Download - Business Policy and Strategic Management - 2
Corporate Level Strategies
StrategicAssessment
AvailableOptions
StrategicIntent
Context
Chosen Strategy
STRATEGIC CHOICE PROCESS
Strategy Formulation : Corporate Strategies- Choice of Direction to the Firm Allocating resources among different
businesses in a firm Transferring resources from one set of
businesses to the other Managing and nurturing a portfolio of
businesses.
Diversified Firms
Multi business firms have interests in serving a diverse base of customer groups, customer functions and alternative technologies that the firm is involved with
Strategic Alternatives
Whether to continue or change the business the enterprise is currently in or improve the efficiency and effectiveness with which the firm achieves its corporate objectives in its chosen business sector
Strategic Alternatives
ExpansionBusiness Definition
MarketPenetration
Mkt DevInnovation.
DiversificationHorizontal
Concentric Conglomerate
Vertical Forward Backward
Stability
IncrementalGrowthProfit
Sustained GrowthPause Strategy
RetrenchmentDivestmentTurnaroundLiquidation Bankruptcy
Cooperation
Joint Ventures
StrategicAlliances
Consortia
Strategic Alternatives -Grand Strategies Expansion Stability Retrenchment Combination of any of above three
Grand Strategies
Expansion -Is followed when an organisation aims at high growth
Stability – when it attempts at incremental expansion of its functional performance
Retrenchment – when it aims at contraction of its activities
Combination – adopting a mixture of expansion stability or retrenchment either at the same time or in different businesses or at different times in the same business to improve performance
Expansion
Concentration –converging resources into one or more firms businesses in terms of customer needs, customer functions,or alternative technologies either singly or jointly in such a manner that expansion result
market penetration (more to same), market development ( same to new), Product development (new to same)
Expansion
Concentration
Market Penetration
Market Development
Product Development
Integration
VerticalHorizontal
Diversification
Concentric(related)
MarketingTechnologyMarketing&Technology
Conglomerate/Unrelated
Cooperation
Merger &AcquisitionHorizontal
VerticalConcentric
Conglomerate
Joint VentureStrategicAlliances
Pro Competitive
Non Competitive Competive
Precompetitive
Internationalisation
InternationalMultidomestic
GlobalTransnational
Digitalisation
Concentration
Idea to get more milk out of same cow Specialise in a few areas and gain rich
experience With predictable conditions market forces
manageable Growth and survival through time tested
technologies proven products and familiar markets
Conditions – Concentrated growth resistant to major technological
advancements, when firm’s target markets are not saturated, firms products are differentiated, market is stable
More to Same
Combine toothbrush with toothpaste Woo customers from others (offer below
competitors price Santro over Maruti), convert non users into users (soap, toothpaste),
LCD TV, in rural areas and sell Tata Max to rural customers over RTV with Safari for urban
Product
Market
Present
Products
New
Products
Present
Markets
Market penetration
Product development
New
Markets
Market
Development
Diversification
Ansoff’s Product Market Expansion Matrix
DIVERSIFICATIOn
VERTICAL
HORIZONTAL
FORWARD
BACKWARD
CONCENTRIC
CONGLOMERATE
TYPES OF DIVERSIFICATION STRATEGIES
Tata Tea – Increase Sales
Cut prices Increase advertising Get product into more stores Better store displays Point of purchase merchandising Increase usage by current customers and
attract customers from other brands by providing similar but additional flavours or advantages
Expansion
Manageable Meet environmental
demands- legal limits Natural Choice among
alternatives Minimal growth or
optimal growth Internal preparation
For Survival For economies of scale To stimulate talent Reach higher targets
Reasons for Diversification
Several Concentration (core competence) Focus All Carry risk
Integration
Integration – combining activities related to the present activity of the firm- done on the basis of value chain – horizontal and vertical
Horizontal – same type of products at the same level of production or marketing process ,it is said to horizontally integrate.
Vertical – can be forward or backward. Backward means integrating the source of raw materials and forward moves it ahead towards the ultimate customer
Diversification
Involves a substantial change in business definition singly or jointly in terms of customer functions, customer groups or alternate technologies of one or more of firm’s businesses
Reasons for Diversification
Minimise risk Capitalise on capabilities and Biz model to
maximise org strengths and minimise weaknesses.
If growth in existing business is blocked by regulatory and environmental factors.
When?
Expansion within existing product market not meet objectives
High retained cash exceeds needs for expansion Greater profit opportunities than in present product
market If information available does not permit clear choice
between expansion and diversification Risk spreading-avoid dependence on one
product /market, greater use of existing distribution and acquire technology
Horizontal Integration
Firms expand by acquiring other companies in the same line of business or services to the existing product line – eliminate competitors, provide new markets
Mergers and Acquisitions Concentric - Related (through
product ,market or technologies) but distinct business e.g Philips electronics producer into cell phones
Horizontal
Conglomerate – when co diversifies into unrelated to current business - tech change , risk diversification, volatile market
Buying high, buying cash Matching complementary business cycles Debt free co if fin. poor
Concentric (Related but Distinct) Diversification
Transaction costs saving – financial synergies Increased market power – marketing synergies Economies of scale (size of operations) and
economies of scope ( using common base of resources and capabilities for varied but related businesses) - operational synergies
Optimising HR utilisation common skill sets and
competencies- Personnel synergies
Concentric
Using common databases and information sources – Information synergy
Using common admin skill and experience- managerial synergies
IBM – Main frames to PC to communication equipment,
Procter and Gamble -use common networks for distribution
Conglomerate or Unrelated Diversification Spreading risk over different ,unrelated business
instead of synergy creation. Stress is on financial matters (to spread risk) instead
of operational matters( benefits of synergy) Maximising returns by investing in profitable biz and
selling out unprofitable ones. Stabilising returns through ups and down on biz
cycles Taking advantages of emerging opportunities Migrating from biz under threat. Personal choice of owners to create industrial
umpires
New Products
Related
Technology
Unrelated Technology
New Functions
Firm its own customer
Vertical Integration
Same Type of Product
Horizontal
Diversification
Similar type of Product
Marketing and technology
Related diversification
Marketing related concentric
diversification
New Type of Product Technology-related concentric diverisifcation
Conglomerate Diversification
ANSOFF’s MATRIX FOR DIVERSIFICATION STRATEGIES
Oil /GasExpolaration
Back ward ForwardRIL
Oil Production
Pipelines RefiningProduct
pipelines
Export
Retail Petro pumps
Position in 1998
Position in 2009
Integration Strategies based on Value Chain
Horizontal Integration
Taking up same type of products at the same level of production or marketing process
E.g taking over a rival company manufacturing the same product (acquisition or merger)
Results in bigger size with con commitment benefits of stronger competitive position.
Geographical expansion, increase market share In value chain keeps company at same level
e.g Bank takeover
Benefits of Horizontal Integration Economies of scale ( Spreading fixed cost
over larger numbers) Increased product differentiation Economies of scope (same resource base for
variety of products) Increased market power Replicating a successful biz model Reduction in industry rivalry
Risk
Demands very high level of managerial, operational and financial competence.
Demands wide variety of skills Decreasing commitment to old businesses. May not result in promised rewards Increases the administrative costs of
managing integrating and controlling a wide portfolio of businesses
Concentric Diversification
When organisation takes up an activity in such manner that it is related to the existing business definition of one or more of a firms’ business either in terms of customer groups, customer functions or alternate technologies
Conglomerate Diversification
When an organisation adopts a strategy which requires taking up activities unrelated to its to its existing business definition in any of its businesses, either in terms of their respective customer groups, functions or alternate technologies
Strategic Alternatives
Expansion
Increase pace of Activity
Prospects of growthIncreased size more Control overmarketExpernce curve and Scale of operations
Stability
Less risky, less changes Comfort
EnvironementStable
Expansion percieved asThreatening
Consolidation after
expansion
Retrenchment
No longer wish to remain In biz
Envrironment is threatening
Stability ensured byReallocating
Resources fromUnprofitable to profitable businesses
Combination Organisation large and faces complex
EnvironmentComprses
different biz each lying in different
Industries Requiring different
responses
StabilityStrategy
No change Strategies
Pause /Proceed with cautionStrategies
ProfitStrategies
Stability Strategies
Maintaining status quo or growing in a slow manner.
Resources put into existing operations Focus on current products current markets
and functions maintaining same level of effort
Why?
Not rock the boat Stop for a while Why swallow risk? -If growth low hold on to market
share after stretched period of growth Resource crunch – for new products new markets or
changing organisation ,resources required Works only if firm doing well and environment is not
volatile or in niche market Cannot be eld for along time as shareholder will
want improved profits.
RetrenchmentStrategies
TurnaroundStrategies
DivestmentStrateges
LiquidationStrategies
Types
Retrenchment – defensive when rival performance is good and its own disappointing or survival at stake
Eco recession, production inefficiencies and innovative breakthroughs by competitors
Chosen if firm not competitive enough to beat leader or make fast changes
Address weakness and restore Arvind Mills (Denim) and Xerox did address their
weakness and came out stronger
Divestment
Divestment –Sale of units or parts of unit that no longer contribute to or fit the firm’s distinctive competence
Outright sale Leveraged Buy Out Spin Off - create new company and distribute
shares to present shareholders Focus on core business
ACC, Raymond, ITC Classic Fin Services, Parle –Thums Up
Divestment Strategy -Reasons Strong focus, Unlock critical funds, Invest in emerging tech, exit non dominant ventures, turn red to black, exit unviable projects
Turnaround Strategy
Turnaround – Reverse a negative trend and bring organisation back to normal health and profitability.
Rid of unprofitable products, leaner firm, more efficiency, reduce distribution outlets.
Turnaround –Danger signals
Continuous cash flow problems Declining profits-lower margins Dwindling market share High employee turnover Low morale of employees Under utilisation of capacity Raw materials supply problem Rising input prices Strikes lockouts Increased competition, recession, Mismanagement
Action Plan
Change the leader Change the prices Focus on specific customer and producers Extend product life thru improvements Replace old products with new Focus on power brands that are valued Liqiudate assets for generating cash Better internal coordination Emphasis on selling advertising Cut employees, interest and fixed costs
Ashok Leyland
1998-99 – Sales and valuations hit rock bottom balance sheet dismal picture, recession
Strategy
Vendor consolidation – from 1400 suppliers brought down to 500 in 2002 with reduction in ordering monitoring costs
J-I-T inventories Reduced from 23 days to 7 days Demand and Forecasting MIS –reduced product
inventory form 90 days to 50 days reducing marketing overheads by Rs 10000 per truck
Financial re-engineering – Switched Rs 90 crs form high to low cost loans and raised Rs 100 cr CP at 9.5 % bringing average cost of debt by 2% over 2 years to 9.6%
Liquidation
Selling of disposing of all or part of an organisation’s assets
When future is bleak –sales ,profitability Unamanageable accumulated losses Someone willing to buy to avail tax benefits Not possible to revive with existing resources Difficult in labour surplus, cash hungry country like
India as unions will oppose Govt, FIs may oppose By selling avoid bankruptcy and protect
shareholders interests
Liquidation
Compulsory winding up under the order of a court
Voluntary winding up Voluntary winding up under the supervision of
a court Companies Act 1956 provides for a liquidator
who takes control of the company ,sell its assets, pays its debt, and distributes the surplus if any to its equity shareholders
Bankruptcy
Means whereby an organisation is unable to pay its debts and can see court protection from creditors and from certain contract obligations while it tries to regain financial health and stability( reorganisation bankruptcy)
Combination Strategies
Simultaneous Combination
SequentialCombination
Combination ofSimultaneous
And Sequential
Combination Strategies
Joint ventures - pool resources to accomplish tasks not done independently way of implementing strategy –spreads risk. Firms take equity in one another
Strategic Alliance – Partners Contribute skills and expertise to a cooperatively conceived
and executed project for a specific period Consortia – Interlocking relationship between
business of an industry -Japanese upto 50 firms – Airbus an example
BHEL -Case
Shift from concentration to include integration or diversification
What areas to diversify if it decides to
Expansion – Internationalisation, Cooperation and Digitalisation
Internationalisation
Type of expansion that requires market for their product or service overseas
Evaluate international environment, own capabilities, devise strategies to enter
Improvements in communication and transportation, investment climate, lowering of barriers
Government
Firm Strategy,Structure
And Rivalry
Demandconditions
Factor Conditions
Related and SupportingIndustries Chance
PORTER’s DIAMOND OF NATIONAL ADVANTAGE
Diamond Determinants (Porter’s Model) Factor Conditions Demand conditions Related and Supported Industries Firm strategy, structure and rivalry
Factors Impinging on Firms’ Internationalisation Strategies Cost Pressure- minimise unit cost Pressures for local Responsiveness-
strategies to respond to national level differences in terms of variables like customer preferences and tastes, policies and biz practices
International Entry Modes
Export entry mode Contractual entry mode Investment Entry mode Born Global firms
Strategic Alliances
Two or more firms unite to pursue agreed upon goals but remain independent
Partner firms share the benefits of an alliance and control over the performance of assigned tasks.
Partner firms contribute on a continuing basis in one or more key strategic areas –technology, product and so forth
Reasons for Strategic Alliances Entering new market Reducing manufacturing costs Developing and diffusing technology
Strategic Decisions in Internationalisation Which International markets to enter? Timing of entry into international markets? Scale of entry into international markets?
Advantages and Disadvantages of Expansion through Internationalisation Economies of scale Economies of scope Expansion and
extension of markets Realising location
economies Access to resources
and markets overseas
Higher risks Difficulty in managing
cultural diversity High bureaucratic costs Higher distribution
costs Trade barriers
Regionalisation Strategies
Home base Portfolio Hub Platform Mandate
Strategies for the Base of the Pyramid Easy payments in instalments Dramatic cost cutting Offering products in small packages Charge prices by pay by use Direct distribution by avoiding costly
intermediaries
Dodge rivals by shifting to new business model or market niche
Contend on a global level
Defend by using home –field advantages
Transfer company expertise to cross border markets
IndustryPressureTo Globalise
Tailored for Home Market
Transferable to Other Countries
Resources and Competitive Capabilities
Low
High
Strategy Options for Local Companies in Competing Against Global Companies
Global
Strategy ( standardised products /services low cost approach to get benefits of experience and location for manuf. And sell in diff countries)
Transnational Strategy (low cost and high local responsiveness)
International
Strategy ( transferring standard product and services to foreign markets)
Multi domestic
Strategy (modify product and services to foreign conditions)
Pressures for Local responsiveness
Pressures For costReduction
Types of Global Strategies
Response of Local Firms to MNC’s Using Home Field Advantages Transferring the Co’s expertise to Cross
Border Markets Shifting to New Business Model or Market
Niche Contending on a global scale
Patterns of Indian Co Response Moving from position of comparative advantage to
position of competitive advantage Reaching a point of having global advantages,
pushing towards global markets pulled by change of India’s perception in the world
Three strategies –1.outsourcing (small markets), 2.internationalised firms (market expansion/balance biz
risks),3. multinational firms (creating sustainable competitive
position in several regions)
Patterns of Response
Different requirements of retail ( JV feasible for retail) and institutional customers (no JVs)
Require different type of organising and capability building
Conviction laden leadership – focused on business fundamentals, international orientation and ready for long tem engagements
Cooperative Strategies
Mergers ( combination, consolidation (if both organisations dissolve identity to create a new organisation ) or
integration (in which one acquires the assets and liabilities of the other in exchange for shares or cash ))or
both the organisations are dissolved and assets and liabilities combined and new stock is issued
.
Cooperative Strategy
Here the objective of buyer and seller firm matched and
Acquisitions or takeover (surprise attempt to acquire or take control of ownership against its wishes or shareholders)
Joint Ventures Strategic Alliances – resources capabilities
and core competencies are combined to pursue mutual interests
Types of Mergers
Horizontal Mergers –same business Vertical Mergers- combination to create
complementarities in the same business Concentric Mergers – same biz definition Conglomerate mergers – Unrelated
combinations of biz definition
Reasons for Merger
Increase value of stock Increase growth rate and investment Improve stability of earnings and savings Balance, complete, or diversify product line Reduce competition Acquire needed resources quickly Avail tax concessions and benefits Advantages of synergy
Sellers Reasons to merge
Increase value of owner’s stock and investment
Increase growth rate Acquire resources to stabilise operations Benefit from tax legislation Deal with top management succession plans
Important Issues
Strategic Issues – commonality of strategic interests between buyer and seller.
Valuation of business and shares of target firm, sources of financing for mergers and taxation matters after merger.
Managerial Issues – problem of managing firms after merger.
Legal Issues – Sec 391 to 395 of Companies Act.
Digitalisation
Digital coding of information and the growing productivity gains in processing and transmission it enables
Type of Strategy Digital Strategy Traditional Strategy
Method Experiment and respond
Predict and plan
Time frame Monthly, revised continously
Three to five year ,revised annually
Owner Everyone in Organisation
CEO’s ,strategists
Competitive threat New forces of digitalisation ,globalisation and deregulation
Porter’s Five Forces Model
Role of IT Disrupter Enabler
Output Killer Applications Plan
Comparison of Digital Strategy and Traditional Strategy
Digitalisation and Value Chain Deconstruction – deliverables may not be
products but components of value Disintermediation – removal of some processes Reintermediation – processes are supplemented Industry Mapping- transforming traditional
boundaries by morphing –providing goods and services in different ways
Digitalisation and Value Chain(2) Cannibalisation – set of activities in a value
chain are replaced by new activities, like eating away parts of the value chain
Techno intensification – intensive use of technology
Rechanneling – Breaking value chain into parts and divesting or outsourcing
Use of Web Site
Disseminate product information only Minor distribution channel for direct selling Major distribution channel to access
customers Primary distribution channel to access buyers Exclusive channel to transact sales with
customers
Leveraging Internet
New means of generating synergies Enhancing revenue among elements of a
diverse firm Linking sources of supply more efficiently Streamline distribution Dealing with suppliers more efficiently
Digitilisation Strategies
Phases – Choosing among e-biz patterns, ebiz models, e biz designs, e governance
Patterns- 1. E-Channel pattern –E chaupal2. Click and Brick pattern - HDFC Life3. E- Portal pattern - IR, SRL labs (Stick , view more
join)4. E –market maker or Net Market pattern –developer
of a B2B site.5. Pure e –digital products pattern
Types of Sites
Vanity – Self expression Billboard – information brochure Advertising – funding of programming and
content Subscriptions – niche individuals Storefront – electronic version of catalog,
promotions, shopping cart One time purchase with no future obligations
Strategic Framework of an Organisation
Introduction
Evolution Genesis Managerial practices based evolution Historical perspective and pointers to the future Business Policy Understanding Strategy Concept of Strategy and levels of operation Strategic Decision making Schools of thought in Strategy formulation –
Prescriptive, Descriptive
Conceptual Introduction of Organisation Mission Mission and Purpose Business Definitions –Dimensions Company Objectives and Goals
Environmental Appraisal
Introduction Characteristics of Environment Impact of Environmental Changes Major Environmental Components Environmental scanning Techniques used for environmental scanning
Strategic Alternatives
Grand strategies Types of Principal/Grand/ Major strategies
Strategic Choice
Introduction Strategic Analysis at the corporate level Techniques used for corporate portfolio analysis Industry competitor and SWOT analysis Behaviour/Subjective factors affecting strategic
choices Contingencies approach to strategic choices Strategic plan
Rationalising the Strategy
Desired qualities of Annual Objectives Benefits offered by annual objectives Linkages between strategy formulation and
implementation Project implementation Procedural Implementation Resource Allocation
Structural Implementation
Structure Definition Types of Structure Selection of Structure Organisation Culture Content of Culture Influence of culture on organisational life The Strategy –Culture relationship Organisational Systems
Behaviour Implementation
Introduction Leadership and Implementation of Skills Leadership and Strategy Skills Political aspects, power and strategy Personal values, ethics and strategies Social responsibility
Strategic Evaluation Control
Introduction Strategic Control Operational Control Evaluation Techniques for Strategic Control Evaluation Techniques for operational control
New Business Models and Strategies for the internet Economy Introduction Strategy shaping characteristics of E-
commerce Environment E-Commerce Business Models and
strategies Internet strategies for traditional business Key success factors in e-commerce
Restructuring
Redesigning an organisation structure with the intent of emphasizing and enabling activities most critical to a firms’ strategy to function at maximum effectiveness
Why
Reduce unnecessary control Focus on enhancing core competencies Reducing costs Opening organisations more fully to outside
involvement and influence Globalisation Speed internet
Core Competencies
Special qualities possessed by an organisation that make them withstand the pressures of competition in the market place
Net result of strategic advantages and disadvantages
When a specific ability is possesed by a organisation exclusively or relatively in large measure it is called distinctive competence
Restructuring
Revamping Regrouping Rationalisation Consolidation
Corporate Restructuring
Corporate or business level restructuring – composition of organisation set of businesses for more profits
Financial restructuring – equity pattern ,holdings ,debt servicing schedule ,cross holding
Organisational restructuring –changes in structure, reducing hierarchies, downsizing, redesignating positions, altering reporting relationships
Why Restructuring?
Ways of working of organisations. Changes in the environment
Business level Strategies
Strategy Levels and FocusStrategy level Focus
Corporate Level Market Definition and Resource allocation ,Competition and alliances(cash,HR equipment)
Business level Market navigation
Functional level Organisation function Integrated support of business and corporate level strategies
Business Level Strategies
Are courses of action by an organisation for each of its businesses separately, to serve identified customer groups and provide value to the customer by satisfaction of their needs
In the process the organisation uses its competencies to gain, sustain and enhance its strategic or competitive advantage.
SBU
A group of related business /divisions each responsible to corporate head quarters for its own profits and losses
Each SBU has its own competitior and own unique strategy
Focus on a particular product or service line Business level strategies involve decsions regarding
these individual products within this service line One product may contribute by huge cash flow for
corporate level strategy while another rproduct uses the cash to increase sales and market share of existing biz.
Businss level Strategies Concerned with Coordinating and integrating unit activities to
conform to organisational strategy Developing distinctive competencies and
competitive advantage in each unit Identifying product or service market niches
and developing strategies for competing in each
Monitoring product or service market so that strategies conform to market needs at the current stage of evolution
Porter’s Generic Strategies
Overall cost leadership – focus on cost not price (give s alternatives for pricing)
Differentiation – uniqueness of product –warranty ,brand image,technology, service ,dealer networks
Focus on a particular market niche –concentrate on a product line,area, channel, stage in production process,or market niche- serve a limited segment
Business Strategies Why?
Direction for business in designing incentive systems
Control procedures Operations Interaction with buyers and suppliers Making product decisions
Business Level Strategies -
Industry Structure Positioning of the Firm Competitive Advantage Competitive Scope –breadth of
organisation’s target within an industry
Basis for Business level Strategies Industry Structure – determined by Porter
five forces model which vary from industry to industry which determines long term profitability of the firm
Positioning of the firm within the industry –overall approach of the firm towards competing and designed to gain a sustainable competitive advantage
Breadth of Organisation
Range of products Distribution channels Types of buyers Geographic areas Array of industries in which firm competes. Broad (full range of products to wide
customer groups) target or narrow ( limited range of products to few groups in restricted area )target approach
Sustainable Competitive Advantage Competitive Advantage (lower cost and
differentiation) Competitive scope (broad target and narrow
target
Competitive Advantage -Low Cost Low Cost – mass produced goods,
distributed through mass marketing thereby resulting in lower cost per unit.
Based on competence of the organisation to design ,produce and market a comparable product more efficiently than its competitors
Differentiation
Differentiation - Marketing relatively higher priced product of a limited variety but intensely focussed on identified customer groups who are willing to pay the higher price.
Produced by batch production and marketed through specialised distribution networks
Differentiation
Competence of the firm to provide unique and superior value to the buyer in terms of product quality ,special features and after sales service
Cost Leadership Differentiation
Focussed Cost leadership
Focussed
Differntiation
Porter’s Generic Business Strategies
Competitive Scope
Low Cost Product/ServicesDifferentiated Products/Services
Competitive Advantage
BroadTarget
Narrow Target
Porter Classification –Business Strategies Cost Leadership (lower cost/ broad target –
same utility/comparable price). Higher profit by volumes and lower margins. Competition stiff. Achieved by ensuring cumulative value chain costs are lower than competitors by analysing cost drivers)
Differentiation (differentiation/broad target) Focus (lower cost or differentiation/narrow
target)
Cost Leadership
Lower cost/ broad target same utility/comparable price).Higher profit by volumes and lower margins.Competition stiff. Achieved by ensuring cumulative value chain costs are
lower than competitors by analysing cost driversStandard products and uniform service packagesEconomies of scaleDemand forecasting and high capacity utilisationInvesting in cost saving technologies
Differentiation
Competitive advantage through special features incorporated into the product/ service which is demanded by customers and who are willing to pay for it.
Outperform competitor through special features in its product or service
Customer value the utility of special features and are willing to pay more
Product or service stand apart in the market and is recognised by its customer
Higher profits from premium vs additional cost of features
Focus
Relies on cost leadership or differentiation Caters to a narrow segment of the total
market Also called niche strategies Based on identifying customer groups on
demographics (age, gender, income occupation), geographic (rural urban, North/South India or lifestyle (traditional /modern)
Focus
Locate a niche where cost leaders and differentiators are not operating as they leave out segments which require special attention or superior skills or efficiency in handling the segment
For identified market segment adopt focus based in cost leadership or differentiation
Music, jewellery, healthcare, BPOs,TV,biscuits.
Tactics
A sub strategy A specific operating plan detailing how a
strategy is to be implemented ain tems of when ( timing) and where (market location) it is to be put into action
Narrower in scope Shorter in time horizon
Timing tactics
Strategy of low cost , dfferentiation or focus may be right move only if it is made at the right time – targets for managers by time
Timing based strategy means attacking the competitor indirectly through surprise and gaining market share at reduced cost
Low labour cost by JIT Time based manufacturing , time based sales and
distribution First Mover and Late Mover
Market location
Where to compete –target market. Role organisation plays in in the target market
and the type of business tactics they adopt to play such a role.
Industry has no of organisations offering products services to make market shares.
One organisation has largest market share, other differing in magnitude
Market Role
Role can be Leader (expanding total, defending existing, expanding by enhancements)
Challenger (try to gain market share by objectives and opponents, general and specific attack strategy choices ,
Follower (imitate market leaders but not upset balance of competition),
Nichers ( carve out distinct segment left out by others or of no interest to them by creating, expanding and protecting niches).
Business Strategies for Different Industry Conditions- Factors Investment, returns capital Timing Technology demand business models risks market shares growth products
Stages in Industry Cycle
Embryonic Stage Growth stage Maturity stage Decline stage
Strategic Analysis and Choice
Overview
Process of Strategic choice Strategic Analysis –tools and techniques Subjective factors Contingency Strategies Strategic plan
Strategic Analysis
Investigation of objective factors being considered in strategic choice ?
Which markets to enter ? Which industries to leave ? Which business to create/ acquire/ divest ? Which products and markets to retain
/grow/divest ?
Corporate Growth Strategies –Choices(Corporate parent –biz units children) Firms Orientation towards growth stability
and retrenchment (Directional Strategy) Industries or Markets in which the firm
competes (Portfolio strategies) Manner in which it management coordinates
activities and transfers resources and cultivates capabilities among product lines and business units (parenting strategy)
Performance
Desired Performance
Performance Gap
TimeT1 T2
Present Performance
GAP ANALYSIS FOR FOCUSSING ON STRATEGIC ALTERNATIVES
Tools and Techniques
Clark Study (1997) -80 tools and techniques Hussey(1992) – 57 techniques Most popular – 25 relevant topical and measurable 2007 Tool– Strategic planning Techniques – CRM, customer segmentation, bench
marking, vision and mission statement Scenario and contingency planning, strategic
alliances, balanced scorecard,growth strategy tools Less popular – M&A, Six sigma, offshoring,
consumer ethnography, corporate blogs
Strategic Analysis Tools
SWOT Portfolio Analysis BCG Matrix GE/ McKinsey Nine Cell matrix Financial Ratios Brainstorming Delphi Techniques CSF Market Opportunity Analysis
Strategic Analysis Tools
Process mapping Focus groups Competitor Analysis Porter Five Forces Model Stakeholder Analysis Budgeting and Value Chain Analysis Factor Analysis McKinseys 7 S PEST Analysis
Corporate Portfolio Analysis
Competitive analysis and strategic planning in multi product and multi business firms
Resources targeted at those businesses that possess the greatest potential for creating competitive advantage
Tools
Corporate Portfolio Analysis Corporate Parenting Analysis SWOT Analysis -ETOP and SAP combined Experience Curve Analysis Life Cycle Analysis Industry Analysis –Porter Five Forces model
Corporate Portfolio Analysis
BCG GE’s Nine cell Matrix (McKinsey & Co) Hofer’s Product- market Evolution Directional policy Strategic position and Action Evaluation
Matrices
Corporate Parenting Analysis
Role of corporate headquarters in managing and nurturing a set of business in a portfolio
Effective use of resources and capabilities, build individual businesses and creating synergies .
Corporate Parenting Analysis
Two key questions are :- What business should a diversified
corporation own and why? What organisation structure, management
processes and philosophy will foster superior performance from the corporation’s individual business units ?
Better than portfolio as it more than just financial aspect of the business.
GE’ S Nine Cell Matrix
Profit
WeakAverageStrongBusiness Strength/Competitive Position
High
Medium
Low
IndustryAttractiveness
Invest expand
Harvest /Divest
Industry Attractiveness Business Strength Market size Growth rate Industry profit margin Global opportunities Competitive intensity/rivalry Seasonality/Demand growth
rate Cyclicality Economies of scale PEST ( Political Technology,
Economic Social, environmental ) Legal Human Impact
Relative market share Profit margins relative to
competition Ability to compete on price and
quality Knowledge of customer and
market Distribution channel access Competitive strengths and
weaknesses -production capacity
Technological capability Calibre of management Brand equity
Difference –Nine Cell and BCG In nine cell ,Industry attraciveness and business
strength vs industry growth rate and market share Nine vs four cells Industry attractivess and business strength criteria
are first identified , then given a value and then multiplied by weightage factor.
Result is a quantitative measure of industry attractiveness and business units relative importance in the industry
Not consider interactions among units and neglects core competencieslaeding to value creation
Plotting
Market size represented by size of circle Market share by pie in the circle Expected future position of circle by means of
an arrow
Strategic Implications –resource allocations recommendations Grow – strong business units in attractive
industries, average business units in attractive industries, and strong business units in average industries
Hold – average BUs in average industries, Strong BUs in weak industries,weak business in attractive industrues
Harvest- weak Bus in unattractive industries, average BUs in unattractive industries, weak Bus in average industries
Hofer- Life Cycle Product Market Evolution Matrix Stage of Industry vs Biz Strength/Company Position Early development Rapid growth/Take off Shake out Maturity /Saturation Decline/Stagnation
Strong Average Weak
Force Field Analysis
Understanding the pressures for and against change or a decision- specialised method of weighing pros and cons
By analysis trying to strengthen forces for change and reduce impact of opposition
Problem
Problem – A firm is considering upgrading a factor with new manufacturing equipment.
List and prioritise the forces for and against change
Analysis
Customers want new products (4)
Improve speed of production(2)
Raise volume of output(3)
Control rising maintenance costs (1)
Loss of staff overtime (3)
Staff frightened of new technology (3)
Environment impact of new technology (1)
Cost (3) Disruption (1)
Plan for Upgradingfactory with
new manufacturing
equipment
FORCES FOR CHANGE
FORCES AGAINST CHANGE
Total 10 Total 11
4
2
3
1
3
3
1
3
1
Action
Train staff (increase cost by 1) eliminate fear of technology (reduce fear by 2)
Show stafff change is necessary for business survival (new force in favor +2)
Staff shown new machines could add interest and variety to jobs (new force + 1)
Raise wges to to reflect new productivity(cost+1,loss of overtime -2)
Slightly different machines with filters to eliminate pollution (environmental impact -1)
Total For 13 Total against 8
Strategic Groups
Cluster of firms based on technological leadership ,degree of product quality, pricing policies, choice of distribution channels and degree of customer service.
Indian Pharma –Exploiters (Neuland labs), Explorers (CIPLA), Outsourcers (Dishman Pharma), emerging globals(e.g Dr Reddy’s) and globals (e.g Ranbaxy).
Restaurant industry – fast food, fine dining based on preparation time, pricing and presentation
Other Analysis -Strategic Groups Strategic Groups – are dynamic collections of
companies that compete simultaneously fo customers and capital
conceptually defined clusters that share similar strategies and business models and therefore compete more directly with one another than with
other firms in the same industry. Firms which appear homogenous form one
strategic group. Similar groups that compete for customers and
capital.
Bench marking
Comparing your organisation or part of your services with others
Why are others better? How are others better What can we learn? How can we catch up? How can we become the best in our sector? Which are the right organisations to compare with?
–Direct competitors (domestic), International, indirect competitor (providing related product or service, other successful companies
Steps in Benchmarking
Identify Product / service to be benchmarked Identify comparable institutions Collect data Identify performance gap Estimate performance potential Communicate and get acceptance Establish targets Develop action plans Act according to targets and monitor the process Adjust process according to monitoring results Continue the cycle from step !
Stakeholders Analysis
Describes a process where all individuals or groups that are likely to be affected by a proposed action are identified and then sorted according to how much they can affect the action and how much the action can affect them
Primary-ultimately affected Secondary -intermediates or indirectly affected Key stakeholders – significant influence or
importance in organisation
Focus Groups
A form of qualitative research in which a group of people are asked about their perceptions, opinions, beliefs and attitudes towards a concept product service idea ,advertisement or packaging
Acquires feedback, test marketing, test new product before being made available to public
Competitor’s Analysis
Actions and reactions of individual firms within and industry or strategic groups.
Determine each competitor’s reaction to industry and environmental changes
Anticipate response of each competitor to the strategic moves by other firms
Develop a profile of the nature and success of the possible strategic changes each competitor might undertake
Components of Competitor Analysis Future goals of competitor – Comparison
with own Current strategy of competitor – How are we
currently competing Key assumptions made by competitor of
future –volatile ,status quo. Competitor’s assumptions
Capabilities of competitor(SW vs competitors)
Business Process Mapping
Activity involved in defining exactly what business entity does, who is responsible,to what standard a process should be completed and how the success of a business process can be determined.
Once done no uncertainty as to the requirements of every business
To meet ISO 9000 standard requires a process approach and business process maps help in assisting the same Then the process becomes effective and efficient.
Visually depict s the sequence of events to build a product or produce an outcome.
Business Process mapping
Biz Process – Acollection of interrelated tasks which accomplishes a particular goal
Three types – management – operational, supporting
Begins with acustomer need and ends when that need is satisfied
Increases effctiveness (add cusomer value) and increases efficiency (save time/money)
If a step does not add value why do it
BP Mapping
Identify all your processes Identify the person responsible for that process Break down each process into individual steps from
start to finish –document Physically map out the steps on computer,
whiteboard Start with the most ineffective or inefficeient
processes – customer/staff dissatisfaction, staff time
Tactics
Position Defence Flank Defence Counter offensive defence Mobile defence Contraction defence Frontal Attack Flank Attack Encirclement Attack Bypass attack Guerilla Attack Couterfeiter Cloner Imitator Adapter
Subjective Factors in Strategic Choice Govt Policy Perception of CSF and distinctive
competencies Commitment to past strategic actions Strategist’s decision style and attitude to risk Internal political considerations Timing and competitor analysis
Strategic plan
After strategy formulation next phase is strategic plan.
A document which provides information regarding the different elements of strategic management and the manner in which the organisation and its strategists propose to put strategies into action.
Strategic Plan
Serve as a framework for decisions for securing support/approval
Provide a basis for more detailed planning Explain the business to others in order to
inform ,motivate and involve Assist benchmarking and performance
monitoring Stimulate change and become building
blocks for next plan.
Contents of Strategic Plan
Statement of Strategic Intent Environmental appraisal results Organisational Appraisal results Strategies chosen and assumptions Resource Allocation Contingent strategies Organisation structure proposed Functional Strategies and implementation Performance evaluation and assessment of success
Contents of Strategic Plan
Statement of Strategic Intent – vision ,mission, business definition, goals and objectives.
Results of environmental appraisal Results of organisational appraisal Strategies chosen and the assumptions under which
strategies would be relevant Contingent strategies to be used under different
conditions .
Contents of Strategic plan
Strategic budget for the purpose of resource allocation for implementing strategies and the schedule for implementation
Proposed organisation structure and the major organisational systems for strategy implementation including the top functionaries and their role and responsibility
Functional strategies and the mode of their implementation
Measures to be used to evaluate performance and assess the success of strategy implementation
Contingent Strategies
Are strategies formulated in advance to deal with uncertainties, emergencies and disaster management that are natural part of the business.
Strategic choices are made on certain conditions, assumptions and premises which may not turn out to be valid. These shifts can be sudden with little time to react.
Some changes in environment are fast (market regulatory or international depending on industry) and others like social change is slow.
Strategic Choice
Focus Analyse Evaluate Chose
Process of Strategic Choice
Focus on strategic alternatives corporate level (expansion, stability,
retrenchment and combination) business level (low cost, differentiated,
focus) based on level of gap by Gap analysis (3-5 years time frame between present and desired performance and working back wards to see if it can reach through present level of efforts)
Process of Strategic Choice
Analyse- Strategic Alternatives- Few feasible alternatives by objective factors( like market share based on rational objective or prescriptive factors) or subjective factors( personal judgement, collective or descriptive factors like top management perception).
Strategic Choice (3)
Evaluate – based on analysis of subjective and objective factors
Chose - Clear assessment of choice of which alternative is most suitable under the existing conditions by making a blue print and also looking a t contingency strategies
Kalyani Group
Motive for Internationalisation Type of International Strategy group is
adopting
Strategy Implementation
Strategy Implementation
Carries out the exercise of putting a freshly chosen strategy in place
Characteristics –
1. Action orientation
2. Comprehensive in scope
3. Demanding varied skills
4. Wide ranging involvement
5. Integrated process
Strategy Implementation
Barriers Overcome by adopting clear model of effective
strategy implementation and Effective management of change Formulation and implementation are iterative
functions and feed upon each other in a two way relationship through forward and backward linkages.
Intended strategies may not get implemented in the intended way.
Strategy Implementation
Nature – Action oriented, comprehensive in scope, varied skills required, wide ranging involvement, integrated process.
Linkages between formulation and Implementation.
Project Implementation Procedural Implementation Resource Allocation
Barriers to Strategy Implementation Barriers – inability to change, poor strategy,
no guidelines for implementation, poor information sharing, unclear responsibility/accountability,
Adopting clear model of strategy implementation and effective management of change in complex situations
Interrelationship between Formulation and Implementation (action and doing) Forward Linkages – managerial task
Changes to structure leadership styles to operationalise strategy
Strategy Formulation Strategy Implementation
Backward Linkages – strategy implemented in the past, indented strategy, unrealised strategy and emergent strategy
Unrealised Strategy
EmergentStrategy
Deliberate StrategyIntended
Strategy RealisedStrategy
Implemented Strategy
FormulatedStrategy
MINTZBERG CONCEPTION OF TYPES OF STRATEGY
Resultant outcome
Influences
Simple Model of Strategy Implementation
Activating Strategies Managing Change
Achieving Effectiveness
ProjectImplementation
ProceduralImplemetation
Resource Allocation
Structural Implementation
Leadership Implementation
Behavioural Implementation
FunctionalImplementation
OperationalImplementation
Strategic Plan
Activating Strategies
Managing change Achieving Effectiveness
FEEDBACK
Evaluation & Control
Strategy
Plans
Programmes
Projects
Budgets
Policies,ProceduresRules and Regulations
PYRAMID OF STRATEGY ACTIVATION
Strategy Plans Programmes Projects Budgets
PolicyRules
Regulations procedures
Strategy to Project Implementation
Strategic ManagementProcess
Project Management Process
Initiating Planning Executing Controlling Closing
Project Objectives
Control Measures
StrategyImplementation
Strategy Evaluation
And Control
STRATEGY IMPLEMENTATION THROUGH PROJECT MANAGMENT
Managing Change
Respond to Dynamic environment –challenges Organisation keep internally fit Strategy implementation itself requires change Innovation and learning Triggers set within or outside the organisation Identify need, prepare , minimise resistance and
then start change with monitoring Degree, timing and Activity areas of change are
important to manage change effectively
Organisational Effectiveness
Goal Model – how well goals achieved (profitability growth market share))
Resource based model – ability of organisation to obtain resources (finance raw materials)
Internal process Model – how well are internal activities working (corporate culture, climate,team work, communication)
Conflicting values model – consolidating different viewpoints, activities and outcomes so diverse indicators of performance are used (dominant issues –external or internal,values, stability or change)
Change Management
Degree of change Timing of change Activity areas of change
Organisational Effectiveness
Means the degree to which an organisation is able to achieve its objectives through the implementation of strategies.
Project Management
Key enabler of strategy implementation within organisations
Not something that are an appendage to strategy implementation but need to be part of overall strategy.
Supported by the right approach, processes and tools and techniques
Must be executed fully inline with the strategies they support.
Project management
Awareness of procedural framework within which plans, programmes and projects have to be approved by the govt. at the central, state and local level.
Project management is for creation of the infrastructure required to put plans into action.
Procedural implementation helps in getting the go ahead form concerned agencies to implement projects
Regulatory Requirements
Formation of a company Licensing procedures SEBI Requirements MTRP/Competition Act Requirements Foreign Collaboration procedures Import and Export Requirements Patenting and trade mark requirements Labour legislation requirements Environmental protection requirements Consumer Protection Requirements Incentives and facilities benefit.
Procedural Implementation
Reacting to regulation Conform Confront Lobbying PR Existentialist –look for opportunities Dynamic– govt. respond to changes Anticipate changes
Assistance
Liaison Formal and Informal – approval, permissions, statutory benefits
Corporate Affairs Consultants Advisors CA’s Company Secretary Legal Experts Lawyers Political donations and lobbying Sickness Taxation Internationalisation- different countries environment
Resource Allocation
Procurement, commitment and distribution of of financial ,human, informational and physical resources to strategic tasks for achieving organisational objectives
Managers guided by strategy
Aligning Resources to Strategy Challenge is how to allocate resources to
competitive strategic tasks that lead to the accomplishments of organisational objectives and realisation of strategic intent
Done through strategic budgeting by iterating strategic decision making between different levels of management
Ways of Resource Allocation
Top Down Approach Bottoms Up Approach Mix of Both (Strategic Budgeting ) –iterative
manner , assumptions made, inputs received and used prepared by Exec level committee
Trade offs
Level of Management
Top Management
ExecutiveManagement
OperatingManagement
CorporatePolicyGuidelines
Desired longAnd short rungoals
ResourceAvailability
StrategicBudget
Position PapersEnvrt,Core Comp.MarketingPast Performance
Minimising gaps
Target/OperationalPlans
Proposals
Approval And sanction
Implementation
STRATEGIC BUDGETING PROCESS
Factors in Resource Allocation Objectives of the organisation –explicit
&implicit Preference of dominant strategists – Decision
maker Internal politics – units see it as possession
of power External influences – outside govt,
shareholders, FIs, legal requirements,social responsibilities
Difficulties in Resource Allocation Scarcity of resources Restrictions on generating resources for
newer units and those with greater potential for growth
Overstatement of needs Tendency to imitate competitors
Method
Role of CEO is major Participative mode Communication of strategic plan to all
executives creates congenial environment for decisions on resource allocation
Structural Implementation
Structural Implementation
Is the way in which the tasks and sub tasks required to implement strategy are arranged.
Relationship of structure and strategy creates its own special requirement that should be met by structure.
Structure
Identifies formal reporting relationships -hierarchy levels and span of control
Grouping into departments and of departments in the organisation
Design of system to ensure communication coordination and integration of efforts across departments.
7-S Framework
Strategy
Structure
Systems
Skills Style
Staff
Shared Values
McKinsey Model Seven factors for Organising Co
McKinsey 7 -S
Management model describing seven factors that enable organising a company in a holistic and effective way.
Together these factors determine how a company operates
7 –S Framework
Shared values - -superordinate goals –what the organisation stands for and what it believes in
Strategy – plans for allocation of a firms scarce resources over time to reach identified goals – envrt ,customers, competition
Structure – way in which organisation units relate to each other- centralised ,functional,divisions or decentralised ,matrix,network ,a hoilding co
Systems – procedures,processes and routines that define how work is done- fin systems, R&S, P&PA,info system
Staff – no and types fo employess Style – cultural sde of the organisation and how key managers
behave to achieve goals (Management style ) Skills – distinctive capabilities of personnel or organisation as a
whole .Compar(e :core competencies).
Uses
Value based Management model Diagnostic Tool Guides organisational change Combines rational and hard elements with
soft and emotional elements Managers must act in parallel and all Ss are
interrelated
Structure of Organisations
Vertical (superior and sub ordinates – division of labour and specialisation)
Horizontal (coordination and collaboration among peers created by integration for team work and cross function information systems)
Challenge is to create and manage organisation requirements and coexistence of both vertical and horizontal structure at the same time
Horizontal and Vertical Structures Shared tasks Flexible authority Few rules and
regulations Horizontal
communications Decentralised decision
making Emphasis on learning
Specialised tasks Hierarchy of authority Rules and regulations Vertical
communications and formal reporting systems
Centralised decision making
Emphasis on efficiency
Changing Environment impacts strategy Strategy determines the type of structure to
have Strategy and structure affect each other more
on the forward side Strategy and structure is spanned by
environment and in one direction and effectiveness in the other.
Relationship –Environment, Strategy and Structure
Environment
Strategy
Structure
Effectiveness
Environment Strategy Structure and Effectiveness
Structural Implementation
Strategic Plan is
Implemented
New Strategies
Put inPlace
ImpleMentationOf new
Strategies
Mismatches
PerformanceImproves
StructureIs changed
EffectivenessIs reduced
Performancedeclines
Life Cycles of Organisations
Stage I -Small scale enterprises –owner manager. Simple objectives, operations. Expansion
Stage II – Bigger than stage I and wider in scope of operations. Marked by functional specialisation and process orientation. Stability and Expansion.
Stages
Stage III – large and scattered multi location, SBUs and Divisions, Stability and Expansion
Stage IV – complex, multi plant multi product organisation resulting from related or unrelated diversification. Divisional organisation with corp. headquarters. Corporate and business level strategies coexist
SBU
A discrete element of a business serving specific products-markets with readily identifiable competitors and for which strategic planning can be conducted
Types of Organisational Strcture Entrepreneurial Functional Divisional SBU Matrix Network
Product based Customer based Process based Goegraphic Intrapreneurial
Evolving Structures –Horizontal Horizontal – based on a structure that
corresponds to the process of providing products or services to the customer rather than the functions that the organisations perform.
Instead of marketing finance etc forming the basis of departmentation, it is core processes managed by cross functional teams used as basis for structuring.
Evolving Structures –Delaminated Matrices Delaminated matrices are combinations of
horizontal organisations with a functional structure. This way retains the process oriented horizontal
teams with functional departments providing the depth of expertise and capabilities to perform those functions.
In this way the functional layer and the process layer of the traditional matrix organisation is separated and the workers and staff of the firm are assigned to either functions or teams but not both.
Organisation Design
based on key activities derived from mission and objectives
Purpose is to create the right structure that fits the requirement of strategy to be implemented
Difficult task to find the right type of structure to fit and satisfy the requirements of strategy.
Dimensions of Organisation Design Structures should match the requirements of
strategy and needs of organisation as it grows from one stage to the next
Purpose of organisation design is to create the right structure.
Structural Dimensions- describe the internal characteristics of an organisation
Contextual Dimensions describe the organisational setting that influences and shapes the structural dimensions.
Organisational Design- Structural Dimensions Formalisation- amount of written documentation to
describe procedures, job descriptions, regulations and policy manuals.
Specialisation- degree of sub division of tasks Hierarchy of authority – reporting relationships and span of
control Centralisation – extent of decision making by top authority Professionalism – level of effective formal education and
training displayed and practiced Personnel Ratios- deployment of people (administrative
ratio, clerical ratio, indirect to direct labour employees ratios).
Organisation Design – Contextual Dimensions Environment Goals and Strategy Culture Technology Size
Steps required for Organisation Development Identifying key activities Grouping similar activities that need common skills Choice of structure to accommodate different
groups of activities Creation of department and divisions to which the
different groups of activities could be assigned Establishing interrelationship among departments
and divisions for coordination and communication
Routine Tasks
Vertical Structure
RigidCulture
FormalSystems
Competitive Strategy
Horizontal Structure
Empowered Roles
Adaptive Culture
Shared Information
CollaborativeStrategy
STABLE ENVIRONNMENTMechanical designEfficient Performance
TURBULENT Natural System DesignLearning Organisation
CONTEMPORARY ORGANISATION DESIGN
Traditional Design Emerging Design One large firm Vertical communication Central top down decision
making Vertical integration Work quality based teams Functional work teams Minimum training Individual focussed
specialised job design
Small business having cooperative characteristics
Horizontal communication patterns
Decentralised decision making
Outsourcing and virtual organisations
Autonomous work teams Cross functional work teams Extensive training Value chain team focussed
job design
Organisation Design For Business Strategies Cost vs Differentiation Efficiency orientation Strong central authority Tight cost controls Detailed control reports SOPs Efficient procurement Close supervision Routine tasks Limited or no employee
empowerment
Learning orientation Flexible loosely knit
organisation Stress on horizontal
coordination than vertical control for product development
Strong R&D and marketing capability
Creativity and innovation encouraged
Rewards for risk taking Broad guidelines for
performance of duties Liberal employee
empowerment.
OD for Corporate Strategies
Concentration- no change but added emphasis on marketing for marketing penetration and development/R&D for product development
Integration- Horizontal (greater emphasis on OD and structure to accommodate adjacent business units) and vertical (extend the value chain forward and backward and extend structure accordingly).
OD for Corporate Strategies
Diversification – Implement through multidivisional and SBU structures. Depending on if related or unrelated, Corproate headquarters may retain some functions and decentralise others
Related would create requirement for retaining linkages among functions and departments within organisations to maintain synergies for economies of scope.
Unrelated through multi division structure
OD Structures for Internationalisation Four types create own requirements for for
OD and change Global strategy –global product structure International Strategy – international division
structure as part of hybrid structure Multidomestic strategy – Global geographic
structure Transnational strategy – Global matrix
Structure
Global Strategy
Global Product
Structure
Transnational Strategy
Global Matrix
structure
International Strategy
International Division Structure
Multi Domestic Strategy
Global Geographic
Structure
Pressures for Global Responsiveness
PressuresFor CostReduction
Structures for Internationalisation Strategies
OD Structures for Cooperatiive and Network Structures
Cooperative – Network structure within and network structure outside for creating and maintaining interorganisational relationships
Region A Structure
ProjectM groupStructure Function X
Structure
Region B Structure
Project GroupN Structure
Function Y structure
CorpHeadquarters
Structures for Digitalisation Strategies Flexible organisation structure, Small decentralised organisation Improved coordination Processes may be redesigned Greater interorganisational relationships
Organisational Change
Structural change – Modification in structural relationships of reporting/ changes in depts. etc
Accompanied by behavioural Change to absorb impact of organisational changes
All organisations make changes in their strategy, structure and administrative procedures from time to time.
Change response now moved from increasing rigid vertical structure to more flexible horizontal structures by empowering employees, shared information and adaptive culture
Changes in Organisation Structure Design Restructuring/Reorganisation – changing
organisation structure in line with environmental changes and strategies
Reengineering (business process reengineering) – fundamental rethinking and radical redesign of business process to improve cost quality and speed
Delayering or flatter structures- reducing the number of layers in the organisational hierarchy
Network structures Interorganisational relationships Virtual Organisations
Structure for Business level Strategies Cost Leadership – Efficiency approach Differentiation – learning approach Focus - similar but structure with different
emphasis
Linking Strategies and Structure Integration and Diversification – Multi
divisional and SBU Internationalisational – Tailored for
requirement Cooperative Strategies –Network Digitalisation – based on impact on
organisation
Organisational System
Set of interacting elements devised to accomplish a process.
Wheels that make an organisation move Transformation process requires a variety of
management and production systems and sub systems.
Organisation breaks objectives into tasks and tasks are performed by groups delegated the responsibility and discharge with coordination and communication
Performance needs to be appraised and desirable behaviour promoted.
System Processes
Defining major tasks to implement strategy Grouping of tasks on skill required/value chain basis Division of responsibility and delegation of authority Coordination and divided responsibility Design and administration of 1. Information system2. Appraisal system3. Motivation System4. Reward system5. Development system6. Planning system
Structural Implementation
Structural mechanisms are the hardware Systems are the software of implementation Need to look closely at
1. Information – to complete task and coordination of activities with others
2. Control –
3. Reward system.
Implementing Information systems Policy Stance (strict or flexible) Hardware configuration( mainframe,
microcomputers) System (transaction processing system,DSS)
Generic
Strategies
Stability (efficiency
Conc(mkt /prod devp)
Growth(Integration,
Diversification,
Internationalisation)
Key Rigid Policy Stance (clearly defined resp.)
Flexible policy stance(learning orientation,creativ
e response)
Dimensions Mainframe computers
Micro computers
Transaction processing system
Decision Support
System
Computer Information Systems and Strategies
Control
Process for ensuring that behaviours and performance conform to an organisation’s standards ,including rules procedures and goals
Ensures that implementation of strategy takes place
Control Process
Establish standards Measure actual performance Evaluate actual vs Standard Determine and apply corrective action
Tailoring Control to Strategy -factors Need for control - structure type Type of control – preventive corrective,
formal or informal, direct or indirect, social or individual
Integrating formal and informal control
Control Systems
Stability/Cost leadership
1. Formal
2. Traditional
3. Cost control focus
4. Specific operating goals and budget
5. Rigid budget controls
Diversification/ Intl
1. Informal
2. Open control
3. Long term controls
4. Interactive use of budgets
5. Informal communications
Borderless Structures –Present Boundaries Horizontal Boundaries – depts / functions Vertical Boundaries – ops/mgt, corporate and
division Geographic Boundaries – physical locations,
countries /regions. External Interface boundaries – customers
and company, suppliers, partners, regulators, competitors
Borderless Structures -
Outsourcing Strategic alliances Product –team structures Reengineering Restructuring Through culture and shared values
Reward System -
Designed to induce Strategically desired behaviour Performance evaluation and feed back Compensation – salary bonus, stock
options ,promotions and perks Linked to control and motivation towards desirable
behaviour Wage inflation and talent shortage due to growth Parity for similar work or responsibility and to
differentiate between unequal grades of employees.
Reward System
High and differentiated compensation – Salary,ESOP, Bonus, promotions and perks
Innovative titles Faster career progression Training Congenial work environment More satisfying jobs Overseas exposure Opportunities to work on cutting edge technologies Retention plans Referral schemes
Reward and Strategy Implementation Stability strategies – improve efficiency and
have appraisal that use objective short term criteria
Expansion - Broad based appraisal and long range performance appraisal
Diversification /Internationalisation- Group rewards and team performance criteria over individual awards.Company wide incentives for knowledge sharing
Nature of Economy Controlled Protected
Regulated
Globalised
Liberalised
Privatised
Environmental characteristics
Certain,stable and predictable
Stability/controlled growth
Unstable volatile and bewildering
Strategic Continum Stability/Controlled growth
Focused expansion/ selective divestment
Structural Alternatives
Entrepreneurial Functions
Divisional/SBU/Alternate and new forms
Information
System
Efficiency –Orientation
Decisional- orientation
Control System Formal –direct /mechanistic
Informal –indirect /organic
Reward System Efficiency –based; monetary.informal ,internal focused
Non monetary,formal
External -focused
SYSTEM CHARACTERISTICS vs STRATEGIC CONTINUM AND STRUCTURAL ALTERNATIVES
Managing
Information ,control and reward (appraisal, motivation, development) and planning systems and processes are managed and are the core of any structure
These play an important role in strategy implementation .
Systems and structure have to change to meet the requirements of strategy.
Structural changes also are accompanied by behavioural changes that affect strategy impelementation
Organisational Process
A series of actions undertaken to achieve a predetermined result
Classification by Contingency Theories Mechanistic Organic