________________________________________________________Strategic Management____________ Q1: Elaborate concept of Strategic Management & Discuss strategic management as a process.

With out a strategy, an organization is li e a ship !ith out a ru""er, going aroun" in circles. #t$s li e a tramp% it has no place to go.& E'olution of Strategic Management( 1) 2) 3) () *) In early 1920s and 1930s the managers used day-to-day planning methods to perform any task. To anti ipate the future! they tried using tools like preparation of "udgets and ontrol systems like apital "udgeting and management "y o"#e ti$es. The te hni%ues &ere una"le to emphasi'e the future ade%uately. The ne)t step &as they tried using long range planning &hi h &as repla ed "y strategi planning and later "y strategi management. In mid 1930s! a ording to the nature of "usiness the planning &as done during +dho poli y making. The strategi management is the modern term for &hat &as earlier alled business policy. The &ord strategy is deri$ed from the an ient ,reek &ord strategia! &hi h onnoted the art and s ien e of dire ting military for es. Strategic management is "efine" as -the set of de isions and a tions &hi h leads to the de$elopment an effe ti$e strategy or strategies to help a hie$e orporate o"#e ti$es.. -It is a pro ess of formulating! implementing and e$aluating ena"le an organi'ation to a hie$e its o"#e ti$es.. /trategi management is indeed managing for the future or competing for the future+ )enefits of strategic management 1. It pro$ides an o"#e ti$e $ie& of management pro"lems 2. It gi$es en ouragement to for&ard thinking 3. It allo&s ma#or de isions 0 supports esta"lished o"#e ti$es (. it fa ilitates "etter delegation! ontrol. *. It helps for in reased employee produ ti$ity and redu ed resistan e to hange _________________________________________________Madhira College of Engineering____________ o-ordination! monitoring performan e e$aluation and ross fun tional de isions that

________________________________________________________Strategic Management____________ Strategic management process 1. + ording to 1ofer strategi management is the pro ess! &hi h deals &ith fundamental 2rgani'ational! rene&al 0 gro&th &ith the de$elopment of strategies! /tru tures and /ystems ne essary to a hie$e su h rene&al and gro&th and &ith the organi'ational systems needed to effe ti$ely manage the strategy formulation and implementation pro ess. *he process of strategic management is, 1. Identifying3 defining "usiness mission purpose0 o"#e ti$es 2. 4n$ironmental analysis 3. 5e$ise organi'ational dire tion (. /trategi alternati$es and hoi e *. /trategy implementation 6. /trategi e$aluation 0 ontrol

Defining business +ision, mission purpose& ob,ecti'es 7efining on organi'ations e)isting mission! purpose and o"#e ti$es is the logi al starting point as they lay foundation for strategi management. 4$ery organi'ation has mission! purpose and o"#e ti$es! e$en if these elements are not ons iously designed! &ritten 0 ommuni ated. These elements relate the organi'ation &ith the so iety and states that it has to a hie$e for it self and to the so iety. 2. 8ompany +ision is 9hat a 8ompany 9ishes to "e ome or aspire to "e. 3. 8ompany Mission is &hat the 8ompany is and &hy it e)ists (. -b,ecti'es( :ong term! ,eneral! :ess measura"le *. .oals( short term! spe ifi ! more measura"le. _________________________________________________Madhira College of Engineering____________

________________________________________________________Strategic Management____________ En'ironmental analysis 4n$ironmental fa tors-"oth Internal 0 4)ternal en$ironment! i.e.! 1. identify hanges in the en$ironment 2. identify present 0 future threats 0 opportunities 3. +ssess riti ally its o&n strengths 0 &eaknesses. 4n$ironmental fa tors may help in "uilding a sustaina"le ompetiti$e ad$antage. /e'ise organizational "irection + thorough analysis of organi'ations en$ironment pinpoints its strengths! &eaknesses! opportunities and threats ;/92T). This an often help management to reaffirm or re$ise its organi'ation dire tion. Strategic alternati'es an" choice +lternati$e strategies &ill "e ranked "ased on the /92T analysis. The "est strategy out of the alternati$es &ill "e hosen. The steps from identifi ation of "usiness mission! purpose and o"#e ti$es of alternati$e strategies and hoi e an "e grouped in to the "road step of strategy formulation. Strategy implementation The organi'ation an not reap the "enefits of the strategi strategy is effe ti$ely implemented. The managers should ha$e lear $ision 0 ideas a"out the ompetitors strategy! organi'ations ulture! handling hange! skills of the managers-in- harge of implementation. Strategic e'aluation an" control It fo uses on monitoring 0 e$aluating the strategi strategi management pro ess in order to essfully. impro$e it and ensure that it fun tions properly. The managers must understand the pro ess of ontrol 0 the role of strategi audit to perform the task of ontrol su management! unless the

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________________________________________________________Strategic Management____________ Q0( E1plain the !or ing of *-WS matri1. &Mc2insey 34s 5rame !or of strategic analysis. *6/E7*S4-88-/*9:#*#ES4WE72:ESSES4S*/E:.*6S ;*-WS< M7*/#= T29/ is also named as /92T analysis. + T92/ +nalysis is a strategi planning tool used to e$aluate the Threats! 2pportunities and /trengths! 9eaknesses! in$ol$ed in a pro#e t or in a "usiness $enture or in any other situation re%uiring a de ision. This is an important tool in order to formulate strategy. This <atri) is an important mat hing tool that helps managers de$elops four types of strategies:
Strengths>S Wea nesses > W

S-4Strategies =se strength to o"tain opportunities S*4Strategies =se strengths to a$oid threats

W-4Strategies 2$er ome &eaknesses "y taking ad$antage of opportunities W*4Strategies <inimi'e &eaknesses and a$oid threats

-pportunities > -

*hreats > *

S- Strategies( 4$ery firm desires to o"tain "enefit form its resour es su h "enefit an only "e o"tained if utili'e its strength to take e)ternal opportunity. 5esour es ;+ssets) an important firms strength to get opportunity for e)ternal resour es. 5or e1ample the firm en#oying a good finan ial position &hi h is strength for a firm and e)ternally opportunity to e)pand "usiness. The strong finan ial position pro$ides an opportunity to e)pand the "usiness. The mat hed strategy is kno&n as /2 strategy. W- Strategies( 92 /trategies de$eloped to mat h &eakness &ith opportunities of the firm. 92 strategy is $ery useful if the firm take ad$antage to e)ternal resour es in order to o$er ome the &eakness. 5or e1ample the firm is in the riti al finan ial pro"lems that is &eakness and firm is a$ailing merger &ith <ultinational 8orporation.

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________________________________________________________Strategic Management____________ S* Strategies /T /trategies is an important strategy to o$er ome e)ternal threats. This does not mean that a strong organi'ation should al&ays meet threats in the e)ternal en$ironment head-on. This strategy is adopted "y $arious olleges "y opening ne& "ran hes in order to o$er ome ompetiti$e thereat. These threats also e)plain "y the >orter in its ompetiti$e model. W* Strategies 4$ery firm has a desire to o$er ome its &eakness and redu ing threats. This type of strategy helpful &hen &eaknesses are remo$ed to o$er ome e)ternal threats. It is diffi ult to target 9T strategy. 5or e1ample &eak distri"ution net&ork reating many pro"lems for the firm if it strong many e)ternal threats an "e remo$ed. *he Mc2insey 3S 5rame!or The < ?insey @/ model in$ol$es se$en interdependent fa tors &hi h are ategori'ed as either ?har"? or ?soft? elements: ?6ar"? elements are easier to define or identify and management an dire tly influen e them:. 6ar" elements are Strategy, Structure & Systems ?Soft? elements! on the other hand! an "e more diffi ult to des ri"e! and are less tangi"le and more influen ed "y S ills, Style, Staff 1. Strategy( the plan de$ised to maintain 0 "uild ompetiti$e ad$antage o$er the ompetition. 2. Structure( the &ay the organi'ation is stru tured and &ho reports to &hom. 3. Systems( the daily a ti$ities 0 pro edures that staff mem"ers engage in to get the #o" done. (. Share" +alues( alled Asuper ordinate goalsA! these are the ore $alues of the ompany that are e$iden ed in the orporate ulture and the general &ork ethi . *. Style( the style of leadership adopted. 6. Staff( the employees and their general apa"ilities. @. S ills: the a tual skills and ompeten ies of the employees &orking for the ompany. ulture. 1o&e$er! these soft elements are as important as the hard essful . Soft elements are, Share" +alues, elements if the organi'ation is going to "e su

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________________________________________________________Strategic Management____________

Q@( E1plain Michael 8orter Aontribution to Strategic management 8orter contribution to strategic management is, 1. >orters generi strategies 2. Bi$e for e model or industry en$ironment analysis 3. Calue hain analysis .E:E/#A S*/7*E.#ES Aost lea"ership emphasi'es produ ing standardi'ed produ ts at $ery lo& per-unit ost for onsumers &ho are pri e-sensiti$e. Differentiation is a strategy aimed at produ ing produ ts and ser$i es industry &ide and dire ted at onsumers &ho are relati$ely pri e-insensiti$e. 5ocus means produ ing produ ts and ser$i es that fulfill the needs of small groups of onsumers.
Bo!er Aost Differentiation

onsidered uni%ue

)roa" *arget

Cost Leadership Cost Focus

Differentiation

:arro! *arget

Differentiation Focus

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________________________________________________________Strategic Management____________ Michael 8orterCs fi'e forces >orter referred to these for es as the mi roen$ironment! They onsist of those for es lose to a ompany that affe t its a"ility to ser$e its ustomers and make a profit. + hange in any of the for es normally re%uires a ompany to re-assess the marketpla e. 4a h of these for es has se$eral determinants: *he bargaining po!er of customers 1. "uyer on entration to firm on entration ratio 2. Dargaining le$erage (. Duyer information a$aila"ility 6. +$aila"ility of e)isting su"stitute produ ts *he bargaining po!er of suppliers 1. /upplier s&it hing osts relati$e to firm s&it hing osts 2. 7egree of differentiation of inputs @. supplier on entration to firm on entration ratio E. ost of inputs relati$e to selling pri e of the produ t 6.importan e of $olume to supplier 3. presen e of su"stitute inputs 3. "uyer $olume *. a"ility to "a k&ard integrate @. "uyer pri e sensiti$ity

*he threat of ne! entrants 1. the e)isten e of "arriers to entry 2. e onomies of produ t differen es 3. Drand e%uity *. + (. /&it hing osts *. apital re%uirements ess to distri"ution @. +"solute ost ad$antages E. go$ernment poli ies

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________________________________________________________Strategic Management____________ *he threat of substitute pro"ucts 1. "uyer propensity to su"stitute 2. relati$e pri e performan e of su"stitutes 3. "uyer s&it hing osts (. per ei$ed le$el of produ t differentiation *he intensity of competiti'e ri'alry 1. po&er of "uyers 0 po&er of suppliers 2. threat of ne& entrants 0 threat of su"stitute produ ts 3. num"er of ompetitors (. rate of industry gro&th *. e)it "arriers 0 di$ersity of ompetitors 6. informational omple)ity and asymmetry @. "rand e%uity 0 fi)ed ost allo ation per $alue added E. le$el of ad$ertising e)pense +alue Ahain 7nalysis ;+A7< The $alue hain! also kno&n as 'alue chain analysis . The ?primary acti'ities? inclu"e: in"ound logisti s! operations ;produ tion)! out"ound logisti s! marketing and sales! and ser$i es ;maintenan e). The ?support acti'ities? in lude: administrati$e infrastru ture management! human resour e management! 507! and pro urement. The osts and $alue dri$ers are identified for ea h $alue a ti$ity. The $alue hain frame&ork %ui kly made its &ay to the forefront of management thought as a po&erful analysis tool for strategi planning. Its ultimate goal is to ma)imi'e $alue reation &hile minimi'ing osts. The a ti$ities of the Calue 8hain 8rimary acti'ities ;line functions< 1. #nboun" Bogistics. In ludes re ei$ing! storing! in$entory ontrol! transportation planning. 2. -perations. In ludes ma hining! pa kaging! assem"ly! e%uipment maintenan e! testing and all other $alue- reating a ti$ities that transform the inputs into the final produ t. 3. -utboun" Bogistics. The a ti$ities re%uired to get the finished produ t at the ustomers: &arehousing! order fulfillment! transportation! distri"ution management. (. Mar eting an" Sales. The a ti$ities asso iated &ith getting "uyers to pur hase the produ t! in luding: hannel sele tion! ad$ertising! promotion! selling! pri ing! retail management.. *. Ser'ice. The a ti$ities that maintain and enhan e the produ tFs $alue! in luding: ustomer support! repair ser$i es! installation! training! spare parts management! upgrading! et . _________________________________________________Madhira College of Engineering____________

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Supporting acti'ities

8rimary acti'ities

Support acti'ities ;Staff functions, o'erhea"< 1. 8rocurement. >ro urement of ra& materials! ser$i ing! spare parts! "uildings! ma hines! 2. *echnology De'elopment. In ludes te hnology de$elopment to support the $alue hain a ti$ities. /u h as: 5esear h and 7e$elopment! >ro ess automation! design! redesign. 3. 6uman /esource Management. The a ti$ities asso iated &ith re ruiting! de$elopment ;edu ation)! retention and ompensation of employees and managers. (. 5irm #nfrastructure. In ludes general management! planning management! legal! finan e! a ounting! pu"li affairs! %uality management! et .

QD( Discuss the role of en'ironment in the strategic management of an organization. 4n$ironment means the surrounding. It in ludes "oth internal and e)ternal o"#e ts! fa tors 0 influen es under &hi h someone3something e)ist. +n 2rgani'ation must "e fle)i"le enough to ad#ust %ui kly &ith this hanging en$ironment. *he en'ironmental scan inclu"es the follo!ing components( 1. Internal analysis of the firm 2. +nalysis of the firmFs industry ;task en$ironment) 3. 4)ternal ma ro en$ironment ;>4/T analysis) *he E1ternal business en'ironment may be "i'i"e" in to 0 sectors _________________________________________________Madhira College of Engineering____________

________________________________________________________Strategic Management____________ D52+7 0 T+/? 4n$ironment *as en'ironment( The task en$ironment onsists of e)ternal stakeholders groups or indi$iduals outside the organi'ation that are signifi antly influen ed "y or ha$e a ma#or impa t on the organi'ation! like: Austomers Suppliers Aompetitors

)roa" en'ironment( #t consists of "omestic an" global forces. 1. >oliti al trends ;e.g. open markets) 2. 4 onomi trends;e.g. gro&ing e onomy) 3. /o io- ultural trends;e.g. demographi s) (. Te hnologi al trends;e.g. internet) 8ES* 7:7BES#S( 8olitical( ,o$ernment term and hange 9ars 0 onfli t :egislations3regulatory3poli y Bunding! grants and initiati$es

Economic 7omesti 3international e onomy Ta)es! B7I! interests /to k markets and e) hange rates /easonality3 &eather issues <arket and trade y les

Social( :ife style trends 7emographi s >sy hographi s 8onsumer attitudes 0 opinions 8onsumption 0 "uying patterns

4thi al3 religious fa tors _________________________________________________Madhira College of Engineering____________

________________________________________________________Strategic Management____________ *echnological( 8ompeting 0 emerging te hnologies 507 Inno$ation :i ensing! patents <anufa turing ost3 apa ity Information and ommuni ation

Aomponents of e1ternal en'ironment analysis 1. Scanning( identifying early signals of en$ironmental hanges 0 trends 2. Monitoring( analy'ing and o"ser$ing en$ironmental hanges 0 trends 3. 5orecasting( de$eloping pro#e tions of anti ipated out omes (. 7ssessing( determining en$ironmental trends for firms strategi management.

#nternal en'ironment analysis( The internal analysis an identify the firmFs strengths and &eaknesses and the e)ternal analysis re$eals opportunities and threats.. This In$ol$es analy'ing and e$aluating internal stakeholders ;managers! employees! o&ners and the D27) and an organi'ations resour es and apa"ilities. >urpose of internal analysis is to determine strengths 0 opportunities for ompetiti$e ad$antage and &eaknesses and organi'ational $ulnera"ilities ;e)posures) to "e orre ted. Aomponents of internal en'ironment 1. -rganizational aspects( >oli ies! pro edures and rules! /tru ture! 8ommuni ation net&ork 0. Mar eting aspects( <arket segmentation! produ t strategy! pri ing! promotion 0 distri"ution strategy. @. 5inancial aspects( :i%uidity! profita"ility and in$estment opportunity. D. 8ersonnel aspects(

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________________________________________________________Strategic Management____________ :a"our relations! re ruitment pra ti es! training progr%ammes! performan e appraisal system! turno$er and a"senteeism F. 8ro"uction aspects( >lant fa ility layout! resear h de$elopment! use of te hnology! pur hasing of ra& materials! in$entory ontrol G. Managerial aspects( <anagement style! management ompeten e! managerial $alues and norms.

Aon"itions affecting "ecisions !ith respect to resources, capabilities & core competencies. 9ncertainty4 regarding hara teristi s of the general and the industry en$ironments!

ompetitorss a tions and ustomer preferen es. Aomple1ity4 regarding interrelated auses shaping a firms en$ironment and per eption of the en$ironment. #ntra organizational conflicts- among people making de isions and those affe ted "y them. QF( E1plain SW-* 7nalysis & )A. matri1 Strengths are attri"utes of the organi'ation that are helpful to the a hie$ement of the o"#e ti$e. Wea nesses are attri"utes of the org. that are harmful to the a hie$ement of the o"#e ti$e. -pportunities are e)ternal onditions that are helpful to the a hie$ement of the o"#e ti$e. *hreats are e)ternal onditions that are harmful to the a hie$ement of the o"#e ti$e. Strengths + firmFs strengths are its resour es and apa"ilities that an "e used as a "asis for de$eloping a ompetiti$e ad$antage. It is an inherent apa ity that is in relation to the en$ironment. Bor an organi'ation to "e a su ess it re%uires strength and it gi$es strategi ad$antage to gain more than the ompetition. 4)amples of su h strengths in lude: 1. patents 0 strong "rand names 2. high %uality produ ts 3. good in$entory management _________________________________________________Madhira College of Engineering____________

________________________________________________________Strategic Management____________ (. moti$ated employees 0 strong 507 *. :atest Te hnology 0 good reputation among ustomers 6. e) lusi$e a @. fa$ora"le a Wea nesses The a"sen e of ertain strengths may "e $ie&ed as a &eakness. It is an inherent inade%ua y that is again in relation to the en$ironment. It gi$es strategi disad$antage and something that re%uired for su ess is missing. It leads to ompetition &here &eakness an "e used to gain more due to inherent limitation 3 onstraint3inade%ua y. Bor e)ample! ea h of the follo&ing may "e onsidered &eaknesses: 1. la k of patent prote tion 0 poor "rand image 2. narro& produ t mi) 0 &eak distri"ution 3. poor reser$es 0 e) ess manpo&er (. ina essi"le lo ation 0 poor reputation among ustomers ess to key distri"ution hannels *. high ost stru ture 0 la k of a -pportunities The e)ternal en$ironmental analysis may re$eal ertain ne& opportunities for profit and gro&th. 2>>25T=GITH: an "e a omplished and an help to onsolidate and strengthen the organi'ation. Its a fa$ora"le ondition for an organi'ation in its en$ironment /ome e)amples of su h opportunities in lude: 1. pri e de ontrol 0 deli ensing 2. import rela)ations 0 B7I norms 3. gro&ing ur"an in omes and population (. gro&th of onsumerism 0 an unfulfilled ustomer need *. arri$al of ne& te hnologies 0 loosening of regulations 6. remo$al of international trade "arriers *hreats 8hanges in the e)ternal en$ironmental also may present threats to the firm. +lso &hen the opportunities are not utili'ed properly it an ause pro"lem to the to the organi'ation &hi h ess to high grade natural resour es ess to distri"ution net&orks

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________________________________________________________Strategic Management____________ auses threat. It is unfa$ora"le ondition for the organi'ation. It auses risk3damage to an organi'ation. /ome e)amples of su h threats in lude: 1. re ession 0 politi al insta"ility 2. religious "attles 0 so ial a ti$ism 3. import li"erali'ation (. shifts in onsumer tastes a&ay from the firmFs produ ts *. emergen e of su"stitute produ ts 0 ne& regulations 6. in reased trade "arriers 0 onsumerism )A. matri1 The D8, matri) ;D.8.,.-matri)! Doston 8onsulting ,roup analysis) is a hart that had "een reated "y Dru e 1enderson for the Doston 8onsulting ,roup in 19@0 to help orporations &ith analy'ing their "usiness units or produ t lines. This helps the ompany allo ate resour es and is used as an analyti al tool in "rand marketing! produ t management! strategi management and portfolio analysis.

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________________________________________________________Strategic Management____________ Stars are units &ith a high market share in a fast-gro&ing industry. The hope is that stars "e ome the ne)t ash o&s. /ustaining the "usiness unitFs market leadership may re%uire e)tra ash! "ut this is &orth&hile if thatFs &hat it takes for the unit to remain a leader. 9hen gro&th slo&s! stars "e ome ash o&s if they ha$e "een a"le to maintain their ategory leadership! or they mo$e from "rief stardom to dogdom. Question mar s =nits &ith lo& market share in a fast-gro&ing industry. /u h "usiness units re%uire large amounts of ash to gro& their market share. The orporate goal must "e to gro& the "usiness to "e ome a star. 2ther&ise! &hen the industry matures and gro&th slo&s! the unit &ill fall do&n into the dogs ategory. Aash co!s are units &ith high market share in a slo&-gro&ing industry. These units typi ally generate ash in e) ess of the amount of ash needed to maintain the "usiness. They are to "e AmilkedA ontinuously &ith as little in$estment as possi"le! sin e su h in$estment &ould "e &asted in an industry &ith lo& gro&th. Dogs, or more harita"ly alled pets! are units &ith lo& market share in a mature! slo&-gro&ing industry. These units typi ally A"reak e$enA! generating "arely enough ash to maintain the "usinessFs market share.

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