What is strategy?

It comes the Greek word Strategos., Meaning a general in command of an army :it is formed from stratos, meaning army and ag, meaning to lead. Strategy was defined in military literature as a a plan of attack for winning or a plan for beating the position.

For business it is defined as the overall plan for Deploying resources to establish a favourable position ,while a tactic is a scheme for specific action. We can also define strategy in terms of three organisational levels Corporate headquartersBusiness strategy-Business (division Level) strategy Functional strategy -Functional strategy

Nature ,importance and scope of strategic planning 1.Rapid changes in environment. 2. Serves as a road map. 3.Suggest growth objectives of the firms & also provide strategies. 4.Ready to face environmental uncertainties. 5.Helps to understand trends in advance. and provide benefit of lead time for taking decisions. 6.Ensures that the firms businesses, products, markets are chosen wisely. 7.Maximum utilisation of resources. 8.Prepares firm to face future 9.Enables long term Decisions Concerning the firm. 10.Helps to build competitive advantage & core competencies

Concerns of strategic planning-

First-concerned with future or the long-term dynamics.

Second-Concerned with growth1.Direction of growth 2.Extent of growth 3.Pace of growth 4.Timing of growth

Third environment-the best fit between the enterprise and its environment. Fourth concerned with basket of businesses the company should have-it is concerned with the changes/additions/deletions to the firms product-market posture. Fifth- Decide corporate strategy not Routine tasks.

Sixth-ready to face uncertainties -core Competencies &competitive advantage.

Seventh-Integration

Component tasksClarifying the mission of the corporation

Defining the business

Surveying the environment Internal appraisal of the firm Setting the corporate objectives Formulating the corporate strategy

Clarifying the missionIt says-insiders and outsiders -what corporation stands for -Communicates what firms want to be -the very purpose of the corporation -Corporation's guiding principles -The businesses the firm will pursue & the customer needs it will seek to satisfy

E.g.1.AT&T-initial years-to give telephone to every American Redefined Any time ,Any where

2.Unilever-The mission of our company, as William Hasketh Leaver saw it, is to make cleanliness common place, to lessen work for women, to foster health and to contribute to personal attractiveness, so that life may be more enjoyable for the people who use our products.
Redefined-- Vitality is at the heart of every thing we do. It is in our brands, our people & our approach to business. (Growth plans, investment plans, technology plans are all focused towards the new mission)

Defining the businessDefining the business is the pre requisite for selecting the right opportunities and steering the firm on the correct path. Without defining its business, the firm cannot fix its corporate objective. It is useful to understand what constitute its relevant environment and to make environment search effective

Basic questions-What business are we in? Whom do we intend to serve? Do we accurately define our business? Do we define our business in its broadest view? Do we know our consumer? What brings us to this business in the future? What would be the nature of this business in future? In what business would you like to be in, in the future? What are our basic strengths and distinctive capabilities to pursue the present business?

A good business should meet following requirements1. It must related to the function of the product. 2. It must cover in its fold as many related areas/functions as possible. 3. It must be wide enough to catch new opportunities. 4. It must study about substitute products. 5. It must be related to basic capabilities and limitations.

Surveying the environmentIt is the analysis of macro environment factors as well as the factors which are specific to the business concerned. Developing the Opportunity Threat profile

1.Economic,Socio-cultural, Demographic, Political,Natural,Technology, Legal 2.The market The customer The industry The competition Govt. policies

Internal appraisal of the firmThree important parts1.Assessment of the strengths and weaknesses of the firm in the different functions/areasThe firm has to assess carefully its capabilities in the various areas, such as marketing,finance,HR, operations, R&D and general management. In each of these areas, several aspects have to be covered.

2. Appraisal of the status/ health of the individual businesses of the firm Issues related to the health of the businessWhat does the basket of businesses look like? Does the firm have a healthy portfolio overall? Is it balance well?

Are there enough businesses with good growth and profit potential?

In what kind of industries are the businesses placed? At what rates do they grow now?

The Concept of Strategic Business UnitThe concept is relevant to multi-product, multi-business corporations. It has to necessarily group its products /businesses into a manageable number Of strategically related groups and take them to the strategic planning. (An SBU is a group of related businesses, that can be treated as a unified entity for the purpose of strategic planning.)

E.g.-HUL, TATA, ONIDA,P&G TATAEntertainment, electronics, Telecom, Food, Housing, Software

Insurance, Financial services

Retail

Analytical Models1. BCG Matrix

High

Low Low

High Industry Growth Low

Stars

Question Marks

Cash cows

Dogs

Companys Relative Market share

Stars are the net users of resources. A star needs a good deal of investment support as it operates in a high growth market. Dont expect immediate profits but have great future.
Question Marks- Are also net users of resources .They rein the high risk category and future is uncertain. Cash cows-They are generator of resources. It does not need heavy investment

Dogs- Dogs being businesses with weak market shares in low growth markets, are generally a drag on a company.

Ansoff product-market expansion grid Growth opportunities available to a company through three main sources-Intensification, integration and diversification. Ansoff model give emphasis to intensification i.e. achieving growth within the companys existing businesses. Through the intensification strategy, a firm basically spots and utilises opportunities for improving products and markets of existing businesses.

Three distinct strategies are1.Market penetration strategy 2.Market development strategy 3.Product development strategy

3.Assesing competitive advantageA competitive advantage is essentially a position of superiority on the part of firm in some function/factor/activity in relation to its competition. It is useful to maintain superior position in the relevant industry. A competitive advantage can beBenchmarking Value chain analysis Innovation in any function Integration R&D Supply chain expertise (lower input costs) Strength in marketing channels Mergers and acquisitions Product differentiation Brand dominance

Setting corporate objectives The main task here is to decide the extent of business growth, the firm wants to achieve. The firm examines its present level of performance with its achievable level over the Planning period. The key areas of objectives are1.Growth in investment,assets,revenue,profits 2.Profitability-ROI, EPS 3.Market share and competitive position 4.productivity-Resource utilisation, Costsavings

5. Technology and R&D

6.Human resources.

Formulating the Corporate strategy

Strategy provide design to achieve the objectives. Corporate strategy has to specify through which businesses and through what kind of product-market posture is the growth objective going to be achieved. Resource allocation is part of corporate strategy.(Indicates risk taking attitude). Corporate strategy statement should be precise &easily understandable .