; plan of action or policy in business or politics etc.( oxford dic.)The determination of the long-run goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals.( Alfred Chandler )A stategy is the pattern or plan that integrates an organisations major goals, policies, and action sequences into a cohesive whole.A well formulated stategy helps marshal and allocate an organisations resouces into a unique and viable posture based upon its relative internal competencies and shortcomings, anticipated changes in the environment, and contingent moves by intelligent opponents
9Definitions. ( cont.)Strategy is the pattern of objectives, purposes, or goals, stated in such a way as to define what business the company is in or is to be in and the kind of company it is or is to be.( Kenneth Andrews.)What business stategy is all about is, in a word, competitive advantage.The sole purpose of stategic planning is to enable a company to gain , as efficiently, a sustainable edge over its competitors. Corporate strategy thus implies an attempt to alter a companys stength relative to that of its competitors in the most efficient way.( KENICHI OHMAE. )
10Definitions ( cont.)The functions and resposibilities of choice of objectives, mobilisation of resouces , allocation of such resources, continuous monitoring of performance. It is the highest function of management .The supervision of the continuous process of deciding the nature of the enterprise and setting, revising and attempting to achieve its goals. (KENNETH ANDREWS )
11Fundamental issues in SM. Purpose and missionsCorporate objectivesChoice of businessesCourses of action for achieving the objectives.
12Nature & scope of SM Route map for the organisation Decision guide Lays down growth objectivesWhat to do how to do where to reachLook forward and far aheadMonitor environment anticipate change and prepare for the unexpectedBuild competitive advantage and build core competenciesNot only anticipate future but shape future.Influence the environment.
13Concerns of SM Future. Growth. Environment. Portfolios of business Strategy.Integration.Creating competitive advantage and core competencyCorporate strategy.
14Evolution of stategic mgt. 1950s. Budgetry planning & control.Financial control through operational and capital budgeting.Investment planning through project appraisal ,ROI, DCF. Financial planning was the key.1960s. Corporate planning.Preparation of short medium and long term plans.business forecasting and investment planning models.Rise of corporate planning departments.1970s. Corporate strategy, diversification, and portfolio planning matrices.multidivisional structure.Quest for global market share.Late 70s & early 80s.Analysis of industry and competition. Choice of industries, markets, and segments and positioning with in them. Competitor analysis and PIMS( profit impact of market stategy ).market selectivity , industry restructuring .active asset management.
15Evolution of st. mg ( cont.) Late 80s & early 90s. The quest for competitive advantage .Sources of competitive advantage with in the firm. Resource analysis of core competencies.corporate restructuring and business process reengineering.Re focusing and outsourcingLate 90s & early stategic innovation and the new economy.Competitive advantage through stategic innovation.Competing on knowledge adopting to the new digital networked economy.Organisational flexibility and speed of response.Knowledge management and organisational learning.Competing for standards .Early mover advantage. The virtual organisation. The knowledge based firm.Alliances and networks. The quest for critical mass.
16Corporate & business stategy Focus of strategic management shifted from planning process to quest for profit.The fundamental goal of business is to earn a return on its capital that exceed the cost of capital.there are two ways to attain this.the firm may locate in an industry where favourable conditions result in the industry earning a rate of return above the competitive level.Second , the firm may attain a position of advantage vis-a vis its competitors with in an industry,allowing it to earn a return in excess of the industry average.Corporate stategy defines the scope of the firm in terms of the industries and markets in which it compets.corporate stategy decisions include,Investment in diversificationVertical integrationAcquisitionNew venturesAllocation of resources between the different business of the firm.Divestment.
17Business stategy.Business stategy is concerned with how the firm compets within a particular industry or market. This is also referred as competitive stategy.The questions ?how can the firm make money ?This leads toWhat business or businesses should we be in?How should we compete ?Answer to the first question describes “ corporate strategy “ and the second describes business ( competitive stategy )
18Strategic managementStrategic management is the study of such set of managerial decisions and actions that determines the long run performance of a firm. The major steps in the strategic management process are :Environmental analysisStrategy formulationStrategy implementationStrategy evaluation and control
19Why strategic planning ? It gives a clear vision of internal and external environment of a business firmFocus on what is most important and how it is to be managed for success of business.Understanding of problem, its nature ,its threats, its controls and implications.Appropriate decisions to implement the strategies evolved to achieve the desirable objectives.A continuous monitaring and evaluation of the progress through the path to the goals
20The strategic planning process The tasks in strategic planning,Clarifying the mission of the corporationDefining the businessSurveying the environmentInternal appraisal of the firmSetting the corporate objectivesFormulating the corporate stategyMonitoring the strategy.
21STRATEGIC PLANNING PROCESS Clarifying the mission of corporationDefining the businessSurveying the environmentMacro environmental factorsEnvironmental factors specific to business concernedDemographicSocio-culturalEconomicPoliticalNaturalTechnologicalLegalGovt PoliciesIndustry & CompetitionMarket/CustomerTechnologySupplier FactorsGovt. Policies
22STRATEGIC PLANNING PROCESS Spotting the opportunities & threatsChecking the attractiveness and probability position of these opportunitiesHighlighting those opportunities the pursuit of which will help the firm bridge its strategic planning gapDeveloping the opportunities-threats profiles (OTP)Internal appraisal of the firmAssessing the firm’s capabilities/strengths & weakness in the various areas:FinanceMarketingHuman ResourcesOperationsR&DGeneral Management
23STRATEGIC PLANNING PROCESS Developing the strength-weakness profileAppraising the individual business/strategic business units (SBUs) of the firmIdentifying the competitive advantages and core competencies and developing the competitive advantage profile (CAP)Examining the capability gap (gap between existing capabilities and the ones needed for pursuing the spotted opportunities)Setting the corporate objectivesFraming the broad aims of the corporation, using the corporate mission as the guide
24STRATEGIC PLANNING PROCESS Examining the strategic planning gap and checking the growth-scopeFixing the growth objectiveSetting specific objectives in all major areas:Prescribing the hierarchy/rank/priorities of the objectivesProfitabilityCompetitive PositionTechnologyProductivityR&D and InnovationHuman ResourcesCorporate ImageSocial Responsibilites
25STRATEGIC PLANNING PROCESS Formulating the corporate strategy: exploring generic alternativesExamining which generic strategy the firm should opt for:Stability ?Expansion ?Divestment ?Combination ?Understanding the effect of the alternatives in terms of changes/additions/deletions to the firm’s existing product-market postureClarifying the competitive advantage and synergy which each alternative would require/use
26STRATEGIC PLANNING PROCESS Formulating the corporate strategy: strategy choiceEvaluating the strategy alternativesKeeping the O-T profile, the growth objective and CAP as the reference frame, examining what strategy would be the bestReviewing the exisiting businessesAssessing the prospects of each SBUExamining what to do with each SBUBuild? Maintain ? Harvest ? Divest ? To what extent ? At what pace ?
27STRATEGIC PLANNING PROCESS Examining which business are to be taken upExamining the resource requirement of the different strategy options and checking the resource availabilityMaking the final choice of the strategy/strategy spectrumTranslating the strategy in terms of what is to be done with each SBUAssigning the priorities to the SBUs, exisiting as well as new onesClarifying what is expected of each SBUAllocating resources to the SBUsMonitoring the strategy
28Generic Value Chain FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENTPROCUREMENTMARGINSUPPORTACTIVITIESINBOUND LOGISTICSOPERATIONSOUTBOUND LOGISITCSMARKETING & SALESSERVICEMARGINPRIMARYACTIVITIES
30Vision & missionVision is what the firm wants to be in future.such a view is often made explicit in a VISION statement of the company.a vision statement gives aspiration and motivation besides guiding the formulation of strategy.Hamel and Prahalad , term it as stategic intent. Examples:To put a man on the moon by the end of the decade– Apollo program.Our vision is to dominate the global food service industry– McDonald.Encircle Caterpillar – Kamatsu.Project infinity – Coca Cola
31MissionMission statement contains the ultimate purpose of the firm.It also is the vision of the founders.The corporate mission is an expression of the growth ambition of the firm.It is the firms future visualised.
32How does mission helps the firm Lends directionGives focusObjectives , targets and programs are formulated based on mission.Helps people at various levels in the corporation understand in what direction they should move.Guiding the action at all levels.Helps prevent people falling into an activity trap.
33A few mission statements The mission of our company, is to make cleanliness commonplace, to lesson work for women, to foster health, and to contribute to personal attractiveness that life may be more enjoyable for the people who use our products.--- UnileverTo preserve and improve human life---MerckTo help business corporations and governments to more successful.—McKinsey & Co.To become a major player in the global chemical business and simultaneously grow in other growth industries like infrastructure ---RILTo become a $ 1 billion research based global pharmaceutical company --- Ranbaxy
34Values & beliefsOrganisational values are a major constituent of mission.It is values that hold the mission in tact.It is the shared values that holds a firm together.Values proclaim the qualities it will cherish and what it will give to and expect from its people and society.The firms beliefs can also be found in the mission statement.
35Environmental analysis Macro environment. A ) socio cultural, politico- legal, socio- economic, technological and economic factors acting on the firm. B ) task environment comprising share holders, suppliers, employees, competitors, creditors, debtors, customers, government etc.Micro –environment. A) organisational structure b) organisational culture and work .c) organisational resources.
36Macro – environment variables Societal environment consisting of :Economic forcesTecnological forcesPolitico legal forcesSocio cultural forcesSocio economic forces.
37Task environment.Task environment consists of all the work and people directly connected to firms activities.major task environments are,Buyer and seller groups.Competitor groups.Employees ( manpower groups ).Stock / owner groupsCrdit groupDebt groupRegulatory group.
38Analytical modelSWOT – model. Strength, weaknesses, opportunities and threats.O & T are external or macro environment and S & W are internal or micro environment factors.Swot is used to identify core competancy as well as lack of appopriate resources.O is no O unless backed by resources.SA = O / S- W or O / S – T where SA – strategic alternative. O – is opportunity, S is stength , T –threat.Swot is used to generate external factor analysis summery ( EFAS) and internal factor analysis summery ( IFAS )
39SWOT -- HM Strength, First motor car company in India, Good product accepability,Monopoly and protected market,Built extensive dealer, repair and sevice networkTheGP-CK Birla group,First collaboration with GM.Acceptance in government and taxi market,Most suited for the then Indian roads.One out of the only two car companies in the country
40Weakness -- HM no mission, vision or goals. No shared values or beliefs.Conflict between labour and management.No corporate strategy.Failed to see the environmental changesDid not anticipate competition,Did nothing to counter the threat from Maruthi till it was too lateCling on the same product for 50 years without any major change,Can failed to see customer needs and what competitors offeredHigh labour cost and low productivityFailed to follow up the initial success of Lancer,Truker was a flop.Deviated from core areas and core competencies.
41Opportunity GDP growth and boom in the car market, Opening of the economy,Globalisation and upsurge in peoples aspiration levelGood road networkExport possibilityLow labour costJV and collaboration with world class motor car companies.the
43BCG growth-share matrix BCG (Boston Consuting Group ) is a simple way to anayse a firms portfolio of investments , products , or business units.The classification is most attractive, potentially attractive, moderately attractive, and least attractive based on growth rates and market share.They are also called CASH COWS, STARS, QUESTION MARKS, DOGS to describe the above position.
44High Low Market Growth II I Market Share Star ? III IV High Low Cash cowDogLowIIIIV
45BCG matrix ( cont. )Stars and question marks are businesses that operate in high growth industries.Cash cows and dogs are businesses that operate in low growth industries.Stars are net users of resources but hold potential for future.question marks are also net users of resources but are in high risk categories.A cash cow brings lot of cash to the company. Dogs are weak in market share and also in low growth market.they are a drag on company resources.
46GE multifactor portfolio planning matrix Different businesses or products are rated based on the following two parameters,Industry attractiveness &Companies business strength.How attractive is the industry and how strong is the firm in the industry.If both are very strong such businesses needs more investment and allowed to grow. Invest and develop such SUBs.If they are medium the stategy should be selective.If they are low the policy should be harvest / divest
48SBUs.It is a single business or collection of related businesses that can be planned separately from the rest of the company,It a scientific method of grouping the businesses of a multi business corporation to help planning.Products/ businesses that are related in the standpoint of “ function “ are formed as a distinct SBU.A SBU can be a separate corporation or adivision in a corporation.Each SBU will be under a separate CEO, and will be a profit centreSBU is for facilitating strategic planning and implimentation and will be having their vision mission, goals, targets, programs,budgetsand SOPs.
49Competitive advantage & core competence A competitive advantage is a position of superiority on the part of the firm in some function /factor/ activity/ in relation to its competition.It is this superiority that enables the firm to survive, grow and excel in a competitive market.The superiority can be in any function such as manufacturing, marketing, finance, HRM, or a combination.Intellectual property, knowledge, or any factor of production can give a competitive advantage.Thus competitive advantage is a superior position relative to competition.
50Com. Adv ( cont.)CA is linked to strategy.both goes hand in hand.CA is a vital component of strategy.For the strategy to work the firm should have competitive advantage.CA is the back up of strategy.without relavent CA strategy will not succeed.Strategy can be used to create and excel CA.
51Com. Adv.( con ) Sources of CA : MARKETING FINANCE PRODUCTION R& D HR THE CEO & LEADERSHIPLOCATION & Many more.
52CA & Strength Strength is different from CA. All strength are not CA. All CA are strength.A strength is a CA only if it can affect the competition in an advantageous manner or bring in superiority in the market vis- a- vis the competitor. Otherwise it will remain as astrength.
53Building CA By strategy By SWOT By bench marking By value chain approach,By analysing value chain of self and competitor
54Core competenceA firm may loose the CA as competitors will catch up after some time.There for to keep up the position the firm should develop some unique strenth . This is know as CORE COMPETENCE .An enduring competency that cannot be easily imitated.A competency that lies at the root of products.( VSR, Ch. 10 )
55mission, vision, goal, objective, policy, SOP. Mission- is the purpose or reason for the firms existance.Vision is a statement of what a firm can do and what it wants to be.Goal is a statement of what a firm wants to achieve. Goals should be SMART.Objective is a statement of what firm wants to achieve with definitive commitment on quantity and time frame.Policy is a broad guideline for decision making to link strategy strategy formulation and strategy implementationStandard operating procedures is developed to control activities .sops can be in the form of simple conventions or in detailed written manuals.
56Strategic management process Environmental analysis-Stategy formulationStategy implementationEvaluation and control
57Environmental analysis Understanding, analyssing the external and internal environment of a firm.models like SWOT, GE spot light can be used for this.Foercasting methods can also be used for finding the future trends and possible developments.This includes external ( society and task ) & internal (structure, culture, & resources )
58Strategy formulation (strategic planning ) This is the planning stage.The firm will decide the the vission, mission, objectives, goals, strategies, policies.the major decisions will be,What business shuold we be in?Where should we locate ?What product /service ?How much capital & from where ?What is the organisation structure ?Who should be the key personnel ?Basically these are the entrepreneurial decisions and these are taken buy the investors/ promoters.
59Strategic planning ( cont. ) Stategy for stabilityStategy for growthStrategy for retrenchmentCompetitive stategyCooperative strategy.
60Generic competitive strategy ( Michael Porter ) 1 ) overall cost leadership.a firm can achieve competitive advantage if it can supply its prodcts / srevice at a lower cost than the competitors. How can one achieve this overall cost leadership ?2) differentiation strategy . Offer something unique or different.through brand creation and and positioning .3 ) focused stategy.concetrate on specific products, customers, segments where it is good or superior.the concept of core competency came out of this.
61Strategy implementation Strategy is translated into action so that the objective of the strategy is achieved.In doing so,Progamms are drawn,Budgets are made,Policies, procedures,rules, are formulated.
62Evaluation & controlEvaluation and control is the most important part of strategic mgt. process.It involves feedback, monitoring, assessment, corrective decisions (sometimes involving total reversal or even abandonment ) and implementation.
64Types of strategiesCompetitive strategy. Aimed at improving competitive position. This is achieved through cost leadership or differentiation strategy.Cooperative strategy.they are,Collusion,Strategic alliances,Mutual service consortiaJoint ventureLicencing agreementValue-chain partnership ( inboud logistic, operations, outbound logistics, marketing and sales, services. Supporting activities, procurement, technology development, HRM,& firm infrastructure.)firm infrastructure includes, planning, finance, acconting, legal, govt & PR
65Common features of competitive and cooperative strategies They are made by board of directors or managersBoth are based on common principle of competitive position of a firm against competitors.They may be formed for entire company, or a business unit or a particular product/ service or a particular market segment.
66Major corporate strategies Directional : the firms overall orientation towards growth, stability, or retrnchment.Portfolio : the industry or markets in which firm compets through its products and servicesPareting : the manner in which the top management coordinates actvities, transfers resources and cultivates capabilities among its product lines and business units
67Distinction between cooperative and competitive strategy Coop. stgy may modify organisational structure. But compet. Stgy will not alter the organisation structure.Both have opposite direction to face competition.in coop. they nullify competition but in compet. they face each other.Cooperative strategy involve sharing, synergetic ,friendly but competitive is unfriendly nonsharing and hostile.
68Directional strategy Growth strategies: Mergers , Acquisitions ,or takeovers,Strategic alliancesTwo types of growth strategies can be seen.Concentration stategies. ( vertical growth,forward integration, backward integration,a firm builds on its value chain.)Vertical integration can be full ownership of value chain to no ownership atall. Example Indian Oil and RIL. As against this some companies outsources the entire value chain and have minimum vertical integration.Horizontal growth results in horizontal integration.It refers expansion of forms products to larger geographical areas or by increasing range of products or services.
69Directional strategy ( cont.) Diversification strategies: continuous growth may not be possible with vertical, horizontal strategies alone.Then the firm goes for diversification. Diversification can be concentric or conglumerate.Concentric diversification refers to growth into a related industry.the search in concentric diversification is SYNERGY. The concept is that two will generate more profits together than they could separately.Conglumerate strategy.It refers to growth by diversification into an industry not related to its current line of business.
71Retrenchment strategies Turnaround strategy.it is an important retrenchment strategy in corporate world. Its focus is on operational efficiency.turnaround strategy involve ,Cuts in profit, sales, production.Cut in costIdentify and stabilise at new level of profit / salse / production.Improvement of operational efficiency.Adopt growth strategies from new stabilised level.Turnaround strategies are adopted in two steps1 contraction2 consolidation and growth at opportune time.
73Generation of strategic alternatives Shortlisting the feasible strategiesComparative evaluation of feasible strategiesSelection of best strategy.
74Steps involved in generating strategic alternatives. Among various models , TOWS matrix model is used most widely.SO – stategy . Use of stregth to take advantage of opportunities.ST –strategy. Use stength to face threats.WO –strategy .overcome weakness to to take advantage of opportunities.WT – strategy. Minimise weakness and avoid threats ( defensive strategies )
75Forecasting techniques. Forecasting is very crucial for all planning as all plannigs are for future. Some of the more important techniques are.Brain stormingConsultancyDelphi technique.
76Organisational strategies Organisational strategies are such strategies that are made at board level.this is the top most level and is headed by CMD.they are corporate strategies and hence decide the direction of the firm.They decide :The objectiveThe overall goals and targetsThe product and service mixThe capital and financial requirementsTotal sequence of how a firm has to perform.They also govern all functional strategies such as for marketing, production, transportation etc.They are regarded as MASTER STRATEGIES.
77Important org. strategies Organisation modification strategy:they modify the organisation structure including the heirarchy, staffing, objective and capital of the company.Functional modification strategy :they may or maynot alter the organisational structure. They bring functional modifications with or without capital restructuring.
78Organisation modification strgs. Organisation life cycle.Stage 1 simple.Stage ii functional,Stage iii divisional.Stage iv declining.Stage v mortality. Organisation modification can be brought in one of the following ways.They push the organisation from stage I to stage ii or stage ii to stage iiiThey may require the restructuring of the objectiveThey may alter the method and persons making strategic decisionsthey may bring about capital restructuringThey change the staffing patternsThey may alter the ownership pattern
79Mergers .Merger is a process involving establishment of a single corporate body by merging resources and technologies of two different bodies performing competitive or cooperative business in the same industry.It requiers situations like,Equal sizeCompetitive firms ,merger nullify competitionTwo firms cooperative and merger will consolidate their cooperationTwo companies are from the same industriesSame or partially same board of directorsSynergic or complementary.( HP- Compaq )
80Functional & organisational modifications on mergers instead of two boards only one board .A new company is formed with new name .shares of old companies are collected and cancelled and new shares of the new company is issuedRestructuring of the organisation is carried out including shifting of personalWork duplication is avoided.The new company will adopt itown policiesStaff relocation is carried out as neededPhysical shifting of fixed assets or manpower is normally not done.Merger involves MOU statement and declaration that earlier entities are no more in existence and the shares ,assets liabilities ,technologies, and all other resources of two companies stand merged into a new legal entity.
81Advantages & disadvantages. Advantages are ; consolidation, increased market , more resources,good will , synergy, nullification of competition.Disadvantages are : liabilities and bad debts are tranfered to new company.staffing can create problems.Usually there is a droppage of share prices in the stock marketFrequent mergers lead to inconsistencies in strategy formulation and implementation
82Joint venturesJoint venture is a cooperative business activity formed by two or more separate organisations for strategic purposes crating an independent entity.the ownership, the operational resposibility, the risk and rewards are shared in agreed manner through a promotional agreement.In a JV the respective stengths are shared to overcome a weakness or exploit a new opportunityIn international business JV is one of the most popular forms of organisations because it has the least financial, political and legal constraints as a mode of entry.Advantages are flexibility, less legal and statutory constraints, synergy and brings growth for both parties.Disadvantages are conflicts, loss of control operations from the respective JV parties, and in technology transfers less advantages to stronger party.
83AcquisitionThis is a method of growth in which a strong company acquires all the assets and liabilities of another company.Acquisitions are made for specific objectives like capital investment, corporate growth, market coverage, new products or technology transfer.Advantages are easy entry, synergy, fast growth, less risky especially in international contest, least jestation period.Disadvantages are cultural conflicts, adjustment problems, erosion in market image if ownership change is frequent.
84Take overTake over is a form of acquisition, and can be done by buying shares from market and taking over the control with or with out the consent of the owners. In a takeover the owners lose their ownership/ control of the company against their wishes.Against an attempt by a hostile takeover the owners may try to get a friendly takeover or bring a “ white knight “ and handover control.
85NetworkingIn recent years a new and radical type of organisations have emerged with network structure . It is also called VIRTUAL ORGANISATION because it is composed of a series of functional ,project, supply groups or collaborations or partnerships linked and constantly changing .the cobweb like networking is nonhierarchial in nature but each one doing its specified function in the value chain.The organisation is only a shell electronically connected to some completely owned division, partially owned subsidiaries,and other independent companies.Such organisations will outsource most of the functions .For ex. Amason . Com. Most functions of DEL COMPUTERS is carried out through a network organisation.Virtual organisation is most dynamic, fexible, and easy to add, delete, disband and relatively less costly.
86ConsortiaIt is a loose partnership between companies in similar or allied industries who pool their resources to undertake specific tasks.Typical consortia working can be seen in R & D activity, loans, insurance, develpomental work of various types.
87FranchisingIt is an agreement under which a company grants right to other company to open an establishment using the name , brand, products, services and operating systems of the parent company.the first company is called the franchiser company and the company that uses the name of the franchiser is called the franchiseeFast growth, least capital ,and mutual benefit..
88SubcontractingSub contracting is a form of outsourcing the work to outside organisation or individuals.Most companies do it in different degrees.International subcontracting is a huge area in which business is developing very fast.The BPO is mostly based on subcontracting .Various functions on the value chain is subcontracted to take advantage of the cost difference in factors of production in different locations in the world.
89LicencingLicencing is an arrangement, wherein a company licences other companies to produce and or sell a product developed by itLicensing is based on copy right, patents, trademarks,which are known as IPRs.
90Major reasons for failures. Managers are inadequately prepared for strategic planning.The information for preparing the plans is insufficient for planning for action.The goals of the organisation are too vauge to be of value.The business units ( SBUs ) are not clearly identified.The reviews of the strategic plans of the business units are not done effectively.The link between strategic planning and control is insufficient.
91Successful implimentation of strategies. It is not enough to have strategic planning.It should be successfully implemented.the following are eight recommendations for successful implementation.Communication of strategies to all key decision making managers.Developing and communicating planning premises.Action plans contributing to and reflecting major objectives and stategies.Regular reviews of strategies.Development of contingency strategies and programs.Making organisation structure fit planning needs.Continuing emphasis on planning and implementing strategy.Creating a company climate that forces planning.
92Strategic management , new leadership model. The old leadership style was more maco or masculine ( strong decision making, leading the troops, driving strategies, waging competitive battle )is shifted to more feminine qualities, ( listening, relationship building, and nurturing ). The model today is not so much “ take it on your shoulders “ but “ create the environment that will enable others to carry part of the burden.The leadership needs of the organisationsare, the ability to :Build confidence,Build enthusiasm,Cooperate,Deliver results,Form networks,Influence others,Use information.And the required competancies of business leaders are :Business literacyCreativityCross cultural effectivenessEmpathyFlexibilityProactivityProblem solvingRelation buildingTeam workvision
93Need is EQ for leaders.Self awareness, in terms of the ability to read and understand ones emotions and asses ones strengths and weaknesses, and have positive self worth.Self management in terms of control, integrity, conscientiousness, initiative, and achievement orientation.Social awarness in relation to sensing others emotions ( empathy ) reading the organisation ( organisational awarness ) and recoganising customers needs.( service orientation )Social skills in relation to influencing and inspiring others, communicating, collaborating, and building relationships with others, and managing change and conflict
94GAME THEORYA game is a competitive activity in which players contend with each other according to a set of rules.Can use game theory to illuminate economic, political, and biological phenomina.The theory of rational choice – a decision maker chooses the best action according to her preferences among all the actions available to her.The players in the game moves according to their perception of their best advantages.Based on this they can be ,Competitive, or cooperative.win – lose,Lose – win,Lose – lose,Win -- win
95G. T ( Cont ) The theory of rational choice: In any given situation the decision- maker chooses the best according to to her preferences. If there are several equally attractive best actions , the theory is,The action chosen by a decision maker is at least as good , according to her preferences, as every other available action.
96Strategic games.A strategic game is a model of interacting decision– makers. Because of the interaction we call them players. Each player has a set of possible actions. Each player has preferences about the action profile ie , the list of all the players actions.A strategic game consists of,A set of players,For each player a set of actions,For each player, preferences over the set of action profiles.c
97The prisoners dilemma.Two suspects Molly and Mottu are caught in a major crime and put in separate cells. If both keep quite they will get only one year each as evidence is only for a minor crime.If molly confeses , she will be set free, but Mottu gets four years.and vice versa.If both confesses , both will get three years.What will MOLLY and MOTTU DO?