Strategic Management

1. Business Policy

IntroDecision Making – primary task of manager. Consult Org Policies during dec making. Policies exist at all levels.Provide framework.

DefinitionGeneral Statement of principles which guide thinking & decision-making and action in an org.Guidepost to decision making.Managements expressed or implied intent to govern action in the pursuit of company’s objectives. Types of Policies – AEIO Appealed, Externally imposed, Implied, Originated

NatureCompare strategy and policy. 1) same thing? Yes or no. 2) Policy is process of impl strategy. Restrictive, practical. 3) Bus Pol is decisions regarding org’s future. Ie: similar to strategic guidelines.

Factors determining Bus PolInternal:

Bus Mission – meaning for operating Bus Objectives Resources – size of plant, capital Mgmt Values

External Industry Structure – competition, entry barriers etc Eco Env – demand supply, price trends, national

income, Polit Env Social Env Technology

ProcessGen Statement of PrinciplesLong Term PerspectiveAimed at Achievement of Objectives – framework for actionBus Pol Statements are Qualitative & General in manner. Sometimes specific.Guide for Repetitive OperationsHave hierarchy. Top Mgmt makes Overall Policy (general). Lower level make specific policy.Decision Making Process – Influenced by many aspects.Mutual Application by superiors and subordinates.Unified Structure – help delegate authorityPositive Declaration / command. Motivates.

ScopeCover the following areas, inside and outside the Org.1. Various Functional Areas: HR Mktg Finance2. MajorPolicies – Overall objectives – structure financial status, prod state, Minor policies

SignificanceElements______________________________________________ x ____________________________________________

2. Strategic Management

Strategy is a plan or course of action Intro5 P’s of Strategy: Plan, Ploy, Pattern, Position, PerspectiveStr Mgmt introduced at 25th Nat Bus Conf in Harvard, 1955 by ChandlerDefinitionPlan, course of action or pattern

Pattern of objectives, purposes, goals and major policiesand plans for achieving these goals so as to define what business the company is in.

Determinations of basic long term goals and objectives for an enterprise and adoption of action to carry out these goals.

Strategy is a stream of decisions and action for guidanceof organizational behavior.

Nature

ScopeMostly related to external environmentFormualted at a higher level. Not at mid level/operational level.Str Mgmt integrated three things – Str Planning, Implemttn, EvaluationLong TermRequires systems and norms for effective adoptionProvides overall framework for guiding enterprise thinking and actionEfficient Allocation of Org Res’s.

SignificanceIn this era of privatization, globalization and liberalization, gaining importance.

ElementsPlan or course of actionSet of decision rulesDerived from policies, objectives, goalsPursue of activities that move org from current pos to desired future stateRequisite resources to implement a plan

Nature of Start Mgmt-Related to Ext Environment-Formed at Higher level-SM Integrates 3 activities – Strat Planning, Strat Implementation/Evaluation, Strat Control-Long Term-Reqs System and Norms for efficient adoption-Provides overall framework for enterp thinking

-Unified Direction, efficient allocation of org resouRces.-Integrated Approach for org, aids in challenges

Components OVCS-Objectives (Purpose)– Provide clear idea about scope of business. Time Frame, Attainable, Challenging, Understandable, Measurable, Controllable-Vector – gives direction within an industry and across boundaries. Series of actions will be taken in the same direction to accomplish objectives.-Competitive Advantage – Cannot ignore competition while making plans. Builds internal strengths and enhances quality of org.-Synergy –Measuring the firm’s capability of taking advantage of a new product market move.

Process

Functions of SM-Provides smart dual approach to problem solving. Best means to overcome difficulty & assist in deployment of scarce resources.-Focuses on Changes in Org Setup, adm of the org process affecting behavior and devp. of effective leadership--Technique to manage change/diff way of thinking-Gives perpective, equal imp to present and future opportunities-Mechanism to cope with highly complex env of diversity.

------------------------------------------------------------------------------------------------------3. Strategic Formulation

Vision MissionBusiness PurposeBus Obj’sBus Goals

Steps of Stat Formulation (Strategic 1., 2. Etc) (IEDESI)

1. Identification2. Evaluation3. Option Development4. Option Evaluation5.Selection6. Implementation

Benefits of Str Planning-Set realistic objs-Recog need for better information for decision making-Accelerate, improve growth-Ident poor performing areas-Control Operational Problems-Better Int/Ext Communication-Road Map for Co.-Better Int. Coord-Frame of Ref for Budgets-Sense of Security for e’ees.

Why org’s don’t devp strat perspective:-Lack of awareness of real situation-No fresh flow of info – Kidding Themselves Syndrom-Vested Interest of Managers-Micromanaging – too much imp to day-to-day activities-Complacent after initial success-Reluctant to change to new direction – admission of being wrong-Cant locate their competitive edge

Process of Strat Planning (PSOG-PSP-PFC-SPIA) (PPPPP-SSS-FC-GOA-I-)

1. Devp Company Philosophy – Beliefs, attitude, values

2. Planning Strategy – Devp of concepts, ideas to achieve objective

3. Setting Objectives – enduring and timeless4. Estb Goals – Decide targets (Shorter in time or

narrower in scope than the overall objectives)5. Estb Policies – Plan of action to carry out

activities in accordance with philosophy6. Plan Org Structure – Harness of the company7. Provide Personnel – Selection, Recruitment,

Training8. Estb Procedure9. Provide Facilities10. Provide Capital11. Set Standards12. Estb Mgmt Programmes13. Provide ‘Control’ Information - To compare

performance14. Activate People – Motivation up and down the

line

Strat Planning is NOT-No future decisions-Goals not based on Forecasts-Not preparation of huge set of complex plans-Doesn’t replace Managerial Intuition/Judgement-Not an extrapolation of existing budgets

Start Formulation Steps1. Establish Objectives (Realistic etc)2. Analyze Environment (SWOT)3. Fix Quantitative Targets4. Relate Targets to Divisional Plans – By making

provisional strat plans for each sub unit. Look at macro env, compet env, trends. Better chance of attainment when related.

5. Gap Analysis: Gap between planned and desired performance. Estimate future state

6. Model

Business VisionDescriptive image of what the company wants to be. Statement for where it is headed, indicating the mission to be accomplished in the distant future.

Business MissionMission is a statement that reglects the vision, basic purpose and philospshy of the organization. Gives a clearidea fo the long run commitment of the org.

Cannot set objectives without Mission. Define the basic reason for companies existence. Includes a statement of philosophy and purpose. Link between performing social function and attaining objectives of org.Core Values. Good mission statement outlines customer needs and utilities. Places emphasis on public. Clarity is important.

Business Purpose – Org purpose defines the acivities it performs or the kind of organization it is. Must be defined and redefined over time. Good business purpose includes statement of products, markets, functions and objectives.

Business Objectives: Goal or destination of the org. Clearly spelled out to be strong.Bus Obj’s are the intended goals which prescribes definite scope and suggests direction to the efforts of amanager.

Feat’s of Bus Obj’s:1. Ultimate Goals - 2. Future Oriented3. Guides4. Complex5. Qualitative6. Quantitative7. Hierarchial

Imp of Bus Obj’s-IDentitty to Org-Faciliatates Coord betw depts.-Guides Decisison Making-Motivagtes-Ensures Planning-Reduces wastage

4. Environmental Scan

Int EnvExt EnvSWOT Analysis

Bus Env is sum of all forces internal and external affecting business’ working. Conditins, forces, events and situations in which ent has to operate

Components

Internal Environment & Ext Ent1) Internal Environment (Phil, Mission/Objs, HR, Phy

Res, Fin Res, Corp Im, R&D, Int Reltnps)a) Mgmt Philosophy – Professional or Traditional

Philosphy. Nowadays Professioanl as helps find our weaknesses.

b) Mission & Objectives – Frame both, then do internal analysis to see if they are in line

c) Human Resources – Very Imp. Do analysis to find shortocmings and solve them.

d) Physical Resources – Machines, Equipment, Bldg, etc Analysis-shortcoming-etc

e) Financial Resources – Working Capital, Fixed Capitaland proper mgmt. of them. Analysis-shortcoming-etc

f) Corp Image – Devp, maintain and enhance good image in eys of ee’s, investors and public. Analysis-shortcoming-etc

g) R&D Facilities – Innovate, new productsh) Internal Relationship – Vert and Horizontal Comm.

Free flow of ideas

2) External Env – factors external to businesss org (PESTL ID)a) Demographic – Population, age, literacy etc.

Affect Demand for goods, Quality of Production etcb) Natural Environment – Water, metals, oil etc. Be

Eco Friendly/Net Social Cost zero.c) .Economic Env – Direct effect on business. Eco

Conditons of Marker, Government and Country. Eco Conditions – Nature of Economy, stage of eco devp,per capita income etc. Economic Policies – Fiscal and Monetary Policies, ImpEx Policies, Indutrial, Lciensing, Bdudgetary Polciies. Economic Systems –Capitalost, Socialist, Mixed.

d) Legal Env – Laws affecting business. Incian Companies act 1956, Cons Prot Act 1986, MRTP Act 1969, Essenital Commodities Act 1955

e) Politi Envf) Social Envg) Technol Envh) International Env

9820487642 – mr Baptist

Enivornamental Scanning – examination and study of a bus environment to identify its chances of surivial and prosperity. Understanding both int and ext bus env. Bus Env is dynamic. Need for Env Scanning

a) Env is the Prime Influence on effectivenenss of bus strategies

b) Tool to aniticpate changesc) Gives time for adjustment – cant plan overnightd) Early warning system

Techniques/Approaches to Env Scanning Seeking opinions from experts in field Extrapolating Estimations – best and worst case scenario. SWOT. Mapping – Read the transformation of the

enviromnemt. Track the factors affecting env Modelling – Regression analysis, probability tables INDUSTRIAL ESPIONAGE (!!?)

SWOT ANALYSISSwot analysis needed to survive and gorw in todays business environment. Analyze surrs before framing policies.

Strength = Something a co is good at. Eg: Brand, cost adv, skiled e’ees, loyal customer.Inherence capacity of org, used to gian over competition.Weakness – Company lacks or does poroly in comparison to others. Str Disadv for Co.

Opp – Favourable conditon in org’s env – stregnethens position Threat – unfav cond in orgs env – can damage ord

Role/Imp of SWOT Analysis1) Identify Strengths2) Identify weaknesses3) Identify opp’s

4) Identify threats5) Effective Planning6) Facilitie Org Resources7) Face Competition8) Flexibility in Operations

5. Formulating Strategic Alternatives & Str. Choice

Str Alts – diff course of action. Inluenced by ext factors. Give examplesA. Generating Strat Alt’s – Depends on size of org, styleof mgmt., work ethos, industry characteristics.Small Org - Owner himself. Success or failure depends solely on the owner/Chief Exec. Fast process of implementing alternatives.

Large Org- mechanisms are used: 1. Brainstorming – all alternatives put on table. Then narrowed down and final selection takes place. Give scenario.2. Special Meetings - Ususally held in a different environment. Eg; Resort, getaway. So that day to day doesnot interfere with course of thinking. Give example. (paramenters like rate of inflation, unempl, forex considered and recommedations made)

3. Outside Consultants.Outsider can observe phenomenon that we cannot see, in objective manner. Blinded by being too close. Give fresh viewpoint. Can show new opportunities.

4. Joint Meetings – Mix of consultant and key internal members. Best of 2 and 3.

B. Classifying Star Alters1) On Basis of Risk

Niche Strategy - Low Risk . Conc around a product or market. Take adv of local knowledge. Vert Integ - Mod Risk.Backward is from retail to raw material.Forward is to the customer thorugh your own retail channels. Eg: Reliance.

Horizonatal – New product/ new market. Diversifitcation.High Risk. Egs: HUL, Tata Birla,

3) On basis of Desired Rate of Growth

Alt’s likeInternal Expansion (add more capacity)Int Stabilty (augment resources)Int Retrenchment – Turnaround. Back to profit after period of loss. Restructuring capital, change in mgmt. personaell, better control in functional areas. HindustanOhoto Films

Ext Retrenchment – Divesture. Withdraw from a lossy business. Promted by low profits, inadequatete market, avblty of better alternatives. Selling unit to ext buyer/floating it independently.Ext Expansion – MergersCombo’s of the above

M&A

Merger_- Firm acq other firm/two or more firms combine together. Merger between co’s of same line, or of different lines (conglomerate merger)Acquisition – Taking over of other firm, getting control of it. Change of ownership and management. Ffriendly and hostile.

Legal position fo meger – leave

6. Str. FormulationInput StageMatching StageDecision StageCultural Aspect of Str Choice & Functional Strategies

Analyze current and projected performance based on existing strategies. Assess desired performance. IdentifyStrategic Gsp. Then use Str Alts to bridge the gap.Strategic choice is the decision to select from among thealternative str’s considered, the strat that will meet the ent’s objectives. Str Gap is the perceived difference between targeted and projected performance levels.Talk about imp of leadership. Same env is opportunity forone, but threat for other leader. Need transformational leader.Env conditions play a role in selecting strategy.

1. Product Life Cycle ApproachPLC is the hypothetical passage of a pruct or service through a series of stages – intro, growth, maturyity anddecline. Diff Strats at diff stages of PLC. Give eg’s. Investment in growth stage. Divestment in decline stage.

2. Managerial Factors

-Attittude of Manager to Risk. Risk Aversion – Stability Strategy. High Risk – Grwoth Strategy. Balanced – Combination Str. Risk assessment depends on the stakes involved. -Awareness of how str’s have worked in the past – Experience.-Percieved Ext Dependence. Aggressive growth strategies usually need imported machines/technology. This influences strat choice- Changes in Credit Policies for borrowed funds affects choice.-Timing is imp. Str’s are time bound. Give eg.-Usually politics involved in strat selection. Power relationships in org play a bearing. -Manager’s perception of the st choice process and its implementation. Very imp Factor. Implementation should match the structure.

Strategic Choice – Four strats to compete in International Env.International Strategy. – Create value by tasnferring skills and products to foreigh markets where competition is weak. Differentiated prduct offerings. More centralized but also have prod units in major makets.Makes Sense when-… Doesn’t make sense when-…Multidomestic Str – maximum local responsiveness. Transfer of skills to other contries, but extensive customization. Hence decentralized R&D. High cost structure. Makes sense when high pressure for local responsiveness and low pressure for cost reduction. Disadv – Tend to become autonomous units and skill transfer becomes hard. Global Strategy – Focus on incrasing oroftabilty by costreduction from experience-curve and location economics. R&D is conc on a few locations. Do NOT tend to customize products as it raises cost. Standardized product worldwide. Eg: manufacturing industrial goods.Transnational – Low Cost AND product differentiation. Local resnpsiveness. Tough to pursue. Raises organizational issues.

Cult Aspec of Str Choice – The Company Way – not right orwrong, but different. Corprorate cultier is the colelciton of beliefs, expeftations and values larened and shared by a co’s members and transmitted between generations of employees. Reflects the values of the founder and mission of the firm. Gives a sense of identity. Two factors – Intensity and Integration.Intentsity –defree to which members follow the curlutre.Integration – culture’s breadth. If different sections ofcompany share something in common its integrated. If diffsections have different cultures, its less intefrated.

Corp Culture – sense of identitry, e’ee commitment to a larger cause, adds to stability, serves as a frame of refin decision makinh.Hard to change corp culture once set.

7. HR StrategiesHR primary task is improve the match between individuals and jobs. Up to date job descriptions, job analysis, job appraisal. Traning and dev, labor negotations. Know what skills e’ees possess. E’ee profiles like in HP. Started in 1930’s to respond to unions. 2000 – emergence of knowledge worker. Use of Teams: Mgmt has to be flexible in utilization of e’ees for HR to be a strength. Job sharing, part time jobs, extended leaves, contract based work introduced. 2/3rd of large US companies use Autonomous Groups (self managing).Give eg’s of Motorola, Chrysler, Boeing, GE where productivity increased, development cycle reduced.Imp of HRM Strategies:

Corp Goals must factor in individual career growth Company Profits linked to Personal Rewards Org Learning should involve e’ee training Bus Strat’s must consider HR Issues

“Succesful org will be able to quickly turn strategy intoactions, to manage processes intelligently and

efficiently to maximize e’ee contribution and commitment”Dave Ulrich

To reduce eee dissatisfaction, strength of unions, Co’s need to consider Quality of Work Life and Job Design, rather than emphasis only on tech and eco factors in job design.HRM should improve QoLife by

1) Introdcuing Particaptice Pornlem Solving2) 2) Restructuring Work3) 3) Introducting innovatiove reward sustems,4) 4) imporivng work environment

Human Diversity – Mix of diff cultures, backgrounds, races in workplace. Give eg of Coca Cola lawsuit. Paid 200 million to Afro American eees discrimination.

Marketing StrategiesIn short run, firms competitiveness is from pricing and application of products, but for LONG RUN, competitiveness is fro the ability to develop and grow atlow cost and faster pace than competition – competitive advantage. Main aspect of Comp Adv is the ability to integrate CORPORATE WIDE technolgoies and processes to individual businesses to adopt quickly. In complex dynamic env etc etc core compet’s are important.

Core Competency is the collective leaning in the org’s, howto coord diverse production skills and integrate multiplestreams of tech’s. comes in handy when facing competition.

Diff str alternatives in different market structuresMonopoly – Stability. To strengthen position, vertical integration (forward and backward). Merge/Acquire competition.

Perfect Competititon – DON’T go for Price Diff/Advertising Strategy. Conc on improving economies ofscale and increasing Comp Adv.

Monopolistic Competition – Advertising, Quality Control and Branding. Can make Str Alliances wrt price.

Differentiation/Diverssification will enhace comp strength.

Duopoly/Oligopoly – Lots of options. Diversitifcation, Integrationg, M&A, Promotional Str’s

Marketing and Pricing Strategies Diff Pricing Strategies for diff market structures.

1) Price Lining S – Fix price of one product of yours, and the rest are pricing relative to that. Eliminates comptn who cant compete on price

2) Limit Pricing S – Existing firms coordinate and fix the price at a certain level to remove threat of newentrants into industry. Used in Oligopoly and Monop Competition.

3) Stay Out Pricing – Priced very high. Then keep lowering until people buy it. Get Maximum possible price people will pay. When no fear of competition ie: monopoly.

4) Psychological P S – Impression of being low. 999.99.5) Skimming P – Skim the cream – Discirminatiory

strategy, when demand is inelastic. Small volume high profit.

6) Penetration P – Price sensitive market, high elasticity. Low price to elim competition or stimulate demand and capture large market share.

7) Others – Premum Pricing, Fraction below competition,Price Discrim, Pull Out Pricing.

Mktg & PRODUCT DEVP StrategyProduct Devp Str’s help achieve many ends. Using PLC to extend product life as long as possible. Using Saturation/Penetration Str to expand market share. New and Improved Variants of existing products for years. Taking successful product from one market and introducingit to new market. Eg: P&G, Coke, Colgate, Unilever. Amulby diversifiying into ice cream etc. Push (flood market shelves with product) and Pull (attractive ad’s drawing customers) Marketing.

Strat Marketing IssuesMarket position – who are our customers?

Selection of specific areas for mktg concengtration. Expressed in terms of market, product and location. Market research is needed to find niches.

Market Segmentation ModelSplit up market into different groups on the basis of various criterion

Types of Mkt Segmentation (xyz segmentation) Geographic Demographic Sociographic Physiographic Behavioristic Product Benefit Multi Attribute (Geoclustering) Status

Marketing MixCombination of key variable under co’s control that can be used to affect demand and gain comp advantage. 4P’s – Product Price Promotion Physical Distrubution.Sub Variables for all 4 P’s. eg Product – Size, Feats, Color, Durability, Style, Quality

Financial StrategiesFinance – science of money. Payment. Funds. Fin Strat embraces all theories, procedures, institutions,

instuments, problems an dpolicies that involve the cquisiton and use of money by business enterprises. Fin Strat examines the fin implications of copr and bus level str Options and identifies best fin course of action. Can provide comp advantage through lower cost of funds/flexibility in raising capital. Tradeoff between achieving desried Debt Equity Ratio andrelying on Internal Long Term Financing (cash flow) is a key issues. Some people use only own funds, but acc to analysts, onlyby having long term debt can you raise the earnings per share and stock price/overall value of company. Higher debt levels deter takeover by other firms and improve prodctivy and cash flow by forcing mgmt. to focus on corebusiensses.

Firm’s Fin Str is influenced by Corp Diversifivation Strategy. When Unrelated Diversification – Equity Financing. When Related Divers – Debt Financing. Leveraged Buyout Strategy (LBO) or Mgmt Buyouts (MBO) – Company acquired in a transaction financed mainly by debt(from 3rd party like Inv Banker or ins company). Debt is paid from the money the acquired company makes. Adv – Company pays for itself.Disadv – Huhe cost puts high pressure on keeping the company profitable, concentrating only on Short Term profits. Usually declines till a point and company goes public to finance growth.

Mgmt of dividends is imp part of fin strategy. Some companies don’t pay dividends, use money for more growth.Hence return is in the form of increased stock price and cpatial gain.

8. Matching Org Structure with Strategies

Org Structure is the established pattern of telationshi among the components or past of an org. Various parts of the org are related or interlinked through structure. Involves division of work among various unirs or depts. And the cord of activities to accomplish org objectives.

Some models people tend to adopt. Automobile – GM Divisional Concept. Consumer Goods Firms : Brand Mgmt concept by P&G

Structural Mechanism to Implement StrategyA. Org Structure - To implement strategy, an org must:

Identify major tasks reqd to impl strategty Group tasks into depts/units Arrange for resources for tasks Assign duties to e’ees. Delegate authority and responsibility Est. superior-subordinate relationship System of coord of various tasks

This creates structure. Strcuture ranges from simple to compelx (matrix/network) Type of structure depends on:-Size of Org-No of Prod Lines-No of Plants/Factories-No of markets

Simple Org Stru –Small CoFunctional Org Stru – Growing in size from an enterp firmStr Bus Unit Stru – Each unit is functionally independentto manage performce

B. Org System – Org has to perform preset tasks in order to evolve systems .

1. Information System: Comm Channels are essential. Info System reqs to coord responsibility section wise. Essential to enable manager to get the necessary info reqd to perform his task effecovely. Also known as Management Info System (MIS). Provides base of admin and design of the other org systems.

2. Motivation System – plays a positive role in getting the desired and reqd behavior of an indiv or group. Mgrs are encourage to work efficiently towards corp goals. Need incentives to match indiv objectives with corp’s objectives.

3. Control System – enforece a desired behavior. Top Mgmt measures performance of each section and determines corrective action. Keep viewing goals and objectives and if they are being attained. Mgmt evaluates perf acc to preset standards. Need control system only for large orgs where owner cannot do all work himself.

4. Appraisal System – Reqd to evaluate perfo of indiv/section so that reqd behaviors can be used best. Salary, Promotions, Raise etc are fixed through appraisal. Appraiser should be impersonal/no close relationship with who they are appraising, Regular intervals and not just yearly.

5. Planning Systems – Essential for Formltn of strategy. Some orgs make all staff take part inolanning. Some make people who have to accomplish the goals, take part in setting the goals via planning. Can work with centralized manager for small firms. Planning system needs to be adapted according to strategy being implemented.

6. Development System – Knowledge of top management must be updated. Systematic imrovment of attitude, skills knowledge. Should not be unhappy as it will affect others.

Matching Org Structure with StrategyDiff types of stuctues need diff stregies. Eg: if org sturctuer set along fucntinal lines,reources need to be allocated across fucnional areas.Changes to stragegy lead to changes in structure.Eg: cosnuemr goods – divisional structure. Small firms – functionalMedium – divisionLarge firms – SBU

Steages of Devp of Org StructureStage 1: Simples tructure:

Small enterprises are usually like this. Singlefounder. Makes all im decision,Adv’s: Quick Decision Making-Decision as per changing environment-simpel in antrue-informal in nature

disadv-depednce on owner for everygthing-he contrates on day-to day instead of long term planning-future expansion limited by owner’s capital.Steg II – Funcionlal Structure:Have a team of managers, with specialized fucntions. Reqs change in managerial stype. Founder needs to larn to delegate power.Departmentaliation, Prfocess Wise .Can only concentrate on one industry. Adv’s – day to day work delegated, owner can conc on strategic decisions-Work done faster due to spefcialization

Disadv- Coordination is difficult-can lead to conflict between deprtments-creates specialists in very narrow fields

Sttage III – Divisional StrucrureAs it grows, this becomes necessary for diverselocations of the firm.Managers need more devision making power. Each division cshould be semi autonomos. Linked to HQ, but functionally independent. Divisions can be bases on:\1. Function: Finance, Marketing, Production2. Area: GM for Mumbai, delhi, etc3. Product wise: Prod a,b,c,d4. Processwise: Spinning, dyeing, fabric, finishing5. Customer Wise: Retial, Coprorate etc

Adv’s: encourages grouping of functions reqd for perf of activities together

-top mgmt. concentrates on strategic decisions,not day to day-quicekr response to environment changes

Disadv-duplciaiton of work in each unit-pilicy inconsistencies betweeb divisions.

Stage IV: Strat Bus Unit SBUGroups similar devisions into SBU’s and senior execsget authority for ach SBU. Can facilitate strategy implementation by improving coord beweeb similar division.Chars of SBU-Businesses that can beplanned independ from rest ofthe company-own set of competition-manager controls profit perf, factors affecting profit

Advs of SBU:-Establish coord between divisions having common strategic interest-Facilitate stat mgmt. and control of large divefrseorgs-fixs accountability to each business unitdisadvs-too manyn sbus make it hard ro handle effectively-difficult defining autonomy of an SBU-takes longer to make corporate decisions

Stage V: Matrix OrgKnown as product mgmt. . Comoanies product many products in many markets. Assign fucntioninal specialty. Divided project wise and department wise in a matrix.PROJECT BASED division. After project, reert to their parent division.

Advs: Fosters specialists with talent-fosters crarivitty-good exposure to specialists to general mgmt.

disadvs-dual accountability causes confusion-costly and conflictual--questions about authrotiy-needs hgh vertical and horizanatl coord

9. Stages in ORganziational Development

Policy spells out the general direction in which a decision will be made. Defines the ground for implementation. Functional Strategies are made keeping in mind Busienss Level Strategies sent from above. Impacted by environamental factors. Usually divided into Finacne, Mktg, Production,Personnel.

Financial Strategies

Functions of Finacneial Mgr.:-Raise funds-Sounf Mgmt of capitalfunds-use capital to earn profit-regular return to investors-pay eees reasonably-pay creditors on time-budgetary control-no misuse

Soruces:Borrowed WCReservesCapital

Use funds for:C-Capital InvCurrent assetsAcq Fixed AssetsLoans and Dividends

Factors realting to plans are:System of budgeting and accountsMangement control systemRisk managemetntTax planning

Marekting Streategies:Marekting Mix:Prodcut: Tangible and itnagible features to satifcy wants of consumers. Undertake SWOT analysi for your product. Find a USP. Then come up with competitiove strategiesPrice: Perceived value of the goods/service. Faciltiies loek dscount, credit, payment terms etc can be used as tools by company.Different prcing strategies like Skimming, Peneteration, Cream of the Crop can be used.Place: Discgturbtuon system. MAximuze customer service and minimize idistrubutuon cost. Cheap transportation, low stocks and few warehouses.PromotionEssential for product awareness and new prospects. Averstising, personal selloing, sales promo and publicity.

Operational StrategiesEssential for Manuacturing process. Plans will be wrt capacity of plant unit, lcoaiton of plant, supply of RM. strategy will lay guidelisnes wrt RM needed, stock, Quaity Control and Miantanence of plant. Esure day to day activiites conform with long term objectives

of the company. Role is to make Objecties in Reality

HR Strategies:Perosnal Selction, T&D, Compesnation, Promotion, Apirraisal.Plans wrt trade unions, staff welfare, collective hargain. Industrial relations.

Integration of Fucntional Plans and PoliciesStrageies should be integrated. Should consider issues such as:- Need for internal consistency: Each dept should

look at polcieis from toehr depts. Too. Give egs- Relevance to organziaitonal capacity – Cant aim at

market leadership if don’t have the capacity for it. Should build up slowly.

- Trade-offs – Cant gave everything. Best mix of different functional polciies.

- Interdependency of functions ; Linked depending onlevel of integration.

ModernizationIntegration

Types of IntegrationHorizonatal – same sctor to create oopoly,. Godrej and p&g.Vertical – diff processes in same industryForward integration – with distrbutuorsBackward integration – with manufacturersLateral/Allied – with diff industry but for a related endproduct-Convergent Lateral - same end product combo

-divergent lateral – same raw meterials sharedcircular/mixed – unrelated, diff industry

diversification

turnaround

liquidation

disinvestment

mergeracquire one of more firms to gain competiitgve strength. One firm survives at the end if it.Why?For diversificationTo secure scarece soucres of supplyEconomies of scaleBetter managementImprove financial standingsAchieve monopoly positionRevive sick units

TakeoverBuying another firm (assets or the company whole). Changeof ownershuop of acquired company.Three forms of takeover: negotiated, open market/hostile,bailoutWhy?Quick growthDiversificationRestablish position at topReduce competitionIncrease market shareCreate goodwill in mkt (?)Eg: MNCs entering indian markt

joint venture

temporary partnership beween companies for certain objectives. Afreement time bound or objectvies bound. Widelt uses to gain entry into new markets by MNCs. JV is a special case of consolidation where two or more ocmoanies form a temproart partnetship for aspeical purpose. Features:-Comprehensive (more detailed than just a collaboration)-tempo-two or more companies-has legal status-mutually benefitial-govt approval neededeg: maruti Suzuki, In USA, Toyota and GM initially

Merits of JV:-Transger of capital and technology-Faster idnsuttial growth-trasnfer of expertise-spreading of risks0synergy – increased efeciveness-international marketplace

Types of JV’s:1) Technical JV – provides technical assistane and know

how training, patents. Through: Granting license forroyalty payment, or complete transfer of tech.

2) Mgmmt Consutlacny: For Project Rpeor, Feasibilit yrpert, Financial and mtg feasibility of product, construction of plant and equipment

3) Marketing JV: used to import products to new market4) Financial JV: help raise finance, study feasibility,

equity partners, loans etcLimitations of JV:-unfair T&C possible-time consuming, complex-Conc=flict between partners-tech transfer is usually old technology-govt policy can be an obstacle.

13.

Strategic Implementation

Issues in Implementation, Project Impl and Control Procedures, Resource Allocation

Start IMPL is transfer of thoughts into action. Need proper understanding and commitment.Affects all fucntinal and divisional areas of the business. Strat Form in not enough. Need Impl. Str Impl is the sum total of all activiites and choces required for the execution f a strategic plan. Cocnsits of policies and strategies put into action though devp programs, budgets and procedures. Def: Strat Impl consists of securing resources, organizing these resources and directing the use of them.

Strat Form vs Strat Impl:-Positiong forces before – manging forces during-focus on effectiveness – efficiencyintellectual process – operational process-good analytical skills – good motivational/leadership skills-coord betw just few people - coord betweeb many people

Components of Strtegic Implnentation:1) annual Objectives: Important because:

-Represent basis for aloation resources-Primary mechanism for evaluating managers-insturment for mooniotring progress toward achivinglong term objectives-extablish priorities

2) Policies: Policies are needed to make strategy work.3) Resource Allocaiton: Allocat3ed according to

priorities. 4) Managing Conflict5) Matching org str with strategy6) Managing resistance to change7) Creating strategy supportive culture8) Production Concerns

9) HR Concertns

Stages of Implementing Startegy:1) Institutinalizing Startegy:

a) Communication of stragb) Securing acceptance of strategy

2) Formltn of Action Plans/Programmesa) Action plans wrt each activity to be taken place.

Consider its purpose, activities reqd, people and resources reqd.

b) Programmes: Single use plan designed to accomplish specific objective. Clearly indicate stesp to be taken

3) Translate general to specific objectives – should be realizstic, achievable, specific. Should contribute to overall objectives also.

4) Allocate Resources: Phsyscial, Financial and Human resources. Mgmt should ask: What are sources, which factors affecr RA, what poblems?

5) Procedural ReqsL licensing, imp exp reqs, labor legislation etc

Project – one time goal oriented undertaking with specific in mindStages:ConceptionAnalysisPlanningOrganziationImplementationOperation

14. Resource AllocationSteps in RA-Determine type and amt of reourcwaDet Source of resourcesMobilize resources

Physcailly allocate resoirecesUtilize resourcesMoniotr RA

Factors affecting RA-Objecives of OrgNature of stratsAvailability of res’sInternal polciitcsExternal factors

Problems with RA-scarcity of resourcesoverestimation of R’sorg’s past Allocaiton of R’sInternal politicsPoor financial climateConflicts of interestResistance to change

16 Management of ChangeOrg change is any alteration that occus in the env of an org. alteartation of objecives, strategy, rechnlogy, sturcuture, job design etc.Restisance to change is a chalange.

Feats of Org Change:Pervasis: cannot avoid it, has to happen. New Mgmt brought in to handle change.Continuous in naturePlanned change and Reactive Change.Change is diff from Innovation

Process of Mgmt of Change-Identiy need for change_decide what is to be changed-planning for change: who, how when.-assess change forces – reaction of people, how it affects depts. Etc-intrdce the change-review change

Reasons for Org Change-Technogy-change in mgmt. philosophy-change in mgmt. personnel-progress in business cycle-Env factors-problem in org-grwoth/expansion-entry into new markets

Factors for Resistance to Change-Tradiitonal Mgmt Philosphy-Who will take new responsiblty for risks?-lack of resources-current system stable-org agreements – eg labor unions-redundanc of jobs (eg due to automation)-less incentives if more efficiency-inconveniece as breaks routine-fear of unknown-ego clashes

Managing R to Change-Involvement and partiicpaiton-Leadership sklls-Shared rewards/icnentives-job security ssuance-education/communication-Traning and Counselling-consult wokrers union-group dynamic

17.strategy evaluationvital for orgs well being as itmely alerts can avert sever penaltiesThree steps:Examine underlying bases for firms strategyCompare expected with actual resultsTake corrective action to ensure conformance

Important in otdays envireonemnt, so dynamic, contant change in int and esxtenral factosf. Hence should be a continuous fprcoess blah blah.

Evaluate strategy on 4 ciretiirion:1. Consistency:Should not have incosnsiten tgoals and policies. Signs of inconsistency in strggy: a) If managerial problems/disputes continue despite resplacing the personnel. B) if success of one dept means the failure of the other.

2. CONSONANCENeed to look at a set oftrends over the years and compare. Could be a result of a different group of trends.

3. Feasibility: should not overburden the mgmt. or use up resoruces that cannot be replenished. Can thestregy be undertaken udner current resources?Has org demonstrated in the past the ability/competetncy to carry out such a strategy?

4. Advantage – what comp adv does the straagy give us?

Importance of Strat Ev/Control-Faciliattion coord-F’c optimum use of reosources-guides operatiors-rechecks validiy of streategic choice-f’s perf appraisal-motivates employees-fixes responsibility-creates basis for future strat planning

Process of Strat Ev:-Determinge what to measure

-Setting of Standards-measure actual perfcompare to standardfinding deviationanalyse deivationtake corrective action

15. strategic, operational and budgetary control

Strategic control – continuously evaluating stragy duirn process of implementation. Like alarm before the storm.

Op Control – processs of esnring that specific tasks are carried out efficiently and efefctivley.

Startegic Control Operational Control

AIMContinuously question direction of streategy Allocation and use of org’s resources

EnvironentInternal and external factorsOnly internal factors

Techniques usedEnv Scanning, Info Gathering Questioning and ReviewBudgets, schedules, inventory control, MBO

Time periodLong term impactShort term upto 1 year

Exercise ControlTop MgmtTop, Middle, lower middle mgmt.

DatabaseHistorical and future oried

Mostly historical

Main covnernDirection of comaony;s futureActions going as per plan/standard

FlexibilityIs flexibleLacks flexibility – has to stick to structures plan

Techniques of evaluation and control

Strategic: constantly question, blah blah, compare standards, take corrective action etc

a. Premise Control – premise is assumption. Keep close watch over this. If it changes, wholes strategy will change.

b. Implemnetation control – evaluating whetehr each part of the plan is leadingthe project toward its goal

c. Strtagic surveillance – if any event withijn the company threatens the sartegic course of action

d. Special alert control – form contijgnency streaties in case of emergency.

e. Str leap control – define new strat reqs in changing env to cope with environmental realities

f. Responsibility centres – diff team monitor diffparts of strategy at all times. Each manger is resp for centers performance on its own, not considering other center. Types:

i. Revenue Centres – production in terms of units/rupees etc how effective it is

ii. Expense centres – use as little resoruces as possible and be within budget

iii. Profit centres- how much profoit is made

iv. Investment centers – also used to find shareholder values

Operational Control: a. Internal Analysis: stegnths and weakness of firmi. Value chain analysis: emphasis on interrelated activities done to meet objectives. Judge effectiveness of each activity in chainii. Quant Analysis – like ratio, market rank, afvertisingrecall rate, units soldiii. qualitative analysis – using market surberys, experiments, observation

b. comprehensive analysis – total approach judging overall. Using:i. Key Factor Rtating – key areas identified and ratedii. Balcned scoreboard. Evaluare overall looking at all aspectsiii. network techniques – PERT, CPM etc for schedulingiv. MBO

c. Memorandum of Understanding (MOU) – agreement between public enterp and Govt stating commitements and repsonsilbiites

d. budgetary control – compare actuala with estimated

Budgetary ControlIprotant tool. Establsuemnt ofbduget realted to respof execs in a business and contunous comparison of actual with budgeted results.Merits of Budgetary Control:

Brings efficiency in working Avoids buck passing by establoshgn

responsibility Eestbalihses corrdination Guards against hopelss optimism Acts as safety signal

Deceases production cost Adopts standard costing pricniples Optimal Mix of diff facors of production Credit Agenceis like it. Easy to finance Optimum capitalization

Limits to Budgetary control Budgets are just estimates. Depends on accuracy of

data Bus conditons constantly change. Budget is rigid. Sstem of budgetary control based on quantitave data

and no human touc, unless proper manager there to overlook it

Go overboard and cut too much. People think it will solve al problems

People tend to dislike it.

16. tehcniques of evaluation and control:PERT, CPM, Variance Analysis, Measuring Org Performance

PERT- program evlautaiona dnreview technique – used in US NavyUsed for large projectes. Asnwers the following q’s:-When wil prject be complete-start and finsh of each individual part-Which should be finished in time to avoid delay-shift resources to affect overall completion time?-where to contrite more itme on in project?

CPM Critical Path Method. Du Pont Company for scheduling. Concerned with the relationshjip between applying more men and resources to shorten duration, against increased cost of these resources.

Both based on same pricciple. Some differences:-CPM based on single estimate of time. Used for cotnrusciton, maintainence-PERT based on expected completion time, optimistic time,pessimistic time and most likely time. Used for more ompelx like enginerring prjects.-Pert when TIME is important. CPM when COST is important.

Stepsn in CPM/PERT-Estmate time for each activity. In CPM, one time. In PERT – three times.-calcualte cirtical path – sequence that takes the lognest time. Helps to monitor the sequcne of events.

Advantages:-Help make a time-event analsysi withoutplanning. -Focus on critical path, aka max possible time, so alwaysin schedule.

Characterostc of efecive evaluation and control system:1. must be economical – min amt of info needed for reliable picture of events2. Must be meaningful – relate to firms objecives3. Timely control warnings, so its not too late to make changes4. should give true pcituer of what is happening. Fairlyshould not dominate decisiosns. Is just for betterundetanding5. should not be too complex or retircitve, confusing6. long term as well as short term controls neede7. emahsize carrot more than stick.

Variance analysisFinding deviations wrt actual performance comapresd to targets. Imp step in control process. Hence know who to hold responsible.

Material Price Variacnes – dif between standard and actualprice of material. Arises due to factors like:-change in amrekt price-purchase order of odd size-no discount-carriage charges-trasnit loss

-cahnge in taxes and duties

material usage VrianceDiff betwe standar dqty used and actual qty usesd. Can bearrtirubuted to:-inefficine tuse of amteral-use of substitute-waste of amteril-change in product spec-change in compsoiton of mixture

Measuring Org Perf1) Find deviations – measure actul with standar fperf.

Prepare performance report2) Identify cause of deviateions – give egs’3) Communicagte deviations and tke corrective action.

17. Global Issues in Strat Mgmt.Globalization is the functional integration of national economies within the circuit of industry and financial. Office 88 DIF delete delete backspace undo back in fact of globalization today everything is changed globalization internationalization of markets corporations change the way moth

Stages of internatjon devp1) Demoenstic ompany2) Domestic co with export division3) Dom co with international div4) MNC with multidomestic emphasis5) MNC with globalemphasis

Centralziation vs decntrlizaiton