© The Institute of Chartered Accountants of India

Strategic Management

Shaleen Suneja, Deputy Director, ICAI

Online SessionCA Intermediate (IPC) Paper 7B

Webcast

Date: September 8, 2017

1• This lecture has been delivered by faculty members to supplement the Study

Material, Practice Manual and other content

2• The views expressed in this lecture are of the Faculty Member.

3

• The content of this video lecture has not been specifically discussed by the Council of the Institute or any of its Committees and the views expressed herein may not be taken to necessarily represent the views of the Council or any of its committees

Disclaimer Statement

8-Sep-17© ICAI, 2017 2

The e-Lectures, PPT, Podcasts and Video lectures on ICAI Cloud Campus aim to supplement the Study Material, Practice Manual

and Supplementary Study Material

The lecture recordings are made according to the syllabus and laws existing/ applicable as on

the date of recording.

Due to changes in law, there is likely to be some time gap

between these changes and the recording of updated lectures.

Hence, students are advised to refer to the Study Material

including Supplementary Study Material, if any, and other relevant

legislation for latest provisions/ amendments required for forthcoming examination.

Important Notes This e-Lecture Deliver Date:

September 8, 2017

8-Sep-17© ICAI, 2017

3

Why do we study strategic management?

▪ Environment is complex and often hostile.

▪ Helps to be more proactive than reactive.

▪ Gets better commitment from the managers.

▪ Research indicates firms that are managed strategically perform better.

▪ It encourages forward thinking

▪ Better allocation of resources.

8-Sep-17© ICAI, 2017 4

How to Study the subject of Strategic Management?

▪ The subject requires understanding of the concepts.

▪ It is not a subject that should be crammed.

▪ Do a lot of reading. Complement study material with financial newspapers, business journals, annual reports. Read about the strategies being followed.

▪ Prepare notes. Do not ignore writing.

▪ Make a group to discuss.

8-Sep-17© ICAI, 2017 5

How to Study the subject of Strategic Management?

▪ Study extensively – avoid selective studies

▪ Attempt past question papers

▪ Use all inputs given by Board of Studies of ICAI

8-Sep-17© ICAI, 2017 6

Target for multiple revisions – Strategy for six months

▪ During fifth and sixth month prior to exams - Study and understand all the chapters. Prepare notes.

▪ During fourth month prior to exam – Revise all chapters from study material, update notes and attempt old questions from practice manual. One chapter at a time.

▪ During second and third month prior to exam – Learn through notes, refer study material only when required and attempt 4-5 old question papers.

▪ During one month prior to exam – Revise through notes and attempt 5-6 old question papers.

8-Sep-17© ICAI, 2017 7

Exam Strategy

▪ Reach well in time.

▪ If a question is difficult - Do not panic. Drop it.

▪ While attempting questions write points in rough for quick recall.

▪ Attempt all parts of a questions together.

▪ Follow exam guidelines.

▪ Write legibly

▪ Emphasise on quality and not quantity.

▪ Complete paper in advance so that you have time to revise.

8-Sep-17© ICAI, 2017 8

Some common questions

▪ May I use my own language?

▪ Are we supposed to remember exact text of study material.

▪ How to prepare in 7 days?

▪ How to connect all the topics?

▪ May I use diagrams, flow charts?

▪ Should we write question point wise or in running text

8-Sep-17© ICAI, 2017 9

Explain business environment

8-Sep-17© ICAI, 2017 10

▪ "The environment includes factors outside the firm which can lead to opportunities for or threats to the firm. Although there are many factors, the most important of the sectors are socio-economic, technological, supplier, competitors, and government. “

▪ Glueck and Jauch

Explain business environment

8-Sep-17© ICAI, 2017 11

Characteristics of Business Environment

8-Sep-17© ICAI, 2017 12

▪ Environment is complex

▪ Environment is dynamic

▪ Environment is multi-faceted

▪ Environment has a far reaching impact

Concept of Strategy

8-Sep-17© ICAI, 2017 13

▪ The common thread among the organization's activities and product-markets that defines the essential nature of business that the organization was or planned to be in future.

▪ Igor H. Ansoff

What do you understand by the term strategy?

▪ Relates organization with external environment.

▪ Mobilize and deploys resources.

▪ Direct efforts and behaviour.

▪ Handle events and problems.

▪ Leads corporate survival and success.

8-Sep-17© ICAI, 2017 14

Corporate Strategy

▪ Corporate strategy is basically concerned with the choice of businesses, products and markets.

▪ Designed to fill strategic Gap.

▪ Ensures right fit with environment.

▪ Helps to build the competitive advantage.

8-Sep-17© ICAI, 2017 15

Strategic Management

▪ The term strategic management refers to the managerial process of forming a strategic vision, setting objectives, crafting a strategy, implementing and executing the strategy, and then over times initiating whatever corrective adjustments in the vision, objectives, strategy, and execution are deemed appropriate.

8-Sep-17© ICAI, 2017 16

Objectives of Strategic Managment

▪ To create competitive advantage, so that the company can outperform the competitors in order to have dominance over the market.

▪ To guide the company successfully through all changes in the environment.

8-Sep-17© ICAI, 2017 17

Mission and Vision

▪ Vision statement outlines what the organization wants to be. It concentrates on the future. It is a source of inspiration.

▪ A Mission statement tells you the fundamental purpose of the organization. It concentrates on the present. It defines the customer and the critical processes. It informs you of the desired level of performance.

8-Sep-17© ICAI, 2017 18

Vision Vs Mission

▪ A mission statement can resemble a vision statement in a few companies.

▪ A mission statement is what an organization is all about. A vision statement is what the organization wants to become in future. A mission statement talks about the present leading to its future.

▪ The vision statement can galvanize the people to achieve defined objectives. A mission statement provides a path to realize the vision.

▪ A mission statement defines the purpose or broader goal for being in existence. Vision describes what will be achieved if the organization is successful.

8-Sep-17© ICAI, 2017 19

Objectives and Goal

▪ Objective are end result that organizations try to reach in long run. They are desired for pursuing mission and normally extend beyond the current financial year.

▪ Achievement of objectives requires the formulation and fulfillment of departmental and unit goals.

▪ Goals and targets are more precise and expressed in specific terms.

▪ They are stated in precise terms as quantitatively as possible. The emphasis in goals is on measurement of progress toward the attainment of objectives.

8-Sep-17© ICAI, 2017 20

What is strategic planning gap and its competitive advantages ?

▪ Gap Analyses is identifying the distance between a firms' current position and its desired position.

Without Strategic Planning

TIME

Gap

8-Sep-17© ICAI, 2017 21

Difference between SWOT Analysis and TOWS Matrix

▪ Through SWOT analysis organisations identify their strengths,weaknesses, opportunities and threats.

▪ Through TOWS matrix organisations match strengths andweaknesses of an organization with the external opportunitiesand threats.

8-Sep-17© ICAI, 2017 22

▪ While conducting the SWOT Analysis managers are often notable to come to terms with the strategic choices that theoutcomes demand.

▪ TOWS matrix lies in systematically identifying relationshipsbetween these factors and selecting strategies on their basis.

8-Sep-17© ICAI, 2017 23

According to SWOT Analysis:

▪ Strength: Strength is an inherent capability of the organization which it can use to gain strategic advantage over its competitors.

▪ Weakness: A weakness is an inherent limitation or constraint of the organization which creates strategic disadvantage to it.

8-Sep-17© ICAI, 2017 24

▪ Opportunity: An opportunity is a favourable condition in the organisation’s environment which enables it to strengthen its position.

▪ Threat: A threat is an unfavourable condition in the organisation’s environment which causes a risk for, or damage to, the organisation’s position.

8-Sep-17© ICAI, 2017 25

According to TOWS matrix:

▪ SO (Maxi-Maxi): SO is a position that any firm would like to achieve. The strengths can be used to capitalize or build upon existing or emerging opportunities.

▪ ST (Maxi-Mini): ST is a position in which a firm strives to minimize existing or emerging threats through its strengths.

8-Sep-17© ICAI, 2017 26

▪ WO (Mini-Maxi): The strategies developed need to overcome organizational weaknesses if existing or emerging opportunities are to be exploited to maximum.

▪ WT (Mini-Mini): WT is a position that any firm will try to avoid. An organization facing external threats and internal weaknesses may have to struggle for its survival.

8-Sep-17© ICAI, 2017 27

What is Six Sigma?

8-Sep-17© ICAI, 2017 28

▪ Maintenance of the desired quality in processes and end products.

▪ It means taking systemic and integrated efforts toward improving quality and reducing cost.

▪ Developing and delivering near-perfect products and services.

▪ Six Sigma has its base in the concept of probability and normal distribution in statistics.

▪ Six Sigma strives that 99.99966% of products manufactured are defect free.

Target areas of Six Sigma?

8-Sep-17© ICAI, 2017 29

▪ Improving customer satisfaction

▪ Improving quality

▪ Reducing wastage

▪ Reducing cycle time

▪ Reducing defects

Six Sigma Methodology – Existing Products - DMAIC

8-Sep-17© ICAI, 2017 30

▪ Define

▪ Measure

▪ Analyze

▪ Improve

▪ Control

Six Sigma Methodology – New Products - DMADV

8-Sep-17© ICAI, 2017 31

▪ Define

▪ Measure

▪ Analyze

▪ Design

▪ Verify

Backward and Forward integration

▪ Backward integration is a step towards, creation of effective supply by entering business of input providers. Strategy employed to expand profits and gain greater control over production of a product whereby a company will purchase or build a business that will increase its own supply capability or lessen its cost of production.

▪ Forward integration is moving forward in the value chain andentering business lines that use existing products. Forwardintegration will also take place where organisations enter intobusinesses of distribution channels.

8-Sep-17© ICAI, 2017 32

Transformational leadership

▪ Transformational leadership style use charisma and enthusiasm toinspire people to exert them for the good of the organization.

▪ Transformational leadership style may be appropriate in turbulentenvironments, in industries at the very start or end of their life-cycles, inpoorly performing organizations.

▪ Transformational leaders offer excitement, vision, intellectual stimulationand personal satisfaction.

▪ They inspire involvement in a mission, ‘vision’ of a higher calling so as toelicit more dramatic changes in organizational performance.

▪ Such a leadership motivates followers to do more than originallyaffected to do by stretching their abilities.

8-Sep-17© ICAI, 2017 33

Transactional leadership

▪ Focus more on designing systems and controlling the organization’s activities and are more likely to be associated with improving the current situation.

▪ Transactional leaders try to build on the existing culture and enhancecurrent practices.

▪ Transactional leadership style uses the authority.

▪ They prefer a more formalized approach to motivation, setting cleargoals with explicit rewards or penalties for achievement or non-achievement.

▪ Appropriate in settled environment, in growing or mature industries, andin organizations that are performing well.

▪ Persuading people to work efficiently and run operations smoothly

8-Sep-17© ICAI, 2017 34

▪ Network structure is a newer and somewhat more radicalorganizational design.

▪ The network structure could be termed as ‘non-structure’ as itvirtually eliminates in-house business functions and outsourcemany of them.

▪ A corporation organized in this manner is a virtual organizationbecause it is composed of a series of project groups orcollaborations linked by constantly changing non-hierarchical,cobweb-like networks.

Network Structure

8-Sep-17© ICAI, 2017 35

▪ Turnaround is needed when an enterprise's performancedeteriorates to a point that it needs a radical change of directionin strategy, and possibly in structure and culture as well.

▪ It is a highly targeted effort to return an organization to profitabilityand increase positive cash flows to a sufficient level.

Turnaround

8-Sep-17© ICAI, 2017 36

▪ It is used when both threats and weaknesses adversely affect thehealth of an organization so much that its basic survival isdifficult.

▪ The overall goal of turnaround strategy is to return anunderperforming or distressed company to normal in terms ofacceptable levels of profitability, solvency, liquidity and cash flow.

Turnaround

8-Sep-17© ICAI, 2017 37

▪ To achieve its objectives, turnaround strategy must reversecauses of distress, resolve the financial crisis, achieve a rapidimprovement in financial performance, regain stakeholdersupport, and overcome internal constraints and unfavourableindustry characteristics.

Turnaround

8-Sep-17© ICAI, 2017 38

Please send your further queries/ or contact at

ssuneja@icai.in

8-Sep-17© ICAI, 2017 39

Thank You

© ICAI, 2017