Strategic Management
Strategic Management
Strategic Management
Chennai - 020
SECOND SEMESTER EMBA/MBA
Subject : Strategic Management
Attend any 4 questions. Each question carries 25 marks
(Each answer should be of minimum 2 pages / of 300 words)
Cost reduction is not necessarily the only or even the primary objective of an
operating plan. Cost reduction should have top priority only when the business
strategy requires a reduction in operating costs or the cost of goods and services
sold.
When a single operating plan serves two or more businesses, each with its own
strategy, differentiated priorities must reflect any different strategic imperatives.
Each business strategy must be supported by an appropriate operating plan that
addresses its special requirements.
When operating priorities are implicit rather than explicit, they are seldom
understood uniformly among key executives and the entire management and
supervisory group. Priorities are frequently determined by individual managers,
applying their own best judgment. Disagreement about priorities is natural. Yet
a uniform understanding of operating and improvement priorities by all
executives,
managers
and supervisors
is critical
for
the successful
States and the United Kingdom but is growing at a much faster rate with a large
number of new entrants. The industry consensus is that growth is at an
inflection point.
Unique to India cash on delivery is a preferred payment method. India has a
vibrant cash economy as a result of which 80% of Indian e-commerce tends to
be Cash on Delivery. However COD may harm e-commerce business in India in
the long run [4] and there is a need to make a shift towards online payment
mechanisms similarly. Direct imports constitute a large component of online
sales. Demand for international consumer products (including long all items) is
growing much faster than in-country supply from authorized distributors and ecommerce offerings
Market size and growth:
Indias e-commerce market was worth about $3.8 billion in 2009. It went up to
$12.6 billion in 2013. In 2013, the e-retail market was worth USS 2.3 billion.
About 70% of Indias e-commerce market is travel related.51 India has close to
10 million online shoppers and is growing at an estimated 30% [61 CAGR vis-vis a global growth rate of 810%. Electronics and Apparel are the biggest
categories in terms of sales.
Key drivers in Indian e-commerce are:
Increasing broadband Internet (growing at 20%m Mom) and 3G
penetration.18
Rising standards of living and a burgeoning. Upwardly mobile middle class
with high disposable incomes
Availability of much wider product range (including long tail and Direct
Imports) compared to what is available at brick and mortar retailers
Busy lifestyles, urban traffic congestion and lack of time for offline shopping
Lower prices compared to brick and mortar retail driven by disintermediation
and reduced inventory and real estate costs
Increased usage of online classified sites, with more consumer buying and
selling second-hand goods
Evolution of the online marketplace model with sites like Jabong.com. Flip
kart.
Asia- Pacific Region at a CAGR of over 57% between 201216
As per India Goes Digital the Indian e-commerce market is estimated at Rs
28.500 Crore ($6.3 billion) Online travel constitutes a sizable portion (87%) of
this market today. Online travel market in India is expected to grow at a rate of
22% over the next 4 years and reach Rs 54.800 Crore ($12.2 billion) in size by
2016. Indian e-tailing industry is estimated at Rs 3.600 crore (US$800 mn) in
2011 and estimated to grow to Rs 53.000 Crore ($11.8 billion) in 2016.
Overall e-commerce market is expected to reach Rs 1.07.800 crores (US$24
billion) by the year 2016 with both online travel and e-tailing contributing equal
Another big segment in e-commerce is mobiIe DTH recharge with nearly 1
million transactions daily by operator websites.
The growth of e-business:
In the last few years of the 20th century all kinds of companies began to think
about doing business through the Internet. This is astonishing given that,
according to one view, e-commerce was virtually non-existent in 1995. By
1998 the electronic economy (e-economy) represented 6.5 percent of US GDP
and 1 percent of Japans GDP. This may not sound very much but the US eeconomy was expanding fast- by 65 percent in 1998. The rate of growth to
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Environmental Scanning
Strategy Formulation
Strategy Implementation
Strategy Formulation vs Implementation
Strategy Evaluation
Strategic Decisions
Business Policy
BCG Matrix
SWOT Analysis
Competitor Analysis
Porters Five Forces Model
Strategic Leadership
Corporate Governance
Business Ethics
Core Competencies
Strategic management is a combination of three main processes which are as
follows:
Strategy formulation
Performing a situation analysis, self-evaluation and competitor analysis: both
internal and external; both micro-environmental and macro-environmental.
Concurrent with this assessment, objectives are set. These objectives should be
parallel to a timeline; some are in the short-term and others on the long-term.
This involves crafting vision statements (long term view of a possible future),
mission statements (the role that the organization gives itself in society), overall
corporate objectives (both financial and strategic), strategic business unit
objectives (both financial and strategic), and tactical objectives.
These objectives should, in the light of the situation analysis, suggest a
strategic plan. The plan provides the details of how to achieve these objectives.
This three-step strategy formulation process is sometimes referred to as
determining where you are now, determining where you want to go, and then
determining how to get there. These three questions are the essence of strategic
planning. SWOT Analysis: I/O Economics for the external factors and RBV for
the internal factors.
Strategy implementation
individuals or groups
proposals to their managers who, in turn, funnel the best ideas further up the
organization. This is often accomplished by a capital budgeting process.
Proposals are assessed using financial criteria such as return on investment or
cost-benefit analysis. Cost underestimation and benefit overestimation are major
sources of error. The proposals that are approved form the substance of a new
strategy, all of which is done without a grand strategic design or a strategic
architect. The top-down approach is the most common by far. In it, the CEO,
possibly with the assistance of a strategic planning team, decides on the overall
direction the company should take. Some organizations are starting to
experiment with collaborative strategic planning techniques that recognize the
emergent nature of strategic decisions.
The strategy hierarchy
In most (large) corporations there are several levels of strategy. Strategic
management is the highest in the sense that it is the broadest, applying to all
parts of the firm. It gives direction to corporate values, corporate culture,
corporate goals, and corporate missions. Under this broad corporate strategy
there are often functional or business unit strategies.
Functional strategies include marketing strategies, new product development
strategies, human resource strategies, financial strategies, legal strategies,
supply-chain strategies, and information technology management strategies. The
emphasis is on short and medium term plans and is limited to the domain of
each departments functional responsibility. Each functional department
attempts to do its part in meeting overall corporate objectives, and hence to
some extent their strategies are derived from broader corporate strategies.
Many companies feel that a functional organizational structure is not an
efficient way to organize activities so they have reengineered according to
Brown and Eisenhart as well as Christensen and portrays firm strategy, both
business and corporate, as necessarily embracing ongoing strategic change, and
the seamless integration of strategy formulation and implementation. Such
change and implementation are usually built into the strategy through the
staging and pacing facets.One of the difficulties faced by managers trying to
decide whether it is worth studying strategy is that there is a wide spread belief
that it just does not work. This is especially true when people start to discuss
entrepreneurial and innovative behavior. Here the common sense perception is
that for entrepreneurs to be successful strategy and plans are the last thing they
need. These are seen as hemming them in and constricting them. Improvisation
or off the cuff action is what is needed. Very few of us though can be quick
wined enough to manage spontaneous and clever action. It often comes as a
shock to people when they learn that many television shows are not the
spontaneous events they are made out to be.
Apart from those who believe that over-strategizing can lead to an
impoverishment of what is possible. curtailing the actions of managers, others
simply do not believe that strategic management actually delivers what it sets
out to achieve. Pragmatically we believe that you have to judge whether or not
it works for the type of situations you will find yourself in.
There sufficient evidence from academic research to suggest that managers
would be advised to take strategic management seriously. However, it can be
said that the question of the value o strategic management is complex. We can
look at studies of actual organizations and see if there is evidence that shows a
correlation between strategic plans and success. Strategic management however,
is not simply the use of strategic plans. It is a way of looking at the
responsibilities of management. It is a way of looking at the organizations
present and future environment. It may make use of a variety of techniques. It
may produce formal documents, but it may not. It is a way of generating
Practitioners
While there is not total unanimity among researchers about the link between
formal strategic planning and better performance, most practitioners would no
doubt think even a modest level of support for the link would make it
worthwhile to invest their time and effort in developing strategic plans. In fact,
the evidence is better than modest. And surveys of practitioners suggest that
their experience has confirmed that investing in strategic planning is a good
idea.
A functional view
Even if academic research finds a correlation between strategic planning and
performance it might still be objected that the case for strategic planning is
unproven. It might be said, for example, that better performing organizations
have the extra management capacity needed to carry out strategic planning. In
contrast. Organizations that are doing less well may not have the time or spare
attention to think about strategic planning.
Benefits of strategic innovation
Innovation has come to be seen as key driver of growth and profitability. In the
last couple of year the United States generated more than a half of its economic
growth from new industries born in the last decade. However, this is not really
new. Innovation is part and parcel of the history of business cycles. Each major
business cycle is characterized by the rise of new industries. In the late 1 8th
and early 19th century textiles and iron were the new industries. In the second
half of the 19th century rail and steel industries became important. In the last
century the new industries included electricity and chemicals, then
petrochemicals, electronics and aviation came to the force. The latest wave of
innovation covering the present period is summed up by describing the period
as the Information Age, meaning that there are new products and services
clustering around digital technology, software and new media.
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While the data on strategic plan failure rates is all over the map, suffice it to say
its HIGH! Below youll find ten common reasons strategic plans fail. Its
likely that the last strategic initiative to fall short in your organization could be
attributed to one (or some combination) of these ten causes.
1. History - You have to be mindful of your history when it comes to launching
strategic initiatives. If youre the kind of organization which, just a year ago,
launched a new initiative with great fanfare only for it to have died an
unceremonious death, then your employees are not likely to be fooled again.
Theyre smarter than Charlie Brown, who as you recall was repeatedly foiled by
Lucy every time he was asked to kick the football. If your announcement is met
with rolling eyes and a collective groan, then you stand little chance of real
success no matter how brilliant the plan.
2. People/Culture -Knowing what to do in the abstract is usually the easy part.
Knowing what YOU can do based on the unique skills and mindset of your
team is an entirely different matter. Understanding your people, the culture and
sub-cultures within your organization, and shared vision/values are essential to
developing a plan that stands a chance of success. Failure to do so is a recipe
for disaster. Dave Logans research on tribes in his book Tribal Leadership
offers a practical framework for understanding and working with your culture to
achieve
what
Peter
Senge
describes
as
the
difference
between
4. Discipline - Lets say youve got committed leaders and employees. Thats
great, but commitment to achieving strategic goals is still not enough. The
question is: Do they have the discipline necessary to make real behavioral
change? Jim Collins refers to this in terms of disciplined people, disciplined
thought, and disciplined action.
committed to losing ten pounds, yet lack the discipline to do whats necessary to
achieve the goal and maintain the weight. Its no different in organizations.
David Maister says that without discipline your strategic plan will have all the
teeth of a typical New Years Resolution.
5. Communication -
thoroughly planned and executed, are designed only to create clarity around
what management wants the employees to do. (Which by itself can be a tall
order). As a result, the communication efforts fall woefully short of the mark.
Good strategic communication should have one goal: To make sure everyone in
the company sees the strategic plan NOT as just the leaderships plan, but as
THEIR plan. Failing that, youre asking your employees to be more committed
to your goals than their own. Not sure thats very realistic.
6. Monitoring, Measurement, Feedback Even the best conceived strategic
plans require adjustments along the way. Its critical to monitor the plans
progress, measure outputs as well as outcomes, and obtain feedback from all
your stakeholders. Its also essential to consider unintended effects.
For
7. Lack of Flexibility While its helpful to have all the right systems in place
to track your progress, its all for naught if you lack the will, the flexibility, and
the triggers necessary to make adjustments along the way.
presented with solid evidence, you cant be afraid to depart from the original
plan. Keep the goal, change the plan not the other way around!
8. Milestones/Rewards - Most strategic initiatives of any consequence take
time. Even for the most disciplined among us, we need to be motivated and
inspired to achieve a longer-term goal. Consider what it takes to keep your
people on track. How do you stay focused on the goal and celebrate your
progress? What are the best milestones and rewards for your plan? Your
organization? You cant let your organization lose steam.
9. Bad Planning - Make a list of the people in your organization who were
involved in developing your last strategic plan. Who were they? How deep did
you go in the organization?
involvement? OR, did the senior leadership team develop the plan on its own
and then announce it to the organization? How did that work for you? Off-site
huddles by the senior management team to develop a strategic plan often result
in developing a plan that has no chance of success.
10. Bad Plan - Sometimes plans fail because they are simply bad plans, and I
would argue that they are often bad plans because we dont tend to get everyone
involved that we should. We either fail to tap into the collective talents and
dedication of our people or we misjudge the external environment and the
response of our stakeholders. It can make employees feel isolated and the
leadership look out of touch.
The reasons for Strategies Fails:
1. Poor Preparation of Line Managers
It was noted that since the early 1980s. An increasing number of companies
have recognized that the responsibility for formulating strategy belongs to line
managers, not staff planners. The latters rule is supportive and facilitative. But
in many instances, line executives have been inadequately prepared to assume
this responsibility.
Line managers need to understand the key concepts and language of strategic
planning. It is unlikely that without some help, they will uniformly understand
the operational meaning of such notions as bases of competition, strategic
issues, key success factors, portfolio role, and strategic management.
Typically, line managers view strategic planning as an additional burden
imposed from above, diverting them from running the business. All too often,
many line managers adopt a grudging, mechanistic approach to their planning
duties. Small wonder that staff planners creep back in to lend a hand and help
fill the void.
Another aspect of preparing line managers to become more effective strategy
formulators has to do with broadening their perspective. They need to think
about the business as a whole rather than only their own function. They also
need to know what questions will be asked and what challenges to expect when
they submit their proposed business plans
2. Faulty Definition of the business
How the management of a firm conceives of and defines each of the businesses
they are conducting can have a profound hearing on the businesss strategic
behavior, its competitive clout and on the strategic options management may
choose to implement.
These examples are meant to illustrate two issues relevant to the connection
between business definition and successful strategy implementation. The first
issue has to do with getting the definition right. In this context, right means
in tune with the marketplace requirements and competitive dynamics. It means
the definition which best positions the firm to compete successfully.
The other issue has to do with how similarly each manager and executive
perceives and understands the business definition. Successful strategy
implementation depends heavily on an agreed business definition among the
entire management group. Differences in perception will undermine the
effectiveness of strategy implementation.
3. Faulty Definition of the Strategic Business Unit (SBU)
When a multi-business fails to define its SBUs correctly within its
organizational structure, an excellent planning process cannot undo the damage.
When strategic planning is newly installed, it is often assumed that the
organizational units already in place should handle the planning. Because these
units are typically a result of historical evolution, they may owe their
boundaries to many factors that make them inappropriate to use as a ha.sis for
planning: geography, administrative convenience, the terms of old acquisition
deals, product lines, traditional profit centers, a belief in healthy internal
competition, or old ideas about centralization and decentralization.
Such rationales for unit boundaries often lead to faultily defined SBUs.
Executives who take organizational structure as a given before planning begins
seldom realize that their SBU definitions are defective. Organization theory and
strategic management hold that the main purpose of organization.
The faultiness of the reorganization logic and its consequences for strategic
planning can be attributed to ignorance or discounting of customer and
competitor behavior in the major borne appliance market specifically, the
product line organization with its associated localized strategic perspective
strategic choices. Such choices seldom reflect the realities of the industry,
markets and competitive environment.
5. Imbalance between External and Internal Considerations
Earlier we have noted that strategic planning differs from earlier efforts to plan
for the long term by its primary emphasis on the firms external environment In
practice, this means developing an understanding of the firms industry,
markets, customers and competition, and using this knowledge to determine
what is strategically relevant when assessing the firms capabilities, and
competitive strengths and weaknesses. Understanding and focusing on externals
is crucial in making the strategic choices that will lead to the desired long-term
outcomes.
6. Unrealistic Self-assessment
There is another element in strategic planning that can significantly influence
the quality of the strategic choices and the extent to which a strategy can be
implemented successfully. This is the quality of managements analysis of their
organizations capabilities to carry out various strategies. Managements
assessment of the firms strengths and weaknesses in the light of possible
courses of action is an important consideration in the choice of strategic options.
Further, this assessment is an important input to the definition of the work
required to implement the selected options.
7. Insufficient Action Detailing
Implementation is bound to go awry if strategy formulation goes no further than
defining general thrusts and end-point goals.
About seven out of ten companies do not carry the formulation of strategy much
beyond some general statement of thrust such as market penetration or internal
strategic plans can be ruined and the whole system undermined at the final
corporate review stage. The issue here is how good is the design and
management of the planning cycle when the SBUs proposed plans hit the
corporate screen. This may be called the corporate face-off.
The face-off is a moment of inevitable, healthy conflict Not only do all the
units resource requests often exceed what Corporate is prepared to provide, but
also their aggregate performance promises are often less than the Corporate
requires. Performance requirements typically come from an analysis of Capital
Market.
10. Conflicts with Institutionalized controls and systems
The foregoing nine factors describe flaws in the upstream strategic planning
process that can undermine downstream strategy implementation.
This tenth factor is the only one directly applicable to the implementation
process. Astrategic planning system cant achieve its full potential until it is
integrated with other control systems such as budgets, information, and rewards.
The badly designed, poorly managed face-off is a manifestation of a deeper
problem - compartmentalized thinking which treats various existing control
systems as freestanding and strategically neutral. When this is the case, there is
a high probability that conflicts will arise between the requirements and
organizational impact of each SBUs intended strategies, and the requirements
of institutionalized control systems. These are usually far more deeply rooted in
the organizations culture than strategic thinking and planning. When conflicts
occur, the existing control systems prevail and strategy implementation suffers.
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