ALLIANCE UNIVERSITY

EPGDM Program
Term III
Jun. - Sep. 2016
BUSINESS STRATEGY
Module 1
Prof.Krishna Kumar V Rao

What is special about these companies?

Britannia India
Dabur
Godrej
ITC
TCS
Mahindra
TVS Group
GE
IBM
J&J
P&G
Pfizer
Coca Cola

What is special about these companies

Daewoo
Nortel Networks
Agfa Photo Co.
K-Mart
Polaroid
Compaq
Remington
Hidusthan Motors
Bombay Dyeing

Success and Failure of organisation

In Retail Industry: Wal-Mart consistently outperforms,

whereas Kmart(rival company once upon a time No.1) faced
bankruptcy in the difficult years of 90s
In Computer Industry: Apple and Digital(DEC), which were
regarded as most successful, faced difficult time in 90s
whereas Compaq and Dell flourished. DEC does not even
exist now. Later Compaq was bought over by HP. Apple is on
Top once again.
In Semiconductor Industry: Intel consistently outperforms its
closest rival AMD

Success and Failure of organisation

Google : Most successful On-line search and

Advertising Co : over 70% market share; Rapidly
increasing its product portfolio & reach
Yahoo, now, a distant second
Microsoft ,struggling to get a foot hold, with Bing
is it likely to do well with Satya at the helm now?
Search engines like AltaVista, once hugely popular
are extinct now

Present Century Competitive Landscape

Pace of change is rapid

Partnerships created by mergers & acquisitions (M&As)
Other characteristics:
Economies of scale
Change in managerial mind-set from traditional to more
flexible and innovative

Present Century Competitive Landscape

Technology and Technology Changes

Perpetual innovation: describes how new informationintensive technologies are replacing older forms
Speed to market may be primary competitive advantage

Disruptive technologies
Technologies that
Destroy value of existing technology
Create new markets

Present Century Competitive Landscape

The information age
Major technological developments: computers, phones,
artificial intelligence, virtual reality
Internet provides infrastructure for information anytime,
anywhere

Increasing knowledge intensity

Defined as information, intelligence & expertise and is the
basis of technology and its application
Strategic Flexibility set of capabilities used to respond to
various demands and opportunities existing in a dynamic
and uncertain competitive environment
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Competitive Landscape
Strategic maneuvering
among global and
innovative companies

Globalisation
of economy
Rapid
technological
change

Competitive Landscape: Hyper-competition

Hyper competition

Hyper competition
A condition of rapidly escalating
competition based on:

Price-Quality positioning

Competition to create new know-how and establish first-mover

advantage

Competition to protect or invade established product or geographic

markets

Assumptions of market stability replaced with notion of Instability

and change

21st Century Competitive Landscape

The Global Economy

Goods, services, people, skills and ideas
Globalisation
move freely across geographic borders
Europe, through the European Union (EU)
is the worlds largest single market
EU vs U.S. GDP: 35% higher
BREXIT: What impact it may have On EU, On Briton and On
other Countries
Emerging major competitive forces: China, India, Brazil, South
Africa, Russia
Globalization increased economic interdependence among countries
as reflected in the flow of goods and services, financial capital, and
knowledge across country borders

Globalisation

Markets are getting flooded with not only industrial goods but
also with items of daily consumption
Each day, an average person makes use of goods and services of
multiple originsfor instance, the Finnish mobile Nokia and the
US toy-makers Barbie doll made in China but used across the
world; a software from the US-based Microsoft, developed by an
Indian software engineer based in Singapore, used in Japan; the
Thailand-manufactured US sports shoe Nike used by a Saudi
consumer
The increased integration of marketsgoods and financialthe
mobility of people with transnational travels for jobs and
vacations, and the global reach of satellite channels, the Internet,
and the telephone all have virtually transformed the world literally
into a global village.

The first major discontinuity in the history of

global business environment

Industrial Revolution.
Mass Production
Complicated Processes
Complex Organisation Structures

Evolving of an emerging paradigm Survival of the fittest

The second major discontinuity in the history of

global economic environment

World War II.

Global market place.
Affluence of the new customer.
Homogeneous to heterogeneous products.
Changes in the technology fore-front

From uniform performance, performance across firms became

differentiated. The question of outperforming the benchmark
became the new buzzword.

The third major discontinuity in the history of

global business environment

Analog to Digital
Miniaturisation
Seamless integration of technologies, domains and
products/services
Global & Regional Trade Pacts
Almost free movement of factors of production across the globe

What subjects you have learnt in Terms I & II so

far in EPGDM?

Can we try and re-collect them

Also briefly describe each of them their significance
(so that we may all have a common understanding of the various
concepts, before we move forward)

Management

What is it?

Management

Deploying Resources Optimally to

Achieve the Desired Results
Thru the Process of
Planning, Organising, Directing, Controlling

Planning as of now

Generally what kind of or what type of planning is

done in most of your companies
you worked or now working in?

Business Questions

We need to discuss and understand the following

key questions and key words:

What drives business performance (the value

creation)?

How firms can continue to perform well over long time

having better advantages relative to competitors, even
while some others firms may fail?

Addressing the Business Questions

How do we address the Business Questions and try to

resolve the situation effectively?

By understanding

some core concepts

basic principles & theories

some techniques, tools, models and their applications over the

next 20 & odd hours

discuss quite a few business cases, Indian and foreign to

illustrate critical points

Planning in the old ways

Budget top down no questions asked

Only two budget parameters revenue, expenses
The only planning we needed to do was to do better
than last year
Planning was bottom up - compilation of plans within
set budget
No one knew what the other Dept./Section would plan!

Planning in the old ways

Compiling and commenting on budget for approval,

were Accountants responsibility!
KPIs were not mostly used
Sales was resource priority
Assumed that there wouldnt be no major changes in
market extrapolation was good enough
R&D was bottom up

Problems right from the beginning of

planning process

Split Objectives: Sales? Share Price? Image? Which one(s)?

Each business unit of a Corporate operating as Independent
entities, with its own priorities
Accounts Dept. controlling schedule
Always short of money!
Lack of appropriate Market research Lack of correct
understanding of the market and the customer/consumer
Sales & Marketing always running over-budget in costs! at
least, that is what Other Depts & Accounts would say

Problems from the beginning

Never learns from past mistakes, usually starting in

under-budgeting (e.g. staff and equipments)
Under-estimating or ignoring competitors or
sometimes playing second fiddle

Say Yes or No
Looking into your organisation as of today!

The need for our services is growing fast, and the resources
to meet the needs are declining. We are in danger of becoming
a crisis first aid service.

There is disagreement among the stakeholders about our

approaches to service delivery.

I find it difficult to explain to outsiders what the organisation

is for.

We have grown far too fast. Some parts of the organisation

are now disconnected from each other.

Say Yes or No
Looking into your organisation as of today!

We have grown far too fast. Some parts of the organisation

are now disconnected from each other.

We are drifting. For the past few years all our energy has
been spent on keeping going. We need to establish a new
direction.

We need to establish a common sense of purpose and

direction that will hold the project together.

We could be criticised for trying to be all things to all people.

We need to sort out our identity and make priorities.

Say Yes or No
Looking into your organisation as of today!

We have been so busy managing that we have missed

several opportunities to develop new initiatives.

We are in danger of becoming complacent and inward

looking. We cannot assume that what we are doing now
will be the same in two years.

Say Yes or No
Looking into your organisation as of today!

How many Yes you have counted against your

organisation, in your current perception?

If you answered yes to many of these statements, then

your organisation is in need to develop a strategic
management process

What is Strategy?

"Strategy is the direction and scope of an

organisation over the long-term:
which achieves advantage for the organisation
through its configuration of resources within a
challenging environment,
to meet the needs of markets and to fulfill
stakeholder expectations".
- Johnson and Scholes

What Strategy is about?

What resources (skills, assets, finance, relationships,

technical competence, facilities) are required in order
to be able to compete? (resources)?
What external, environmental factors affect the
businesses' ability to compete? (environment)?
What are the values and expectations of those who
have power in and around the business?
(stakeholders)

Strategy?

Is a combination of competitive moves and business

approaches. It is necessary to stand up in the face of
aggressive competition

Is required to achieve superior performance &

organisations goals

Strategy?

Is mainly Proactive

Is the art and science of Formulating, Implementing, and

Evaluating Cross-Functional Decisions that enable an
organisation to achieve its objectives in competitive
environments.

Concept of Strategy-Where it came from

Until the 1940s, strategy was seen as primarily a

matter for the military - devising offensive and
counter-offensive moves for the purpose of defeating
an enemy
The word strategy derives from the Greek for general
ship, strategia, and entered the English vocabulary in
1688 as strategie.

Concept of Strategy-Where it came from

In the 1980s business strategists realized that there was a

vast knowledge base stretching back thousands of years that
they had barely examined
They turned to military strategy for guidance.
Like Offensive marketing warfare strategies, Defensive
marketing warfare strategies, Flanking marketing warfare
strategies, Guerrilla marketing warfare strategies
The marketing warfare literature also examined leadership and
motivation, intelligence gathering, types of marketing
weapons, logistics and communications

STRATEGY Then & Now!

In the ancient days battles were won not by virtue

of size, efficiency, adaptive ability; but by virtue of
their strategies.
Even in todays markets, battles fought on the
market front are won by companies by virtue of
their strategies, most of which we have learnt by
studying and analysing the battles fought in earlier
days.

SOME PARALLELS

Japans attack on Pearl Harbour

Strategy: Attack where it hurts the most.
Toyotas entry in the US challenging GM and Ford

Napoleons attack on Russia

Strategy: Waiting for the right time.
Reliances (Mukesh)- entry into telecom
.

Strategic Management Now

Primary aim in business is to gain competitive

advantage
In business the focus is competition & competitors
whereas in military it is conflict & enemy

Therefore: What is Strategic Management?

The set of decisions and actions used

to formulate and implement strategies
that will provide a competitively superior fit
between the organisation and its environment,
so as to achieve organisational goals,
perform better than most of the competition,
sustain the superior performance over time

STRATEGY

Strategy is all about making trade-offs between what

to do and more importantly what not to do
consciously choosing to differentiate
It reflects a congruence between external
opportunities and internal capabilities.

Business Strategy & Strategic Management

Strategic Management is a wider term applied to the

long term management of any kind of enterprise
Business Strategy is usually referred to the Strategic
Management in the context of for-profit business
enterprises
We will be using either of these terms, interchangeably, in our Term III course on Business
Strategy (BS)

Stages of Strategic Management Process

Strategy Formulation
Strategy Implementation
Strategy Evaluation

Strategy Formulation Issues

Strategy Formulation almost irrevocably commits

and organisation to specific products/services,
markets, resources, technologies over a long period
of time
Chosen strategies aim at creating long term
competitive advantage for the organisation
For good or bad, they have major multi-functional
consequences and enduring effects on the
organisation

Strategy Implementation:
The Action stage of Strategic Management

The success or failure of the outcome of a meticulously

formulated strategy depends on the effectiveness of the
implementation
Dependent upon the ability of the management to get the
best out of each Division/Dept
Competencies in Achievement Orientation, Inter-personal
skills, Leadership Skills, Goal Orientation, Sensing the
environment, Adaptiveness to change, Communication
skills are critical to be present throughout the organisation

Strategy Evaluation

Carefully crafted and efficiently implemented

strategies : Are they working well ? Are we on
course?
Where are we in relation to the stated objectives
The external environment is constantly changing
impacting the organisations on-going activities
Todays success no guarantee for success tomorrow

SBU: Strategic Business Unit

SBU is an operating division of the Company, which serves

as a distinct product-market segment or a well defined set of
customers or a focused geographical area
SBU is given authority to make its own strategic decisions
within the corporate guidelines and objectives as may be set
Because a diversified company is in fact a collection of
businesses it may be organised on the basis of SBUs
SBUs help in decentralisation of authority, faster
formulation of effective strategies, assured accountability

SBU: Strategic Business Unit

If certain SBU grows big or has new emerging

opportunities, it could even be spun off as an independent
company

The identification of a companys SBUs is essential to the

development of business-level strategies, since these will
vary from one SBU to another

Levels of Strategic Management

Multidivisional Company

Strategic Managers

People located in different parts of the firm using the

strategic management process to help the firm reach its
vision and mission

Decisive and committed to nurturing those around them

Create and sustain organisational culture
Must be able to think seriously and deeplyabout the
purposes of the organisations they head or functions they
perform, about strategies, tactics and people and about the
important questions they need to address.
Ensures optimum profits are earned in an industry, at all
points along the value chain

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MICROSOFT

Pre-1994: Fluid, Freewheeling, Entrepreneurial,

Innovative
1994-Bill Gates & Steve Balmer invites Bob Herbold
(from P&G) to join as COO
Lack of operative efficiency and cohesion
3 Year Plan initiated
Strategic Planning Process- Formal, Decentralised &
Flexible
The Rest is History

IBM
The 90s:
The focus was process centered
Resulted in what Michael Giersch, VP Strategy
called a near death experience .
With plummeting revenues and profits, a
reorganisation brought Lou Gerstner as President &
CEO in 1996
His background: Highly successful stints at Amex,
Nabisco
He started a radical revamping the company's
existing planning and execution practices and policies

IBM

Today, strategic planning at IBM looks quite different

than it did in the late 1990s

A continuous strategic planning process involves

ongoing review of major issues and executive
decision making on a twice-monthly basis.

"Deep dive" research initiatives enable the firm to

fully explore a new challenge or opportunity, develop
a strategy, and allocate resources within 30-90 days.

IBM
With economic (and political) upheaval, technical
innovation, and competitive initiatives happening
rather more frequently than annual strategic reviews,
IBM's continuous strategy evolution enables the firm to
act and react more quickly than most to critical market
challenges and opportunities
Couple of years back they adopted 3 Key Value Factors
dedication to every clients success
innovation that mattersfor our company and for the
world
trust and personal responsibility in all relationships

IBM continues its leadership among tech companies

Gains from Strategic Management Process

Strategic Management Process drives the organisation to be

more pro-active than reactive in shaping its future
It helps organisation to initiate and influence- to exert
control not only over its own destiny but even the
environment itself
Empowerment throughout the organisation resulting in
engaged, motivated and involved managers and employees
Organisations using Strategic Management Process are
more successful and profitable
Helps reduce the financial and non-financial risks
associated with businesses

Notable Quotes

Without a strategy, an organisation is like a ship without a

rudder, going round in circlesno place to go Joel Ross
& Michael Kami
If we know where we are and something about how we
got there, we might see where we are trending-and if the
outcomes which lie naturally in our course are
unacceptable, to make timely change- Abraham Lincoln
Strategic management is not a box of tricks or a bundle of
techniques. It is analytical thinking and commitment of
resources to action - Peter Drucker