Transcript No Slide Title

WELCOME TO THE
STRATEGIC MANAGEMENT
PROGRAMME
Nalanda Small Scale Industries Development Corporation was
established in the year 1962, to help development of the small scale
industries (SSIs) in the state of Nalanda. The company was
enjoying good profitability and sales upto the early seventies. All of
a sudden, the company's sales started falling, going down from Rs.
18 crores in 1974 to Rs. 13 Crores in 1975 and it was expected to
touch a low of Rs. 5 crores in 1976. The company also started
making losses. The reason? The corporation could not see the
changes taking place in it's environment. The situation of glut
appeared as the government decontrolled iron and steel industry.
The corporation, which was engaged primarily in trading of iron and
steel, lost the market overnight. It did not know where to look for. It
was a late realisation to the management that the corporation did
not have any strengths to fall back upon. Worse still, in the process
of making profit the soft way (by trading in a regulated item), it lost
sight of it's mission itself, the SSI were no longer the focus of the
organisation.
Hindustan Tractors Limited, a manufacturer of 35
and 50 h.p. tractors, was doing pretty well till
1967, when all of a sudden it faced the crisis of
survival, wrought by government regulating the
price of tractor, even though it had been given
the margin that was somewhat higher than the
others. Reason? The owner manager did not
realise what all was required to manufacture
tractors with local content; whether it was the
development and retention of skilled manpower,
institution of appropriate costing and control
system, the design of suitable organization
structure or the timing of expansion of capacity/
massive indigenisation programme.
Olivetti Company, another world leader, in
the field of office equipment, faced rough
weather in the early sixties, after over 50
years of successful operations. It was on
the verge of collapse. Reason? Too
ambitious, unplanned growth aimed to be
achieved not only through internal
expansion but also through acquisitions,
and unrelated diversifications, all leading
to huge cash requirement that the
company could not bear.
International manufacturing company after 100 years of
undisputed leadership in the sewing machine business
world over with operations spread over more than 125
countries , all of a sudden started losing share both in
the domestic and international markets accompanied by
heavy erosion of profitability. Reason, a single product
highly vertically integrated company, coupled with high
cost of operations and conservative top management
could not withstand the onslaught of competition from
low cost machines from Japan, until a new, young Chief
Executive takes over the reigns of the company
All the above cases have one thing in
common. They could not maintain a
good fit with the changing environment
of their company. They did not notice
the changes in time and make
necessary changes in the design of
organization to adjust with the
changed environment
In the mid fifties, Hindustan Lever Ltd., forecasted an
acute shortage of edible oil in India during the next
twenty years. The forecast came true with pin point
accuracy. However, the company was able to avert a
collapse by undertaking diversification in a big way,
taking up many new products, over a period of ten to
fifteen years. The conscious analysis of the company's
environment, keeping the long term perspective in mind
enabled the company to make painless transition. The
company had realized the importance of a crucial
management function, that of strategic management,
that of shaping the future of organization, which the other
companies cited above had not.
THE STAKEHOLDERS
OWNERS
FIN. INST
CUSTOMER
SUPPLIER
EMPLOYEES
PLANT & M/C
THE PROBLE OF LOW STAKES OF THE
STAKEHOLDERS
DIVIDEND
OWNERS
FIN. INST
INTEREST/
REPAYENTS
CUSTOMER
PRODUCT
SUPPLIER
PAYMENT
EMPLOYEES
SALARY/WAGES
PLANT & M/C
DEPRECIATION
INPUT
PROCESS
OUTPUT
STRATEGIC
DECISIONS
ADMINISTRATIVE
DECISIONS
OPERATING
DECISIONS
TYPES LEVELS OF ORGANISATIONAL DECISIONS
Strategic Management can be defined as
management function which concerns with task
of coping with this challenge of environmental
change.
The concept originates with the word strategy.
When used in the context of organisation as a
whole, strategy describes the way the
organisation will pursue its goals Strategic
management may thus be called as a process
by which the top management determines the
long term direction and performance of
organisation, by ensuring that careful
formulation, proper implementation and
continuous evaluation of strategy takes place
Strategic management can also be
defined as a process which deals with
fundamental organizational renewal and
growth with the development of the
strategies, structure, systems necessary
to achieve such renewals and growth and
with the organizational systems needed
to effectively manage the strategy
formulation and implementation
Corporate strategy can be defined as "a
statement of organization mission, objectives,
strategy, policies and major plans and
programs of actions, described in a way that
conveys what business we are in and why are
we in this business" . This definition given
brings out the need for organization clarity to
integrate or unify the organizational efforts.
Corporate strategy may, thus, be understood
as the outcome of strategic formulation
process, including the thinking part (but
excluding the action part) of strategy
implementation.
It also encompasses the
unstructured, non-formal cases of
strategic management process.
Andrews maintains that every
organization has a strategy. This
could be implicit, rather than explicit,
informal rather than formal,
inadequate rather than proper. The
imperative of strategic management
is strategic thinking rather than the
formal way of doing it.
CORPORATE
OFFICE
CORPORATE FUNTIONS
.
PROD
DIV. I
CORPORATE FUNTIONS
.
PROD
DIV.II
.
PROD
DIV. III
.
PROD
DIV. IV
STRATEGIC BUSINESS UNITS
THE MEAS -ENDS RELATIONSHIP
.
PROD
DIV. V
DISTINGUISH BETWEEN
• THE CORPORATE STRATEGY AND
• THE SBU STRATEGY
STRATEGIC MANAGEMENT REQUIRES:
DIFFERENT PERSPECTIVE
LOWER TO HIGHER
•
MULTIFUNCTIONAL
DIFFERENT SKILLS
QUANTITATIVE TO QUALITATIVE
•
ABILITIES TO DEAL WITH UNCERTAINITIES
•
DYNAMIC MATCHINGS
•
CREATIVE THINKING
DIFFERENT ORIENTATION
•
SHORT TERM TO LONG TERM
ADVANTAGES OF STRATEGIC
MANAGEMEBNT
1. IT HELPS TOP EXECUTIVES IN FACING
THE EXTERNAL WORLD BOLDLY
2. HELPS IN AVERTING ENVIRONMENTAL
SHOCKS
3. HELPS MANAGEMENT IN HAVING
CLARITY OF ORGANISATION’S
BLUEPRINT FOR FUTURE/ GROWTH
4. HELPS IN INTEGRATING ORGANISATIONAL
EFFORTS
5. HELPS THE ORGANISATION IN
UNDERSTANDING ITS STRENGTHS
6. HELPS MANAGEMENT IN HAVING AN
AUDIT OF CHANGING COMPETITIVE
STRENGTHS
7. PUSHES THE MANAGEMENT TO TAKE
STOCK OF ITS ORGANISATIONAL
8. HELPS THE MANAGEMENT IN MOBILISING
AND DEVELOPING RESOURCES
9. HELPS IN CONTINUING THE LINE OF
ACTION
10. HELPS MANAGEMENT IN MAKING PROMISES
AND REJECTING APPEALS OF UNIONS
11. HELPS IN MANAGING CONFIDENTLY
STRATEGY
FORMULATION
STRATEGY
IMPLEMENTATION
CONFIDENCE TO EFFECT
NECESSARY
ORGANISATIONAL CHANGES
STRATEGIST
OTHER
CONSITIT
UENT
MEMBERS
PAST PERFORMANCE
OF THE
ORGN.
MISSION
OBJECTI
VES
GOALS
ENVIRONEM
ENTAL
ANALYSIS
STRENGTH
&
WEAKNESS
ANALYSIS
STRATEGIC
ALTERNATI
VES
CHOICE OF
STRATEGY
STRUCTUR
SYSTEMS
SKILLS
STYLES
FUNCTION
AL
POLICIES
ORGANISA
TIONAL
CULTURE
POST IMPLEMENTATION
EVALUATION OF
STRATEGY
THE NEED GAP
DESIRED
PERFORANCE
NEED GAP
TO BE BRIDGED
SEARCH FOR
OPPORTUNITY
CURRENT
THREAT
STRATEGY
EXPECTED PERFORANCE
OF CURRENT STRATEGY
THREATS COME FROM
THE CUSTOMERS
THE COMPETITORS
PROCESS OF SEARCH FOR
OPPORTUNITY
INSIDE -OUT APPROACH
OUTSIDE -IN APPORACH
ENVIRONENTAL ANALYSIS-1
ECONOMIC
SOCIAL
POLITICAL
TECHNOLOGICAL
REGULATORY
COMPETITOR
ENVIRONENTAL ANALYSIS-2



CONSIDER ALL THE
CONSTITUENT MEMBERS
DIFFERENT ANALYTICAL TOOL
REQD. FOR EACH COMPONENT
EACH TOOL DIFFERS FROM
OTHERS IN TERMS OF
PRECISION
ENVIRONENTAL ANALYSIS-3
SOME APRIORY DEFINITION OF
MARKET IS ALWAYS REQUIRED FOR
ANALYSIS
ENVIRONENTAL ANALYSIS IS UNIQUE
TO THE STRATEGIST
PROPER DESCRIPTION OF STRENGTH /
WEAKNESS IS EXTREMELY CRUCIAL
STRATEGIC ADVANTAGE PROFILE
Marketing +
R&D
Operations +
Corporate o
Finance
Note:
o
+
Product line is extensive, and service is
excellent
Channels of distribution are weak in the
southwest.
No R&D performed.
Excellent sourcing for raw materials.
Facilities are old and becoming outdated.
Company size is about average for the
industry.
Profits have been consistent but average.
Union employees complain frequently.
Balance sheet shows ability to obtain
needed capital; low working capital
position & debt-equity ratio,high and
favorable stock price.
+ indicates strength; o indicates neutral;
- indicates weakness.
PHYSICAL
INFRASTRUCTURE
FINANCIAL
RESOURCES
HUMAN
RESOURCES
ORGANISATIONAL
RESOURCES
VERY WELL
STRENGTH
HOW WELL
DO THEY
MEET THE
REQT. OF
BUSINESS?
NOT VERY WELL
WEAKNESS
HOW DO THEY
COMMPARE WITH
COMPETITOR
CAN STRENGTHS
BE TRANSFERRED
TO ANOTHER BUSI
DISTINCTIVE
COPETENCE
BETTER
COPETITIVE
ADVANTAGE
AS GOOD
MEETING BUSI
REQUIREENTS
INFERIOR
KEY
VULNERABILITY
Determinants of the Ex-post Performance Of Mergers and Acquisitions
Pre - negotiation Context
of Acuqisiton / Merger
Post - negotiation Context
of Acuqisiton / Merger
Managerial Skills Available
to Perform the Integration
Tasks Involved
No. of Partners
Divergence of their
Interest
Commitment of the
Coalition members
Stability of the Emergent
Power Structure
* Completing the legal
formalities
-* .Selection of Top
Management team
Relative Capacity to
Contribute
State of the
Organisations
Scope of improvement
possible through
pooling/rationalisation
of resource/
infrastructure
* Rationalisation of
Product/Operation
Tech./Facilities
Diversity in orgn.
structure, systems styles,
key policies, cultures
* Rationalisation of the personnel
policies, compensation system
* Rationalisation of work norms,
working hours, changing work
groups, s ystems and
procedures,
workflows
* Re-allocation of the Executive
responsibilities
* Containing the Storm
* Managing Crisis
* Managing Labour Union
* Managing Corporate
Communication
* Developing or establishing
Corporate Ideology
Level of Integration Achieved
Post Acquisition/Merger Performance
Fig. I. Model of Ex-post Performance of Mergers and Acquisitions
Personality Traits Required for the Strategist
1. Perspective
-
2. Orientation
-
3. Competencies
-
Corporate, Perspective,
Neutrality towards functional areas
Long term orientation
Integrative ability to mobilise support
Ability to see opportunities
Ability to see strengths (No resource myopia)
Ability to generate alternative solutions
Ability to elaborate (see through the issue tree)
Ability to develop coherent Plan for
Implementation
-
Ability to' create vision--excite the key
executive
4. Style
for the
adhocism
5. Makeup
-
Develop supporters for implementation
Ability to empower the subordinates
Participative (genuine, not due to fear of subordinates) ~
Concern for subordinates development as key
organisation growth
Operate through systems/policies rather than
-
-
Stick to his guns, fearless
High stress threshold
Commitment to ideals and moral values
Desire to learn, update
HRD Interventions for Grooming the Strategists
Exposure
-
Assignment
Freedom
-
Evaluation
-
Reward
Protection
-
Subordinate
-
Vision
Competition
-
external training, seminars, conferences related to strategic
management,
rotate in multifunctional tasks, if he succeeds
variety, complex, unclear
to experiment, sanctioned pilferage of resources, permit
violations of rules
examine decision making process: the issues tree considered,
functional biases if any,
innovation brought, integrated thinking
evaluate for end result -the effectiveness,
make efficiency as an integral part of evaluation
evaluate on creative problem solving skills
evaluate on and make change agentry an integral part of
evaluation
explicit, public
give protection from superiors, peer group members for change
and innovation effected
has he been able and devotes to the empowering development in
the subordinates
organise and encourage vision creation exercise
Financial Performance
•Economic value Added
•Profitability
•Growth
•Financial Risks
Competitive Advantage
•Differentiation
•Low Cost
•Quick Response
Process Execution
Structural Position
•Rivalry
Customers
•Entrants Supplies
•Substitutes
Enterprise Synergies
•Core Competencies
•Market Power
•Shared Infrastructure
•Balanced Cash Flows
•Transnational Advantages
Organisational Capacity
•Leadership
•Learning
•Leverages
•Product Development
•Demand Management
•Order Fulfillment