Presentation is loading. Please wait.

Presentation is loading. Please wait.

1 Strategic management. 2 The concept of strategy  Strategy is the great work of organisation. In situations of life or death it is the tao of survival.

Similar presentations


Presentation on theme: "1 Strategic management. 2 The concept of strategy  Strategy is the great work of organisation. In situations of life or death it is the tao of survival."— Presentation transcript:

1 1 Strategic management

2 2 The 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.C  Stategy 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.

3 3 Characteristic of a winning strategy  Goals that are simple, consistent, and long term.  Profound understanding of the competitive environment.  Objective appraisal of resources.  Effective implimentation.  Examples  Kochouseph & V Guard  Viswanathan Anand  General Giap  Dheerubhai Ambani

4 4 Origin of the word  Strategia 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 BC  There are 13 chapters in the book.  Laying plans  On waging war  The sheathed sword  Tactics  Energy  Weak points and strong points  Maneuvering  Variations of tactics (cont..)

5 5  The army on the march  Terrain  The nine situations  Attack by fire  The use of spies.  What is there in these chapters that can be adopted to Business ?

6 6 Sun Tzu says  If 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

7 7 SUN TZU says,  Know the other and know yourself  Triumph without peril  Know nature and know the situation  Triump completely.

8 8 Some 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

9 9 Definitions. ( 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. )

10 10 Definitions ( 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 )

11 11 Fundamental issues in SM. I.Purpose and missions II.Corporate objectives III.Choice of businesses IV.Courses of action for achieving the objectives.

12 12 Nature & scope of SM I.Route map for the organisation II.Decision guide III.Lays down growth objectives IV.What to do how to do where to reach V.Look forward and far ahead VI.Monitor environment anticipate change and prepare for the unexpected VII.Build competitive advantage and build core competencies VIII.Not only anticipate future but shape future. IX.Influence the environment.

13 13 Concerns of SM I.Future. II.Growth. III. Environment. IV.Portfolios of business V.Strategy. VI.Integration. VII.Creating competitive advantage and core competency VIII.Corporate strategy.

14 14 Evolution 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.

15 15 Evolution 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 outsourcing Late 90s & early 2000. 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.

16 16 Corporate & 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 diversification  Vertical integration  Acquisition  New ventures  Allocation of resources between the different business of the firm.  Divestment.

17 17 Business 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 to  What 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 )

18 18 Strategic management  Strategic 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 analysis  Strategy formulation  Strategy implementation  Strategy evaluation and control

19 19 Why strategic planning ?  It gives a clear vision of internal and external environment of a business firm  Focus 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

20 20 The strategic planning process  The tasks in strategic planning,  Clarifying the mission of the corporation  Defining the business  Surveying the environment  Internal appraisal of the firm  Setting the corporate objectives  Formulating the corporate stategy  Monitoring the strategy.

21 21 STRATEGIC PLANNING PROCESS 1.Clarifying the mission of corporation 2.Defining the business 3.Surveying the environment  Macro environmental factors  Environmental factors specific to business concerned DemographicSocio-culturalEconomicPolitical NaturalTechnologicalLegalGovt Policies Industry & CompetitionMarket/CustomerTechnology Supplier FactorsGovt. Policies

22 22 STRATEGIC PLANNING PROCESS  Spotting the opportunities & threats  Checking the attractiveness and probability position of these opportunities  Highlighting those opportunities the pursuit of which will help the firm bridge its strategic planning gap  Developing the opportunities-threats profiles (OTP) 4.Internal appraisal of the firm  Assessing the firm’s capabilities/strengths & weakness in the various areas: FinanceMarketingHuman Resources OperationsR&DGeneral Management

23 23 STRATEGIC PLANNING PROCESS  Developing the strength-weakness profile  Appraising the individual business/strategic business units (SBUs) of the firm  Identifying 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) 5.Setting the corporate objectives  Framing the broad aims of the corporation, using the corporate mission as the guide

24 24 STRATEGIC PLANNING PROCESS  Examining the strategic planning gap and checking the growth-scope  Fixing the growth objective  Setting specific objectives in all major areas:  Prescribing the hierarchy/rank/priorities of the objectives ProfitabilityCompetitive PositionTechnology ProductivityR&D and InnovationHuman Resources Corporate ImageSocial Responsibilites

25 25 STRATEGIC PLANNING PROCESS 6.Formulating the corporate strategy: exploring generic alternatives  Examining 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 posture  Clarifying the competitive advantage and synergy which each alternative would require/use

26 26 STRATEGIC PLANNING PROCESS 7.Formulating the corporate strategy: strategy choice  Evaluating the strategy alternatives  Keeping the O-T profile, the growth objective and CAP as the reference frame, examining what strategy would be the best  Reviewing the exisiting businesses Assessing the prospects of each SBU Examining what to do with each SBU Build? Maintain ? Harvest ? Divest ? To what extent ? At what pace ?

27 27 STRATEGIC PLANNING PROCESS  Examining which business are to be taken up  Examining the resource requirement of the different strategy options and checking the resource availability  Making the final choice of the strategy/strategy spectrum  Translating the strategy in terms of what is to be done with each SBU Assigning the priorities to the SBUs, exisiting as well as new ones Clarifying what is expected of each SBU Allocating resources to the SBUs 8. Monitoring the strategy

28 28 FIRM INFRASTRUCTURE HUMAN RESOURCE MANAGEMENT TECHNOLOGY DEVELOPMENT PROCUREMENT INBOUND LOGISTICS OPERATIONSOUTBOUND LOGISITCS MARKETING & SALES SERVICE SUPPORT ACTIVITIES PRIMARY ACTIVITIES Generic Value Chain

29 29 Strategy Alternatives StabilityExpansion Intensification Market Penetration Market Development Product Development Diversification Vertically Integrated ForwardBackward Concentric Diversification Conglomerate Diversification DivestmentCombination

30 30 Vision & mission  Vision 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

31 31 Mission  Mission 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.

32 32 How does mission helps the firm I.Lends direction II.Gives focus III.Objectives, targets and programs are formulated based on mission. IV.Helps people at various levels in the corporation understand in what direction they should move. V.Guiding the action at all levels. VI.Helps prevent people falling into an activity trap.

33 33 A 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.--- Unilever  To preserve and improve human life---Merck  To 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 ---RIL  To become a $ 1 billion research based global pharmaceutical company --- Ranbaxy

34 34 Values & beliefs  Organisational 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.

35 35 Environmental analysis I.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. II.Micro –environment. A) organisational structure b) organisational culture and work.c) organisational resources.

36 36 Macro – environment variables  Societal environment consisting of :  Economic forces  Tecnological forces  Politico legal forces  Socio cultural forces  Socio economic forces.

37 37 Task 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 groups  Crdit group  Debt group  Regulatory group.

38 38 Analytical model  SWOT – 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 )

39 39 SWOT -- HM  Strength,  First motor car company in India,  Good product accepability,  Monopoly and protected market,  Built extensive dealer, repair and sevice networkThe  GP-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

40 40 Weakness -- HM  no mission, vision or goals.  No shared values or beliefs.  Conflict between labour and management.  No corporate strategy.  Failed to see the environmental changes  Did not anticipate competition,  Did nothing to counter the threat from Maruthi till it was too late  Cling on the same product for 50 years without any major change,  Can failed to see customer needs and what competitors offered  High labour cost and low productivity  Failed to follow up the initial success of Lancer,  Truker was a flop.  Deviated from core areas and core competencies.

41 41 Opportunity  GDP growth and boom in the car market,  Opening of the economy,  Globalisation and upsurge in peoples aspiration level  Good road network  Export possibility  Low labour cost  JV and collaboration with world class motor car companies.the

42 42 In Threat competition ? any other ?

43 43 BCG 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.

44 44 High Low HighLow Star? Cash cowDog I II IIIIV Market Growth Market Share

45 45 BCG 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.

46 46 GE 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

47 47 High Medium Low Strong AverageWeak Industry Attractiveness Business Strength/competitive Positions ssssssssssssssssssssssssss ssssssssssssssssssssssssss ssssssssssssssssssssssssss ssssss

48 48 SBUs.  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 centre  SBU is for facilitating strategic planning and implimentation and will be having their vision mission, goals, targets, programs,budgetsand SOPs.

49 49 Competitive 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.

50 50 Com. 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.

51 51 Com. Adv.( con )  Sources of CA :  MARKETING  FINANCE  PRODUCTION  R& D  HR  THE CEO & LEADERSHIP  LOCATION & Many more.

52 52 CA & Strength I.Strength is different from CA. II.All strength are not CA. III.All CA are strength. IV.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.

53 53 Building CA  By strategy  By SWOT  By bench marking  By value chain approach,  By analysing value chain of self and competitor

54 54 Core competence  A 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 )

55 55 mission, 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 implementation  Standard operating procedures is developed to control activities.sops can be in the form of simple conventions or in detailed written manuals.

56 56 Strategic management process  Environmental analysis-  Stategy formulation  Stategy implementation  Evaluation and control

57 57 Environmental 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 )

58 58 Strategy 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.

59 59 Strategic planning ( cont. )  Stategy for stability  Stategy for growth  Strategy for retrenchment  Competitive stategy  Cooperative strategy.

60 60 Generic 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.

61 61 Strategy 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.

62 62 Evaluation & control  Evaluation 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.

63 63 Strategic mgt. process ( summery ) I.Environmental analysis: task environment factors & internal factors. II.Strategy planning : objectives, strategiies,tactics, policies. III.Strategy implementation: programmes, budgets, procedures. IV.Evaluation & control: evaluation, assesment and control.

64 64 Types of strategies  Competitive strategy. Aimed at improving competitive position. This is achieved through cost leadership or differentiation strategy.  Cooperative strategy.they are,  Collusion,  Strategic alliances,  Mutual service consortia  Joint venture  Licencing agreement  Value-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

65 65 Common features of competitive and cooperative strategies I.They are made by board of directors or managers II.Both are based on common principle of competitive position of a firm against competitors. III.They may be formed for entire company, or a business unit or a particular product/ service or a particular market segment.

66 66 Major corporate strategies I.Directional : the firms overall orientation towards growth, stability, or retrnchment. II.Portfolio : the industry or markets in which firm compets through its products and services III.Pareting : the manner in which the top management coordinates actvities, transfers resources and cultivates capabilities among its product lines and business units

67 67 Distinction between cooperative and competitive strategy I.Coop. stgy may modify organisational structure. But compet. Stgy will not alter the organisation structure. II.Both have opposite direction to face competition.in coop. they nullify competition but in compet. they face each other. III.Cooperative strategy involve sharing, synergetic,friendly but competitive is unfriendly nonsharing and hostile.

68 68 Directional strategy  Growth strategies:  Mergers,  Acquisitions,or takeovers,  Strategic alliances  Two 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.

69 69 Directional 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.

70 70 Stability strategy. I.Pause / proceed strategy. II.No change strategy. III.Profit strategy.

71 71 Retrenchment 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 cost  Identify 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 steps  1 contraction  2 consolidation and growth at opportune time.

72 72 Turnaround strategy ( cont. )  Entrepreneurial turnarond strategy.  Efficiency turnaround strategy.  Captive company strategy.  Disinvestment strategy.

73 73 Generation of strategic alternatives I.Generation of strategic alternatives II.Shortlisting the feasible strategies III.Comparative evaluation of feasible strategies IV.Selection of best strategy.

74 74 Steps 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 )

75 75 Forecasting techniques.  Forecasting is very crucial for all planning as all plannigs are for future. Some of the more important techniques are.  Brain storming  Consultancy  Delphi technique.

76 76 Organisational 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 objective  The overall goals and targets  The product and service mix  The capital and financial requirements  Total 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.

77 77 Important org. strategies I.Organisation modification strategy:they modify the organisation structure including the heirarchy, staffing, objective and capital of the company. II.Functional modification strategy :they may or maynot alter the organisational structure. They bring functional modifications with or without capital restructuring.

78 78 Organisation 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 iii  They may require the restructuring of the objective  They may alter the method and persons making strategic decisionsthey may bring about capital restructuring  They change the staffing patterns  They may alter the ownership pattern

79 79 Mergers.  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 size  Competitive firms,merger nullify competition  Two firms cooperative and merger will consolidate their cooperation  Two companies are from the same industries  Same or partially same board of directors  Synergic or complementary.( HP- Compaq )

80 80 Functional & organisational modifications on mergers I.instead of two boards only one board. II.A new company is formed with new name.shares of old companies are collected and cancelled and new shares of the new company is issued III.Restructuring of the organisation is carried out including shifting of personal IV.Work duplication is avoided. V.The new company will adopt itown policies VI.Staff relocation is carried out as needed VII.Physical shifting of fixed assets or manpower is normally not done. VIII.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.

81 81 Advantages & 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 market  Frequent mergers lead to inconsistencies in strategy formulation and implementation

82 82 Joint ventures  Joint 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 opportunity  In 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.

83 83 Acquisition  This 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.

84 84 Take over  Take 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.

85 85 Networking  In 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.

86 86 Consortia  It 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.

87 87 Franchising  It 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 franchisee  Fast growth, least capital,and mutual benefit..

88 88 Subcontracting  Sub 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.

89 89 Licencing  Licencing is an arrangement, wherein a company licences other companies to produce and or sell a product developed by it  Licensing is based on copy right, patents, trademarks,which are known as IPRs.

90 90 Major reasons for failures. I.Managers are inadequately prepared for strategic planning. II.The information for preparing the plans is insufficient for planning for action. III.The goals of the organisation are too vauge to be of value. IV.The business units ( SBUs ) are not clearly identified. V.The reviews of the strategic plans of the business units are not done effectively. VI.The link between strategic planning and control is insufficient.

91 91 Successful 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.

92 92 Strategic 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 literacy  Creativity  Cross cultural effectiveness  Empathy  Flexibility  Proactivity  Problem solving  Relation building  Team work  vision

93 93 Need 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

94 94 GAME THEORY  A 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

95 95 G. 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.

96 96 Strategic 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

97 97 The 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?


Download ppt "1 Strategic management. 2 The concept of strategy  Strategy is the great work of organisation. In situations of life or death it is the tao of survival."

Similar presentations


Ads by Google