820.strategic mgt

7/28/2019 820.Strategic Mgt.

1/92

Strategic Management

- Refers to analysis, formulation and the

implementation of a specific Strategy

- Art & science of formulating, implementing &

evaluating decisions that enable an

organization to achieve its objectives

-To ensure success over all the operations

Strategic Management used synonymously

with Strategic Planning, whereas latter refers

to formulation of strategy only


2/92


3/92

Strategy Defined

Strategy-Greek Strategia, directing military

-a game plan to oust the competition

-to attain competitive advantage-to scan the external & internal environment

-to make a choice for markets to compete

-how to stay clear of the threats-what is our business & what should it be

-what are our products & the markets


4/92

Strategy Defined

As perPorter, a strategy is:

- A plan or a course of action or a set of decision

rules forming a pattern

- Is related to those activities which move an

organization from its current position to

desired future state

- Is concerned with the resources necessary for

implementation of a plan


5/92


A Capstone Course-Evolution

1911-Integrative course in BusinessManagement introduced in Harvard

1950-Research methodology introduced US

-Gordon Howell report recommended a courseon Business Policy

-American Assembly of collegiate schools of

Business made business policy mandatory-1990 title of Business Policy changed to SM

Term SM used as-subtitle for Capstone Course


6/92


Nature of Business Policy:

i) Study of functions & responsibilities of

senior management

ii) Determining future course of action

iii) To define what needs to be done to improve

identity of the organizationiv) Mobilization of resources


7/92


Importance of Business Policy

Business Policy acts as guide for executivedevelopment program for middle levelmanagers who aim to occupy top positions

4 areas where Business Policy is beneficial:i) For understanding the Organization

ii) For understanding business environment

iii) For personal developmentiv) To integrate knowledge & experience


8/92


Purpose of Business Policy

- To exploit & create new & different

opportunities for tomorrow

- To integrate knowledge gained in various other

functional areas

- To adopt a clear approach towards problem

solving

- To understand complexities among Internal &

External environment


9/92


Scope of Business Policy

-To integrate Intuition & Analysis

-Adaptation to the changes in external & internal

environment, by answering following

questions;?

-What kind of business should we become

-Are we in the right field-Should we reshape our business

-What new competitors are entering


10/92


Objectives of Business Policy

i) In terms of knowledge:

- Gain experience to find unique solution

- Gain information to determine Mission &Strategies

ii)In terms of Skills:

-To sharpen the skills of middle level

-To develop analytical ability thro cases

iii) In terms of Attitude:

-To do away Dogmatism approach


11/92


Levelsat which a Strategy operates:

3 levels i.e.

i) Corporate Level

ii) Business (SBU) level

iii) Functional Level


12/92


Concept of Strategies

a) Corporate Strategy- serves 3 initiatives

-Establish position & diversification

-Establish Investment Priorities

-Capture cross business units

b)Business Level Strategy: 2 factors

-deciding products that are winning

-Insulate business from rivals

c) Functional Strategy: to support above 2


13/92

Strategic Decision Making

It is to make a specific choice from differentstrategic alternatives that help the Co. toachieve its objectives & realize its Mission

It is the domain of Senior managementProcess of Strategic Decision Making:

-It is continuous in nature

-It must align itself with the environment-must have Cross functional Interaction


14/92

Strategic Decision Making

Issues in Strategic Decision Making: 6

i)Concept of Maximization & Satisficing

ii) Rationalityiii) Creativityby develop unique strategy

iv) Variability

v) Person Related Factors-age, educationvi) Individual vs. Group Decisions


15/92

Strategic Decision Making-

Phases5 phases of Strategic Decision Making:

1) Establishing Hierarchy of Strategic Intent:

Creating & communicating VISION Designing MISSION

Defining the BUSINESS

Setting OBJECTIVES


16/92


Phases2) Formulation of Strategies:

Performing Environmental Scanning

Performing Organizational AppraisalSynergy, Core Competency, Capability factors

& Techniques

Formulating Strategies-Corporate, Business(Generic) & Functional

Preparing a Strategic Plan & its review


17/92


Phases3) Implementation of Strategies:

Designing Structures & Systems

Managing Behavioral Implementation Managing Functional Implementation

Operationalizing the Strategies

4) Strategic Evaluation5) Strategic Control


18/92

Strategists & their Roles

A strategist can be an individual or a group ofindividuals who are responsible for the successor failure of the organization

Strategists are usually occupants in higher

hierarchies & generally possess a considerableauthority for decision making


19/92

Types of Strategists & Roles

10 major types

1) Board of Directors:

- Appointed & elected by the stake holdersresponsible for framing policies & ensuring

Corporate Governance

- Also responsible for Acquisitions, Mergers,Collaborations


20/92


2) Chief Executive Officer:

-Carries different names such as MD, President

or Executive Director,

-Has many roles to perform including defining

the Mission & objectives, interacting with

external environment, Implementation of the

strategies

- To provide a direction to the organization


21/92


3) Role of Chief Operating Officer (COO):

i) Legal or Symbolic Head

ii) Leader

iii) Monitor

iv) Disseminator

v) Spokesman

vi) Resource Allocator

vii) Negotiator & Liaison


22/92


4) Role of Entrepreneurs: He is normally theone who sets up the business, runs itsuccessfully & consolidates it into a big entity,

always being proactive & looking for a changecontinuously.

5) Role of Senior Management: dual role,mainly for implementation & evaluation butalso front runners for formulation of a strategy.Can also attend to expansions, diversificationor revamping technology


23/92


6)Role of SBU level Executives: An SBUbeingan organized & independent unit of a multiproduct, multidimensional firm is often headedby a Chief Executive who is responsible forprofitability & operates with completeautonomy. Developing strategies for long termsuccess.

7)Role of Middle Managers: Attached withheads of functional deptts. to implementstrategies & to learn skills for a futurestrategists thro execution of policies.


24/92

Strategists & Roles

8) Role of Corporate Level Planning Staff:

They are the support staff who provide

valuable information, that has been collected

through competitors strategies &environmental feed back, to the strategists for

decision making, implementation, evaluation

or even re-formulating the strategies.


25/92

Strategists & Roles

9) Role of Consultants: These are individual orgroup of individuals from outside the firm who

provide unbiased strategic feed back on

SWOT, Technical matters, Future trends &Project evaluations for strategic decision

making.

10) Role of Executive Assistants: Secrecy &confidentiality of the information being top

responsibility


26/92

Why firms dont do

Strategic Planning Poor Rewards

Waste of Time

Expensive Fear of Failure

Prior bad experience

Content with success Difference of opinion

Over confidence


27/92

The Strategic Intent

It is a commitment to gain competitiveadvantage to become a leader by topplingexisting ones & to sustain a highly respected

status & desired leadershipIt thus clearly specifies What to do in future

thro 3 elements:

Vision Mission

Objectives


28/92

Strategic Intent: VISION

Vision is a thought that needs to be translatedinto words & then to action to make dreams

come true

Vision talks about a position that anOrganization wishes to attain in future

Vision is a one sentence statement that defines

the path to be followed by an organization in

the future

Vision is more of thoughts than day to day

accomplishments


29/92

Strategic Intent: VISIONCharacteristics of Vision:-Ongoing activity for leadership

-a pathway, not above reality

-not a Mission

-sets op direction for a Co. to proceed

Elements of Strategic Vision:-a clear one line statement to arouse

commitment-To convey Who we are, Where are we now,

Where we will be in future

-To answer What do we want to become

-must contain future goals & plans


30/92

Strategic Intent: MISSION

It is a statement of purpose, beliefs & the

reasons for existence of a firm

Elements of a Mission: Mission statements to

include 3 basic elements:

Customer Needs- what is being satisfied

Customer Groups- who are being served

How to deliver values to consumers &

satisfying their needs


31/92

Strategic Intent: Mission

How to develop Mission Statements:

Common & widely accepted approach is to

involve all Managers followed by appointing a

Facilitator to prepare Mission

Other common method is to use discussion

groups of Managers

Seeking unbiased advice from outside agencies

or Consultants


32/92


Characteristics of Mission:

-Helps setting up feasible alternatives

-Statement should be broad-Statement not to be vague

-must provide high degree ofmotivation

-Should be enduring-Should be dynamic allowing additions &

modifications


33/92


Components of Mission Statements:

i) Customers (who are our customers)

ii) Products (what are our main products)

iii) Markets (where do we compete)

iv) Technology (are we sound)

v) Philosophy (Beliefs, values & Ethics)

vi) Concern for public image

vii) Concern for employees


34/92

Strategic Intent: Mission-

the Business Definition

The business definition of a Mission mustinclude all the 3 elements i.e. customer groups,customer needs & how to deliver value

Business definition of a Mission, thus, to beprovided at 2 levels i.e.

-at Corporate Level: 3 elements of Mission

will be wider in large Co.s than small ones-at SBU level: Mission to apply to each SBU


35/92

Strategic Intent:

Objectives/ Goals

Objectives: close ended statements & not

stereo type statements, often the end result of

an activity or the end of planning, highlighting

what is to be achieved by when & how muchof what

Goals: open ended statements often used

interchangeably with objectives, laying notime frame for completion of a task or what is

desired to achieve with no measurement of

what is to be achieved

St t i I t t Obj ti


36/92

Role of Objectives:

-to help a Co. to pursue Mission & Vision-Helps in performance appraisals

-Helps in Strategic Decision making

Characteristics of Objectives:-Must be time bound

-must be challenging

-must be quantifiable

-must be specific & clear to understand

-must integrate functional areas of Marketing &production

Strategic Intent- Objectives


37/92

Strategic Intent: Objectives

Areas in Objectives Setting or(What objectives to be set?):

i) Efficiency (production targets, costs)

ii) Resource utilizationiii) Market Share (for leadership)

iv) Growth & Profitability

v) Employees welfare

vi) Society welfare


38/92

Strategic Intent:

Objectives-Setting

4 aspects while setting Objectives:

i) Identify Needs for Objectives:- long term(market share) & short term (sales volumes)

ii) Need for Top down objective setting- toguide lower management to support overallobjectives

iii) Types ofObjectives-Strategic/Financialiv) Factors-Environment, Industry, Self


39/92

Strategic Intent:

Critical Success Factors(CSF)

Also known Strategic Factors for success

Rockart suggested 3 step process for CSF

a) First generate success factors by asking what

does it take to be successful

b) Fine tuning these factors into Objectives

c) Identify measures of performance

Steiner: Brain Storming internally to develop

CSFs & answer what to do for success

Ohmae: suggested the need of careful allocation

of resources


40/92

Strategy Formulation

Environment Assessment

It is the process of monitoring, evaluating &

disseminating of information from the external

& internal environment to the people who

shape the destiny of an organization.

It is thus the sum total of all the influences,

events or conditions that affect & surround the

organization.


41/92

Environment Assessment

Characteristics of Environment:

- Ever Changing & Dynamic, never static

- Highly complex

- Has varying effect (for some it offers an

opportunity & for some it acts as a threat)

- Is unpredictable & hence can create chaos- Multidimensional


42/92


43/92

ExternalEnvironment Opportunity: It is a favorable condition that

exists for a co. offering avenues for profitable

growth, building up of competitive edge

Imp. Opportunities are:

- Easy Trade barriers,

- Ability to acquire rival firms,

- Expansion of distribution network,- Expansion of product lines

- Expansion of customer base


44/92

Threat: It is an unfavorable condition that can

cause a damage or can pose a great risk to the

well being of the organization.

Imp. Threats

- Rising Interest Rates

- Fluctuating Foreign Exchange Rates

- Threats of hostile take-over- New legal policies by change of Govt.

- Introducing better products by competition

External Environment


45/92

Internal Environment It consists of :

a) Strengths: These are those skills in which a

company excels or exceeds

Important Strengths:

-Healthy financial conditions-Easy availability of capital for future use

-Cost Advantage

-Strong Brand Equity-Wide geographical coverage

-Strong R & D

-Strong Alliances & JVs


46/92

Internal Environmentb) Weaknesses: These refer to something in which

a company lacks or restricts it to move ahead

Imp. Weaknesses:

-Old & Obsolete technologies-Very high cost of production

-Product line too thin & too narrow

-High employee content-Poor Distribution

-Under utilization of capacity

SWOT


47/92

SWOT

Its Value: Kotler says managers who lack

imagination fail to identify opportunities &

can cause a disaster, thus value of SWOT

lies in a careful evaluation that can lead to

a clear formulation of a Strategy. How to formulate Strategy from SWOT:

-Match Co.s Strengths with opportunities

-Neutralize the effect of Threats

-To rediscover your unknown strengths

-Continue a constant SWOT re-evaluation


48/92

How to make SWOT effective

SWOT to TOWS

-Converting Threats to Opportunities &

Overcoming the Weaknesses & convert them

into Strengths

- Exploit the Opportunities by carefully

avoiding the Threats

- Identifying which strength to be enhanced &

which Weakness to be reduced

e.g. Dell (Direct Mktg.), Wal Mart(EDLP)

PEST


49/92

PEST

It is to carry out a scan of various forces/

factors that will help in shaping up the futurepath of the organization, such as

a) Customers- Need identification, Purchasing

powers, Buying Behaviors

b) Marketing Intermediaries: i) Middlemen

comprising of Wholesalers/Retailers &

ii) Facilitators made up of Transporters/Warehousing

c) Product Related factors; Price, Image

d Com etitors: Threats & their SWOT


50/92

Also known as External Audit

It reveals to the organization the keyOpportunities to en-cash & potential Threats to

avoid, calling for study of external factors i.e.

Economic Factors Technological Factors

Political-Legal- Governmental Factors

Cultural & Social Factors

International Business Environment (WTO)

Supplier Environment

conom c ac ors


51/92

conom c ac ors

The various Economic Factors include;

Money Supply & Inflation rates GDP Ratios & Industry Growth rates

Interest Rates

Stock Markets

Taxations & Monetary Policies

LPG concept ( Liberalization, Privatization &

Globalization) to pursue. Also study the

concept ofIndustrial Organization I/O to

know as to how to gain Competitive edge by

integrating external & internal factors


52/92

Technological Factors

Factors affecting current & future business of an

organization due to advancements in

technology & machines such as:

Altering the relative competitive cost

Making existing products as obsolete

Reducing/Eliminating Cost barriers

Creating new competitive advantages thatare stronger than the existing ones

Creating new markets & new channels


53/92

Political-Legal-Governmental

It consist of Laws & Regulations that limit or

influence organizations performance i.e

-Form of Government

-Stability of government-Strength of opposition

-Advertising bans

-Labor laws, ESI & PF-Weights & Measures act

-Environment protection laws

-Children employment


54/92

Why a mgt. practice is successful in one nation & a failure in

the other, factors as identified by Hofstede are

1) Power Distribution(PD)-unequal b/w societies

2) Uncertainty Avoidance(AV)extent to which a

society feels threatened by uncertainties

3) Individualism-Collectivism(IC) extent to which asociety values the freedom

4) Masculinity- Feminity (5) LongTerm Orientations

Certain other Prominent Factors:a) Customs, Norms & Beliefs

b) Ethnocentrism, Work Ethics

c) Literacy Levels

International Business


55/92

International Business

Environment

Factors affecting the co.s working due to:

-Globalization & Liberalization

-Financial Intermediaries: Banks, World Stock

markets & Bullion markets

-Trade barriers

-Cross Cultural boundaries-Varying conditions of Economy

-Racism, Layoffs & Recruitments

-R & D advancements

S i i


56/92

Supplier Environment

Factors having a direct impact on business

-Raw Materials Suppliers: Availability, cost,

quality & continuity

-Human Resource Suppliers: Cost of hiring,training & development

-Finance Suppliers: Affordable, Interests

-Capital Goods Supplier: Spare parts, cost &availability

-Production Process Suppliers: Power, Gas,

Oil & Furnaces etc.


57/92

Among the 3 most powerful institutions the other 2

being IBRD(International Bank for Reconstruction &Development or World Bank) & IMF

Founded on 1st Jan, 1995 as a successorGATT

(general agreement on Trade & Tariffs), specifies

major guidelines such as:-Trade without discrimination & fair Competition

-Access to National & International Markets by

removing Trade & Tariffbarriers-Prevention of unfairlow pricing

-To regulate Anti Dumping Duties

Establish legal framework forIP protection


58/92

It is the process of identifying & monitoring

the potential changes in the general

environment that can make or mar the Co.

3 Factors for Scanning:

a) Identification ofEvents

b) Monitoring Emerging Trends

c) Forecasting Events & Outcomes

3 Approaches to Environment Scanning:a) Systematic- Regular collection & updating

b) Adhoc: Conduct special study on need

Environment Scanning


59/92


Techniques

Most widely used techniques range from:

Statistical methods: such as Extrapolationmaking use of Historical Trends, Brain

Storming & Delphi Techniques

Other notable techniques are

-Scenario Writing

-QUEST

-ETOP



60/92


Techniques

Scenario Writing:

It is most commonly used technique & is

presented in the form of a report based on

intuitions & judgments in the most

descriptive or narrative style.

It is compiled by the industry experts who are

experienced enough to forecast events

correctly.



61/92


Techniques

Quick Environment Scanning (QUEST)

Technique:4 step process, by B. Nanus

-Observing major trends & events in the related

industry

-Speculating future impact by Envi. scanning

-3 to5 scenarios written by QUEST directorabout major issues & discussion themes

-Review of scenarios by Strategists & ranking

options in terms of feasibilities



62/92


Techniques

Environment Threat & Opportunity

Profile (ETOP): This was proposed byGulieck toprepare an Opportunity & Threat

profile for the organization by-

-Splitting the environment into different

segments or sectors

-Making an analysis of each segment in terms of

its impact on the organization to help it to

understand where it stands

Internal Environment Scanning/


63/92

Internal Environment Scanning/

Organizational Appraisal Unit II Internal scanning often referred to Organizational

Analysis is concerned with developing Organizational

Resources internally which can not be easily matched

or imitated by the competition.

A Resourcebecomes a Strength if it provides the

company with a competitive advantage & it becomes

a Weakness if it does not provide the company with

all that which its competitor has in abundance. Thus internal scanning or appraisal is all about the

Strengths & Weakness of a Co.

Internal Environment


64/92


Assessment

Evaluation of Key Resources: Barney in hisVRIO framework proposed 4 criteria:

1) Value: does resource provide competitive

advantage?2) Rareness: Do other competitors possess it?

3) Imitate ability: Is it costly for others to copy

4) Organization: Is the co. organized to exploit

the resource



65/92


Assessment

Categories of Internal resources: 3 types1) Physical Resources: Plant & Machinery,

Raw materials, Technology,

2) Human Resources: Employees, Skills &abilities, Training & Development,

Experience, Intelligence & Knowledge

3) Organizational Resource: Copy right, Trademark, Patents, Formal/Informal Structures

More is the resource valuable, stronger is the

Competitive Advantage

Internal Appraisal


66/92

Internal Appraisal

Strategic Advantage

Gaining a Competitive Advantage is also

known as Creating Strategic Advantage

Strategic Advantageis result of capabilities of

a Co. that offers reward in terms of increased

sales/profits/market share & Co. image, while

Strategic Disadvantageacts as a penalty in

terms of decreased market shares & profits. To create a Strategic Advantage2 aspects:

a)Synergy leading to build up ofCompetency

b Or anizational Ca abilit Factors


67/92

Strategic Advantage

a) Synergy: It is an idea that whole is lesser or

greater than sum total of its parts i.e.

2+2=3 or 5, 1+1=11

Synergy is developed & exists only when every

one in organization pulls together as a team to

achieve both short term & long term objectives

of the organization, thus, leading to a build upof Competencies

Competency


68/92

CompetencyMost valuable resource, is something a Co. is

good at doing & to withstand any oppositionin the mkt. by gaining competitive advantage

Competency is, therefore, a product of

experience & built-up efficiencies by learningover a period of time. Thus Competencies need

to be developed- as it does not happen on its

own, which are of 3 types

i) Core competency

ii) Distinctive competency

iii) Competitive Capability

Strategic Advantage


69/92

Strategic Advantage

Competencyi) Core Competency: Something a Co. does well internally by

quick response to changes, adopting innovations & able

distribution of responsibilities.

It resides in its people & in its intellectual capital & not in

assets of balance sheets

It is a product of experience accumulated by learning over

time & is genuine strength

A word of caution Core competency not to get converted into

Core Rigidity as long spells of success often spoils &

expose weaknesses

Successbegets failure because the more you know a thing

works, the less likely is that it wont work

Strategic Advantage


70/92

g g

Competencyii) Distinctive Competency: something a

Company does well in comparison to its

competitors & always depends upon

organizational capabilities

e.g. Sonys Trinitron Technology

4 ways to gain Distinctive Competency

1) Creating own Asset Endowment(Key Patent)

2) Acquired from others

3) Shared with alliance partner

4) Built & accumulated over a period of time

Strategic Advantage


71/92

Strategic Advantage

Competency

iii) Competitive Capability: It is something by

the virtue of which a Co. gets differentiated

from its competitors .

It gets achieved when the customers of the Co.realize and feel the value as well as benefits by

getting associated with the company

It leads to building up of a highly sustainableadvantage over the competitors.

St t i Ad t P fil


72/92

Strategic Advantage Profileb) Organizational Capability Factors:

These comprise of 6 types:

1) Financial Capability Factors: it include

Sources of Funds- Borrowings, Reserves &surpluses, capital requirements

Usage of Funds- Loans, Advances, Capital

investments, Dividends Management of Funds- Tax planning,

Budgeting, Financial Accounting

Organizational Capability


73/92


Factors

2) Marketing Capability Factors:

Product Related: Positioning, Packaging,

Variety & Mix, Quality

Price Related: Pricing structure & changes

Place Related: Distribution & Logistics

Promotion Related: Advertising, DirectMarketing, Intermediaries

Other Factors: Co.s Image, MIS



74/92


Factors

3) Operations Capability Factors:

Production Related: Installed vs. Utilized

capacity, Vertical Integration, R&D, Cost of

production

Operations & Control Factors: Inventory

management, Quality control & Maintenance,

Feed Forward Control systems

R&D related: People, facilities, level of

technology, New additions, Budgets



75/92


Factors

4) Personnel Capability Factors:

Related to Personnel System: Manpower

planning, Selection, Training & Development,

Appraisals, Compensations

Related to Co.s & Employees' Character:

Corporate image, Perceptions, Working

conditions

Related to Industrial Relations: Unions, Safety

& Welfare

Organizational Capability Factors


76/92

5) Management Information System

Factors Relating to Acquisition/Retention: Sources,

confidentiality, Timely

Related to Processing & Synthesis: Softwarecapabilities

Related to Retrieval & Usage: Speedy

availability Related to Transmission & Dissemination

Related to Support Systems: Infrastructure of

IT, Up-gradation & compatibility



77/92


Factors

6) General Management Factors:

Related to Managerial Systems: Corporate

planning system, Rewards & Incentives,

Strategic management

Related to General Managers: Risk Taking

abilities, Competency, Retirements & Track

Records

Related to Organizational Climate: Culture,

Use of Power, Hierarchy


78/92


79/92

Value Chain Analysis


80/92

y

Support Activities: consisting of 4 types:

1) Firms Infra structure: Financial health,Corporate Planning, Organizational

Structures

2) Human Resource: Recruitments, Training &Development, Rewards, Terminations

3) Technology Developments: R&D, Process

Management4) Procurement: Machines, Resources, Raw

materials



81/92


When a major competitor or a new entrant

offers products at a very low prices, it could be

mainly due to a cost advantage gained thro

value chain

A core competency is also a value chain

activity to gain & sustain competitive edge

An automobile Co.s value chain activities

include: Auto leasing, Insurance, Used Cars

sales & purchase, After sales Service

Quantitative Analysis


82/92


Study offinancial & Non financial Factors:

Financial Factors: Study of imp. Ratios:

-Liquidity Ratio: ability to meet maturing short

term obligations

-Leverage Ratio: To know the extent to which a

co. is financed by debt

-Activity Ratio: To know effectiveness of a co.to use its resources

-Profitability Ratio: To measure overall

effectiveness on ROI

Financial Ratios


83/92

Current Ratio= Cash & Securities

Current LiabilitiesQuick/Acid Test=Current AssetInventory

Current Liabilities

Debt/Equity Ratio= Total DebtTotal Equity

Fixed Asset Turnover= Total Sales

Fixed Assets

Operating Profit= Profit before Tax & Interest

Total Sales

Q tit ti A l i


84/92


Non Financial Quantitative Analysis:The various factors studied under this are:

Market Shares

Employees Turnovers Production Cycles

Advertising Effectiveness

Trade Marks & Patents

MIS

Q lit ti A l i


85/92

Qualitative Analysis

The various aspects under this, which can notbe measured in absolute figures or terms, are:

- Employee Satisfaction

- Motivation- Perception

- Work culture

- Work environment

- Organizational climate

C ti A l i


86/92

Comparative Analysis3 methods to evaluate strength & weakness:

1) Historical Analysis: To measure howwell or badly an organization has faired in

past. Conducted mainly thro balance sheets &

profit & loss statements.

Its analysis also reveals areas of consistent good

performance indicate area Strengths.

The major drawback is-it does not indicate any

comparison with competition & also does not

state any reasons for poor show

C ti A l i


87/92

Comparative Analysis

2) Industry Norms:An industry is definedas an aggregate of homogeneous firms.

The performance indices vary from industry

to industry & thus each firm in order toevaluate its performance must compare

with the norms & standards set up by the

industry so as to identify areas of

excellence or improvements.

Comparative Analysis


88/92

3) Bench Marking: Bench mark is referencepoint to measure & evaluate performance:

1) To compare what? It includes:

Performance- Owns with other co's

Process- compare methods & processesStrategic-compare long term decisions

2) To compare against whom? It includes:

Internal-comparison b/w units of same co.Competitive-Own performance with competition

Functional- b/w non-competition in same sector

-

Comprehensive Analysis


89/92

2 most popular methods:

1) Balance Score Card:Kaplan & Norton ofHarvard, to include customer viewpoint as

well in evaluating the performance & not only

the financial indices, to answer:

-How do customers rate us?

-What needs to be done to excel?

-Are we creating value?-How do we treat the shareholders?

2) Key Factor Rating- same as that of

Organizational Capability factors

Corporate StrategyU it III


90/92

Unit III It is primarily about the choice of direction a

co. needs to follow, including decisionsregarding financial & other resources to form a

business unit or a companys product line, to

gain Competitive edge. Also known as Grandor Directional Strategy. 4 Grand Strategies-

1) Stability Strategies

2) Growth Or Expansion Strategies

3) Retrenchment Strategy

4) Combination Strategy

Corporate Strategy


91/92

p gy1) Stability Strategies: adopted by Cos who

have found their niche segments & arerelatively happy content with achievement

The strategy is best when a Co. operates in a

reasonably predictable environment.

The drawback of this strategy is- it is too gud in

the short term but is fatal in long run.

Types of Stability Strategies:a) No Change Strategy

b) Profit Strategy

c) Pause/Proceed-Caution Strategy

St bilit St t i


92/92

Stability Strategiesa) No Change Strategy:A strategy to do

nothing new & to continue with thepresent operations hoping that future will

remain as an extension of the present,

due to reasons such as:- No new competitor will enter the industry

- No immediate threat of substitute product

- No opportunities for growth- No obvious changes in strengths &

weakness of the organization

820.strategic mgt

Documents