Session
One
Strategic Management:
Prof. R.K. Verma
MODULE DESCRIPTOR OF CORPORATE
STRATEGY
Topic
Concepts of
Strategy:
Coverage
Defining strategy,
levels at which strategy operates;
Approaches to strategic decision making; and purpose,
objectives and goals
Environmental
Analysis and
Diagnosis:
Concept of environment,
components of environment (Economic, legal, social, political and
technological).
Environmental scanning techniques- SWOT (TOWS).
Porter’s Five forces model of competition in an Industry
Strategy
Formulation and
Choice of
alternatives:
Corporate level strategies—
Stability,
Expansion,
Retrenchment
Combination strategies.
BCG matrix
Business level strategies—
Generic business strategies
Cost leadership business strategy
Porter’s Generic Business strategies
WHAT IS CORPORATE SRATEGY
Corporate strategy can be described as:
‘The identification of the purpose of the
organisation and the plans and actions
to achieve that purpose.’
MODULE DESCRIPTOR OF CORPORATE
STRATEGY
Topic
Strategy
Implementation:
Future Strategies:
Vision 2030
Coverage
Interrelationship between formulation and
Implementation
Project Implementation:
Phases of project
procedural issues
Resource allocation:
Factors affecting resource allocation
Difficulties in resource allocation
Two case studies,
exercises and presentations
WHAT IS STRATEGY AND
WHY IS IT IMPORTANT?
by:
Prof Ram K Verma, Dean, SBS
Work Plan for today




Let us define Strategy.

Identifying a Company’s Strategy

Strategy and the Quest for Competitive Advantage

Strategy Is Partly Proactive and Partly Reactive

Strategy and Ethics: Passing the Test of Moral
Scrutiny
The Relationship Between a Company’s Strategy
and Its Business Model
What Makes a Strategy a Winner?
Why Are Crafting and Executing Strategy
Important?
LEARNING OUTCOMES

the concept of strategic management and its four key attributes

the strategic management process and its three interrelated and principal
activities

why stakeholder management is so critical in the strategic management
process and how “symbiosis” can be achieved among an organization’s
stakeholders

Develop communication strategies to promote the strategic planning
process

the key environmental forces that are creating more unpredictable change
and requiring greater empowerment throughout the organization

how an awareness of a hierarchy of strategic goals can help an
organization to achieve coherence in its strategic direction
THINKING STRATEGICALLY:
THE THREE BIG STRATEGIC QUESTIONS
1.

Where are we now?
Identify conditions, competitive pressure, current performance, market
standing, resource strength, competencies, competitiveness, weaknesses
2. Where do we want to go?

Business(es) to be in and market positions to stake out

Buyer needs and groups to serve

Outcomes to achieve - Market share

ARPU (Average Revenue Per Unit)
3. How will we get there?

A company’s answer to “how
will we get there?” is its strategy; management action for running &
“WITHOUT A STRATEGY THE
ORGANIZATION IS LIKE A
SHIP WITHOUT A RUDDER.”
Joel Ross and Michael Kami
WHAT IS CORPORATE STRATEGY
Corporate strategy can be described as:
‘The identification of the purpose of the
organisation and the plans and actions
to achieve that purpose.’
DEFINITION OF STRATEGY


Consists of the combination of competitive
moves and business approaches used by
managers to run the company
Management’s “game plan” to

Attract and please customers

Stake out a market position

Compete successfully

Grow the business

Achieve targeted objectives
STRATEGY AND PROCESSES
REPRESENTATIVE
COMPANY VALUE CHAIN
VISION AND MISSION OF SHARDA UNIVERSITY
Vision of Sharda University

To be a globally respected centre fostering learning spirit,
academic and professional excellence, and innovation.
Mission of Sharda University
Sharda University seeks to realize its vision by:

Creating a stimulating and flexible learning environment for its
students as well as faculty

Leveraging academic research to form strong industry linkages

Developing a culture that strongly promotes innovation and
continued betterment in all facets of life
CORE VALUE OF SHARDA UNIVERSITY






Excellence : Commitment to Innovation and continuous learning
to ensure that we keep striving for the best outcomes in all facets
of life.
Ethical Conduct : Integrity, Fairness, Honesty and
Transparency in all actions.
Global Outlook : The University welcomes and encourages
diverse Ideas, Beliefs, and Cultures.
Promote Leadership : The University believes that leaders
create leadership skills in others, thus igniting a virtuous cycle of
growth.
Collaboration and Inclusiveness : Developing a symbiotic
community of faculty, students, alumni, industry, government
bodies, and other Universities/centres of learning.
The University is committed to its core values and expects all
stakeholders (faculty, students, etc.) to embrace them. It has zero
tolerance towards any deliberate violation of the core values.
FOUR PHASES IN STRATEGIC MANAGEMENT
Establishment
of
strategic
intent
Formulation of
strategies
Implementation of
strategies
Strategic control
Strategic
evaluation
18
(c)
Dr.
Azh
ar
Kaz
mi
200
COMPREHENSIVE MODEL OF
STRATEGIC MANAGEMENT
Strategic
Intent
Vision
Mission
Business definition
Business model
Objectives
Strategy Formulation
Environmental
Organisational
Appraisal
Appraisal
SWOT Analysis
Corporate-level Strategies
Business-level Strategies
Strategic analysis and choice
Strategic plan
Strategy
Implementa
tion
Strategic
Evaluation
Project
Procedural
Resource
allocation
Structural
Behavioural
Functional &
Operational
19
(c)
Dr.
Az
har
Ka
zmi
200
Strategic
control
THE HOWS THAT
DEFINE A FIRM'S STRATEGY


How to attract and acquire customers
How to respond to changing
market conditions

How to outcompete rivals

How to grow the business


Strategy
is HOW
to . . .
How to manage each functional piece of the
business and develop needed organizational
capabilities
How to achieve strategic and financial objectives
WHAT ARE A COMPANY’S
STRATEGIC CHOICES?
Strategic choices are based on . . .



Trial-and-error organizational learning about

What has worked and

What has not worked
Management’s appetite for taking risks
Managerial analysis and strategic thinking about
how best to proceed, given prevailing
circumstances
KEY ELEMENTS:
SOUTHWEST AIRLINES’ STRATEGY
Grow the business by gradually adding more
flights on existing routes and initiating service
to new airports
 Make friendly service a company trademark
 Maintain an aircraft fleet of only Boeing 737s
 Encourage customers to make reservations and
purchase tickets at the company’s Web site
 Avoid flying into congested airports
 Employ a point-to-point route system
 Economize on

Amount of time it takes terminal personnel to check
passengers in and on-load passengers
 Costs

IDENTIFYING A COMPANY’S STRATEGY
STRIVING FOR COMPETITIVE ADVANTAGE

To achieve sustainable competitive advantage, a
company’s strategy usually must be aimed at
either
Providing a distinctive product or service or
 Developing competitive capabilities rivals can not
match


Achieving a sustainable competitive advantage
greatly enhances a company’s prospects for
Winning in the marketplace and
 Realizing above-average profits

What separates a powerful strategy from an ordinary strategy
is management’s ability to forge a series of moves,
both in the marketplace and internally, that
produces sustainable competitive advantage!
STRATEGIC APPROACHES
 Strive
to be the industry’s low-cost
provider
 Outcompete
rivals on a key differentiating
feature
 Focus
on a narrow market niche, doing a
better job than rivals of serving the
unique needs of niche buyers
 Develop
expertise, resource strengths, and
capabilities not easily imitated by rivals
THE FIVE GENERICCOMPETITIVE STRATEGIES
EXAMPLES: STRATEGIES BASED
ON DISTINCTIVE CAPABILITIES

Sophisticated distribution systems – Wal-Mart

Product innovation capabilities – 3M Corporation, Apple

Complex technological process – Michelin,IBM

Defect-free manufacturing – Toyota and Honda

Specialized marketing and merchandising know-how –
Coca-Cola

Global sales and distribution capability – Black & Decker

Superior e-commerce capabilities – Dell Computer

Personalized customer service – Ritz Carlton hotels
A COMPANY’S STRATEGY IS PARTLY
PROACTIVE AND PARTLY REACTIVE
WHY DO STRATEGIES EVOLVE?

A company’s strategy is a work in progress

Changes may be necessary to react to

Fresh moves of competitors

Evolving customer preferences

Technological breakthroughs

Shifting market conditions

Crisis situations
CRAFTING STRATEGY IS AN
EXERCISE IN ENTREPRENEURSHIP
 Strategy-making
is a market-driven activity
that involves

Studying market trends and competitors’ actions
Keen observation of customer needs
 Scrutinizing business possibilities based on new
technologies

Building firm’s market position via acquisitions or
new product introductions
 Pursuing ways to strengthen firm’s competitive
capabilities


Proactively searching out opportunities to
 Do
new things or
 Do existing things in new or better ways
LINKING STRATEGY WITH
ETHICS

Ethical and moral standards go beyond

Prohibitions of law and the language of “thou shalt not”
to issues of



Duty and “right” vs. “wrong”
Ethical and moral standards address
“What is the right thing to do?”
Two criteria of an ethical strategy:

Does not entail actions and behaviors that cross the line from
“can do” to “should not do’ and “unsavory” or “shady” and

Allows management to fulfill its ethical duties to all
stakeholders
A FIRM’S ETHICAL RESPONSIBILITIES TO ITS
STAKEHOLDERS
Owners/shareholders – Rightfully expect some form of
return on their investment
Employees - Rightfully expect to be treated with dignity
and respect for devoting their energies to the enterprise
Customers - Rightfully expect a seller to provide them
with a reliable, safe product or service
Suppliers - Rightfully expect to have an equitable
relationship with firms they supply and be treated fairly
Community - Rightfully expect businesses to be good
citizens in their community
ROLE OF SENIOR EXECUTIVES: LINKING STRATEGY
ETHICS

WITH
Forbid pursuit of ethically questionable business
opportunities

Insist all aspects of company strategy reflect high ethical
standards

Make it clear all employees are expected to act with
integrity

Install organizational checks and balances to

Monitor behavior

Enforce ethical codes of conduct

Provide guidance to employees in gray areas
WHAT IS A BUSINESS MODEL?

A business model addresses “How do we make money in
this business?”


Is the strategy capable of delivering
good bottom-line results?
Do the revenue-cost-profit economics
of the strategy make good business sense?

Look at revenue streams the strategy is expected to
produce

Look at associated cost structure and potential profit
margins

Do resulting earnings streams and ROI indicate the
strategy makes sense and the company has a viable
business model for making money?
RELATIONSHIP BETWEEN STRATEGY AND BUSINESS MODEL
Strategy - Deals with a
company’s competitive
initiatives and business
approaches
Business Model Concerns whether
revenues and costs
flowing from the
strategy demonstrate
the business can be
amply profitable and
viable
MICROSOFT’S
BUSINESS MODEL
Employ a cadre of highly skilled programmers to develop
proprietary code; keep source code hidden from users
Sell resulting OS and software packages to PC makers and
users at relatively attractive prices and achieve large unit
sales
Most costs in developing software are fixed; variable costs
are small - once breakeven volume is reached, revenues
from additional sales are almost pure profit
Provide technical support to users at no cost
REDHAT LINUX’S
BUSINESS MODEL
Rely on collaborative efforts of volunteer programmers to create the
software
Add value to free, downloadable version of Linux by offering users Red
Hat Linux systems containing upgraded and tested features
Charge a modest fee to those preferring to subscribe to Red Hat Linux
version
Release updated versions of Red Hat Linux every 4-6 months to small
users and every 12-18 months to corporate users
Make source code open and available to all users
Make money by providing fees-based training, consulting, support,
engineering, and content management services
TESTS OF A WINNING
STRATEGY

GOODNESS OF FIT TEST


COMPETITIVE ADVANTAGE TEST


How well does strategy fit
the firm’s situation?
Does strategy lead to sustainable
competitive advantage?
PERFORMANCE TEST

Does strategy boost firm performance?
OTHER CRITERIA FOR JUDGING
THE MERITS OF A STRATEGY



Internal consistency and unity among all pieces of the
strategy
Degree of risk the strategy poses as compared to alternative
strategies
Degree to which the strategy is flexible and adaptable to
changing circumstances
While these criteria are relevant, they seldom
override the importance of the three tests of a winning
strategy!
WHY IS STRATEGY IMPORTANT?
A
compelling need exists for managers to
proactively shape how a firm’s
business
will be conducted
A
strategy-focused firm is more likely
to be a strong bottom-line performer
than one that views strategy as secondary
GOOD STRATEGY + GOOD STRATEGY EXECUTION =
GOOD MANAGEMENT


Crafting and executing strategy are core
management functions
Among all things managers do, nothing affects
a company’s ultimate success or failure more
fundamentally than how well its management
team
Charts the company’s direction,
 Develops competitively effective strategic
moves and business approaches, and
 Pursues
what needs
to excellent
be done internally
Excellent
execution
of an
strategytois the best
good day-in/day-out
testproduce
of managerial
excellence --strategy
and theexecution
most reliable

recipe for winning in the marketplace!