Implementation of strategy

Session objectives

Implementation of strategy

though

 SWOT Analysis
 Focus on Execution
 Value chain analysis
 Balanced Score Card
Amazon.com
Amazon invented the retailing business model
that all other dot - coms are struggling to copy
While Amazon. com is price competitive, it is not largest web retailer
by having the lowest prices on all the items all the time
It does’nt guarantee to match or beat other’s prices.

Instead, Amazon has won the loyalty of millions by building online

Store that is friendly, easy to use and inspires a sense of confidence
and community among customers.

People trust Amazon, partly because it knows their tastes and does
what it promises. For me and many others, it would not be worth
roaming all over the web to save a few bucks shopping elsewhere

Walter Mossberg -technology commentator for The wall Street Journal

Amazon.com— list of items

Books
Movies ,Music & Games
Electronics & Computers
Home & Gardens
Grocery
Toys ,Kids, Baby Care
Apparel, Shoes & Jewelry
Health& Beauty
Sports & Outdoors
 SWOT Analysis

It is a systematic procedure for identifying

a firm’s critical success factors:
its internal strengths and weaknesses
and its external opportunities and threats
 Critical Success Factors

Total Continuous Activity Based

Bench Costing &
Quality Improvement
Marking Management
Management

Theory of Just in Time

Mass
Reengineering Customization
Constraints

Computer aided
Design & Target Costing Balanced
Value Chain Score card
Manufacturing
 Core Competencies

Skills or competencies that the firm

employs especially well are called
core competencies
 Core Competencies

Strengths Core
competences

Weaknesses Lack of Skills

&
competences
 Evaluating internal Strengths & Weaknesses and its Resources

Product lines Management R&D

Manufacturing Marketing Strategy

External Opportunities & Threats

Intensity of
Barriers to Rivalry
Entry Among
Competitors
Pressure
From
Substitute
Products
Bargaining Bargaining
Power of Power of
Customers Suppliers
 Quantifying Critical Success Factors

Critical Success Factors How to Measure the CSF

Financial Factors

•Profitability
•Liquidity
•Sales
•Market Value
 Quantifying Critical Success Factors

Critical Success Factors How to Measure the CSF

Financial Factors

Earning from operations

•Profitability
Earnings Trends
 Quantifying Critical Success Factors

Critical Success Factors How to Measure the CSF

Financial Factors

Cash Flow
•Liquidity Interest Coverage
Assets Turnover
Inventory Turnover
Receivable Turnover
 Quantifying Critical Success Factors

Critical Success Factors How to Measure the CSF

Financial Factors

Level of sales in Critical Products

•Sales Sales Trends
% of Sales from new products
Sales forecast Accuracy
 Quantifying Critical Success Factors

Critical Success Factors How to Measure the CSF

Financial Factors

•Market Value

Share Value
 Quantifying Critical Success Factors

Critical Success Factors

Customer Factors

Customer Satisfaction
Dealer & Distributor
Marketing & Selling
Timeliness of Delivery
Quality
 Quantifying Critical Success Factors

Measuring CSF

Customer Factors

Customer Satisfaction

Customer Returns & Complaints

Customer Survey
 Quantifying Critical Success Factors

Measuring CSF

Customer Factors

Dealer & Distributor

Coverage
Strengths of channel
No. of Dealers in State
No. in Region
 Quantifying Critical Success Factors

Measuring CSF

Customer Factors

Marketing & Selling

Trends in sales
Training
Market Research
Sales per Area/SM
 Quantifying Critical Success Factors

Measuring CSF

Customer Factors

Timeliness of Delivery

On time delivery

Lead time
 Quantifying Critical Success Factors

Measuring CSF

Customer Factors

Quality

Customers Complaints
Warranty Expenses
 Quantifying Critical Success Factors

Critical Success Factors

Quality
Internal Productivity
Business
Flexibility
Processes
Equipment Readiness
Safety
 Quantifying Critical Success Factors

Measuring C S F
Quality
No. of defects
No. of Returns
Internal Customer Survey
Business Amount of Scrap
Processes Amount of Rework
Field Service Report
Warranty Claims
 Quantifying Critical Success Factors

Measuring C S F

Productivity
Internal
Business
Product Cycle (RM to Finished Product)
Processes Labour Efficiency
Machine Efficiency
Amount of Waste
Rework and Scrap
 Quantifying Critical Success Factors

Measuring C S F

Flexibility
Internal
Business
Processes
Setup time
Cycle time
 Quantifying Critical Success Factors

Measuring C S F

Equipment Readiness

Internal Downtime
Business Operator experience
Processes Machine capacity
Maintenance activities
 Quantifying Critical Success Factors

Measuring Critical Success Factors

No. of Accidents
Internal
Business Effects of accidents
Processes •Safety
 Quantifying Critical Success Factors

Critical Success Factors

Product Innovation
Learning
Timeliness of New Product
& Skill Development
Innovations Employee Development
Competence
 Quantifying Critical Success Factors

Measuring CSF

Product Innovation
Learning
&
Innovations No. of Design changes
No .of new Patents or copyrights
Skill of R& D Staff
 Quantifying Critical Success Factors

Measuring CSF

•Timeliness of New Product

Learning
&
Innovations
•No of days over or under the
announced date of new product
 Quantifying Critical Success Factors

Measuring CSF

Skill Development
Learning
&
Innovations •No. of Training hours
•Amount of skill
performance improvement
 Quantifying Critical Success Factors

Measuring CSF
Employee Morale

Learning Employee Turnover

No. of Complaints
&
Employee Survey
Innovations
 Quantifying Critical Success Factors

Measuring CSF

Competence
Learning
& Training
Innovations Experience
Adaptability
Financial & Operating
Performance Measures
Execution of Goals
 Execution of Goals

Execution is really the critical part of a successful strategy

Getting it done….
Getting it done right….
Getting it done better than the the next person is far more
Important than dreaming up new visions of the future

Louis V Gerstner, Jr
IBM
 Execution
Required Skills &
Resources Tight Cost Control
Frequent Control Reports
Strategy Structured Organization
Cost Structured Policies
Leadership Target Based Incentives
Capital Investments Strong coordination
Process Reengineering  Research
Labour Supervision  Product Development
Product Designing  Manufacturing
 Marketing
 Strategy and Execution Skills

Execution
Required Skills &
Resources
Tight Cost Control
Frequent Control Reports
Strategy Structured Organization
Structured Policies
Differentiation Target Based Incentives
Strong Mkt Abilities
Product Engineering Strong coordination
Corporate Reputation  Research
Uniqueness  Product Development
 Manufacturing
 Marketing
Value Chain
Analysis
Value Chain
Analysis

VCA
is a strategic analysis tool used to better understand
the firm’s competitive advantage, to identify where value
to customers can be increased or costs reduced and to
better understand the firm’s linkages with suppliers,
customers and other firms in the industry.

The Activities include all steps necessary to provide

a competitive product or service to the customer
 VCA has two steps

1 Identify the value chain Activities

2 Develop a competitive Advantage by Reducing Cost or adding Value

 VCA has two steps

1 Identify the value chain Activities

 Value
Activities

Value Activities
are activities
that a firm in industry
must perform in the process
of converting raw materials
to final product, including
customer service

Value added

Service
Researc

Sales
Assembly
Design
h
 Value Chain For Computer Manufacturing Industry

Step 3
Step 1 Step2 Materials
Design RM Acquisition Assembled into
Components

Step 6
Step 4 Step5
Wholesaling
Intermediate Computer
Warehousing
Assembly Manufacturing
Distribution

Step8
Step 7
Customer
Retail Sales
Service
 Value Chain For Computer Manufacturing Industry

Step2
Step 3
Step 1 RM Acquisition
Materials
Design
Assembled into
Components

Activities
Converting RM into
Performing Mining, development
Components and
Research and and Refining
Parts to make
Development
Computers

Expected Output
Of Activities
Silicon, Plastic,
Completed Product Various metals
Desired components
Design
and parts
 Value Chain For Computer Manufacturing Industry

Step 6
Step 4
Wholesaling
Intermediate Step5
Warehousing
Assembly Computer
Distribution
Manufacturing

Moving products to
Converting,
Retail locations and
Assembling, Final Assembling,
Warehouses as
Finishing, testing Packaging and
Needed
And Grading Shipping the final
Product

Rail, track and Air

Boards, Higher Level Completed Computers
shipment
components
 Value Chain For Computer Manufacturing Industry

Step8
Step 7 Customer
Retail Sales Service

Processing returns,
Making Retail Sales Inquiries, and repairs

Service and restacked

Cash Receipts computers
 VCA has two steps

2 Develop a competitive Advantage by Reducing Cost or adding Value

4 options may be considered

 Competitive advantage

1 Identify competitive advantage

(cost leadership or differentiation)

2 Identify opportunities for added Value

Wal-mart using computer based technology for supplies
Reduction in transaction cost by banks

3 Identify opportunities for Reduced Cost

Material Substitution, Change in Production Process

4 Exploit Linkages among activities in the value-chain

Changing location of Factory near to suppliers
balanced scorecard
A balance scorecard translate a organization’s
mission and strategy into set of performance
measures that provide the framework for
implementing its strategy
 4
Perspectives

Financial

Perspective Customer
Internal
Perspective Business
Process
Perspective

Learning &
Growth
Perspective
 Clarify mission &
Mission Vision
Vision statement

Develop Strategic Goals

Strategic Goals

Derive Balanced Scorecard

Sub-Goals
Sub-Goals
Financial
• Sub-Goals
Map Sub-Goals to Internal Business
Methodology
Customer
each quadrant of the • Sub-Goals • Sub-Goals
Balanced Score Card Learning & Growth
Overview • Sub-Goals

For each BSC Quadrant

Apply Statistical techniques to:

- identify measurement areas Indicators
- develop measurement goals
- pose relevant questions

Trouble Reports
- postulate indicators Module

- identify data elements

Data Elements
 A Balanced Scorecard Perspective on Performance

FINANCIAL

Initiatives
Measures
Objective

Targets
How do we
look to
shareholders?

CUSTOMER INTERNAL BUSINESS

Initiatives
Measures
Objective

PROCESS

Initiatives
Measures
Objective
Targets

Targets
How do our
Vision
customers and What must
see us? Strategy we excel at?

LEARNING and
GROWTH
Initiatives
Measures
Objective

Targets

Can we
continue to
improve and
create value?
 4
Perspectives

Financial

Perspective

Financial Perspective Evaluate

the Profitability of the Strategy
 4
Perspectives Customer

Perspective

Customer Perspective identifies Targeted

Customer and market Segments and Measures
the Company’s success in these Segments
 4
Perspectives
Internal
Business
Process
Perspective

This perspective focuses on internal operations

that create value for customers that ,in turn,
furthers the financial perspective by increasing
the shareholder value
 4
Perspectives
Internal
Business
Process
Perspective

3 sub
Processes

Innovation Process Operations Process Post sales-Service

Process
Creating Products Producing & delivering Providing service and
Services &Processes Existing products that Support to the customer
To meet the demand Will meet the needs After the sale of a
Of Customers Of Customers product or service
 4
Perspectives

Learning &
Growth
Perspective

This perspective identifies the capabilities the

organization must excel at to achieve superior
internal processes that create value for
Customers and shareholders
 FINANCIAL PERSPECTIVE

Target Actual
Objective Measures Initiatives Perform Perform

Financial Operating income

Perspective From Productivity Manage Cost
Rs 20 Cr Rs 20.12Cr
Gain And Unused
Capacity

Operating Income Build Strong

Increase From Growth Rs 30 Cr Rs 34.20 Cr
Customer
Shareholder Relationship
value
Revenue Growth 6% 6.48%
 Customer Perspective

Target Actual
Objective Measures Initiatives Perform Perform

Customer Market Share in

Perspective Communication Identify future
6% 7%
Network Segment Needs of
Customers

Number of New Identify new 1% 2%

Customers Target
Increase Customer Seg
Customer Customer 90% give 87%Gave
Satisfaction Satisfaction Top two top two
Rating Increase Customers
Ratings Rating
Focus of Sales
 INTERNAL BUSINESS PROCESS PERSPECTIVE

Target Actual
Objective Measures Initiatives Perform Perform

Reduce Order Delivery Re-engineer order 30 days 30 days

Delivery Time Time Delivery process

Meet Specified
Delivery dates on time delivery Re-engineer order 92% 90%
Delivery process

Improve post Service Response Improve Customer Within Within

Sales Services Time Service process 4 hrs 3 hrs

Improve Number of Impv. Organize teams

Processes In Business from Sales & Manuf 5 5
Processes

Improve % of processes Organize R&D/Mfg 75% 75%

Manufacturing With Advanced Teams to implement
Capability Controls Adv. control
 Learning and Growth Perspective Target Actual
Objective Measures Initiatives Perform Perform

Align Employee Employee Satisfac- 80% 88%

Employee
And tion Rating Employees
Participation to
Organizational Give top
Build Team Work
Goals Two
Ratings

Develop % Employees Employees

Process Trained in Process 90% 92%
Training
Skill & Quality Mgt Programme

Empower % Workers Supervisors as

Work Empowered to 80% 80%
Coaches rather
Force Manage Decision
Processes Makers
 Features of Balance Score Card

 Indicate Organizational strategy and its link with perspective

Strategy is communicated to all

Strategy translated into measurable targets

Motivates Managers to achieve targets

BS limits the measures to only four

Highlights effect of one perspective on another

Pitfalls in Implementing Balanced Score Card

Difficult to establish Fin-Non financial Linkages

Improvements at all levels may not be possible

Both subjective-objective measures Consideration

Considering Cost & benefits of initiatives

Non-financial Achievements are ignored

 Balanced Scorecard for an Electronics Firm
Customer Perspective

QUALITY Own quality & industry standard, delivered quality

PRICE Competitor Price, Customer willing to Pay, Market Price

Delivery Actual vs Planned, No. of on time deliveries

Shipment Sales Growth, No.Of customers making 90% shipments

New No. Of New Products, Technology innovations,

Products % of sales from new products

Support Response time, customer satisfaction survey

 Balanced Scorecard for an Electronics Firm
Internal Capabilities

Efficiency of New Product New Products

Manufacturing Introduction Success

Cycle time Rate of new New products

Lead time Product
Y/Q sales
Mfg. Overhead Introduction per No. of Orders
Automation Rate Quarter/year

Sales Penetration New Businesses

Actual vs Plan
No. of New
Increase in Rs 1
Business each
Crore customers
year
Per year/quarter
 Balanced Scorecard for an Electronics Firm
Innovation

Technology
Cost Leadership Market Leadership
Leadership
Product
Manufacturing  Market share in
Performance –
Overhead per all major markets
• Competition
quarter as percent • No. of systems
• No. of new
of sales; rate of developed to meet
products with
increase in cost of customer
patented
quality per quarter requirements
technology

Research and
Development

 No. of new
products
• No. of new
patents
 Balanced Scorecard for an Electronics Firm
Financial Perspective

Sales Cost of Sales Profitability

Annual growth Extent it remains

Return on total
in sales and flat or decreases
capital employed
profits each year

Prosperity

Cash Flows
Balanced Scorecard for an Electronics Firm
Employees & Community Perspective

Competitive benefits
Opportunity
& Salaries

• Individual
Salaries
contribution
compared
• Personal
to norm in local
satisfaction in
area
job

Citizenship

Company
Contributions to
Community &
Institutions that
generate
environment
 A Strategy Map for Dell Computer

Learning and Innovation

Measures (by product segment)

• Training dollars per employee

• Number of emerging technologies evaluated

• No. of new manufacturing processes developed

• No. of new manufacturing processes under developed

A Strategy Map for Dell Computer

Internal Processes

Measures (by product segment)

- Product manufacturing time

- Raw materials inventory

- Order processing time

- Manufacturing defects
 A Strategy Map for Dell Computer

Customer

Measures (by product segment)

• Customer perception of order-taking convenience &

accuracy

• Customer perception of product quality

• Customer retention

• Customer satisfaction with speed of service

A Strategy Map for Dell Computer

Financial Performance

Measures (by product segment)

• Revenue growth

• Gross Margin

• Operating Cost ratio

• Selling expense to sales ratio