Foundation to Business Strategy
image

Topic-3
Porter's Five Forces Analysis

image

Topic-1
Strategy & Strategic Management Process

image

Topic-8
Vision and Mission Statements

image

Topic-6
Sources of Competitive Advantage

image

Topic-5
Resource Audit

image

Topic-2
PEST Analysis

image


Topic-4
SWOT Analysis

image

Topic-7
Stakeholder Analysis

image

Topic-9
Change Management

image

  1. What is Strategy?

1.Strategy Evolution

  1. Levels of Strategy

Functional Strategy

Competitive Strategy

Corporate Strategy

Overall vision, mission
Kinds of business, portfolio management

What product and/or service to offer
How to manufacture, how to get to market, etc.

Functional/Operational
Focused domain

4.Key Driving Factors

Globalisation

Technology

Intellectual Capital

5.Process of Strategic Management

Strategy implementation

Strategy development and choice

Strategic analysis

Micro environmental analysis

Macro environmental Analysis

Porters five force analysis- Unit-3

PEST-Unit 2

SWOT Unit-4

The determination of the basic long-term goals and objectives of an enterprise and the adoption of courses of actions and the allocation of resources necessary for carrying out these goals”. (Chandler, 1962)

Difficulties in analysing the environment

Environmental uncertain.

Globalisation and technological developments.

Unpredictable.

PEST Factors.

Political

Economic

Socio-Cultural

Technological

Government Stability

Foreign Trade regulations

Taxation Policies

Employment laws

Environment protection laws

Deregulation

Monopolies act

Business Cycles

Interest Rates

Inflation

Disposable Income

Unemployment

Energy Availability and Cost

Population Demographics

Income Distribution

Lifestyle Changes

Levels of Education

Attitudes to Work and Leisure

Consumerism

New Discoveries and Developments

Government spending on Research

Rate of Obsolescence

industry’s competitiveness

Profitability level
Intensity of competition

Threat of New Entrants.

Threat of Substitutes.

Bargaining power of Buyers.

Bargaining power of Suppliers.

The extent of Industry Rivalry.

There are many competitors

Exit barriers are high

Industry growth is slow or negative

Products are not differentiated and can be easily substituted

Competitors are of equal size

Low customer loyalty

There are few suppliers but many buyers

Suppliers are large and threaten to forward integrate

Few substitute raw materials exist

Suppliers hold scarce resources

Cost of switching raw materials is especially high.

Buying in large quantities or control many customer.

Only few customers exist

Switching costs to other supplier are low

They threaten to backward integrate

There are many substitutes

Customers are price sensitive

Low amount of capital is required to enter a market

Existing companies can do little to retaliate

Existing firms do not possess patents, trademarks or do not have established brand reputation

There is no government regulation

There is low customer loyalty

Products are nearly identical

Economies of scale can be easily achieved

First, if the consumer’s switching costs are low

Second, if the substitute product is cheaper than the industry’s product

Third, if the substitute product is of equal or superior quality compared to the industry’s product, the threat of substitutes is high

Fourth, if the functions, attributes, or performance of the substitute product are

equal or superior to the industry’s product

.

Strengths
A STRENGTH is something a company is good at doing or a characteristic that gives it an important capability.

Weaknesses
A WEAKNESS is something a company lacks or does poorly (in comparison to others) or a condition that places it at a disadvantage

Opportunities
An OPPORTUNITY is a chance for firm growth or progress due to a favorable juncture of circumstances in the business environment.

Threats
A THREAT is a factor in company’s external environment that poses a danger to its well-being.

Good brand image

Well-known name

Good reputation

Cost advantage in production

High market share

Confidence in the market

Customer loyalty or repeat business

More advanced technology and R & D

Ineffective in production

Falling profit

Falling sales of the product

Declining age of the life cycle of a product

Poor reputation

Lack of innovation and change

Lack of adequate capital or having some financial problems

Customers’ losing confidence or increasing complaints on the business

Poor management or inefficient organizational structure

Possible development of new products

Expansion into new markets

Development of a global brand

Joint –development with other companies

Possible growing demand for a product in the market

Possible government policies encouraging the growth of the business and its certain products

New sources of profit or income

Changes in law or regulation which may prohibit or affect the production of a business

Growing competition from local companies

Increasing competition from foreign competitors

New products developed by other companies which may replace the product of the business

Marketing activities or strategies which will be implemented by competitors

Elements of SWOT Analysis



Leverage
Leverage is when a strength allows you to take advantage of an opportunity.

Constraint
Constraint is when a weakness prevents you from taking advantage of an opportunity.

Vulnerability
Vulnerability is when a threat attacks a strength.

Problem
Problem is when a threat attacks a weakness.

Internal Resource Analysis
The internal analysis of the organisation's resources is done to identify the strengths and weaknesses of the organisation around which strategies can be made.

The Resource Audit
The quantity of resources available.
The nature of resources
The extent the resources are unique

Types of resources

Intangible resources
Ownership of brands, Company image, Trademarks

Tangible resources

Physical resource

Financial resource

Human resource

Four important questions about
their resources and capabilities.



VALUE: Do a firm’s resource and capabilities add value by enabling it to exploit opportunities and/or neutralise threats?

Rare: How Many competing firms posses valuable resources and Capabilities?

Are the resources Imitable?

Non-Substitutable : Is the firm’s resources/competencies a substitutable one?

Competitive Advantage
A firm's relative position within its industry determines whether a firm's profitability is above or below the industry average.

Competitive source

.

Competitive Scope.

Differentiation

Lower Cost

Broad Target

Narrow Target

Broadly Targeted Differentiation
Production emphasis: “Nobody makes it better.”
Marketing emphasis: “Ours is better than theirs.”
Many frills – different models, options, features, and services.
One or more points of difference.
Frequent innovation.
Premium pricing to cover the cost of differentiation.
Intensive advertising and sales efforts.

Overall Cost Leadership

Focus
Production emphasis: “Made especially for you.”
Marketing emphasis: “Ours meets your needs better.”
Specialization for buyer segments, geographic areas or end-use applications.
Competitive advantage depends on being the low-cost leader in the target segment, or doing something particularly appealing to the targeted customers.

Cost

Differentiation

Overall Cost Leadership
Production emphasis: “Nobody does it cheaper.
Marketing emphasis: “Budget Prices and Good Value.”
Standardized products – only a few models and limited optional features.
No Frills operating culture – lean and mean reputation.
Higher productivity per employee.
Cost-cutting innovations.
Accept low profit margins in return for high volume

Any group or individual that can affect, or is affected by, the performance of the organisation” (Freeman 1984)
Individuals or groups who depend on the organisation to fulfil their own goals and on whom, in turn, the organisation depends” (Johnson & Scholes 1999)

Types of Stakeholders

Primary & Secondary Stakeholders
Primary: a firm cannot exist without their continuing participation
Primary stakeholders include: shareholders & investors, employees, contractors, customers & suppliers
Secondary: those who influence or affect or are influenced/affected by, the corporation, but they are not engaged in transactions with the corporation or essential for its survival
Secondary stakeholders include: media, action groups, government agencies, trade unions, regulatory authorities

Internal & External Stakeholders

Differing stakeholder expectations
Owners Financial Return/Added Value
Customers Quality Products/Additional Services
Employees Pay & Benefits/Work Satisfaction
Creditors Creditworthiness/Timely repayment
Government Compliance/Improved Competitiveness
Community Welfare/Safety & Security
Suppliers Payment/Long term Relationships
Competitors Fair Competition/play

The Stakeholder Theory of the Firm

Stakeholder Theory of the Firm

Stakeholder Analysis
Stakeholder analysis is the process of identifying the individuals or groups that are likely to affect or be affected by a proposed action, and sorting them according to their impact on the action and the impact the action will have on them.

Ownership Theory of the Firm

Stakeholder Mapping
Stakeholder mapping refers to the process of generating a stakeholder map by which the stakeholders of a particular organization can be identified and understood appropriately.

Stakeholders Influence = Power x Interest

image

Category C

Category B

Category D

Category A

Interactive
Companies actively engage with stakeholders in an ongoing relationship of mutual respect, openness, and trust

Proactiv
Companies try to anticipate stakeholder concerns
e

Reactive
Companies act only when forced to do so

Inactive
Companies ignore stakeholder concerns

A vision statement
A vision is a mental picture of what an organization aspires to become.
A vision statement is concerned with the desired future state of the organisation; an aspiration that will enthuse, gain commitment and stretch performance.


Mission Statement
A mission statement should answer the question: ‘What business are we in?’
‘How do we make a difference?’
‘Why do we do this?’

Characteristics of a Vision Statement

  1.  Provides future direction
    
  2.   Expresses a consumer benefit
    
  3.   Is realistic
    
  4.   Is motivating
    
  5.   Must be fully communicated
    
  6.   Consistently followed and measured 
    

Characteristics of a Mission

  1.  Broad in scope; do not include monetary amounts,     numbers, percentages, ratios, or objectives
    
  2.  Less than 250 words in length
    
  3.  Inspiring
    
  4.  Identify the utility of a firm's products
    
  5.  Reveal that the firm is socially responsible
    
  6.  Reveal that the firm is environmentally responsible
    
  7.  Include nine components customers, products or services,     markets, technology, concern for survival/growth/profits,     philosophy, self-concept, concern for public image,     concern 
    
  8.  Reconciliatory
    
  9.  Enduring
    

Mission Statement Components

  1.  Customers—Who are the firm’s customers?
    
  2.  Products or services—What are the firm’s major products or services?
    
  3.  Markets—Geographically, where does the firm compete?
    
  4.  Technology—Is the firm technologically current?
    
  5.  Concern for survival, growth, and profitability—Is the firm committed to growth and financial soundness?
    
  6.  Philosophy—What are the basic beliefs, values, aspirations, and ethical priorities of the firm?
    
  7.  Philosophy—What are the basic beliefs, values, aspirations, and ethical priorities of the firm?
    
  8.  Concern for public image—Is the firm responsive to social, community, and environmental concerns?
    
  9.  Concern for employees—Are employees a valuable asset of the firm?
    

Benefits of Having a Clear Mission and Vision

-Achieve clarity of purpose among all managers and employees.

-Provide a basis for all other strategic planning activities, including the internal and external assessment, establishing objectives, developing strategies, choosing among alternative strategies, devising policies, establishing organizational structure, allocating resources, and evaluating performance.

-Provide direction.

-Provide a focal point for all stakeholders of the firm.

-Resolve divergent views among managers.

-Promote a sense of shared expectations among all managers and employees.

-Project a sense of worth and intent to all stakeholders.

-Project an organized, motivated organization worthy of support.

-Achieve higher organizational performance.

-Achieve synergy among all managers and employees.

Broad Concept of Change
Change is a permanent part of life. No matter who we are, where we live, how old or young, we all make changes in our lives. Most of us struggle with change…

Forces for Change

External Forces

Internal Forces

click to edit

Scope of Change

Incremental change - change of a relatively small scope, such as making small improvements

Transformational change - change in which the organization moves to a radically different, and sometimes unknown, future state

Organizational Change

Planned change
Change resulting from a deliberate decision to alter the organization


Kurt Lewin’s three-step change process


  1.  Unfreezing Status quo(1)
    
  2.   Changing
    
  3.  Refreezing Status quo(2)
    

UnPlanned Change
Change that is imposed on the organization and is often unforeseen.

Kotter’s eight-step plan for implementing
1.Establish a sense of urgency.
2.Form a powerful coalition of managers.

  1. Create a vision to direct the change and the strategies for achieving that vision.
    4.Communicate the vision throughout the organisation.
    5.Empower others to act on the vision.
    6.Plan for visible, short-term performance improvements and crate those improvements.
    7.Consolidate improvements.
    8.Articulate the relationship between new behaviors and organizational success.

Models for managing change

Managerialist approach to change

Change agent approach to change

Resistance to change
lack of trust
perception that change is not necessary
perception that change is not possible
relatively high cost
fear of personal failure
loss of status or power
threats to values and ideas
social, cultural or organizational disagreements
resentment of interference

Overcoming resistance to change using the managerialist approach.
1.Education
2.Negotiation and Participation
3.Culture and Communication and Teamwork
4.Support
5.Reward Systems
6.Leadership.
7.The use of force(coercion).