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ITM KHARGHAR

CORPORATE STRATEGY AUG-2011

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Art of war
So it is said that if you know your enemies and know yourself, you will win a hundred times in a hundred battles. If you only know yourself, but not your opponent, you win one and lose the next. If you do not know yourself or your enemy, you will always lose Sun Tzu 6 th. century BC

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BATTLE OF TRANSOXIANNA
CHENGIZ KHANS DEFEAT OF EMPEROR MOHAMMED II- AN EXAMPLE OF STRATEGY IN BATTLE

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LESSONS IN MILITARY STRATEGY


SURPRISE SPEED DISCIPLINE BOLDNESS SELECTION AND MAINTENANCE OF AIM MANOUVRE EXPLOITATION OF OPPORTUNITY

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STRATEGY-WHAT IS IT
DEF- A STRATEGY IS AN ACTION THAT MANAGERS TAKE TO ATTAIN ONE OR MORE OF THE ORGANIZATIONS GOALS. THE OVERRIDING GOAL IS TO ACHIEVE SUPERIOR PERFORMANCE RELATIVE TO RIVALS.
WHAT IT IS COMPETITIVE MOVES IN BUSINESS TO PRODUCE SUCCESSFUL PERFORMANCE MANAGERS GAME PLAN FOR RUNNING THE BUSINESS STRENGTHENING THE FIRMS COMPETITIVE POSITION ACHIEVING PERFORMANCE TARGETS SATISFYING CUSTOMERS
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ANOTHER PERSPECTIVE---Strategy is the direction and scope of an organization over a long term: which achieves sustainable competitive advantage for the organization through its configuration of resources within a changing environment,to meet the needs of markets and to fulfill stakeholder expectations.
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UNDERSTANDING STRATEGY
CENTRE OF GRAVITY DAVID VS GOLIATH SHWERPUNKT ARDANT DU PICQ OODA- THE HEART OF MANOUVRE

THEN SAUL DRESSED DAVID IN HIS OWN TUNIC. HE PUT A COAT OF ARMOR ON HIM AND A BRONZE HELMET ON HIS HEAD. DAVID FASTENED ON HIS SWORD OVER THE TUNIC AND TRIED WALKING AROUND BECAUSE HE WAS NOT USED TO THEM. I CANNOT GO IN THESEHE SAID TO SAUL BECAUSE I AM NOT USED TO THEM SO HE TOOK HIS STAFF IN HIS HAND, CHOSE FIVE SMOOTH STONES FROM THE STREAM, PUT THEM IN THE POUCH OF HIS SHEPHERDS BAG AND , WITH HIS SLING IN HIS HAND APPROACHED THE PHILISTINE---

Understanding strategy
Strategy as a set of actions arrived by accident or design Development of resources Delivering products or services that users find valuable Meeting shakeholder objectives and constraints Unique or distinctive features Renewing advantages as the environment changes Organization as an accumulation of knowledge and learning Organization as a bundle of resources

Strategic development process


Imposed strategy intended deliberate realized

Unrealized strategy

Emergent strategy

FOR WHOM STRATEGY HAPPENS


PRIVATE OWNERS EXTERNAL SHAREHOLDING INSTITUTIONS PRIVATE FUNDING BODIES GOVERNMENTS AND REGULATORY BODIES SENIOR MANAGEMENT JUNIOR EMPLOYEES UNIONS CSR

WHAT IS CSR
CSR IS THE CONTINUING COMMITMENT BY BUSINESS TO BEHAVE ETHICALLY AND CONTRIBUTE TO ECONOMIC DEVELOPMENT, WHILE IMPROVING THE QUALITY OF LIFE OF THE WORKFORCE AND THEIR FAMILIES AS WELL AS OF THE LOCAL COMMUNITY AND SOCIETY AT LARGE. WORLD BUSINESS COUNCIL FOR SUSTAINED DEVELOPMENT

SOME FACTS
WHILE 94% OF THE COMPANIES BELIEVE THAT DEVELOPMENT OF CSR STRATEGIES CAN DELIVER REAL BUSINESS BENEFITS ONLY 11% MADE ANY SIGNIFICANT PROGRESS IN IMPLEMENTING STRATEGY IN THE ORGANIZATION CEOS ARE FAILING TO RECOGNIZE THE BENEFITS OF IMPLEMENTING CSR STRATEGIES DESPITE INCREASING PRESSURES TO DO SO CSR PROGRAMMES INFLUENCE 70% OF ALL CUSTOMER PURCHASING DECISIONS

CARROLLS 4 PART MODEL

philanthropic

Desired by society

ethical

Expected by society

legal economic

Required by society

Required by society

Levels of strategy
Corporate strategy Business strategy Functional strategy

HISTORY
ORIGINS FIRST AND SECOND INDUSTRIAL REVOLUTION WORLD WAR II THE 50S AND 60S THE 70S POST 1970S

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CONTRIBUTIONS TO STRATEGY
ANSOFFS MATRIX BCG AND THE EXPERIENCE CURVE PORTFOLIO ANALYSIS BCGS GROWTH SHARE MATRIX INDUSTRY- ATTRACTIVENESS AND BUSINESS STRENGTH MATRIX

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ANSOFF MATRIX
EXISTING PRODUCTS NEW PRODUCTS

EXISTING MKTS

MKT PENETRATION

PRODUCT DEVELOPMENT

NEW MKTS

MKT DEVELOPMENT

DIVERSIFICATION

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ANSOFF MATRIX AND RISK


GREATER THE DEGREE OF NEWNESS,GREATER THE RISK.HENCEMARKET PENETRATION-LITTLE RISK INVOLVED MARKET DEVP-MODERATE RISK PRODUCT DEVELOPMENT-MODERATE RISK DIVERSIFICATION-HIGH RISK BECAUSE BOTH PRODUCT AND MARKET ARE UNKNOWN.

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MARKET PENETRATION
AIM- TO MAINTAIN INCREASE IN SHARE OF CURRENT MARKET WITH CURRENT PRODUCTS TO SECURE DOMINANCE OF GROWTH MARKET OR RE-STTRUCTURE A MATURE MARKET BY DRIVING OUT COMPETITION INVOLVES INCREASE OF SALES OF EXISTING PRODUCTS TO EXISTING MKTS IF SATURATED- DIFFICULT GROWTH RISK MIN BUT SUCCESS ALSO LTD.

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MODUS OPERANDI
INCREASE USAGE BY EXISTING CUSTOMERS ATTRACT CUSTOMERS AWAY FROM RIVALS GAIN MARKET SHARE AT THE EXPENSE OF RIVALS DEVISE NEW APPLICATIONS ENCOURAGE NON BUYERS TO BUY. USE WHENSCOPE FOR SELLING MORE TO EXISTING CUSTOMERS MKT NOT SATURATED COMPETITORS SHARE FALLING INCREASED VOL LEADING TO ECONOMIES OF SCALE.
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MKT DEVELOPMENT
SELLING SAME PRODUCTS TO DIFFERENT PEOPLE ENTERING NEW MARKETS OR SEGMENTS WITH EXISTING PRODUCTS GAINING NEW CUSTOMERS/SEGMENTS/MARKETS CHANGES-NEW DIDTR CHANNELS/PRICING POLICY/NEW PROMOTIONAL POLICY USED WHENUNTAPPED MARKETS ARE BECKONING FIRM HAS EXCESS CAPACITY ATTRACTIVE CHANNELS TO ACCESS NEW MARKETS LACK OF FAMILIARITY WITH CUSTOMERS-FAMILIAR WITH PRODUCT
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PRODUCT DEVELOPMENT
DEVELOPMENT OF NEW PRODUCT-EXISTING MKTS NEW PRODUCTS IN THE FORM OF: REPLACEMENT FOR CURRENT PRODUCTS, INNOVATIONS,IMPROVEMENTS,PRODUCT LINE EXTENSIONS,NEW PRODUCTS TO COMPLIMENT EXISTING PRODUCTS ETC. USED WHEN-STRONG RAND D ,GROWING MKT,RAPID CHANGE,BUILD ON EXISTING BRANDS, COMPETITORS HAVE BETTER PRODUCTS
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DIVERSIFICATION
NEW PRODUCTS,NEW MARKETS. RELATED AND UNRELATED RISKY-TWO UNKNOWNS HORIZONTAL, VERTICAL AND CONCENTRIC.

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USES-ANSOFF MATRIX
FRAMEWORK TO EXPLAIN DIRECTION FOR STRATEGIC GROWTH IDEN AND ANALYSIS OF DIFFERENT GROWTH OPPORTUNITIES ENCOURAGES PLANNERS TO CONSIDER RETURNS/RISKS REAL WORLD DIFFERENT.
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EXPERIENCE CURVE
ACCUMULATED EXPERIENCE COMPETITORS COSTS INDUSTRY PRICES ECONOMIES OF SCALE LEARNING AND INNOVATION

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MASTER INNOVATORS
YLG- RAHUL BALACHANDRA MERU CABS- NEERAJ GUPTA RED BUS- PHANINDRA SAMA HUMMING BIRD- VIVEK MADAPPA AND VINOD THIMAYYA NET AMBIT- GIRISH BATRA MAHESH TUTORIALS- MAHESH SHETTY VORTEX RURAL ATM- L KANNAN

BGC GROWTH SHARE MATRIX HI HI


GROWTH
CASH COWS DOGS

MARKET SHARE
STARS

LO
QUESTION MARKS

LO

x
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INDUSTRY ATTRACTIVENESS

HI HI
INVEST
BUSINESS STRENGTH

MED
SELECTIVE GROWTH

LO
GROW OR LET GO

SELECTIVE

MED

GROWTH

GROW OR LET GO

HARVEST

LO

GROW OR LET GO

HARVEST

DIVEST

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FACTORS CONSIDERED
INDUSTRY ATTRACTIVENESS Nature of competitive rivalry Bargaining power of suppliers /consumers Threat of substitute Products/new entrants Economic factors Financial norms Socio Political considerations

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Contd--BUSINESS STRENGTH Cost Position Level of differentiation Response time Financial strength Human assets Public approval
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PHASES OF STRATEGY
4. STRATEGIC MGT

3. EXTERNALLY- ORIENTED PLANNING 2. FORECAST BASED PLANNING

1. FINANCIAL PLANNING

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QUESTIONS TO BE ANSWERED
WHERE ARE WE NOW? WHERE DO WE WANT TO GO? HOW DO WE GET THERE?`

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World market trends


1. 2. 3. 4. Break down of market boundaries New technologies Industry cross-overs Strategic alliances Deregulation

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World market trends


1. 2. 3. 4. 5. Globalization Increased standardization of buying patterns Global player with country strategies Emerging economic powers Opening up of restricted markets Communication technology
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World market trends


1. 2. 3. 4. 5. Increasing market fragmentation New emerging customer groups Powerful changes in demography and lifestyles Problems for mass marketing Reduced customer loyalty Opportunities for mass customization
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World market trends


1. 2. 3. 4. Products Product proliferation Massive consumer choice Life cycle compression Shorter USP life

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World market trends


1. 2. 3. 4. 5. Greater customer sophistication Improved life styles and education Greater purchasing power Credit facilitation Greater product awareness Greater use of freedom to choose
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World market trends


1. 2. 3. 4. 5. The digital age The digital age Fast global communication Equalization of knowledge Doing business on the internet New segments,new opportunities,new problems
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The Known Future


Change will accelerate and become more turbulent Uncertainty will get stronger Markets will get more dynamic and fragmented Customers will get more sophisticated and demanding Competition will get tougher Survival will become more difficult

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The new consumer


Individualistic Involved Independent Informed

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Change
Uncertainty is the only thing to be sure of If you dont like change, you are going to like irrelevance even less

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CORE DRIVERS OF STRATEGYTHE ODM


ORGANIZATIONAL STRATEGY Mission , Vision, Competitive advantage External assessment Internal assessment Objectives, initiatives and goals

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ORGANIZATIONAL DESIGN
Basic Structure Core Competence Information System and Technology Organizational Efficiency

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ORGANIZATIONAL CULTURE
Values and Beliefs Leadership Human Resource Systems Organizational Character.

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MISSION
CORE PURPOSE OF THE FIRM EFFECTIVE MAPPING OF A COURSE OF ACTION FOR THE NEAR FUTURE UNDERSTANDING THE NEEDS OF A COMPANYS PRIMARY STAKEHOLDERS ALIGNING CURRENT PROCESSES TO SUPPORT THE COMPANYS COMPETITIVE POSITIONING

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ATTRIBUTES
SHOULD CLEARLY ARTICULATE A PURPOSE SHOULD BE REALISTIC SHOULD SERVE THE BEST INTERESTS OF ALL STAKE HOLDERS CLEARY DIFFERENTIATES COMPANY FROM COMPETITION SEPARATES DIRECT COMPETITORS FROM SUBSTITUTES REFLECTION OF CORE COMPETENCY

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ESSENTIAL COMPONENTS
CUSTOMERS PRODUCTS AND SERVICES MARKETS TECHNOLOGY CONCERN FOR SURVIVAL, GROWTH WND PROFITABILITY BELIEFS,VALUES AND ASPIRATIONS SELF CONCEPT CONCERN FOR PUBLIC IMAGE CONCERN FOR EMPLOYEES
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MOTOROLA MISSION
TO HONORABLY SERVE THE NEEDS OF THE COMMUNITY BY PROVIVING PRODUCTS AND SERVICES OF SUPERIOR QUALITYAT A FAIR PRICE FOR OUR CUSTOMERS: TO DO THIS SO AS TO EARNAN ADEQUATE PROFIT WHICH IS REQUIRED FOR THE TOTAL ENTERPRISE TO GROW: AND BY DOING SO, PROVIDETHE OPPORTUNITY FOR OUR EMPLOYEES AND SHAREHOLDERSTO ACHIEVE THEIR PERSONALOBJECTIVES.

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WAL-MART
TO OFFER ALL OF THE FINE CUSTOMERS IN OUR TERRITORIES ALL THEIR HOUSEHOLD NEEDS--IN A MANNER THAT THEY CONTINUE TO THINK OF US FONDLY

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Mission- McDonalds
Key Market Contribution-To offer the fast food customer food prepared in the same high-quality manner worldwide,tasty and reasonably priced. Distinction- Delivered in a consistent, lowkey dcor and friendly atmosphere.
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VISION
INTUITIVE UNDERSTANDING OF WHAT A FIRM WANTS TO BECOME IN THE LONG TERM REFERENCE POINT FOR MAKING STRATEGIC DECISIONS DYNAMIC AND FLEXIBLE GIVES OUT THE PURPOSE AND THE VALUES OF THE FIRM IS INSPIRATIONAL
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VISION IS NOT--A PROPHECY A MISSION FACTUAL TRUE OR FALSE A CONSTRAINT ON ACTIONS

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Wal- Mart- Vision


To be a $125 billion company by the year 2000.

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BIOCON
TO BE AN INTEGRATED TECHNOLOGY ENTERPRISE OF GLOBAL DISTINCTION.

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TOYOTA
TO BECOME THE MOST SUCCESSFUL AND RESPECTED LIFT TRUCK COMPANY IN THE US

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THE BUSINESS LANDSCAPE


VARIATIONS IN PROFITABILITY DEPENDS ON THE INDUSTRY IN WHICH BUSINESS OPERATES NEED FOR MANAGERS TO UNDERSTAND WHERE AND HOW TO COMPETE IMPLICATIONS OF MAJOR CHANGES IN THE BUSINESS LANDSCAPE. SHAPING THE BUSINESS LANDSCAPE/ADAPTING TO THE BUSINESS LANDSCAPE. ASSESS THE FOLLOWING- PORTERS FIVE FORCES MODEL, SUPPLY DEMAND ANALYSIS AND THE VALUE NET.
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Company SW

Industry OT

Competitive strategy

Values-key implementers

Societal expectations

Context-strategy
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TESTS OF CONSISTENCY

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PORTERS FIVE FORCES MODEL


SUPPLIERS

NEW ENTRANTS

FIRM AND INDUSTRY COMPETITION

SUBSTITUTES

BUYERS
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INDUSTRY COMPETITION

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BARRIERS TO ENTRY/EXIT
LO LO
ENTRY BARRIERS HI, STABLE RETURNS HI, RISKY RETURNS LO, STABLE RETURNS EXIT BARRIERS

HI

LO RISKY RETURNS

HI

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SUPPLIERS

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SUBSTITUTES

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BUYERS

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NEW ENTRANTS

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THE VALUE NET


CUSTOMERS

COMPETITORS

COMPANY

COMPLEMENTORS

SUPPLIERS
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BARGAINING POWER

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PORTERS DIAMOND
chance
Firm strategy , structure and rivalry

Factor conditions

Demand conditions

Related and sp industries

govt
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TRADITIONAL COUNTRY ADVANTAGE

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NEW FACTORS
PHYSICAL KNOWLEDGE CAPITAL INFRASTRUCTURE

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CLUSTERS

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TYPES OF CLUSTERS
GEOGRAPHICAL CLUSTERS SECTORAL CLUSTERS HORIZONTAL CLUSTERS VERTICAL CLUSTERS FACTOR ENDOWMENT CLUSTERS TECHNICAL CLUSTERS
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CLUSTERS WORLD WIDE


SILICON VALLEY BANGALORE NAPA VALLEY WINE PRODUCING REGION BAHRAIN- ISLAMIC BANKING DUBAI SILICON OASIS- SEMI CONDUCTORS AND MICRO ELECTRONICS FINNISH MARITIME CLUSTER

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CRITICISMS- PORTERS DIAMOND


LARRY DOWNS- NEW FORCES LIKE DIGITALIZATION,GLOBALIZATION,DE REGULATION,COOPERATION FOR MUTUAL BENEFITS ALAN RUGMAN- INFLUENCE OF FDIS, MNES AND FOREIGN GOVERNMENTS

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MAPPING BUSINESS LANDSCAPES


STEP- 1- GATHERING INFORMATION THROUGH INDUSTRY STUDIES, GOVT SOURCES,COMPANY SOURCES,PUBLICATIONS, WEB,ETC STEP-2- DRAWING THE BOUNDARIES STEP 3-IDENTIFY GROUPS OF PLAYERS STEP 4-UNDERSTANDING GROUP LEVEL BARGAINING POWER STEP-5 THINKING DYNAMICALLY STEP-6 ADAPTING TO/SHAPING THE BUSINESS LANDSCAPE

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